Introduction

Improving workforce skills and knowledge through training is widely regarded as crucial to enhancing the UK's economic performance and competitive position. Small businesses are now responsible for a very substantial proportion of economic activity and jobs in the UK economy. However, it is generally accepted that small firms have problems in providing training for both owner-managers and workers.

This study reports findings from a research project commissioned by the Department for Education and Employment. The aims of the project were to assess: the extent and types of training carried out in small firms; the influences affecting training, and any failures to train; the difficulties small employers encounter in conducting training; owner-managers' experiences of, and need for, support services including those provided by Industry Training Organisations, Training and Enterprise Councils and Business Links; and the policies of Industry Training

Organisations towards small firms.

Previous research has stressed the importance of informal training in small enterprises. Therefore, a broad definition of training is adopted to include both formal and informal types of skill and knowledge acquisition. The study focuses on the training of both owner-managers and workers in firms with 1-199 people in manufacturing, services and construction. The study incorporated a number of separate stages: a telephone survey of 751

owner-managers; face-to-face interviews with 70 owner-managers; face-to-face interviews with 20 owner-managers who had had contacts with their Industry Training Organisation; and face-to-face interviews with representatives of 10 ITOs. Both quantitative and qualitative analyses of the data were undertaken. Quantitative data from the telephone survey has been grossed-up to provide national estimates on key issues. The survey was carried out by the Small Business Research Centre at Kingston University.

The Findings

Owner-Managers' Own Training
Over three out of four owner-managers reported undertaking training themselves during the last 12 months. Most training was in-house: only a third had undertaken external training. Owner-managers of larger firms were more likely to undertake external training than owners of smaller businesses. Owners of service businesses were more likely to have undertake external training followed by owners in construction and owners of manufacturing firms the least.

Owner-managers' most popular training topics were health and safety, product knowledge, working methods and computing and IT. The latter is particularly significant given the growing importance of IT in the UK economy. These topics ranked substantially higher than financial management and business planning skills.

Much owner-manager training was self-directed but a wide range of other sources were also used. ITOs and TECs were less important than other sources although some owners probably receive training supported by ITOs and TECs from private providers.

Owner-manager training was typically of short duration. This helps explain the lack of formal qualifications gained. Under 10 per cent had obtained, or expected to obtain, a formal qualification of any kind. Training was very much geared to the specific short-term needs of the business with relatively little devoted to growth or business development.

Workforce Training

Just over a quarter of firms had written training plans and only 10 per cent had a dedicated training budget. Both were positively related to size of firm. Services firms were more likely to have a written plan and budget than businesses in manufacturing or construction.

Three quarters of firms provided induction training of some kind for workers. Even among the smallest businesses, seven out of 10 firms provided induction training for new workers. Provision of induction training was much lower in construction than in the other two sectors.

Continuing training (training after induction) was provided by three quarters of the firms and, again, this was positively related to size of firm. The most common training topics were working methods, product knowledge, health and safety, quality and computing and IT. Most continuing training was provided in-house but often with support from outside providers, particularly suppliers. Little of the training led to formal qualifications such as NVQs.

External continuing training was provided by fewer firms but over half of the owners reported that at least some workers had received external training in the last 12 months. External training was most frequently undertaken by higher level staff. The most important sources of training were educational institutions followed by private sector providers. ITOs and TECs were less important. About 60 per cent of the owners who sent workers on external training reported that at least one worker would gain a formal qualification. Of these, over half reported that at least one worker had gained, or would gain, an NVQ. Most of those owner-managers providing external training for workers were positive about its quality and benefits.

Overall, the major factors explaining small firm training behaviour included size of business, sector, market conditions and regulatory frameworks. Lack of a perceived need for training was the most common reason given by business owners for not undertaking more training themselves or providing more training for their workers.

Use of Industrial Training Organisations and TECs

ITOs and TECs were used by about a quarter of firms. Contact was positively related to size of firm. The construction ITO (the Construction Industry Training Board) had reached almost a third of the firms in the sector over the last 12 months. TECs had a lower level of contacts in construction but did better than ITOs in services and manufacturing.

Owner-managers who had contacts with ITOs and TECs were generally satisfied with the services provided. These firms also tended to be more likely to use other sources of training. However, there were criticisms of costs and the availability of specific training to meet the particular needs of firms.

Interviews with ITO representatives showed an uneven approach to small firms. Some saw themselves as setters of training standards rather than training sources. Some were optimistic about reaching small firms while others were much less positive.

Policy Recommendations

Training policies should build on existing training practices, bridging the gap between in-house, informal training and externally provided training. (Some policies such as NVQs already do this). In this way, more training could be publicly supported and more would result in portable, nationally certified skills benefiting both the firm and the economy as a whole.

Small business training policy needs to emphasise initially the topics owner-managers themselves see as important. This would open the way to promoting training on topics such as business growth which owner-managers are less likely to name as immediate training needs but which would benefit the firm in the long run. Training support policies should also include explicit measures to demonstrate to owner-managers how training directly benefits the business. Further, the most important trainers in small firms are owner-managers themselves and they should receive more support and training on how to train their workers more effectively.

Distance learning as a means of training should be given more attention. This would support in-house training and reduce lost production where workers train away from the firm. It would also help bridge the gap between informal training which does not lead to nationally recognised qualifications, and training which leads to portable, nationally recognised skills helping the firm and the economy generally.

ITOs and TECs should be seen as complementary. ITOs should be encouraged to be more involved in Business Links. This could also be used to augment the resources ITOs have to help small firms. For the Business Links, more ITO involvement would add an in-depth, sectoral dimension to the services they offer.

The Department for Education and Employment undertakes research to help achieve its aim of supporting economic growth by promoting a competitive, efficient and flexible labour market.
Research Briefs summarise key findings from reports that are published in the Department's Research Series.

Prepared for the Internet by HMSO

The full text has been published by HMSO as
Establishing Small Firms' Training Practices, Needs, Difficulties
and Use of Industry Training Organisations
ISBN 0 11 270962 1
Price £25.95

Copies can be obtained from Stationery Office Bookshops,
Bookshop Agents and all good booksellers.
For full details on how to obtain Stationery Office titles click here.

© Crown Copyright 1996

---