May, 2009 - UK manufacturers need to change their mindset to training during the current recession to avoid hindering progress towards a more highly skilled workforce. According to The National Skills Academy for Manufacturing (The Skills Academy), fear and pessimism generated by a deep recession may thwart the Government’s commitment to the UK becoming a world leader in global manufacturing. However, a more strategic approach to training combined with a good understanding of the nature of long term value creation, could ensure that the UK is ideally placed to capitalise on the upturn.

“Manufacturing companies hit hard by the current economic crisis could be making a huge mistake by cutting back on training,” warns Bob Gibbon, managing director of The Skills Academy. “In a longer, deeper recession many businesses are forced to make redundancies, thereby losing part of their highly skilled workforce. In addition, companies may also be tempted to save money by reducing investment in training those remaining employees, because they cannot see the immediate benefit,” he explained.

The last two deep recessions, one in the early 1980s and another in the early 1990s, shed some light on the problems faced by manufacturing today. The recession of the early 80s provides evidence that when employers cut back on their investment in training their workforce, there was a noticeable fall in the number of apprenticeships and other trainees in the manufacturing industry. However, evidence of only a small drop in training in the recession of the early 90s shows that lessons were learnt and training had become less vulnerable to economic cycles.

Reason to Invest

Importantly, The Skills Academy believes there is reason to actually increase training in a recession. Bob Gibbon explains, “A recession intensifies competition. International competition, in particular, is increased during a global downturn. Businesses are competing for a globally contracting market and the quest for competitive advantage becomes the holy grail of survival.

“Competitive advantage is achieved by understanding the value drivers of a business, such as skills and capabilities. This allows businesses to compete on innovation, performance and value creation. And this means creating strategies that require a greater investment in training whereby these drivers are leveraged to deliver customer and shareholder value.”

To ensure that operational activities, such as training, are aligned with strategy, the more enlightened companies make sure that learning and skills are part of the key performance measures of their business. Such companies thereby ensure their training strategy creates customer and shareholder value and delivers long term cash-flow.

The Skills Academy is working with research bodies, academics and employers at the forefront of work-based learning to help manufacturers accelerate their competitive advantage through investing in skills. Through its Learning Engine tool as well as its new web-based learning portal, The Skills Academy gives businesses access to the latest systems and processes to ensure that any investment in training delivers measurable improvements in business performance.

To raise industry awareness of the crucial role in skills and learning in helping UK manufacturers to outperform and out-innovate their global competitors, The Skills Academy has established the new Skills Development Award. Organised by The Skills Academy in conjunction with Cranfield University School of Management, the award aims to recognise exemplar companies who have built sustained competitive advantage and value creation through investment in training.

CASE STUDY
Power Panels Gains the Edge through Training

The 2009 winner of The Skills Academy’s Skills Development Award, Power Panels Electrical Systems, has learnt from failures during the last recession, and subsequent investment in skills has enabled it to triple its profits, increase turnover four-fold and achieve unprecedented 99.97% quality levels.

Based in the West Midlands the company specialises in the design and manufacture of electronic, electrical and electromechanical assemblies and systems for a wide variety of industry sectors including food processing, semiconductor, power generation, printing and medical. Over the last eight years it has achieved unprecedented business success through taking a strategic approach to skills development and developing a culture of learning across the organisation.

PP Electrical Systems’ story of change began in 1990. The company had experienced robust performance in making control systems for the automotive sector. But as the recession deepened, work dried up. Turnaround was achieved after PP Electrical Systems first introduced Japanese manufacturing techniques and later, Six Sigma processes.

Although these initiatives had a big impact on quality improvement levels and improved business performance, the company was frustrated with not being able to get beyond 98% quality level. Although considered world-class at the time, PP aimed higher because it saw quality as a competitive advantage.

David Fox, the company’s chairman and chief executive, elaborates, “We soon realised that to accelerate performance to the next level we needed to look at attitude, competences and skills; we had gone as far as we could by improving processes.

“In 2000, we set up an in-house training school run by a six sigma black belt trainer. We needed to make it clear that all our people needed to contribute and collaborate to PP’s success.

“Within [a year] we were seeing a change in behaviour. From being used to [working in silos] and not challenging things, they were truly working in teams and solving problems collectively through collaboration.

“We developed a Training Road Map, which aligns our strategic objectives with the competences that we need to get there. It is a structured approach to competency development and takes our people through a number of development levels from the shop floor through to leadership.”

In order to maximise real time improvements in the work place, PP Electrical puts a strong focus on the practical application of training to ensure that learning happens and employees quickly put their new skills to use back in the workplace.

Training is compulsory at Level 1 and 2 with all employees participating. Beyond that, Level 3 and 4 training (in the form of NVQ Level 3 and 4 B-IT) is optional for those who want to take it further, when they are ready and competent to do so. Essentially this means that anyone who reaches a managerial role, including team leaders and supervisors, are trained to 6 Sigma Green belt level.

As well as giving each employee a compulsory 200 hours training per year, the training attains a 40/60 split between classroom theory and practical application.

Continues David, "I have a favourite quote for this: ‘In theory, there is very little difference between theory and practice, in practice the difference is enormous.’ The difference in our training is in how we relate the theory to the practical application of the learning. People are shown how to use the skills they have learnt. Learning in this respect is continuous and ongoing throughout the organisation."

"The impact of training on the bottom line can be measured in what we have saved on rework, the overtime we have eliminated and our 99.7% on time delivery levels relieves the need for buffer stock and helps the customer to reduce their costs. And the tangible improvement in increased employee motivation leads to measurable customer satisfaction improvements."

Rita Davey, West Midlands regional manager for The Skills Academy is delighted to be working with a company whose driving force for success is training. "Power Panels sees learning as a strategic decision and believes that it is an investment rather than a cost."

"This has brought measurable benefits to the company and significant return on investment. It is highly innovative in how it involves its supply chain in this training – training its suppliers to pass on the value of this learning down the supply chain. This is what gives PP the edge.

"Power Panels is an exemplar of organisational learning and its numerous external awards are recognition of this."

- Ends -

Media contact:
Martin Farrow
CHANGEWORKS Communications
T. + 44 (0) 1785 247588 / + 44 (0) 7771 970025
E.

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