Investors in People Special Report: Putting people first is a capital idea

If the words Investors in People mean nothing to you the chances are they will do in the next few months, provided you work for a medium- or large-sized firm. In the last year there has been a rapid rise in the number of organisations signing up to the government-backed standard, which is designed to make employers take investment in people as seriously as they take investment in plant and equipment.

Established in 1991, IIP got off to a slow start and meeting the government targets for companies achieving the standard by 2000 seemed a pipe dream as recently as a year ago.

But the latest figures from Investors In People UK, show the standard is likely to meet the target of 70 per cent of firms with more than 200 employees and 35 per cent of firms with between 50 and 200 achieving IIP recognition by the millennium.

Independent research just launched by training institute the Industrial Society confirms that there has been a rapid rise in take-up in the last year.

Yet a question mark hangs over IIP's role in bringing about a skills revolution in British industry. Although there are now just under six million people in companies working towards the standard, the vast majority of workers, almost three quarters, remain outside the net. Cash-strapped small employers have been slow to come on board and the biggest British firms have failed to take an effective lead. Does this mean IIP will become a kite mark for an elite band of organisations? Not according to the CBI, which came up with the idea for IIP in the first place.

Margaret Murray, CBI head of learning skills says, "That view is very old fashioned. What is unusual about IIP is its pick-up in a very short time - it goes against the whole Zeitgeist. What I can't understand is the blindness and reluctance to celebrate that."

Ms Murray argues that if you take into account workers in organisations with up to 49 staff there are more involved in IIP than the official figure of 28 per cent suggests. She also argues that the standard will never be relevant to huge numbers of workers because a third of the workforce is employed in very small firms and there are large numbers of self-employed individuals. "IIP is an organisational standard - if you're running a window cleaning company and there's only two of you it's not relevant," says Murray.

Murray also attacks the stereotype of the hard-nosed small employer. "We need some fresh thinking here. We know from our most recent research from the Department for Education and Employment how relatively easy it was for small firms to get IIP recognition. And the benefits to a smaller firm are more keenly felt." Nevertheless the CBI has proposed a voucher system to help small to medium-sized enterprises buy training needs analysis from consultants. The cost of IIP is an issue for employers. Even among the relatively enlightened membership of The Industrial society more than one in 10 survey respondents who decided against committing to IIP felt it was too expensive. Last year the Society found it cost the average organisation about pounds 127 per employee annually on training materials and just more than pounds 200 per head on external training facilities.

One employers' group, the Engineering Employers' Federation, asked the Government to offer a tax incentive in the last Budget for firms that win IIP recognition.

The move followed a survey of 5,200 engineering firms. Murray says EEF members were enthusiastic about it but, "There was a strong feeling among members, particularly among small and medium sized enterprises that an incentive to support Investors in People would encourage more companies to take it up."

The EEF's submission to the Treasury proposed that employers who achieve recognition should get pounds 100 per employee deducted from national insurance contributions.

Investors In People UK hopes firms will be persuaded to sign up by the business benefits of IIP which are endorsed by a series of reports. The latest Industrial Society survey finds that a third of IIP recognised firms found the biggest benefits of gaining IIP are that it more clearly links operational plans and human resource strategy, makes training more focused on business needs and improves training evaluation.

There is also evidence that IIP makes firms more competitive and profitable. A report by Cranfield School of Management in 1995, for example, found that IIP-recognised firms performed better in productivity, profitability and exports than other organisations. IIP has proved easier to get off the ground in some industry sectors than others.

The financial sector has been slow to get on board with few City firms committed to IIP. The construction industry is hampered by the fact that firms employ large numbers of temporary staff.

Take-up has also been uneven among business divisions of large firms. And Investors In People UK is currently attempting to get large firms to support their suppliers in gaining the standard.

There have also been doubts about whether IIP is penetrating the crucial parts of British industry. Last year a report from the Hambleden Group found that only 20 per cent of organisations recognised were fully fledged trading companies.

This is a statistic that annoys chief executive of Investors In People UK Mary Chapman. Chapman says the report was compiled from published financial reports and the findings were "totally misleading" because large corporations publish one set of results for the whole group.

The latest figures from Investors In People UK show that 70 per cent of staff in organisations working towards IIP are in the private sector. Despite these quibbles, the future of IIP seems secure although there remains the challenge of attracting small and medium-sized enterprises.

The Labour Party is considering, if elected, offering time-limited tax incentives for organisations achieving the standard, possibly national insurance reductions to both employers and employees.

The TUC is also strongly behind IIP but Bert Clough, senior education and training advisor, questions whether tax incentives for recognised firms will be enough. He suggests a grant to buy in training advice from Tecs or consultants at the beginning of the process, along the lines of proposals from the CBI may be more appropriate.

"Given restricted public expenditure you really have to target small and medium sized companies," says Mr Clough. "The issue is whether you give them a tax break at the end - probably they need more financial breaks when they're preparing to go down the IIP route."

Ms Chapman is not dismissing cash incentives out of hand. "I think that one has to be careful in considering any sort of incentive because the real incentive ought to be the benefits for the organisation," she says.

"But there is a view that says smaller organisations - because there are so many of them and more of them need to be encouraged - might well benefit from some additional kind of incentive."