Employee Training and Organizational Performance in Britain

Introduction: British Employers and the Training Debate

It is a commonly accepted fact that British employers have neglected the significance of employee training. They justified this neglect probably on the premise that although training is a major cost item, it does not have a significant correlation with improvement in organizational performance (Hallier and Butts, 1998, p. 80). However, in recent years there has been a major upheaval in this line of thinking, prompted by industry experts and the fast-spreading public opinion about the impact of training and employee development. Employers in Britain are gradually but surely conceding to the fact that employee development does pay in terms of better organizational performance. Based on a research study sponsored by the National Institute of Economic and Social Research, experts generally subscribe to the theory that skills training improves organizational performance and efficiency (Stevens and McKay, p. 55).

This recognition assumes great importance, as a direct relationship between training and profitability is yet to be firmly established (Ashton and Felstead, 1995, p. 35). According to the employment trend survey report published by the Confederation of British Industry (CBI) in 2001, covering 673 private sector organizations in Britain, employers rated workforce and management skills as the principal factors that will increasingly determine business success in the present and future competitive scenario. More than one-third of the respondents said there is a growing trend of shortages in the skills required to meet the rapidly changing needs of a dynamic market environment that is becoming increasingly global. This gap is affecting business performance and hence the profitability of stakeholders.

To meet this challenge, more than two-thirds of the respondent companies claimed that they have been increasing training expenditure. An important indicator of the growing importance of training is that sixty-two percent of firms offered financial support for training of employees beyond the needs of their current jobs. The majority of firms also provided time off and funding for employees who take the initiative of upgrading skills and knowledge through self-study. Yet the general perception is that the United Kingdom still has some way to go in training investment before it can catch up with major competitors in Europe and the new industrial competitors from the rest of the world.

Results of a study by Mercer Human Resource Consulting (the Britain at Work Survey) reveal that one possible reason for Britain's productivity gap compared to other European nations could be due to the lack of attention shown by companies in managing employee performance. The study, covering over 3,500 British workers, throws up some telling statistics: only 20 percent of workers feel that good performance is rewarded, and only a third of the surveyed workers believe that there is a significant link between performance and pay. Less than 40 percent feel that underperforming employees are managed in the right manner.

The study highlights that a lack of training among managers who conduct the performance appraisal process is one of the major concerns hindering effective employee management. For instance, only 40 percent of workers feel that their managers show concern for their career development, and just one-third are convinced that high-performing employees are adequately compensated in terms of promotions and incentives. The study also warns that organizations and managers are increasingly focusing on employee development practices that produce immediate results, especially in a recessionary economic environment. While employers may feel elated by quick returns on people investments, the study cautions that such organizations will eventually face a drain of talent when the economy returns to growth, as efficient and productive employees will shift to companies that have a genuine performance-rewarding culture.

Employers tend to view training as the answer to performance deficiencies in organizations. However, bridging the skills gap requires a wide range of human resource practices. Often, the tendency of employers to sanction training is driven by competitive pressures rather than actual needs, which does not produce the expected results and may only serve to increase costs. From an employer's perspective, there is justification for differentiating the training needs of apprentices or new hires from those of experienced employees. Employers unanimously agree that apprentices need the longest period of training. However, in terms of quality and effort, employers tend to focus more on established employees, especially when it relates to specific, project-based training that leads to direct improvement in organizational performance. The socialization of managers is necessary, and management development schemes that reinforce the manager's professional identity and strengthen the bond with senior management become crucial in this context (Ackers and Preston, p. 678). In information technology companies, for example, there is great impetus to train experienced software programmers so that the company remains abreast of the latest advances in the field.

Training, Productivity, and the UK Skills Gap

It is difficult to provide a conclusive answer to whether training leads to a tangible increase in performance and thus profitability; in fact, it is almost impossible to establish such a correlation mathematically, due to the multiplicity and complexity of factors involved. However, it has been established that a lack of training activity can adversely affect organizational performance (Steedman and Wagner, 1989, p. 45; Mason et al., 1994, p. 64). Another study has claimed that inadequate development of employee skills would hinder performance in many ways, such as an inability to adapt to new technology quickly, slower reaction to changing customer and market demands, and lower efficiency levels affecting deliverables (Hendry, 1991, p. 80).

In the United Kingdom, a major cause of concern is the perceived weakness in the functional skills of middle-level employees, which is identified as one of the reasons for the UK's lower ability to compete in international markets for certain goods and services. Low levels of initial education and inadequate training compared to the workforce in some competing countries have resulted in a segment of the British workforce becoming stuck at low skill levels (Stevens and Mackay, 1991, p. 55). If this is the case, then the logical interpretation is that training to improve intermediate-level operational skills would translate into greater efficiency and higher profitability.

This view has found wide acceptance, and the fear of losing out to international competition is the fundamental reason for British employers' favorable inclination toward training and employee development. A case in point is the rise in employer-sponsored training incidence from 9.2 percent to 15 percent during the ten-year period from the mid-eighties to the mid-nineties. Employers are initiating training both to promote commitment toward the organization and to foster a constructive work environment. However, there are important caveats to this statistic (Ashton and Felstead, 1995, p. 175).

In 1985, 26 percent of workers who underwent training took courses that lasted less than a week; by 1994, this figure had risen to 45 percent (Felstead et al., 1999, p. 112). This is a clear indication that while the incidence of training is rising, the intensity of training in Britain is in decline. Furthermore, the distribution of training in Britain is relatively skewed: highly educated and well-paid employees are more likely to receive training compared to those with lower qualifications and lesser pay. The probability of an employee gaining access to a training program has been found to be linked with employer characteristics — the larger and wealthier the employer, the greater the likelihood of employees receiving training. It is correspondingly more difficult for employees of smaller companies to obtain approval for training (Machin and Wilkinson, 1995, p. 17). A closer examination of the recent growing interest of British employers in training gives enough indication that they are not concerned only with the gap in middle-level operational skills.

British employers have begun to view training as a key human resource activity that encompasses the entire organization, with a focus on personal development, human relations skills, and attitudes (Hallier and Butts, p. 84). The narrow focus on interpersonal abilities probably stems from the long-standing values of British management's interest in short-term business results and the refusal to appreciate broader organizational and socio-economic problems (Glover, 1992, p. 326). In other words, British employers take the view that managers must be capable of managing everything necessary for the job, and training imparted should address this central concept of management thinking. This sharply contrasts with the approach in continental Europe, which values productivity, specialized skills development, and stability in management.

Employers' favorable inclination toward personal development training probably has the hidden objective of resolving conflicts in the employment relationship, which has undergone a sea change in the era of intense competition, corporate restructuring, and rightsizing. A relatively new definition of the employer–employee relationship offers employees the opportunity to develop themselves and increase their employability in return for the increased skills and output required of them under a flat organizational structure (Holbeche, 1995, p. 48). In the turbulent times of economic downturn and job losses, employers lean toward personality development training in the belief that it can protect the integrity of the employment relationship and promote some sort of common ground between organizational and worker interests. Thus, the primary interest of employers is more directed at how efficient and ambitious employees can be satisfied during periods of shrinking career advancement opportunities and the absence of stable lifetime employment.

Employer Motivations and the Changing Employment Relationship

One possible approach to this issue is the concept of partnership, where the responsibility of upgrading workers' skills is shared by both the employee and the employer, with the objective of achieving higher profitability by improving quality and reducing costs (Herriot and Stickland, 1996, p. 127). Today, employers demand more and more from employees but are not prepared to offer job security. In the past, the employment relationship was based on the trusted principle of paternalism, by which the employer promised to take care of the employee. Now, the guiding principle is partnership, where the employer only offers to create opportunities for the employee to take care of herself. In this context, the aim of employee training is to achieve the delicate balance of making employees more employable in the open market, even as employers decline to provide job security and assured career development.

From a practical viewpoint, however, employers would not go all out in enhancing the employability of workers for various reasons. Employers would hesitate to make the large financial investments required for upgrading the competitive skills of employees; more importantly, they are likely to be concerned that such employees would be poached by competitors. This concern is precisely why British employers have a poor history of training investment (Hendry, 1991, p. 82). It can therefore be supposed that for the average employer, the question of employability becomes more relevant when the employer finds that the worker is no longer useful — and not the other way round.

One of the major driving forces behind employers accepting the need for employee training is competition. Competitive pressures push employers toward training as a ready-made solution for overcoming organizational weaknesses. Competitive pressure manifests either in the form of technical change or product-market development, both of which convince employers that a need for training exists. But the degree of response to competitive pressures may vary from situation to situation and depends on external factors as well. For instance, during periods of recession or low profitability, employers are more interested in cutting costs, and training initiatives are postponed or shelved. Thus, competitive pressures coupled with shifts in employer perception and the recognition of need lead to the sanctioning of training.

Where competitiveness is concerned, training can play an important role in enabling organizations to compete more effectively in the market. Though competitiveness is a strong driving force, it is not alone sufficient to produce training. Based on a sound understanding of the psychology of behavior in organizations, training can be used to develop people to exhibit certain desired behaviors in the best interests of the organization (Hendry, 1991, p. 79). For instance, workers can be trained to work efficiently in groups, to regulate behavioral responses and manage emotions under different circumstances, and to develop leadership qualities for meeting competitive challenges.

More and more employers are now offering new psychological contracts, which differ considerably from conventional job offers. In these new contracts, employers include features such as mutual requirements, reciprocation of offers and promises, the employee's willingness to voluntarily strive for pre-set goals, and terms for breach or non-fulfillment of obligations (Hallier and James, 1997, p. 135). With this approach, employers feel they are equipped with an option to enforce perceived changes in the terms of employment. This places employees in a situation where they must possess the necessary knowledge and skills to meet their contractual obligations, which requires the intervention of human resource practices.

As employers open up more avenues for employee training, it is vital that the right type of training is provided so that the objectives of employers and the aspirations of employees are both met. A critical area where human resources management can play a key role is the management of workers during layoffs — in this instance, training is required both for the workers who are to be laid off and for the supervisors or managers handling the situation. Another critical case is the management of emotions, where employees are required to regulate their responses in front of external and internal customers (Hochschild, 1983, p. 164). One of the major challenges in this context is the effective management of rude and demanding customers, where skilled human resource practice can make all the difference.

Training has a major role to play within the realm of Human Resource Management, mainly because it focuses on concepts such as knowledge, skills, and understanding. The growing interest in the use of the term "Human Resource Development" is such that some practitioners no longer favor the term "employee development" (Harrison, 1997, p. 27). The basic reason cited for this view is that in modern organizations, there is a growing need to address the issue of "non-employee development" — meaning the development of those working for the organization who do not fall within the standard employer–employee relationship, such as contract employees, suppliers, and agents (Walton, 1996, p. 106). This is especially true in the current environment, where employers no longer provide lifelong employment security but base continued engagement on performance, and are instead ready to invest in training employees so they develop higher-level skills and become more independent in sustaining their own employment.