Mike Thompson, Chief Executive, Sustain HR Limited

Time to reverse the decline

As I talk to clients from across different sectors of our economy about their future skills needs a common theme emerges which is that, to survive and flourish, businesses must reverse the decades long decline in investment in workforce training that we have seen in the UK.

It is clear that businesses large and small see themselves in the midst of a skills revolution driven by the ever growing pace of technological change that has revolutionised traditional business models and changed consumer behaviours and preferences for how they consume goods and services.

Many businesses have recognised that they need to invest significantly in new technologies and new skills within their workforce to meet this challenge head on but this re-skilling effort is often hampered by a lack of available learning and development budget which has been repeatedly scaled back year on year.

It is made even more challenging in larger more established businesses by the sheer scale of the re-skilling efforts required and an ageing demographic with the workforce.

Delivery models challenged by emerging technologies in all sectors

No industry I talk to appears untouched, with even the more traditional sectors such as Insurance or Law seeing their delivery models challenged by emerging technologies such as Artificial Intelligence and digitisation.

At a recent visit to the Barclays Law Eagle lab I saw how start up tech firms are partnering with major law firms to look at how to create new ways of meeting client needs through technology.

These type of incubator hubs will become common place and will fuel the success of our businesses in the modern world but moving from old models to new will be painful.

Historically, to meet their current and future skills needs businesses have looked to recruit either experienced skilled labour or develop early in career graduate talent.

Increasingly this avenue is becoming more problematic with graduate talent often difficult to attract and subsequently hold on to and skilled labour only available at a premium if available at all. Brexit can only exacerbate this.

Business Barometer 2019

The latest research  from the Open University drives home this point with some incredibly stark figures and costs to business of the current skills shortage

The research reveals that organisations spent £4.4 billion on temporary staff, recruitment fees and increased salaries in the past 12 months due to difficulties finding employees with the right qualifications and experience.

Key Findings: 

  • Over two-thirds (68%) of employers have struggled to find the right skilled workers over the last 12 months 
  • Organisations report a 33 per cent increase in spending on recruitment fees in the last 12 months as they try to attract talent
  • But more than half (53%) of organisations report increasing training budgets, in an attempt to develop a more sustainable solution to skills gaps
  • The skills shortage comes as the UK employment rate stands at the highest level since 1971. The dearth of skills in the labour market means that recruitment is taking one month and 27 days longer than anticipated, forcing many to seek external help. 
  • Three in five (59%) senior business leaders agree that the skills shortage will worsen after the UK officially leaves the European Union, which may explain the shift to focus on home-grown talent. 
  • While seven in 10 (71%) employers agree that developing the skills of the existing workforce is a more sustainable approach, it is crucial that any training helps to support business objectives, while offering as much as value as possible.

Decades of underinvestment in skills

The skills gap has come about due to years, if not decades, of employers underinvesting in skills and a consequent stagnation in productivity.

The greatest area of under investment that I experienced in my corporate career was in leadership development where an army of accidental managers was created as strong “technicians” were promoted into leadership positions without sufficient training and development.

The knock -on effect of this has been poor employee engagement, productivity and wellbeing.

The advent of the Apprenticeship Levy and degree apprenticeships has handed businesses the key to unlock this issue with access to the highest levels of leadership development now an affordable reality.

Many businesses are grasping this opportunity with both hands and will reap the benefits but, incredibly, many still have little or no awareness or understanding of how they can take advantage of both the funding and access to learning that is available.

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This is leaving vast sums of levy unspent which at best is a missed opportunity for L&D professionals and at worst a true dereliction of their duty of develop the skills their businesses desperately need.

Higher level technical skills

It isn’t just Leadership skills where businesses aren’t taking full advantage of the Levy it is also higher level technical skills such as IT, Data Analytics and Engineering where there are desperate shortages of skill but where numbers of starts on degree or degree level apprenticeships is growing but still well below what you would hope to see.

There are a number of factors contributing to this but probably the most concerning is the simple lack of understanding of the levy and the opportunities it presents.

There is no doubt that awareness of apprenticeships is higher than it has been for a long time but understanding of how to reap the benefits of apprenticeships remains low.

The DfE must think long and hard about how to stimulate the supply side of the apprenticeship equation and turbo charge the growth of higher level anddegree level skills in the UK.

It needs to focus on three things:

  1. Stop only funding the lowest cost route: It needs to take a long hard look at its policy of only funding the lowest cost route to competence which has driven down funding bands to the point where Universities do not feel it is worth entering the market and there is often a lack of meaningful provision available to employers. We saw this very starkly in Financial Services where on a handful of HE organisations stepped in to deliver the Level 6 and 7 standards which are very much needed for our Financial Services companies to continue to compete on a global stage.
  2. Stop preaching to the converted: Holding bi-annual conferences for companies already utilising apprenticeships adds little or no value. This effort would be better focused on selling the benefits of apprenticeships to the thousands of companies who are yet to make any meaningful investment of their levy. The Apprenticeship Ambassador Network needs to be supported by a high profile national campaign working alongside Universities that focuses on educating employers. High profile schools education/marketing campaigns are only any good if there is a strong pipeline of opportunities for young people to move into.
  3. Close the gap between FE and HE provision: A more joined up and consistent offering to employers is needed to allow simple and easy progression from the lower rungs of the skills ladder to the higher and degree level skills businesses need.

The skills gap is a stark reality we all face but we can take encouragement from the fact that the foundations to address this gap are in place.

We now need to press on and build on them.

Mike Thompson, Chief Executive, Sustain HR Limited

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