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Skills gaps in Australian firmsMargaret Lindorff aa Department of Management , Monash University , Melbourne,AustraliaPublished online: 20 May 2011.
To cite this article: Margaret Lindorff (2011) Skills gaps in Australian firms, Journal of VocationalEducation & Training, 63:2, 247-259, DOI: 10.1080/13636820.2011.567336
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Journal of Vocational Education and TrainingVol. 63, No. 2, June 2011, 247–259
ISSN 1363-6820 print/ISSN 1747-5090 online© 2011 The Vocational Aspect of Education LtdDOI: 10.1080/13636820.2011.567336http://www.informaworld.com
Skills gaps in Australian firms
Margaret Lindorff*
Department of Management, Monash University, Melbourne, AustraliaTaylor and FrancisRJVE_A_567336.sgm(Received 25 August 2010; final version received 25 February 2011)10.1080/13636820.2011.567336Journal of Vocational Education and Training0729-4360 (print)/1469-8366 (online)Article2011Taylor & Francis0000000002011Professor [email protected]
This paper reports the results of a survey of more than 2000 managers examiningperceptions of skills gaps in a range of Australian firms. It finds that three quartersreport a skills gap, and almost one third report skills gaps across the wholeorganisation. Firm size and industry differences exist in perceptions of the effectof the skills gap on the organisation, the causes of the skills gap, the strategies usedto address the skills gap, the types of skills which are lacking, and the managementof training and development. The research shows that managers believeleadership, management, and professional and industry-specific roles have thegreatest needs, and that basic skills are generally strong. There is evidence thattraining and development is being under-used as a remedy for skills gaps, and thatsmall firms may not be strategically recruiting due to perceptions that there arefew qualified job candidates. Although skills gaps may be more of an issue forlarge than for small firms, the needs of small firms and those in ‘non-big business’areas such as charities and the not-for-profit sector should not be overlooked.There is not a ‘one size fits all’ approach to reducing skills gaps which will fit allfirm sizes across all sectors.
Keywords: skills gap; small firms; training and development; Australia
Introduction
Recent newspaper reports are replete in claims of skill shortages in Australia. Theseinclude a ‘dire skills gap in the rail sector’ (Tamarzin 2010), a ‘drastic depletion’ ofkey skills in ports (Hepworth 2010), and skill gaps in IT (Corrigan 2010), agribusiness(Mather 2010), resources and construction (Scott 2010) and plumbing (Herde 2010).Also identified is an absence of skilled scientific researchers (Healy 2010), stonema-sons, locksmiths, signwriters, midwives, mining engineers, geologists and arborists(Harvey 2010). The Victorian Employers’ Chamber of Commerce and Industry (2010)also recently put out a media release claiming that ‘Nearly three quarters (76 per cent)[sic] of employers believe school leavers have poor literacy skills’. Governmentfigures also indicate growth in 16 of the 20 industry sectors in the past five years,particularly in mining, which has grown 9.9% per annum over that period (and 20%over the past year), and electricity, gas, water and waste services (grown 5.7% peryear), and professional, scientific and technical services (grown 5.2% per year) (SkillsAustralia 2010). The 2010 government budget also announced $661 million would bespent on 39,000 new training places, 22,500 apprenticeship start-ups, and adult literacyand numeracy programs (Hannen 2010).
*Email: [email protected]
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There thus seems to be general consensus that there are many skills shortages inAustralia, and this has been the case for several years. For example, Sheldon andThornthwaite (2005) reported on ‘serious skills shortages, particularly in higher tech-nical skills, information technology and particular interpersonal competencies’ (421).Likewise, Lansbury and Baird (2004) reported that industry representatives ‘regularlycomplain about skill shortages – especially in critical areas of the economy such asconstruction, mining and manufacturing’ (152).
On the face of it this appears strange, as the latest Australian Bureau of Statisticssurvey on education and training experience (ABS 2009) found that in the past year32.1% of employed persons undertook some form of non-formal learning (taught byan educational institution or in the workplace but not leading to a recognised qualifi-cation), 23.9% undertook formal learning toward a recognised qualification, and87.1% undertook some form of informal learning (which could be related to work,family, community or leisure). Earlier data (ABS 2001a) found that 75.2% of personsin the labour force participated in some work-related training in the previous year.
However, 60% of these courses were completed in less than 10 hours (ABS2001a), and the spread of training provision is uneven. For example, the latest ABS(2003) data on employer training practices reports more public sector employers(84%) than private sector employers (41%) provide structured training, and largeremployers with more than 100 employees are more likely to provide structured train-ing than small firms with less than 20 employees (98% compared to 39%). Similarly,Jones’ (2006) analysis of ABS data for 1994–1995 and 1997–1998 shows smallerfirms are less likely to ‘provide training, adopt formal training methods and use exter-nal training providers relative to medium-sized firms’ (p. 592). Firms with fewer thanfive employees are unlikely to train, and skills acquisition in small firms is dependentupon the skill set and training expertise of the owner-managers or employees whoconduct the training. Similarly, Bartram (2005) in an analysis of 1995 data found thatfirms with fewer than 100 employees are less likely to undertake formal trainingschemes, supervisory training or skills audits. This may be because small businessespredominate in the retail and hospitality industries, and suffer from unqualifiedmanagers who find it difficult to ‘drive training’ (Smith and Kemmis 2010, 222).
Moreover, there may be skills wastage in the system, with many employees eitherover-qualified for their current position, or qualified in areas unrelated to their currentemployment (see Hall and Lansbury 2006 for a discussion of this area). Many employ-ers are also reluctant to take on the cost of training and development (Lansbury andBaird 2004; Sheldon and Thornthwaite 2005). In one study, even when employers‘identified an impending shortage of trades persons due to a decline in apprenticeshipnumbers, none of the enterprises indicated they intended to increase their commitmentto apprenticeships’ (Billett 2000, 17). This may be because training is seen as a costrather than an investment, particularly in small firms (Tessaring and Wannan 2004),and because skill development is seen to increase employee mobility, with a subse-quent loss to the firm of their training investment (Freyens 2006). More precisely, 89%of training courses reported in the ABS (2001a, 9) study were undertaken by ‘wageand salary earners who considered skills gained from training to be transferable to asimilar job with another employer’, although the financial cost of only 7% of all coursecompletions was borne by employees. ‘Poaching’ by ‘free-riding’ firms thereforemakes economic sense (Crouch 2005).
There is also criticism of the way industry groups and enterprises drive the voca-tional education system in Australia (Billett 2000; Sheldon and Thornthwaite 2005).
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It is claimed that enterprises want staff trained to fulfil only specific current enterpriseneeds and expect courses to be tailored accordingly, and most do not have a long-termor strategic view of their workforce skill needs (Billett 2000). It has also beensuggested that most prefer to meet skill needs through recruitment rather than training(Sheldon and Thornthwaite 2005). Yet current Australian VET policy is that individ-ual firms are the client base, and that funding should reflect the wishes of thesecompanies (Sheldon and Thornthwaite 2005). Furthermore, industry associationsreflect the immediate commercial interests of their members, and push for evengreater influence for enterprises and their associations.
Thus VET faces the expectation it ‘will respond rapidly and effectively to industryemergency calls about… skills shortages’ (Butler and Ferrier 2006, 583). Yet it ispossible that these calls are made by the large industry groups which now drive thevocational education sector, rather than small firms. However, small firms are impor-tant contributors to the Australian economy. Ninety per cent of employing businessesin Australia employ less than 20 people (the ABS 2009 definition of small business);10% employ 20–199, and less than 1% have 200 or more employees (ABS 2010a).Almost half the private sector workforce is employed in small businesses with fewerthan 20 employees (ABS 2001b). However, there is consistent evidence that smallfirms spend less than large firms on training (Freyens 2006; Smith 2003) perhapsbecause small firms lack the resources needed to support or replace those undergoingtraining programs which necessitate an absence from normal work. They are alsounlikely to have the resources to register as publicly funded private Registered Train-ing Organisations (RTOs) within the VET sector, an option which is available to largerfirms (see Agbola and Lambert 2010 for a review of the Australian VET sector).
Small firms thus may not only be overlooked in the discussion on skills shortages,but they seem critical to any assessment of skills requirements. They are typicallymanaged by informality (Cardon and Stevens 2004), and human resource manage-ment has been identified as a major area of deficiency in many (Jones 2004). Forexample, Bartram (2005) in an analysis of 1995 Australian data found that firms withfewer than 100 employees were less likely to utilise formal HRM practices in selec-tion or staff appraisals. This is of concern, as it is only those small firms which haveformalised HRM practices which are able to ‘search for and find the skills, attributesand competencies required from new employees’ (Barrett et al. 2007, 694).
In summary, it is probable that the debate on skills gaps has focussed upon claimsby employer associations which over-emphasise the ‘big business’ perspective (andtheir own interests). An alternative is to ask a large number of managers working insmall, medium and large organisations in a range of sectors to identify the skills gapsin their own firms. This should give an ‘on the ground’ picture of gaps in different sizedworkplaces in different sectors, rather than selectively filtered ‘opinion-driven wishlists’ (to quote Sheldon and Thornthwaite 2005) provided by employer organisationswith a ‘large organisation’ mindset.
The aim of this paper is therefore to identify perceived skills gaps in the Australianworkforce. It will have three secondary objectives. The first is to compare the skillsgaps in small firms with those in medium and large firms. The second is to highlightthose industry sectors which have the greatest skills gaps. The third is to consider theimplications for education and training, particularly in the VET sector. Skills gaps are‘skills deficiencies on the part of a firm’s existing workforce’ (Sutherland 2009, 542).These contrast to skills shortages, which are ‘the absence of potential employees withthe requisite technical abilities to perform tasks required by the firm,’ (Sutherland
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2009, 542). This is done by asking more than 2000 Australian managers of large,medium and small firms across a wide range of industries about skills gaps in theircurrent organisation. They are asked if they have a skills gap and, if they do, the areasof need, the reasons for the gap, and its impact on their organisation. They are alsoasked what their firm is doing to address skills gaps.
Method
This paper uses results of a survey conducted by the Australian Institute of Manage-ment (AIM) Victoria of approximately 10,000 Victorian and Queensland membersand other managers. Members were sent an email by the Victorian office asking themto click a link to respond to a survey. Participation was anonymous unless respondentswished to be entered into a draw for a bottle of Grange. Results of the survey werepassed on to the writer of this paper; contact details of those who entered the drawremained confidential.
Two thousand one hundred and sixty-three managers responded, a response rate ofapproximately 20%. Forty-one per cent of respondents were female. Seventy-sevenper cent were from the state of Victoria, 14% from Queensland, and the remainderwere spread across other states. Six per cent were business owners, 7% were CEOs orboard members, 30% were senior managers, 32% were middle managers, 11% wereprofessionals or technical specialists, 12% were team leaders or supervisors, and 4%regarded themselves as a team member. Forty seven per cent were aged 45 years ormore; 45% were aged 31 to 44; and 8% were aged 30 years or less. Forty one per centhad some postgraduate qualification; 23% had a completed undergraduate degree;18% had a completed diploma; and 18% had a certificate, a completed Year 12, orlower than Year 12 education. Two per cent worked for small businesses with fewerthan 20 employees; 17% for business with 21 to 50 employees; 11% for businesseswith 51 to 100 employees; 12% for firms with 101 to 200 employees; 17% for firmswith 201 to 500 employees; 14% for firms with 501–1000 employees; and 28% forfirms with more than 1001 employees. Company size was collapsed into three groupsto match the Australian Bureau of Statistics’s (2001b) study of small business’sclassification of firm size – small firms (20 or fewer employees – 2%), medium firms(21 to 200 employees – 40%) and large firms (more than 200 employees – 59%).Sector affiliation of respondents is shown in Table1.
Results
The prevalence of skills gaps
When asked about whether they believed there was a skills gap in their organisation,75% of respondents believed there was. Significantly fewer respondents in small busi-nesses (62%) than medium (73%) or large businesses (78%) believed there was a skillsgap (Gamma = .171, p = .000). The greatest need was seen in charity and not-for-profitorganisations (100%), followed by public administration and safety (86%), mining(84%) and utilities (81%). In other areas between 67% and 80% of respondentsbelieved there was a skills gap.
When asked in which department was the skills gap most evident, 29% nominated‘Across the organisation’, particularly in large (34%) compared to small (20%) ormedium (22%) firms (Gamma = .283, p = .000). Firms where there were the greatest
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gaps across the whole organisation were public administration and safety (55%), artsand recreation services (39%), agriculture (37%), charity and not for profits (36%)and education (35%). Fewest organisation-wide problems were in retail trade andmanufacturing (both 19%).
Consequences of skills gaps
Fifty-two per cent of respondents said the current skills gap in their organisationplaced more stress on employees. Thirty nine per cent claimed it lowered staff morale,32% that it had caused the loss of high-performing employees, 31% that it had reducedcustomer service standards and had impacted on profits and performance goals, 30%that it had impacted on strategic planning, and 17% that it had caused the firm to losemarket share to competitors. Fewer than 2% of respondents believed it had little or noimpact.
There was no significant difference in the amount of stress caused by skillsgaps across organisational size: small, 47%, medium, 51%, large 53% (Gamma = .048,p = .262). The greatest stress was felt in public administration and safety (61%),utilities and education (both 58%), construction (57%), information and media, whole-sale trade and health and social assistance (all 56%) firms. The least stress was felt incharity and not for profit firms (27%).
Table 1. Sector affiliation of respondents.
Sector Number (%)% population
employed in sector*
Accommodation and food services 60 (2.8%) 6.9Agriculture, forestry and fishing 49 (2.3%) 3.3Arts and recreational services 18 (0.8%) 1.8Charity and not-for-profit 11 (0.5%) Not availableConstruction 74 (3.4%) 8.8Consulting and professional services 167 (7.7%) 3.9Education and Training 119 (5.5%) 7.7Finance and Insurance 247 (11.4%) 3.6Health and social assistance 229 (10.6%) 11.0Information and media 34 (1.6) 2.0IT and communication 168 (7.8) Not availableManufacturing 246 (11.4%) 9.1Mining 37 (1.7%) 1.6Professional, scientific and technical 77 (3.6%) 7.7Public administration and safety 210 (9.7%) 6.2Rental, hiring and real estate services 68 (3.1%) 1.6Retail Trade 92 (4.3%) 11.0Transport and storage 87 (4.0%) 5.2Utilities 111 (5.1%) 1.1Wholesale trade 59 (2.7%) 4.0
*Source: ABS (2010b) Catalogue 6359.0.
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Staff morale as a result of skills gaps was significantly worse in large (42%) andmedium (36%) organisations than in small firms (9%) (Gamma = .175, p = .000).Worst affected were those in public administration and safety (51%), professional,scientific and technical services, and manufacturing (both 42%), and information andmedia, education, mining and IT/communication (all 41%).
The loss of high-performing employees was similarly greatest in large (35%)and medium (29%) organisations, and lowest in small firms (7%) (Gamma = .182,p = .000). The loss was greatest in information and media (47%), public administra-tion and safety (45%), and utilities (37%) firms, and lowest in arts and recreationservices (22%).
Reduction of customer service due to skills gaps was most reported in publicadministration and safety (38%), charity and not for profits, and construction (both37%). There was no significant difference in the impact on customer service in firmsof different size (large and medium firms both 31%, small firms 18%) (Gamma =.024, p = .600), although small firms seem less affected.
The impact of skills gaps on profits and performance goals was most serious incharities and not for profits (54%), professional, scientific and technical (42%) andinformation and media (41%) firms. There was no significant difference in the impacton profit or performance in firms of different size (large firms 30%, medium firms31%, small firms 33%) (Gamma = −.026, p = .575).
Firm size did, however, influence the impact of skills gaps on strategic planning(Gamma = .091, p = .050), with large firms (31%) more affected than small (24%) ormedium (28%) firms. The impact was greatest in professional, scientific and technical(48%) firms and public administration and safety (42%), and lowest in mining (13%).
Causes of skills gaps
Of those companies with skills gaps, the most common reason cited was that skills inthe current internal workforce did not match changes in company strategy, goals,markets, or business models (47%). This was most frequently mentioned in arts andrecreation services (67%), professional scientific and technical, education and train-ing, and charity (all 55%). There was no significant difference across firm size,although small firms seem least affected – large (48%), medium (45%) and small(32%) firms (Gamma = .075, p = .128).
Too few qualified candidates when hiring was mentioned by 42% of those with askills gap in their organisation, and small firms (71%) were more affected thanmedium (43%) or large (40%) firms (Gamma = −.110, p = .028), perhaps due to theabsence of formalised recruitment strategies in small firms (Barrett et. al 2007), orbecause of the need for staff to be more multi-skilled in smaller firms. The absence ofqualified candidates most frequently occurred in mining (61%), utilities (53%), andagriculture and construction (both 49%) firms.
There was believed to be no long-term commitment to employee learning anddevelopment in 24% of companies with skills gaps, most frequently in informationand media (36%), IT and communication services (34%) and arts and recreationservices (33%). Again, although there was no significant difference in large (25%)medium (23%) and small firms (11%) (Gamma = .079, p = .171), small firms seemedleast affected.
Insufficient funds to employ new people was nominated as a cause by 19% ofthose with a skills gap, and was more common in medium (24%) than small (21%) or
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Journal of Vocational Education and Training 253
large (16%) firms (Gamma = −.223, p = .000). Funding problems mainly occurred inthe arts/recreation (50%) and information and media (36%) areas.
Training budgets were also cut in 18% of companies with skills gaps, more oftenin large companies (21%) than medium or small firms (both 14%) (Gamma = .208,p = .001). Training cuts were most common in arts and recreation services (50%)and charity/not for profits (27%).
Retrenchments were mentioned by 16% of those with skills gaps, and were morecommon in large (18%) than medium (12%) or small (11%) firms (Gamma = .206,p = .002). Retrenchments were most common in wholesale trade (33%), manufactur-ing (24%) and finance and insurance (23%). All these factors resulted in fewer skillsin the current workforce.
The nature of skills deficiencies
The skills gaps most frequently mentioned by all respondents were in leadership(34%) and professional and industry-specific skills (33%). Leadership was a biggerissue in large (39%) compared to medium (27%) and small (11%) firms (Gamma =289, p = .000). Information and media (53%), arts and recreation services firms (50%)and public administration and safety (47%) were most affected, and consulting andprofessional services (20%) were least affected. Professional and industry-specificskills gaps were greatest in mining (54%), utilities (49%), public administration andsafety (44%), accommodation and food services (40%), and construction (39%), andlowest in information and media (9%). They were not affected by firm size (36%small, 31% medium, 34% large; Gamma = .050, p = .272).
Process and project management skills were identified as lacking by 27% ofrespondents, particularly those in large (30%) and medium (24%) rather than smallfirms (11%) (Gamma = 171, p = .000). The professional, scientific and technical(38%), charity and not for profit (36%) and agriculture (35%) sectors were mostaffected, and wholesale trade (14%) was least affected.
A management gap was identified by 23%, and was greatest in large (25%) andmedium (23%) rather than small (9%) firms (Gamma = 117, p = .019). Retail andcharity and not for profit (both 36%) and wholesale trade (32%) enterprises were mostaffected, and professional and consulting services (15%) were least affected. Interest-ingly, the management gap was much smaller than the leadership gap in arts and recre-ation (22% compared to 50%) and information and media firms (27% compared to53%), suggesting respondents conceptually differentiated strategic leadership fromday-to-day management.
Communication and interpersonal skills were also seen to be deficient by 23% ofrespondents, particularly those in charity and not for profit firms (36%), wholesaletrades and rental, hiring and real estate services (both 32%). They were less needed inutilities (14%). There was no significant difference by firm size (small 11%, medium23%, large 24%; Gamma = .063, p = .209), although again small firms were less likelyto report a problem.
Additionally, although technical, IT or systems skill gaps were identified as lack-ing by only 18%, they were more a problem in large firms (20%) than small (13%) ormedium (16%) firms (Gamma = .151, p = .006). There were large gaps in this area incharity and not for profit (46%) and arts/recreation (33%) firms, and it was also aproblem in specialist IT and communication services firms (32%). It was a lesserproblem in construction firms (7%).
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Customer service skills gaps were evident to 17%, particularly in accommodationand food services (25%) and education (24%). These skills were particularly strong ininformation and media and mining firms, with only 6% and 5% respectively ofrespondents in these firms believing there was a customer service skills gap in theirfirm. There was no difference by firm size – small 16%, medium 16%, and large 18%(Gamma = .044, p = .434).
Sales skills were seen as acceptable in 86% of workplaces, although they weremore lacking in medium (18%) compared to small (16%) and large (11%) firms(Gamma = −.286, p = .000). Information and media and retail (both 24%), profes-sional, scientific and technical and rental, hiring and real estate services (both 21%)firms were most affected. There little need for sales skills or little gap in public admin-istration and emergency services, with less than 1% of respondents identifying it as agap in their organisation.
Employee basic skills such as typing, writing, internet, and phone etiquette wereseen as acceptable by 92% of respondents, although 18% of those in charity and notfor profit, 13% of those in transport and storage, and 12% of those in accommodationand food services saw a skills gaps in their workplace. There was no difference byfirm size (small 9%, medium 8%, large 8%; Gamma = .035, p = .649).
Management of skills gaps
The most frequently used strategy for addressing the skills gap within organisationswas training and development of employees (38%), followed by external recruitment(30%) and internal promotion (25%). Outsourcing (17%) was used less often.
Large firms (40%) were more likely to use training and development than small(38%) or medium (35%) firms (Gamma = .095, p = .030). There were also differencesin strategies across firm sectors. Training and development was most often undertakenin the mining (62%), public administration and safety (49%), transport and storage(48%), and education (45%) sectors.
External recruitment occurred less often in small (22%) and medium (25%),compared to large firms (33%) (Gamma = .192, p = .000). It was used mostly in trans-port and storage (37%), public administration and safety (35%), utilities (34%), andwholesale trade (32%), and less often in arts and recreation services (11%).
Similarly, outsourcing was used more by large (18%) than by small (11%) ormedium (15%) firms (Gamma = .15, p = .045). It was used most frequently by utilities(27%), mining (22%), IT and communications (21%) and public administration andsafety (20%) firms, but little used by agriculture and accommodation and foodservices (both 8%).
In contrast, there was no difference in the use of internal promotion in small(20%), medium (24%) and large (26%) firms (Gamma = .066, p = .180). It was mostoften used in mining (41%), retail (36%), information and media and construction(both 32%) and public administration and safety and wholesale (both 31%) firms.
Management of training and development
Overall, only 15% of companies strategically predicted skills needs, and 14% used askills inventory, whereas 25% used internal training and 21% used external trainers.Large (17%) and small (18%) firms were not as good at predicting skills needs asmedium firms (24%) (Gamma = .128 p = .031). Information and media (24%), public
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Journal of Vocational Education and Training 255
administration and safety (22%) and professional, technical and scientific (21%) firmsmost often strategically predicted skills needs; this was seldom done in wholesaletrade (7%).
Large (16%) firms were more likely to use a skills inventory than medium (12%)or small (9%) firms (Gamma = .168, p = .008). Mining and transport and storage (both24%), arts and recreation (22%) and public administration and emergency services(21%) used skills inventories most frequently; their use was not reported in charitiesand not for profits.
Firm size did not have a significant effect on the use of internal (Gamma = .063,p = .198) (small firms 16%, medium firms 24%, large firms 26%) or external training(Gamma = .072, p = .167) (small firms 11%, medium firms 20%, large firms 22%),although in both cases small firms reported less training. Internal training wasreported most often in construction (37%), arts and recreation services (33%), andretail (30%); it was used least often in utilities (15%). External training was used mostoften in mining and agriculture (both 29%), public administration and safety (27%)and transport and storage (26%), and least often in IT and communications (11%).
Discussion
In summary, managers in three quarters of the organisations represented report a skillsgap, and almost one third report a skills gap across the whole organisation. Skills gapsare believed to place stress on employees in more than half the firms, as well as lower-ing staff morale, causing the loss of high performing employees, reducing customerservice standards, impacting on profits, performance goals and strategic planning, andcausing firms to lost market share to competitors. Almost half the managers believethe causes of these skills gaps are a result of changes in company strategy, goals,markets, and business models, as well as too few qualified candidates when hiring,little business commitment to employee learning and development, insufficient fundsto employ new persons, and retrenchments. This is perhaps a reflection of the fast paceof organisational change (Jacobides 2010), and difficulties in constantly reskillingworkplaces. Skills gaps appear to be primarily due to environmental pressure placedby a changing economy, which has resulted in a need for new skills in the internalworkforce and skills shortages in external job candidates.
Those firms which address their skills gaps are doing so by training and develop-ing employees, recruiting externally, promoting internally, and outsourcing if needed.It is disappointing that only slightly more than one third of respondents report theirorganisation is using training and development of employees to overcome skills gaps,although, in contrast to the claim by Sheldon and Thornthwaite (2005), this is a higherproportion than those who use recruitment. Internal training also takes preference overthe use of external trainers. In addition, the finding that few firms strategically predictskills needs or use skills inventories is concerning, but consistent with Billett’s (2000)earlier findings. The reason for this may be constraints in HRD workforces (and theabsence of HRD professionals in smaller firms), but also the difficulties inherent inattempting to strategically predict future workforce needs given the rapid pace ofchange in the economy and in many firms.
Reported gaps centre on leadership, management, and professional skills, andinclude professional, industry-specific, process and project competencies. Althoughalmost a quarter of respondents identify gaps in communication and interpersonalskills there is little evidence that other basic skills are lacking. This is in contrast to
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reports by Industry bodies such as VECCHI (2010) which claim that high proportionsof school leavers have poor basic skills, and place emphasis upon trade skills. It alsoacts as a caution to having policies driven by pressure from industry bodies.
It is therefore suggested that vocational education courses should target leadershipand management areas, not just as discrete areas of study, but as units integrated intoother courses. This would provide a workforce ready to take on leadership andmanagement responsibilities as they occur. There are also specific professional andindustry specific skills, particularly in mining, utilities, and the public sector whichrequire development. The reluctance of firms to provide such training is of concern,as the vocational training sector cannot be expected to anticipate ongoing and ever-changing institutional needs, particularly when the firms involved do not strategicallypredict their own skills needs. Lifelong learning seems to be needed, and it may benecessary for individuals to bear some of the cost of the constant skills updating whichseems to be required.
With respect to differences across industry sectors, all the respondents in charitiesand not-for-profits report skills gaps in their firm, and it is the sector in which the larg-est proportion of respondents report the skills gap is having an effect on profits andperformance goals. Reduced customer service is also an issue. Gaps are mainly inmanagement, technical, and process and program management areas. It may be that,as Sheldon and Thornthwaite (2005) suggest, ‘big business’ is driving VET policy,and that charities and not-for-profits are being overlooked. It is therefore recom-mended that VET providers develop linkages with this sector, and develop speciallytargeted short courses to meet their skills needs.
Seven eighths of public administration and emergency services firm managers alsoreport a skills gap, and they were most likely to report a skills gap across the wholeorganisation. They also report the highest stress and lowest staff morale as a result ofskills gaps, in addition to loss of high performing employees, reduced customerservice, and poorer strategic planning despite relatively high levels of training anddevelopment. This requires further investigation. Public sector organisations are twiceas likely as private sector firms to provide training (ABS 2003). Why is the trainingand development not solving skills needs in the public sector? Is there large turnoveror job rotation? Is the training in the wrong areas? Is the training ineffective?
The third greatest skills gap is in mining firms, with almost two thirds reportingskills gaps. This is, in part, due to the continued growth of the sector, including 20%in the past year (Skills Australia 2010). Mining firms also report the highest shortageof external candidates. Mining firms are also the most likely to have professional- andindustry-specific skills gaps, and to undertake training and development, with almosttwo thirds using it as a strategy to reduce skills gaps. They are also the most frequentusers of internal training. In contrast to the situation in charities and not-for-profits,the skills issues relating to this sector are well known (Harvey 2010; Scott 2010), andhave been the subject of government immigration policy relating to short-term skilledmigration. Many mining firms are also RTOs and provide their own certified training.However, the continued growth of the sector suggests it may be in constant ‘catch up’mode.
Funding problems for employment of new recruits and training cuts occur inhalf the arts and recreation firms, suggesting that this sector is particularly sensitiveto changes in the economy. It also has the greatest leadership needs. As with chari-ties and not-for-profits, this sector may also benefit from tailored training courses,particularly in arts leadership.
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With respect to differences across firm size, managers in small firms are less likelyto feel skills gaps than are those in large or medium firms, and, if there are skills gaps,they report less effect on staff morale, customer service and strategic planning, andlesser loss of high performing employees. Skills gaps in small firms are less likely tobe due to cuts in training budgets or retrenchments, and more likely to be due to diffi-culties in finding suitably qualified candidates. This finding highlights both thestrength and the weakness of the informal nature of HRM in small firms. A strengthis that employees are flexible and can ‘fill in gaps’ across areas when required. Aweakness is that their failure to use the formal selection procedures used by largerfirms (Bartram 2005) creates difficulties when recruiting. Small firms are also lesslikely than large or medium firms to use external recruitment and outsourcing toaddress any skills shortages, and are less likely to use skills inventories or training toovercome skills gaps. This finding is again consistent with other studies (e.g., Bartram2005; Barrett et al. 2007; Jones 2006). Targeted short courses aimed at providingsmall business owners and managers with human resource skills would therefore beuseful.
Leadership and management skills shortages are given as less of a problem insmall than in large or medium firms, probably because small firms require fewerpeople in management positions and management of small firms may not have thecomplexity of management of large organisations. Process, project management, tech-nical, IT and basic skills are similarly strongest in small firms, although small firmshave the greatest shortage of qualified production employees.
In concluding, it is noted that limitations of this research include the reliance onself-reports from a non-random selection of managers largely from two Australianstates (Victoria and Queensland), and the small number of responses from small firmmanagers compared to medium and large firm managers. This may be because fewsmall firm managers identify themselves as professional managers, and so most do notbelong to AIM. It also explains why in a lot of research on small firms the definitionof ‘small firm’ is stretched to include those firms with fewer than 100 employees (e.g.,Bartram 2005).
A strength of this research is that it includes a large number of respondents, andprovides a view of skills shortages which is not filtered by industry or employer asso-ciations. It has five major implications. First, further efforts should be made toincrease the skill levels of managers and business leaders. This area is at least asimportant, if not more so, than general workforce skill development, as managementand leadership skills ‘trickle down’ and affect the whole organisation. It can be under-taken through leadership modules in existing vocational and tertiary courses, in shortstand-alone management and leadership courses provided by external providers, or byinternal training. Second, there is evidence that company-based training and develop-ment is being under-used as a remedy for skills gaps, and encouragement should begiven to firms to train and develop employees. This can be undertaken through firmregistration as a RTO, by outsourcing to external training providers, or through inter-nal training. A business case for the associated costs would need to be made; it maybe that, as Crouch (2005) suggests, firms prefer to ‘free ride’ and allow others to bearthe cost of training while they avoid the costs by recruiting already trained workers.Additional government financial support for organisations which utilise accreditedtraining courses would also increase training provision.
Third, small firms may not be strategically recruiting due to perceptions that thereare few qualified job candidates. Assistance should therefore be provided to enable a
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more professional approach to recruitment and selection, perhaps by providing busi-ness owners and managers access to short HRM programs. This may reduce theirperceptions of skills shortages in the potential workforce, and provide them withappropriate discipline knowledge. Fourth, charities and not-for-profit firms needtargeted interventions and training programs. Finally, although skills gaps may bemore of an issue for large than for small firms, the needs of small firms and those in“non big business” areas such as charities and the not-for-profit sector should be over-looked. There is not a ‘one size fits all’ approach to reducing skills gaps which will fitall firm sizes across all sectors.
AcknowledgementsMy sincere thanks to Leigh Funston and Hwafern Quach of the Australian Institute ofManagement who designed the survey upon which this paper is based and made the resultsavailable to me.
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