A false alarm on skills

Firms might say talent is in short supply, but they should blame their recruitment policies

Many organisations believe Britain is suffering a major skills shortage that is set to plunge them into financial loss. However, the research company Saratoga says this is little more than a myth. Its findings show employers are so concerned about a skills crisis that they are "panic recruiting" and ending up with more staff than they need. The research suggests it is this unnecessary employment that is causing the financial problems.

Many organisations believe Britain is suffering a major skills shortage that is set to plunge them into financial loss. However, the research company Saratoga says this is little more than a myth. Its findings show employers are so concerned about a skills crisis that they are "panic recruiting" and ending up with more staff than they need. The research suggests it is this unnecessary employment that is causing the financial problems.

Saratoga warns that the repercussions may be severe. "Governments are thrilled about the increase in employment across Europe," says Philip Burton, client development manager. "But our research [which incorporated surveys of 5,000 employees in 22 European countries] found that while staffing levels this year were up 13.5 per cent on last year, revenue per full-time employee dropped by 3.9 per cent. Profit per full-time employee fell by 18.3 per cent.

"When companies wise up to this, employment may fall. I don't know what that trigger will be, but I believe this is the calm before the storm."

The most depressing figures are in the retail sector, with revenue per employee down nearly 17 per cent. "The trend towards price slashing, and the sometimes detrimental effect of the growth in e-business, may also contribute to this figure," adds Mr Burton.

Nevertheless, the latest skills index from recruitment consultancy Reed Employment found that 74 per cent of organisations in the retail sector report skills shortages. Many are checking their recruitment methods as a result.

"Seven in 10 UK firms across all industries believe there is a skills shortage - 26 per cent higher than six months ago," says a spokesperson for Reed. "If Britain is to be globally competitive, it is vital to be able to attract the very best talent from around the globe."

But Mr Burton believes the recruitment industry may be partly responsible for the perception of a skills gap: "It is possible they have exploited the myth for their own purposes."

Mike Cannell, training adviser at the Chartered Institute of Personnel and Development, adds: "The fact there is a genuine skills shortage in areas such as IT may also be a source of the perception. But while some sectors may have difficulty in finding staff that meet their needs, employers shouldn't make the mistake of thinking this is the case in all sectors."

Andy Westwood, head of policy and research at the Industrial Society, believes even the much-documented skills shortage in the IT industry may be exaggerated: "The speed of the turnover of jobs can lead to artificially inflated figures."

He adds that when employers complain of a shortage of skills, they may simply be looking in the wrong place or using the wrong recruitment methods. Many companies, for instance, do little more than place a job ad in a local paper, while others use inadequate techniques in assessing skills.

Charles Woodruffe, a specialist in assessment centres, agrees. He warns that even the centres are getting selection processes wrong and losing valuable recruits as a result. "Lack of focus is the most prevalent mistake. Leaderless group discussions and team-building exercises may be popular, but they don't tell re- cruiters much about how, say, a retail buyer will close a deal."

Meanwhile, Mr Cannell says the best way to improve skills is offer on-the-job training. "There has been a decline in developing existing people in many firms, but it is a crucial way of overcoming apparent skills shortages." He adds that employers should also consider how they are perceived by the public. "Very often, a company can't find a suitable candidate for the job because it is not considered desirable to work for."

For the time being at least, Mr Cannell believes employers may remain ignorant of the truth about the "skill shortage" -- not least because staff are hardly likely to complain that they're being underworked. "Most days, I could reasonably finish all my work within four hours," says a PA working for an advertising firm in central London. "But because I'm worried I won't find another job so highly paid, I make it look as though it takes me eight hours."

Even critics of Saratoga's theory have to ask why, if there really is a skills shortage, companies are taking on all these extra staff.