The following article, 'Employer demand for higher level skills: A known unknown?', appeared in April's edition of Graduate Market Trends, the quarterly publication from The Higher Education Careers Service Unit (HECSU).
Back in 2006, Leitch threw down the gauntlet to policy makers and providers to enhance the UK’s higher level skills base through increased workforce development and employer engagement in higher education (HE). It was within this context that CFE embarked on an extensive programme of research to explore the appetite for higher level skills training amongst employers. In this article, Tristram Hughes and Lindsey Bowes from CFE summarise the findings from their research and highlight the key messages for HE providers.
‘As we know, there are known knowns. There are things we know we know. We also know there are known unknowns. That is to say, we know there are some things we do not know. But there are also unknown unknowns, the ones we don't know we don't know.’
Donald Rumsfeld, Former U.S. Secretary of Defense, 2003.
At first glance, this much-maligned quote may appear to be a strange source of inspiration for the title of an article about higher level skills, yet when CFE began their research in this area, it was clear that the demand for higher level skill from businesses was very much a ‘known unknown’ (or a thing we knew we didn’t know much about).
At that time, public policy was primarily focused on the need to reform the supply of higher level skills. However, it was our contention that these reforms should be informed by a more sophisticated understanding of employer demand.
Over the past two years, CFE has consulted with over 1400 employers to establish the extent and nature of demand for higher level skills in three English regions: East Midlands, West Midlands and Yorkshire and Humberside. Our aim was to support HE providers seeking to respond to the employer engagement agenda with robust intelligence on the current and potential market for their services.
With support from the Higher Education Funding Council for England (HEFCE) and the relevant regional university associations, we conducted telephone surveys of VAT registered private companies employing 25 or more staff in each of the regions. All the companies that took part in the research had undertaken training at some level in the previous 12 months.
Companies employing fewer than 25 people were excluded for two reasons. First, although these businesses form the bulk of the business stock, it is businesses that employ more than 25 staff that account for approximately three-quarters of the private sector workforce. Second, evidence suggests that a significant proportion of micro and small businesses do not provide any training for their staff, let alone at higher levels (LSC: National Employer Skills Survey 2005: Main Report).
To add qualitative depth to our survey findings, the East Midlands Universities Association (EMUA) and HEFCE commissioned CFE to conduct a series of employer focus groups - five with employers that had purchased higher level skills training and five with employers that had not.
The market for higher level skills training
Our findings show that a third of employers (33%) are already investing in training at Level 4 or above; a further 29% that do not currently invest in higher level skills are seriously considering training at this level in the future (Figure 1). These ‘soft nos’, as we refer to them, represent an as yet untapped market for providers seeking to grow their market share, including higher education institutions.
Figure 1: Market segmentation for higher level skills training (Base = 1332 employers)
Just under half of all the businesses that undertake higher level skills training (46%) purchase it from a university. Further Education colleges and private training providers also have significant shares of the market (23% each). However, the market for different types of higher level skills training provision is further segmented. Although the HE sector, and universities in particular, dominate the market for academic qualifications, the market for professional, vocational and non-accredited training is much more hotly contested (Figure 2).
Figure 2: Type of qualification purchased by provider type (Base = 369 employers)
The good news story for the HE sector is that it already has a significant share of the market for higher level skills and there is potential for further growth, both in terms of attracting new business from companies that have not previously invested in training at a higher level and gaining a larger share of the market for non-academic qualifications. The key messages for providers seeking to increase their level of employer engagement in this way are four-fold: know your market, understand and challenge perceptions, meet market norms and play to your strengths.
HE providers seeking to increase their share of the market for higher level skills training need a more sophisticated understanding of both the existing and latent demand from employers. Employers’ motivations for investing, or not investing, in training at this level provide vital insights into current and likely future demand.
Our findings suggest that employers are primarily driven to invest in higher level skills training by their human resource and/or wider business strategy and by a belief that it has a positive impact on their business. Businesses are concerned with developing their staff to ensure they are motivated and have the right mix of skills to take the strategy forward. Although a more skilled and effective workforce may impact positively on the productivity and profitability of the organisation, these do not appear to be the primary drivers of higher level training (Figure 3).
Figure 3: The reasons why employers invest in higher level skills training
Company strategy is also a significant driver for businesses that do not invest in higher level skills training. Just over a quarter of businesses (26%) do not invest because they already have the skills they need and a further 14% recruit rather than up-skill their existing workforce to plug skill gaps. Perhaps surprisingly, the cost of training and concerns about staff retention do not appear to be discouraging substantial proportions of employers from investing. However, cost appears to be increasing in importance as the full effect of the economic downturn is felt in some sectors.
Half of the employers consulted indicated that they had not invested in training at a higher level because there was no business case for doing so. As this group is primarily comprised of ‘hard nos’, our findings suggest that there is little providers can do to engage this type of business in training. However, higher level skills will play an important role in the future survival of those seeking to shift from low to high value-added products and services. By working with businesses to solve the challenges of sustainability and to develop the high value-added strategies necessary to make the transition possible, providers can position themselves to respond to future higher level skills training needs as they emerge.
Employers, on the whole, do not view universities and private training providers as competitors in the same marketplace. Universities, on one hand, are perceived to offer academic qualifications delivered through traditional methods; there is limited awareness of the wider range of services, such as flexible, bite-sized modules; credit accumulation and transfer; and accreditation of prior experience and learning.
‘Universities are probably as not as flexible as the other providers. They can’t usually come out to the workplace; it is a case that the student has to go to them and what they do is quite rigid in terms of the syllabus and what they are going to cover.’
Private training providers, on the other hand, are perceived to be the first choice for flexible, responsive and bespoke provision designed to address company-specific requirements:
‘For us private training providers can tailor make programmes. We can say we need x, y and z addressing. They will go away, look at our business and come back with a training programme to suit our needs.’
East Midlands Employers
Challenging these perceptions of the HE sector through effective marketing and communication is key for those universities wishing to win a greater share of the bespoke vocational and professional training market.
Private training providers have set the bar high in terms of the standards of service employers expect when it comes to flexible, responsive and tailored provision. Some of the businesses we consulted observed that a number of the ‘innovative’ delivery methods being developed and marketed by the HE sector have been operating in the private sector for some time. In order to extend their reach into the vocational and professional market, universities need to meet and exceed these market norms. This means articulating a clear offer in a language that businesses understand; ensuring programme content is relevant to current business needs; delivering programmes in flexible ways to suit the needs of businesses and their employees; and providing training at a competitive cost.
If universities can demonstrate they can compete in terms of flexibility and responsiveness without compromising on quality, our findings suggest that innovations such as bite-sized learning and credit accumulation and transfer could help to change employers purchasing habits.
The decision to compete with private training providers in the market for non-academic and non-credit bearing short-courses is a high risk strategy for many universities. Like any new entrant seeking to break into a relatively established market, universities must first identify their unique selling points and then play to their strengths.
Our findings suggest that the HE sector has developed a strong brand based on a reputation for high quality, robust teaching and academically-rigorous provision. However, this reputation will be undermined if institutions, in their attempt to compete with private training providers, over promise and under deliver to employers. The private sector is unencumbered by the cultural and practical barriers that can bedevil universities. Acknowledging what is in an institution’s gift to deliver alone or in partnership, and what is best left to other providers, is an essential part of the strategic development process; once the decision to embrace the employer engagement agenda has been taken, a strategic commitment to the development of the institutional infrastructure and systems and procedures that are fit for this purpose, is an essential prerequisite.
We believe that the demand for higher level skills is now more of a known, and less of an unknown quantity. However, it remains our contention that an in-depth knowledge of the market demand for higher level skills is vital to both the development of effective employer engagement strategies and supply side reforms. Although the current economic climate will undoubtedly impact on the attitudes and behaviours of some employers towards training, our messages to providers remain the same. Those that know their market, play to their strengths, and successfully respond to the skills challenges businesses are facing will be most likely to flourish.
Lindsey Bowes & Tristram Hughes