Skills shortage killing innovation for many

Small and medium businesses may be weathering the skills shortage better than their larger counterparts.

The inaugural Australian Industry Group and Deloitte national CEO survey asked 492 CEOs a range of questions about skills shortages and innovation, with 68.2% reporting that the skills shortage had affected their business in the last 12 months. In addition, 60.2% of the CEOs suffering from skills shortages said they were restricting their ability to innovate.

But while more than 80% of large businesses reported that the skills crisis had affected their business, around 64% of medium businesses (with between 25 and 100 employees) and 59.7% of small businesses (fewer than 25 employees) cited affects from a deficiency in skills.

But small firms indicated they need an average increase in full-time employment of 11.7% to meet current skill requirements, while medium-sized firms need to raise full-time employment by an average of 6.7% to meet current skill needs.

The survey also shows that smaller companies tend to look internally for solutions to skills shortages. Just over a third of small firms (36.2%) find retaining mature-age workers to be effective in helping them meet skill requirements, compared with 27.6% of medium-sized firms and 24.1% of large firms. By contrast, 38.6% of large firms believed recruiting experienced employees was a key solution, compared with 21.3% for small firms and 26.9% for medium-sized firms.

Worryingly, the impact of the skills shortage of innovation is felt most at the smaller level, the 45.7% of small company CEOs reporting that skills deficiencies were restricting their ability to innovate, compared with 41.3% of medium company CEOs and 42.1% of large company leaders.

AIG chief executive Heather Ridout wants action. “The CEO survey points to the need for the Federal Government’s review of the National Innovation System to consider arrangements specifically directed towards lifting the skills and capabilities required to drive innovation in Australian businesses.”

Medium firms are aiming for a big boost in their spending on upskilling in 2008, increasing their spending as a percentage of turnover from 0.45% to 0.58%. Small firms are expecting to lift their spending from 0.53% to 0.58%.