Incentives for SMEs to Invest in Skills

3. Building SMEs’ capacity and learning culture

SMEs face challenges to training and hiring new talent that go beyond the costs of such activities and are rather linked to the firms’ capacity to invest in the acquisition and effective use of relevant skills.

Indeed, relative to large firms, SMEs have less information on the existing opportunities for training and for support to training available to them; in other cases, they are not aware that training is needed, as they lack the capacity to assess their skill needs; and in other cases still, they enjoy lower levels of trust or awareness about the benefits of training, or simply the long-term business perspective which is needed to invest in human capital and innovation (OECD, 2019[21]).

These relative deficiencies often stem from the firm’s lack of a professional human resource department or of specialised staff, which are dedicated to organise and co‑ordinate training, assess personnel’s needs, navigate the landscape of available funding and trainings, or more broadly develop tools to attract new talent or upskill the current workforce (OECD, 2020[19]).

In other cases, SMEs’ ability to invest in human capital crucially relies on the skills and vision of the company’s management. Measures that promote innovative management practices and workplace innovation, build management and leadership skills, and promote a culture of learning are instrumental to enhance investment in and the effective utilisation of skills within SMEs.

For these reasons, effective policies combine both financial support and measures aimed to enhance SMEs’ access to these functions as provided by external providers, or their capacity to develop them within the company itself.

3.1. Skill assessment and anticipation capacity

The effective use of skills in a firm requires that skill needs are regularly assessed and anticipated. Building the capacity to do so remains one of the main challenges they face when it comes to investment in human capital. While approximately 68% of firms in the EU27 report having performed a diagnosis of skill needs in 2015 (CVTS), a large proportion of them only do so irregularly, and do not align training activities with the resulting skill priorities (OECD, 2019[2]). Managers struggle to identify the skill needs of the firm, especially beyond the short-term, and the training programmes that may address them (OECD, 2017[3]).

Skill assessment and anticipation (SAA) exercises are tools to generate information about the current and future skills needs of the firm (or more generally of labour market), and the available supply. These exercises can be found in all OECD countries, at the national, regional or sectoral level, and are carried out mostly by public bodies or within tripartite networks. The main aim of these exercises is to inform relevant stakeholders about how to align demand and supply of skills within the changing labour market, and help them plan for the future (OECD, 2016[30]).

Generally, the PES in each country is an important actor in enabling skill assessment and anticipation, facilitating the matching of skill supply and demand through dissemination of information and active support services to companies and job seekers (OECD, 2016[30]).

At the regional and sectoral level, participatory approaches that involve social partners can have a positive effect on employer awareness with regard to skill needs and trends, as well as on and training supply. This is the case of Skill Councils or Fora, where stakeholders discuss skill-related issues and provide recommendations on relevant policies, including on the monitoring and forecasting of competence needs in their sector or region (OECD, 2016[30]). The Irish Network of Regional Skills Fora, for example, help regional public partners and businesses identify skill needs, and the education and training system shape adequate responses.

Box 3.1. SAA and support to employers in Ireland

Skills councils are employer-led or tri-partite organisations involving representatives from employers, workers and government or educational institutions. They are usually independent organisations that provide a platform for the discussion of skills-related challenges of specific sectors or regional areas, as well as the development of joint policy responses. One of their tasks is to monitor the labour market in the relevant sector and forecast which skills will be needed.

In Ireland, for example, Regional Skills Fora help regional public partners and businesses identify skill needs, and the education and training system shape adequate responses, in nine regions. More specifically they provide:

• A contact point in each region to help employers connect with services and supports available across the education and training system;

• Robust labour market information and analysis of employer needs;

• Greater collaboration and utilisation of resources across the education and training system;

• A structure for employers to become more involved in promoting employment and opportunities for career progression in their sectors.

A Regional Skills Website was launched in May 2016 as a communication tool for employers and education and training providers. The website provides access to a detailed profile for each of the nine Regions drawn from all relevant skills research and datasets to provide the basis for informed dialogue on skills needs.

The work plan of RSF within each region is driven by key stakeholders including employers, enterprises and education and training providers. The RSF engage with all sectors and size of businesses, but have a particular focus on SMEs, with 55% of all activity focusing on small businesses in 2019.

Within this context, in 2018 the ‘Skills for Growth’ project was launched, providing a service for employers to help them identify their skill needs and receive guidance on education and training providers best suited for them. Each employer in the programme had access to a skills audit tool to capture data on the skill needs of their business; as well as, one to one assistance from a RFS Manager to use this tool and plan for the future. Once skill needs are identified, Regional Skills Fora link companies with education and training providers.

Enterprise Ireland – A government agency in Ireland responsible for supporting Irish businesses – is also involved in the programme and runs a series of ‘Spotlight on Skills’ tailored workshops for companies. In those workshops, the companies gain knowledge on human resources and skills management.

This is an collaborative project led by the Department of Education and Skills and Enterprise Ireland, working in partnership with Regional Skills Fora Managers as well as SOLAS – the national agency responsible for further education and training, under the Department of Education and Skills, in addition to other stakeholders, such as the Higher Education Institutions that are part of the Mid-East North Dublin (MEND) cluster, the All Ireland Research Observatory (AIRO).

Source: OECD (2016[30]), Getting Skills Right: Assessing and Anticipating Skill Needs, OECD Publishing, https://doi.org/10.1787/9789264252073-en; Irish Department of Education and Skills, (2020[31]), Regional Skills Fora – Annual Report 2019; Regional Skills Forum, (2020[32]), Skills for Growth.

While these exercises are instrumental to influence policies and to inform workers about the skills in highest demand on the market, SAAs at the company level remains rare, especially for SMEs (OECD, 2016[30]). At the company level, different approaches can be used to help SMEs improve their skill assessment and anticipation capacity. Often programmes that promote subsidised training, such as the ones presented in Chapter 2, also provide SMEs with support in the identification of their training needs, of the right candidates for training and of the most relevant training options. Similarly, in the context of the digital transformation, programmes that help SMEs build their digitalisation strategies can also offer support in the identification of skill needs.

SMEs can access SAA services as performed by an external party, or develop their own internal capacity to perform such an assessment. Public support measures can target either form. This section is mainly concerned with the internal development of SMEs’ capacity: programmes that help SMEs develop HR structures and competences, as well as programmes that build the capacity of managers to assess the needs of their company, and programmes that promote workplace innovation and improved management practices.

Box 3.2. The Forecast management agreement for jobs and skills (GPEC) – France

Advance management for jobs and skills (Gestion prévisionnelle des emplois et des compétences – GPEC) is an instrument for strategic workforce planning embedded in French labour law. It brings together aspects of skills analysis and skills planning at the aggregate level with processes of human resources management at the company level.

The purpose of the GPEC is to anticipate, in the short and medium term, human resources needs in companies and to feed them into the collective bargaining process. For the company, it translates into the obligation to perform a global diagnosis of its employees’ skills and abilities, based on individual reviews and reviews of skills and professional experiences.

However, the GPEC goes beyond the collection of information and aims to prepare employees for these changes. Several tools can be used at the employee level: individual performance review, validation of professional experience acquired on the job (VAE) but also training. GPEC medium-term objective is to adapt jobs, staffing levels and skills to the requirements of corporate strategy and changes in its economic, social and legal environment. It is a prospective human resources management tool that is expected to support change(s) within a company.

In France GPEC is now mandatory for companies with more than 300 employees. For SMEs, state aid is available and companies with small HR departments can work with consultancies specialised on implementing GPEC.

Assistance can be provided by DIRECCTE, the French regional directorates for companies, competition, consumption, labour and employment under the Ministry of Labour, which are unique interlocutors at the regional level for businesses and socio‑economic actors and bring together administrative services from various backgrounds. Through DIRECCTE, SMEs can access assistance for human resources consultancy services can be applied to an individual company or a group of companies in the same branch, sector and territory, and subject to the same HR issues. Support can be provided for a maximum of 20 consulting days on themes related to the integration of HR into the company or the professionalisation of the HR function for both leaders and management. The maximum amount of the subsidy for each company is of EUR 15 000 excluding tax, with the remaining 50% of the cost borne by the company, in case of individual support. Support to groups of companies is limited to EUR12 500 with a maximum coverage of 90% of costs. The cost of using software for SAA from private providers can also be financed within the framework of aid to companies.

Source: Ministère du Travail, de l’Emploi et de l’Insertion (2014[33]), Gestion prévisionnelle de l’emploi et des compétences (GPEC); European Commission (2018[34]), Skills audits: tools to identify talent.

Dissemination of SAA results carried out at national regional and sectoral level is also important. In most countries, results from SAA exercises are shared and disseminated through the publication of reports and the development of websites. Public media (TV, radio, newspapers or magazines) and in more rare cases (e.g. in the Netherlands), social media are also used to disseminate the results (OECD, 2016[30]). Effective web dissemination usually centralises all the information on one platform. Web platforms are particularly successful when they have more than one interface depending on the targeted audience or when they allow for an interactive experience. This is the case, for example, in Austria, with the “Qualification Barometer” web platform (OECD, 2018[35]).

3.2. Promoting innovative and modern workplace practices

Work organisation, job design and management practices are important factors in influencing skills use. Modern human resource management, High-Performance Working Practices (HPWP) and workplace innovation therefore play an important role in ensuring effective skill utilisation within companies, with clear effects on performance and competiveness, as well as quality of life and work experience for employees.1

The promotion of HPWP however is not solely motivated by skills utilisation. Several countries have undertaken initiatives to promote changes within these areas, with policy efforts motivated by a variety of objectives, including innovation, productivity and job quality (OECD, 2020[15]).

The German Federal Government, for instance, is taking various approaches to build the capacity of SMEs to develop HR and personnel policies that can make SMEs attractive and innovative employers in light of current economic and labour market trends. In particular, the 2014‑20 European Social Fund (ESF) programming has been largely leveraged at federal level to build the capacity of SMEs in this respect.

KOFA is the German Competence Centre on Securing Skilled Labour that assists SMEs in their efforts to become and remain attractive employers and stay competitive on the labour market. The Centre is funded by the BMWi and ESF and operates as an online platform that supports SMEs in their HR work, targeting mainly directors and HR managers in SMEs, and providing instruments for innovative and modern human resources.

The measure facilitates knowledge sharing and dissemination and provides recommendations and best practice examples, but also workshops and trainings, and online tools to assess the company situation and HR functions. It supports SMEs HR capacity and makes information easy to access and understand, with very operational approaches and examples, which are key for supporting SMEs understanding and integrating new solutions (OECD, 2020[19]).

Box 3.3. Competence Centre on securing skilled labour (KOFA) – Germany

The “Competence Centre on securing skilled labour” (KOFA) operates an online platform to support small and medium-sized companies in their HR work. Its aim is to assist SMEs in their efforts to become attractive as employers and remain competitive by recruiting, training and retaining staff. KOFA is a project of the Cologne Institute for Economic Research and is funded by the Federal Ministry for Economic Affairs and Energy. It aims to attract SMEs, and motivate them to implement modern and skill-enhancing HR practices.

More specifically, KOFA offers the following: studies (analyses of the skilled worker situation in Germany), recommendations for action and checklists on HR work, practical and best practice examples, information and guidance on future trends, such as digital education and leadership 4.0, lectures and networks, with exchange with experts, and webinars for remote training and exchange. The website contains welcome guides, step-by-step guides, with checklists and recommendations for actions, that guide SMEs through analysis of company needs and current situation, strategic HR work, in addition to dossiers on topics such as digitalisation in SMEs, digital education and training, training 4.0, digital teachings and learning methods, and inclusion in SMEs of migrant/refugee workers.

KOFA’s offer is primarily aimed at managing directors and HR managers in SMEs. For companies, KOFA provides instruments for innovative and modern human resources along the entire production chain, from situation and company analysis to positioning as an employer to finding, retaining and qualifying specialised workers.

With reference to the latter, the Centre supports the initiative “Custom-made appointments” (Passgenaue Besetzung) of the Federal Ministry for Economic Affairs and Energy. The project helps SMEs find suitable trainees and specialists, by filling vacant positions and training, including through foreign skilled workers and migrants already living in Germany. The project makes use of a network of about 160 consultants that work with the companies throughout the process of recruitment. It is funded by the BMWI and the ESF, with companies contributing 30% of the costs. The project is running since 2007, with around 100 000 training positions and more than 10 000 positions for entry-level qualification successfully filled. The initiative will be extended by a further three years until the end of 2023.

In addition, the KOFA benchmark tool Spiegel der Personalpolitik offers companies an interactive comparison of their own HR work with other companies. With a quick check, companies can analyse the situation of their company in a few minutes and find out whether there is a need for action.

The design of personnel policies that can help SMEs respond to current mega-trends in the labour market such as digitalisation and globalisation is further supported by the German Government and the European Social Fund through two programmes: the UnternehmensWert: Mensch (uMV) programme, that aims to support SMEs and their employees in designing employee‑oriented and future‑oriented personnel policies, and the Fachkräfte sichern programme, which aims to support the establishment of staff development and training structures within small companies.

In particular, the uMV programme focuses on promoting the development of personnel policies within SMEs through a tripartite approach and along four main areas of HR policy that are considered strategic for the future of companies: personnel management, equal opportunities and diversity, health, knowledge and competences. The programme supports the initiation of change processes related to organisational development through a three‑stage, participation-oriented advisory process, which is geared to the needs of companies and works through counselling centres and process consulting vouchers. The 102 contact points, or counselling centres (EBS), carry out an initial consultation with the company, with the aim to check eligibility and needs. Based on this consultation, the EBS can emit a voucher that allows SMEs to access further consulting services for a maximum of 10 days (BMAS, 2020[36]).

To date, the programme has served about 5 000 companies, scaling up after a successful pilot scheme, that showed high levels of company satisfaction and overall high participation of employees and a high share of companies undertaking follow-up measures at their own expenses in order to continue the processes initiated (BMAS, 2020[36]). Since 2017, the programme (called uMV Plus) has also been used to support SMEs developing learning and experimenting rooms, projects in which new approaches to solving the challenges of the future of work are tested in operational practice, with a strong focus on digital change, smart transformation and, since 2019, Artificial Intelligence. The uMV programme seems scalable and transferrable to other contexts, with low levels of administrative burden for SMEs, which are supported by counselling centres, as was the case for voucher systems leveraging on consulting companies and aiming at building digitalisation capacity.

Box 3.4. Ensuring skilled labour in SMEs through the ESF – Germany

The initiative “Securing the skilled labour base: vocational training and education (CVET) and gender equality” (Fachkräfte sichern: weiterbilden und Gleichstellung fördern) supports social partners and companies’ management in securing the supply of skilled labour. It does so by establishing sustainable training structures and personnel development strategies, increasing participation in adult training in SMEs, strengthening the learning culture in the company, and improving career advancement and opportunities for women and generally gender equality at work. For this purpose, actions fundable under the programme include:

• Creation of staff development structures: concepts for personnel development (e.g. development of qualification plans, introduction of diversity management); upgrading the skills of key individuals in companies (e.g. specialists and managers, personnel managers, members of company interest groups) to become training multipliers, and implementing concepts for adapting qualification to increasing and changing requirements of technological innovation, especially in the area of the green economy; implementation of concepts to promote learning in work processes;

• Development of training advisory structures for SMEs and creation/implementation of in-company and inter-company training measures for SMEs;

• Initiation of social dialogue: workshops of social partners to initiate and conclude agreements on qualification and equal opportunities in the sector; analysis of sectoral needs for training and gender equality polices; determination of needs for future competence profiles; strategies, concepts and projects for developing industry standards with regard to further training and equality;

• Strengthening the competences of operational actors with regard to equal opportunities: advice and qualification for company interest groups; sensitisation and coaching of executives and HR managers; development and implementation of guidelines or company agreements for the improvement of the employment situation of women; promotion of equal participation of women and men in working life;

• Development of work time models and career pathway plans geared towards specific phases in a worker’s life: development and implementation of innovative approaches to the organisation of working hours to improve the workforce participation of women, taking into account business needs and work-life balance; approaches to reduce loss of qualifications of employees when on parental leave and support to quick career re‑entry.

The programme is a joint initiative of the Federal Ministry of Labour and Social Affairs (BMAS), the Confederation of German Employers’ Associations and the Confederation of German Trade Unions, with around EUR 130 million in funds from the BMAS, the European Social Fund and contributions from companies and social partners. It is the follow-up programme to the “Further Education” (Weiter bilden) and “Equal opportunities” (Gleichstellen) programmes, that were implemented in 2007‑13 ESF programming period.

Under these initiatives, more than 93 projects were successfully funded, including projects aiming at developing structures and skills linked to smart transformation, digitalisation and entrepreneurship. Guidelines are developed and implemented in close collaboration with the partners, with collective agreements on training or agreements with social partners on skills development and equal opportunities being a prerequisite for project funding.

The “UnternehmensWert: Mensch” (uMV) programme aims to support SMEs and their employees in designing an employee‑oriented and future‑oriented personnel policy, on the basis of a holistic and tripartite approach developed within the framework of the New Quality of Work initiative launched by the German Government. The programme is aimed at supporting the development of human resource policies that are in line with current mega-trends. In particular it focuses on four areas which are considered strategic for HR policy and the future of companies:

• Personnel management: modern personnel management which takes into consideration the individual needs of employees, with a participatory approach to decisions;

• Equal opportunities and diversity: creating policies that consider the specifics of the company own workforce and offer all employees development opportunities, regardless of age, gender, family or cultural background;

• Health: creating offers suitable to promote physical and mental health and increasing awareness of employees;

• Knowledge and competence: developing ways to incentivise knowledge sharing and learning within the company, in addition to providing specific training to respond to digital transformation and measures to promote employee motivation to learn.

The federal programme supports the initiation of change processes related to organisational development, supplementing programmes at the State (regional) level.

The programme was launched after the implementation of a successful pilot programme and provides for a three‑stage, participation-oriented advisory process that is specifically geared to the needs of the companies. There are 102 main contact points for the programme – so-called counselling centres (EBS) – that carry out the initial consultation, accompany SMEs with red tape, carry out public relations, and provide guidance for other regional support instruments for SMEs.

As part of the initial consultation, the counselling centres verify eligibility and, together with the companies, identify the specific operational changes required needs along the four areas of human resource policy of the programme (personnel management, equal opportunities and diversity, health, knowledge and skills). Depending on the results of this consulting phase, companies and their employees can have access to further advice to the extent of a maximum of ten consultation days. This second consultation focuses on production processes, takes place directly on site, and is performed by consultants specialised in operation management. It includes the analysis of the company’s strengths and weaknesses, as well as the development of action goals and measures, which are then recorded in a binding operational action plan. The suggested change in processes is then initiated and accompanied. Six months after the second consulting, the initial counselling centre with the participation of the social partners at company level or individual employees assesses the implemented measures. In this occasion, the EBS checks whether there is a need for further advice and whether the company can request access to other State‑wide support measures.

By 2019 around 4 900 small companies had taken advantage of these consulting services.

In addition to the above, since 2017, the ESF programme can be used to fund the creation and set up of learning and experimenting rooms (Lern- und Experimentierräume). In line with the White Paper on Work 4.0 and the initiative “Sustainable Companies and Administrations in Digital Change” (Zukunftsfähige Unternehmen und Verwaltungen im digitalen Wandel), companies and administrations can set up and apply for funding to create learning and experimentation rooms. These test new approaches to solving the challenges of the future of work in operational practice, with a strong focus on digital change, smart transformation and Artificial intelligence. In particular through the uMV Plus programme, SMEs that have been on the market for at least two years can receive support in the development of experimentation rooms from trained process consultants, with the aim to support them in the adoption of digital technologies. The funding covers 80% of 12 consultation days.

The initiative is linked to an online platform for practice and transfer www.experimentierraeume.de, which provides companies and administrations with an online space to present their learning and exchange ideas with other companies. Experts from science, business and trade unions also comment on various aspects of digitalisation.

Source: BMAS (2020[37]), Initiative Fachkräfte sichern.

When considering workplace innovation and innovative personnel policies, Nordic countries have a long tradition of workplace development programmes. While these programmes can respond to a variety of policy priorities (e.g. innovation, growth, quality of life) they generally encourage training and learning, as well as an effective use of skills within the company. Many of these programmes, however, depend on the national and regional context to be effective. InnovaSouth is a project that aims to support workplace innovation in SMEs in the South of Europe, wanting to improve the entrepreneurial culture of small companies in the region and move beyond the challenges specific to them.

The project, which has been funded through Horizon 2020, provides services and financial support for innovative workplace solutions, including a manual of good practices, which can be used by SMEs to understand and put in practice easy solutions that promote employee’s motivation and productivity, as well as an online questionnaire to assess how innovative workplace are.

Box 3.5. InnovaSouth

InnovaSouth is a project funded by Horizon 2020, which aims to improve Southern European SMEs’ entrepreneurial culture, while increasing their resilience and competitiveness, through the provision of services and financial support for innovative workplace solutions. The project is based on a matrix of best practices related to four fundamental drivers of innovation: jobs and teams; organisational structures, management and procedures; employee driven improvement and innovation; co-created leadership and horizontal structure.

For each of these categories, workplace innovation practices are identified, distinguishing between practices that can be carried out for free and those that involve spending of resources.

One of the tools of the project is an online manual of good practices for workplace innovation, available in various languages. It aims to inspire entrepreneurs to find simple and innovative solutions to increase employee’s motivation and productivity. The Online Manual is aimed at SMEs that need practical advice on possible innovation actions to implement within their companies. It includes monetary and non-monetary solutions to promote workplace innovation, including for example practices on how to promote transversal skills among employees, with description of exercises that can be carried out in the workplace and practical examples implemented in other companies.

In addition, an online questionnaire is also available for companies to assess their level of workplace innovation. The questionnaire is available in different languages (Italian, Greek, English) and includes 20 questions.

InnovaSouth also provides SMEs with a EUR 8 000 voucher to be spent on workplace innovation services.

Source: InnovaSouth (2020[38]), https://www.innovasouthproject.eu/methodology/.

3.2.1. Workforce innovation diagnostic tools

Diagnostic tools and self-assessment surveys provide an affordable way for companies to assess their current work organisation and needs. These tools can be built with different objectives, helping companies and employers to assess their needs with regard to skills and professional development specifically, or within the broader context of workplace innovation or even digital maturity. The practices below provide good examples of instruments that respond to these different objectives. They include tools that can be administered online or in person to companies, mostly thanks to surveys and in-person interviews.

The Workplace Innovation Tool in Ireland is an online questionnaire that facilitates a business in self-evaluation of its capacity to become a more innovative workplace. The service is designed to enable single individuals within an organisation to participate; each asks a number of questions about the organisation, with regard to employee engagement, innovation, productivity and training approaches. The tool produces an individual report and a company report, that can provide the basis for an assessment of the strengths and weaknesses of the business, and a starting point as how to best enhance the business’s capability to prepare, adapt and respond to change.

Box 3.6. The Workplace Innovation Tool – Ireland

The Workplace Innovation Tool focuses on employee engagement, innovation, productivity and training. The toolkit encourages businesses to be proactive in transforming their work practices by quickly identifying areas for improvement. It then guides users to relevant supports.

It is composed of an online questionnaire of 25 questions designed around four pillars: employee engagement, innovation, productivity and training. An unlimited number of employees in an organisation can participate. Each is asked a number of questions about his/her organisation’s approaches to Employee Engagement, Innovation, Productivity and Training. The whole process takes only a matter of minutes and everyone receives a personalised report with signposting to relevant, high quality events and resources to help drive change. The report suggests opportunities for job rotation, training, or mentorship within the firm based on the employee’s inputted skills, interests and experience.

The toolkit produces two reports: a personalised report for each individual respondent, and a company report (generated only if there are two or more respondents). The company report shows the average result for the company’s individual respondents. It provides the basis to assess the strengths and weaknesses of the business and can be used to start the conversation on how best to enhance the business’s capability to prepare, adapt and respond to change. The personal report enables individual respondents to assess their strengths and weaknesses under the four aforementioned pillars.

The Workplace Innovation Toolkit is a 2018 governmental initiative involving: National Government, Department of Business, Enterprise and Innovation, Regional/local government Local Enterprise Offices, Employer or employee organisations, the foreign investment promotion agency (IDA Ireland), the investment and export promotion agency (Enterprise Ireland), Skillnet Ireland, a union-based research institute on workplace innovation (Ideas Institute), the quasi-governmental commission for employment relations (Workplace Relations Commission) and the National Standards Authority of Ireland, which decides on certifications including on management practices.

This instrument has been developed and is supported by the social partners (government, trade unions and employer organisations, and other state bodies such as the Workplace Relations Commission), which fosters the buy-in from its constituents.

Source: https://witool.dbei.gov.ie.

Similarly, Workplace Innovation Europe, a non-profit organisation focusing on workplace innovation in Europe, offers a pay-for diagnostic tool in the form of an employee survey, designed to employers an in-depth understanding of where change is needed and how to deliver it. The tool focuses on evidence‑based workplace practices associated with high performance, engagement and workforce health, and the reporting indicates specific actions at team, department, site and organisational levels. (Workplace Innovation Europe, 2020[39]) The organisation offers different pricing and services for micro-, small and medium-sized organisations, as well as a free version of the toolkit.

Other diagnostic tools have been developed to support SMEs in assessing their level of maturity with regard to specific aspects such as the digital transformation. These tools are often provided by private sector or by research organisations. In France, The “Smart Diag’ tool”, for example, is a 5‑minute survey that aims to help SMEs identify their level of digital maturity, including areas of strength and weakness, pointing out areas where further progress can be made and identifying potential follow-up services. The tool was launched in 2018, as part of a larger initiative, the Smart SME Initiative, which also offers support services to SMEs, including training for digital upgrading and development of training plans for employees (OECD, 2020[40]). The European Digital SME Alliance maintains a repertory of tools available to SMEs for self-assessment (European Digital SME Alliance, 2020[41]).

3.2.2. Remote work

The COVID‑19 crisis promoted the use of remote‑work technologies in a large number of firms across OECD countries. In many instances, remote work was the only feasible way for the firm to keep on producing while respecting social distancing and stay-at-home mandates. Even beyond the pandemic emergency, some of the investments companies made in upgrading their digital tools and organisational structure are likely to remain relevant and affect firms’ skills requirements and reskilling practices (OECD, 2021[8]).

SMEs were especially challenged by the greater use of remote work. They typically have fewer resources and more limited access to funding to invest in the necessary technological and organisational changes. In contexts where access to broadband connection and online public services are more limited, SMEs suffer a greater competitive disadvantage than large firms. This can justify the deployment of different policy tools to support SMEs in their transition towards a hybrid working environment, where in-presence and remote work can coexist at the firm, team or individual level.

While it is too early to evaluate if any of the public policy instruments countries deployed in 2020‑21 yielded the expected return, a synthesis of the main areas of intervention is possible. Relevant practices include setting up online platforms for remote work and other digital services; providing information and training on remote work opportunities and challenges for SMEs; enabling access to remote professional training for SMEs; and providing financial support for SMEs to take up remote working practices (OECD, 2020[42]). If many programmes supported SMEs’ investment in IT hardware and software, fewer provided funds for complementary expenses such as consulting or training for entrepreneurs and workers to deal with remote working. One such case was the inclusion of telework among the refundable expenses in the Industria Digitala 2021 initiative (Basque Country, Spain). The programme subsidises between 25% (large firms) and 50% (micro and small-sized firms) of the expenditure incurred for the acquisition of technology but also digital skills and diagnosis and implementation support. Other initiatives are non-financial in nature instead, and help spread information on existing best practices for the uptake of remote work. One recent example is Flanders’ Telewerk Action Plan, which has guided workers and firms during the pandemic and aims to make this model a sustainable part of the future of work.

Box 3.7. Telewerk Action Plan – Flanders, Belgium

In the Telewerk Action Plan, the Flemish Government gathers a number of initiatives aimed to facilitate firms’ and workers’ transitions towards remote work, with a special focus on SMEs. The key aspects include:

• A web portal (within “Werkbaar werk”) that collects information on remote work, including the legal framework, available financial support measures, guidelines for managers, webinars, self-assessment tools and a number of successful case studies.

• “Workability vouchers” (“Werkbaarheidscheques”) that reduce firm’s cost of professional advice on how to best organise remote work and reduce workers’ psychological cost of the transition.

• The appointment of an inter-sectoral advisor who is tasked to map out the needs for remote work in the various sectors.

• A monthly monitor of teleworking adoption, via enterprise surveys.

• Links to the career guidance services offered by the Flemish Service for Employment and Vocational Training (VDAB), and to ESF-funded initiatives aimed at developing digital skills and other skills for remote working (e.g. leadership and communication skills).

• A consulting and co‑ordinating effort about remote work policies between regional and federal authorities.

3.3. Fostering management and leadership skills

The success of these measures is not exclusively linked to the provision of services or expertise on these specific aspects, but depends in an important way on the leadership of managers and owners, as they ultimately decide on change and skills strategies within the firm. Ensuring their commitment to investment in human capital is therefore a key prerequisite for making adult learning a reality in smaller firms (OECD, 2020[40]; OECD, 2019[1]).

The linkages between management practices and firm productivity has been broadly documented in the academic literature and supported by an increasing number of country specific and cross-country firm surveys. As an example, the World Management Survey, which is conducted since 2004 in more than 30 countries, shows that management practices account for around 30% of total factor productivity (TFP) in the manufacturing sector, both across and within countries (Bloom, Sadun and Van Reenen, 2016[43]). In several instances, family ownership compounds the problem: managerial quality is lower in firms which are fully managed by the owning family (Bloom, Sadun and Van Reenen, 2016[43]), and family management is negatively associated to firm performance, on average across country (Bloom and Van Reenen, 2007[44]). While good managerial practices and skilled managers are two distinct aspects of firms’ managerial capabilities, the association of good managerial practices to firm productivity is largely explained by the human capital of managers (Bender et al., 2018[45]).Improving management practices requires changes in both the supply of and the demand for managers.

Measures that aim to foster management and leadership skills are therefore important to promote investment in human capital for the competitiveness and productivity of the company. A recent OECD comparative analysis of government programmes aimed at improving managerial skills in small enterprises, mostly from traditional sectors of the economy (e.g. retail trade and low-tech manufacturing), finds that combining management training and consulting with support in ICT use is a common approach to boosting innovation in small low-tech enterprises (OECD, 2016[30]; Marchese et al., 2019[46]).

These measures all envisage a highly tailored approach: by culture (every entrepreneur feels its company is a world apart from all others) or as a consequence of the realities of production, business leaders prefer training that is highly specific to their territory, sector and ultimately company. This requires a set of training instruments that emphasises such tailored and often personalised approach: vouchers, coaching, mentoring. Moreover, good support practices follow the (digitalisation, internationalisation, or reskilling) project throughout at least part of its life. Indeed an initial assistance on the design of the project does not exclude that serious implementation difficulties can emerge along the project’s life, and make the initial support irrelevant.

Owner-managers of small firms are found to generally prefer mentoring and longer-term business development programmes with intensive training and support sessions at intervals (Stone, 2010[16]). Measures adopted across European countries indeed tend to favour mentoring, peer learning and coaching, with the aim to build general leadership and management skills, or to focus on specific aspects such as building skills linked to the digital transformation and management of change. By fostering trust between instructors and learners, and leveraging the value of peers’ experience, coaching and mentoring are especially valuable for those business leaders who do not think any intervention is needed. Successful coaching and mentoring happen in small groups (or even solely between the instructor and the business leader), and they require the active involvement of the trainee.

Providing public support to SMEs by introducing an external consultant or coach is important because firms, and especially SMEs, often lack a strategic and long-term vision and are not fully aware of their needs in terms of technology, business planning, organisation or investment in their workforce. Even if aware of their needs, SMEs more than large firms lack the financial resources to cover the cost of consultants or coaches as offered by private consulting companies. The concrete support given by the coach or a consultant to the SME has proven successful. Coaching in particular helps CEOs or owners gain a longer term vision, develop a positive attitude towards risk, engage in restructuring, and increase motivation among the staff (OECD, 2017[47]).

Evidence from existing practices suggests that coaching, mentoring and peer learning have overall a positive impact. Companies where coaching or mentoring takes place benefit from sharing and acquiring knowledge of best leadership and management practices, as well as from the creation and establishment of new networks and contacts. This type of measure seems particularly suitable for SMEs, as their sensitivity to extra costs for long-term investment, average lower margins and lower ability to raise funds increase the return to information sharing from other businesses.

Mentoring is widely employed in Ireland and the United Kingdom. SMEs in Ireland have good access to mentoring opportunities, which are offered by the main public providers of business and training support and services. Management development training and leadership development programmes are also available in Ireland through Skillnet, the business support agency of the Government of Ireland that supports businesses in their skills needs, and Enterprise Ireland (see also Box 4.1 in the next chapter).

Box 3.8. Mentoring in Ireland

Mentoring is widely employed in the Irish business advisory services system. The main public providers of mentoring services are the local enterprise offices, Enterprise Ireland (EI) and Skillnet Ireland, InterTradeIreland (the agency supporting internationalisation of SMEs in Ireland and Northern Ireland), but sectoral actors, incubators and accelerators are also involved in the provision of mentoring services.

Beyond internal advisors, Enterprise Ireland offers SMEs companies and High Potential Start Ups (HPSUs) access to a wide network of experts in Ireland and overseas, connecting companies with strategic advice and knowledge that can support them in addressing business challenges, and developing and executing growth strategies. Enterprise Ireland maintains a Mentor Network, a network of more than 400 highly experienced business people, who can offer advice and guidance, on a one to one basis. This network is shared with Local Enterprise Offices, which also have a panel of local mentors, used for referrals for their start-ups and micro‑enterprise clients.

Mentors of the EI Mentor Network do not act as consultants, but offer advice based on their business experience. Companies can apply for a mentor through development advisors within EI, which then matches the company with a short list of mentors from which to choose. The mentorship is face‑to-face and is based on an agreement and mutual understanding of the objectives and goals to be achieved. Depending on the needs, the duration of the mentorship can last 3, 6 or 12 months. Enterprise Ireland provides grant support to qualifying companies towards the cost of a mentor for up to 10 sessions (to a total of EUR 1 750). This amount is paid directly to the mentor, not as a fee, but as a per diem to secure their commitment. Mentors’ profiles are reviewed on an individual basis by EI, on the basis of the needs of the client base and after a monthly recruitment day. All Mentors sign a confidentiality agreement with Enterprise Ireland.

In addition to one‑on-one mentorships, EI organises mentors panels where companies in the early stages of development can present and gain feedback on their business plans and investment proposals. It also offers half-day deep-dive advisory sessions on different challenges that businesses can normally encounter and International Advisory Panels. The Panels are groups of senior private sector executives, who volunteer to advise CEOs and senior managers of Irish companies targeting international markets. While guidance is provided to mentors upon acceding the network, a recent evaluation has noted that considering the widespread use of mentoring in the Irish system, there could be space for a review of training and guidelines provided to mentors who are publicly funded, to assess the current situation and potentially consider strengthening the process of orientation, training and certification of these figures.

Source: Indecon (2019[48]), Evaluation of Skillnet Ireland in 2018; Enterprise Ireland (2020[49]), How to Become an Enterprise Ireland Business Mentor.

In the United Kingdom, the Small Business Leadership Programme (2018) is part of a package of measures to assist businesses in improving their productivity. The programme is a fully funded 10‑week management training programme delivered by a consortium of business schools. Targeted at SMEs, aims to reach 10 000 beneficiaries by 2025. It is accompanied by other measures, aimed at strengthening local networks focused on business improvement, and at getting UK’s leading businesses signed-up to mentoring programmes (OECD, 2020[19]). SMEs’ leaders are in fact further supported through Peer Networks, a programme that brings together diverse cohorts of business leaders through high-impact group discussions and sessions, and by Be The Business, an independent charity with a large business network, which strongly leverages on practice and knowledge sharing and mentoring. The charity has been funded to help SMEs better understand how their productivity levels can be increased by best practice leadership and management techniques and making use of tried and tested technologies.

Box 3.9. Mentoring and peer learning in the United Kingdom

Peer Network is a programme aimed at SMEs aimed to support their leaders through peer learning and high impact group sessions, where they gain and reflect on feedback from their peers and identify practical solutions to overcome challenges of their business. Guided by expert facilitators, SMEs leaders are supported to create a trusted support network, helping to build and strengthen their business. The programme works through free, online group sessions moderated by a facilitator and/or delivered locally by Growth Hubs. The programme targets SMEs with at least five employees and GBP 100 000 turnover.

Be the Business is an independent charity gathering large and small businesses, which want to improve their performance and share their experiences to help others do the same. It provides inspiration, practical tools and free resources for businesses to identify opportunities for improvement and develop approaches that can boost their productivity. Its main working tools are expert analysis and advice from the business community, transmitted through mentoring programmes and peer learning groups. The charity is set to receive GBP 18.6 million of government funding to support SMEs in the adoption of best practice leadership and management techniques.

Source: Gov.UK (2020[50]), Small business support schemes: Small Business Leadership Programme and Peer Networks; Be the Business (2020[51]), https://www.bethebusiness.com/.

In Italy, the Turin Chamber of commerce runs a mentoring programme that encourages the exchange of managerial experiences across international markets between entrepreneurs.

Box 3.10. Mentoring by the Turin Chamber of Commerce – Italy

The Turin Chamber of commerce runs a mentoring programme that encourages the exchange of managerial experiences across international markets with business leaders with personal or professional ties to the Piedmont region. The programme consists in a voluntary relationship between a business professional with well-recognised work experience (mentor) and a new entrepreneur (mentee), where the mentor facilitates the professional development of his/her mentees. The programme is open to business owners as well as to high-ranked managerial positions.

Mentors are Italian professionals living abroad, with ties with Piedmont by origin, study or work and must have more than 10 years of proved experience in the field of management and business development. Mentees are mostly company executives or managers of companies based in Piedmont that work towards the international growth of their company.

Both parties engage in the relationship on a voluntary, non-paid basis within ethical guidelines. The Mentoring lasts at least 8 months with the aim to improve the internationalisation process of the companies and sharing good practice experiences. The project starts with a kick off meeting, in person, with mentors meeting potential mentees, facilitating the right matching.

Mentors and mentees interested in the programme has rapidly increased, with applicants going from 76 (1^st edition) to 130 (3^rd edition). 90% of the applicants are satisfied with the Programme, gaining new strategic plans to grow internationally, new marketing and communication strategies, business plans, organisational changes, development of international contacts. The programme has the potential to help mentees enter a new international market and acquire new contacts and networks.

The main reported challenges are linked to finding the right matches and ensuring that the mentoring relationship is not interrupted.

The Mentoring programme is easily replicable in other regions, as it is mainly based on the networking capabilities of the Chamber of Commerce, both through the mentors and the mentees. The programme is funded through the ERDF.

Source: Interreg database of good practices.

In Sweden, peer learning and coaching of key representatives within SMEs has been used with specific focus on digitalisation, with the aim to build the capacity of SMEs with regard to digital transformation. The Kickstart Digitalisering (Kickstart Digitalisation) and INDIGO are both part of Sweden’s Smart Industry Strategy, and leverage on peer learning and mentoring in order to provide companies with inspiring examples and in-depth knowledge, help them identify opportunities and adopt digital technologies.

These programmes have received positive participant feedback and proved successful in affecting digital maturity of SMEs and strengthening networks of companies and institutions. Using co‑operative coaching and learning sessions that can take into consideration the context of participating firms was especially considered a positive element (Ramboll, 2018[52]). In addition, it was made evident that SMEs need continuous and operational support when it comes to implementing solutions, making coaching a useful tool to aid to companies overcome challenges during the implementation of new digital solutions (Tillväxtverket, 2020[53]).

Box 3.11. Kickstart Digitalisering and coaching – Sweden

The Kickstart initiative is a national initiative in which small and medium-sized Swedish businesses attend workshops to inspire them to begin their own digitalisation effort.

The programme seeks to de‑dramatise digitalisation, showing that it concerns all companies and thus lowering the entry or initial investment cost for firms. It enables peer-learning between the participating companies and provides good examples of digitalisation. The initiative is indeed based on a participatory design that brings together actors at different levels, through a series of workshops over a six‑week period, consisting of three free‑of-charge meetings where two representatives from approximately ten companies share experiences and ideas.

The programme has been carried out by the Association of Swedish Engineering Industries, RISE Research Institutes of Sweden, IF Metall, IUC and Swedish Incubators & Science Parks (SISP), and has been financed by The Swedish Agency for Economic and Regional Growth. A total of 627 companies participated in 75 “kickstarts”, which means that the goal was achieved with good margin. 75% of the participants the companies had 50 or fewer employees and 70% were manufacturing companies, the remainder operating in the service sector. After the project, a large share of these companies started a digitalisation project or increased the pace of ongoing investment in digital technologies. Companies were satisfied with Kickstart as a concept, which has also been exported to Estonia, Latvia and Lithuania.

The result required amendments to the initial design of the programme. The initial goal or reaching 1 000 companies and 100 “kickstarts” was revised down, since it showed little capacity to scale after the pilot of 2016 to national dissemination. A major challenge was to reach companies and entice them to participate, as companies have limited resources and perceive digitalisation as an abstract phenomenon. A mitigation strategy adapted the programme’s communication to focus on companies’ needs and solutions, rather than digitalisation per se, showing clear examples of benefits.

Overall, Kickstart has contributed to a deeper understanding of digitalisation in companies. Another positive result of the project was the strengthening of networks between companies and between the company and the promotion actors. On the downside, companies proved to need continuous support in their digitalisation work to move forward, which is why the project has been expanded in 2020 to include coaching as a way to aid SMEs overcome capacity shortages in the implementation phase.

The Swedish Agency for Economic and Regional Growth has granted funding for coaching on digitalisation to several companies. These projects have mostly been conducted by local and regional parties, with a majority of them, implemented by regional chapters of IUC – a business-owned national network that aims to support Swedish business staying competitive, through their concept INDIGO.

The INDIGO projects provide companies with in-depth knowledge on digitalisation It offers a training programme that combines network meetings and joint workshops with coaching for the individual company, with a coach/consultant who supports concrete digitalisation efforts at the company, helping them to define needs and opportunities and to lay the foundation for a development strategy. As a rule, the coaching model involved a start-up meeting with management team/managers, coaching for 20‑80 hours, knowledge seminars, follow-up meetings and an identification of the next steps. Participating companies are met at the early stages of their projects and are offered tailored advice, following an in-depth analysis of the company’s situation and strategic development goals. Flexibility, low access thresholds and concrete objectives were important to ensure SMEs participation.

Source: Tillväxtverket (2020[53]), Kickstart Digitalisering: Method.

Similarly, in Denmark, Scale‑Up Denmark, an accelerator programme that targets promising businesses and start-ups with a focus on smart specialisation, uses intensive development courses, peer learning, mentoring, workshops, access to venture capital and expertise, with the aim to create a group of high growth companies in the country. The programme has been funded through the European Regional Development Fund (ERDF), in addition to funds from the Danish regions, the Danish Business Authority and companies participating.

Box 3.12. Scale‑up Denmark

Scale‑up Denmark is a training concept that targets promising entrepreneurs and start-ups with the aim to establish an elite group of high-growth companies. While the country has a long history when it comes to developing entrepreneurial competences and supporting entrepreneurial learning and start-ups, creating scale‑ups and high-growth company was considered a strategically important step for the Danish industry competitiveness.

Scale‑up Denmark is an accelerator programme that targets the most promising national and international entrepreneurs within the business areas of the Danish regional smart specialisation strategy, through intensive development courses, professional discussions, mentoring, workshops and access to expert knowledge and venture capital. Large companies participate as partners of the initiative, thus allowing for a transfer of knowledge to young firms.

It is a four‑year initiative, inspired by a private accelerator programme (Next Step Challenge) and funded by the ERDF, regions’ own development funds, the Danish Business Authority and the participating companies, with total budget of EUR 22 million. The initiative is expected to identify 355 companies that will create 1 200 new jobs and an increase in turnover of EUR 266 million.

While the impact of the initiative is yet to be determined, it is an interesting example, which builds upon the positive experience of the Next Step challenge. As the precursor mostly attracted foreign participants, it is expected that Scale‑up Denmark will find it challenging to attract Danish entrepreneurs.

Source: https://scale-updenmark.com.

Note

← 1.  Workplace innovation is a type of workforce innovation: it is the testing, sharing and implementation of new approaches to work organisation, management practices and job design that leads to better use of workers’ skills and more learning in the workplace (OECD, 2020[15]). The term “high performance work practices” refers to a set of human resources practices that include aspects of work organisation and job design such as teamwork, autonomy, task discretion, mentoring, job rotation, and applying new learning. They also include management practices such as employee participation, incentive pay, training practices and flexibility in working hours. Even though definitions vary, they are generally associated with greater skills use and informal learning, employee participation and discretionary effort at all levels of the organisation (OECD, 2020[15]).