Rover proves high skills aren't enough

17th June 2005 at 01:00
The collapse of the Rover Group is a Greek tragedy with a postmodern twist: the hubris of the four directors led not, as is traditional, to their own ruin but to that of their workers.

In 1996, John Towers CBE, the chief executive of the Rover Group, wrote an arrogant foreword to a book on lifelong learning: "We at the Rover Group Ltd are proud to be among the world's foremost "learning organisations"...

we invested in the empowerment of the people who work for us. I am glad to say that this strategy has worked like a dream.

"What we have achieved here lights the way to what can be achieved in every other sphere of life. Schools, colleges, universities, professional associations, even whole nations can learn something from our experience Their future lies in empowering (people) through improved learning conditions, and putting the focus on the needs of each individual learner."

If only it were that easy. I wrote then, and I still think, that reliance on this debased notion of human capital theory is dangerously naive. My continuing worry is that the leaders of the three main political parties are all signed up to the same simplistic nostrum as Mr Towers - and this is acting as a poor substitute for a proper industrial and educational policy. They give no indication of learning from Rover's debacle.

Let's be clear: the death of Rover wasn't caused by the workforce's lack of skills or flexibility but by decades of poor management which failed to invest in innovation or secure a niche in an overcrowded market. One could also point to Stephen Byers's earlier bungling when BMW disinvested in the company and the high rate of the pound; but the Rover directors must take much of the blame.

Will the four directors, however, pay for their stewardship of a once proud and flourishing British company? John Towers now enjoys a pension of pound;105,000 a year, being paid to him after working for the company for just five years. In the sharpest of contrasts, the 5,000 workers will get pound;280 for every year of service, up to a maximum of 12 years, or the princely, one-off sum of Pounds 3,360. How empowered do you think they feel now, Mr Towers?

Why does the theory of human capital have such a hold over politicians, commentators and captains of industry? It's difficult to decide whether they really believe in it or whether the theory gives them a convenient weapon to attack the education system for giving young people "low aspirations and skills". And just guess who will be blamed for these alleged deficiencies.

The theory also diverts attention away from the unwillingness of ministers to stand up to employers who don't train workers, the low standard of British management and the absence of an economic policy for manufacturing.

I'm emphatically not dismissing the importance of investing in human capital; I'm simply arguing that, on its own, it's not enough. Not nearly enough.

Without heavy investment in plant and technology, in research and development, and in innovation to improve the quality of goods and services, investment in human capital is unlikely to bear much fruit.

But will the politicians and senior industrial managers learn from Rover's collapse that investment in human capital is a necessary but not sufficient condition for prosperity? I doubt it.

Even Will Hutton, chief executive of the Work Foundation, wrote recently in The Observer about Rover's demise, that "the only solution is reskilling."

One of the reasons for Britain's failure to increase productivity is the obsession with increasing the supply of skills as the one and only prescription for economic success.

Let's just suppose that, with help from government and European grants, the 5,000 Rover workers are all re-trained. The current plan is to spend half the extra funds from government on training only up to level 2. Where will they then find 5,000 high-level jobs in the West Midlands? Are all these people who have been left in the lurch once going to undergo lengthy training in new skills, only to be stuck with low-skilled and low-paid jobs, if they get a job at all? To be betrayed once is scandalous, to be betrayed twice would be unforgiveable.

Now that Mr Towers has time on his hands, perhaps he could tell schools, colleges, universities and "whole nations" the lessons we can learn from his latest experiences. May I suggest a lecture from him entitled: What British industry can teach British education: let them eat skills; or perhaps A brief introduction to British capitalism: golden pensions for directors and tin-plate redundancies for flexible workers". It would be comic if it weren't so tragic.

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