The Complex Links Between The Complex Links Between Skills, Productivity and Skills, Productivity and

Workplace ConfigurationWorkplace Configuration

Evidence and thinking from Evidence and thinking from the UKthe UK

Ewart KeepEwart Keep

Proving ‘It’ PaysProving ‘It’ Pays

A great deal of research has been conducted A great deal of research has been conducted across the OECD to try and ‘prove’ that across the OECD to try and ‘prove’ that investment in:investment in:

• Skills and trainingSkills and training

• High Performance Work Organisation (HPWO)High Performance Work Organisation (HPWO)

Produces a positive return/improved Produces a positive return/improved performance. It’s easier said than done!performance. It’s easier said than done!

Potential Research UsersPotential Research Users

1.1. Researchers themselves and the Researchers themselves and the academic publishing/research systemacademic publishing/research system

2.2. Managers in organisationsManagers in organisations

3.3. Policy makersPolicy makers

Mis-Aligned ExpectationsMis-Aligned Expectations

These 3 groups have different expectations of, These 3 groups have different expectations of, and uses for, the research and hence and uses for, the research and hence divergent expectations about what is divergent expectations about what is required.required.

Most research is either done by academics for Most research is either done by academics for themselves, or is commissioned by policy themselves, or is commissioned by policy makers in order to ‘prove’ to business the makers in order to ‘prove’ to business the need for business to do something policy need for business to do something policy makers want.makers want.

ResearchersResearchers

• Different disciplines – economics, HRM/HRD, Different disciplines – economics, HRM/HRD, wider E&T, consultants.wider E&T, consultants.

• Interested in relationship between skills Interested in relationship between skills (and/or HPWO) and performance, but often (and/or HPWO) and performance, but often at very different levels.at very different levels.

• Often only able to provide one-off snapshotsOften only able to provide one-off snapshots

ManagersManagers

• Focus is on their own sector and Focus is on their own sector and organisation. General lessons may organisation. General lessons may not be deemed to hold good therein.not be deemed to hold good therein.

• Focus on performance, but Focus on performance, but ‘performance’ using measures they ‘performance’ using measures they recognise (e.g. profitability, not recognise (e.g. profitability, not productivity).productivity).

Policy MakersPolicy Makers

• Often interested in whole economy. Often interested in whole economy. Effects at level of individual firm simply Effects at level of individual firm simply assumed.assumed.

• Obsess about productivityObsess about productivity

• Use qualifications as main/sole proxy for Use qualifications as main/sole proxy for skillskill

Policy Makers Cont.Policy Makers Cont.

• Have little interest in why skills or Have little interest in why skills or HPWO make a difference to HPWO make a difference to economic performance – the firm is economic performance – the firm is viewed as a black box.viewed as a black box.

• As a result, policy tends to be a one-As a result, policy tends to be a one-size-fits-all approach.size-fits-all approach.

A Complex Research A Complex Research ChallengeChallenge

• Defining and measuring inputsDefining and measuring inputs

• Defining and measuring performanceDefining and measuring performance

• Snapshots rather than longitudinal dataSnapshots rather than longitudinal data

• Many other mediating factors interveneMany other mediating factors intervene

• ‘‘Fit’ or ‘universal best practice’Fit’ or ‘universal best practice’

Even if we had ‘proof’ would it work?Even if we had ‘proof’ would it work?

Skills - Defining Input Skills - Defining Input FactorsFactors

How do we measure skill/training?How do we measure skill/training?

• Years of schoolingYears of schooling

• Qualifications Qualifications

• Days per year of off-the-jobDays per year of off-the-job

No good measures of informal learningNo good measures of informal learning

Weak figures on employer investmentWeak figures on employer investment

Poorly Input DataPoorly Input Data

• If research is meant to be proving a If research is meant to be proving a return on investment, we need to return on investment, we need to know the scale of that investment. know the scale of that investment. Figures on employer training spend in Figures on employer training spend in the UK are very general and weak.the UK are very general and weak.

• Also, what elements of the overall Also, what elements of the overall spectrum of training provision make spectrum of training provision make the difference? the difference?

Defining HPWODefining HPWO

There are many different names for HPWO and There are many different names for HPWO and many different definitions.many different definitions.

There is a strong belief that HPWO works best There is a strong belief that HPWO works best where work organisation/employee relations where work organisation/employee relations practices are ‘bundled’ together, but the degree practices are ‘bundled’ together, but the degree of bundling necessary is the subject of deep of bundling necessary is the subject of deep controversy. Using the same data, one set of UK controversy. Using the same data, one set of UK academics decided only 2% or firms had strong academics decided only 2% or firms had strong HPWO, while another group decided the figure HPWO, while another group decided the figure was 26% by using different bundling thresholds.was 26% by using different bundling thresholds.

Defining and Measuring Defining and Measuring PerformancePerformance

• In the vast bulk of studies it is In the vast bulk of studies it is productivityproductivity

• ProfitabilityProfitability

• Gross Value Added (GVA)Gross Value Added (GVA)

• Share price/performanceShare price/performance

• Customer satisfaction/service qualityCustomer satisfaction/service quality

• Scrap ratesScrap rates

Performance at What Performance at What Level?Level?

• Individual (bulk of skills research)Individual (bulk of skills research)

• OccupationOccupation

• Workplace or FirmWorkplace or Firm

• Product market or niche thereinProduct market or niche therein

• SectorSector

• RegionRegion

• National economyNational economy

SnapshotsSnapshots

Vast bulk of both skills and HPWO work Vast bulk of both skills and HPWO work has been done through one-off, has been done through one-off, survey based work using a one-survey based work using a one-moment-in-time dataset.moment-in-time dataset.

It is very hard to generate causality It is very hard to generate causality from a snapshot.from a snapshot.

Many Other Mediating Many Other Mediating FactorsFactors• Exchange ratesExchange rates

• Interest ratesInterest rates

• State of world tradeState of world trade

• Consumer confidenceConsumer confidence

• Ownership of enterpriseOwnership of enterprise

• Technological changeTechnological change

• Capital or R&D investmentCapital or R&D investment

• New productsNew products

• State of wider labour marketState of wider labour market

If You Can’t Hold Those If You Can’t Hold Those Constant…….Constant…….

Then it is very difficult to disentangle Then it is very difficult to disentangle the impact of skills or HPWO from the impact of skills or HPWO from any of the other factors that may be any of the other factors that may be raising or lowering performance raising or lowering performance (however you have chosen to define (however you have chosen to define that).that).

‘‘Best Fit’ or Universal Best Best Fit’ or Universal Best Practice?Practice?

At a theoretical level, trying to link skill levels At a theoretical level, trying to link skill levels or the adoption of HPWO to or the adoption of HPWO to organisationalorganisational performance runs up against the issue of performance runs up against the issue of whether there is ‘one best way’ for whether there is ‘one best way’ for everything for every organisation, or whether everything for every organisation, or whether work organisation and employee relations work organisation and employee relations policies need to be tailored to deliver a policies need to be tailored to deliver a particular organisational strategy. A low particular organisational strategy. A low skilled workforce can be appropriate in some skilled workforce can be appropriate in some circumstances!circumstances!

To Put It Another WayTo Put It Another Way

The kind of work practices and skill levels that The kind of work practices and skill levels that make sense for a Michelin ** restaurant make sense for a Michelin ** restaurant might not pay off for Burger King.might not pay off for Burger King.

Research indicates that market segmentation Research indicates that market segmentation gives rise for the need for policies and gives rise for the need for policies and practices that ‘fit organisational strategies.practices that ‘fit organisational strategies.

Policy often assumes universal best practice.Policy often assumes universal best practice.

And the Results…….?And the Results…….?

• In the field of skills, no conclusive proof In the field of skills, no conclusive proof of a simple, direct causal link at firm of a simple, direct causal link at firm level to investment in skill. Best effort - level to investment in skill. Best effort - Tamkin et al, Tamkin et al, People and the bottom People and the bottom lineline, 2008., 2008.

• Mixed results in the area of HPWO.Mixed results in the area of HPWO.

Even If There Was ‘Proof’, Even If There Was ‘Proof’, Would It Be EnoughWould It Be Enough

David Guest’s David Guest’s Voices in the BoardroomVoices in the Boardroom study (2001). Presented senior managers study (2001). Presented senior managers with US and UK findings on the value of with US and UK findings on the value of HPWO.HPWO.

RESULT: Many managers were deeply RESULT: Many managers were deeply skeptical about the value and meaning of skeptical about the value and meaning of such research. It was not enough to such research. It was not enough to change their opinions or behaviour. change their opinions or behaviour.

The Weak Value of The Weak Value of Externally Generated Externally Generated EvidenceEvidenceOur interviewees questioned whether (the Our interviewees questioned whether (the

research findings) told the whole story, and research findings) told the whole story, and were unsure whether they were of sufficient were unsure whether they were of sufficient relevance to their organisations to justify any relevance to their organisations to justify any change in their current practices. As confident change in their current practices. As confident senior executives, they trusted their own senior executives, they trusted their own experience and values considerably more than experience and values considerably more than any research findings, however convincing any research findings, however convincing and however well presented.and however well presented.

Guest et al, 2001: 73Guest et al, 2001: 73

It Sounds Nice But……..It Sounds Nice But……..

These practices are nice-to-haves; I could These practices are nice-to-haves; I could implement all of them in my own company implement all of them in my own company and still go bankrupt. The awful truth is, and still go bankrupt. The awful truth is, some of the most successful companies some of the most successful companies are run by bastards!are run by bastards!

Respondent (running a business support Respondent (running a business support agency) to an unpublished government agency) to an unpublished government study of HPWO, 2006.study of HPWO, 2006.

In Skills PolicyIn Skills Policy

The government still keeps trying to The government still keeps trying to ‘make the business case’ for ‘make the business case’ for investment in skills (but it investment in skills (but it investment to meet government investment to meet government targets not business need).targets not business need).

The all graduate workforce is 30% The all graduate workforce is 30% more productive than the no-more productive than the no-graduate workforce story.graduate workforce story.

So What’s the Future So What’s the Future Hold?Hold?• Irish Republic’s National Centre for Irish Republic’s National Centre for

Partnership and Performance, and the Partnership and Performance, and the Workplace Innovation Strategy.Workplace Innovation Strategy.

• Scotland may be willing to copy.Scotland may be willing to copy.

• Proposition starts with innovation and Proposition starts with innovation and firm performance, and skills and HPWO firm performance, and skills and HPWO follow.follow.

Things to ReadThings to Read

D. Guest et al. 2001. D. Guest et al. 2001. Voices in the BoardroomVoices in the Boardroom. London: Chartered Institute of . London: Chartered Institute of Personnel and Development.Personnel and Development.

D. Guest. 2006. D. Guest. 2006. Smarter Ways of WorkingSmarter Ways of Working, SSDA Catalyst Issue 3, Sector , SSDA Catalyst Issue 3, Sector Skills Development Agency.Skills Development Agency.

P. Tamkin, M. Cowling & W. Hunt. 2008. P. Tamkin, M. Cowling & W. Hunt. 2008. People and the Bottom LinePeople and the Bottom Line, , Department for Innovation, Universities and Skills (research report).Department for Innovation, Universities and Skills (research report).

Keep, E., & Mayhew, K. Keep, E., & Mayhew, K. Can Employers Be Persuaded That Training Pays?,Can Employers Be Persuaded That Training Pays?, Glasgow: Futureskills Scotland.Glasgow: Futureskills Scotland.

National Centre for Partnership and Performance. 2005. National Centre for Partnership and Performance. 2005. Working to our Working to our Advantage - A National Workplace StrategyAdvantage - A National Workplace Strategy, Dublin: NCPP., Dublin: NCPP.