Is "Investors in People" solving the UK training problem?

The "Investors in People" (IIP) scheme was a response by the UK Government to a perceived deficiency in training levels, combined with a finding that the UK's most successful companies linked people management issues strategically to business objectives. Yet six years since the introduction of IIP, commentators are still complaining that UK skill levels are insufficient to be able to compete in the markets of the future. This article assesses the success of the Investors in People initiative.

At the end of February 1997 the education and employment minister, James Paice, was warning that "people ignore at their peril the value of investing in learning", arguing that too many employers still do not realise the value of investing in their employees. He went on to say that action should be taken immediately to drive up skill levels and standards to keep up with growing international competition. Employers were said to be a crucial part of this process but, it is "not how much you invest in training, its how you invest it". The Government thus backs the Investors in People (IIP) standard, as it shows that spending money on people is an investment and not a cost.

IIP has been in place for six years but according to a report in theFinancial Times in March, Britain had made limited progress in equipping more of its workforce with even the basic skills such as reading, writing and arithmetic. The report goes one step further and calls into question Britain's ability to compete in international markets.

What is IIP?

Investors In People was the Government's direct response to a survey in the late 1980s which raised fundamental concerns about the quantity and quality of training in the UK (see "Making capital out of investors in people", Employment Department Bulletin, 84). Based on findings that successful companies were generally committed to their staff and to linking training and development strategically to business objectives the conclusion was that:

"productivity would increase if, on the one hand, those offering training could be persuaded to be more systematic and, on the other hand, those who were the least active in offering training could be encouraged to increase its provision"

Unlike the statutory model of training of the 1960s, IIP places the onus on employers to "benchmark" from best practice. It focuses on the following four principles:

  • commitment from the top to develop all employees to achieve its business objectives;
  • planning the training and development of all employees;
  • action to train and develop individuals on recruitment and throughout their employment; and
  • evaluation of training to assess achievement and improve future effectiveness.

The bodies responsible for overseeing IIP are theTraining and Enterprise Councils (TECs). TECs are funded by the Department for Education and Employment and their role in IIP is to evaluate what companies needs to do to meet the standard, and whether they in fact carry out these requirements. IIP has received widespread support from employers, the Confederation of British Industry, and the Trades Union Congress. The Labour Party is also largely in favour, but wants to make better use of TEC resources

From the beginning of 1997 there will be revised standards for IIP, which build upon feedback, to provide clarity to the process, but the revisions may well disappoint those who were hoping for higher standards to be put in place.

Effectiveness of IIP

There are two surveys which have recently assessed the effectiveness of IIP. The first was conducted using 1995 data by the Institute of Employment Studies or IES ("The return on investors", IES Report 314, (1996)). The second was carried out by the Cranfield School of Management (see "Time for a check up", People Management, 6 February 1997.. Below are some of the summary finding from the reports.

IES

  • Employers feel that IIP is successful in urging them to changes they otherwise would not have made.
  • Employers believe that IIP has, or will in the future, improve their performance.
  • The smaller the organisation, the larger the impact.
  • Those employees with a low level of skills see the greatest impact.

Cranfield

  • Organisations recognised for IIP are more likely to:
    • have experienced reductions in workforce turnover;
    • fill vacancies more easily with better-quality recruits;
    • have experienced positive effects on company image.
  • Organisations that really benefited actually used IIP as a mechanism for assessing performance and implementing continuous improvement.
  • The greatest benefit was where mechanisms at the heart of the standard had helped to identify the areas where improvement would enhance performance.

Overall, IIP seems to have received a positive response from the reports. It is said to have awarded the IIP standard to more than 4,000 organisations, with another 20,400 committed to gaining the award. Despite this, recent news releases have been warning companies that training is under threat from more than one direction.

The Institute of Personnel and Development (IPD) has recently urged the Hampel committee on corporate governance to encourage UK companies to include a fuller account of their employee practices in their annual reports. The Hampel committee, established by the Government, aims to examine UK companies and their relations with shareholders. The IPD argues that, despite evidence demonstrating the link between good people management and organisational success, investors still base their decisions almost entirely on the perceived financial performance of the organisation. While long-term gain depends on good people management, definitions of corporate success often translate into the ability to cut costs, due to the pressure to increase earnings per share. At the management level, there have been complaints that the UK is not producing enough leaders to meet the challenge of the future. In order to cultivate people within the organisation "visionary leadership is crucial". The lack of good leadership is blamed on too few courses and centres, and there is still the traditional cultural barrier of people thinking that leaders are born and not made.

Even the trade unions have joined in the call. The Banking, Insurance and Finance Union (BIFU) has urged one of the UK's largest banks, NatWest, to listen to its staff in order to get it right in terms of services and products. Finally, the Government is unlikely to meet its own targets on IIP: there are indications that those companies that are already registered for IIP are the ones who are most likely to meet the standards anyway, and there also seems to be little interest among "non-involved" companies.

Commentary

Companies often have to invest substantial time and money when taking people management issues seriously. Achieving the IIP standard, for example, takes much longer, and is more difficult than employers expect, according to the IES survey. If organisations are going to put in this kind of investment, they will want to seek some assurances that skills will not go elsewhere, or else they will be wary of making those kinds of investments - the traditional "free-rider" problem. A recent survey of 205 organisations indicated this was the case, finding that organisations preferred to recruit people who already had the required skills (IPD press release, 6 March 1997). Their general perception is that they are reluctant to invest time and money in training, because newly-trained staff tend to take their skills elsewhere. Even more damning is the fact that 56% of organisations indicated that training and development is not a priority. More serious though, is the fact that UK companies, because of the country's corporate governance structures, face short-term pressures which makes it very difficult to invest in a long-term strategy. Training and development are often at the bottom of their list of organisational priorities. (Mark Gilman, IRRU)

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