Management Capabilities and Training Needs in Australia's Small-to-medium Size Manufacturing Enterprises:
an Analysis of Existing Reports and Studies

by Manjit Monga, PhD

 5.   Findings

This analysis of training needs is divided into three sections –

Section 5.1 begins with a narrative summary of the management capabilities in Australia’s manufacturing sector based on the relevant material contained in various sources listed in Section 4. Five issues which received particular attention in a number of studies are dealt with more extensively –

 

• Quality management and continuous improvement
•  Networks and alliances
• People management
•  E-commerce and IT skills
• Needs arising from globalisation

Section 5.2 covers the topics related to diffusion and delivery issues, including a discussion of the drivers of training and commitment to training shown by manufacturers, especially SMEs.

Section 5.3 concludes the analysis with a comparison of priority needs identified in this study with those in the application to DISR. 

5.1   Analysis of training needs from the sources identified

There is no consistent format for the sources listed in Section 4. For some the identification of training needs for Australian SMEs is a key issue, while others provide useful information about these needs even though the main purpose of the study or report lies elsewhere. A few produce clear, prioritised lists of training needs based on surveys but many are less quantitative. Thus a simple tabulation of the findings is not possible. This section provides a summary of the relevant points from each source, grouped according to the main themes that have emerged rather than in the chronological order used in Section 4. Even so, the groups are not exclusive and cross-linkages abound. This indicates that there is a core group of management capabilities, which are widely held to be important and a second group which although seen as important have been mentioned less frequently, perhaps because they are confined to particular industries, or are only now emerging, or have been more closely defined as a result of particular focus of the study.

Two management processes which have been singled out for particular and recurrent attention in the studies are quality management and continuous improvement. Discussion of the needs identified from the sources begins with these two topics.

Quality management and continuous improvement

Quality management has developed from the inspection of manufactured product to a management philosophy which pervades the entire business strategy. This proactive approach towards Total Quality Management can be described as a comprehensive set of processes that involves participation by every member of the organisation in process improvements. It enhances company performance through customisation of services and products, involving operations, marketing, distribution and support services to meet customer expectations. Total Quality Management is well established as a fundamental business strategy and a competitive advantage, while at the same time being a source of continuous improvement. Despite growing evidence in support of quality practices resulting in enhanced productivity, performance and profits, a number of studies included in this report indicate that a lack of understanding amongst the managers about these concepts and techniques has impeded their implementation in Australian enterprises specially in SMEs. A longitudinal study of manufacturing enterprises in Australia by Sohal and Terziovski (Source: 7) indicated that short term vision and misconceptions about costs and benefits associated with total quality management amongst Australian managers are an obstacle to the implementation of quality management practices. The surprise finding was that the managers were still looking for quick fix solutions to the problems. The study indicated that-

• TQM practices are least implemented in the HRM area and most implemented in the operations area, maintaining the traditional concept of relating quality with product and limiting it to the shop floor
• The popularity of tools and techniques declined over time even though the managers acknowledge the positive impact of these practices
• There was little evidence of application of statistical tools to improve the organisational capability processes
• The major challenge faced by Australian managers in implementing TQM is dealing with the cultural diversity that is present in many organisations
• The extent to which leadership training is provided influences organisational performance. The companies that had invested in leadership training are more likely to succeed than those that did not invest in such training

These findings were consistent with the results of an earlier study by Terziovski, Sohal and Moss (Source: 14) where they evaluated the results of three empirical studies conducted in 1991, 1993 and 1996 on the adoption of quality management practices in Australia. It was found that the popularity of TQM and its related practices such as statistical process control, quality circles, bench marking and business process re-engineering has decreased while the popularity of ISO 9000 certification has increased significantly. The authors recommended that the managers improve their understanding of quality management practices and the sources of their organisation’s quality performance, which would lead to quality management being perceived as a philosophy rather than as tools and techniques for problem-solving on the shopfloor.SMEs have been found to be particularly slow to adopt TQM practices (Ghobadian and Gallear 1996, cited in Source 26). The extent to which SMEs adopt broader quality concepts was studied by Wiele and Brown (Source: 26). They examined the factors that distinguished between those SMEs which focus on narrow concepts of quality such as ISO 9000 and those who move to more holistic approaches such as TQM. It was found that a large majority of SMEs with less than 50 employees belonged to the category which felt forced to seek ISO 9000 certification and did not move further down the quality path. The study concluded that the role of the top manager was a very important factor in driving organisational change from ISO 9000 to continuous quality improvement and TQM implementation. The study also indicated that for many SMEs the obstacle in moving up the quality ladder may not be financial but the reluctance of the managers who are not convinced of the need to implement them. Some of the reasons that have been suggested by Lee and Oakes (1995 cited in Source: 26) to explain this attitude of the managers are –

• It is hard to prove that Total Quality Management is an effective business strategy
• Investment in training requires not only financial resources but also the time necessary to implement training without disturbing the ongoing processes
• Development of a knowledge base for TQM within the SMEs may be problematic as it is difficult to develop expertise on their own with the available manpower, and the resources for bringing in a consultant or for hiring experts are usually limited.

The authors suggest the development of shared facilities and advice at regional centres overcome these inhibiting factors in the implementation of TQM.

Banfield et al (cited in Source: 26) suggested a link between the development of a knowledge base for TQM and the development of management skills in SMEs. They believe that training can and should be a powerful agent of change, facilitating and enabling a company to grow, expand and develop its capabilities thus enhancing profitability.

The concept of Continuous Improvement is closely allied with both innovation and quality management. It is a management process whereby activities, processes and products are subject to continuous review and adjustment. In that sense it is distinct from processes which seek competitive advantage by technological breakthrough. For some, CI and TQM are quite distinct processes, while some see one as a component of the other and some use the terms indiscriminately. The sources included in this study are no exception, and this section reviews those sources, which have made particular mention of continuous improvement.

A survey of Australian manufacturing firms to determine the main motives for implementing CI and the focus of CI activities was conducted by Hyland et al (Source: 8). They found that while some firms were using CI across all aspects of their business most of them were using it primarily in the manufacturing function at the operational level. The authors compared and contrasted the support methods, content and tools which the companies used and valued at different stages of CI implementation. In all sixteen tools were used –

• Training of personnel
•  Promoting on notice boards
• Monitoring CI process
•  Promoting through internal media
• Management support
•  Promoting through competitions and awards
• Incentive systems
•  Face to face communication
• Support leadership
•  Regular shop-floor visits by management
• Work in teams/work groups
•  Use of ISO 9000
• A suggestion scheme
•  Use of total productive maintenance
• A general problem solving format
•  Use of formal policy deployment

The study found that although management support, supportive leadership and face-to-face communication were seen by managers as most important to be used to promote CI, the actual usage of these tools was disproportionately low.

Another comparative study of large and small manufacturing firms, which was conducted by Chapman and Sloan (Source: 19) to understand the implementation of CI, found a greater degree of frustration in the smaller firms between the knowledge of CI mechanisms and the reality of their implementation. The findings for SMEs were similar to those of Hyland et al (Source: 8). Chapman and Sloan found that smaller firms see CI predominantly as a means to improve manufacturing productivity, delivery reliability and to reduce costs. They also found-

• Both sectors clearly focus their CI activities on manufacturing operations with only limited attention given to areas such as design and administration
• Monitoring the CI process, supportive leadership and management support are considered the most important aspects in both small and large firms but the actual use of these support mechanisms appear to be less frequent in the small firm sample
• Small firms appear to recognise the importance of training, but the actual usage of training is considerably lower
• Problem identification and checklist tools and the basic quality improvement tools are infrequently and generally poorly used

The lack of understanding and misconceptions about TQM and CI processes emerge as vital factors affecting the productivity and performance of the manufacturing industry.

Manufacturing SME managers need to enhance their capabilities in TQM and CI processes which emerge as vital for productivity and performance of an enterprise. They require both expertise in the techniques and skills of quality management – statistical analysis, benchmarking, business process re-engineering, quality control, ISO 9000 and also an understanding of the benefits which can be achieved by the integration of quality management tools with vision and strategic management.

The Karpin report (Source: 33) identified frontline managers and supervisors as its major concerns as they have an immediate impact on the productivity and quality output of the workforce. A study on the changing role of production managers by D’Netto and Sohal (Source: 21) revealed that although the production managers are qualified, highly paid, and found their jobs challenging and interesting, they worked long hours, lacked managerial skills and found it hard to deal with labour. The Karpin report had also found supervisors and frontline managers overwhelmed with their work and having little support staff to assist them. Analysis of trends by D’Netto and Sohal (Source: 21) indicated that in future the production manager’s job would require higher levels of conceptual, interpersonal and analytical skills and these authors stress the need for skills in cross-cultural issues and management of workforce diversity in the Australian context. Similarly the ability to understand and cope with change and to understand different cultures were perceived by Karpin as most important skills in the year 2000. Production managers would need additional training in interpersonal skills as the ‘managerial component’ of their job increases (Source: 21). The findings of the study indicate that the production manager’s job is no longer a purely technical one. It has become imperative for production managers to acquire these additional managerial skills (Delaney and Huselid, 1996, cited in Source: 21) and to keep abreast with new technology.

In 1995 the Industry Task Force had found leadership scarcity at senior and middle management levels. From the review of the studies conducted and reports compiled by different groups and organisations, it is clear that there is still a scarcity of leadership skills amongst managers, although leadership continues to be viewed as vital to efficient management and performance. The continuing trend towards leaner organisations, increased pace of change and highly competitive economic environment demand special competencies amongst managers. Caudron (Source: 10) rounds up the competencies needed to be an effective manager in such a turbulent work environment. The list is completely made up of soft people management skills and capabilities:

• Can create and communicate an inspiring vision
• Know how to attract and develop talent
• Communicate both in individual and group settings
• Create opportunities for employees to demonstrate their abilities
• Solicit questions and guide subordinates in expanded thinking
• Help people on an individual basis, gain confidence in themselves through demonstration of their skills and abilities
• Help employees understand their career paths and developmental needs
• Surround themselves with effective advisors.

There is an increased emphasis on the soft skills needed to manage any workplace effectively and a recent report reaffirms the importance the business organisations are placing on managerial leadership (Source: 1). The results revealed that on average, business leaders believed that 55% of the potential improvement in their businesses is available by self-improvement through building managerial leadership. The feedback from Smartlink’s first round of seminars (Source: 30) reconfirmed these views as the development of leadership skills was indicated as a priority area which should be included in the training programs by Smartlink. Soft skills such as people management skills emerge as important capabilities for all managers irrespective of the size of organisations. A range of capabilities were found to be lacking in Australian manufacturing SMEs managers – leadership skills, interpersonal skills, cultural diversity management skills, conceptual skills, problem solving skills and ability to deal with the pressures of globalisation.

The importance of the Asia-Pacific region has grown with the expansion of the economies of the countries in this region. The skills and abilities of the managers are vital to achieve a comparative advantage when competing in a highly competitive environment. The Industry Task Force on Leadership and Management Skills examined the perceptions of Asian business leaders towards managers from Australia, Germany, Japan, Taiwan, the USA and UK. The survey was focussed on the medium sized firms, with the largest representation being that of the manufacturing firms. The study found that the Australian managers were perceived as the weakest amongst the countries studied along with the Taiwanese managers and recommended that efforts be made to encourage managers to enhance their capabilities through training and education (Source: 29).

Innovation, competitiveness, workplace change and flexibility, customer orientation, and quality initiatives are identified as drivers of training and learning culture fuelled by globalisation. Innovation has been identified as a key factor influencing the success and competitiveness of an enterprise in the global marketplace where the pace of change is increasing rapidly. The annual survey of world competitiveness, published by IMD and the World Economic Forum assesses the quality of a nation’s management as "the extent to which enterprises are managed in an innovative, profitable and responsible manner". The attitude to innovation is specifically listed among the criteria used in the assessment (IMD 1994, 2000). BCA and the Federal Government Ministry for Industry, Science and Resources convened The National Innovation Summit in February 2000. It was a joint initiative by both business and government where the participants developed a comprehensive package to enhance Australia’s innovation system identifying innovation as the key to economic growth. The Innovation Summit Implementation Group strongly recommended the creation of an ideas culture and then acting on the ideas. They indicate that it may be hard for small firms to act on ideas, as they are less able to compete in export markets. The group also recommends strengthening of Australia’s skill base and maintenance of a world class research base, operate in world class facilities and access world class skills.

Competitiveness in the global economy requires industry specific skills in addition to innovation and entrepreneurship skills. Some industry specific reports have determined the skill shortages faced by individual industries. Source 17 is an assessment of current skills, demands and shortages in South Australian automotive industry in the face of global competition. The report indicated skill shortages in the following areas-

• Design
• Material management
• Technology management
• Lean and agile management

In addition to these hard skills it identified deficiencies in soft skills like people management and basic management skills at management and supervisory level and recommends training for such soft skills as effective communication and leadership styles. The report also stresses the skills needed for managing pressure and emotional problems. Management and technology are indicated as key areas that are being constantly influenced by globalisation and consequently become drivers of training and skills development. The increasing need for computer literacy skills is also identified in this source. This is supported by two surveys conducted by the University of South Australia in preparation for the introduction of its manufacturing management courses (Source: 30). These surveys were based on interviews with South Australian manufacturers and asked the respondents to identify the most important matters to be included in the planned courses. The key areas were-

Innovation emerges as a determining factor of success and growth of business irrespective of the size or nature of the enterprise. It is identified as the driver of comparative advantage for Australia in future, by the Centre for International Economics (Source: 24). Product innovation, customisation, process efficiency and innovation are seen to be the keys to competitive advantage. The study revealed a lack of management skills which currently hamper the ability to exploit the design skills and labour skills in the Australian market and if not addressed, could prove to be a major constraint. Innovation, be that of product or process or services is vital for business prosperity when competing in the global market. An industry or firm gains advantage by supplying a product that fills a niche or creates a new demand or by tailoring products to customer requirements (Source: 14).

According to the Innovation Summit Implementation Group, Australia lags behind when it comes to innovation and reports a shortage of managers skilled in innovation and entrepreneurship in Australia (Source: 2). Innovation emerges as a determining factor of success and growth of business in a turbulent economic environment, more so for the SMEs because of the constraints due to their size. The Australian managers are found to be lacking in innovation and entrepreneurial capabilities. The specific capabilities for manufacturing lean production, the supply chain and management of the interface between people and technology were clearly identified in those studies which dealt specifically with manufacturing.

Collaboration helps business innovate in many ways, for example, technology alliances and cooperative arrangements that allow firms to share costs, extend product range and access new knowledge and markets. A study of Australian and New Zealand manufacturing sector by Corbett (Source: 27) to benchmark performances revealed that manufacturers needed to improve their supply chain partnerships along with internal processes and capacity management in order to improve productivity. Source 25 lays out a vision for the future of manufacturing in SA. In confirmation of the point made in the previous section, globalisation is indicated as a key influencing factor along with evolution of a knowledge-based economy, consumer behaviour and demographics. The source envisions a global enterprise as being managed through process-based disciplines, networked structures, managed with alliance partners, common IT platforms for low cost management, operating units constructed around unique core competencies. The challenges to achieve the envisioned manufacturing are listed as follows -

• Skills development for entrepreneurs and managers in new product development
• Commercialising technology
• Understanding designs, new technologies and global markets
• Electronic commerce, online technology and online marketing
• Establishing and strengthening global small and medium business network through Internet access, seminars, short courses and visiting experts
• Supporting global supply chains by using e-commerce as a means of marketing, connecting to local and global supply chains linked to national and international markets.

There is a strong emphasis on developing management and marketing skills, including online marketing skills, to exploit international market and to build a skill base to match new opportunities. The source recommends strong support from the government for SMEs to step into international market and development of networks of smaller firms.

A similar study was conducted in the USA (Source: 22) to create a vision of the competitive environment for manufacturing enterprise in the year 2020. It emphasises the integration of human and technical resources to enhance workforce performance and rapid reconfiguration of enterprises in response to changing needs and opportunities as vital for competitiveness. The need for new educational and training methods that enable the rapid assimilation of knowledge is highlighted.

Source 15 stresses developing a manufacturing strategy and recommends high priority programs focussing on innovation, productivity and global market development, in view of the productivity gap between SA manufacturers and the world best. The authors place priority on initiatives to develop capabilities in knowledge management, e-business, advanced manufacturing technology, product process and design. In addition to these hard skills they also include two networking capabilities, SME global network feasibility and strategic alliances.

Networks, alliances and collaborations are vital for increasing performance, through technology alliances, cooperative arrangements that allow firms to share costs, extend product range and access new knowledge and markets. The sources indicate the need for enhancing capabilities of SME managers in this domain.

The Australian Industry Group is an independent representative body created by the merger of Metal Trades Industry Association of Australia (MTIA) and The Australian Chamber of Manufacturers and represents approximately 11,500 members with many from small-and medium-sized enterprises including a sizeable number of the manufacturing sector.

A study commissioned by the group on the training needs of industry in Australia (Source: 20) identified a significant shortage in IT skills related with software development and electronic engineering more generally, web and e-commerce skills. Respondent companies were concerned that shortages of these skills are both holding back their development and causing major human resource problems in the IT and related sectors. Industry requires higher level skills founded on solid generic skills to deal with a competitive business climate.

A report of the Department of Industry Science and Resources prepared in December 1999 for the senate inquiry on Vocational Education and Training also found a shift in demand to higher skills at all occupational levels. It reported an increasing premium being placed on generic skills, both hard and soft. Hard skills especially in Information Technology were notably highly placed on the list. IT related skills like e-commerce, online marketing and general computing skills have emerged in a majority of sources reviewed, as vital for success of any business and currently in shortage.

Businesses world wide are feeling the impact of e-commerce. It is about new ways of doing business that is enabled by IT. A detailed definition of e-commerce by National Office of Information Economy (NOIE) including the business and technological dimensions of e-commerce and adopted by Source 5 is as follows –

"In e-commerce, business is communicated and transacted over networks and through computer systems. The most restrictive definition limits e-commerce to buying and selling goods and services, and transferring funds through digital communications. However, e-commerce also may include all inter-company and intra-company functions (such as marketing, finance, manufacturing, selling and negotiations) that enable commerce and use electronic mail, EDI, file transfer, facsimile, videoconferencing, workflow or interaction with a remote computer. E-commerce also includes buying and selling over the world wide web and the internet, transferring electronic funds, using smart cards and digital cash, and doing business over digital networks."

A list of key terms in e-commerce is presented below with a brief description (Source: 5) -

In a recent interview published in Outlook (2000) Erkki Liikanen, European Union Commissioner for Enterprise and the Information Society called for "a wake-up and shake up" to prepare for a position of global leadership in e-commerce in the evolving Internet world. He specifically stresses the need for small and medium enterprises to recognise that B2B is not only a threat but also an opportunity and when the bigger companies go online so must they.

A recent survey of Australian manufacturers to measure the extent of internet usage by small, medium and large manufacturers and the benefits realised, was conducted by PricewaterhouseCoopers (Source: 3). The survey revealed that more than 86% of respondents were either using the Internet or expecting to use it over the next 12 months. 35% of Internet users thought they were benefiting from it and just over 37% said they are still trying to understand how their businesses could benefit from it.

Consistent with the findings of the reports reviewed so far, are the findings in Source 5. This report is a result of review of international literature on e-commerce and of Commonwealth government reports on e-commerce, benchmarking of Australian developments in e-commerce against developments in UK and interviews with a range of industry representatives from small, medium and large businesses. The report confirms the emergence of e-commerce as a vital business issue.

The growth of e-commerce in Australia and worldwide cannot be ignored. The indicators of its rapid growth are many, for example, the number of business websites in Australia doubled between 1996 and 1998 and there is a doubling or better in annual revenues in the recent years for several Australian companies that supply Internet systems or the know-how. Internet based e-commerce in Australia is predicted to grow from $61 million in 1997 to 1.3 billion in 2001 (Source: 5). The source also summarises the economic opportunities provided by e-commerce as reduced costs, changes in the value chain, changes in international competitiveness and the introduction of new products and new ways of doing things. It indicates manufacturing industry has already been a beneficiary of major productivity gains from previous forms of e-commerce such as electronic data interchange (EDI). Manufacturing may extract further efficiencies made possible through open networks. Companies can build stronger relationships directly with customers including buying and selling products directly online. In many cases e-commerce has the potential to change the way business is conducted with Internet-based supply chain. All industries will feel the need to develop e-commerce competencies (Source: 5). On the more concrete and practical level Internet based IT skills and e-commerce was one of the key business concerns expressed by a majority of participants in the first round of Smartlink seminars.

E-commerce could bring significant changes to the way manufacturing SMEs operate. As the more recent reports reviewed in this study point out, this will require new capabilities from managers but it is perhaps too early to identify these needs with any precision.

Businesses worldwide are feeling the impact of E-commerce. It has emerged as a critical business issue. It is about new ways of doing business that is enabled by IT . Reports indicate that a high premium is being placed on IT skills and also that such skills are in shortage. This report takes the view that the impact is greater for SMEs. These new ways to do business require capabilities to manage ever increasing pace of change efficiently and to create a work culture, strategic thinking and good people management skills in order to train, develop and retain the skilled workforce. To compete and remain competitive would require capabilities in innovation and entrepreneurship, which have been noted to be in shortage already. 

  5.2   Diffusion of management techniques and the delivery of training

This section covers the issues related to diffusion and delivery of training including a discussion of the drivers of training and the commitment of employers to training. Some of the studies reported the particular difficulties faced in the delivery of training to SMEs and their proprietors, and some raised issues relating to the need for a change in attitude to be supported by appropriate diffusion methods. These points are repeated or mentioned here, together with material from other studies that have not been previously mentioned.

A recent 1999 report by the Australian Industry Group (AiG) (Source: 20) examined the training needs of industry and identified the following drivers of training –

• Innovation
• Competitiveness
• Flexibility and
• Customer orientation.

Intense competition has compelled companies to distinguish themselves from their competitors. The trend has been to provide increased choices to the customer and the customer demanding products and services tailored to their needs as a consequence. The result has been the emergence of niche markets and segmentation of mass markets. This is referred to as ‘customer orientation’ in the AiG list of drivers of training and as ‘customisation’ in the Karpin Report. In addition to customisation, the Karpin report also identified globalisation and technological innovation as drivers of change.

A survey of small, medium and large enterprises including the manufacturing sector was conducted by Smith and Hayton (Source: 16) focusing on the demand side of training rather than the supply aspect. The study identified following factors which drove training in the enterprise -

• Workplace change
• New technology and product innovation
• Quality initiatives (e.g.. Customer service, TQM)

The study also found an increasing emphasis on soft skills, particularly towards interpersonal and communication skills. It was found that the commitment of the senior management to training and the size of the organisation influenced the nature and extent of training activity in an enterprise. This is consistent with the findings of Banfield et al (cited in Source 26) that management training and development received very little attention in small companies. The authors indicated that small business owners might not recognise the need for training or that there were obstacles in converting the need for training to an effective demand for the following reasons -

• Scepticism concerning the value of existing management training for small business
• Reluctance to admit to needs which may be seen as indicators of deficiency or inadequacy in the business
• Unwillingness to commit the necessary time or resources.

A similar set of obstacles was identified in a study of flexible delivery methods for small business training in Tasmania (Source: 32). Innovation, competitiveness, workplace change and flexibility, customer orientation and quality initiatives are identified as drivers of training, whereas management commitment to training and constraints due to the size of the organisation are identified as training moderators. In addition to these moderators there are issues related with diffusion and delivery of training which influence management decisions regarding training. These issues are discussed in the next part of this section.

In the preceding sections of this report the focus has been on the capabilities needed by managers. As the table in section showed over one third of the sources made specific mention of the way in which training is delivered and the impact which diffusion methods can have on the uptake of modern management techniques in an organisation.

Research conducted by the Industry Task Force showed that the greatest amount of criticism was levelled at formal education which was seen as too time consuming, too expensive and too difficult to access. Respondents also viewed formal management education to be less related to the challenges they face as managers and as not providing the immediate support that is provided by informal work activities, learning from relationships and formal management training. The most popular forms of delivering management education, training and development were found to be in-house training courses, short external training courses (up to 5 days) and management seminars. This finding is consistent with the feedback received from the participants in the early Smartlink seminars. The participants preferred seminars which provide ample of opportunity to take part in discussions and where they could express their own thoughts and problems.

Formal management education to strengthen management breadth and technical depth, formal management education to deepen or strengthen technical knowledge and long external training courses (3 weeks +) were found to be least popular. In general terms, less formal, shorter and more focused delivery methods appeared to be more popular than the formal, longer programs of management education. It was concluded that there is ambivalence about management education, training and development practices, and particularly formal management education. Although it was perceived to be proper and correct thing to do, there was considerable doubt about its value and effectiveness as compared to the learning that occurs at the work place and through work-related training and development, indicating a pragmatic approach to management education and training and development with an emphasis on methods that are in-house, focused and informal. There was a relatively low level of familiarity or confidence in the new management development methods and strategies, e.g. mentoring and coaching, and a significant level of suspicion, unease or dissatisfaction with the more formal management education options.

In 1996 the Queensland government embarked on a small business management skills development programme to find ways to provide relevant quality professional development to small businesses to enable them to select appropriate training and to train their own staff. The 1998 review of the programme established a new aim which focussed on the need to stimulate within small business a demand for quality professional development thus shifting the emphasis to the demand side and away from the actual provision of services (Source: 23). The review also emphasised the need to develop a business culture within the training industry to develop a training culture in business. The major concern for small businesses is that training should be relevant, flexible and affordable. As such, they do not have a primary preference for either recognised or non-recognised training (Source; 23) This finding is consistent with the findings in Source 13, which reports the concerns of the industry about the present VET system. The major concern expressed by industry being that the system is not flexible and responsive enough to cater for their needs, leading to a mismatch between the skills training available and the employer requirements. The failure by the system to be responsive to the needs of the industry is seen as influencing the performance of the firms. The concern of the industry has been that the training is supply driven rather than demand driven. These concerns are not restricted to Australia only. The Institute of Personnel Development (IPD), Great Britain launched a major initiative, "Managing People: The Changing Frontiers" to investigate the key issues facing personnel management. It was found that training is not particularly well received by the management because it is supply led rather than demand led (Source: 11).

Source 13 highlights the needs for Australia’s training culture to be strengthened and linked to other key drivers of growth, most importantly innovation. A highly trained workforce supports and drives innovation. Equally, a country with an industry base progressing up the value chain and consolidating its links with the services sector will also drive change in the education and training system with an emphasis on skill formation (Source: 13).

The Karpin report suggests that managers be developed to meet these future requirements through combining hard and soft skills, foreign experience and lifelong learning. It notes the blurring of managers and workers skill needs and these are important issues to be considered regarding the nature of management development to ensure that it meets changing organisational needs (Source: 33)

Creation of a learning culture throughout the economy is seen as essential to economic growth and to keep up with the changing needs. Firms need to become learning organisations that have the capacity to continually learn from their experiences and to translate that knowledge into improved performance and competitive advantage (Source: 13). Human capital and skills are becoming increasingly important in a knowledge-based economy with technology and resources becoming more and more mobile. Training practicing managers is one way of improving the efficiency and productivity of the firms and realising their full potential. Although training is considered critical for competitiveness for Australia, there is evidence that the employers are spending less on training (refer Section 5.2).

The Report of the Australian Mission on Management Skills (cited in Source 33) stated that replenishing, retraining and upgrading the skills of the vast majority of its managers and supervisors would be the major challenge for Australia. The Karpin report notes that the Australian businesses’ current management education, training and development practices do not appear to have changed dramatically since 1990. There is no obvious movement in a direction that would make Australian business more competitive and will have to undergo major change to begin to approach international best practice.

With the increasing pace of change, the demand for more and different skills is growing. Some of the concerns of the industry are that the system is -

• Too complex to be understood especially by small business
• Still focused too much on the existing institutional structures
• Focussed on traditional manufacturing requirements and therefore failing to recognise the changing nature of industry and the greater crossover between manufacturing and the services.
• Not placing enough emphasis on lifelong learning and future skill requirements.

In order to sufficiently train managers, companies need to individualise training, give managers more control over their learning process, and provide ongoing, on the job support says Caudron (Source: 10). Every manager comes with his/her own strengths and weaknesses and training should be focussed on the developmental needs of the individual through assessments. Some of the best management development programs are those in which the managers choose how and what they should learn. There is evidence in the literature that it is important for facilitators and instructors of adults in learning situations to both recognise and use the knowledge and experience of the group in the learning process (Source: 10). Effective learning is linked to the adult learner’s past experience, and the new information builds on previous knowledge. In addition to the recognition of past experience and learning the source also recommends program flexibility, effective group discussions, relevance of the content to facilitate effective learning.

Formal management education is viewed as very time consuming, expensive and difficult to access by the industry. There are reservations about the present VET system in Australia, which is considered inflexible and unresponsive is the needs of the industry and the challenges faced by the managers in the highly volatile economic environment. Literature favours individualised training for managers in order to facilitate better learning, making fuller use of their prior knowledge and experience, in other words efficient knowledge management.

The preceding sections have established that with change and innovation taking the front seat in competitiveness, the development of a continuous learning culture seems inevitable if an enterprise is to succeed where competition is at the global level. The critical need to build a training culture within businesses is well acknowledged. In a knowledge based and skills intensive economy the concept of lifelong learning has emerged as a very important factor in improving and sustaining economic growth.

Size of the organisation, industry sector, occupational structure, training infrastructure and senior management commitment to training have been identified as factors influencing the nature and extent of training activity in an enterprise (Source: 16).

The Karpin Report concluded that Australian business is not fully aware or convinced of the critical importance of management training, education and development and of lifelong learning or its potential to improve the competitiveness of businesses. While these practices improve the bottom line performance, they are not currently being given the same attention or priority that is given to financial measures of performance. For small to medium-sized enterprises, bridging the gap to world best practice is a more challenging exercise. The managers of these enterprises often are not tertiary qualified and do not undertake management development to any significant extent. The small scale of these organisations also makes a commitment to quality, and the development of longer term strategic skills, difficult (Source: 33).

Employer commitment to training varies significantly across firm sizes and sectors. While approximately 60% of Australia’s enterprises provide some level of structured or unstructured training for employees each year, the majority of this training can be attributed to large and medium sized enterprises. This commitment to training is less evident in small business sector where most enterprises and employees are found (cited in Source 20)

Data on expenditure by individual industries on training on a consistent basis is available for 1993 and 1996. It indicates that for manufacturing as a whole, there was a fall of over 5% but within manufacturing there were extremely high variations. Table 1 indicates industry expenditure per employee on training.

Data from a more recent survey by Cranfield-PricewaterhouseCoopers (Source: 4) suggests that the decline is continuing although there have been attempts to stimulate investment in training during the last decade in Australia. The percentage of managers receiving more than three days of training decreased from 67% in 1996 to 49% in 1999. The change in percentage of employees receiving more than 3 days training for professional/technical staff was from 73% to 53%, clerical staff from 48% to 29% and manual employees from 52% to 40%. In an era in which education and training is critical to long term competitiveness for Australia, particularly when the economic activity is more knowledge based and knowledge driven, this decline is of a considerable concern in the emerging structure of the economy. In order to compete at the global level it seems imperative that opportunities be made available for all to acquire skills through life and a willingness to invest in skills acquisition by both employers and employees through a flexible and responsive training delivery by a range of providers. The creation of learning culture is important as the firms would need to learn continuously and convert the knowledge into improved performance and competitive advantage. This decline in training may be partly explained through the concerns of the industry discussed in the diffusion and delivery part of this section, that training is supply led, time consuming, expensive, does not cater to the changing needs of the industry.

5.3   Comparison with the needs identified in the submission to DISR

The submission made to the DISR for the Technology Diffusion Program funding to support the establishment of smartlink identified for priority areas to be addressed by the initial SME programs. They were

• Lean and agile production
• People management
• Supply chain management
• Management of networks and collaboration

This assessment was based on an analysis of needs and capabilities identified in reports (Sources 15, 17, 22, 25, 33), discussions with manufacturing organisations and the surveys conducted by the university of South Australia prior to the introduction of the postgraduate programme in manufacturing management in 1996 and the bachelors degree in 1998 (Source: 30)

The findings of this phase of the need identification confirm the needs identified in the earlier phase. In addition to those needs e-commerce emerged as highly critical need for all enterprises today and SMEs needing special help and support to take advantage of the opportunity to enhance their productivity. The needs and capabilities identified in this report are:

• Quality management and continuing improvement
• People management
• Needs arising from globalisation
• Networks and alliances
• E-commerce and IT skills

Both the DISR submission and present study identified the need for delivery methods and diffusion techniques which are industry led, flexible and accessible.