DfEE
Higher Education and Employment Division
Graduate Skills and Small Businesses
a DfEE briefing paper
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1. Introduction
In recent years the number of small and medium sized firms (SMEs) in Britain has been
growing rapidly. 99% of all firms now employ fewer than 250 people, and 60% of the
workforce work in SMEs. They represent a major growth area of the British economy, and are
the seedbed of much innovation.
At the same time, competition is driving many British firms towards higher quality markets,
and into service and knowledge based industries which depend on higher levels of skill and
knowledge in their workers. Many commentators argue that Britain’s economic survival
depends upon this shift, which calls for a general upgrading of the skills and knowledge of the
whole workforce.
Together, these trends imply that we will see more small firms, but that those firms will have
higher skill levels and stronger knowledge bases. In turn, this suggests that we will need
stronger links between the SME sector and higher education, where much new knowledge is
created and disseminated, and many high level skills are developed. However, although much
has been written about the development of the SME sector, about the rise of knowledge based
industries and learning organisations, and about the importance of technology transfer between
HE institutions and industry, much less attention has been given to the role of higher education
in contributing to the knowledge and skill base of the SME sector.
Bridging the gap between HE and SMEs is not easy. The cultures of small firms and higher
education could hardly be more different: they work to different timescales and priorities, they
have different objectives and motivations, and little tradition of working together on recruiting
and developing skilled staff.
This brief publication aims to increase understanding across this divide; to draw attention to
schemes and approaches which have been tried; and offer examples of good or interesting
practice which may be relevant to those trying to build closer links. It is based on the
experience of a range of projects supported through Government (DfEE and DTI) and other
agencies in recent years.
It is designed as an introduction for those with an interest in improving the way in which
graduates can be prepared for work in SMEs, and SMEs can upgrade the skills and knowledge
of their existing staff. Some of the issues are being explored in more depth through projects in
progress at the time of writing, and these are listed in the Chapter 8.
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2. Contents
1. INTRODUCTION ................................................................................................................................... 2
2. CONTENTS........................................................................................................................................... 3
3. BACKGROUND ..................................................................................................................................... 4
3.1 What are graduate skills? ............................................................................................................ 4
3.2 A changing market ....................................................................................................................... 4
3.3 The decline of the “Graduate Career” ........................................................................................ 4
3.4 The SME tradition........................................................................................................................ 4
3.5 Changing support services........................................................................................................... 5
3.6 The danger of stereotypes ............................................................................................................ 6
4. GRADUATES AND SMES - WHAT WE KNOW......................................................................................... 7
4.1 How SMEs acquire graduate skills and knowledge ..................................................................... 7
4.2 What kinds of SME can benefit from graduate skills ................................................................... 8
4.3 What stimulates SMEs to recruit graduates? ............................................................................. 10
4.4 What kind of skills can graduates provide? ............................................................................... 11
4.5 What do graduates contribute to SMEs? ................................................................................... 12
4.6 What sort of career patterns do graduates follow in SMEs? ..................................................... 12
5. ISSUES IN HE - SME RELATIONSHIPS ................................................................................................ 14
5.1 Mutual perceptions .................................................................................................................... 14
5.2 Information for undergraduates ................................................................................................ 15
5.3 Information for SMEs ................................................................................................................ 15
5.4 Human resource strategies ........................................................................................................ 16
5.5 Recruitment ................................................................................................................................ 16
5.6 Support for new graduates ......................................................................................................... 17
5.7 Coordination of initiatives ......................................................................................................... 17
5.8 Funding of schemes ................................................................................................................... 17
5.9 Changing qualification structures ............................................................................................. 18
5.10 Upgrading existing staff........................................................................................................... 18
5.11 Disseminating good practice ................................................................................................... 18
5.12 Using technology ..................................................................................................................... 19
6. SCHEMES AND INITIATIVES ............................................................................................................... 20
6.1 Pre university placement ........................................................................................................... 20
6.2 Short placement ......................................................................................................................... 20
6.3 Long placement.......................................................................................................................... 20
6.4 Part-time work ........................................................................................................................... 21
6.5 Recruitment at graduation ......................................................................................................... 21
6.6 Schemes for unemployed graduates ........................................................................................... 22
6.7 Teaching Company Type Schemes ............................................................................................. 22
6.8 Graduate start-up ...................................................................................................................... 23
6.9 Apprenticeship schemes ............................................................................................................. 23
6.10 Workbased learning and continuing professional development .............................................. 24
6.11 Other Initiatives ....................................................................................................................... 24
6.12 Research and development work ............................................................................................. 25
7. ISSUES FOR ACTION .......................................................................................................................... 26
8. REFERENCES ..................................................................................................................................... 27
8.1 Publications ............................................................................................................................... 27
8.2 Active agencies .......................................................................................................................... 27
8.3 DfEE Funded Projects ............................................................................................................... 28
8.4 Acknowledgements ..................................................................................................................... 28
9. INDEX ............................................................................................................................................... 30
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3. Background
3.1
What are graduate skills?
Higher education institutions develop a range of qualities in their students, and employers have
always sought these in professional, creative and technical staff. As firms raise their skills
levels and the knowledge content of their products they are seeking these qualities for a wider
range of roles.
Although graduate skills are difficult to define precisely, they include both generic and specific
qualities. Graduates are expected to have higher powers of thinking, analysis, argument, as
well as a more developed knowledge and skill base in a particular field. Most people acquire
them through full or part-time study in a higher education institution, either immediately after
leaving school or FE, or by returning to study later in life.
However, recruiting new young graduates is not the only way in which firms raise their skills
and knowledge base. Upgrading existing staff can be a more efficient route, and some higher
education institutions are active partners in such work, through continuing education courses,
workbased learning programmes, partnership degrees, consultancy and other initiatives.
3.2
A changing market
The relationship between higher education and the SME sector is changing from both sides. To
remain competitive, many SMEs need to raise their levels of skills and knowledge, while the
higher education system is producing more graduates than the traditional graduate employers
(themselves experiencing downsizing) require. This sounds like an ideal match, with two
converging trends leading to a balancing of supply and demand in the labour market. However,
there are many reasons why this does not translate easily into a well managed flow of new
talent to developing firms.
3.3
The decline of the “Graduate Career”
When higher education recruited 5% or 10% of school leavers, their route into employment on
graduation was clear. Most left university and progressed to employment with a large
“graduate employer” in a “graduate job”. Where graduates did have careers in SMEs it was
usually after a period of work in a large firm, and some large employers, like the major
accountancy firms, recruited and trained large numbers of graduates, who later took the skills
they had acquired on to smaller firms.
This model had obvious advantages for graduates, who passed from university to a large firm
with a national reputation, well known to Graduate Careers Advisory Services, and with
induction programmes and support systems for new recruits, all of which made the transition
natural and easy to manage.
Now, however, the notion of the “graduate job”, or the “graduate career”, at least for the
majority of graduates, is in decline. The employers who traditionally recruited to such roles are
not expanding recruitment, and even they are using graduates in new ways. A 1995 study by
the National Institute of Economic and Social Research found that many traditional graduate
recruiters were unaware that they were also recruiting significant numbers of graduates directly
to jobs outside their graduate recruitment scheme. In the best cases such graduates are growing
“non-graduate” jobs, turning them into something new, and thus raising the overall skill level
and productivity of the whole organisation. In the worst, however, we have employees
underemployed, representing a wasted investment for the firm, the individual, and the state.
3.4
The SME tradition
The traditional graduate career model largely ignored SMEs. Because the large majority of
graduates were being absorbed by large firms, most SMEs did not look to new graduates as a
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natural source for recruitment. Regional Trends in 1996 showed that only 8% of staff in SMEs
are graduates, compared with 13% in larger organisations.
As a result, most SMEs have not developed (even if they had been able to do so) the kinds of
recruitment and support processes offered by large firms. Studies of the issue repeatedly reveal
mutual suspicion: on one hand that graduates are impractical, reluctant to get their hands dirty,
and slow to become productive, while on the other hand, graduates have little idea of what
employment in an SME would be like, or the opportunities it might provide. Thus SME
employers see little evidence of real economic benefit in recruiting a graduate, while graduates
have no visible models of success.
However, many firms face barriers to growth and competitiveness imposed by lack of high
level skills, both technical and managerial. As a result they fail to take up market opportunities,
and in doing so limit their long term potential, and become less attractive to ambitious
graduates. In 1992 a study for DTI found a direct connection between innovation and growth
and profitability in firms in general.
But recruitment of graduates can be expensive and risky for SMEs. They lack the structures
and resources to plan to make best use of graduate skills, and to induct them into the
workplace. They also lack time for building links with universities, and what time they have
for external networking needs to be devoted to customers and suppliers, on whom survival
depends, rather than with HE institutions or Graduate Careers Advisory Services. They also
have less time to analyse whether the firm has a skills problem, and whether it is best
addressed by new recruitment, by a placement student, or by upskilling existing staff. Above
all they need new employees to make a real contribution to productivity quickly.
The result can be an inward looking and unambitious culture in many firms, exacerbated by the
traditional approach of many SMEs to training and development for their existing workforce.
Surveys repeatedly show that smaller firms invest less in the skills of their existing workers,
and while higher education provides continuing education and continuing professional
development support on a large and growing scale, it is usually easier for large firms to take
advantage of this. As a result, HE institutions and departments usually have better links with
large than small firms, and are more experienced at responding to their needs.
Despite this there is evidence that firms are responding to the changing market, and graduates
are being increasingly recruited into SMEs. Williams and Owen found in 1996 that 20% of
SMEs had changed their graduate recruitment activity in the recent past, and a further 12%
expected to do so in the near future. Almost all of the changes involved recruiting more
graduates, or recruiting graduates for the first time.
3.5
Changing support services
A further factor inhibiting development is the change being experienced by Graduate Careers
Advisory Services, which provide a bridge between the higher education institution and the
world of work. For them, work with SMEs involves developing strategies to deal with much
larger numbers of employers. Whereas the major traditional graduate employers used to recruit
hundreds of graduates a year, to familiar specifications, a typical SME may recruit one or two
graduates in some years and none in others, and may be looking for very specific skills in each
one.
Furthermore, Careers Services face a very rapid expansion of student numbers without
expanding resources. They are developing new skills in group guidance rather than individual
interviewing, but these also pose learning challenges for careers advisors, and call for new
kinds of collaboration with academic staff. These changes are putting services under great
pressure, and a review of the options, commissioned from the National Institute of Careers
Education and Counselling was published in June 1997 (Watts 1997).
Despite this, however, some Careers Services have made efforts to develop links with SMEs
over a number of years, particularly in their local areas, and the issue is well recognised both
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by individual services and their professional body, the Association of Graduate Careers
Advisory Services (AGCAS).
3.6
The danger of stereotypes
In considering the place of graduate skills within the SME sector it is vital to recognise that
there is no such thing as a “typical SME”, “typical university”, or “typical graduate”: all three
categories embrace an enormous diversity. The solutions will inevitably be diverse, and a
range of approaches and policies are required. Furthermore, not all graduates will be suited to
working in SMEs, and not all SMEs can make effective use of graduate skills. Some ownermanagers will find an ambitious entrepreneur hard to cope with as a new recruit, and few small
taxi firms will have any long term use for a graduate’s skills and knowledge.
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4. Graduates and SMEs - what we know
4.1
How SMEs acquire graduate skills and knowledge
Firms acquire graduate skills by a variety of routes, of which formal recruitment of new
graduates is only one, and often not the most relevant for an SME. For many, it will be more
appropriate to upgrade the skills and knowledge of existing staff than to buy in new and
inexperienced young graduates. For others, what is needed is a short injection of knowledge or
expertise, rather than a permanent employee. Many firms have benefited greatly from a fresh
view brought a placement student, whose analytical skills are not encumbered by the detail of
history and internal politics or by anxieties about career prospects in the firm.
The routes by which SMEs acquire graduate skills and knowledge include:
pre-university
placement1
a number of schemes, including the Year in Industry, place young people
in industry for a year before beginning their degree programmes. Some
return to the firm during vacations and on graduation.
short placements
and work
experience
a growing proportion of degree programmes include some form of work
placement, ranging from a few days to several months (full or part-time).
Some institutions require all students, regardless of subject studied, to
undertake a work related module, and a placement during their
undergraduate careers.
vacation
placements
a variety of schemes exist to encourage structured placements during
vacations. The national Shell Technology Enterprise Programme (STEP)
is the largest and most widely known, organising such placements on a
national basis, with careful selection, and structured support as well as a
scheme of regional and national awards.
long placements
the traditional “sandwich course” model placed undergraduates,
particularly in Engineering, in firms for a year during their study. Large
employers have always used such placements as an opportunity to
identify potential recruits.
part-time work
because of financial pressures, a large proportion of undergraduates now
undertake part-time work during term time, or full time work during
vacations. A number of universities now have their own student
employment services which find casual, short term or part-time work for
them. Such services are often linked to the university’s careers service
and to the Students Union (which runs some schemes). This offers
another opportunity for graduates to learn about small firms, and firms to
try out individuals
recruitment at
graduation
this is the traditional route, but it is changing. Increasingly
undergraduates are deferring applying for jobs until after graduation in
order to concentrate on gaining the best possible degree. However, the
needs of SMEs can rarely be effectively met by a surge of potential
recruits in July-September
“apprenticeships”
and assisted
a number of schemes have been developed to assist SMEs in recruiting
new graduates, especially where graduate employment is new to the
firm. Here the university provides support to the graduate for the first
year of employment to ensure that they are successful in meeting the
It is worth noting that the student placement “market” is a large and complex one, involving many
firms, and schools and FE Colleges as well as HE institutions. Good placements, where students can
undertake serious learning, as well as benefiting the firm, are always in short supply.
1
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recruitment at
graduation
needs of the business. Such schemes have a high success rate in securing
ongoing employment, and are often linked to a university or NVQ
qualification.
A developing, more formal, model of this kind is the “graduate
apprenticeship” scheme. A number of TECs have been exploring ways
of using the Modern Apprenticeship scheme for this purpose, providing
employment linked to acquiring a vocational qualification in addition to
the first degree
recruitment at
masters degree
level
a growing number of people are continuing directly from first degree to
taught postgraduate courses, in the hope of improving their position in
an increasingly competitive job market. Some such courses include work
placement or work based projects. In some areas of science and
engineering four year programmes, like the M.Physics and the M.Eng.,
are developing, enabling some students to progress from the second year
of a first degree directly to a two year Masters qualification.
teaching company
programmes
the most formal model of linkage, where a university department links
with a firm for a specific piece of project work, supervised jointly by a
manager and an academic, and often involving a number of graduates
schemes for
unemployed
graduates
there is a growing number of projects whose aim is to prepare
unemployed graduates for employment in SMEs, and provide supported
placement with firms. Schemes are usually funded by TECs, through the
Training for Work programme
workbased
learning
a rapidly growing area of higher education has been the provision of
courses for employees. Some are tailored to the specific needs of a
particular large employer, while others aim at a particular industry or
technology. Some lead to a formal qualification.
4.2
What kinds of SME can benefit from graduate skills
SMEs come in all shapes and sizes. 99% of all firms in Britain employ fewer than 250 people,
and they include the family corner shop, the software house employing a dozen highly
qualified specialists, and a manufacturing firm with 200 semi skilled workers. All are “SMEs”,
but they have little in common in terms of needs or circumstances.
Williams and Owen (1997) found that graduates formed 8% of the workforce of SMEs,
without great variation between medium, small and micro businesses, although medium
businesses were much more likely to have recruited a graduate in the last five years (64%
medium: 15% micro). However, they found considerable variation by occupational area, with
graduates forming over 20% of employees in all SMEs in Business and Financial Services
(which they suggest may be “approaching saturation point”), followed by 8% in very small
firms in the Wholesale, Retail, Hotels and Restaurants. In all other areas the proportion was
below 6%.
The majority of SMEs are unlikely to benefit particularly from recruiting graduates, (although
even a small percentage would represent a large number of firms) but it is not easy to define
clearly which are most likely to do so. The most improbable firms can suddenly find a new
direction, and flourish with a new input of expertise, but HE institutions planning to develop
their work with the sector might wish to consider some of the categories listed below as a basis
for designing a strategy.
In all cases one should remember that organisational culture is a more significant factor in
predicting potential than size alone: there are large firms with few graduates and small ones
8
with many. Many SMEs will also not discriminate between graduates and non graduates in
recruiting - they are looking for specific qualities, which they many or may not associate with
being a graduate2.
2
Very small/ micro
firms
firms with fewer than 10 employees constitute 95% of all firms in the
UK, and employ 30% of all employees. A high proportion of these firms
are small local businesses (the owner manager or family firm) unlikely to
benefit particularly from graduate staff. Where they do take on a
graduate it is likely to be for the first time, which can create particular
problems for graduate and owner-manager. However, at the other end of
the spectrum, this category includes small knowledge based high skill
consultancies, like spin off companies created by Universities to exploit
their own research, whose entire survival depends on graduate skills and
knowledge.
Small firms
firms with 10-50 employees are more likely to have scope for graduate
employment. They constitute only 5% of all firms, but employ 16% of
employees.
Medium sized
firms with 50-200 employees constitute less than 1% of all firms, but
employ 14% of employees. They are more likely to have scope for
graduate employment, and to have the kinds of internal structure
(personnel functions particularly) which make it easier for them to
recruit and support graduates. However, they are still less likely than
larger firms to be well known to graduates seeking careers.
Knowledge based
firms
firms whose business is concerned with the development and
transmission of knowledge (like high technology design and
manufacture, or the provision of specialist consultancy services) are
probably the most likely to seek graduates. However, they are sometimes
only interested in graduates with some previous experience, which
creates the common phenomenon where all employers seek graduates
with two years’ experience, but none will provide that experience.
Schemes like Graduate Gateway have been created to try to overcome
this problem.
Non-recruiters
firms with no history of graduate recruitment, or who do not already
employ graduates are, in general, much less likely to be willing to do so
in the future, reflecting either the nature of the business, or suspicion of
the unfamiliar. Schemes like the Durham University GAP programme
seek to address this directly by targeting such firms with consultancy
support to identify opportunities and to match graduates or placement
students with the particular need. Ongoing support for both graduate and
SME is critical to the success of such schemes.
High skill firms
there are a significant number of SMEs which are at the leading edge of
their own technologies, and have a knowledge and skills base as high as,
or higher than, the HE institutions. Teaching Company programmes are
sometimes relevant here, seeking to solve specific technical problems
through new research linking the university and the SME.
Supply chains
SMEs which are established parts of the supply chain of a large firm may
be under pressure from their partners in the chain to raise skill levels and
all data in the following section is from SME Statistics for UK DTI 1995
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recruit graduates. Their partners may also be able and willing to provide
support in processes like recruitment and training.
Industry/sector
A similar approach is being adopted in some industries, where there is
some pooling of resource and expertise to help all SMEs. In the Meat
and Glass industries the relevant National Training Organisations are coordinating and supporting the deployment of graduates to SMEs from a
national level.
Clusters
There is a tendency for high skills firms to cluster geographically, and
some areas have very high concentrations while others have few or none.
In such areas it may be necessary to support several together if the
approach is to take root.
4.3
What stimulates SMEs to recruit graduates?
There are a number of factors which may predispose an SME to recruit graduates. Some
possible ones include:
Step change
small firms, and especially those which grow from a specific craft base,
reach a point in their development where expansion requires them to
acquire a new set of managerial and strategic skills. Firms approaching
this point may benefit particularly from recruiting graduates to assist in
the upgrading of management or the introduction of new technology.
Succession
planning
small firms are vulnerable as their founders approach retirement, or
when they leave. Firms which have identified succession for senior staff
as a current strategic problem are more likely to be interested in
recruiting graduates. This may be a critical growth point for the firm
where “new blood” or professional updating for existing staff may be
particularly welcome.
Growth
orientation
Not all firms seek to grow. Some decide that the additional complexity
of management and administration will detract from the quality of their
current service, while others are content with a particular niche which
sustains the incomes of the owners. Firms which have an explicit
strategy to grow are much more likely to seek graduate skills.
Specific problems
some firms have specific problems which they recognise as inhibiting
growth, but which they cannot easily overcome with existing human
resources, and they may not be able to find, or afford, to buy in the
necessary expertise to move forward. There are examples of such firms
making the key leap forward through the use of placement students or
teaching company projects. In a study of 150 SME owners in 1992,
Mullen found that at least 40% had problems which could be solved by a
student on a vacation job or placement.
“Ideas centred”
managers
managers differ greatly in their personal motivation. Some are
principally concerned with money, others with providing a service to a
community. Those whose personal motivation relates to ideas and
innovation are more likely to be interested in creative relationships with
HE institutions, and in the potential uses of graduate skills and
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knowledge. They are also more likely to provide a stimulating
environment for a graduate recruit.
Graduate
managers
there is also very strong evidence in the work of the Welsh Development
Agency and Williams & Owen, that firms with graduate managers are
more likely to employ more graduates
Word of mouth
because of the pressures on their time, and the difficulty for outside
agencies of making contact with large numbers of SMEs, they are more
likely to be influenced by word of mouth than formal approaches.
Personal recommendation from other business people who have
successfully used graduate skills can be an important factor in
influencing willingness to consider recruiting graduates or offering
placements
Competition
firms watch their rivals’ behaviour, and graduate recruitment may be
perceived as something which gives a competitive advantage. In such
cases a firm may be open to recruiting graduates, but without a clear
view of what it wishes to achieve by it. In such cases it may be
particularly important to ensure that the graduate is well supported if the
relationship is not to sour.
Changing markets
and technology
when firms are undergoing some form of transition they may be
particularly ready to acquire and use graduate level skills. Such
transitions include a change in the market or the technological base
which brings in new competitors or new opportunities
Region
there are dramatic regional differences in the numbers of high skill
SMEs in the economy. Some regions are likely to be much more
receptive than others, and there may be a need for special strategies in
those where there is no history of graduate recruitment to SMEs. Recent
DfEE work suggests that graduate first destinations cluster in a broad
corridor between London and Manchester.
Professional
requirements
in some fields a professional qualification is required to practice. In these
cases, the firm has no option but to recruit graduates, or train existing
staff for professional qualifications.
Experience
firms which already employ graduates are more likely to seek graduates
for future jobs, especially where a graduate is responsible for recruitment
4.4
What kind of skills can graduates provide?
Graduates can provide firms with both generic and specialised skills and knowledge. Generic
skills include such qualities as, communication, numeracy, analysis, research. Some of these
have always been embedded (though not usually explicitly) in degree level programmes, and
universities have increasingly sought to include them in the curriculum for all graduates. For
many SMEs it is these qualities which are most valuable, but they are rarely certified, or made
explicit in HE qualifications.
Specialist skills are developed in HE in particular disciplines. Often these have been
developed in limited contexts, and sometimes on equipment now regarded as out of date by
leading edge firms. However, such graduates usually understand the basic principles and
approaches of the discipline, and can update their skills relatively rapidly. When a graduate is
recruited through a placement or graduate gateway type scheme s/he may have access to up to
date knowledge from within the university.
Johnson identified three kinds of job which SME owners thought a graduate could usefully do:
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specific technical
accounted for 35% of responses, using a discipline related to the firms
principal business
specific management
accounted for 54% of responses, usually in firms where the
owner/manager lacked formal training in areas like finance and
marketing
general management
accounted for the smallest proportion. Here the graduate would take on
some of the owner managers’ own functions as a “right hand man”
Williams and Owen found that the larger a firm the more likely it was to seek generic, rather
than specific skills. Overall they found that SMEs valued particularly the ability to learn,
intelligence and knowledge, ideas and imagination, and communication skills.
The precise mix of generic and specific which a particular firm needs will differ for many
reasons, and may vary over time, and. As a result HEIs often receive confusing messages about
“what employers want”. Some work suggests that, unlike larger firms, SMEs are more likely to
recruit specialists than generalists, perhaps because the need for specific technical expertise is
easier to identify clearly. However firms can change focus in response to market pressures.
Thus a firm which established itself manufacturing a high technology product may choose, as
the market matures, to shift its emphasis towards providing consultancy in the application of
the product. As a result, its recruitment needs will shift to generic negotiating, consultancy and
interpersonal skills, and away from leading edge technical knowledge.
4.5
What do graduates contribute to SMEs?
There is good evidence that graduates (and indeed undergraduates on placement) can add
significant value to firms. The Quinquennial Review of the Teaching Company Scheme, for
example, shows that an investment of £1m in partnerships with HE institutions, linked to the
appointment of Associates (who are graduates carrying out a project for the firm) generates on
average £3.6m in value added, £13.3m in turnover and £3.0m in exports.
Similarly, the experience of the STEP scheme and Year in Industry both show that young
people on carefully planned and managed placements can make a major impact on the
effectiveness of a small firm.
An evaluation of the Durham Graduate Associate Programme found that 70% of SME
owner/managers believed that graduates had made “ a major contribution” to the business, and
65% of graduates were offered ongoing employment after the funding ran out. This was
particularly true of mature graduates and those specialising in engineering, science and IT.
Williams and Owen found that SMEs recruiting graduates saw the principal benefits in terms
of sales/client skills, management, new ideas and an external view of the business. Against this
the same firms identified non graduates as more practical, experienced, streetwise and willing
to take orders.
4.6
What sort of career patterns do graduates follow in SMEs?
One reason for lack of graduate recruitment into SMEs is the lack of knowledge, among
undergraduates, employers and careers advisers, about graduate careers in the sector. After a
year in employment most graduates are no longer thought of as “graduate recruits”, and their
skills and knowledge are merged into those of the organisation as a whole.
The general lack of good longitudinal data on the working of the graduate labour market after
the first months makes it difficult to define benefits for either side. Most available information
is based on evidence gathered in the very early stages of career (mainly through the First
Destination Survey, carried out within six months of graduation). This is heavily influenced by
factors like the differential take up of employment by subject of study, the short term impact of
economic cycles on recruitment, the proportions of graduates continuing study. Such evidence
is therefore a poor indicator of the impact of a graduate on a firm 5 or 10 years after
graduation, or of continuing professional development or post experience education at degree
12
level. Ironically, there is much better evidence of the benefits of student placement than of
graduate recruitment, and there is a clear need to gather better information on this issue.
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5. Issues in HE - SME relationships
5.1
Mutual perceptions
Studies of graduate recruitment into SMEs repeatedly find problems of perception on both
sides. Most graduates have no clear perception of SMEs or what work in them would be like,
while most SME managers’ views of the academic world, and of the graduates it produces are
based on outdated stereotypes. This is especially true of managers with no direct experience of
HE (as student or parent). In 1993 Johnson carried out a series of qualitative interviews with
owner managers in the North East, and identified the following perceptions of the contrast
between the academic and business worlds.
Business world
Academic world
practical
sheltered
the real world
insular
the big wide world
protective
money and time oriented
divorced from reality
fast
useless
hard
impractical
results orientated
lack of pressure
75% of their interviewees expressed doubts of the ability of graduates to make the cultural
leap, described graduates as arrogant and elitist, unwilling to “muck in” and communicate with
people less well educated than themselves. Recruiting a graduate was thus a serious risk they
were reluctant to take.
In 1993 the Welsh Development Agency surveyed 500 private sector firms. Asked what
advantages there might be in employing a graduate they responded:
50% no advantage
15% rapid availability (since not already employed)
7% fast learners
5% technical knowledge
3% more intelligent
13% other advantages
7% no answer
Asked what disadvantages they perceived they responded:
42% no disadvantage
23% over qualified
10% lack of experience
9% too expensive
4% likely to leave
10% other disadvantage
2% no reply
Asked how rapidly they expected a new graduate recruit to become effective, 50% estimated
that this would take over 3 months.
14
In 1996 Williams and Owen reached similar conclusions, but divided respondents into those
who did and those who did not employ graduates. Both groups identified knowledge, new
ideas and specialist skills as advantages of employing graduates, but significantly, only those
who did employ graduates identified ability to learn, communication and management skills,
which may imply a narrower vision of the potential of graduates in the non-graduate
employers, or perhaps a weaker orientation towards learning and change in those organisations.
On the graduate side the issue is less about unhelpful perceptions than no perceptions at all.
Employment in an SME is not something which is considered, and in general graduates have
no idea what they would expect. Williams and Owen found some suggestive evidence that
students in “old” universities perceive SMEs as places to gain varied experience as a first step
in a career, while students in “new” universities see them as places where they might grow
along with the firm, with more opportunity for autonomy and responsibility.
In both cases the most effective way of overcoming preconceptions, apart from direct
experience through carefully managed placements and projects, is word of mouth. Both
graduates and SME managers are more likely to be influenced by the personal testimony of
their peers than by advertising material or external consultancy. Approaches which provide the
opportunity for face to face contact with successful examples are the most likely to change
perceptions.
It should also be noted that these perception problems relate mainly to “traditional” new
graduates in their early 20s. However, a majority of students in higher education are now
mature3, and most of these come to higher education with some substantial experience of the
world of work, albeit often in a field or role which they do not wish to pursue after graduation.
Their entry routes to the labour market are probably more varied (though they have not been
extensively studied), and they may well find it easier to enter SME employment than younger
graduates. However, this is too recent a development to have been properly studied, and it is
likely that most studies, and their respondents have assumed the traditional model.
5.2
Information for undergraduates
In general undergraduates have easier access to information about large firms than small ones.
Undergraduates also are under increasing time pressure - many face increasing academic
workloads and a majority now undertake some form of part-time employment for financial
reasons while studying. Thus they have less time to find out about firms, and a growing
proportion of those who have not secured a job offer by the beginning of their final year are
choosing to concentrate hard on academic work in their final year in order to achieve a good
degree result4, deferring job hunting altogether until after graduation. Developing ways of
improving information about SME employment is a priority, and Williams and Owen
recommend the creation of sub-regional databases to help with matching, of the kind being
piloted by some Business Links and by some of the DfEE’s “Using Graduate Skills” projects.
5.3
Information for SMEs
Although HE has much potential to support the development of SMEs, most SME managers
are ill informed about HE as it has developed in recent years, and about the skills it can
produce. Furthermore, the sector is dominated by non-graduate managers, who have no direct
experience of HE, and are much less likely to recruit graduates. SME managers also have little
time to attend conferences, meet visitors or read publications, and often assume that
universities have little to offer them.
3
Defined by DfEE as over 21 at entry to undergraduate programmes, and over 25 at entry to
postgraduate programmes
4
In an increasingly competitive graduate job market this is critical, because many employers use the
degree result as a first stage screening of applicants - a lower second or third class degree may mean not
being considered at all by many employers.
15
As the Business Link network becomes established it may become a way in which SMEs can
be helped to identify needs and the potential of HE to support businesses and human resource
development. TECs, too, have become increasingly interested in, and better informed about,
HE and may provide some links through Investors in People. It is possible that the arrival of
new technologies can help to bridge this gap through the creation of databases of resources, of
which the Welsh “Prosper” database is an interesting model, providing details of SMEs for
students and graduates, and enabling them to place their CVs on the database, allowing
employers to search for relevant expertise.
5.4
Human resource strategies
The decision to recruit a graduate, to offer a placement or to support an existing employee in
upgrading their skills and knowledge all represent a significant medium term investment of
time and money for the firm. However, SMEs, and small firms in particular, rarely have
developed human resource management strategies. Their survival requires them to operate on
the basis of rapid response to their environment, and deal with skill needs as and when they
arise. They are thus less likely than large firms to have formal procedures for identifying
human resource needs, and for planning their response to them, and although the development
of such a strategic approach is a central element of the Government’s Investors in People
scheme, this is only slowly penetrating smaller firms. Many firms need assistance in
developing such strategies, and in analysing skill and knowledge shortages.
It is important to recognise that the qualities which an SME seeks in a graduate may be
different from those sought by a large firm. The experience of Durham GAP scheme suggests
that the graduates who are most successful in small firms tend to be those with good A level
scores (which demonstrates high intellectual ability and the skills to operate within an
externally imposed framework) rather than embryo entrepreneurs with strong leadership skills
(who tend to challenge the owner manager, be disruptive and/or leave quickly).
5.5
Recruitment
Staff recruitment is a major cost for all firms, but especially for SMEs, and doubly so when
they are seeking to recruit graduates for the first time. Advertising a vacancy typically
generates a vast quantity of application forms and CVs and consequent workload for managers,
and graduates without any previous work experience can be very difficult to assess. Some
graduate or student placement schemes offer help in this matching, and Hanage, Johnson and
Mullen report that SME managers often welcome assistance with the first stages of selection,
though they prefer to make the final decisions themselves from the resulting shortlist.
A number of schemes have sought to overcome this problem, by sharing the costs, or creating
graduate employment agencies of some form. In South Yorkshire, the Graduate Link initiative
has been created to provide a single point through which SMEs in the region can publicise their
vacancies to job seeking students in the 12 participating universities and colleges.
An alternative approach, and one traditionally adopted by some large firms, is to use student
placements as a mechanism for identifying and “trying out” likely potential employees.
However, the planning and management of such placements is critical to their success, and
lack of time for this is one cause of the relatively low participation of SMEs in student
placement, which is in turn another way in which they fail to benefit from opportunities taken
up by larger firms. Schemes like the Sheffield PLUS initiative, which provides a placement
recruitment agency can provide a single point of access to the University for SMEs with
placement opportunities, and help to ensure a match between student and SME. The Durham
GAP initiative plays a similar matching role in relation to unemployed graduates.
The recruitment process itself can also cause problems. Unlike the traditional graduate
recruitment schemes of large employers, SMEs usually recruit against a specific and
immediate need, and tend to advertise only in local press. Often such advertisements do not
16
suggest that the job might be of interest to a graduate, and additional information on the firm or
the job may not be available.
5.6
Support for new graduates
SMEs are not in a position to offer the new graduate the kind of support in establishing
him/herself in a new job which is common in large graduate recruiters, but new graduates often
also need to develop specific skills before they can be fully effective. Graduate Gateway, and
Modern Apprenticeship type schemes typically try to address this by offering some formal
tuition, usually based in the HE institution. Such tuition is often designed to lead to a formal
qualification like NVQ3 in Supervisory Management. Bolton Business School bases its
programme around the four MCI areas of managing people, finance, information and
operations.
Mentoring of new recruits by more experienced colleagues (in the same firm or another) is
another way of overcoming some of the difficulties of adjusting to work in an unfamiliar
environment. It can reduce stress and pressure on line managers, but does, of course, place
extra load on the mentor.
SMEs can reduce the costs or risks of recruiting graduates for the first time by sharing
expertise or resource with others. One approach is through larger firms in the supply chain,
which often have better links into HE, and better systems for supporting staff, as well as the
motivation to ensure that their suppliers are well equipped with skill and knowledge. Some
projects have used this approach to build links into the SME sector.
A second approach is through trade and industry based bodies, including Trade Associations,
and the new National Training Organisations (NTOs) which are replacing the former Industry
Training Organisations and occupational standards Lead Bodies. NTOs will naturally have an
interest in the human resource base of their industries. Some , for example the Meat and Glass
industry bodies, have been exploring strategies for providing support to SMEs through central
recruitment or placement initiatives.
5.7
Coordination of initiatives
Graduate recruitment is only one of the options open to SME managers. The Government’s
review of business support in 1996 identified over 200 separate support services available to
smaller firms. Business Link advisers exist to help SMEs to find their way through them, and
it is important that the use of graduates is one of the options on the menu of resources available
through Business Link. However, there are other areas where agencies and service overlap,
often without adequate co-ordination, and with conflicting regulations. Initiatives to do with
training and the unemployed, like Training for Work are often used to support graduate
recruitment to SMEs, but are constrained by regulations designed for other purposes. Perhaps
most importantly, there is little communication between the world of SMEs and the HE
curriculum itself, although there is a growing acceptance in HE that the development of
employability in graduates is a legitimate objective of HE.
5.8
Funding of schemes
Although there are long term benefits to the SME from graduate employment, it calls for an
initial investment of time and money which can be unrealistic, especially for the businesses
with least previous experience. In practice, external funding has often proved necessary, and a
variety of routes have been taken in the past. They include funding related to unemployment
(e.g. Graduate Gateway) which is constrained by rules related to unemployment rather than
business performance. This can limit who is eligible to participate and give precedence to
qualification outcomes rather than business benefit. Alternatives include European funds
including European Social Fund and Regional Development Funds. These suffer from
administrative complexity, and resources are only available in some areas or regions. The
17
Single Regeneration Budget has also been used (on Tyneside “Graduate Support and
Development Programme” for example).
In many cases funding is precarious, and schemes cannot rely on such sources for long term
schemes. This imposes constraints on what can be achieved, can discourage the creation of a
reliable infrastructure which would make marketing on a large scale possible, and can
encourage the development of models which are in themselves interesting, but cannot be scaled
up for more general use.
5.9
Changing qualification structures
The kind of graduates available for employment may also be changing as a result of changes in
the structure of HE qualifications. On one hand, the widespread adoption of modular degrees,
and the (less widespread) adoption of credit based qualification systems, make it possible to
identify more clearly what an individual graduate knows and can do. On the other, institutions
are producing a different mix of qualifications. One growing tendency is for first degrees to get
longer (as with four year programmes in sciences and engineering) or for more undergraduates
to stay on for a taught Masters Degree, sometimes linked directly with a particular firm.
Project work linked to such programmes, and substantial placements associated with some of
them, can provide another means of bridging gaps, bringing graduate skills and knowledge at a
higher level into firms with no history of graduate recruitment. One approach being explored
by several universities, including Leeds, is the City and Guilds Licenciateship qualification,
which can provide a tool for accrediting work related learning within an academic programme.
Other institutions are experimenting with offering units of NVQs within degree programmes,
especially through work placements.
5.10
Upgrading existing staff
One major way in which SMEs upgrade their skills and knowledge base is through the training
and education of their existing employees. Although this takes longer than buying in the skills
(always a concern for SMEs which work on short time horizons), for many SMEs it is the least
risky strategy, and can often be the cheapest, if learning can be tailored to the firm’s needs and
fitted around the firm’s timetable. Sometimes skills are transmitted by using graduates in the
workforce as trainers. Recent DfEE work suggests that the presence of graduates in a
workforce can reduce resistance to further learning among other workers.
However, much of the support which HE institutions can provide comes in the form of formal
courses, and in higher education, and often in government funded programmes, accreditation
and qualifications are seen as crucial. A programme which does not lead to qualification is not
usually seen as of the same status as one which does, and funding is often dependent on
achieving qualification results. To bridge the gap between this culture and that of the employer,
many HE institutions have introduced schemes for the accreditation of work based learning or
of prior experiential learning (APL), which recognises the learning undertaken in the course of
normal work for credit in the academic framework.
For employers, on the other hand, qualification is rarely important, except where it confers a
licence to practice, as in some professions. Some employers are actively hostile to accrediting
learning programmes, since qualifications make employees mobile and liable to be “poached”
by other employers.
5.11
Disseminating good practice
There have been many experiments in encouraging graduate recruitment to SMEs, and some
successful schemes have now been running for several years. However, the collective lessons
of this work have not all yet been distilled into models which are transferable to other
institutions and regions
Similarly, many of the issues are best addressed at regional rather than national level, and there
are experiments in developing regional models, like the “Graduate Link” project, which
18
provides a vacancy matching service for all the Universities in South Yorkshire. The DfEE’s
Regional HE Development Fund is supporting a number of such initiatives, and models for
dissemination need developing and disseminating.
5.12
Using technology
Many of the most effective examples of HE/SME work involve close tailoring of learning
programmes to the needs of the individual firm, but this can make the design and delivery of
programmes prohibitively expensive for the HEI. Sometimes Open Learning, or technology
based learning can help to overcome such barriers, enabling firms to upgrade the skills of
current staff. Graduates and placement students might play a role in assisting with the setting
up and running of such schemes.
Technology also offers the possibility of improving communication between HE and SMEs in
other ways. The advent of electronic mail, video and computer conferencing all make easier
and more efficient communication possible, and a number of HE institutions already use such
technologies for monitoring and supervising placement students.
19
6. Schemes and Initiatives
This chapter identifies some current projects and programmes which aim to improve the take
up of graduate skills in SMEs. Some have this as their primary aim, while others achieve it as
an incidental benefit.
6.1
Pre university placement
A proportion of young people leaving school have always chosen to take a “year out”, to gain
wider experience or to earn money, between leaving school and entering higher education. The
Year in Industry scheme is one such opportunity, open to young people with high academic
qualifications at A level, before they enter University. It is open to young people studying any
subject but with particular emphasis on those seeking careers in engineering, science,
computing and mathematics. Young people carry out a planned one year placement, and are
paid by the employer. It is open to large and small firms, and regional officers identify
placements and recruit young people. In 1997 the scheme offered 500 placements in 250
companies. A very high proportion (25%) of Year in Industry students go on to gain 1st class
Honours degrees, which suggests either that the scheme’s selection process is very effective at
identifying the most able students, or that the experience provides a focus and motivation for
their subsequent studies.
6.2
Short placement
Most HE institutions now incorporate short placements in some of their courses, and the
number is growing. Placements may vary from a week or two to several months, and
sometimes involve part-time placement (1 or 2 days a week). Some institutions, like the
College of Ripon & York St.John, require all their students, whatever their subject of study, to
undertake a work related studies module, incorporating a short placement. In some institutions
the students themselves are expected to find the placement, in others the course staff do so. In
others there is some form of central clearing house for finding placements, which may be run
by the Graduate Careers Advisory Service, the Students Union or some other agency.
While, in some cases the principal emphasis is on obtaining real experience of the workplace,
most focus on undertaking a specific project of benefit to the firm. The Sheffield PLUS scheme
is an example, where a university based service provides a brokering service between
undergraduates seeking project placements and local firms with projects to tackle. Some
schemes have very specific targets: London Guildhall University, for example, has a project
aimed at placement in ethnic minority owned SMEs.
The STEP programme operates on similar principles at national level. Its placements are not
directly related to the academic curriculum and are carried out during the second summer
vacation. It selects undergraduates, and places them for 8 weeks in an SME to carry out a
specific project identified by the business. STEP is administered through local agencies on
behalf of Shell UK’s Enterprise Unit, and Shell run a scheme of high profile regional and
national Awards to publicise outstanding examples of projects. STEP currently organises 1500
such placements a year.
Placements also take place at postgraduate level. Sheffield Hallam University with its Business
Link and TEC have developed a scheme to integrate business support with a Masters level
business programme, providing project based placements to investigate and address the
international marketing strategies of the firms.
6.3
Long placement
The classic form of long placement is the “sandwich year”, traditionally undertaken by
students in fields like engineering, where the undergraduate enrols on a four year HE
programme, of which one year, or several shorter periods, are spent working in relevant
industry. During the placement period the student is paid by the employer (students on
20
placement do not receive maintenance grants). Well managed, such placements can provide a
clear focus to the academic learning and an opportunity to test theory in practice. Large firms
have often used them as an informal recruitment method, giving them the chance to try out an
undergraduate as a potential employee.
During the 1980s there was a concerted effort to improve the quality of such placements,
developing manuals and advice, and quality assurance systems to ensure that placement
students received proper support and guidance from both academic and workbased supervisors.
Some placement years are linked to “pre-placements” like the “student attachment” scheme
offered in Building Management at the University of Northumbria, where during the academic
year before the placement, students in pairs make two visits a term to a firm, to prepare for the
placement, and develop an understanding of the academic and career implications of it.
Traditionally the learning undertaken on a placement was only assessed on a “pass/fail” basis,
but in recent years a number of institutions have experimented with ways of accrediting it
through some form of certificate, or through assessment for units of a national vocational
qualification. The resulting new graduate, equipped with a degree, a practically based NVQ,
and practical experience of the workplace, is likely to be substantially more employable.
A number of specific schemes act as brokers and support to long or short placement in
particular industries or academic fields (either as their principal objective, or in association
with other work like technology transfer). Examples include the national scheme for
engineering which begins with Year in Industry and runs through to postgraduate level,
MEDILINK, which brokers placements in medical technology based SMEs, the Environmental
Projects Forum, which organises environmentally related projects, mainly in the voluntary
sector, in the Mersey Basin region, and ENVIRONET, which uses placement students to carry
out environmental audits in SMEs.
6.4
Part-time work
In recent years there has been a rapid expansion in the number of students who undertake parttime work during term time or full time work during vacations, in order to maintain themselves
through their studies. In 1993 Ford found that 57% of students undertook vacation work, and
29% part-time work during term time (38% of them more than 10 hours per week), mainly
because of financial pressures. Half of them were working in catering, bar work and sales. By
1996 the DfEE’s Student income and Expenditure Survey found that the proportion had risen
to 66% in employment outside the summer vacation, working for an average of 143 hours
during the year.
In general little, if any, opportunity is available for students to use this experience explicitly to
develop and record their own skills, although some institutions are considering this. However,
potential graduate employers do value this kind of experience, as providing evidence of ability
to cope with the workplace, and an understanding of the pressures of “the real world”. In some
institutions services now exist to act as recruitment or brokering agencies for such work. Some
are run by students themselves through Students Unions, others by the Graduate Careers
Advisory Service or some other unit. Some such services apply quality controls in terms of the
kind of work, or minimum levels of pay, which they will accept. Some provide more detailed
support and matching than others. As with placements, this route can give the employer an
opportunity to try out the use of graduates in an organisation which has not recruited graduates
before, to tackle a particular project or problem, or to try out a potential recruit.
6.5
Recruitment at graduation
The Graduate Careers Advisory Service of each HE institution is the principal brokering
agency at this point, with the most comprehensive access to information about the university’s
graduates, and about firms locally and nationally.
However, there is also a growing range of specialised services for particular purposes. The
following are examples:
21
Product development - Durham University’s “Product Champions” initiative
is designed to support product development in SMEs. The SME pays the
graduate’s salary, and the university provides ongoing support for a year, with
training and mentoring for both graduate and firm, and group.
Firms employing graduates for the first time - The “Graduate Associate
Programme” (GAP) mounted by Durham University, supports the first 12
months of employment of new graduates in firms which have not employed
graduates before.
Disabled graduates- Coventry University runs a specialised scheme to
support the use of disabled graduates in communications, informatics and
information design while Sheffield Hallam University runs a “Fast Track”
programme offering them work experience and a management qualification.
Export development - “Gateway to Export” at the University of Wales,
Swansea, offers a six month placement scheme for languages graduates
specifically to work in export related SMEs.
Whole industry schemes - The Glass Industry Training Organisation is
running a scheme which places graduates in SMEs in their industry to carry
out consultancy projects in firms ripe for growth and where the potential for
continuing employment is therefore good.
6.6
Schemes for unemployed graduates
A range of schemes exist to assist the recruitment of unemployed graduates. “Graduate
Gateway” is the oldest model, operating in Sheffield, Loughborough, Salford and Liverpool
(among others), while “Graduates into Employment” in Calderdale and Kirklees and in East
Lancashire are similar. Most are funded through the Training for Work programme and consist
of a period of formal training (varying between 6-12 weeks) followed by a placement, usually
totalling six months in all. The graduate receives benefit plus £10 per week. Some such
schemes, like GRADSTART mounted by Teesside TEC and local training providers,
incorporate a level 3 NVQ in supervisory studies. One of the largest of these schemes is the
Merseyside Graduates into Employment scheme run jointly by Liverpool University and the
Merseyside Innovation Centre, which places 200 graduates a year, of whom 70% find jobs as a
result.
6.7
Teaching Company Type Schemes
The Teaching Company Scheme (TCS) is a programme focused on academic-industry
technology transfer, sponsored jointly by five government departments and four research
councils. It enables firms of all sizes to acquire new technologies, processes or methodologies
in virtually any business related subject. The Scheme brings together one or more firms with a
University department with a background in the technology or process to be transferred. The
university recruits one or more post-graduates (“TCS Associates”) who will each be based in
the firm for about two years. By overlapping Associate appointments, individual programmes
may last for four or five years if necessary. Associates are supervised jointly by an academic
from the university and a senior manager from the firm. They receive additional businessrelated training and may read for a higher degree.
There are currently about 620 individual TCS programmes in operation with over 1000
Associate places. In 18 universities there are “TCS Centres for Small Firms” where SMEs can
get specialist help and advice about how the scheme can help them. Access is also available
through Business Links.
TCS sponsors pay up to 70% of the costs of the programme, on a sliding scale dependent on
size of firm and how many programmes its has had before. The scheme is managed on behalf
of the sponsors by the Teaching Company Directorate of DTI, which includes a national
22
network of individuals who help to broker individual programmes and ensure that, once
established, they run smoothly.
In 1996 the DTI launched a new scheme, College Business Partnerships, which is similar to
TCS, but aimed specifically at SMEs in need of more mundane technologies, and operated on a
shorter timescale. A Partnership enables people with qualifications at NVQ level 4 or above to
undertake a one year placement in an SME to transfer technology from an FE college or
university. The scheme is sponsored by DTI, the Scottish and Welsh Offices and the Northern
Ireland Office, managed by TCD, and accessed through Business Links.
There are other schemes of similar type and purpose to TCS. One example is the Company
Associate Programme (CAP), run by Leeds Metropolitan University, which offers similar
opportunities but with rather less formality, and closer involvement of local Further Education
Colleges. The graduate is employed by the University which manages the personal support and
training, while the graduate works as an Associate in the firm on a problem identified by the
firm. The University is responsible for marketing, approval and quality assurance of the
schemes, and provides a Regional centre to build links between FE and HE institutions and
small firms to share experience and resources
6.8
Graduate start-up
Relatively few graduates start their own businesses immediately after graduation, but a number
do so, and some schemes exist to support this. In the late 1980s and early 1990s the national
Graduate Enterprise Programme was run on a regional basis with sponsorship from DTI. It
helped a large number of graduates to successfully start their own businesses. Since then there
has been little funding for graduate business start-ups although interest is now reawakening.
Current examples include Manchester TEC’s “Campus Ventures” which provides “incubator
units” for graduates starting new businesses, and “Headstart” and “Meteor”, which promote
innovation and business start up in South Yorkshire5.
6.9
Apprenticeship schemes
One barrier to using graduates for SMEs is the cost of recruitment and induction. A number of
projects are exploring strategies for overcoming the initial recruitment costs and the costs of
supporting a new graduate during the first year of employment. Some are also linking this to a
formal qualification, in management or some specialist field.
The “Catalyst for Change” project mounted by Sunderland University with Sunderland City
TEC provides consultancy support for the recruitment of graduates, linked to other support
through Business Link. The graduate has access to the expertise of the university, and support
from a business mentor, while the SME has consultancy on its needs and the precise role of a
graduate in meeting them. The “Skillsmatch” project mounted by Thames Valley University
and its partners, provides tailored graduate selection, a month’s front end training for the
graduates and continuing mentor support leading to an NVQ, as does the University of Luton/
Bedfordshire TEC’s “Graduate Apprenticeship Scheme”. Some initiatives, including Sheffield
TEC, are using the Modern Apprenticeship scheme to provide a similar kind of link between
the first year of employment and a vocational qualification.
A more radical approach seeks to bridge the gap between higher education and work in an
SME by linking a final year project to ongoing employment. The Bolton Institute, with Bolton
& Bury TEC and the East Lancashire TEC are mounting “Seamless Transitions” in electronics.
Here the firm effectively recruits the individual at the beginning of the final year, and the
student’s final year project is then based in the firm, leading directly to ongoing employment in
that firm, with the Institute providing support to the new employee through the first year in
employment.
5
Organised by Barnsley and Doncaster TEC, with the Barnsley Business Centre, Sheffield University
and Sheffield Hallam University
23
6.10
Workbased learning and continuing professional development
Recruiting a new graduate is not the only solution to a low skills problem for an SME. For
many firms, the best way of developing their skills and knowledge base is through upgrading
existing staff, rather than recruiting new ones. Although, in the short term, there is a loss of
working time, experienced staff are likely to be able to relate their learning more directly to the
needs of the workplace, and will become effective in their new roles more rapidly, since they
do not then need to learn the disciplines and politics of the organisation. There can also be spin
off benefits from the individual passing on learning to workmates, and in the strengthening of
links between the firm and the HE institution.
Most higher education institutions offer a range of approaches to assist in this process. In some
cases this is centrally co-ordinated through a department of Continuing Education or a
Regional Office, in others, work is organised directly through relevant departments. 94 higher
education institutions are currently receiving development funding specifically for this purpose
from HEFCE. Schemes like the Portsmouth Partnership Degree, allow employees to plan and
undertake an individually designed learning programme, combining credit for previous
learning, learning in the workplace, and units of study in the university to lead to a full higher
education qualification. Less formal programmes, negotiated with individual learners or firms
for a group of employees are commonly available. Some institutions will offer programmes
linked to consultancy and technology transfer, enabling the learning to be very directly targeted
at the firm’s needs.
The Durham “Young Managers’ Scheme” provides training and development opportunities to
young graduates (or graduate equivalents) who are already employed in small businesses and
are taking on more of a management role. It leads to a University Certificate in Management
Studies, and the option to work towards a level 4 NVQ in Management.
Where SMEs employ qualified professional staff, membership of the professional body may be
a requirement to practice legally, and in a growing proportion of professions, continuing
professional development is a requirement of remaining a member. Many professions, from
Law to Engineering, have an established policy and framework for CPD, as well as publishing
guidance on good practice. Often universities are closely involved in the planning and delivery
of such programmes. Sheffield Hallam University in partnership with the Royal Institute of
Chartered Surveyors is exploring the operation of professional training requirements in SMEs.
A similar project is being carried out in the Engineering Industry, led by Brunel University
with the Engineering Employers Federation.
The DTI’s Integrated Graduate Development Scheme (IGDS) funds schemes to provide
support for the professional development of graduates through industry based organisations.
Most work based higher education does not lead to formal degree level qualification, bus a
significant proportion of employees are in fact engaged in study for degrees. Once again, this
correlates closely with size of firm. Williams and Owen found the range extending from 6% of
employees in micro firms in manufacturing and construction studying for degrees to 58% of
employees in Transport, Communications and other services.
6.11
Other Initiatives
Promotion
A small number of initiatives are actively seeking to promote the principle of using graduate
skills in SMEs. One example is the “Unlocking Potential” scheme mounted by Devon and
Cornwall TEC with Exeter University and the College of St Mark and St John. Gloucester
TEC is leading a project which is producing promotional materials to encourage the take up of
graduate skills in SMEs.
Brokerage and recruitment agencies
The Graduate Careers Advisory Service provides by far the largest and best established system
for matching individual graduates with particular opportunities. However, a range of new
24
services are emerging, some of them developed by the Careers Services themselves, to
strengthen this process. The “Graduate Connections” service run by a partnership of Durham
University and County Durham and Darlington TEC is an example, as are the “Project Clinics”
provided by Teesside University, the “Training for Industry” service offered by Manchester
TEC, and the “Graduate Link” service in South Yorkshire.
Further examples exist in the North West (Chester, Ellesmere Port and Wirral HE Business
Partnership); Tyneside (“Graduate Direct North East”); University of Liverpool; Dudley
(West Midlands TECs with University of Wolverhampton);
Databases
There is a small but growing number of databases which seek to support graduate entry into
SMEs. The longest established is the Welsh PROSPER database, funded by the Welsh Office,
which provides details of 8000 companies in Wales, an ongoing vacancy bulletin, details of
placement schemes and opportunities, and an opportunity for graduates to enter their CVs for
searching online by employers.
A similar initiative is being developed in Suffolk by Suffolk College with BT and others, and
in South Yorkshire through “Graduate Link”.
6.12
Research and development work
There are many projects in progress to develop new models and approaches or to increase
understanding of the nature of the graduate SME relationship. The DfEE, through its Higher
Education and Employment Division, is supporting a number under its “Using Graduate
Skills” and “HE Business Partnership” programmes, including a review of the costs and
benefits of graduate employment in SMEs by Birmingham University and a review of local
HE/SME links by Host Consultancy. The Department’s own Analytical Services Division is
conducting a study of the number of graduates entering SMEs and the factors affecting their
take up.
Each year since 1993, Durham University Business School has run a national “Graduates for
Growth” conference, sponsored by the DTI. This has proved very successful in helping
networking between HEIs, TECs and Business Links, and it has been suggested that similar
events should be mounted on a regional basis. Leeds TEC is convening a national network of
TEC staff concerned with TEC/HE issues in general, and as part of this is conducting a review
of issues and barriers affecting SMEs in recruiting graduates.
25
7. Issues for Action
This report has indicated some of the dimensions of the policy problem which faces all those
concerned with the development of an effective high skills SME sector. It suggests that a very
wide range of activity is going on, but on a relatively piecemeal basis, and that there are a
number of major challenges which need to be addressed. Most of the issues identified below
can be addressed at local level by TECs, HE institutions, Business Links as well as at national
level.
1. Marketing to SMEs
SMEs need to be convinced of the relevance of graduate skills
and knowledge to their business objectives. This calls
particularly for good evidence of business benefit, and
convincing case studies
2. Marketing to students
Students need to be encouraged to see SMEs as positive career
destinations, supported by experience of successful placement
and project work (their own or that of friends).
3. Improving recruitment
and “matching” processes
SMEs need support in selecting recruits. Good examples exist
of brokering and placement agencies which carry this out, but
they are few, slenderly resourced, and unevenly distributed.
4. Developing
“apprenticeship” and
induction
The first year of a graduate’s employment in an SME is a
critical period for both parties. A variety of effective schemes
exist for supporting both, and their benefits are evident. Again,
such schemes need generalising, to ensure that they are
available to graduates of all institutions and to SMEs
throughout the country.
5. Support for SMEs in
projects and placements
SMEs can benefit greatly from well managed placements, but
they consume time and energy which is in short supply. The
development of partnerships between agencies, and of agencies
to broker placements across regions or industries would be
very helpful
6. Curriculum change in HE
SMEs seek a variety of qualities in graduate recruits, but
common requirements are skills in teamwork, project
management, presentation, communication and problem
solving. Much effort has been devoted to developing ways of
embedding these in the HE curriculum, and much is known
about it. However, this knowledge is not sufficiently widely
disseminated across all institutions and subject fields, and not
all academic staff see its relevance.
7. Research on graduates in
SMEs
Current information about the early years of graduate careers
(after the first six months) is very incomplete. This makes it
difficult to convince employers, students and policymakers of
the concrete benefits of graduate recruitment to SMEs. Further
longitudinal research is needed.
26
8. References
8.1
Publications
Connor H. and Pollard J. What Do Graduates Really Do? IES Report 308
Coyne. J “Review of the ESRC Research Programme Outcomes” in Small Business Issues
ISBA Summer 1996
DTI Industry University Research Links DTI 1995
DTI SME Statistics for the UK DTI 1995
DTI Teaching Company Scheme Annual Report DTI 1996
ERES The Demand for Higher Education Students in Wales: a report for the Welsh
Development Agency 1993
ESPRC University Interactions with SMEs 1996
Ford J. Bosworth D. and Wilson R Part-time Work and Full-time Higher Education. In Studies
in Higher Education Vol 20 No 2 June 1995
Hanage. R. Graduates in Smaller Businesses - which ones will make good? Paper presented to
Technology Transfer and Innovation Conference. Durham University Business School 1994
Hanage R Johnson D. and Mullen D Employing Graduates for Growth Durham University
Business School 1994
Harvey L. Moon S. & Geall V. Graduates Work: organisational change and students’
attributes Centre for Research into Quality, University of Central England 1997
Hawkins P. Building HEI/SME Partnerships CIHE 1996
Institute of Employment Studies Annual Graduate Review (1996 edition is IES Report 296 by
Court G. Jagger N. and Connor H)
Institute of Small Business Affairs - annual conference and newsletter Small Business Issues
Jarrett D. The Interface Between HE and the TECs in Wales: Conference Proceedings.
University of Glamorgan 1995
Johnson D. Pere-Verge L. and Hanage R Graduate retention and the regional economy , in
Entrepreneurship & the Regional Economy 5 (1993) pp 7
Mason G. The New Graduate Supply Shock: recruitment & utilisation of graduates in British
industry NISER Report Series 9 1995
Regional Trends DfEE, 1996
Storey. D Understanding the Small Business Sector Chapman & Hall 1994
Watts A.G. Association of Graduate Careers Advisory Services. 1997
Williams. H and Owen G Recruitment and Utilisation of Graduates by Small and Medium
Sized Enterprises: final report to the Department of Education and Employment Policy
Research Centre, Sheffield Hallam University 1997
8.2
Active agencies
The following are some of the agencies and institutions known to be particularly involved in
work on SME/HE relationships. The list does not claim to be comprehensive.
Department of Education and Employment
Department of Trade and Industry
Durham University Business School
Warwick University Small Business Centre
Kingston University Small Business Centre
Federation of Small Business
27
Leeds Metropolitan University
Middlesex University Centre for Enterprise and Economic Development
Sheffield University
Sheffield Hallam University
Shell Technology Enterprise Programme
Small Business Bureau
Small Business Research Trust
TECs which have been particularly active in this field include - County Durham, Devon &
Cornwall, Leeds, Merseyside, Manchester and Tyneside
8.3
DfEE Funded Projects
In 1996 the Department for Education and Employment launched a number of projects
concerned with the entry of graduates into the labour market through two programmes:
Using Graduate Skills - is a developmental programme which sought to explore strategies for
enabling SMEs to make better use of new graduates and graduate level
skills within their organisations
Higher Education -Business Partnerships
- has similar underlying aims, but with a focus on supporting the
creation of ongoing partnerships.
The following projects were funded. Each will produce reports and dissemination activity, and
further information is available from the Higher Education and Employment Division of DfEE.
*** insert from HEED Briefing document ***
8.4
Acknowledgements
This paper was drafted for the Higher Education and Employment Division of the Department
of Education and Employment by Stephen McNair, with support from:
Fraser Galbraith, David Clark Associates
Dr Ian Harrison, Management Best Practice Directorate, DTI
Richard Hanage, Small Business Centre, Durham University Business School
Peter Hawkins, Whiteway Research International
David Lane, County Durham & Darlington TEC
Prof. David Parsons, Host Consultancy
Richard Pethen and colleagues, Sheffield University Careers Service
Karen Roberts, Leeds TEC
Liz Rhodes, Shell Temporary Employment Scheme
28
29
9. Index
A level, 16, 20
APL, 19
apprenticeship, 8, 17, 23, 24, 27
Association of Graduate Careers Advisory
Services (AGCAS), 6
Barnsley and Doncaster, 23
Birmingham, 25
Bolton, 17, 24
Brunel University, 25
Building Management, 21
Business Link, 16, 17, 20, 23, 24, 26
Calderdale and Kirklees, 22
Catalyst for Change, 24
Certificate in Management Studies, 24
City and Guilds Licenciateship, 18
College Business Partnerships, 23
Company Associate Programme, 23
Continuing Education, 24
databases, 15, 16, 25
Devon and Cornwall, 25
DfEE, 2, 19, 25, 29
Disabled graduates, 22
DTI, 2, 5, 9, 23, 25, 26, 28, 29
Durham, 9, 12, 16, 17, 22, 24, 25, 26, 28, 29,
30
East Lancashire, 22, 24
Engineering Employers Federation, 25
ENVIRONET, 21
Environment, 21
ethnic minority, 20
European Social Fund, 18
FE, 4, 23
GAP, 9, 16, 17, 22
Gateway to Export, 22
Glass Industry Training Organisation, 22
GRADSTART, 22
Graduate Associate Programme, 12, 22
Graduate Careers Advisory Service, 4, 5, 21,
22, 25
Graduate Careers Advisory Services, 4, 5
Graduate Connections, 25
Graduate Gateway, 9, 17, 18, 22
Graduate Link, 16, 19, 25
Graduate Support and Development
Programme, 18
Graduates for Growth, 26, 28
Graduates into Employment, 22
HE Business Partnership, 25
Headstart, 23
Host Consultancy, 25
Integrated Graduate Development Scheme, 25
Investors in People, 16
Leeds Metropolitan University, 23, 29
Loughborough, 22
M.Eng, 8
M.Physics, 8
Manchester, 23, 25, 29
mature, 15
mature graduates, 12
medical technology, 21
MEDILINK, 21
Merseyside, 22, 29
Meteor, 23
Modern Apprenticeship, 8, 17, 24
modular courses, 18
National Institute of Economic and Social
Research, 4
National Training Organisation, 10, 17
NVQ, 8, 17, 18, 21, 22, 23, 24
Open Learning, 19
Partnership Degree, 24
Product Champions, 22
Prosper, 16, 25
Regional Development Funds, 18
Ripon & York St.John, 20
Royal Institute of Chartered Surveyors, 24
Salford, 22
Seamless Transitions, 24
Sheffield, 17, 20, 22, 23, 24, 30
Sheffield PLUS, 17, 20
Shell Temporary Employment Scheme (STEP),
7
Single Regeneration Budget, 18
Skillsmatch, 24
South Yorkshire, 16, 19, 23, 25
STEP, 7, 12, 20
Student income, 21
Students Union, 7, 20, 21
Suffolk, 25
Sunderland, 24
supply chain, 10, 17
TCS Centres for Small Firms, 23
Teaching Company, 10, 12, 22, 23, 28
TECs, 8, 16, 20, 22, 23, 24, 25, 26, 28, 29, 30
Teesside, 22, 25
Thames Valley University, 24
the Training for Work, 22
Training for Work, 8, 17, 22
University of Luton, 24
University of Wales, 22
Unlocking Potential, 25
Using Graduate Skills, 25, 29
vacation work, 21
Wales, 11, 14, 16, 23, 25, 28
Welsh Development Agency, 14
work based learning, 19
Year in Industry, 7, 12, 20, 21
Young Managers’ Scheme, 24
30