Governments can provide incentives for firms to invest in skills in a variety of ways, thus addressing the misalignment between the supply and demand of skills and promoting the competitiveness and productivity of SMEs. This report provides an overview of a range of policy instruments available to governments that have proven effective among small and medium-sized enterprises in different countries.
In line with the good practice examples provided, the evidence suggests that a good and effective policy toolkit should include both financial and non-financial incentives, which lower the costs of investment and support SMEs in building or accessing the resources a needed to invest effectively in skills.
Subsidies seem to be the most suitable form of financial incentives when it comes to SMEs. Vouchers especially are among the most used incentives to support small businesses, with co-funding and cost sharing systems being the most common. These should be combined with effective support measures to help SMEs identify their skill needs, promote the most relevant forms of training for their workforce, and use the skills available to them in an effective way.
Good examples from European countries include Skill Assessment and Anticipation (SAA) services administered through external operators, such as the PES or consultants, or services which aim to build internal capacity through the promotion of modern HR systems, High Performance Working Practices and other forms of workplace innovation, as well as management capacity. Among this type of measures, diagnostic tools for self-assessment are an affordable way to help SMEs assess and identify their needs, as they can be easy to implement. Coaching, mentoring and peer learning are also broadly used and are suitable for SMEs, as they promote knowledge sharing and transfer, and build on concrete practices from successful entrepreneurs, especially when it comes to working with managers and company executives.
Co‑operative coaching and learning sessions are especially effective in improving the take‑up of digital technologies in SMEs, as each firms’ history and context can be taken into account. However, as firms also require continuous and operational support for the implementation of solutions, measures that combine peer learning and individual support services, for example through subsidised consulting/coaching services, seem to be best placed to help SMEs invest in the key competences for the digital transformation.
Among measures aimed to foster co‑operation among companies, learning and training networks have proven effective in promoting SMEs investment in human capital. Good examples include subsidies for the development of networks or for the training activities developed under the networks, as well as guidance on financial incentives available to cover costs of training, or direct expertise to develop skill assessments.
Similarly, competence centres and measures that help firms creating partnerships with public and education sectors can be successful in promoting inclusive skill ecosystems, as well as digitalisation ecosystems, thus supporting knowledge and technology transfer to SMEs, as well as promoting working-learning programmes strengthening SMEs.
Based on an analysis of the good practices presented in this study, a number of elements can be identified that are instrumental to the success of the different measures and interventions for promoting investment by SMEs in skills:
Take‑up and satisfaction are higher when the administrative burden is low, i.e. application and compliance procedures are easy, and when there is certainty of funding.
Measures that factor in the indirect costs and opportunity costs of training, and that cover informal learning in addition to formal and non-formal training can facilitate skills investment by SMEs. The adoption in European countries of National Frameworks for Qualifications should contribute to this goal: the Framework should improve the transparency and comparability of qualifications of different regional systems and foster geographic and professional mobility. Further efforts could be made to integrate micro-credentials and learning acquired informally on the job in the framework, where not yet present.
Co-funding or cost-sharing models are most common and effective. While this is already a common standard in several measures across OECD countries, special arrangements could be designed for the participation of SMEs, which cannot necessarily absorb the initial cost of setting up training for their workers.
Programmes typically including a mix of hands-on consultancy and financial incentives. Bundling of financial and non-financial instruments is usually a good way to increase participation to the schemes and the return on the financial investment.
Programmes and measures should respond to specific needs or challenges of individual companies, as SMEs often lack the capacity or resources to see how certain measures can be tailored to their specific context. Measures that include practice and knowledge sharing, as well as measures that can easily adapt to the needs of each company are for this reason most suitable for SMEs. Competence Centres, as e.g. in Austria and Germany, are shaping up to become an important venue for knowledge exchange, in particular with the higher education sector. Flexible programme delivery is also important in an environment with limited resources for investment, for example when requiring management involvement and in-person presence in workshops or training, or in terms of modular and distance provision of training and measures.
Access to clear information is very important to foster the take up of support measures by SMEs. This can be achieved through close collaboration and open and proactive channels of communication between companies and the agencies managing the measures.
SMEs do not often participate in networks of companies or with other stakeholders of the digital transformation, perhaps due to more limited information or trust in the network partners. Strategies to increase participation include awareness-raising activities, early and personal contact with companies, as well as the use and sharing of practical good practice examples from other companies.
Micro and small-sized firms in particular face additional challenges in investing in skills development and in introducing new technologies, compared to larger firms, calling for policy solutions that are targeted to their specific needs. The general principles described above apply even more so for micro and small-sized firms.
1. Reduce the cost of compliance
Many micro and small-sized firms do not make use of government support for adult learning activities because they lack the capacity (e.g. a dedicated HR department), financial resources, or time to apply for support and comply with the ensuing administrative requirements. Administrative costs for the beneficiaries (e.g. delays in reimbursements, multiple simultaneous applications, complex procedures, etc.) should be minimised. This could be done by providing micro and small-sized firms with tailored conditions in terms of generosity of the support, application procedures, or reimbursement practices (e.g. setting a first tranche of reimbursement as soon as possible to foster uptake from cash-constrained firms).
2. Leverage informal learning
As training in micro and small-sized firms is more frequently informal in nature, more tailored help may be required to help these firms recognise and validate informal learning. In addition, initiatives that cover the cost of labour for workers participating in training are potentially more interesting for micro and small-sized firms, where the opportunity cost of the hours dedicated to training is high.
3. Identify flexible solutions
Many micro and small-sized firms are mid- or low-tech companies, and require technological solutions that are relatively affordable, easy to implement, and often already in use in other firms operating in the same sector. To match this heterogeneity and maximise its returns, training in micro and small-sized firms should be flexible in content (e.g. tailored to the needs of the firm and covering both technical and soft skills), provision (e.g. modular training, distance training, training outside working hours) and recipients (e.g. involving the entrepreneur as well).
4. Provide guidance to managers and entrepreneurs
Managerial skills are often more limited in micro, small and family-led businesses than in large or publicly-owned companies. Training for managers contributes to raise awareness of the benefits of up- and re‑skilling, and to better address skills gaps within companies. Existing skills assessment tools are considered useful, but more support should be given to managers in the interpretation of the results of the assessment, and in the identification of actionable and targeted solutions. Actions aimed at improving the learning culture and the use of public support instruments in micro and small-sized firms should further target the entrepreneurs or business owners, as they are usually the locus of control in the firm. This can be achieved via external expertise from people that the entrepreneur can trust, such as representatives from employers’ associations, professionals (e.g. tax accountants, employment consultants), or other business leaders. Policy actions could also raise awareness of public policy instruments, or aim at improving the quality of the consulting expertise provided to SMEs.
5. Foster collaboration
Micro and small-sized firms have limited resources to formalise collaboration with other firms or other institutions that contribute to bolster their innovation capacity. A greater involvement of micro and small-sized firms in company networks or associations, as well as the development of joint strategies within the supply chains of larger companies would reduce training costs and promote the exchange of knowledge. Policy interventions should also target existing intermediary structures between the policy maker and firms in order to: raise awareness and the use of existing support instruments; accompany firms in their upskilling strategy; and involve firms in a broader network of institutions, including universities and other post-secondary education institutions. The collaborations can also supply skills that are not locally available, as is likely the case for the mastery of some new technologies or organisational practices.