Falling down the skills black hole
Katie Jacobs, November 18, 2014
Is the UK missing the skills it needs to sustain economic recovery? HR magazine explores the role of business and HR in averting disaster.
When Derek Browne, former City trader and chief executive of educational organisation Entrepreneurs in Action reflects on his big break – from school dropout to A-level trainee at Barings Investment Bank – it’s bittersweet.
“I know I wouldn’t get a job in the City now,” says Browne, who devotes himself to helping young people into work. “I was an accidental success, but I had time to learn on the job. Work is such a life-changing experience. There were so many skills I needed to learn.”
Whether today’s young people are given the opportunity to learn those skills on the job is something Browne is sceptical about. “Businesses and HR departments have become obsessed with academic qualifications,” he believes. “But if you look around leading businesses, how many of them are run by people who had outstanding academic qualifications at 16, 18 or 21?”
It’s a view echoed by Ben Marson, director of National Corporate Partnerships at The Prince’s Trust. “A lot of CEOs say to me: ‘I’ve created a company that wouldn’t have employed me at 19’,” he says. Yet, according to Prince’s Trust research from earlier this year, 72% of businesses believe the recruitment of young people is vital to averting a skills crisis.
That the UK is suffering skills shortages is nothing new. For several years now, there has been a fundamental mismatch between skills and job opportunities. According to data from the UK Commission for Employment and Skills (UKCES), skills shortage vacancies have been increasing since 2011.
What’s particularly concerning now is that the mismatch could be threatening our economic recovery. According to The Prince’s Trust research,73% of British businesses believe a significant skills crisis will hit the UK within the next three years, while 43% predict it will happen in the next 12 months. Two-thirds fear this will slam the brakes on the UK’s economic recovery, and 35% even worry it could cause their business to fold.
“Things are getting worse and skills shortages are back to pre-recession levels,” says Nigel Whitehead, group MD of programmes and support at defence giant BAE Systems. “We are seeing a worsening situation, especially in manufacturing and engineering. These areas are vital for the economic growth of the nation. We need to sort this issue in a hurry or we won’t be able to fulfil our economic strategy.”
Heading for disaster
How did we get into this mess? And what is business’s and HR’s role in averting disaster? According to UKCES CEO Michael Davis, one of the main problems is the skills many companies need are becoming increasingly niche.
“You also have occupations where the skills required are constantly evolving,” he adds. “Technology and globalisation are increasing the churn of skills. That pressure wasn’t there 10 years ago.”
The speed of change makes it harder for the education system to keep up, agrees Ann Brown, former senior VP HR at IT consultancy Capgemini (who has just moved into a new role at Nationwide). “In our sector, we are working with technology that wasn’t invented five years ago,” she points out. “How can you expect teachers to stay up to date?”
Mike Campbell, principal associate fellow at the Institute of Employment Studies and a skills expert who has worked for UKCES and the OECD, believes there is a deep structural issue with the way skills are approached in this country.
“There’s a lack of strategic long-term vision,” he says, bluntly. “Making the case for skills is a huge issue and is not done as well by the government as it could be. We need to make the case better, see how it connects with other areas and not leave it in its own box.”
Davis agrees: “On the public policy side, I wish we thought about talent and skills in the same way we think about roads and runways. The timelines need to be a lot longer. If you can inspire a 14-year-old into mechanical engineering, that won’t deliver for 10 years. The whole [skills agenda] suffers from short-term thinking.”
A recent report from City & Guilds revealed there have been 61 secretaries of state responsible for skills over the past 30 years, and claimed “constant churn” has led to a “collective amnesia that has damaged skills”.
Employers agree constant tinkering around skills policy certainly doesn’t help. “It’s very frustrating when someone comes in and changes things, seemingly for the sake of it,” says Toby Peyton-Jones, HR director for UK and Northern Europe at Siemens. “It’s hugely costly for everyone in the skills community. This is something that needs to be worked on on a cross-party level.”
Anouska Ramsay, head of talent at Capgemini, agrees. “This is a crowded area in terms of initiatives; we don’t need a scattergun approach,” she says. “With a new government likely next year, will it all get turned on its head?”
Business to blame?
But while the government has to shoulder some of the blame for damaging, short-term thinking, businesses are also guilty. “Employers can lack that long-term vision and not be interested in the talent pool more generally,” believes Campbell. “Too many employers are making decisions as though their company exists in a bubble.” He adds that for too long, many companies have relied on “poaching” people that are already fully trained.
Campbell also believes migration has been used as a “short-term solution to the skills issue” by employers. “Employers have been able to fill any skills gaps with migrants at any level,” he says. “You can argue whether that’s good, bad, or ugly, but it’s removed the incentives to deal with these issues in the first place.”
While recent research for the CIPD found 66% of employers said the availability of migrant workers has had no impact on the opportunities for people between 16- and 24-years-old, 6% admitted it had impacted opportunities for younger workers “to a large extent”.
According to Davis, there’s also a problem with well-meaning companies being too focused on throwaway projects, rather than sustainable strategies. “[This area] can become initiative-driven,” he says. “Business leaders want to do something now, rather than establishing something for the next 20 years. That might not feel very snappy, but it will last.”
Peter Cappelli, director of the US-based Wharton School’s Center for Human Resources, goes one step further. He believes that the skills shortages suffered by the UK and US are completely the fault of employers. “
This is a consequence of meeting all your skill needs by hiring,” he explains. “Hiring has become more difficult because you’re doing more of it. It’s seen as faster and cheaper. I don’t think the average member of the public gets what’s going on here: employers are saying they are not responsible for people’s skills any more.”
Training budgets certainly suffered during the recession, and 2013 UKCES data finds employers spent less in 2013 than in 2011, with the number of training days provided decreasing across the board.
But while Cappelli’s view might be true of certain organisations, the employers HR magazine spoke to take a very different stance. Groups of forward-thinking organisations are taking matters into their own hands. “It’s pointless waiting for a period of stability,” says Graham Bann, director of Business in the Community’s (BITC) Talent and Skills campaign. “By and large, businesses have realised this and are collaborating within their sectors to make big, systemic changes.”
Catching them young
Brown says skills shortages have forced Capgemini to rethink its entire talent strategy. “It’s fundamental to build a talent pipeline that starts at an earlier stage,” she says.
“We used to start with graduates, but we faced issues with them moving. When we investigated why, it was because they weren’t working at graduate level. We needed to think about jobs in a different way. We redesigned our workforce profile to access people at a lower level. Our talent pipeline was starting in the wrong place, which was a structural inefficiency. Now apprentice retention is higher [than graduate retention was] and there’s a smoother flow of people through the organisation.”
Capgemini’s experience neatly encapsulates what Campbell has found to be vital. “Senior managers and leadership are absolutely critical in all this, both culturally and in terms of their practices,” he explains. “Part of the problem is how the skills are used. It’s one thing to have skilled workers, and another to actually use them. How the talent pool is managed is as important as how it’s recruited.” UKCES has found 48% of employers have staff who are over-qualified for their jobs.
Savvy organisations are also beginning to cotton on to the fact that it’s not enough to only offer school-leaver apprenticeships or internships to graduates (although of course it remains important). Outreach, like talent management, has to begin much earlier. IT company Tata Consultancy Services (TCS) goes into schools and works with children as young as 11, inspiring them about careers in IT.
“Schools and young people are good at using technology,” says Nupur Mallick, UK and Ireland HR director at TCS. “What we need is young people to have the same engagement around back-end technology. If you go into schools and say: ‘Let’s talk about programming’, most students will go to sleep. We talk about smartphones and apps, and in three days they know so much.”
Last year, TCS worked with more than 10,000 students, and Mallick says it has grand plans to almost double that number this year.
However, she believes it’s not enough to engage with students and teachers – you need to include parents too. TCS is creating STEM (science, technology, engineering and maths) ambassador roles, open to spouses and clients as well as employees.
“Many of them are the ones who do the school run, so we are trying to inspire our community that way,” says Mallick. “You need to influence parents. Everyone is going to have to play a role. We can’t just sit back and say someone else is responsible for future-proofing the country, or even the world.”
However, parents can also be a major barrier to companies recruiting young people into apprenticeships, according to Brown. “We find parents, with their aspirations set on university, are often the hardest to reach,” she says. “If I talk about higher apprenticeships, I often hear: ‘Are you saying my child isn’t good enough for university?’”
Davis thinks it will take “a decade to get the message across that apprenticeships are a credible alternative to university”, but BITC’s Bann is more optimistic. “I think we are seeing the death of a certain type of snobbery around vocational routes,” he says, adding that this has been helped by the rise in university fees.
Industry-wide collaboration is also having a big impact on the range and quality of apprenticeships available. “Cross-sector collaboration has really come to the fore,” says Ramsay. “Now it’s about sustaining skills development as a whole.” BAE System’s Whitehead sees the skills agenda as “strangely unifying”.
“I’ve sat in rooms where companies who have their antlers locked in the marketplace are working together on skills,” he explains. “There’s no point having a Cold War-style escalation. If companies are not grasping the supply issue, they are not going to have a demand issue.”
What Whitehead now wants to see more of is larger companies collaborating with the SMEs in their supply chain. “Set up training in your supply chain,” he urges.
“Some of the biggest organisations don’t feel the skills gaps yet as they are household names, but they are only as strong as their supply chains, which are clearly struggling. Some of the big names have mopped up all the skills and left their supply chains denuded.”
Similarly, National Grid CEO Steve Holliday, chair of BITC’s Talent and Skills campaign, wants to encourage all employers to increase their interactions with schools. “Businesses must find time to go into schools,” he says.
“Evidence shows if children between 11 and 16 have four separate interactions with businesses, they are five times less likely to end up as NEET [Not in Education, Employment, or Training]. We must make sure every child gets those interactions and businesses take a more active role.”
Cappelli agrees it’s simply “not effective not to have employers engaged” in the school system, while Peyton-Jones calls for a “strategic engagement with schools, not a marginal one”. However, Davis cites worrying statistics that only one-in-four businesses currently offer work experience in the first place, and suggests replacing the concept with “work inspiration” to encourage more businesses to get involved.
Teaching young people about the world of work can also help to tackle perception issues on both sides. Holliday says the “story” of what roles are needed “has not been told well to our children”, and believes business needs to step in and take a more active role in educating about growth areas and the skills we so desperately need, such as STEM. And on the employer side, spending time in schools could help overcome the stereotypes surrounding young people.
The future of vocational skills
Campbell points out talk about skills shouldn’t just focus on children leaving school. “You won’t fix any skills problems unless you fix them in relation to adults,” he asserts. As well as thinking about building a pipeline for the future, employers, training providers and policy makers must also focus on training the people they already have.
This poses another question in an age of austerity, adds Campbell: “How do you change the behaviour of employers, individuals and training providers when they are going to have to pay for it?”
Whitehead believes we need serious reform in the regulated skills market to make it more attractive to employers. “If employers express demand, it’s more likely we will get a match between supply and demand,” he says.
“I would encourage the government to step back from over-regulation of skills provision and employers to step forward and form industry partnerships. Define what skills and attributes you need for your sector, and work hand-in-glove with providers.”
He hopes parading good practice will help to bring Employer Ownership of Skills, where employers bid for government funding for skills provision, into the mainstream.
Peyton-Jones agrees we need more direct collaboration between the training industry and commerce. “One of the big difficulties with the skills engine has been providers producing skills and industry saying: ‘This isn’t what I need’,” he explains.
“The policy shift to a demand-led education system is important. Changing the funding mechanism and construction [of skills provision] will fundamentally change how the engine is run.”
Going forward, Davis emphasises this is a “genuine shared responsibility”. “Where skills policy hasn’t helped is creating a narrative where the role of schools and colleges is to supply and the role of business is to demand, and that if they don’t meet, there’s a market failure and someone must be at fault,” he says.
“What we need is a better model; it’s a shared responsibility between schools, colleges and businesses.”
But Whitehead urges business to step up now if the UK is going to fulfil its economic ambitions and move further into recovery.
“Companies still expect their workforce to be developed by someone else, and that’s a travesty,” he says. “There’s a Chinese proverb I like: ‘If you want one year of prosperity, grow grain. If you want 10 years of prosperity, grow trees. If you want 100 years of prosperity, grow people.’”
And it’s becoming all too clear that growing people with the appropriate skillset is the only way for UK plc to avoid being sucked further into a skills black hole.