South West Regional Skills Enterprise and Employment Analysis 2007/2008

Final Report

4.10 Skills Utilisation

Just like any other resource, the possession of skills does not provide any benefits unless they are put to use. Experience, education and training can enable the acquisition of skills but utilisation is needed if any value is to be added. Hence skills utilisation is important to many different stakeholders.

On behalf of the LSC, SLIM commissioned a review of research into what we have termed ‘skills utilisation’ (see Working Paper on Skills Utilisation)(45).

Skills utilisation forms the vital link between skills acquisition and productivity. It is important to government because of the impact on the economy and the perceived need to demonstrate a return on investment in education and training. In much the same way, employers and individual employees have an interest in achieving impact through skills utilisation and a return on the time and money invested in developing them. It is the ways in which firms use skills that makes them competitive, rather than simply the skills that they have available, and individuals can benefit from opportunities to use skills through wage levels, career progression and job satisfaction.
There is one recurring theme throughout the working paper on skills utilisation. All paths seem to lead to leadership and management, not just of learning and people but also of organisations in general. The overwhelming conclusion of this report is, therefore, that leadership and management has a greater impact on skills utilisation than any other factor. The choices that managers make and the working environments that they create influence the opportunities and motivations for skills to be used.

This is worrying from the perspective of the many reports that have highlighted deficiencies in leadership and management in this country. The seminal paper on UK competitiveness by Porter and Ketels (2003)(46) cited management weakness at the top of its list of possible drivers for each of the three competitive disadvantages faced: low rate of capital assets and innovation; competing less on unique value than advanced peers; indications of lower use of modern management techniques. On the people management front, Guest (2005)(47) also drew attention to problems, stating that “those in senior positions […] tend to be rather complacent about their human resource practices, giving fairly low priority to further investment in them.” (See Working Paper on Leadership and Management)(48).

A further aspect of the economic perspective relates to the return on investment in skills development that can or should be expected by government, individuals and employers. The need to demonstrate impact from expenditure has become a dominant feature of public service provision in the UK and the effectiveness of education and training is now viewed almost exclusively through measurable outcomes. Hence while increased productivity is a wider goal, the main currency for assessing return on investment of public funds is qualifications.

In highlighting the importance of this issue to the South West, it is important to note that when compared with other regions in England, the South West has a greater proportion of people who are employed at levels lower than those to which they are qualified(49). On the basis of return of investment, the fact that many people in the region with degrees are working at NVQ level 3 and below is seen as underutilisation when viewed from a purely economic perspective. Many reasons have been put forward for explaining this, including that fact that many people are prepared to accept lower levels of job status and pay in return for the substantial non-economic benefits the region offers. Nevertheless it points to the fact that the region does not use the skills capability at its disposal to generate higher levels of productivity.

Conclusion

One of the major problems in the region is the application of skills to improve productivity. The work on skills utilisation demonstrates that investing in leadership and management is the most effective strategy for improving skills utilisation and therefore productivity.

This should therefore remain a priority for the region and be the focus of co-ordinated action. The RSP is well placed to ensure that co-ordination takes place.

It is also critical that issues of skills utilisation are built into the enterprise services delivered by Business Link and emphasised as part of the IDB and Skills Brokerage services.

(45) G James, Working Paper on Skills Utilisation, SLIM, 2006
(46) Porter, M. and Ketels, C. (2003) UK Competitiveness: moving to the next stage, DTI Economics Paper No 3, ESRC
(47) Guest, D. (2005) Human Resource Management and Corporate Performance: Recent Empirical Evidence, Joint DTI/Kings College Seminar, DTI Economics Paper No 13
(48) Working Paper on Leadership and Management, SLIM, 2006
(49) Local Futures Group (2003) South West Skills Analysis: a profile of level 2 and 3 qualifications