Human capital is seen as one of the key factor conditions contributing to national competitiveness and economic performance (Porter, 2002). Productivity performance of OECD countries tends to correspond to the skill levels of the workforce in specific countries. Hence, governments increasingly view human capital formation, both quantity and quality of workforce, as one of the key levers in ensuring sustained productivity gains and standard of living. Skill development of the workforce requires major investments beyond formal schooling. It demands ongoing training investment in continued education and workplace training in order to help the workforce keep pace with technological innovations and continued adoption of new technology in the workplace. Private and public partnership in this context dictates both the government and private companies and organizations participate in the training effort. Investment in training requires effective and efficient methods, which in turn calls for sound and robust management tools and standards at the micro (firm) level to ensure continuity and sustained efforts. This article examines two training related standards, “Investors in People” (IIP) and ISO 10015, in order to identify similarities and differences of these two instruments.
IIP is a socio-economic policy instrument launched by the UK government in the 1990’s to improve the skill level of its workers. IIP works by encouraging the organizations (private and public alike) to provide adequate resources for the training and development of their employees in order to raise their skill levels and thus increase their respective organizations’ productivity.
Worker’s productivity has been a standing concern of the UK government regardless which political party has been in power. Successive administrations since Margaret Thatcher’s have undertaken a series of macroeconomic reforms in order to sustain a “stable trend” of economic growth through increasing productivity and employment generations.
In comparative terms, the UK’s labor productivity performance has been poor throughout the post-war years (HM Treasury, UK, 2001a). Labor productivity growth has been faster in France and Germany than in the UK for most of the post-war period, as shown in Table 1, 2.Table 1.
Labor productivity growth rates (percent per annum) (Source: O’Mahony, 1999)
|*Figure refers to former West Germany only|
Productivity comparison in 1999 (UK=100) (Source: OECD. Quoted in HM Treasury Budget, 2000)
|Output per worker||145||119||107|
|Output per hour worked||126||123||114|
|Total factor productivity*||118||120||113|
|*Total factor productivity (TFP) takes account not only of labor inputs, but also of capital. TFP is an estimate rather than direct measure. It requires accurate measure of the capital stock, which is often not available. Therefore, TPF should be used with care|
Despite efforts to raise the skill level of workers, UK productivity measured by “output per worker” remains behind that of other industrialized countries (HM Treasury, UK, 2001b) .
This persistent productivity gap in terms of output per worker can be attributed to two fundamental factors. One is the hourglass shaped skill composition of the labor force (see Figure 1). The other is the relative low investment in training by both public and private sector in the UK. To encourage the private sector to invest in the skill upgrading of its human capital and to distinguish the high performers in this regard from the laggards, IIP has been devised as one of the public initiatives to spur awareness and action.
Chart demonstrating that in terms of human capital, UK has a larger proportion of high skill workforce (obtained a tertiary degree or above) than Germany but much less proportion of intermediate skill workforce (with a vocational qualification above high school but below degree level) (Source: HM Treasury Report, 2001. Productivity in the UK: The evidence and the government approach)
Key Terms in this Chapter
Quality Assurance (QA): QA is the activity of providing evidence needed to establish confidence among all concerned, that quality-related activities are being performed effectively. It consists of all planned or systematic actions which are necessary to provide adequate confidence that a product or service will satisfy given quality requirements defined by customers and stakeholders. QA assures the existence and effectiveness of procedures that attempt to make sure-in advance-that the expected levels of quality will be reached. It covers all activities from design, development, production, installation, and servicing to documentation. It introduced the sayings “fit for purpose” and “do it right the first time.”
Productivity: Productivity captures the relationship between production of an output and inputs used in accomplishing the assigned task. It is measured as a ratio of output per unit of input over time. It is a measure of efficiency and is usually considered as output per person-hour.
Human Capital: The term ‘human capital’ has two different levels, personal and systemic. At the individual level, OECD (2001 AU30: The in-text citation "OECD (2001" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. ) defined it as “the knowledge, skills, competencies, and attributes embodied in individuals that facilitate the creation of personal, social, and economic well-being.” Therefore, personal human capital refers specifically to individual possession of human capital and the development of ‘whole individuals’. At the systemic level, ‘human capital’ is the collection of the skills and knowledge (and attitudes) of all workers in an organization or all the people of a nation.The latter sense has increasingly been seen as an engine of national economic and social growth and development