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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 262-iv House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE TRADE AND INDUSTRY COMMITTEE
PROGRESS TOWARDS THE KNOWLEDGE DRIVEN ECONOMY
Tuesday 24 February 2004 MS A M FORSYTH MR M NATHAN and MS G CARPENTER Evidence heard in Public Questions 264 - 319
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Trade and Industry Committee on Tuesday 24 February 2004 Members present Mr Martin O'Neill, in the Chair Mr Roger Berry Richard Burden Mr Michael Clapham Mr Nigel Evans Judy Mallaber Linda Perham Sir Robert Smith ________________ Memorandum submitted by the Call Centre Association Examination of Witness Witness: Ms Anne Marie Forsyth, Call Centre Association, examined. Q264 Chairman: Good morning. May I welcome you here. You have sent us a note about your organisation, and I think we know a fair amount about the business, although it has to be said that we are getting conflicting views. Some of us who have visited call centres do not always have the impression that there are low wages, poor working conditions, repetitive tasks and comparisons made with dark satanic mills. To what extent is that, if not a fair reflection, nevertheless a reflection of some of the call centres? Is this a problem that is diminishing, or is it something that does not exist at all? How would you see this? Ms Forsyth: I think you have to go back a little while to look at the history. Call centres have been around for probably less than ten years on any sort of scale and have gone from employing zero, if you like, to the latest estimates of round about 750,000. Any type of activity or sector which has such high growth so very quickly - and it is not a normal growth curve but a very accelerated one - is bound to have issues to do with high growth. I think it is fair to say that in the early days all the effort was really about getting the rules in situ; and it was all about competition between all the regions in the UK to fight over the jobs. During that period there was less attention paid to professionalism and the rules themselves and probably a lot more on the number of jobs, the buildings and the infrastructure. I think that has changed over the last few years, and it is changing rapidly. Our organisation is certainly around improved professionalism; that is our only aim and only reason for being. Many of the organisations themselves do not identify in any way with much of the attributes given around low skills, low conditions and everything else. I think it is probably fair to say, as with any sector or with any activity, there are some low cost operators; but, by and large, the types of call and contact centres that we have today reflect the increasing complexity of what you deal with. You just have to think yourselves of some of the things you deal with on-line on the phone to do with mortgages, health, and fairly complex things, to realise the skills needed by those who deliver the service are indeed higher than that. Q265 Chairman: Would you say, setting aside criticisms - which you do not deny but you think are exaggerated both in terms of prescription and in terms of the numbers - that this is quite a legitimate area of employment for the government to try and sponsor and promote? Ms Forsyth: I think it is certainly legitimate and I think it is necessary. One of the comments we get repeatedly from organisations is that they feel the efforts that are made into improved customer service delivered through contact centres today are not reflected well when you put them together in terms of the messages that are read in the press. If you accept that 80 per cent of everything we do is in the service sector, and a lot of the service sector is dependent on call and contact centres (whether it is inhouse, outsourced or whether it is small or larger), then increasingly there is a tide towards this way of doing business. That is why we see the growth numbers that we see, even though there is a consolidation with some of the bigger players setting up large call centres. Those days are gone - the high growth days - but there is still a growth in terms of new applications. I can evidence that by the number of enquiries we get as a professional body from service sector companies which you probably would not categorise as call centres per se. The types of enquiries are: we are operating more by phone; we want to do it in a more systematic fashion; we want to learn from some of the big contact centre operators, but we are not call centres. There is a huge rise in that, and you just have to think of the numbers of things you do: GP surgeries; local offices of one sort or another; small businesses in the service sector which are now using this as a way of doing business. It is an expanding operation and it is becoming very differentiated. You cannot categorise it by calling it a "call and contact centre"; there are very many different types. Q266 Chairman: Do you think that the kind of skills which are required are the kind that will facilitate the concept of a knowledge-driven economy? One of the attractions, and certainly from your voice you are a Scot like myself, is that we have seen significant employment creation in some of the more disadvantaged areas of the UK, not just Scotland. It has been a pathway to employment for a lot of people. Do you think that enough is demanded of the staff in terms of the skills or training provided so that this is really enabling our labour force, who quite often do not stay in the call centres all that long, to move up the skill chain in a way that will help UK plc get to more ambitious levels of IT working? Ms Forsyth: I think the term "moving up the value chain of skills" is very, very appropriate within the call and contact centre setting. There are a few reasons for that: probably in excess of 90 per cent of all our transactions are still delivered by voice, despite our desire and need to become multi-media. The voice system is the predominate thing we deal with. Many organisations are now taking advantage of improved technology, and we are beginning to get over the hurdles of the kind of crude, automated messages that we had over the last few years, and we still have to some degree. Nevertheless, some of those applications are becoming much more successful. Automation is happening, and self-service and automation will mean that some of the routine roles done by call centre operators today will be done by technology in the future - that is absolutely certain. What that means is, when you do present to somebody to speak to we are inclined to want more from them because we will have done an element of self-serve on our own. It is a bit like the analogy with GP surgeries, when you do your self-serve, and when you present, you may be a bit of a pain because you are probably more informed than they are. The call centres are finding that more and more. They have a more informed customer base. That does determine that greater skills are required. The second reason for it is that organisations are putting much more volume and complexity through the contact centres. They are changing them from being a remote channel dealing with one thing, to being the hub of their organisation dealing with customers in general. If you think of financial services transactions where you have the kind of magic that they give you your credit card balance and your overdraft and somehow give you lots of money at the end of the month by mixing it altogether, and you explain that over the phone as operators often do, it is far, far different from, "Can you send me a brochure about X, and can I ask about my balance?" It is a lot more complex than that. Automation and the complexity of what companies are putting through the call centres will inevitably mean there are greater skills required. Q267 Chairman: I got a letter yesterday from British Airways telling me they were closing call centres in Glasgow and London and they gave the reason for it as not outsourcing but the fact that they had provided incentives for people to go online and sidestep the human connection; that this had been very successful; there had been quite a dramatic drop in the number of calls received by the call centres; and, in fact, the business had been replaced by online facilities that did not require this number of people. Do you see that as one of the roads we are likely to travel? Ms Forsyth: The travel industry has two reasons: one they have made it very easy for me to do bookings online; I personally would do flight bookings online for a variety of operators, and many people do. It is horses for courses. If the companies make it very appealing and easy for you to do your business online then clearly that will be the case. There is also the added thing with the difficulties in the travel market and the need to reduce costs, and it is much more imperative for them to do that. They will still, however, need to have customer service because travel is not an easy thing to do. There are lots of complications; lots of things can go wrong; there are lots of concerns about travel, and you cannot necessarily deal with that on the internet. The booking side of it is absolutely valid. The more that you do the more they want to know so, therefore, it does not always follow that by automating something you will reduce the voice requirement; in fact the evidence to date has been that the more we use other channels the more we raise questions about how to use the channels and other confirmations by voice. That may be a transitional thing, but I think we will see an increase in automation, absolutely, and I would say that travel booking is certainly one of those areas. Q268 Linda Perham: The DTI suggested that the UK is the second most popular destination, after the US, for foreign direct investment. Is it your experience that the UK is a primary destination for non-UK businesses? You said you had enquiries with people wanting to set up call centres; but do they come from abroad to the extent that the DTI is saying we are the second most popular destination after the US? Ms Forsyth: In the UK we have probably about 40 per cent of call centre activity that happens in Europe in general. You can see that the UK is highly successful when compared with other locations. There were a lot of US operators located in different parts of the UK in increasing numbers over the last five to seven years. There have not been so many in the last year for a lot of different reasons: one, we are reaching a consolidation area with large companies who want to grow contact centres, and generally have done so by now; so it is not so many of the big ones. You can cite examples like IBM, MBNA, Morgan Stanley, to name but a few, who have big call centres presences. The UK has been successful in delivering customer service in that area. The future for that, there are some projects still coming in, but I think the trend now is for the applications that are here in the UK to grow because we are demanding more as customers, rather than more inward investment into call centres. Q269 Linda Perham: Who would you see as our main competitors in getting that business? Ms Forsyth: There is an emerging market around the world. We hear a lot about India because it is high English-speaking; and we hear about South Africa as well. One of the things that probably needs to be reiterated is the perspective of the numbers we are talking about. We have in excess of 700,000 people working in call and contact centres in the UK in all sorts of different roles and responsibilities. In India, which we read about in the headlines, there are in total around 40,000 call centre jobs predominately serving the US market and not the UK market. UK customer service call centre jobs in India are not even up to 10,000. That is not to say it will not increase but it is important to get a perspective on it, largely outbound, so you get an increase in the number of calls you probably receive yourself. I would say India is in the headlines just now. The marketplaces which are developing are India itself, but clearly there is not such good English-speaking capability, or local English-speaking capability. Eastern Europe is an interesting one because we assume the English-speaking capability is not so high but, in fact, some of the reports that have been cited recently suggest there are better English-speaking capabilities there than we would imagine. India seems to be the headline, but India itself is concerned about the competition from China and from the rest of the world. I would way that customer service is increasingly a global proposition, and the competition is Europe, probably Eastern Europe, but you cannot underestimate the strength of experience and skills that reside within the UK to do this. One of the things we do not hear about often enough is the possibility of the UK itself serving a wider market in customer service. To do that it has to have more language skills, greater awareness of technology and greater awareness of customer needs in other countries. Q270 Linda Perham: More language skills with the UK learning to speak foreign languages, which they do not really do much now? Ms Forsyth: Yes. Q271 Linda Perham: I think you said earlier that there were not so many enquiries this last year. Do you think there is evidence - although you have given what the benefits are of investing in the UK area - that other countries are going direct to what might be seen as lower cost areas at the moment? Ms Forsyth: People are looking wider in the marketplace because there is more availability. I do think there are quite a lot of drivers happening; and one of them is that call centres are not different things from companies, they are part of a department within a company that deals with its customer service, its sales and service, and other things. They do tend to reflect the economy in general. I do not think we could go on expecting that call centres could grow exponentially when other organisations are not. They have grown in a different curve from the rest of business over the last few years, and that is without any doubt at all, but I do not think that can continue. It is very much in a consolidation mode. With regard to enquiries coming in, the big organisations by now will have call centres located in various places, and the agenda now is all about change and review of what is happening, where best to either move or change, how much to automate and how much to outsource. I think customer service is the differentiator between businesses now: it is less product and more customer service and access to organisations. In the realisation of that, many organisations are looking critically at how they deliver a customer service. If there was one benefit from this rather sensational stuff, one of the benefits is that it is forcing more senior people within organisations to assess the value of their contact centre in terms of what it delivers to customers. Q272 Sir Robert Smith: In your memorandum you actually suggest that at the same time there is evidence some other organisations have tried the offshore route but failed to realise the benefits. Do you actually have any concrete examples to give us? Ms Forsyth: No, I do not have any concrete examples. I can give you anecdotal evidence. Certainly several of our members have had projects running that have not worked, and I think it demonstrates two things: one is that there is this tendency at the moment, because of so much debate around offshore, that we hear the phrase "offshore is the answer, but we're not really sure what the question is". There is a very, very big risk in businesses today that they take their eye off the customer service ball, which is hugely important, and they move on to thinking about offshore before understanding why they would wish to offshore. There is a lot of that. Phrases like "lemmings off a cliff" and "chasing low cost" are common just now. There are organisations which have gone, decided it is not for them and have come back. At the same time there are many organisations just now which are assessing the opportunities offshore in terms of lower cost and extended capability. Q273 Sir Robert Smith: In making that assessment what do you think the main advantages are, versus the disadvantages? Is there a simple answer? Ms Forsyth: There is not a simple answer; this is a very, very complex topic. If you look at the organisations which are there they are, by and large, insurance companies who are facing market downturn and they have a real need to reach out to more customers. There is an obvious link to having more cost sales opportunities, and they also want to globalise. You could then contrast that with some of the power companies, for example, who are based here who may have it suggested to them, "You could save a lot of money and go offshore"; and when they have done the analysis what they realise is a large part of their offering is about local community, culture, and being able to converse appropriately with people who are culturally attuned to those who are enquiring. There are very, very different reasons for why organisations would do it. I think the early heady headlines that everybody in call centres will be offshore are, frankly, unrealistic. Q274 Mr Evans: Are we exporting all centre jobs? Ms Forsyth: Yes. You will see an increase of call centre jobs in offshore locations; and in some cases that might be extended capability. If you take an example of an organisation here which may wish to sell more and cannot afford to spend more on customer service but could take advantage of that by having five or ten percent of its activity some place else, the net effect would be better for the organisation based here because they are selling more, so there would be a benefit there. Q275 Mr Evans: It is like a split then, is it not? Ms Forsyth: Yes. Q276 Mr Evans: I am forever opening my newspaper and reading call centres closing in Glasgow, Swansea or somewhere and the jobs shipping out to India, in the main, because they have got English language skills. Are we getting that wrong? Ms Forsyth: I think there has been an overstatement of call centre jobs. What has been transporting overseas and what is very easy for overseas is the back office processing jobs which often get described as "call centre" jobs in the press. That is not to say there are no call centres - Lloyds TSB, HSBC and Aviva, to name but a few, but they are the main ones, and they account for probably a few thousand between them. Arguably some of those jobs would not have been in this country because they are new set-up jobs to deal with the global marketplace. If you look at back office processing and if you look at data jobs in general, it is much, much less of an issue to cite them anywhere. As we become more inclined to do our business in this way then we have to accept that it is far easier for any organisation to consider the cost savings and cite those jobs where there is cheap labour, and where the customer really does not know that it is being done some place else. That has been happening for years, and I think that is now accelerating. Q277 Mr Evans: With people either being contacted by a call centre or, indeed, them phoning in and ending up somewhere just talking to somebody, you are quite right, they do not know where they are. Are you aware that people in all centres are being told not to answer the question, "Excuse me, where are you based?" Ms Forsyth: I think there has been an issue, and I know that some of the unions have asked for it to be put into the condition if asked, and it is almost a human rights thing because people feel pressurised; it is not just about where they are, it is also about if they have been asked to use a different name to disguise where they are. Again, I think that has been largely disguised, but I know from personal experience having asked when I was calling that you do not always get told. Q278 Mr Evans: It would be your view that if somebody asks the question, "Where are you?" you think they should say, "I'm in Bangalore"? Ms Forsyth: If an organisation takes a decision to move its customer service to a location it ought to have reasons for why it is doing that available for its customers, employees and shareholders. If it is embarrassed about it then, frankly, it should not be doing it. Q279 Mr Evans: There was a lot of publicity at one stage about the organisations that were offshoring, particularly the 118; that some of the people there did not have the skill; their knowledge of English was very poor; they had never heard of Woolworth; and did not know what Piccadilly was. Do you think that has done a lot of damage to call centres being offshored? Ms Forsyth: The 118 experience and deregulation of 192 has not been positive from everybody's point of view. As a serial user of 192 I can say that it has not been positive. There are lots of 118s everywhere; they are in Wales, Scotland and Ireland; but certainly that experience highlighted the problems, because when you want a phone number you do not have a lot of patience and usually do not have a lot of time. Whilst it might be routine to the organisation providing, it is probably critical to the person asking. Yes, that was a negative. The other slight negative is that predominantly the activity that happens offshore is outbound sales calling which people do not like anyway and, therefore, that is perhaps not giving a fair reflection of the capability of offshore. Q280 Mr Evans: I was surprised about the figure of three-quarters of a million people involved in contact call centres. That is a huge number. Of the jobs that are disappearing abroad, are they being replaced? Is the number on the increase or is it stabilising? Ms Forsyth: Hardly any call centre jobs have gone from the UK. I think it is very, very important to state that. There are hardly any call centre jobs. You are talking of very, very low numbers; and some of those numbers are in fact designed that over the next two years you will see this happening but it is not actually at the moment. I think the welcome thing about the debates, and the press reporting of it, is that it is making organisations think very critically about the customer service. The negative side of it is, if you read the papers, as an organisation you may be tempted to go and look at cost savings because you think everybody else is doing it, and you may well end up with an agenda which you might not have thought of. It is double-edge on that one. I would make the point I think it is a big wake-up call. I think the capability offshore has been demonstrated, despite some teething problems, as improving. There certainly have been lots of very, very skilled labour, and very, very good work attitude. Cultural issues, given a period of time, may well be overcome. I do not think we should say it is not going to happen; all I am saying is that we should understand where we are at the moment so we can measure what happens. I do think we need to focus extensively on professionalisation of contact centre, which is what CC's agenda is. Q281 Mr Clapham: The figure you gave was impressive and it does put it into perspective that we have three-quarters of a million people involved in call centre work, as compared with 40,000 in India. Given that fact, that we are a second behind the US for investment in call centres, what would be the comparative advantage for a non-UK business to invest in the UK in call centres, rather than to look at low cost economies? Ms Forsyth: Depending on the sort of organisation they are, if customer service is a big issue and a driver, then we will give a lot of experience in setting up and managing customer service departments and contact centres here in the UK, which they will not get in emerging markets. Again, a rider in that: in a few years' time they will get emerging markets because that experience may well be there. At the moment the UK has that competitive advantage. Q282 Mr Clapham: Given what you were saying about some of the evidence you have as to where investment is being made, is there any indication that companies are beginning to bypass the UK and go to invest in some of the low cost economies? Ms Forsyth: Yes. There was a programme broadcast in Scotland which highlighted a couple of sales outfits which had looked at Ireland and the UK and had chosen India because of its low cost activity. The question is, given their activity was largely outbound sales activity, then they may well not have had such a scale of activity here, but in India they would be able to afford a higher scale. I think you will get examples; I am not party to them solely by chance. There are organisations which may well have considered them and might just bypass that and go straight offshore and help to educate that market in their needs. Yes, I think that is happening. Q283 Richard Burden: The statistics you have given about the actual numbers of call centres that have gone to India and elsewhere are interesting, and it is important to get that on the record. You did mention that you thought there may be more of an issue there in terms of backroom processing work. Do you think there is also an issue around the business-to-business customer contact centres, as opposed to business-to-Joe-Public contact centres? Do you feel that there is more of an issue there in terms of offshoring of work? Ms Forsyth: No, I do not think so. I do not think there is a particular issue. Just to reiterate around India, India is the one that hits the headlines but there are lots of emerging markets and it is very important to get that in perspective. You have South Africa; you have China; you have Jamaica; you have Mauritius; you have Eastern Europe; and India is the first one getting all the attention. If there is one thing I would like to say it is, in terms of communication, we probably need to communicate that there are emerging markets elsewhere other than just India. India has still got a lot of growth and the figures are changing daily. The figure you get today, by next week with one announcement of a couple of thousand jobs, could change those numbers. In terms of the call centre, the big sales market is the one, if you were looking for low cost, where you would look at the emerging market, if you were looking to get a big consumer marketplace. Business-to-business is a very mature market and very demanding of high customer service, and certainly one where the UK has a good record. Q284 Richard Burden: You mentioned in terms of safeguarding Britain's competitive edge two things: one is the issue of language skills - and perhaps there needs to be more attention there; and, secondly, looking for constant improvement on the question of customer service and performance. Is there anything particular you think the government should be doing that it is not doing in those two areas, or indeed in any other, that might be able to convince more companies to retain their operations here in the UK? Ms Forsyth: It is always dangerous to ask for a wish list! The first thing is about information, good information available about the success of contact centres in the UK and the difference they make to the economy and the difference they make to people's lives. Communication of positive messages is very important. I think the language skills are very important; and also cultural awareness of how customers behave in other countries is an important thing as well. The joined-up government issue is one I feel quite strongly about; that some of the initiatives from DfES, DWP, and DTI around this agenda need to be coordinated. There are signs those are happening, but they need to come together a bit more. Q285 Richard Burden: What sort of things? Ms Forsyth: Around skills, for example, would be an interesting one to look at. There is a conception that these jobs are low skill and that training does not happen. In fact, if you go and look at some of the large operators what you will find is that all do a lot of training and a lot of skills enhancement, but they do it in a bespoke way which suits their own organisation rather than in a collective way - you would expect that from an organisation's own area of interest; but from the employee's point of view, if they want to progress their career what they are looking for is a passport and something that is transferable, and a demonstration or evidence of the skills they have gathered and the training they have done. The professisonalisation agenda at an individual level is one that government is active in, but perhaps we need to accelerate that. To give you an example, we have an initiative when we work with Nottingham Trent University who will assess inhouse training and award real university points at manager level at contact centres towards postgraduates and diplomas. They will then take that a step further and will use the same rigour to assess the training at agent and adviser level in order that points can be given at that level - not real university points but industry points towards what they call a CC qualification. That is a very new thing over the last few months, but it has got a lot of interest from some of the big companies. In a few years' time it will be normal for those who wish to develop a professional career in customer service, in a contact centre setting, to be able to talk about the qualifications that they have. That is the aspiration we should have. It goes back to my earlier comments, if you ask, "Why hasn't this happened earlier?" the industry is still relatively young; it is maturing very, very quickly, and the offshore debate is making us look at these issues more seriously. In any event, it does need to professionalise because companies need good customer service. I think the skills are there. There are four things, I would say: communication of the right messages; language skills and improving on that; joined up delivery, and the skills agenda. Q286 Richard Burden: In terms of encouragement, you have been clear on some of the ideas there. In terms of retaining the market here in the UK for call centres, as opposed to winning markets abroad, do you feel there is also a question of data protection? In other words, do you feel there is sufficient monitoring? Is there anything the government should be doing to ensure that data protection requirements which operate in this country are actually respected if call centre work moves abroad, because the legislative requirements of companies it would still be the same? Ms Forsyth: It is the company which is responsible for the data regardless of where it is. This is an interesting topic, because there was some news coverage at the weekend of the Alliance & Leicester. They were reporting their profits and success and were saying they were going to keep all their customer service and contact centre activity here in the UK. One of the reasons they cited was about data protection concerns; they did not want to make their customers fearful of any data issues. In making their choice that was one of the factors. That was then refuted by HSBC, I think, saying that offshore has not been an issue. If government has a role to play it would be about clarity of information and data protection. If there is a need to make sure that people understand the actual implications of data protection legislation then that information is made available freely. In the same vein, around data protection, the other issue that sometimes gets a little confused is the area around VAT on outsourcing, and it affects outsourcers in this country. These two things are in some ways related because of legislation and clear communication, so that anybody who picks it up (be it public or an organisation) understands how they would be impacted by any change in where their organisation chooses to serve their customer. Q287 Judy Mallaber: A couple of weeks ago I visited a call centre in India and it was noticeable that they were able to pay rates of pay that were very good in comparison with professional jobs there, but still left a big gap in this country. They provided accommodation, medical facilities, a gym, a sports facility, and they seemed to do a lot of training and know about local things happening in this country and were doing it for Norwich Union, and the technical back-up for one particular computer firm. Were we getting an atypical example of one that was top notch with good conditions and good training? Would that be typical of what is happening in India? Ms Forsyth: All the feedback that we have had from India, from lots of people who have been there, and there have been lots of visits - there has probably been more trade done in trips there than anything else - is that the Indian government has had a lot to do with assisting in the infrastructure, and making sure that employment conditions are right to impress investors. Probably what you have seen in Norwich Union is not atypical for some of the big operators but, bearing in mind, that is one which has been set up by Norwich Union. We have also got a lot of operators which are Indian investment outsourcing opportunities where they are trying to attract inwards investments to an Indian organisation based there. I am not sure of the relative conditions. Certainly the ones I have heard about - Norwich Union and others that are there - those things are what I find also. Q288 Judy Mallaber: Moving on to that second aspect you are talking about. Government has suggested that losing the low tech customer contact centres from this country is inevitable; indeed one of our Party has just lost two call centres from her Cardiff constituency. Do you think it is inevitable that not only can they set up at the high tech end but we are almost definitely going to lose low tech call centres? Ms Forsyth: I think low tech is going to be affected by a combination of automation and offshore, and companies will have choices as to which route they want to go. I think for years people have been saying that the internet will basically be aimed at call centres - that has been said for five or six years - and we have not yet seen that. I do think some of the low tech will go offshore, yes. The trend is away from that in contact centres anyway. The trend is to do more complex things in contact centres. Q289 Judy Mallaber: Somewhere like Cardiff, where the call centre jobs are often replacing jobs in traditional industries, do you think there is more that could be done in those areas by the government to counter that negative impact where we lose those jobs? Ms Forsyth: This is an interesting debating point, because the government view is very much that they do not wish to be protectionist; and the view from industry is they do not wish the government to be protectionist in jobs, and that is across all the different sectors. The call centre sector has a peculiarity which is different from other sectors, and that is, as I explained earlier, very, very high growth that happens over a very short space of time to take us up to higher levels of employment. If you look at where the highest levels of employment occurred it typically was in Cardiff, Newcastle, Glasgow, Leeds and other areas where we had suffered from loss of traditional employment. The question is, whilst protectionist is not a good aim, and the government does not want to have that, there needs to be a clear understanding at the R&D level, and an understanding of, "What if this was to happen, what would be the implication and what could we do to fill jobs that would be lost in communities that, frankly, could not quickly replace those volumes of jobs?" We have not seen evidence yet of anything large scale. The numbers are changing but it is still a very, very low level, but I think there will be a case in point when - in one of the areas which has benefited enormously over the last few years, and has reached a high employment level due to several large call centres - because of the very fast growth, an equally fast demise of one of them could be quite catastrophic for the local area, particularly because the employees may not have the ability to move and to do other things to get employment elsewhere. There are some peculiarities about the very rapid rise of call centres and, indeed, areas in which they are located. Q290 Judy Mallaber: Finally, do you think India - which is obviously one of the countries that is taking a lead in this - should be wary they are likely to get undercut by lower cost countries elsewhere which might then make us in this country be more wary about conditions that there would be in outsourced call centres? Ms Forsyth: Certainly the Indian businesses I have spoken to are very aware of their positioning within an even wider global situation. China is the big fear for India because it is probably going to be cheaper and there will be more people in a service economy. It is a desperately complex issue, but the hardest thing to export is voice communication - customer service communication - because of all the cultural issues that go with it. There are endless very, very funny stories about some of the exchanges that have happened with incredibly clever, highly intelligent PhD people at one end of the phone and colloquial calls in the UK and some of the nuances and funny things which happen as a result of that call, and that is always going to be the case. I think the customer service in contact centres and applications are still going on in the UK. Some of the more mature operators who have large contact centre operations are looking at change. They are looking at whether they should outsource in this country or look at other savings. It is a time for decision making and change. I really do not believe we will see a situation where all our contact centre activity disappears because, frankly, it would be inconceivable that we no longer speak to anybody in our local culture about what we are doing locally. Q291 Richard Burden: Taking you back to the issue of skills again, you talked about there being a role for government in trying to develop a passport-based approach to skill in this area. A number of other witnesses have stressed there is a particular skill shortage in the UK around intermediate level skills. Can I push you a bit further to say what you think government should be doing, and also the role of organisations like yourselves and other professional bodies? Ms Forsyth: First of all I think the message is very strong that a career in contact centres is a viable career and the DWP are doing that at the moment. Material is going to be launched shortly which we have had an input into, and that is positive because that will then start off with people asking the questions. Government intervention in skills in the past has not been terribly positive. The field of NTUs(?), for example, was a marker point where we saw a failure there. Once you replace them with the new Sector Skills Councils it looks more hopeful. With the Sector Skills Councils in this area we have worked extensively to make sure that it is a free market which training providers can build on. If Government were to do anything it would perhaps be to encourage the Learning and Skills Councils and the Regional Development Agencies to collectively support professional qualifications rather than trying to do it individually, versus each other, which is a problem at the moment, so it would be about a collective approach. Coming back to the roots, it is accepting first of all that there is a qualification and there is a career and promoting that and supporting that through the existence of the councils when they are set up, and supporting the work that we do. We are an independent body and very proud of that. We exist through member subscriptions researching our services and we are not-for-profit. There are only a few professionals in the sector. We enjoy support through DTI and moral support through attendances at our meetings and everything else, but again, there are times when I feel that the Government should be a strong voice in talking about the benefits of good, strong customer service delivery through UK call centres and what that means to our economy. That is beginning to happen, so that is positive. Q292 Richard Burden: You do have good practice in customer service centre businesses, so they do train to upskill, but are you finding that there is a retention problem within the industry? Ms Forsyth: There is always an issue of retention in contact centres because it is a fast-moving job and some of the roles are around fluctuations in demand, so you do get some seasonal things. You get students who wish to come in. You just have to accept that there is a portion of the market, people who are serious about developing qualifications and professionalism and want to progress, but there is always going to be an element of sessional work - and we value sessional work - which fills customer demand and customer need. It is about segregating that out and understanding it. The attrition side of it has been an issue, and again some of that is related to the very high growth of call centres themselves and perhaps not enough attention paid to good recruitment practices because they are desperately trying to meet current customer demand. Again, I think that is changing and consolidation will bring that about. We are now in full employment at least and a few years ago we had unemployment and it was easier to recruit. It is now more difficult. All these issues are making it difficult to recruit the right sorts of people to work in the centres. Chairman: Thanks very much, Ms Forsyth. Your voice held up. If there is anything else we need we will get in touch. Thank you for the time and trouble you have taken today. Memorandum submitted by The Work Foundation Examination of Witnesses Witnesses: Mr Max Nathan, Senior Researcher, and Ms Gwendolyn Carpenter, Researcher/Project Manager, The Work Foundation, examined. Q293 Chairman: Good morning, Ms Carpenter and Mr Nathan. Thanks very much for the summary of your report. It was very helpful. We are returning to this subject. We started off in 1998 with the White Paper Building the Knowledge Driven Economy, and at that time the Government aim was to close the performance gap with our competitors in terms of productivity. Their view at that time was that this could not be left to the market alone. Do you think that errors have been made in the development of policies which you might say are supportive of increasing productivity within the knowledge driven economy? It was an area of unploughed fields and new territory and what-have-you. Have we got it right or are there things we should have done? Mr Nathan: Before we start to discuss how well the strategy has been thought out we need to think about what the knowledge driven economy means. One of the things that I was always unclear about in the White paper was what was being referred to. As far as we can see there are two distinct definitions of the knowledge based economy. On the one hand we have changes in a small set of sectors and occupations - financial and business services, creative industries, science and high-tech industry and the groups of people who work in those highly skilled professions. On the other hand we have a much larger and more long term set of changes going on across the UK as a whole and those are to do with changes in work organisations, changes in the style of work, new management techniques, the spread particularly of new technology and, putting that all together, we have a longer term shift away from a manufacturing based economy towards a service based economy. If we want to think about what the strategies are to take the UK towards a knowledge driven economy we need to be clear about which of those is the key area of focus for policy. One of the things that the White Paper was not as clear about as it could have been was which one of those is of most interest to government and which one of those would be the focus for policy. If you look in the paper you can find references to both but there seems to be a presumption that a lot of the action is going to be the narrow definition for a fairly small set of sectors and a very small set of occupations. In fact, what we have seen is that there are much broader changes going on across the economic structure of the UK as a whole. All the evidence you have heard about what has been going on in the call centre sector and the spread of the call centre model out of banking and financial services across industry bears that out. Q294 Chairman: Do you think that we have got to take new tacks to avoid this happening again? If there is one thing about the knowledge driven economy it is that we change gear a lot more frequently than we probably change gear in our motor cars; things are moving on. Do you think that we are on top of the pace of change? Mr Nathan: I am not sure that policy can ever be fully on top of changes this deep. Q295 Chairman: Is the catching-up process fast enough or do you think that it is getting ever further away? Mr Nathan: I do not think it is getting ever further away. I do not think we are moving as fast as we would like, certainly in terms of the adoption and adaptation of new technology which the research that we did focused on. If you look at how these changes take place in general, a lot of the popular discussion assumes that technology has arrived and is having an instant impact across the whole of the economy. There is a lot of thinking that these things have arrived out of nowhere, and suddenly everything changes and everyone becomes much more productive or a whole load of jobs disappear and a whole load of new ones arrive. Of course, it never happens like that. What you have is a gradual process - adoption and adaptation with people learning how to use new gadgets like mobile phones and, at the organisational level, organisations taking on hardware and software construction and so on. What we have found in the UK is that because UK firms have invested less and later in technology than have firms in the US, for example, the process of adaptation and grappling with new technology is still going on here and firms are at an earlier stage than their transatlantic counterparts. If you look at some of the products to do with data, there is not all that much in the UK but some work that Nick Alton did for the Bank of England and that London Economics did for Sisco, both of which came out in 2002, suggested that technology in particular, which is the underpinning of whichever knowledge based economy you want to talk about, had had a big impact on UK labour productivity. It had contributed around 25 per cent of UK productivity over the early nineties but that had been dropping off in the latter part of the decade. The rate of growth and the size of contribution to the UK level of productivity has been falling away and that suggests that that process of grappling with technology and making best use of it inside organisations is not proceeding as fast as we would like if we are concerned with keeping up with competitors in other countries. Ms Carpenter: Equally, if you take into account our research, which took a view of what was happening with a qualitative approach (we took a snapshot of the shop floor across all levels of seniority in eight different firms in the UK ranging from very small to large, from highly networked to governmental departments), our findings were not that different from the findings that you would have found 50 years ago, which is what we term the low-tech equilibrium: people are unskilled, the IT department talk a different language and quite literally the firms and the individuals that we directly observed did not seem to be getting on with their technologies as well and as efficiently as required in a context where you talk about high performance and high productivity. What we did not do was study in detail the governmental programmes running to address this, but what we bring to you is a finding that this has not changed but sits alongside other tendencies of scepticism, which at the moment is coming through at a time when potentially productivity links with investment in technology, the conclusion being that this is the time to talk about what organisational trends alongside of the actual implementation and adaptation will lead to higher productivity and higher performance. Q296 Judy Mallaber: Can you perhaps expand on why you think we have fallen behind, because certainly the White Paper suggests that ICT offers huge potential for an increase in productivity, but your report on what you have just said suggests that in fact investment in this country has failed to deliver, is not seeing an overall growth rate? You have described that situation. Can you speculate on why you think that is happening? Mr Nathan: Sure. There are numbers of external factors. We would say that much of the explanation lies in organisations and this is why we wanted to do our research inside organisations to find out what people were doing with technology in their day-to-day jobs, but also what managers were doing and thinking in the way that ICT was being deployed and designed. In essence, as you say, ICT has enormous potential and has become pervasive, so there is a lot of it about. Some of the headline figures we looked at which we pulled out of some big ESRC research were that some 75 per cent of UK employees now use a computer or other ICT at work and nine out of ten jobs involve IT skills and so on. If you look at the way that technology is deployed inside organisations, a number of key operations - customer relations management, performance management, stock take, information systems - are underpinned by technology, so it is very much there across the economy. The problem is that all of this stuff is not understood or deployed as well as it could be inside organisations. This is the critical point. When we talk about low-tech equilibrium, what we are describing is a sort of second-best outcome where we have managers who do not understand and take an active interest in technology and how it can be used in organisation strategy. They tend to hand over decisions to IT people or technologists who do not have as good a grasp of how the organisation works as a whole. IT departments tend to be separated in a number of ways from the management mainstream. The solutions that are then designed and implemented often do not fit as well as we might want with the needs of the organisation and the work that people actually do. As people become disenchanted with what is described as the solution that is delivered on the ground, that feeds a lack of interest at managerial level, and so there is a cycle of poor implementation, poor return on investment and a disenchantment and scepticism inside the organisation about what technology can do and that is something which a lot of the organisations which we looked at seem to have settled into. They were using a great deal of ICT and if you took it away there would be a lot of very painful adjustment as people went back to paper and the abacus and all the rest of it. On the other hand, people were not getting as much out of the technology they had invested in as they had expected to and as would have liked to. If you zoom up away from the organisation and look at the macro economy, if you think of that happening in thousands of sites across the UK you have a very good understanding of why productivity has not shifted upwards in a way that people imagined it would back in 1998. Q297 Judy Mallaber: Is this a UK problem? If other countries are doing better, how come, and what can businesses and Government do to help improve the way in which we exploit ICT in a way which is competitive? Mr Nathan: Quite a lot of the productivity research has been focused on the US and there is not all that much data on how other countries are doing. There was a study that we looked at by some OECD economies which looked at OECD countries and concluded that there were some countries in the OECD group in Europe who were doing relatively well and some who were doing less well, but broadly speaking the States were established long before most of the European countries compared in the OECD study. A number of reasons have been advanced for that. The kind of adjustment process that we have been talking about is further advanced in US firms because they invested an enormous amount of money in ICT earlier than firms elsewhere tended to do, so that kind of learning and struggling has further to go here and in other European countries than it does in the States. There are also network effects to take into account. If you do not have enough people using the technology you will not always get the full benefit out of it. If I buy a mobile phone it is much less good to me than if Gwendolyn also buys a mobile phone and if the rest of the committee buys a mobile phone we can all ring each other and get all the benefits of having a mobile phone. Those network effects do not seem to have an effect in the UK. This is one of the reasons put forward to explain the UK's low productivity. There simply are not enough businesses using some of these systems to enjoy the full benefits of them. The strong pound has made it harder for the manufacturing sector to invest recently and I think that needs to be put into the pot as well. Some commentators have posited that more flexible labour markets and more flexible hiring and firing policies in the States have enabled organisations to adjust more quickly, and that is something which should also be considered, although there is no conclusive evidence one way or the other. One could almost say that it is great if organisations are inflexible because they can re-engineer themselves quickly. On the other hand you can say the extra costs of doing that are enormous, the extra costs of retraining and so on. There are numbers of external factors which are important, some of which are affecting other European countries as well, and a lot of it has got to do with when countries started off and how organisations are doing this. Q298 Judy Mallaber: Is it just a question of time or are there actions that Government or employers or business can take now to speed up the process of learning about it and using it effectively? Mr Nathan: I hope it will not be just a question of time. We identified a number of areas where we thought that the technology industry and the Government could all contribute and they are set out in the report. The two areas where we think Government policy can have an effect are on the supply side looking at workforce developments and training and on the demand side looking at business support systems and promoting smarter use of technology by employers. In both of those areas there are policies in place and there are a large number of changes to workforce development and learning and training pilots. There are also union learning pilots and so on. We also have a small business service in the office of the e-Envoy and so on, so a lot of these needs have been identified, but I think there is an issue in the implementation in that most of the firms we looked at were unaware of these policies or these sources of support and were not making very good use of them because their reach and their profile were not all that they could be. Also, if we as policy makers and commentators are concerned to get the most out of technology quickly, there is something to be said for putting in more resource and better co-ordinating these areas of policy so that we get results more quickly and we do not just have to rely on the natural progress of time in order to see the benefits. Q299 Judy Mallaber: Can you say a couple of things which could be done by the Government or generally that would start to crack it and are there mechanisms that you could highlight that could help immediately? Mr Nathan: One of the ideas we float in the paper is for what we call technology driving licences to become mandatory for school leavers. One of the things that some of the experts we talked to said to us was that each cohort of school leavers has more skills and confidence in IT. On the other hand, there are still large numbers of people who leave school and go out into the workforce without any qualifications, and there are also millions of people in the workforce who do not have that skill and confidence in ICT. We think that a technology driving licence should be mandatory for school leavers and should also be rolled out gradually to cover the whole workforce. What we argue is that it should cover the ability to operate generic software and systems that people are likely to encounter in work, but also give people some understanding of how hardware works and works well. One of the IT directors we talked to said it was extraordinary that we sent people out into the workforce without any training on these pieces of machinery in a way that we would never have sent people out to work in factories without giving them an understanding of the machinery that they were using and some training with it. What we find when it comes to IT is that a lot of employers are perfectly happy to let people learn by osmosis. There is a certain amount of formal training that goes on but that people are at least as likely to do informal learning on the job, so we think the Government needs to step in here and give people the basic minimum level of skills and confidence about using technology and employers can then provide bespoke training as they need to. There needs to be a specific technology spin to a lot of the workforce development and rhetoric coming out of the Department for Trade and Industry. Q300 Mr Clapham: Given what you have said, Mr Nathan, about the technology that is out there but yet we are just failing to ensure that it reaches the potential that it ought to reach and could reach, how can we encourage employers to take on the full potential of it? Is it possible, for example, to list quite simply what the benefits would be for the employer, the business, the employees and the economy? Would such a listing of those benefits be helpful, do you feel, in encouraging employers to come forward? Mr Nathan: I think it would be. One of the things that struck us very strongly with the employers that we were talking to was that they responded to the key lesson and to numbers and the headline figures on those. A lot of this information is out there; there is a lot of academic study and a lot of other study on how technology is used by organisations and how organisations achieve the performance benefits that they are looking for. It is not difficult to set out some of those lessons and set out some indication of the extent of the gain that we get. The problem is that all of these findings have been around for a while and the really tricky thing is implementation. It is less taking the technology on than what you do with it that makes the difference. This is what the literature shows. If we were going to provide a prompt card for employers saying, "This is what you can get out of this stuff", it would need to cover a whole load of points on the other side saying, "But only if you do this, this and this, and it will take longer than you might think from talking to some of the technology industry sales people that you have talked to". On the one hand there are these benefits that there is now good evidence we can realise, but on the other hand it will take some time for employers to get there, particularly if they have got systems already in place which they need to dismantle and work around. Q301 Mr Clapham: You explained a little earlier about how information and communication technology evolves within business. Is it therefore that each business requires different kinds of skills with information technology or is it possible to be able to ensure that people, for example, coming on to the labour market have the skills which would be generally applicable? Mr Nathan: I think that you can give people a general grounding in the types of activities that technology is likely to be used in and in some of the programmes and systems that are currently being used, but new programmes and new systems are being brought out all the time and at the moment we are not, as far as I know, at a stage of radical change. Each new addition of software X and software Y is an incremental improvement on what the previous version did; there is not a completely dramatic change, so I think it would be possible to do that, yes. One of the things which struck us from the research was that we focused on the service section, on the work that generally takes place in offices or buildings that have office functions, and we looked at quite a broad spectrum of industries from very big multinationals to very small high street firms, and a lot of the same stuff was going on in each of them. There is a big area over that that if we had given them the same training they would all have been able to go away and do it a bit better than they previously could do. On the other hand, these firms also used bespoke applications. They were working in different industries with different supplier and customer networks, and so there is stuff that employers will need to do in that area to train people in the systems that they need to use. Q302 Mr Clapham: From your research is it fair to say that the information communication technology systems in the larger companies develop precisely in the same way as they would develop in a smaller company? Ms Carpenter: I am not so sure. I think that larger companies are likely to have the time and inclination to go for something bespoke in a way that smaller companies do not. Whether or not they then get a better solution depends very much on the people working inside the firm, and I can think of examples where large technology systems have been rolled out in big firms and have not been what was required, but what we need to be able to say to sellers and providers is that these are not exact views; these are questions that we want answering as it were. That is a much better place to be starting from than looking around for stuff that is ready to go and trying to fit it in somewhere. A lot of the issues that we have talked about generally impact particularly on SMEs because of these time and capacity issues, because the IT person in a small firm is likely to do a number of other things as well, so they do not always have the time or the inclination to keep themselves up to date to be able to negotiate on the basis of equality with the people they are trying to sell stuff to. On the business support side there are specific things that the Small Business Service and other DTI associated agencies need to focus on. Q303 Mr Clapham: Finally, have you looked at some of the programmes that the Education and Skills Council are operating and do you feel that the Learning and Skills Council is appropriately focusing itself on what is required in terms of the training of people to deal with information communication technology? Mr Nathan: This is not something that we looked at specifically, so I would have to get back to you on that. One of the programmes that we have looked at with the LSCs and the national LSC is the employer training pilots which look at ways of funding around training generally and those seem to have been, at the pilot stage anyway, very well received and there is no reason why they cannot be used to deliver IT training specifically. That seems to be quite a good way of doing it, but I do not know enough about what kinds of training get to be delivered through those to be able to give you a proper answer. Q304 Richard Burden: My question is pursuing much of the same area about what Government can do to move from the low-tech equilibrium to a high-tech equilibrium. Earlier on you mentioned that there maybe needs to be greater integration between different initiatives, e-envoys and various other things. What you have said since then has been more to do with in a sense whether the Government is doing the right things rather than whether they are integrated properly. What do you think we need to be doing on the integration issue? Mr Nathan: The key thing is having a single voice which is speaking across all these issues. It is not entirely clear to the employers that we have talked to that that is what is going on at the moment. If you were an employer and you go to a unit and type various words into Google and go to various bits of the DTI website you will find all the bits and pieces that you need eventually but there does not seem to be any strong sense of connection between them and there is not any obvious way in. If you go to the Office of the e-Envoy you will find more of what you want but it is not the obvious place that you would look. Cosmetically it may be a question of organising the information and making it available in a different way. Underpinning that there may also be some questions about how those agencies work together. I know there are some discussions going on with the e-Envoy at the moment about how that is going to be operating in the future, so again, we are moving in the right direction. Q305 Richard Burden: Do you think the performance of Government in the way it manages its information and promotes things like that is an example that Government is in a similar kind of governmental low-tech equilibrium to industry? Mr Nathan: Gwen should talk a little about some of the public sector organisations that we looked at. Two of the eight firms that we spent time in were in the public sector. One was a local government agency and one was a central government agency. Generally speaking the public sector has got a lot on its hands because it has these these public sector delivery targets which are coming up very quickly and it is investing from a much lower stock base than private sector firms. A lot of money is going to be spent over the next few years on IT and this is where the growth in the IT sector is going to come from - the public sector in the UK. That is going to happen very quickly. If the private sector firms are having these difficulties with implementation then there is a worse case scenario for the public sector where it all goes terribly wrong, a sort of train-track scenario. On the other hand the public sector and managers in the public sector are able to look around them and see how the private sector has done this in the past and has a lot to draw on in terms of what the implementation challenges are, so it is in a good position to do it better, to do it more smartly. On the other hand, it does not have much time to take that on board. Ms Carpenter: We went into a central government department and a local government office as part of our research. The purpose at the outset of the research was not to come out with comparative findings as such, but essentially what the research suggests is that, apart from being an institution that talks about non-delivery of targets or failed innovative case studies which are picked up by the media and is one of the major themes discussed around e-government systems, it should switch the discourse to the best practice that it employs and offers and work with industry around issues such as skills and training. If I could pick up a point that Max made earlier, the striking finding is this balance between informal and formal learning. Balance equally means that organisations in the private sector and in the public sector need to address how those two can be merged into formal strategic packages inside their organisations. This is where there is a great opening to work together for the private and public sectors to form alliances around addressing what is going on inside their firms and how this fits with where the Government is in reviewing its 2005 targets. Do we make it look good on paper or do we look at adoption and how it works? This is where, given this crucial stage in terms of 2005 coming up, the Government can push very strongly in showcasing solutions. The central government case study that we did was very strong in being very self-reflective about its programmes on innovation. It was very strong in realising that communication and information will be the issue and that bottom-up innovation needs to be addressed. That is where there is scope for publicity and for practical solutions in terms of best practice. Q306 Sir Robert Smith: Given the number of large scale disasters the Government have had in introducing ICT, why should they be in any position to provide advice to the private sector on how to handle ICT? Mr Nathan: Indeed, but that is an argument you could apply to any area of policy that the Government seeks to comment on. One of the key jobs of the DTI is to provide exactly that type of advice. It is possible to provide some of the general lessons without seeking to provide detailed solutions about what the private sector should do. Neither should the DTI seek to provide detailed feedback because organisations' needs are very different. As you say, the public sector has not had a very happy history with big ICT projects. On the other hand, you would hope - and there is some evidence of this from the research that we have done - that people in key roles are learning from that. If you look at the advice that OTC has given departments about how to purchase, for example, that is changing and is moving away from telling departments to bring in one-size solutions for ever towards bringing in things which will solve some problems for the moment, that they can see how things go and add to them, that they can move to other products and systems if they do not work out as well. That is an agency that is going to be influencing the way a whole load of Government departments use technology in the future and if that is the kind of advice that is given that is good. In thinking about the two case studies specifically, neither of the organisations was anywhere near the worse case scenario that I have outlined. There is some evidence that the central government department had a very good idea of what work was done, what the challenges were, what technology they could use to answer those challenges and was pretty good at deploying it. The same was true of the local government department. They had thought long and hard about where they could use ICT to improve service delivery. They were bringing various functions together and again they were doing it pretty well. Compared with some of the private sector organisations we looked at, those two public sector organisations came out pretty well. On the other hand, those were only two of X-hundred local authorities and Y central government departments and agencies, so further research is required. Ms Carpenter: That takes me on to another point, which is criterion success measurements. What our report shows is that technology has become social and that the area to address is the cultural change, the adaptation and measuring that adaptation with productivity in everyday working lives, so to speak. That is where the Government can take a stand in terms of addressing its IT investment. Q307 You made the point that in the short term there is not much return from IT investment. In the long term there could be great returns but only if you get all the other organisational things right, and many do not, so why do people buy ICT? Mr Nathan: Because they see that if they do this other stuff as well they will get the returns that they are promised. The finding that you played back to us is a very important one because what it suggests is that you need to come up with total investment. Technology investment is only part of that and there is a whole lot of human capital investment and organisational changes. The Brynjolson and Hitt research from the US shows that we are talking of a five to seven year time frame for the productivity to kick in. If that is the message that is put across we should have a more open and honest discourse about what technology can actually do and move away from this discourse on solutions and instantaneous change. It will also give managers a better idea of what they need to be putting in place to help them plan better. On the third hand there is no getting away from the fact that a lot of the people in managerial positions in UK industry grew up without ICT, do not know that much about it, are not particularly interested in it and are not taking ownership of key strategic decisions that they need to make. There is this presumption that technology is about geeks, server rooms and wiring and all kinds of the messy stuff that nobody really understands, but actually technology underpins everything that most firms do. Managers who do not understand how technology works do not fully understand how their firm works. They cannot get away from that because it is used across all the key processes and functions that most managers are in charge of, so pretending that technology is not their pot, that it belongs to the geeky person sitting in the corner of the room, is not an option. That is a government issue finally, but that needs to be put across as well. Ms Carpenter: Which suggests accountability and leadership issues essentially. Q308 Mr Clapham: Just coming on the back of that, if we are saying what really is required of businesses is better leadership skills in order to be able to exploit a technology, and given that the DTI is responsible for skills training in IT, if you were asked by the DTI, for example, what are the particular skills that you feel business requires, what would be your response? Mr Nathan: In a sense it is less a case of what the skills are than who has the skills. A lot of the training and learning that is going on IT-wise is directed at front line and shop floor staff. One of the points that came through from the research was that managers and decision makers higher up the organisation do not make brilliant decisions unless they also have some basic knowledge and understanding of technology. This was something that a lot of managers that we talked to were echoing back to us, either consciously or unconsciously, through the answers they were coming out with. If we are thinking about skills policy we need to be thinking about it from top to bottom in organisations rather than just deploying it in key functions of the firm. Q309 Mr Clapham: So it really is starting with management down. You referred earlier to the fact that many people in managerial positions probably have not come through any technology training, so they need to be taken through that. Would you say that the skills that the management require differ in different sectors, or is training on leadership, for example, in the context of IT going to be similar right across the sectors? Mr Nathan: There will be some clear differences between sectors because of some of the bespoke stuff that is used. If you looked at a financial services firm with a large call centre, which was one of the organisations that we looked at, that call centre had big server systems underpinning it, and that part of the firm was all about the people sitting in the call and contact centre being able to pull up all the information they needed and having these big servers running what they do. If you look at a solicitors' firm, their IT needs are totally different but there are some general principles about understanding strategy and design and implementation which are common across the piste and that is where management education needs to focus. Q310 Linda Perham: We have been told there is a shortage of intermediate ICT skills in the workforce, and indeed your report recommends that the Government should intervene to increase the supply of those skills. We have talked about what Government can do with earlier questions, but is there a form of intervention that you are proposing the Government should take to increase or improve ICT skills? Mr Nathan: The specific measure we propose is this driving licence measure that we talked about earlier. It would be possible to grade that so that you could have one that corresponded to the minimum level of skills that you want people to have in the workforce, but also you could have the equivalent of the advanced driving licence which would provide intermediate level skills. That would be one way of doing that. One of the things that we need to do - and this is why I am sitting on the fence in answering your question - is to think further about how we plug these technology issues into workforce development policy more generally. As I said before, there are a lot of measures in place which could be used to deliver some of these specific skill needs, but we need to think further and I can give you some written thoughts afterwards if you like about how those two agendas come together. Q311 Linda Perham: When you talk about the driving licence analogy, and it goes back to something that Mick Clapham asked as well, are we talking about all employees? I am thinking of my own experience where I am sure a lot of our constituents think that Members of Parliament are sitting at their computer desperately receiving their e-mails and instantly replying, and if you do not they are on to you two days later. I never actually do that because my staff do that and so my ICT skills are not as developed as they might be. Are you saying that it should be something that everybody from the chief executive downwards should have a certain level of or that there should be certain employees or certain groups of employees who would be trained to a higher level, mainly because of the job they do? Mr Nathan: There are three things. Ideally, the first thing we would like to see is everyone with the basic minimum which is higher than the average at the moment. If you are going to roll a policy like this out you need to prioritise certain groups of workers where you need to start your policy off because their needs are greater. There are also going to be some specific needs that people have based on the type of jobs they do. We do not want the Government to try and master plan this because it is far too complex a story for policy to be mapped out completely and solutions devised for every detail of the picture. There is no straight link between putting the technology in place and getting the productivity to get down to it. There is also no single story about how technology is used in the typical firm because there is not a typical firm across the economy. One of the things we do say in terms of the top team use of ICT is that senior staff and managers are in some cases people who take quite a hands-on approach to their technology. They have a laptop; they carry it around; they have a PDA and a number of other gadgets and they enthusiastically use them. Others are able to outsource this stuff within the organisation and give it to PAs and other teams to deal with. If people are very busy, that is fine, but I think it is only acceptable in a sense if the people doing the outsourcing have some idea of what the equipment is that their teams are using and what it can do and are able to set the task but also make the decisions that affect the rest of that. It is a question of general awareness at that level rather than forcing people to use their own IT all the time. Ms Carpenter: An example from the research, just to make it visual, is that in the context that Max used in the beginning, basically all the workplaces we went to and sat next to looked very similar, which was one of the striking findings but not surprising. Each had a computer and a telephone and a mobile phone and lots of papers, suggesting that (a) paper is not going to go away, and (b) one of the major skills to look at is typing. Equally, it did not mean that for every person we sat next to (and we sat next to three times eight workplaces) that was a skill that was not developed necessarily, so there is a whole range of skills to look at just from this one example. Mr Nathan: Absolutely. While we were doing the research a colleague in another firm, which will remain nameless, sent me a picture of their chief executive, which is the picture he used to describe his mobile working style. He was in the back of a cab with his secretary with him with a laptop, giving her dictation and she was tapping away on the laptop. On the one hand this was a brilliant example of the international mobile worker who is obviously going to the airport to fly to some conference or other. On the other hand, he had completely taken away from himself any need to understand or use the technology himself because he had somebody who was both PA and some sort of bag person carrying all the stuff around with him. Given that that person is also likely to be making decisions about how all of the people in his organisation use technology, we do not think it is a particularly good state of affairs just to opt out like that. It is something that shareholders of the firm at any rate would expect the CEO, who is ultimately accountable, to be thinking quite hard about, and it may be something that government policy has to take into account. Q312 Linda Perham: What is the balance of responsibility between government and employers because there are employer training pilots going on and certainly, talking to people in the TUC yesterday, I think the general view is that employers are not really investing in training, not just ICT, but that is an obvious example. Where is what the Government should be doing and where is what the employer should be doing in putting investment into training their own workforce? Mr Nathan: The way the Government works, as I understand it, is that it is a broker between the supply side and the demand side of the market. It has a role to provide a basic level of generic training and learning for everyone through the education system and through continuous learning and so on, and there are specific training needs that employers have, which it seems that employers should provide, and there may also be some failures in the education system and the level of training and learning that employees come out of school with and have access to over their lifetime, for which government will need to intervene and provide. The basic settlement that was expressed in the PRU paper on workforce development seems to be the right place to start as far as the workforce is concerned. That means obligations on employers but also on government and policies, such as work training pilots which intervene in the market and provide financial incentives for employers to get their people trained and try and get over some of the basic things that they need. This is something that the Work Foundation is interested in generally but, as you say, technology skills are one of the key areas where exactly that type of intervention is required. Q313 Sir Robert Smith: You mentioned the importance of e-mailing and communication. How significant is the growth of spam and inappropriate mailing to undermine the enthusiasm for ICT? Mr Nathan: Considerable. There are various figures floating around about what proportion of e-mail is spam, and it is anything from 50 to 80 per cent. I hope it is not 80 per cent but 50 per cent feels about right. We all know the basics of spam. A lot of it comes from a fairly small number of people, mainly based outside the UK, and in order to combat that some kind of international agreement is required and there are a number of solutions on the table, one of which has been enacted in the States, one of which has been proposed for Europe. On a day-to-day level one of the things that we found was that people were generally a bit cynical and a bit frustrated with technology but getting a lot of spam every day was one of the things that wound people up. We distinguished between two types of spam in the research, one of which is bad spam, which is stuff from Florida about Viagra, and the other of which is good spam, which is unwanted or unnecessary communication from colleagues and people you are working with. That is something which organisations need to get a handle on. One of the things that we argue is that, because ICT has come into organisations quite quickly and it has come in quite quietly under the management radar, a lot of the social routines and etiquettes that are formed around other types of communication and are accepted by everyone in the firm intuitively are not in place in the form of ICT, so people are not always sure whether to e-mail or not, who to e-mail to, whether to leave a voicemail message or whether to keep ringing or whether to send a text message. All of these things are very trivial but collectively they add up to an important part of organisational life, and are a very important part of people's working day. Getting information and communicating information is something that most of us spend a good deal of time doing, whether we are an information worker or not. Not having good ground rules about what to do when and how to do it with what makes for quite a lot of stress and strain and it is one of the things that at one end can lead to a lot of frustration but at the other can hold things up considerably and lead to misunderstandings and problems and difficulties with systems which cost a lot of money. Spam is an external thing for the government to think about but also it is something for organisations and employers to think about. Q314 Sir Robert Smith: It may be more the employees that see the frustration, or are employers getting frustrated that their employees are not being productive? Mr Nathan: On the spam issue I think it depends on whether the senior team are reading their own e-mails or not. If they are not then maybe the person who does will tell them about it. If you are self-servicing, which an increasing proportion of professionals are, at any rate, it is something that you are going to encounter head on. The other thing to say is that e-mail is not universal. ICT is, but things like the internet and e-mail are not used by anything like as large a proportion of employees. A lot of the debate about e-mail and spam and information overload is generated by and is about professionals, journalists and people like us and people in financial services and people who have access to e-mail all the time. It is in the corner of the screen and ticking along. Some of the people in contact centre and call centre environments did have e-mail but it was not working while they were on shift because they were supposed to be talking to people, so their experience of spam and e-mail issues is going to be very different, so keep that in view. Q315 Chairman: Do you think more could be done to filter certainly the bad spam? There are techniques. Would you get a sense that this time-wasting could have been avoided had some software been purchased and utilised? Mr Nathan: I wish we knew of a product which would get rid of all our spam. We seem to have an enormous amount of it. That is not a question that I can give you a proper answer to. Q316 Chairman: I am not asking you to adopt the role of an ICT consultant. Mr Nathan: You need to ask a security systems person the answer to that question. The sense that I have is that anti-virus protection is something where more can be done. To speak from personal experience, the Work Foundation has a number of screening programmes in place and they screen very effectively for viruses, which are the worse type of spam of all because they have such serious consequences. We do not seem to have a programme that gets rid of spam and can spot various types of spam coming through. If you do hear about one in the course of the inquiry please let us know and we will buy it for ourselves. At the moment it is something that we just delete rather than deal with organisationally. Ms Carpenter: From the research numbers we saw a lot less heavy use of e-mail than we had expected from debates on it and suggested numbers before we went into the field. There was an interesting difference between people thinking they were heavily using e-mail and actually counting that they had ten to 20 e-mails on their screen when they came in in the morning. I am not suggesting that there are not spheres out there that have extremely heavy use of e-mail. What I am suggesting is that there is the potential to look at workplaces, and what their balance is would probably bring a different view of the extent of the problem right now. Q317 Chairman: I do not know whether I would qualify for being on the top floor in paragraph 19 of your evidence, but certainly I am among the "lots of 40 or 50-somethings [that] can't even type". Actually I do not get many e-mails because I do not send any. When I have to reply, or my staff reply, the replies tend to be frosty and terse because I object to them because usually they are thoughtless cretins writing because they can do it easily rather than thinking first and then writing, so you get a stream of ill-digested consciousness from someone. I just wonder if maybe there is a case for a self-denying ordinance on the part of some of the more garrulous e-mailers and that might be it. Mr Nathan: The most extreme response to this was what Phones4U did last year, which was to ban e-mail entirely inside the organisation. I am not sure exactly what was driving that, and obviously they were getting frustrated with e-mail, but it is also an absolutely fantastic publicity masterstroke from a mobile phone company to make everyone speak on the phone more. That is one way of rediscovering the joys of face-to-face communication, talking on the phone, sending faxes or whatever. Generally speaking, it is useful to have some ground rules and some basic assumptions in your company about when to e-mail and when not to e-mail, and equally when to ring and when not to ring. If everyone knows that that is the way it is done around here, then there is a lot less friction, but that sort of social hardware is not really in place and that should be looked at. Ms Carpenter: In the context of technology companies looking at e-mail equally as part of information in work is where it becomes an issue not around the dangers of spam or how much does it create frustration but more about how do you impact the usefulness of the information within e-mails, and that is where most of the organisations began to think about piloting programmes around their CRM systems and how to use those effectively, so how e-mail and knowledge management and the knowledge that knowledge workers bring can be packaged into a future-looking development of that workforce. Q318 Chairman: Obviously we have got to have a sense of proportion about the e-mail issue, but on the other matters we thank you very much because you have provided us with a useful overview which we will pursue with other people. We are very grateful for that. We may well come back to you; whether it is by e-mail or letter remains to be seen. Ms Carpenter: We also have phones. Q319 Chairman: We will communicate if necessary and if you have anything else that you think on reflection you would like to submit, by whatever mode, we would be very happy to receive it. Thanks very much. Ms Carpenter: We will send a pigeon! |