Over the last two decades we have witnessed unprecedented changes in the ways in which transnational companies are using the skills of employees. Improvements in computing power and the use of the Internet have provided transnational companies with new opportunities to modularise production and locate the component parts in different countries across the world. This has coincided with huge changes in the supply of educated labour. In the last decade we have witnessed a doubling of the global supply of graduates, with China now having more students in tertiary education than the USA. At the same time, companies have been able, through the use of their own competency systems to speed up the process of learning in company specific skills.

The impact of these changes is enormous. First, they have enabled transnational companies to globalise the creation of high skills, which means that while traditionally they have been able to relocate low skilled production to low income emerging economies, they can now do this with production requiring high skills. High skilled production is no longer a prerogative of the US and European economies. Even research and development, how companies think about their business and new products, is currently being undertaken in China, India and Brazil and increasingly in countries such as Vietnam and Indonesia. This provides them with access to low paid, high skilled labour from a global pool.

Second, it has meant that companies no longer compete on either cost or quality; access to cheap highly skilled labour means that they now compete on both quality and cost. The ready availability of low cost high skilled labour places a downward pressure on the wages of highly skilled labour in the high-income countries. This pressure is being reinforced by developments in computing which have enable the routinisation of much white collar and professional, “knowledge” work, facilitating the relocation and outsourcing of such work to low income countries. Companies are reducing the cost of this knowledge work.

All this means that for the new transnational corporations the process of skilling their labour forces represents a source of business advantage. Decisions about where to source skills across the globe and how to use them now represent important means of increasing company profitability and performance. While this is good news for the Human Resources profession whose work becomes more valuable in these firms, there are negative consequences for western nations as a whole.

First, the downward pressures on the cost of high-skilled labour is breaking the link between the investment in education and training and higher levels of income. Investment in education and training is no longer a guarantee of a good job. This is already manifest in some European countries in the form of reduced incomes for graduates, as the returns that graduates receive from their investment in education and training fall. It is also evident in increasing levels of graduate underemployment, as they are forced to enter what are regarded as non-graduate jobs.

Second, the transnational companies’ abilities to skill their own people is undermining national qualification systems. While governments attempt to develop more comprehensive systems of qualification the transnational companies are increasingly saying that such lengthy and formalised systems are not what they want. What they require are shorter, more company specific forms of training, a trend that is already posing a very real threat to the German “dual” system of training.

Within the national economy, the intensification of competition that these transnational corporations produce creates important challenges for companies, especially those in the supply chain and those competing in international markets. They too must face the need to compete on the basis of quality and cost.

Here our research has revealed that one of the ways in which this has been done is through the use of new management practices. The adoption of these practices has enabled companies to tap into the full range of skills and knowledge possessed by their employees and use these as a source of competitive advantage in the market. Using such techniques as employee involvement, self-managed work teams, on-going forms of continuous improvement combined with the facilitation of employee learning and performance based rewards, companies have been able to increase efficiency and productivity, thereby increasing quality while reducing costs. This system of management contrasts with the traditional command and control system of management still used by many companies. Using the new (high performance) working practices companies have been able to find ways of using the skills of their employees as a source of competitive advantage in the market.

What our research also revealed is that this is no easy task, the practices have to be introduced as bundles, not in isolation, otherwise they just become another “management fad”. The precise combinations used to best effect differ from sector to sector, and crucially, they can only be implemented effectively in an atmosphere of trust and mutual benefit, where both company and employees share in the performance gains. Many companies have sought to implement these high performance working practices but have used them without securing the consent of their employees, often in an exploitative manner. The result has been some initial gains but usually the failure to achieve lasting improvements in company performance. However, when they are implemented in the right manner, the result is not just a substantial improvement in employee capabilities but also a step change in company performance enabling national companies to compete effectively in global markets.

David Ashton is Emeritus Professor at the University of Leicester and Honorary Professor at the University of Cardiff. He is the founder of the Centre for Labour Market Studies at the University of Leicester and an international researcher in the field of workplace learning, high performance work organisations, the analysis of national systems of workforce development and training, and the skill strategies of global corporations. Prof. Ashton will be presenting two papers as the keynote speaker of the seminar the Foundation is organizing on 28th May at 2pm at the Intercontinental Hotel in St Julian’s entitled “The Alignment of Knowledge and Skills to Business Success”. For seminar details visit www.fhrd.org. This seminar is sponsored by: Agenda Bookshop, Air Malta plc, Employment and Training Corporation, FIMBank plc, International Safety Training Centre Ltd, Keep Me Posted, Koperattivi Malta, Outlook Coop, Reed Consulting Malta and IBM-SPSS, Standard Publications Ltd, St Martins Institute of Information Technology, Studio 7 Co. Ltd, The Insiter Magazine.