George Bernard Shaw observed “We are made wise not by the recollection of our past, but by the responsibility for our future”. Jane Gray discovers how people and the companies they work for are both being asked to take responsibility for advancing their skills.
From the formation of the coalition government through the austerity Budget and the Comprehensive Spending Review, the impression of hard times and the requisite adjustments in society is palpable.
One of the most important issues for society pushed to the front of the queue by this zeitgeist for overhaul is the skills of the nation’s workforce. There is intense focus on the development and delivery of the skills that the UK needs if the economy is to rebalance and the deficit be redressed.
Following a period of reviews and surveys of the UK skills landscape, including projections of what it ought to become, there is widespread uncertainty among employers and skills providers as to how their relationship will be affected. Two things, however, are certain. There will be less public money available to support skills development and policy will be driven by a consistent desire to complete the termination of command and control administration.
The combination of these is driving the reorganisation of the skills landscape and prompted the Skills Minister John Hayes to declare in July: “The first and most important action [with regards to skills] is to secure a real transfer of power – and also of responsibility – from the centre to individuals and their employers.”
With great power comes great responsibility
Chris Humphries, CEO of the UK Commission for Employment and Skills (UKCES), an organisation that advises government on the restructuring of the skills landscape and strategic skills priorities, explains what this means in practical terms for manufacturers: “The budget available for skills will be significantly less over the next four years than it has been in the past.
Twenty five to thirty per cent cuts is almost certainly the territory we are in. We should be clear that this refers to the total input of government spending over the next four years and those cuts are qualified by… a GDP deflator.” “There will be a number of priorities and concerns that drive the application of these cuts,” he continues. “The first priority is that, because there is not enough money for the volume of training needed, we will see a move to spread the costs between the state, employers and individuals. This is true for further and higher education and it is true for engineering and manufacturing, but there may be some sectoral advantages. These will be influenced by the clear evidence that both employers and individuals gain from all qualifications achieved at level three and higher. Therefore the proportion the state will expect the individual or employer to contribute towards those higher level skills will be less. Combined with this approach there will be a prioritisation of economically valuable skills.” The definition of these skills will be consistent with the National Strategic Skills Audit 2010, published in March. First and foremost, skills considered to be strategic priorities will focus on science, technology, engineering and maths (STEM) subjects at technician and apprentice level.
In addressing the inevitable suggestion that prioritising certain skills routes will encourage people to pursue qualifications inappropriate to their talents and abilities, Humphries was clear. “It is really important to ensure that we get high success rates with apprenticeships. The last thing we want to do is what we did with university degrees – put far more people in by accepting lower grades and then see massive drop-out rates. This was a bad thing for the state and taxpayer but the most destructive consequence was the dashing of expectations for the individual.” To avoid this, Mr Humphries seeks a far greater focus being put on the diagnostic skills of careers advisers, employers and skills providers to help learners choose their qualification path and plan their progression. In order to incentivise care in this area he says that provider funding will soon become closely linked with outcomes. “This means that they will have an incentive to encourage as many people as possible to aspire to Level Three and higher skills, but also a disincentive to encourage individuals not capable of those skills from embarking on them.”
Anne Watson, managing director of EAL, the UK’s leading awarding body for engineering qualifications, sees this as a positive move. “This is a very sensible approach. Attaching funding to the end of the training process will incentivise providers to give the learner as much help and support as possible throughout their education. Typically 25 per cent of those who start a qualification do not complete it. Often this is because they find midway through their training that the qualification isn’t right for them.
Incentivising outcomes will mean far more care is taken both with the individual and the employer to make sure that the path is absolutely right.” Another key factor that is likely to increase the care with which training plans are devised is that new skills delivery structures will be characterised by financial responsibility of both employers and individuals, according to Humphries. In the same breath as they assume that responsibility they will also be empowered to ask for much more flexible delivery.
For Humphries, this is likely to manifest both in more individual learning accounts accessed – which are repayable under similar income-dependant terms to the student loans used by most university students – and in the personalisation of training modules by individuals and employers who will be able to demand that colleges and other training organisations tailor their offerings to ensure the best results for them.
Bill Williams, CEO of the Centre for Engineering and Manufacturing Excellence (CEME), a London-based charitable organisation supporting business and skills development for engineering companies, has already seen demand for this begin to build and predicts that it will become the norm. But he also foresees that employer-employee relationships will have to build-in a greater level of negotiation so that mutually beneficial arrangements for funding contributions can be reached. “Over the last 10 years organisations in this country, firstly large ones and latterly also SMEs, have developed an expectation that their skills requirements will be subsidised by the government. That is not sustainable,” he says. “I don’t think there is anything wrong with employers or individuals paying for training. Like everything in life if you get something for nothing you do not value it.” This increased value on skills is resulting in more creative thinking around how time and money can be found to acquire them. Williams adds: “We work with a large manufacturing organisation outside London, which traditionally made much of its commitment to sponsor employees through engineering degrees.
In the last three years they’ve changed that. They now give paid leave for completion of the degree but the employee self funds. Since that change was implemented, the numbers of employees participating in the programme went from less than 10 to more than 50. In the future I can see this happening on a much broader scale, including in SMEs.”
Incentives for skills linked to growth
A natural observation would be that not all workers are lucky enough to have relationships with their employers where they would feel comfortable highlighting a current skills deficiency, and feel confident to ask for either time or money to help provide a qualification. Philip Whiteman, CEO of the Sector Skills Council Semta, is confident that the unions will play an effective and valuable part in protecting members’ professional development. “It is not a bad thing that individuals will have to take more ownership of their own development,” he says.
“It will mean that in certain cases they are driving their employer to do more training and the trade unions can support that. As an SSC, we will try and tackle issues from the employer down, but it is useful that there is also a push in the other direction. The unions have shown more dexterity in understanding the skills needs of their members over the last few years and an advance in the way they manage their relations with employers over skills issues. They are now extremely skilful in this area and union members should be confident that they can look for protection and guidance for their professional development.” Beyond direct support, however, both individuals and employers will be able to take advantage of incentive schemes, according to UKCES’s Humphries. “Where there is a case of adequate provision for a qualification but not enough applicants, government will distribute support so that prioritised courses require less contribution from the individual.
These financial incentives will send clear signals about which skills are considered to be linked to growth.” He adds: “Incentives for employers will be particularly important for apprenticeships as here there is typically no contribution from the learner.
Support for these will likely go to areas where it is known there is a significant shortfall of skills.” The detail of how these incentives will work and who will have the responsibility of taking action to access them will largely be hammered out in the last quarter of 2010, however some pilot schemes are already running including a scheme to encourage big employers to over-train apprentices in certain strategic areas. “In Germany, large employers used to over-train apprentices as a natural part of their responsibility to help develop their supply chain.
Even the Germans are no longer able to afford that, but the UK government has been piloting subsidies for each apprentice trained beyond company requirements.” (These overtraining initiatives are known as Apprentice Expansion Pilots.) This is positive news for enterprise employers and the manufacturing industry as a whole ought to benefit as the skills disperse throughout the supply chain and help emerging industries to grow.
However what of incentives and support for SMEs? How will the demographic that makes up 96% of the UK’s manufacturing sector benefit, who are often cited as struggling to maintain training investments in the face of recession?
Small but perfectly formed
On this point Humphries’ advice is controversial but informed. “The evidence is absolutely clear that SMEs do not need incentives.” Referencing data from the National Employer Skills Survey 2009 on which organisations provide apprenticeships in the UK, the same data that was recently assessed and submitted to government for policy advice, Humphries revealed that relative to company size, the vast majority of apprentice training in England, rather than the whole UK, takes place in the hands of very small organisations employing up to 24 people.
Eighty per cent of apprenticeships are provided by firms with less than 100 employees. In contrast to this large enterprises (+500 employees), while providing 16% of overall employment in the UK, offer only 5% of available apprenticeships.
Humphries eulogises: “This data shows that SMEs are providing five times the number of apprenticeships for young people that large companies are. I think that is hugely reassuring.” Confusion over the lack of apprenticeship provision from SMEs has arisen in the past due to measurements focusing on the number of employers in each size range providing any apprenticeships.
As the table below show this has led to a misrepresentation of SME apprenticeship provision.
Referring to government targets, to increase the provision of apprenticeships (Semta predicts that 10,000 per annum will be needed to replace higher level skills retiring from industry in their sectors alone) Humphries says this data will bring about “a strong focus on SMEs, but they do not need incentives.
They just need evidence of return on investment.” This information will almost certainly spur government initiatives to provide better intelligence with greater clarity of meaning to both employers and individuals about the job prospects to be gained through different training routes. This information has been gathered for years – largely by the Sector Skills Councils – and will include clear statistics on average employment rates, wage increments and other labour market intelligence that has been lacking visibility in the past. The collated information will be made available from the Department for Business, Innovation and Skills as it establishes its long-awaited, age inclusive careers and employment advice service – the first stage of which, named Next Step and aimed at adult education, was launched in October.
Summing up his feelings for the outlook on the manufacturing skills provision market, Chris Humphries was quietly confident. “The glass is half full not half empty. There is no question of the skills sector being exempt from government cuts, but if they sit at the lower end of 25 to 30 per cent [cuts] and are implemented over four years then they are achievable. We ought to be able to cover that 25 per cent with employer and individual contributions. This co-funding approach can work.”
