« Previous | Contents | Next »
Listen
Executive Summary
The aims of this project were to use case studies of companies, to obtain a better understanding of the links between employers' product markets strategies and the demand for skills. It sought to identify the conditions and constraints in which firms' product market strategies affect skills utilisation, and explore the potential implications for public policy.
Methodology
The methodology was to use case studies of 32 companies in five of the economic sectors identified by the Scottish Government as crucial for the development of its economic strategy. In order to achieve sufficient coverage of all the various segments in each sector and because of confidentiality issues the study focused on the following sectors: Hotels, Financial Services, Creative Industries, Food and Drink and Utilities. Interviews were also conducted with key informants who had a knowledge of the sector and skills issues within it. The case studies covered three main areas: the firm's competitive or product market strategy and how this was affected by market conditions and public policy; the ways in which the firm developed and utilised the skills of its employees and their experiences with the recruitment and supply of labour. These three themes were developed in the subsequent analysis which forms the main body of this report and the conclusions. Individual case study write-ups will not be published. Including the level of detail necessary in each case-study made it impossible to adequately anonymise some of the companies involved.
Previous research had identified the link between product markets strategies and employers' demand for skill in terms of a linear relationship with product market strategies determining the companies skill strategies and thereby the utilisation of skills within the firm. The researchers adopted a different approach, one which saw the product market or competitive strategy of the firm, (how the firm positions its product or services in the market in relation to their competitors) as potentially influenced by a range of factors in the market, including government policy. However, the way in which this competitive strategy then shaped the utilisation of skills within the company was seen to be a result of the firm's skills strategy; that is the ways in which the company chose to use the skills of its employees. This meant that in each of the case studies the links between the product market strategy and the utilisation of skills was seen as empirically contingent.
The nature of the research, based on a small number of case studies in key sectors, suggests that there is no basis for general policy recommendations or conclusions. However, the detailed insights gathered can illustrate potentially fruitful areas to take forward.
Key Findings
There are three sets of key findings.
1. The first is that while employers remain in firm control of their product market and skills strategies, these are shaped by their experience of the market. We identified a number of ways in which government has been able to influence employers' product market strategies. These ranged from legal measures such as the use of levies, licences to practice, procurement specification and skills passports to government-sponsored programmes such as Investors in People (IiP), to persuasion based on research evidence. In addition to confirming the importance of some of these, this research revealed a series of other ways in which government actions, at different levels, affected employers' product market and skills strategies. None of these have been previously discussed in the research literature. The two most important of these were what we have called 'regulation' and 'branding'.
The report distinguishes between three types of regulation: efficiency, standards and criteria.
(a) Those that attempt to function through improving the efficiency of companies - we call these 'efficiency' regulations, e.g. regulatory frameworks in the utility sector. Their main function is to increase the operational efficiency of the old nationalised utilities and to safeguard against any possible misuse of monopoly power. These regulations can show a powerful influence over business strategies.
(b) The second type we call 'standards'. These may be legislative standards, as in the case of Health & Safety or they may be private standards as with those developed by the International Standards Organisation ( ISO) and enforced through large or multinational companies. These require compliance and can also have a powerful impact on the utilisation of skills in the workplace.
(c) The third type we call 'criteria' regulations as these provide guidelines for compliance which are spelt out in the criteria that are used for enforcement. These are evident in the private sector through the use of grading systems, as in the hotel industry where the grading of hotels by both public sector and private sector agencies provide guidance for employers on what criteria they need to satisfy to improve the quality of the service they offer. In the public sector they may be evident in the criteria that grant giving bodies attach as a condition of their awards, for example insisting that grants given to charities include a proviso that acceptance of the grant should be accompanied by actions to ensure the development of staff skills.
We use the term 'branding' to refer to the attempts by government, in collaboration with the private sector, to market specific industries and improve their location in national and global markets. These function to help employers change their product market strategies usually in the direction of higher value-added products or services. In our case-study sectors, they are especially important in the Hotel industry (as well as in the wider tourism and hospitality sector) and to a lesser extent in the Food and Drinks and Financial Services industries. These public private sector collaborations provide another set of levers through which employers' product market strategies can be influenced by public policy. In the public sector Creative industries, the use of government controlled appointments to leadership positions has been instrumental in changing the product market and skill strategies of organisations in the creative and performance arts.
Another form of government action which we encountered in all sectors was the use of persuasion. Our case studies revealed a number of ways in which employers might be better persuaded to improve the utilisation of their labour forces' skill and so enhance their competitive position in the market. However, the impact of this type of government action will vary between sectors. In Food and Drink there is considerable scope for improvements but in the Utilities sector there is much less room for improvement, as the employer's use of skills is much more tightly controlled there by standards regulation.
What our result also suggests is that these mechanisms operate differentially across the various sectors. This means that in some sectors, employers have more control over their competitive strategies and, in some instances their skills strategies than in others. For example, in the Energy and Utilities sector, forms of efficiency regulation leave employers with less room to manoeuvre than, say, in the Food and Drinks or Hotel sectors. Similarly, standards regulations in the Energy and Utilities sector constrain employers' utilisation of skills far more than in the Hotel industry. What these and the subsequent results suggest is that concept of sector has an important analytic content. It suggests that when it comes to understanding the levers that government can utilise to shape the product market strategies of employers these are much more powerful in some sectors than others because of the nature of the sector. From the employers' point of view it means that in some sectors they are in a position to exercise much greater control over their product markets strategies and their utilisation of skills than they are in others.
In terms of government levers, we must also recognise the devolved nature of Scottish government. Some of the levers we identify are the preserve of the Scottish Government; others are reserved powers of the UK Government. Our discussions with the Sector Skills Council representatives, themselves licensed by the UK Commission for Employment and Skills, indicated the need for close collaboration on these issues.
2. The second set of results concern the relationship between product market strategies and skills utilisation. Here, the case studies provided examples of companies in which there was a link between the decision of the company to compete in high value-added product markets and their subsequent attempt to up-skill their labour force. The line of causality went from the product market or competitive strategy to the utilisation of skills. However, there were also companies which had decided to use the skills of their employees to provide a competitive advantage and move their product market strategy into higher value-added goods and services, with the line of causality apparently moving in the other direction. These case studies all suggested that attempts to compete in higher value-added markets was creating pressure on employers to up-skill their labour force.
Yet what we also found were firms in the case studies which were already competing in higher value-added product markets but with only a minority of skilled workers and the majority low skilled. There were others which while competing in a relatively high value-added market were thinking of deskilling the work process in order to resolve difficulties in recruitment. There were a number of others which while competing in the middle of their markets saw no need to enhance the skills of their employees. In short, while attempts to compete in higher value-added markets created pressure on employers to increase the utilisation of employee skills, there was no invariant relationships involved. Employers had considerable discretion over whether or not they chose to enhance the skills of their labour force.
3. The third set of findings concern the ways in which employers set about utilising the skills of their labour force. Here our results, supported in places by other research, suggested that there are two important factors that shape the level of skills and the utilisation of those skills by employers. These relate to the technologies used by employers and the management or high performance working practices they adopt. This explains why some employers are able to compete effectively in high value-added markets with a high proportion of low-skilled labour and conversely why some employers in low value-added markets can improve their competitive provision through improving the skills of their labour force. While these findings are not necessarily new, what is new is the suggestion provided by the case studies and other evidence, that there are important sector differences both in the use of technologies and in the use of high performance management practices that are specific to each sector. Again the concept of sector has strong analytic potential.
Conclusions
While we have concentrated on identifying the levers available for government action, we must stress that not all employers would request such support. We have a number of case studies of employers who do not see any need for government help and who are perfectly happy with the skills of their labour force and their product market strategy. We also have others who, while they may request improvements in the supply of vocational skills from the education system, see their own skill strategies as something they wish to control. Indeed, they have taken a lead in formulating some very forward-looking skills strategies to support their own operation and expansion. For these employers who see the skills of their staff as part of their competitive advantage in the market, any attempt to try and control their use of skills by outside parties would be counter-productive. For others who wish to shift the product market strategy and make more effective use of the skills of their staff such help would be welcomed. To be effective any policy initiatives have to be sensitive to these diverse requirements.
Of course these findings are only based on a limited number of case studies and therefore the results are tentative. They require further research to corroborate them. However, what the analysis of these case studies suggests is that there are important sector differences in the factors which shape employers product market strategies, including those influenced by governments. They also suggest that there are also important sector differences in the factors which shape employers' utilisation of skills and the issues they encounter in the supply of labour. This suggests that public policy delivery may be improved by the development of institutional structures, employer-led, and firmly located within each sector, which can help co-ordinate these various government levers in order to enhance the pressure to shift product market strategies up the value chain. Such institutions could also deliver sector specific knowledge of skills utilisation practices to those employers who want to change their skills utilisation strategies as well as help ensure an adequate supply of skills.
The sectoral approach is not the only possible approach. There are differences in terms of ownership, for instance, there may be specific issues around family businesses. Similarly, small businesses may have particular issues. But, in our opinion, a sectoral approach not only has analytical power, it also provides a mechanism for implementation.
In some of these key industries Scotland may already be on the way to meeting this challenge. They are already developing an appropriate collaborative infrastructure for supporting employers in improving their product market strategies and responding to their skill needs. For example, in the Financial Services, the Financial Services Strategy, a collaboration between the public and private sector, has already been successful in identifying and addressing skill needs and helping employers improve the utilisation of skills. In the Hotel industry, and now in the Food and Drinks industry, the basis for an effective set of institutions may be developed through the activities of VisitScotland and more recently Scotland Food and Drink. Our discussions with employers and other stakeholders suggest that at the moment the Utilities sector and the Creative sector, especially the private sector of the creative industries, do not have similar support mechanisms, although the Sector Skills Councils are currently playing an important role here.
« Previous | Contents | Next »