Broadly speaking, at a policy level, skills are often seen as an explanation for the United Kingdom’s persistently lower productivity levels when compared to other national economies. There are a number of problems with this; not least at the firm level, where productivity is unlikely to be seen as a key performance measure other than for those firms operating in a relatively labour intensive environment competing in global markets. Interestingly there is evidence of a weak link between productivity and profitability as seen in matched plant studies of commercial banking firms in Germany, the UK and the USA – the German firms exhibited higher productivity levels, but lower profitability levels than their counterparts in the other nations ( Mason et al. 1999).
The key point is that there are a number of factors that drive and impact on productivity levels beyond skills; innovation, technology, supply chain relationships, physical capital, leadership and culture to name a few. As such, it becomes difficult for researchers to single out the impact that skills are having on productivity alone, whilst making comparative studies over extended periods of time a challenge. Similarly, a great number of firms do not compete on the basis of skills, therefore “whole economy studies conflate low, no and high-skills competition” (Grugulis & Stoyanova 2011: 516) to such an extent that the data/information drawn from them may be considered unreliable and unreflective of the position of an economies skills capital.
In the UK, the reality is that a large section of the economy produces low-value goods, employing “large numbers of low skilled, low wage jobs” (Lloyd & Payne 2004: 18); comparing and/or including findings from these firms with those that operate with skills as a focus of their competitive advantage does little to aid our understanding on establishing the causal links between skills, productivity and performance. Put simply, if businesses successfully (profitably) operate producing low value goods/services through low-skilled employees, why would/should they invest in the skills of their people if they do not see it adding to their performance (profits)? The reality is skill development becomes a hard sell to these people. The building-up of skills and competencies needs to be embedded in the company business and competitive strategy; research/policy decisions ought to focus on supporting organisations/sectors where this is viewed as an imperative to their success. In other words…wise up to when and where skills can add value.
Grugulis, I and Stoyanova, D. (2011) ‘Skills and Performance’ British Journal of Management Studies 43(3): 515-536.
Lloyd. C and Payne, J. (2004) ‘Just another bandwagon? A critical look at the role of the high performance workplace as vehicle of the UK high skills project’, SKOPE Research Paper No.49, Coventry: Universities of Oxford and Warwick.
Mason, G., Keltner, B., and Wagner, K. (1999) ‘Productivity, Technology and Skills in Banking: Commercial lending in Britain, the United States and Germany’, NIESR Discussion Paper No 159, London: NIESR.