The Skills-Productivity Nexus

This report has been written as part of a joint Department of Labour/Industry Training Federation project aimed at improving the ability of Industry Training Organisations (ITOs) to assist workplaces to raise their productivity. The report sets out results of a literature scan exploring the links between skills, their application, and productivity, and also documents the experience of a number of manufacturing ITOs in expanding the breadth of their services beyond skills development. The report points out that:

• Improved productivity and organisational performance is attributed to a number of “interventions”: be those better training, enhanced managerial capability, employee engagement, improved employee recognition and reward, innovative production practices. The key finding though, is that on their own, any one intervention is likely to have limited impact. The additive effects must be recognised, as well as sequencing of change in some cases.
• Interventions of this nature do add cost. They are more likely to add value in firms that have a competitive strategy based on the delivery of high-value products and services, and to have limited (or net negative) returns in high volume business models that rely on minimising cost. They are not a universal panacea. Furthermore, managers can often be certain about the costs and when they will occur but much less so about the rewards and when they can be realised.
• It is not the nature of the interventions that matter, but the manner in which they are deployed. For example, engagement of employees through unions can be a high value intervention, or it can have large negative consequences.

You can either view the report in HTML or download the PDF version (pdf, 37 pages, 1MB).