JOINT COMMITTEE ON ENTERPRISE, TRADE AND EMPLOYMENT debate -
Wednesday, 1 Oct 2008

Human Resource Issues: Discussion with CIPD Ireland.

Chairman

I welcome Mr. Michael McDonnell, director, Mr. Sean O'Driscoll, chairman, and Mr. Gerald Flynn, research and policy adviser, from the Chartered Institute of Personnel and Development, CIPD Ireland. I must profess an interest in the matter. I give a welcome from the heartland of Ballinderry, Mullingar, to my friend Gerry Flynn. I mean no disrespect to either of his colleagues, but every Westmeath man recognises one of his own.

Before we begin, I draw everybody's attention to the fact that while members of the committee have absolute privilege, the same privilege does not apply to witnesses appearing before the committee. It is generally accepted that witnesses have qualified privilege, but the committee cannot guarantee any level of privilege to witnesses appearing before it. Members are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.

Mr. Michael McDonnell

I thank the Chairman and members for their kind invitation to the Chartered Institute of Personnel and Development, CIPD, to appear before the joint committee to discuss some major issues in the strategic management and development of people in the economy. This is our first opportunity to meet the committee and I hope we may be of some benefit in briefly outlining a few of the significant challenges facing those in the workplace. I am joined by the chairman of CIPD Ireland, Mr. Seán O'Driscoll, a former HR director at the ESB, and employment specialist Mr. Gerald Flynn who is research and policy adviser to the institute.

The Chartered Institute of Personnel and Development has 6,500 members in the Republic, a near doubling of membership since 2000. This reflects the growing recognition of management competencies in the area of people as the drivers of innovation and productivity and key services to the public and private sectors. The institute has seven regional committees and works closely with colleagues in Northern Ireland, as well as being affiliated to a number of international bodies.

The institute was established in Ireland in 1937 and last year we marked our 70th anniversary with the presentation of the inaugural Charles E. Jacob medal to the then Taoiseach, Deputy Bertie Ahern, to signify his skills and dedication toward beneficial employment relations since the mid-1980s. Mr. Jacob, a joint managing director of W & R Jacob biscuit firm in Dublin was one of the original founders of the institute in 1913. Nearly 100 years later we still face many challenges in the employment sphere, currently the modernisation of the regulations governing agency employees. In 2001 the CIPD made a submission to the Department on this issue. We welcome the commitments in the new national social partnership agreement to advance the legislation in the coming weeks.

We have been concerned about the growth of employment agencies, some of which are operated by people with few professional qualifications in HR or people management practice. Unfortunately, a few agencies, some based overseas, have treated migrant workers as if they were running a 19th century hiring fair. That is why we welcome the proposed monitoring and advisory committee in the employment agencies regulation Bill to oversee employment agencies. Up until now, the only main requirement was financial solvency rather than operational competency and good standards in recruitment practices.

I referred briefly to the draft agreement on national pay terms which we welcome as providing a sense of continuity and stability in a period of financial upheaval and rapid rising unemployment, mainly arising from redundancies and company closures. So far this year the number of jobs lost has increased by over 40%, with 25,000 people losing their jobs since last Christmas.

That brings us to the key area of managing and developing talent in the State. Our investment across the board in workplace training is still disappointing and lags behind practice in other developed EU countries. Greater emphasis needs to be placed on in-company training and skills development. Instead we are more likely to see a rush toward training when people lose their jobs as a remedial measure than a planned enhancement. The CIPD 2007-08 study of training in Ireland with the University of Limerick which will be published next month shows that average expenditure on learning, training and development in Irish organisations amounts to 3% of payroll costs. The percentage invested in training appears high but it does not compare favourably with our EU competitors. Germany and France spend significantly more. Average EU expenditure on training is 4.15%.

Our survey also points to a worrying trend that spending in Ireland is disproportionate across the sectors. Our ongoing review of the more vulnerable parts of the economy, mainly smaller indigenous industry, lower skill assembly and processing employments, suggests to us that up to 27,000 workers are at serious loss, not just of losing their jobs but of never getting another one when the employment market improves. Employees in Ireland in their late 30s or mid-40s should not have to face the prospect of being dubbed no-hopers when they have the potential to contribute more than 25 years to our growth and development. It is up to senior management to take the strategic decisions to enhance training and development with the support of the State agencies. This is where we see a role for a reformed FÁS, to work more closely with people still in jobs, rather than waiting for them to be referred from a social welfare office. Trade unions also have a role in being honest advisers to their members and advising them to avail of training as the best means of securing their futures, rather than trying to delay inevitable change or preserve inefficient practices.

Performance management and enhancement is an accepted key principle in successful commercial operations but we have been slow to adopt it in the public service and smaller organisations. It is not about churning or firing one tenth of one's employees each year, as it is sometimes presented. It is about helping people to do a better job and recognising it when they do, often with a bonus or additional reward. It is also about helping people to overcome hurdles which restrict their contribution, whether through a lack of resources and training or the quality of line management.

We need a radical overhaul of public policy to manage the pensions crisis which we are doomed to face if significant decisions are not taken in the next two years. The committee may wish to consider workplace and remuneration proposals to enhance some of the initiatives suggested last year by the Minister for Social and Family Affairs, the late Deputy Séamus Brennan. This would involve a blending of PRSI increases with a personal savings plan akin to the successful SSIA scheme which would ensure both employers and employees, with the support of the State, would provide an increasing level of savings with which to purchase pension annuities. Had we adopted such a scheme ten years ago, in tandem with the Exchequer allocation of 1% of GNP towards the public pension reserve, we would not face as big a challenge as we do today. However, there is no point in stating, "We would not start from here." We must involve all stakeholders - employers, employees and the State - in diffusing the so-called pensions time bomb.

I thank the Chairman and members of the committee for listening to us outline these topics. With my colleagues, Mr. O'Driscoll and Mr. Flynn, I will be happy to probe these aspects in greater detail if members so require.

Chairman

Mr. McDonnell has mentioned that 27,000 people are at serious risk, not just of losing their jobs but of never getting another one when the employment market improves. Where are the people concerned mostly placed? Some have already lost their jobs, while others will lose them in the future. What system could be put in place for them? We speak of an up-skilling programme for almost 500,000 people. Is that process not too elongated? How can FÁS be reformed to accelerate that up-skilling and retraining programme? The current programme is geared towards 2020, with an average of between 40,000 and 45,000 a year. Given the current situation and because so many jobs are being lost in the construction industry, we cannot wait that long.

What is the view of the Chartered Institute of Personnel and Development on apprenticeships? Many who embarked on apprenticeships, particularly in the construction industry, now find that their employers have gone out of business. The committee has suggested apprentices could be subsidised to complete their apprenticeships abroad and, in two or three years when the economy picks up, return with qualifications and enhanced skills. What is the CIPD's view of this suggestion?

Mr. Michael McDonnell

We think FÁS can play a very significant role. One of the difficulties we see is that its remit is so wide. It covers everything from social and community schemes right up to high-technology training for the workforce of the 21st century and we think this remit is far too wide. We also think that the model must be reformed because it sees people's lives as compartmentalised - as though one is first educated or trained and one then goes to work for 30 or 40 years, often with one employer. This approach compartmentalises training. Now, however, people move around more and jobs go out of existence more quickly. We have not developed a methodology but we would like to see FÁS develop a methodology that would allow it work more closely with and upskill people currently in employment. This would present an alternative to waiting for people to lose their jobs before the machinery of the State steps in.

We were looking at the idea of developing a skills passport for individuals. At the moment there is much talk of certification and so on, but international research shows that most people learn on the job. However, the perception remains that one can only really learn on a course, where one might get a certificate. FÁS could work with industry, employees and trade unions to develop an ongoing skill base that would leave people not necessarily employed, but employable. We believe the definition of employability is the speed with which one could get another job, should one's current job go out of existence. A skills passport could help measure, identify and develop the skill base. Much of the funding and resources that go into training and training centres could be used in the spirit of partnership by giving individuals the incentive to continue to develop and train in the workplace.

Mr. Seán O’Driscoll

I had the opportunity to be involved in a review of apprenticeships, which examined what was being covered in the curriculum, at the social partnership discussions a few years ago. Nobody at that point anticipated the fall in employment in the construction industry that has happened since. The apprenticeship scheme allows people to work across a range of different industries and, while there has been much focus on apprenticeships in the construction industry, there is a dearth of talent coming through in other areas. It is crucial that we examine how people can be reassigned or use their capabilities in industries other than construction.

This issue does not apply solely to apprenticeships; it applies to a number of skills areas, such as engineering and ICT, where many of our members find it difficult to get the quality and quantity of people they need coming through the system. They need people who express an interest in studying for degrees in engineering and ICT and we are having difficulties in these areas.

On Mr. McDonnell's point regarding building the employability of people, we must ensure that people understand they will work in three or four different organisations in their lives. They need to develop skills that will allow them to work in those organisations.

Deputy Chris Andrews

I thank the witnesses for the presentation. Following on from the Chairman's points, does the organisation have an active relationship with FÁS? Apprenticeships and employment opportunities are going to become rarer but when the upturn comes, as it inevitably will, how should we position ourselves? When things take off again people will say FÁS is failing to do certain things, such as delivering on apprenticeships. How do we ensure that we do not have a case of peaks and troughs in terms of the supply of staff? Is this part of the delegates' remit?

Mr. Michael McDonnell

We have good relations with FÁS. Our group is neither a social partner nor a lobbying group so we do not have a vested interest. When one examines the structure of boards of organisations such as FÁS, they tend to be limited in terms of where they draw representation from. It is inevitable that a significant number of social partners will sit on them and we feel they miss out by not having a wider remit.

FÁS, however, runs an excellent scheme called Excellence Through People, a business improvement tool which tries to link learning and development with business objectives. One of the great difficulties is in trying to demonstrate a return on investment in training. A new machine may increase the output of widgets but with an investment in people the link is always more tenuous. Excellence Through People is a very good scheme that seeks to link business objectives and learning. I have the privilege of being chairman of the board and we have a good relationship with FÁS.

The question on the skills base is valid. During the last downturn in the early 1990s the first reaction of organisations was to let people go and cut numbers. That cut a lot of good talent out of organisations to save costs but four or five years later the global economy took off again and there was, in a phrase coined by McKinsey and Company, a war for talent. Suddenly there was a scarcity of talented people and we are in danger of making the same mistake. We take the short-term view that if organisations are struggling, the first thing to do is cut the workforce. An organisation needs some assistance in getting the balance right in this regard. One does not want to unfairly help an organisation but there is now a great opportunity to make use of FÁS resources to help individuals to stay in their jobs and acquire the training and upskilling that will stand to them in three or four years' time when there is an upturn. We missed an opportunity to do this in the early 1990s but now have an opportunity to keep the talent in the workplace through retraining in order that in three or four years' time not only will we have a talented workforce but also one that is trained in the next generation of skills.

Mr. Seán O’Driscoll

One of the things that concerns us as an organisation and something I see as a human resources manager is the tendency to cut the training budget when there is a downturn, at a time when we have capacity within the workforce and should be investing in training and raising skill levels. If we do not do this, when things start to improve, people will not have the skills to be where the work is and we will be playing catch-up. In the private sector there tends to be more of a focus on things that add value to the business, whereas in the public sector the first thing to be cut is training. Therefore, we do not continue to develop our people's skills, meaning that when we need them to have those skills, we are not ready.

Mr. Gerald Flynn

The apprenticeship is the key bedrock of skills for the future and the passport to which Mr. McDonnell referred. Part of the problem with apprenticeships is that rates have crept up significantly as a proportion of the skilled rates, especially in construction. Many apprentices going into their third or fourth year suggest they are willing to stay on social welfare rates as long as they have the opportunity to continue their apprenticeship. They are sensible, bright young people who know that, even if there are no jobs in this country following their apprenticeships, there are plenty in Australia. Like many people in the 1980s and 1990s, they could go there for five years and return afterwards.

Some of our colleagues have proposed that if apprentices went onto the social welfare rate, they should qualify for a sponsorship though FÁS. There would be a liaison scheme, whereby if they obtained work in the construction industry in London, their apprenticeship could be supervised through FÁS, like a university tutor system. Apprenticeship is key to our skills and talent pool for the future but the people at serious risk are not apprentices. Instead, they are the ones in low-skilled jobs which have been reasonably secure for the past few years but are now highly vulnerable. Of approximately 30,000 people who have lost their jobs this year, up to 5,000 would be persons with minimal skills.

It is very hard to recover from the loss of jobs requiring minimal skills. Let me give an example. The textile factory in Buncrana employed whole families - parents, daughters and their husbands. When these jobs went to Morocco, the area was highly vulnerable. We do not want to repeat those mistakes. It takes a great deal of courage for people to say to another person, that while the group certificate was sufficient to get a job in the early 90s it may not be sufficient to get a job in the later years of 2008 onwards. Somebody has to speak up. Management and those at senior level are guilty of the fact that the more training and education one has the more one receives. Those who left school without completing the leaving certificate cycle are highly vulnerable, even though they have the potential to contribute much to our economy.

Deputy Michael Fitzpatrick

I am a firm believer in lifelong learning. I am a product of the vocational education system. People referred to FÁS but nobody referred to the VECs, which I believe is a superior system in the delivery of education and training. It is a great pity that we took the role of training apprentices from the VECs and transferred it to FÁS. The skills and knowledge in the VECs was well capable of delivering these programmes. We should focus on delivering training to young people and adults in second level and vocational schools. When people lose their jobs we hear what FÁS will do, but we seldom hear that the organisations tap into the vocational educational committees. I have worked in eight or nine different jobs and I am well enough qualified to continue to do the work because of lifelong learning.

The Department of Education and Science should look at ways to help people to upskill through night courses. I do not think FÁS should have the entire role of upskilling people.

Mr. Michael McDonnell

I agree. I started in third level education in what was the then OTC in Athlone, an excellent college and progressed to what was then known as the NIHE in Limerick, now the University of Limerick. That is an example of how one moves through the system. It is interesting that the perception of elitism in the Irish education system is holding back people. We put the emphasis on the leaving certificate and the impression is created by newspapers that unless one gets a good leaving certificate and a place in a traditional university, one will miss out and be second rate. A significant number of people achieve great things through a system that allows them to progress from one level to another. There is a need to educate people on the opportunities and to demystify this misguided elitism. The VECs can play a major role in giving opportunities to develop and progress through the national qualifications framework. I agree totally that an overfocus on FÁS is wrong. A more accurate approach is to focus on seeing how one can progress through the national framework of qualifications which goes from level 1 up to level 10, which is a PhD, so that one can acquire qualifications at every level in a whole range of subjects. A great deal more could be done to place people in that framework and develop them through that process. The VECs can play a significant role in that regard.

Senator Brendan Ryan

Mr. McDonnell compared the average training spend in Ireland with general trends elsewhere in Europe. The average spend in Ireland is 3.1% of payroll. Given that many foreign companies operating in Ireland spend significantly more than this, many companies must be doing little or nothing. It is the responsibility of senior managers to take strategic decisions to enhance training. If they do not, how does one encourage that shift in emphasis? Should there be some form of regulation, or linkage of training with Government supports? Would there be merit in such an approach? How real is the link between job losses and lack of training? Does lack of training have a greater effect on job losses than the cost of doing business in Ireland compared with overseas?

Mr. Seán O’Driscoll

One of the key drivers of a good training and development plan in any organisation is performance management. Too few organisations sit down with their staff. We find this in smaller organisations and other environments where it is difficult to get the discussion to take place. In that discussion one can identify training needs and develop a training plan. Good human resources practice in training and development is crucial. Many of our members are fighting hard to introduce a philosophy which is consistent with retaining good talented people within an organisation and developing skill within it. Implementation of good performance management is a mechanism to move from one place to the other. We are not hugely comfortable with it in Ireland, as one is expected to talk about what one does well and not so well. We tend to have our own language and way around this. A much more modern management of performance, a discussion with people about their needs and a recognition that they need different supports at different times of their lives are crucial. The starting point to making sure the spend is right is a good performance management system. That will drive the need for training and link it with organisations which provide training. It will link the value of training with profitability within a company. This is something we must expand in small organisations and within the public service.

Senator Brendan Ryan

How does one get that message across to so many smaller Irish companies which do not see the importance of training? How does one get them to see it? It is obviously the way to go but how does one make the shift?

Mr. Michael McDonnell

That is a very valid point. Many multinational companies spend between 8% and 10% on training. If the average spend across the economy is 3.1%, many organisations are spending little or nothing. Where unit labour costs are a small proportion of total costs there tends to be a higher spend on training. The unit labour cost of multinational companies tends to be lower than that of indigenous companies. Therefore, they spend more on training. Much traditional investment in Ireland has been in people who are unemployed or in capital developments such as the provision of machinery. Our biggest challenge is in maintaining competitiveness and up-skilling our workforce. We can no longer depend on low unit wage costs as an attractive feature for inward investment. There is a strong economic argument to be made for shifting the emphasis of investment in organisations towards developing people. There is a real strategic advantage to be had in this.

The owner of a small company employing, perhaps, 50 people does not have the time or resources for sophisticated training. This is why we see the need for a shift in the emphasis of State support. It is legitimate to move from capital to talent grants. We also see the need to support organisations such as FÁS and Enterprise Ireland to provide professional support and advisers. People could go into those organisations and work with the management teams and individuals in them to provide development and training. There is no doubt that they will need significant State support to raise the average training spend.

One of the key things is a shift of policy into investing significantly in upskilling existing workers in areas where there is little commitment to training at the moment. This can be done with support from State agencies that could work, almost as consultants, with the organisations. It would tie in with the skills passport that we suggested for individuals - the training and development could be recorded. This is where the shift must occur because if not the percentage will remain low across the economy and the proportion will be distorted.

Mr. Gerald Flynn

This has been addressed in some of the Scandinavian countries. I think Denmark introduced training vouchers which meant a company can be compensated when an employee takes time off for focused training that could help his or her development. Across the board we have the One Step Up programme, referred to by the Chairman but, unfortunately, much of the emphasis in that programme is on people with quite a lot of training getting more. It should be aimed at more vulnerable people. It has been suggested that people should get training vouchers, though perhaps not in the current climate. Many people who have paid taxes since the age of 16 or 17 have missed out on the major investment that has gone into education, especially into third level, RTCs and so on. The vouchers used in the Scandinavian model are not just for the employee, they also compensate the employer for the employee's absence.

Chairman

One of the problems facing a small company that trains an employee to a certain skill level is that the employee may then be head-hunted in an almost predatory fashion by a larger company. This might suit the employee but the small company of 20 to 25 people that has invested in him or her would hope that the employee will pass the expertise on to another person within the company. Perhaps some of the delegates have been head-hunted - it does not happen in politics because one's head tends to go the other way. The head-hunted employee may move on to a big job where he or she doubles his or her salary and that is fair enough but the small company loses out. In fact, the economy in general will lose out in such a case because a company with greater spending power may simply buy in expertise moulded in smaller companies. Is this a greater problem in Ireland than other European countries?

Mr. Seán O’Driscoll

It is both a problem and a success factor facing companies.

Chairman

I thought Mr. O'Driscoll would say that.

Mr. Seán O’Driscoll

I fundamentally believe that one must develop the talent in an organisation. It is a compliment to an organisation to have an employee head-hunted. It is common for organisations that invest a significant amount in a person's training and development to apply a fidelity agreement that sees the individual agree to refund the company if he or she should leave within a certain period. This may be part of the price the head-hunting company must pay - it will give the individual the money to reimburse the smaller company. There are mechanisms around head-hunting that can be applied by smaller companies but for a larger company to try to steal a smaller company's employees is a great vote of confidence for an organisation.

Chairman

I was never stolen from anyone so I must not be much use. This is an interesting discussion and I am interested in some of the issues that have been raised. The delegates have shown an ability to think outside the box and have illuminated the discussion today. We thank Mr. McDonnell, Mr. O'Driscoll and Mr. Flynn. Deputy Varadkar is joining the committee now because he is involved in the Credit Institutions (Financial Support) Bill. Many people are up to their eyeballs in work in the Houses today. Yesterday and today were critical in keeping the economy going and the delegates may speak of these days in five or six years' time.

Deputy Leo Varadkar

We have reached 240,000 people on the live register.

Chairman

The Deputy is able to bring me fresh news.

Deputy Leo Varadkar

It is spiralling into the abyss.

Chairman

If Mr. Flynn was in his old job he would be typing as we speak. I thank Mr. McDonnell, Mr. O'Driscoll and Mr. Flynn for joining us today and assisting us in our deliberations. They have given us a clearer insight into the world of personal management and Mr. O'Driscoll's riposte to me was interesting. It exposed my ignorance of how things work at that level, but I am always thinking of the small man and Mr. Flynn will vouch for that.

It has been an interesting meeting and I am glad that a small company that upskills an employee can get recompense when the employee is head-hunted. To be head-hunted may be great for the employee and may reflect well on the smaller company but, as Senator Ryan mentioned, it would not encourage further investment in upskilling.

The joint committee adjourned at 11.40 a.m. until 10 a.m. on Wednesday, 15 October 2008.