Linking skills with performance management

It has become an accepted truism that the way to succeed for individuals, organisations and nations, is through skills based competition. Yet job growth, work design and organisational practice consistently fail to follow this route. Management rhetoric accepts that skill development route to prosperity. Management practice lags behind.

Skill is complex. It may be possessed by individuals, through qualifications, experience, expertise or attributes. It is built into jobs, the successful completion of which may demand autonomy, decision making, technical know-how or responsibility. And it produces, and is itself the product of, status.
Essentially skill is part of a social system; and skilled and expert work is a product of the way different parts of this system relate to one another where none of these elements are static and all are subject to change. Performance too is not readily defined or measured,
For organisations in the private sector there are a range of financial ratios including share price, profits, turnover, dividend yield and dividend cover. Specialists in employment might also assess absenteeism, staff turnover, staff costs and the presence or absence of various human resource practices
For individuals, performance measures might include pay rates, job satisfaction, status, career opportunities, working conditions, levels of control and discretion or management style. While for national governments the extent to which firms contribute to civil society, employment growth and investment plans are the areas of focus. A multi-stakeholder audit might provide a basis for exploring these different notions of performance. Link between skills and performance for its measurement is difficult to establish. These include examining human resource management, high involvement management practices, high commitment management practices, high performance work practices and high performance work systems. Performance measures also vary as productivity, self-reported employee productivity or labour productivity. But it has also been taken to refer to: product quality, various financial measures, pay rates, turnover, efficiency (including labour efficiency), machine efficiency, scrap rates, labour turnover, job creation, absenteeism, perceived organisational performance and perceived market performance. Apart from large number of measures and variety of proxies there is a risk of bias towards the dominant occupational group and studies may omit groups such as contingent workers. Moreover, assumptions about causality seem to depend more on the specialism of the manager concerned than any evidence available to the researcher. Almost all studies focus on organisational performance and the gains that accrue to firms rather than the benefits for individuals. Employee’s and employer’s gain assume to demonstrate positive outcome. It can be argued that skills are the litmus test of human resource management and that without skills other building blocks such as performance related pay or employee involvement make little sense (Keep and Mayhew 1996). However, intuitively attractive as this link is, the evidence suggests that the presence or absence of human resource management is management's choice rather than the inevitable result of a high-skill strategy. Sophisticated human resource management may also be implemented in workplaces that compete on low skills. The most positive data on the link between skills and performance seems to come from manufacturing that confirm the link between high skill and high quaLity. In service sector links are harder to gauge. Good service may be equated to the number of staff available rather than their individual capabilities and Lloyd's (2003) research into the fitness industry found that, while technical skills formed part of work processes, 'soft' skills, including the ability to please customers were far more highly valued. Therefore increasing skills are one way of competing rather than the way of competing. The argument is that society would improve if there were fewer low paid workers and that national competitiveness would be more sustainable if firms concentrated on high margin, high quality goods that could be less readily outsourced to developing nations and that individual workers would also gain. Highly skilled workers tend to be paid more, they are more likely to benefit from human resource practices than their unskilled peers, highly skilled work is less vulnerable to being outsourced.

Extracts:

Skill & Performance, issue paper 9, www.skope.ox.ac.uk

Arthur, J. (1999) ‘Explaining variation in human resource practices in US steel mini-mills,’ in P. Cappelli (ed) Employment Practices and Business Strategy, Oxford and New York: Oxford University Press.

Keep, E. and Mayhew, K. (1999) ‘The assessment: knowledge, skills and competitiveness,’ Oxford Review of Economic Policy, 15(1):1-15.


SMEs
A guide for freelancing that explains the procedures that one has to go through for setting up a business which was reviewed by expert bodies for recent changes in tax regime and further refinements and amendments. Once you set up a business you enter a whole new realm of laws and regulations.

At the outset, you need to decide which form of business is most appropriate for you, and the aim of this section is to give you some information about the various options available to you, to assist you in making a choice about which is most suitable for your circumstances. These are some of the vehicles through which you can operate:
limited company
limited liability partnership (LLP)
partnership
sole trader
composite company
umbrella company
offshore trust
PAYE agency worker

Technically, you do not actually need to set up a limited company to be a freelancer. In law, you can work as a self-employed sole trader or partner, as an employee of a composite or “umbrella” company or as a PAYE employee to an agent. But Act 2003 Section 44 effectively prevents individuals from being self-employed where an agency is involved, as it obliges the agency to treat the individual as if they were an employee.

Important note: One cannot determine one’s own status nor do so by agreement with the client; status is determined by the nature of the engagement.

A limited company also offers the owners (i.e. the shareholders) protection against liability for the company’s debts. So, if the company were to become insolvent, as a shareholder, you would lose only the value of your shares. To set up a limited company is to go to an accountant or company formation bureau and buy an “off-the-shelf” company. You can also purchase off-the-shelf companies from specialist company formation agents. The name and the Articles of Association of this company can be very easily modified to your requirements. The Companies House website www.companieshouse.gov.uk.

A limited company must have at least one director, a company secretary and a registered office, and must have “Limited” or “Ltd” after its name. The company secretary can also be a director but a sole director cannot be the company secretary. This means that there must always be at least two people involved in the running of a company.
The registered office must be within the jurisdiction in which the company was incorporated.

What is a Limited Liability Partnership (LLP)?
An LLP is an alternative corporate business vehicle, introduced on 6 April 2001, which gives the benefits of limited liability but allows its members the flexibility of organising their internal structure as a traditional partnership.
An LLP is different from a traditional partnership in that it is a legal person separate from its members. In many ways it is a partnership in name only. It has “members” rather than partners and must be formally incorporated to exist. Because an LLP is a legal person it is subject to some parts of the Companies Act 1985.
The designated members, who have a similar responsibility to a director and secretary of a limited company, together with the other members, control the business. They provide the capital for the business, and LLPs are similar to partnerships and sole traders in this respect.
Incomes derived by the members are more similar to those derived within a partnership than to dividends paid by companies. As a member of an LLP, you are self-employed and must register with the HMRC within three months, otherwise you may be liable to a penalty of £100. You can register by calling the helpline for the newly self-employed on 08459 154 515 (open from 08.00 to 20.00 Monday to Friday, and 08.00 to 16.00 Saturday and Sunday), or by completing form CWF1 ‘Becoming self-employed and registering for Class 2 National Insurance contributions and/or tax’.

Umbrella and composite companies

Umbrella companies come in two guises:
Umbrella companies, which act as a single limited company for a large number of contractors who operate within the Pay As You Earn (PAYE) scheme
Composite companies, in which individual workers own a share of a company that is fully managed by administrators, and receive dividends from their share
This is something of any oversimplification; in reality, umbrella companies come in all shapes and sizes and can be quite complicated.

Their purpose is to make life simpler for contractors while maximising their earnings, by taking responsibility for administrative affairs and compliance on behalf of the contractor, and reducing the amount of tax that they pay. Some offer a lot of benefits, whilst others offer nothing different from standard temporary employment.


Choosing an accountant

When choosing an accountant you should look for Membership of a professional body such as one of the Chartered Institutes. This offers you more protection against malpractice. Remember that anybody can call themselves an accountant, qualified or not. Accountants who specialise in handling freelancers are usually limited companies and, therefore, in the event of there being a complaint, the freelancer has full rights under UK law.
Devising a basic plan
Unless you are borrowing money for your business venture, you probably do not need to produce a written marketing plan, but you will almost certainly find it invaluable to consider the following points, and commit some of your thoughts, at least, to paper:
Clearly define your product and service offerings
Identify your target audience and market segments
Review the scope, size and trends within your market segments
Define your pricing model
Identify your main competition
Identify your strengths and weaknesses (SWOT analysis)
Differentiate your products and services by defining a series of Emotional Selling Points
(ESPs) – ask existing customers why they bought from you

Develop a positive attitude
Having a positive attitude and believing in yourself are very important if you are to succeed in marketing yourself. Not only that, but planning, organisation and persistence will pay dividends. Never forget that people buy from people, and so always try to treat your business contacts as you would like to be treated. Listen carefully to what they want, ask them for feedback, keep your promises, and be thoroughly professional in all your dealings with them.
And finally, remember that having a proper marketing strategy and marketing expenditure is a pointer for being in business on your own account.



Source: www.pcg.org.uk
GUIDE TO FREELANCING, for freelance consultants and contractors, Edition 4.0
Published August 2006

Useful links and resources
Institute of Chartered Accountants for England and Wales: www.icaew.co.uk
Institute of Chartered Accountants for Scotland: www.icas.org.uk
Association of Chartered Certified Accountants: www.acca.org.uk
List of PCG affiliates: www.pcg.org.uk/affiliates
PCG – Insurances: www.pcg.org.uk
HSE guide: www.hse.gov.uk/pubns/hse40.pdf
Financial Services Authority: www.fsa.gov.uk
PCG Affiliates – insurance: www.pcg.org.uk/affiliates

Marketing
Roy Sheppard’s website: www.Smart-Worker.com
Online agency freelancing database: www.jobserve.com
iProfile: www.theskillsmarket.com

Pension Plans
PCG’s Guide to Pensions: available for members at www.pcg.org.uk
For a state pension forecast: www.thepensionservice.gov.uk
FSA publications: www.fsa.gov.uk/consumer/pensions/5_tools/publications.html
HMRC overview of Pensions Tax Simplification: www.hmrc.gov.uk/pensionschemes/pts.htm
The Motley Fool guide to Pensions, including alternatives such as SIPPs –
www.fool.co.uk/pensions