Increasing skills is a key factor but those skills need good management

THE publication of the Leitch Review of Skills reflects the growing recognition, by business, government and other stakeholders that the mantra "our people are our greatest asset" is now less a cosy statement of reassurance and more the fundamental principle which will underpin the prosperity of our economy in the future.

The goal of the review was to identify the UK's optimal mix of skills in 2020 which will be required to maximise economic growth, productivity and social justice.

While skills are clearly a Holyrood rather than a Whitehall responsibility, the conclusions of the review and the recommendations for implementation will have implications for employers and policy makers in Scotland.

But, in looking ahead and anticipating Scotland's own specific skills needs and issues, it is essential that they are placed in the wider context of the factors that will turn the promise of skills into reality.

At face value, the equation appears to be straightforward - skills are good and good for the economy. In order for our companies to be productive and prosperous, employers need to be able to recruit people with the right level of qualifications and skills. Where skills gaps and shortages exist, government, our education system, our enterprise networks and, of course, employers all have a role to play in addressing these trends.

But the emphasis on developing the skills we need for the future of our economy and public services must be matched by a recognition that it isn't simply a matter of putting skilled and qualified people into business. It is how skills and knowledge are then deployed which will have the biggest impact on productivity and performance.

When we compare productivity in the UK with that in the US, research shows that, for every 100 widgets a UK worker produces, their counterpart in the US produces 130.

As John Van Reenen of the London Stock Exchange has said: "John Doe in the US could take Thursday and Friday off and still produce as much as poor John Bull in the UK, toiling away throughout the working week."

On closer examination, skills and physical infrastructure - plant, transport, technology - account for just over half of this productivity gap, with the remainder being attributable to the quality and ability of leadership and management to make best use of the people, resources and technology available. In short it's not just about getting skills into the workplace, it's about making the most effective use of them once they are there.

While comparisons around effective management in the US and Europe are valid today, the issue is brought into sharper focus by last year's Treasury commissioned report on creativity, which concluded: "What is impressive - and worrying - about the emerging economies is not where they stand today but how they are positioning themselves for the future. Alongside the enterprise and vigour that characterise their economic growth, they are building up new technology-based industries and impressive capabilities in scientific research and investing massively in education, technical skills and creative capabilities."

In other words, emerging economies have no plans to stay emerging by simply competing on cost alone. They aspire to take up the high-value-add high-skill route just as much as we do, giving even more urgency to the issue of addressing our leadership and management capability now..

Of course, this is just plain business sense.

You don't need to be a business leader, a guru or a management consultant to understand that the way in which people are managed and developed in the workplace is fundamental to their performance and willingness to give that additional discretionary effort that can make the difference between mediocrity and success.

The recent Future of Work study confirmed that profit per employee increases and labour turnover reduces in correlation to the type of management practices in an organisation.

Businesses who place high importance on engaging, developing, supporting and involving staff see far higher returns in productivity and profitability as a result.

And the qualitative, quantitative and anecdotal evidence of the importance of this issue now seems to be hitting home, with more than half of CBI members citing leadership and management skills as the most significant contributor to competitiveness.

In his first interview as the newly appointed "skills envoy", Sir Digby Jones was very clear that the skills agenda wasn't just about literacy, numeracy and qualifications, but about the ability of management to make the most of those skills.

But, when we think about good leadership and management, our automatic reaction is to identify individuals who are universally recognised for their outstanding talents.

From Napoleon to Churchill and Jock Stein to Jack Welch, we have created a hall of fame of leadership and management heroes

who play an important position as role models who inspire us to achieve our own ambitions. But, by putting them on pedestals, we also reinforce the perception that excellence in leadership and management is the gift of a few individuals.

Perhaps we need to redefine excellence in leadership and management from an individual attribute to a feature that we expect as standard practice across all levels of an organisation, so that it's not just individuals that we look up to as good leaders, but we see organisations and businesses as being characterised by effective leadership and management.

Without competent, engaged and motivated managers, any organisation will struggle to take its people on the journey of success. They will either help accelerate improvement or block its path. This isn't just management speak, it's just plain common sense.

• Peter Russian is chief executive of Investors in People in Scotland