skills utilisation · 2017-11-02 · their workforce has ... the need for outstanding leadership,...

SKILLS UTILISATIONHow effectively are businesses utilising the skills at their disposal?

PLAN SOURCE ASSESS DEVELOP MANAGE CHANDLERMACLEOD.COM

2 Chandler Macleod

A$54.8 BILLIONAnnual cost of employee disengagement to the Australian economy Source: Gallup

TOP 3 feelings individuals feel as a result of skills underutilisation:1. Loss of job satisfaction2. Boredom3. Feeling of being unappreciated Source: Chandler Macleod

#1 reason for employers to pay attention to employee engagement: Organisations with engaged workforces have

147% higher earnings per share than those who don’t Source: Gallup

Skills Utilisation in Australia

Australian managers and executives who are highly

engaged in their jobs: 1 in 5 Source: Gallup

THE GOOD NEWSEngaged workplaces can boost economies

Source: Chandler Macleod

Only 24% of Australians are engaged in their jobs Source: Gallup

THE BAD NEWS

Almost 1 in 10 organisations estimate that more than half their workforce has significant skills underutilisation


Employees who don’t advertise all their skills

to their employer for fear of being perceived as

overqualified

Employers who assume their employee’s

skills are >50% underutilised

Proportion of employees who report

that their skills are underutilised

Employers who can estimate the level

of underutilisation in their workforce


3Skills Utilisation

Executive summarySkills utilisation in Australia… as it turns out, it’s topical, but not typical.

Australia’s productivity growth woes have sent politicians and business leaders on an urgent search for answers. With

productivity across most segments of the Australian economy well below world-best practice, leaders are looking for

productivity triggers – and utilisation has become a buzzword.

For Skills utilisation – how effectively are businesses utilising the skills at their disposal?, the latest in Chandler

Macleod’s white paper series, we surveyed 386 senior businesspeople and 258 employees in February 2014. This

was supplemented with insights from a range of publications, research reports and articles produced in the last 24

months, including Chandler Macleod publications The 5 faces of productivity and Coming of age: the impacts of an

ageing workforce on Australian business.

Unsurprisingly our research confirms that skills underutilisation exists - the surprise is that it presents at far higher

levels than employers presume. This white paper examines the significant and timely opportunity skills underutilisation

offers the Australian business sector.

Key findings:

� There is no general definition of skills utilisation. Consequently, organisations don’t measure what they can’t define. 81% of employers cannot estimate underutilisation within their own organisation, and although skills

shortages impact on their performance, just 17% have tried to quantify the cost of skills shortages.

� While employees and employers are agreed that skills are being underutilised, employers vastly underestimate by what extent. Of those employers who could put a figure on underutilisation, most approximate it at less then

20% and only 8% believe the level of underutilisation is over 50%. But almost two thirds - 64% - of employees

indicate that they have skills which current or recent employers are not utilising, and 74% report that their

employer does not know all their skills.

� In our current variable economy, different sectors are adjusting to structural changes with varied pace and

emphasis. However, whether organisations are concerned with cost cutting or with revenue growth, labour productivity remains a key driver for success, and skills utilisation is a key process of labour productivity.

� Today’s businesses are doing more with less; they have worked hard to push the productivity levers of process

efficiency, restructuring and systems standardisation, leaving better utilisation of human capital as one of the last remaining productivity levers.

� Nine out of ten - a massive 91% of employers surveyed - indicated a current skills shortage within their organisation. This is up from 58% in our October 2012 Productivity white paper. With skills shortages in some

areas and industries threatening to trigger wage inflation and risk growth, the need for the business community

to pay much greater attention to the issue of skills utilisation is heightened.

� The need for outstanding leadership, culture and values, supportive HR practices, communication and employee

engagement has never been more crucial. In particular, strong and innovative leadership and management within organisations plays a key role, acting as both a ‘trigger’ and ‘enabler’ of skills utilisation.

� The costs and benefits of skills utilisation do not solely rest with employers. Personal decisions made by employees

have a significant impact on skills utilisation at an individual, an enterprise and a national level. Remarkably,

42% of employees we surveyed said they do not advertise all their skills to their employer for fear of being

perceived as overqualified. Employees need to share the responsibility to engage, communicate and manage the use of their skills. If their employers have little to no knowledge of their skills, underutilisation will occur.

� Organisations of any size or sector can lift their productivity by better exploiting their employees’ full range of

capabilities. Those that start pushing towards their utilisation potential now stand to gain significant advantage over those whose inertia keeps them stuck at their current level, or even sliding backwards. Not realising these

benefits is something organisations can ill-afford at the best of times; it is something they especially cannot

ignore in the current economic climate.

4 Chandler Macleod

Measuring what we can’t defineThere is no general consensus on the definition of skills utilisation (UKCES, 2009) (1). Warhurst and Findlay (2012) define

it as ‘the use of better skills and the better use of skills.’ (2). This definition, although encompassing, is simplistic. Skills

Australia (2012) offers an alternative:

‘Skills utilisation is a process which ensures the most effective application of skills in the workplace to maximise

performance through the interplay of a number of key agents (e.g. employers, employees, learning providers and the

state) and the use of a range of HR, management and working practices.’ (3)

Even defining ‘skills’ can be difficult. Monash University defines skills as ‘the qualities that enable you to apply knowledge

in a practical way to get something done’. Traditionally, skills were thought of in terms of theoretical knowledge, intellectual

ability and manual dexterity, but according to Monash and B. Keep et al. (2002), this definition has now widened to

include transferable work skills such as communication, leadership and problem solving, and personal characteristics such

as enthusiasm for a field of work, commitment to on-going learning, having integrity and being honest. (26 & 27)

Effective skills utilisation is about confident, motivated and relevantly skilled employees who are aware of the skills they

possess, can align these to the organisations’ goals and know how to best use them in the workplace. The other side

of the coin is that they need to be working for an employer that provides meaningful and appropriate encouragement,

opportunity and support for them to use their skills effectively. Together, this can lead to outcomes such as improvements

to innovation, productivity, profitability, staff retention and safety.

In 2012, Skills Australia indicated relatively little recognition of the term ‘skills utilisation’. (3) It is therefore not

surprising that 81% of the employers surveyed for this white paper cannot estimate the level of underutilisation within

their organisation.

Base: Client survey n=386

Do you know the proportion of employees in your workforce that have significant under-utilised skills?

19% Yes

81% No/Can’t Estimate/Don’t Know

What proportion of employees in your workforce do you think have significant, underutilised skills?


24% Less than 10%

35% 10-19%

21% 20-29%

12% 30-49%

8% 50% +

How governments measure skills utilisation

At a national level, skills utilisation is often measured using unemployment and participation rates; commentators agree

that these are inadequate, as they do not consider time underutilisation of labour or skills underutilisation and as such,

don’t reflect the well-being of people or the extent to which their aspirations for employment are being met (Mehran,

2008). (4)

5Skills Utilisation

The International Labour Organisation (ILO) suggests that unemployment rates reported by governments should be

supplemented with measurements of employment problems experienced by individual workers such as insufficiencies

in the volume of work (underemployment) and deficiencies in its remuneration, as well as incompatibilities between

education and occupation (skills mismatch or poor skills utilisation). (4)

The Australian Bureau of Statistics acknowledges that economically and socially, there is interest in measuring the extent

to which available labour resources are not being fully utilised within the economy – those people whose aspirations for

work are not being fully met. They define the extended labour force underutilisation rate as ‘in addition to the unemployed

and the underemployed, the two groups of people with marginal attachment to the labour force, namely:

1. People who are actively looking for work and who could start within four weeks, but are not available to start in the

reference week, and

2. Discouraged job seekers’. (5)

Time underutilisation of skills

Time underutilisation is a form of underemployment where employees are not able to work as many hours as they would

like. According to Australian Bureau of Statistics February 2014 figures, the unemployment rate of 6% means that there

are 717,700 people who want work but can not find it, and there are even more people (875,000) in work who want more

hours. (5)

While the ABS figures show that 26% of part-time workers would like to work more hours, our survey found that this figure

is as high as 44% for part-time workers and 13% for full-time workers. Of those individuals who would like to access more

work hours, 51% would like to work 10 to 19 hours more, while 25% would like to work 20 + hours.

� Average hours Australian employees work: 46.8

� Average hours employees would like to work: 43.2

� Part-time workers who would like to work more hours: 44%

� Full-time workers who would like to work more hours: 13%

How many hours per week did you work on average in your current/most recent job?

Base: Candidate survey n=258

10% Less than 35 hours

33% 35-40 hours

25% 41-49 hours

32% 50+ hours

Hours worked

And how many hours would you like to work?


14% Less than 35 hours

54% 35-40 hours

7% 41-49 hours

25% 50+ hours

Hours like to work

6 Chandler Macleod

Base: Candidate survey n=51 Base: Candidate survey n=124

20% Work more hours

48% Work less hours

32% Work the same hours

24% 1-9 hours more

51% 10-19 hours more

25% 20+ hours

14% 1-4 hours less

54% 5-9 hours less

7% 10-19 hours less

25% 20+ hours

Breakdown of hours individuals like to work Individuals who want to work more Individuals who wants to work less


Of course, if these employees were to access more work hours, their employers would only realise a boost to financial and

operational results if the incremental cost of labour did not have a net negative impact on the balance sheet, and if the

employees were engaged, productive and empowered to unleash discretionary effort.

The relationship between skills utilisation, engagement and productivity

In recent years, Australia has realised cost savings by tightening the screws to adapt to changing market conditions –

removing process duplication, streamlining systems, cost cutting and restructures have all delivered results. The challenge

now lies in un-tapping the productivity potential represented by human capital; EY’s May 2013 Productivity Pulse found

that despite corporate Australia, and some government departments and agencies, seeing incremental improvements

through restructuring and cost cutting, there is still $305 billion in productivity potential for the taking.

It reported that four in five - 85% of workers - believe they

could be up to 21% more productive every day – representing

$305 billion, or $26,300 per worker - in untapped potential.

Employees said the main obstacles to increasing their level

of productivity are poor staff management and a lack of

motivation, reward and recognition in the workplace. (6)

In today’s economic environment, employee engagement has become even more crucial as a lever to productivity, as

organisations ask fewer people to do more, creating increased risk that top-performing employees may leave as conditions

improve.

According to Gallup’s 2013 State of the Global Workplace

report, Australian and New Zealand employees are among

the most engaged in the world. However ‘winning the

race’ isn’t enough. Despite being among the best regions

in the world for engagement, only 24% of all workers are

engaged in their jobs, 16% are actively disengaged and an

overwhelming 60% of workers in Australia are not engaged.

Gallup says this costs Australian businesses up to $54.9

billion per year in lost productivity. (7)

Engaged

Not engaged

Actively disengaged

24%

60%

16%

As former Campbell’s Soup CEO Doug Conant says, ‘To win in the marketplace, you must first win in the workplace’.

conantleadership.com

Only 19% of managers and executives were highly engaged in their jobs.

This should leave Australian businesses very worried, as managers play the most significant role in influencing engagement and utilisation among workers who report to them.

Gallup 2012 State of the Global Workplace Report

7Skills Utilisation

Gallup says that a ratio of 1.5 to 1 is the average healthy company’s employee engagement ratio and that a ratio of 8:1

is world-class. As a company, Google achieved a ratio of 9.57 to 1, which makes the national ratio across Australia of 1.5

engaged employees to every 1 disengaged employee look very poor.

Region Engaged Not EngagedActively

Disengaged

United States and Canada 29% 54% 18%

Australia and New Zealand 24% 60% 16%

Latin America 21% 60% 19%

Commonwealth of Independent States and nearby countries 18% 62% 21%

Western Europe 14% 66% 20%

Southeast Asia 12% 73% 14%

Central and Eastern Europe 11% 63% 26%

Middle East and North Africa 10% 55% 35%

South Asia 10% 61% 29%

Sub-Saharan Africa 10% 57% 33%

East Africa 6% 68% 26%

2011-2012

Source: Gallup, State of the Global Workplace Report: Employee engagement insights for business leaders worldwide, October

2013

The most direct impact of inefficient skills utilisation and employee disengagement is a negative impact on productivity.

While as a nation, our productivity levels are slowly rising, we are still missing out on enormous latent potential associated

with skills utilisation.

How businesses measure skills utilisation

Although it appears that few organisations are familiar with the term ‘skills utilisation’, our research showed that Australian

organisations do in fact have practices in place to manage the (utilised and underutilised) skills of their employees. 95%

of companies surveyed keep track of the skills of their workforce, 43% use a skills register, 35% keep formal records and

17% have an informal understanding of the skills of their staff.

The larger the organisation, the more likely that some form of tangible record is held; 92% of large organisations have

formal mechanisms in place compared to 85% of medium and 65% of small organisations.

Around one in five organisations have formal skills utilisations measurements in place, a further 35% use informal

measurements of skills use and 25% measure skills use in some areas of their operation.

Keeping a record of employee training is a widely used tool to assess the skills available within an organisation. This may

be popular partly because it is relatively easy to implement, or because employers are required to report this information

for other purposes. The finding that only 28% maintain a skills register suggests that there may be organisations that

hold skills data, but do not make full use of it.

8 Chandler Macleod


Other

None

Don’t know

Undertake a skills audit

Updated CV register library

Personal development planning

Skills register

Updated formal records of staff (i.e. reflectingskills acquired since recruitment)

Training records register

What processess do you have in place to formally identify and manage the skills you have within your organisation?

10% 20% 30% 40% 50% 60% 70% 80% 90%

Total (n=386)

Less than 200 employees (n=138)

200-999 employees (n=89)

1000+ employees (n=159)

0%

For smaller businesses (less than 200 employees), management knowledge of all key staff is the most widely used process

for informally identifying skills.

Communication, consultation and collaboration between employees and managers is the most common practice to

increase skills utilisation, which encompasses both formal channels such as performance appraisals, and informal channels

such as open door policies. The practices below were also identified by Skills Australia (2012) as critical factors which

contribute to successful skills utilisation. (3)


What practices are in place within your organisation to increase the skill utilisation of your employees?

2%Other

13%None

6%Don’t know

35%Having effective HR processes to manage employee requirements(includes rewards for performances, recognition etc.)

33%Having good change management processes to provide leaders and employeeswith clear understanding of directional change of the organisation

28%Regularly updated skill matrix

48%A strong organisational culture which encourages employeesto contribute to the organisation

53%Encouragement from managers for employees to be innovativeand challenge their role within the organisation

62%Communication, consultation and collaboration with employeesand line managers

9Skills Utilisation

Barriers to identifying skills underutilisation

Having formal and informal feedback mechanisms in place is great for the development and engagement of individual

employees. However, individual feedback does not provide information on skills utilisation of organisations at an

enterprise level. Organisations need to develop processes to aggregate and collectively report skill use in a format that

can be used by management to properly understand skills utilisation at the enterprise level.

More than 50% of employers cite cost as the main barrier to implementing programs which formally identify underutilised

skills at an enterprise level. They see these programs as requiring financial resources, additional time from employees and

management support, which is often not available.


What are the main barriers to identifying the under-utilised skills within the organisation?

Cost to implement the program

Lack of time by employees

Lack of management support

Available skills to develop the program

Knowledge of where to develop the skills (i.e. where to train for the skill)

Resistance by employees

None

Other

55%

49%

31%

21%

20%

15%

11%

2%

It is interesting that many businesses do not make better use of technology to record and assess skills at an enterprise

level. Earlier in this paper we define ‘skills’ in terms of theoretical knowledge, intellectual ability and manual dexterity

(sometimes gained through qualifications and trades) and also transferable work skills and attributes such as languages,

communication skills and experience in certain sectors and geographies. While most organisations have systems in place

to record qualifications, they do not seem to make use of additional system functionality to create programs to track and

develop employee’s overall talents and utilisation. This may be due to the perceived barriers cited above.

Use of better skills vs. better use of skillsUnfortunately, skills acquisition doesn’t necessarily equate to skills utilisation.

This was evident in the United Kingdom in the late 2000s, when Gordon Brown announced New Labour’s Skills Project

as the answer to the ‘global skills race’. With the shift towards a knowledge-driven economy, skills were one of the few

remaining policy levers available to his government to address key social and economic problems. The Skills Project,

largely driven by the expansion of publicly-funded education and training, certainly boosted the supply of skills, but didn’t

address weak employer demand for, and utilisation of, those skills. (30)

Today, the UK’s Commission for Employment and Skills recognises that ‘the future employment and skills system will need

to invest as much effort on raising employer ambition, on stimulating demand, as it does on enhancing skills supply’. (8)

In Australia, our government is increasingly recognising that the application and use of skills in the workplace is just as

important as skills development. Skills Australia, in releasing its first national workforce development strategy, Australian

Workforce Futures, identified skills utilisation as an important element. One of the key actions under this strategy is to

‘increase productivity, employee engagement and satisfaction by making better use of skills in the workplace’. (9)

The Government of South Australia Economic Development Board purports that ‘good leadership and management and

the formal incorporation of aims for workforce planning in the business plans of companies is required’. (10) Maintaining

an appropriate balance of skills is just as important as gaining news skills, as having too much of one type of skill can

result in idle resources and wastage, while having too little of other types of skills can impede capability and productivity.

10 Chandler Macleod

Despite Australia’s highly skilled workforce, policymakers say there is still a need for more skills development, at all levels

but especially at higher level skills. The trends influencing this need include technological change, the changing nature

of work, globalisation, the skills needed to respond to climate change impacts, and broader issues of sustainability. (11)

As employers seek more highly qualified employees to deepen their organisation’s skills base, they may need to broaden

their thinking around what constitutes skills. Recently, even elite universities have embraced the trend for MOOCs (massive

open online courses) – free courses aimed at unlimited participation and open access via the web – which have opened

up skills development to people who may lack access to traditional education.

Recognition of prior learning or prior skills, whether these have been gained on-the-job or in every day life, can help

employees to become competent faster. Traditionally applied to trades programs, we are now seeing increased application

of recognition of prior learning (RPL) in non-trades programs such as child care, community services and aged care as

Governments increase funding into RPL programs in these sectors. (28)

According to a 2009 DEWR Report, many good practice examples of RPL now exist, negative perceptions of the credibility

of RPL have been reduced and the capacity to deliver quality contemporary RPL has been increased; if this trend continues

it is possible that we will see more skills recognition occurring in a wider range of disciplines. (29)

Utilisation in a Brave New world

As the world changes, employers need to keep pace in terms of how they are sourcing, upskilling, deploying,

rewarding – and utilising – their staff. We have already seen the beginning of the revolution in the what, where

and when of work. The Economist’s January 18–24 2013 edition featured how today’s technology could affect

tomorrow’s jobs (12).

Since the industrial revolution, innovation has cost some jobs, while creating new and better ones. However,

The Economist purports that the wave of technological disruption to the job market has only just started, with

the exponential rise in processing power and the ubiquity of digitised information (‘big data’) transforming the

process of innovation itself. They cited a 2013 paper by Carl Benedikt Frey and Michael Osborne of the University

of Oxford which argued that jobs are at high risk of being automated in 47% of typical occupational categories

which work is customarily sorted into, including accountancy, legal, technical writing and other white collar

occupations.

Jobs and tasks are being broken into component specialties, organised differently, dispersed more widely, and

managed across borders and time zones. In many respects, this ‘brave new world’ has the potential to dramatically

improve productivity and innovation. But adapting to it puts even more pressure on leaders, managers and

employees themselves to embrace continuous learning, remain open to alternative work arrangements, and find

better ways to give and receive discretionary effort on the job.

The war for talentIn May 2012 Chandler Macleod’s Leadership in a Patchwork

Economy white paper discussed the perfect storm of the

looming talent shortage, reporting that 42% of businesses

surveyed were facing a talent crunch. Six months later our

5 Faces of Productivity white paper found that this figure

had jumped to 58%.

The current research conducted for this paper shows that

nine out of ten – a staggering 91% of employers surveyed

–indicate that they are currently experiencing a skills

shortage within their organisation.

While 38% of these shortages relate to temporary skills

shortages from staff turnover, most (53%) report endemic

skills shortages in at least part of their organisation.

Employers facing skills shortages:

• Feb2014:91%• Oct2012:58%• May2012:42%

Organisations utilising people with insufficient skill to perform tasks: 1 in 5

Organisations who have tried to quantify the costs of a skills shortage: 17%

Reported average cost of skills shortage to those organisations: $661,206

11Skills Utilisation

To what extent do you currently have a skills gap? (that is one of more areas where demand for specific skills outstrips supply)


Endemic skills shortages in several areas18%

Endemic skills shortages in a small number of areas only30%

Some temporary transient gaps due to staff turnover38%

Not at all9%

Endemic skills shortages throughout much of the organisation5%

These figures are supported by data from Seek, which show that nationally new job ads (seasonally adjusted) rose by 6.4%

in January 2014, 9% higher than the rise three months earlier. This is the highest rate of quarterly growth since 2010.

Seek’s data suggests that at the present time a strong performing consumer, housing and services sector is outweighing

the problems facing manufacturing and the larger construction sector. (13)

The next few years will see skill shortages proliferate. A 2012 Deloitte Report found that, ‘The world may be demanding

what Australia has, but our ability to supply that demand is slipping as migration falls and retirements rise. The next five

years are projected to see fewer than 125 people exiting education for every 100 people retiring – the highest ratio of job

market retirements to new entries in Australia’s history’. (14)

As Chandler Macleod reported in Leadership in a patchwork economy, even when there is an available number of workers,

many Australian businesses are facing a ‘quality crunch’, or the need to fill jobs with workers of lower skill levels

and experience due to a lack of options. A massive 90% of business leaders reported facing a quality crunch in their

organisation; even industries such as banking that have retrenched workers in large numbers are still struggling to get

the right people.

Deloitte’s 2013 report It’s (almost) all about me; workplace 2030: built for us found, unless we change quickly, Australia’s

problem won’t be a lack of jobs – it will be a lack of workers. Deloitte predicts that growth in demand, coupled with a

shift in power, will force Australian workplaces to seek out and adapt to suit the needs of workers with new demographic

profiles and different sets of needs, capabilities and expectations. They envisage companies paying more attention to

historically marginalised population segments, such as people with disabilities and older workers. (15) We examined the

valuable and often untapped source of increased productivity represented by mature employee participation rates in

Chandler Macleod’s 2013 white paper Coming of age: the impacts of an ageing workforce on Australian business.

Evidence shows that skill gaps and skills shortages can influence organisations to adopt skills utilisation practices. In

an Employer Skills Survey undertaken by Futureskills Scotland, 53% of respondents said they changed their working

practices as a way of addressing skill gaps. In a survey commissioned by the UK’s Migration Advisory Committee, 23%

of respondents indicated that they would ‘redefine existing jobs and processes’ as a way of tackling skills shortages. (16)

Although skills shortage impacts on the performance of the organisation, just 17% of organisations we surveyed have ever

tried to quantify the cost of skills shortages.

Has your organisation ever tried to quantify, in dollars, the cost of skill shortages?


17% Yes

83% No

12 Chandler Macleod

What is/was the estimated amount (in dollars) of the impacts of skills shortages in the organisation?


44% Less than $100K

37% $100,000 to $999,999

19% $1 million +

Of those who have quantified the cost and provided a monetary value, just thirty two respondents were able to provide a

cost estimate, with the reported average cost of skills shortage being $661,206.

The factors impacting skill demands for organisations are varied; organisations are not static and skills needs are constantly

changing. Demand for skills within Australian organisations is impacted by both internal and external factors and varies

greatly between organisations. Employers consider that growth in their business as well as change in business direction

are key drivers for the need of additional skills.

To what extent do the following drive the need for additional skills in your organisation?


Full extent

Large extent

Little extent

To no extent/N/A

Some extent

Growth in the business(need more skills)

Change in the business direction(need different skills)

Change in the market place(need different skills to be competitive)

Feedback from employees(e.g. need training, too much to do etc.)

Skills audit (existing skills notaligned with company needs)

5% 48% 37% 8%

6% 43% 32% 16% 3%

6% 29% 38% 18% 9%

2% 31% 49% 12% 5%

2% 16% 36% 30% 16%

2%

A key driver for new skills, according to employers, is the need for additional resources to cover new/large/specific

projects that the company is working on. Having directives from senior management which are linked to strategic goals

also a widely used predictor of skill requirements of organisations.


Other

In which of the following ways does your organisation determine the skills requirements within your organisation?

0% 10% 20% 30% 40% 50% 60%

HR formally monitors and estimates skills requirements

Management requests information from businessunits periodic

Directives from senior management linked tostrategic goals

Needs assessed to cover new/large/specific projects

None

Don’t know Total (n=386)





One in five (19%) organisations are utilising people with insufficient levels of skill to perform tasks. So how are businesses

acquiring the skills they need? Almost half (46%) of the employers frequently use training as a way to acquire new skills for

their organisation. It is a cost effective and viable option to acquire skills and hopefully retain them within the organisation.

Thinking about each of the following ways in which your organisation can acquire new skills, how frequently do you use each of the following?


Often

Occasionally

Never

Rarely

Training

Hire new resources

Use people to perform tasks withinsufficient skills

Outsource skill needed

Hire new resources (permanent)

Mobilise workforce (across teams/geographic locations etc)

46%

25%

19% 40% 34% 7%

19% 49% 27% 6%

19% 56% 23% 2%

18% 45% 28% 9%

48% 21% 5%

43% 10% 1%

Similarly, training is the most utilised tool to tap into latent employee skills. Job rotation, job redesign and innovation

time are used less frequently, probably because these initiatives can be expensive to implement and run. It is ironic

however that the top four most used tools actually require further up-skilling of employees to reduce skill underutilisation.


Thinking about the under-utilised skills in your organisation. What processes does your organisation have in place to use these skills?

Training

Multi-skilling

Mentoring

Knowledge transfer

Job rotation

Job redesign

Don’t know

None

Other

43%

42%

39%

36%

30%

14%

8%

6%

15%

2%

Provision of “innovation time” (where employees are allowed to useother skills on their own projects)

Skills utilisation: whose responsibility is it? Good skills utilisation requires both a deep understanding of the individual employee (to gauge their skills) and a holistic

understanding of the organisation’s needs. Within medium to large organisations, this knowledge is rarely found within

the one person.

As such, it is appropriate that skills utilisation is managed by both those with a deep understanding of the individual

(such as team leaders and employees themselves) and those with an appreciation of the strategic skills needs of the

enterprise (CEO, COO, Office Manager). HR can fall into either, or both, categories depending on the role of HR within the

organisation.

The size of an organisation has some impact on which staff are responsible for skills utilisation. Medium size organisations

(with 200 to 999 employees) rely on their HR manager just as much as their General Manager to manage their skills

utilisation. Large organisations (over 1000 employees) are more likely to involve employees in this process – potentially

because they have more formal processes in place.

14 Chandler Macleod


In your organisation, which of the following people are responsible for managing skills utilisation?

Total (n=386)




COO

Don’t know

Don’t Other

Employees

HR manager

General manager

Team leader

Office manager

CEO

10%0% 20% 30% 40% 50% 60% 70% 80%

Shared responsibility for skills utilisation

Almost two thirds (64%) of employees we surveyed indicated that they possess skills not being used during their most

recent tenure in an organisation – which leads us to ask whether businesses are creating the right environment for them

to communicate their skills and career ambitions with their employer.

Thinking about your current / most recent job. How much of your formal and on the job training and skills do you / did you use in this job?


All of my skills

Enough of my skills to keep me happy

There are some of my skills which are not being used

There are a lot of my skills which are not being used

21%

31%

33%

1% Don’t know

15%

Our research suggests that employees are not comfortable when it comes to communicating their skills to their employers.

A massive 74% of employees report that their employer does not know all their skills, and 42% don’t advertise all their

skills for fear of being perceived as overqualified. This is despite the sentiments of individuals’ surveyed showing that 59%

believe that they would earn more money if their skills were properly utilised.


Do you think you would earn more money in a job where your formal and on the job training and skills were properly utilised?


59% Yes / would earn more money

23% No / would not earn more money

18% Don’t know

50% of respondents also believe that underutilisation of their skills has impacted their career through depletion of skills

learnt or acquired, and one third believe that it will have an impact on job prospects in their chosen career.

These sentiments are reflected in the recent study by Mavromaras et al (2013) which found that workers who have

underutilised skills are significantly more likely to be unemployed relative to workers with skills well-matched to their

current role. (17)


Thinking about your skills which are not being used. How has underutilising your skills impacted on your career?

Skills depletion/My skills become rusty 48%

Reduction in the number of job prospects in my chosen career 33%

I have become unemployable as my skills are not being used 8%

Don’t know 12%

None 13%

Other 7%

Employees have many opportunities (formal and informal) to discuss and report underutilised skills – which prompts a

question around their unwillingness to use these channels available to them.

Employee feedback such as performance appraisals are formal processes used by 70% of organisations to assess

underutilisation. Conversely, 64% of organisations utilise informal discussions to assess employee skills utilisation.

16 Chandler Macleod


In which of the following ways does your organisation determine the skills requirements within your organisation?

0% 10% 20% 30% 40% 60%50% 70% 80%

Mentorship

Self-managed career development programs

Discretionary spending budget on training

Don’t know

None

Other

HR (or other) managed career development programs

Informal discussions/open door to discuss

Formal employee feedback (e.g. performance appraisals)

Total (n=386)




What does underutilisation look like in the workplace?An underutilised employee is likely to be:

� Dissatisfied and disengaged

Skills utilisation is a key lever for engagement, and engagement is a lever for developing strategically agile organisations.

Having an engaged and committed workforce provides a competitive advantage that can significantly impact

key performance indicators such as safety incidents, turnover, absenteeism and quality – as well as improve overall

organisational performance.

Gallup’s 2013 State of the American Workplace report found that high engagement organisations experienced an EPS

(earnings per share) growth 147% higher than their competition. (7) Hewitt’s Best Employers in Asia research found that

‘organisations with high engagement are 78% more productive than those organisations with low levels of engagement.’ (18)

64% of our respondents who utilised all of their skills indicated that they were very satisfied with their job. In contrast,

68% of those who were not using many of their skills were not satisfied with their current or previous roles.

Thinking about each of the following ways in which your organisation can acquire new skills, how frequently do you use each of the following?


Extremely satisfied

Very satisfied

Not very satisfied

Not at all satisfied

Don’t know

Quite satisfied

Total (n=258)

All of my skills (n=39)

Enough of my skills to keep me happy (n=53)

There are some of my skills which are not being used (n=80)

There are a lot of my skills which are not being used (n=84)

9%

28%

8%

5%

2%6%

16%

21% 38% 30% 2%

54% 18% 8%

34% 49% 6% 4%

36% 15% 10% 8% 6%

19% 36% 21% 13% 2%


Loss of job satisfaction, boredom and the feeling of being unappreciated and undervalued are the top three feelings

individuals experience as a result of skills underutilisation at work; all are factors which can lead to poor performance

and high staff turnover.

� Poor fit for the role and culture

BEHAVIOUR FUNCTION OF PERSONALITY

JOB CONTENT, SCOPE, COMPLEXITY

JOB CONTEXT, CLIMATE, CULTURE,

VALUES

SKILLS, KNOWLEDGE, EXPERIENCE

COGNITIVE ABILITY APTITUDE

INTERESTS

TEMPERAMENT

CAN DO

WILL DO

WILL FIT

ENVIRONMENT[ ]

Enhanced Satisfaction & Motivation Greater Employee EngagementImproved Performance

Paying attention to sourcing candidates that are BestFit™ for the role, the work team and the organisational culture pays

dividends. In high performing businesses, the recruitment process resists hiring people simply for their qualifications and

extends to assessing their motivations and style.

The oversupply of skills in the Australian market, in part, stems from hiring decisions made by employers. Organisations

are more receptive to employees with more qualifications, even if the qualifications or the person’s personality fit is not

relevant to the role. Having additional qualifications provides employers with a sense of comfort that the employees are

more competent in their abilities and will be a high performer in the organisation. Unfortunately, it is this preference

to hire overqualified workers which leads to over-education and over-skilling in the Australian labour market (Linsley,

2005 19 and Mavromaras et al, 2007 20). A study by Linley shows that about 21% of workers with a degree are working in

jobs that don’t require that level of education, while about 46% of workers with a vocational education are experiencing

the same. The ABS data presents findings similar to Linley, with about 20% of tertiary graduates and 35% of VET graduates

working in jobs not requiring those qualifications. (21)

This dichotomy between skills shortage and skills oversupply is ironic, given that 91% of employers surveyed indicated

they were facing a current skills shortage within their organisation. That organisations are struggling to recruit they skills

they need despite a large pool of skilled labour possibly reflects a gap between the skills needed by organisations and the

skills employees choose to develop.

Unfortunately skills mismatch can reduce productivity, quality of work and job satisfaction for workers, leading to higher

employee turnover and meaning that the employer does not benefit from the additional skills they selected the person

for in the first place.

Imagine that you had two employees equally suitably qualified for a role. One has all the desired qualifications and nothing else. The second has all the desired qualifications and an additional qualification in a field which is completely irrelevant. Which employee would you hire?


77% The employee with all the desired qualifications and the additional unrelated qualification

23% The employee with all the desired qualifications and nothing else

18 Chandler Macleod

� Highly educated

As discussed earlier, higher education does not lead to higher levels of either skills utilisation or employee engagement.

In fact, employees without secondary-level education or higher are more likely to be engaged in their job than those who

continued their studies. It seems that people are struggling to find either jobs that align with their education and skills,

or workplaces that provide meaningful opportunity and support for them to use their skills effectively. Higher education

levels often bring with it higher expectations which are not being met when skills are being underutilised – contributing

to the ongoing cycle of disengagement and reduced productivity.

� Often absent

Employee wellbeing has been identified as an outcome of practices such as job enrichment, employee involvement,

autonomy, job control, and employee participation; these practices are closely associated with skills utilisation strategies.

Employee wellbeing is highly correlated to absenteeism, which according to a 2012 Absence Management Survey, costs

Australian business up to $30 billion per year, or $385 per day per employee. The Australian average level of absenteeism

is 9.4 days a year. In areas where workers have little control over their work and do not have access to flexible work

practises – which allows them to take time off when they need it – average absences can rocket to 20 days a year. (22) For

contact centre employees, absence levels are almost 30% higher than non-contact centre environments. (23)

� Poorly managed

It’s clear that effective skills utilisation requires management practices, processes and approaches that support, inspire

and enable employees to use their skills to best effect to improve business outcomes. The Australian Treasury puts

Australia’s productivity performance firmly at the doorstep of second-rate management practices. In 2012, David Gruen,

head of Treasury’s macro-economic forecasting unit, told the Australian Conference of Economists that managers of

Australian companies ranked well below the US, Japan and Germany, in part because of the many small manufacturers and

fewer multinational corporations. He said figures show that better managed firms are more innovative and have higher

productivity, and that research had found that the productivity of Australian manufacturers’ would improve about 8% if

they were as well managed as those in the US. (24)

� Highly stressed

Some underutilised and unengaged employees may be suffering from the effects of cost cutting programs. For many

organisations, ‘doing more with less’ is shorthand for continually raising the bar on goals and expectations while spending

less money. For employees, it means their employers want them to work longer hours or accomplish more in the same

amount of time, sometimes without investing in the tools they need to do the job well. This is frustrating to loyal

employees who genuinely want to deliver results.


RecommendationsThe research underpinning this report uncovered the following key areas that business leaders urgently need to address to

realise the sizeable latent potential associated with skills utilisation:

� With Holden, Toyota and Ford exiting local production, and other manufacturing closures such as the decision to close

Alcoa’s Geelong smelter, Australian industry must be more innovative in recognising and deploying skills as our

labour force is required to evolve into new industries.

� Re-think business models. Discern which work needs to be done by full-time employees and which can be done

more efficiently through contracting, outsourcing or offshoring. When employees are not utilised for 100% of their

time and skills, it may make economic sense to outsource. This applies as much to senior managers as it does to other

employees. For example, you may need an IR Manager to deal with complex employee laws, but if employing a full-

time employee means their skills and time would not be fully utilised, it may make sense to outsource.

� Better use of technology. There are many possibilities for applying data capture and measurement around skills

utilisation. Implement some form of time recording – by capturing timesheets you will better understand current

utilisation and productivity. Use an employee engagement survey to drive changes in productivity. Don’t just track

employee training – go a step further and use your HRIS to conduct skills audits, move underutilised employees into

the right roles, and track, support and retain staff.

� Hire for BestFit™, not just qualifications. Simply matching employee skills and qualifications to the job is not

enough. High performing organisations find and keep employees with the right skills and the right attitudes necessary

to help the business reach its goals by contributing their talent and expertise.

� Set the tone from the top. CEOs must make productivity a priority by setting the tone and following through.

Businesses will see the most benefit from initiatives where leaders weave them into performance expectations for

managers and enable employees to execute on those expectations.

� Engage and up skill line managers. Leadership and management have a greater impact on skills utilisation than

any other factors. The best utilisation strategy can’t succeed unless it is adopted by managers who have the skills

and understanding necessary to engage and motivate employees. Engage and reward managers, and support them in

acquiring the knowledge and skills needed to better utilise their employees.

� Conduct a Skills Audit. Because it takes time to alter skill levels, businesses must not only understand their current

demand for skills, but be able to predict future demand. Conducting a skills audit can uncover the skills and talents

you have access to now, as well as help forward planning to improve future productivity and utilisation.

� Implement job design. The step following a skills audit, job design leads to job enrichment, engagement and in the

best case scenario, better skills utilisation. Ensure work is designed to make full use of employee’s skills and abilities,

and design jobs to involve teamwork, flexible job descriptions, multi-skilling and flexible work arrangements.

� Get the culture right. As Peter Drucker is famously quoted as saying, ‘culture eats strategy for breakfast’. An open

culture which gives employees flexibility, autonomy and a supportive environment where they can contribute their

ideas is a key success factor in successfully introducing skills utilisation practices.

� Provide flexible working options. Mobility will play an increasingly important role in hiring practises as employers

look further to recruit talent and fill skills gaps. Consider virtual teams, outsourcing, international placements,

contracting and job sharing as opportunities to increase your skills base and more fully utilise the skills you do have.

� Offer training for casual and part-time employees. IBISWorld Chairman Phil Ruthven says that by the middle of

the century, all workers will be their own enterprise as contractual arrangements supplant the concept of being an

employee. (25) With the changing face of the workforce, it no longer makes sense to invest less effort in up skilling

part-time and casual employees and independent contractors.

� Reward productivity. Identify metrics and support managers in setting productivity goals for employees. Motivate

employees to deploy their ability by linking productivity metrics to performance reviews and reward employees

financially with a share in productivity gains.

� Employees need to be more transparent. If they want more satisfying and better jobs and improved career pathways,

employees need to start having honest conversations with their managers about their skill levels and how these are

being utilised. Employees will also need to take more responsibility for driving their own skills development, training

and education, especially as they are likely to have multiple careers throughout their working lives. Equally, employers

need to be receptive to these conversations and ensure the channels for disclosure of skills sets remain open.

20 Chandler Macleod

About the Research The research for this white paper was conducted for Chandler Macleod by Lonergan Research during January 2014. The

methodology comprised an online survey, with responses gained across a range of industry and organisation sizes, as well

as secondary research across a range of published articles and reports.

Employer Survey

Respondents to the employer survey were collected from 386 senior businesspeople, most with a management, HR or

technical engineering specialisation.

52% of respondents were aged over 50, while 41% were aged 35-49 and 6% were aged 25-34. 68% of respondents were

males and 32% females.

Respondents were from a range of industries, dominated by manufacturing, mining, health & community services and

transport and storage.

Industry

19%

12%

11%

11%

8%

6%

Manufacturing

Mining

Health & Community Services

Transport & Storage

Construction

Wholesale Trade

5%

5%

5%

4%

11%

3%

Retail Trade

Electiricity Gas & Water Supply

Finance & Insurance

Property & Business Services

Other

Don’t know

Employee Survey

Respondents to the employee survey were collected from 258 employees, with the mining, communication services and

construction sectors strongly represented.

Industry Specialisation

30% Mining

11% Construction

12% Communication Services

10% Finance & Insurance

Manufacturing8%

4% Health & Community Services

7% Transport & Storage

7% Electiricity Gas & Water Supply

11% Other

28% IT Communications

Labour Trade Industrial19%

12% Technical Engineering

11% Management

8% Operations

6% Logistics Supply Chain Procurement

4% Accounting Finance

12% Other

28% of respondents held a IT communications specialisation, 19% held a labour, trade or industrial specialisation and

12% held a technical engineering specialisation.

75% of respondents were male, 25% female, and the majority were drawn from the 50+ age group (44%) and 35-49 age

group (41%).


The key published information sources for this paper include:

1. UK Commission for Employment and Skills (2009) High performance working: a synthesis of key literature, UK

Commission for Employment and Skills

2. Warhurst, P. and Findlay, More effective skills utilisation: shifting the terrain of skills policy in Scotland, SKOPE Research

Paper 107, SKOPE, Cardiff University

3. Skills Australia, Better use of skills, better outcomes: a research report on skills utilisation in Australia, Department of

Education, Employment and Workplace Relations (DEEWR), April 2012

4. Mehran, F. and Bescond D, Beyond unemployment: measurement of other forms of labour underutilization, ILO Bureau

of Statistics, 2008

5. Australian Bureau of Statistics, Underemployed Workers, Australia, Sep 2013, cat. no. 6265.0, ABS, Canberra, February 2014

6. The EY Australian Productivity Pulse™ Wave Five, Closingthe$2.4billionpublicsectorproductivitygap, October 2013

7. Gallup, State of the global workplace report: Employee engagement insights for business leaders worldwide, October

2013

8. Australian Institute of Training and Development, Response to future focus: Australia’s skills and workforce development

needs, August 2012

9. Skills Australia, Australian Workforce Futures, 2010

10. Premier’s Department of NSW, Workforce Planning: A Guide, 2003

11. Australian Workforce and Productivity Agency, Australia’s skills and workforce development needs, July 2012

12. The Economist, January 18th – 24th 2014, Coming to an office near you and The Onrushing Wave

13. SeekDataShowsPositiveStartto2014, Media Release, 13 February 2014

14. Deloitte, Building the Lucky Country #1, Where is your next worker?, November 2011

15. Deloitte, It’s (almost) all about me; Workplace 2030: Built for us, 2012

16. Skills Australia, Skills Utilisation Literature Review, April 2011

17. Mavromaras, K., Sloane, P. and Wei, Z., The scarring effects of unemployment, low pay and skills under-utilisation in

Australia compared, 2013

18. Hewitt, What Makes a Company A Best Employer, 2009

19. Linsley,I., Australian Journal of Labour Economics, Causes of over education in the Australian labour market, 2005

20. Mavromaras, K. & McGuinness, S. & O’Leary, N. & Sloane, P. & Fok, Y.K,. The Problem of Overskilling in Australia and

Britain, Melbourne Institute Working Paper Series wp2007n33, Melbourne Institute of Applied Economic and Social

Research, The University of Melbourne, 2007

21. Australian Bureau of Statistics, Barriers and incentives to labour force participation, 5 December 2013

22. Jason Murphy, Fiona Smith and Peter Roberts, Absenteeism reflects sick organisation, The Australian Financial Review,

7 February 2012

23. WorkplaceInfo, Sick leave levels lowest in four years: survey, 17 August 2012

24. Jacob Greber and Jason Murphy, Managers blamed over productivity, The Australian Financial Review, 11 July 2012

25. Phil Ruthven, Business in Australia, IBISWorld Newsletter August 2013

26. Monash University, Definition of skills and attributes, http://monash.edu/science/current/undergraduate/getting-

the-most/employ/skills.html

27. SQW Consulting, Best strategies in skills utilisation, January 2010

28. OECD thematic review on recognition of non-formal and informal learning, A report prepared for the Australian

Government Department of Education, Science and Training By National Centre for Vocational Education Research

(NCVER) September 2007

29. Council of Australian Governments (COAG) Recognition of Prior Learning (RPL) Program Final program report for

DEEWR, November 2009

30. The Economic and Social Research Council, Education, globalisation and the knowledge economy, 2008

22 Chandler Macleod

Chandler Macleod truly believes in the power of peopleIt’s true that an organisation’s greatest asset is its people. When you have the right plan and the right people in the right roles

at the right time, enabled by a great culture and effective systems, delivering on opportunities for growth and competitive

advantage is inevitable.

For 55 years, Chandler Macleod Group has been helping people and organisations to reach their full potential through

enhancing their human resource strategy and practices to support achievement of their goals.

Today, we have diversified to offer end to end human people management and practices that reduce risk, increase productivity

and quality, unleash capability and deliver leverage.

With more than 1,300 internal employees and 21,000 employees out working on client sites, we are one of the region’s

largest employers – so we know what it takes to recruit, select and retain the best people. In fact, everything we do relates

to unleashing potential in people and companies; from providing today’s career opportunities to planning, measuring and

managing the workforces of tomorrow.

Chandler Macleod Quick Facts: � $1.5 billion in revenue

� ASX listed company

� Over 1,300 internal employees

� Over 21,000 employees out working on client sites every week

� Over 450,000 hours worked per week across Asia Pacific

� Over 300,000 people payrolled every week

� Over 650,000 assessments carried out since 2005

� Over 8,000,000 hotel beds made nationally

� Provided hands on care at over 18,000 aged care beds nationally

� Applied specialist sector knowledge to over 3,100 companies

� Over 50 branches across Australia and internationally

� Outstanding workplace safety record, with a national Lost Time

Injury Frequency Rate (LTIFR) of 1.4 and TRIFR decreased by 10%

� Deep understanding of industrial relations

� Unmatched service breadth and career opportunities

� Currently working with over 60% of ASX Top 100 companies

� Certified to ISO9001:2008 Quality Management Standard.


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