4. Using people’s skills more effectively in Lithuania’s workplaces

As described in the previous chapters, Lithuania has been making progress in developing strong skills among youth and adults. However, it should also strive to use these skills as intensively as possible in the economy, workplaces and society to take full advantage of this initial investment in skills. In addition to activating the skills of people by ensuring that they have jobs, there has been growing awareness that the effective use of skills in workplaces helps to make the most of the skills that workers possess (OECD, 2019[1]). This chapter will examine how Lithuania could strengthen the use of skills in workplaces by assessing the factors that help to drive better skills utilisation.

The effective use of skills (see Box 4.1 for definitions) positively affects the performance of employees. For instance, studies using data from the OECD Survey of Adult Skills (a product of the OECD Programme for the International Assessment of Adult Competencies, PIAAC) demonstrate that a higher intensity of skills use in workplaces is associated with higher job satisfaction, wages and productivity (Figure 4.1, Panel A) (OECD, 2016[2]; OECD/ILO, 2017[3]). As a consequence, this has many benefits for employers (e.g. businesses that more effectively use the skills of their workers have, on average, higher output and are more innovative), as well as the broader economy and society, including by driving economic growth.

The organisation of workplaces is arguably the most important determinant of skills use. Practices known to positively affect the performance of employees and businesses are referred to as high-performance workplace practices (HPWP). These include work flexibility and autonomy, teamwork and information sharing, training and development, and career progression and performance management (Figure 4.1, Panel B) (see Box 4.1 for definitions). However, various other factors matter indirectly for skills use and the adoption of HPWP. For instance, skills use is affected by external factors such as the general economic context, local or regional skills landscapes, management capabilities, and the broader value chain (OECD/ILO, 2017[3]). Moreover, the extent to which skills supply is aligned with skills demand in the labour market is important for skills use: to optimally use skills, employees need to have the right skills for the job.

For Lithuania, the more effective use of skills and their effect on productivity, overall business performance, growth and innovation, could help to address the challenges linked to megatrends, as described in Chapter 1. To start, it could help to address the challenge of a shrinking working age population in Lithuania, which makes productivity growth, rather than a growing workforce, an increasingly important driver of future economic growth. In the longer term, enhanced business performance resulting from the better use of skills could be one of the drivers for raising the demand for skills by helping Lithuania to create jobs in more high value-added activities, remain internationally competitive, and re-position itself in the global economy (e.g. by participating more and moving up in global value chains) (OECD, 2017[8]). The better use of skills could also support the adaptation of the economy to the challenge of climate change by supporting the growth of “green” economic sectors that mostly comprise high value-added and labour-intensive services (OECD, 2017[9]). Better using skills could also support the transition to jobs that are less vulnerable to automation. This is particularly relevant for Lithuania as 63% of jobs have a high or significant risk of being automated – one of the largest shares in the OECD (Nedelkoska and Quintini, 2018[10]).

The need to optimally benefit from the skills of workers has become even more relevant in the context of COVID-19. After an expected mild economic contraction of around 2% in 2020 (OECD, 2020[11]), the better use of skills could contribute to the economic recovery of Lithuania from the COVID-19 crisis through its effect on productivity and business performance. COVID-19 has already created a major challenge for the use of skills in workplaces as businesses had to rapidly reorganise their workplaces to contain the spread of the virus. The resulting expansion of teleworking, with 37% of Lithuanian employees working from home in April and May 2020 (Eurofound, 2020[12]), likely helped to strengthen the use of some types of skills (e.g. digital skills, team collaboration). However, it probably also temporarily negatively affected the use of other types of skills as changing working arrangements created new challenges for workers and managers.

This chapter examines the role of skills use and the transformation of workplaces in raising Lithuania’s overall skills performance. It also considers the role of more effectively using skills to achieve wider policy objectives – thus complementing skills development policies (as described in Chapters 2 and 3) – including improving business performance, moving towards more high value-added activities, and moving up in global value chains. These are highlighted in strategic documents such as the National Plan for Progress 2021-2030 (Nacionalinis pažangos planas [NPP]), Lithuania 2030 (Lietuva 2030), and the Draft Lithuanian Programme 2021-2027, which sets the direction of European Union (EU) funding for the period 2021-2027 (Table 4.1).

Given the many factors directly or indirectly affecting skills use and workplace practices, a broad range of policies need to be considered, including those pertaining to industry, innovation, economic development and human capital development policy. As a result, most ministries are involved in the development of relevant policies, but two ministries could be considered most important. The Ministry of the Economy and Innovation (Ekonomikos ir inovacijų Ministerija [EIM]) has the leading role in creating a supportive business environment (e.g. human resource [HR] development, support for small and medium-sized enterprises [SMEs]), investment (e.g. attracting foreign direct investment [FDI]) and innovation (e.g. cluster policy). In addition, the Ministry of Social Security and Labour (Socialinės apsaugos ir darbo ministerija [SADM]) has broad responsibilities for labour and employment, social integration, families, gender equality, and more. For skills use, the Labour Law unit within the SADM is particularly relevant through its work on labour relations, illegal work, undeclared work and remuneration.

Responsibilities for the provision of support for businesses in Lithuania are spread over several organisations. The government agencies Enterprise Lithuania and Invest Lithuania, which are under the responsibility of the EIM, are particularly relevant for strengthening workplace and business performance, and therefore could play a vital role in strengthening skills use in Lithuania (Table 4.2). Other agencies and organisations that affect the demand for skills (e.g. by strengthening innovation in workplaces) could also be relevant for strengthening skills use.

Business confederations play a vital role in representing the business sector in Lithuania. They support skills use by contributing to a stronger business environment where good workplace practices are shared across the business sector. Some of the largest confederations are the Lithuanian Business Confederation (Lietuvos verslo konfederacija – LVK), which unites 32 business associations and over 3 500 businesses; the Lithuanian Employers’ Confederation (Lietuvos darbdaviu konfederacija – LDK), which represents primarily SMEs; and the Lithuania Confederation of Industrialists (Lietuvos pramonininkų konfederacija – LPK), which is an umbrella organisation that unites 51 branches and 5 regional associations comprising over 3 000 medium and large industrialists and employers. There are also a number of chambers of commerce active in Lithuania, such as the Association of Lithuanian Chambers of Commerce, Industry and Crafts, and the Chamber of Agriculture of the Republic of Lithuania. The Investors Forum (Investuotoju forumas), which is a business association, brings together the major investors in Lithuania.

Employees are represented by a large number of trade unions. Some of the largest labour organisations in Lithuania are the Lithuanian Trade Union Confederation (Lietuvos profesinių sąjungų konfederacija – LPSK), which is the largest trade union centre in Lithuania representing over 25 unions; the Lithuanian Trade Union “Solidarumas”; and the Lithuanian Trade Union “Sandrauga”.

These employer and employee organisations are also all members of the Tripartite Council (Lietuvos Respublikos trišalė taryba), which is the main tripartite body that provides advice on socio-economic and labour matters. There are also a number of other councils and committees that affect policies aiming to raise demand for skills and strengthen workplace practices. These include the Human Resources Working Group of the National Platform Industry 4.0 (Nacionalinės platformos Pramonė 4.0 Žmogiškųjų išteklių darbo grupė), which aims to increase and strengthen HR competitiveness and productivity by integrating digital solutions and technology; the Science, Technology and Innovation Council (Mokslo, technologijų ir inovacijų taryba), which prepares insights, visions, plans and proposals for science, technology and innovation; and the SME Council (Lietuvos smulkiojo ir vidutinio verslo taryba), which aims to strengthen co-operation between SMEs and the government to create a favourable business environment.

There is evidence that employers could do more to effectively use the skills of workers in Lithuanian workplaces. According to the Survey of Adult Skills (PIAAC), Lithuania is using the skills of its workers less intensively than most OECD countries. For all types of skill measured (e.g. reading, ICT, numeracy), their use in workplaces is below the OECD average, and the use of social interaction skills in Lithuania (e.g. sharing information, working with colleagues, giving presentations) is the lowest among all OECD countries (OECD, 2019[18]) (Figure 4.2).

There are indications that the low use of skills is driven by the inadequate skills of workers (see also Chapter 2 and Chapter 3 for more discussions on the skills of workers). The frequency of skills use is naturally restricted by the skills that adults possess, and as a result, low-skilled adults (who are often low-educated and relatively old) are using their skills in general less intensively than those with higher skills. Many employees do not have the right skills for their job in Lithuania: 23% of employees in Lithuania report that they would need more skills to cope well with their duties, compared to an EU average of 14% (Eurofound, 2019[19]), and 64% of employees believe that it is (very) likely that their skills will be outdated in the next five years – one of the largest shares in the EU (Cedefop, 2014[20]). While foundational skills (e.g. literacy, numeracy) are slightly above the OECD average, other skill types that are increasingly needed in digital working environments could be strengthened. Problem-solving skills are low, and digital skills could be enhanced, especially for older workers: more than one in three adults aged between 45 and 65 have low digital skills in Lithuania (Eurostat, 2019[21]). To raise the skills use of a large share of the workforce, adult learning is crucial (see Chapter 3 on how to strengthen adult learning) (OECD, 2016[2]).

However, even when people have high levels of skills, these skills are not always effectively used in workplaces. For instance, there is a discrepancy between the performance in skills development and use in Lithuania: while the use of reading skills is near the bottom of the OECD ranking, the literacy skills of adults are comparable with the OECD average (OECD, 2019[18]). This is an indication of a large untapped potential of skills supply in Lithuania.

There is large variation in the use of skills between different firms and sectors – for example, ICT skills are likely to be less needed in construction than in the financial sector. Skills use is also correlated with firm size – larger firms use the skills of their employees more intensively, on average, than SMEs (with the exception of the smallest businesses). This is largely the result of the particular difficulties that SMEs face in adopting HPWP, often due to an inadequate HR function (OECD/ILO, 2017[3]). As a consequence, the aggregated use of skills in workplaces is largely shaped by the sectoral composition and distribution of firm sizes in a country. For Lithuania, the weak performance in skills use could be partly attributed to the comparatively large share of business with fewer than 10 employees (OECD, 2020[22]).

The low use of skills in Lithuanian workplaces is largely the result of a low adoption of HPWP – about 15% of jobs have adopted HPWP, compared with 26% on average across the OECD, and only Turkey and Greece have a lower share (OECD, 2019[18]). Looking at specific types of HPWP, practices related to employee engagement, work autonomy, and HR and people management could in particular be enhanced.

Employee engagement is considered to be one of the main determinants of skills use and productivity, and helps to drive the performance of employees (OECD/ILO, 2017[3]). However, various studies show that Lithuanian organisations could improve the involvement and engagement of employees. For example, Lithuania is near the bottom of the EU ranking in terms of the share of employees who feel involved and engaged in improving the work organisation or work processes of the department or organisation – 35% indicate feeling involved always or most of the time, compared with an EU average of 49% (Eurofound, 2019[19]). Moreover, many organisations in Lithuania are characterised by overall top-down management, and only a small share of employees state that they have interesting and stimulating work (Figure 4.3, Panel A) (Eurofound, 2020[23]).

Autonomy and flexibility for workers are also both essential HPWP that help to enhance skills use and employee performance. In 2019, only a comparatively small share of employees had a job where the workers independently organised their own time and scheduled their own tasks (Figure 4.3, Panel B) (Eurofound, 2020[23]). The OECD Survey of Adult Skills (PIAAC) and other Eurofound surveys also show limited autonomy for workers in Lithuanian organisations, including limited influence on their working time and few possibilities to apply their own ideas or choose and change tasks at work (Eurofound, 2019[19]).

Various trends and developments have likely already helped to strengthen worker autonomy and flexibility in recent years. For instance, the amendments of the Labour Code in 2017 supported more flexible working time arrangements and helped to strengthen the adoption of HPWP linked to autonomy. Also, the expansion of teleworking following the COVID-19 pandemic created the need for businesses to adapt their workplace practices to allow for flexibility and autonomy by workers, which are both a natural consequence and a requirement for effective teleworking. A recent survey by the SADM showed that 49% of respondents indicated that their workplace offers flexible working hours and forms of work (Ministry of Social Security and Labour, 2020[24]). The rapid adoption of teleworking during the COVID-19 pandemic could also help to strengthen broader workplace performance. Studies show that employee flexibility through teleworking (depending on conditions) is generally having a positive impact on worker performance (OECD, 2020[25]). A recent study in Lithuania showed that a majority (almost 70%) of employees who started working from home would like to continue teleworking after the lockdown, and more than 50% indicated that they have learned to use teleworking tools (Spinter Research, 2020[26]).

The adoption of HPWP linked to HR and people management could be further enhanced, such as career planning, performance review and performance-based bonuses (OECD, 2019[18]). For instance, only 21% of firms have performance appraisals for all employees, compared with 45% across the EU (Eurofound, 2019[19]). This low adoption of performance management practices is likely to drive the overall weak prospects of career advancement – only 28% of employees in Lithuania think that their career prospects are good, with only Italy having a lower share in the EU (Eurofound, 2019[19]). Furthermore, indications of low mobility are also reflected in the very small share of employees who indicate that they saw a change in salary, tasks and/or duties in the last 12 months. However, performance-based bonuses are more common in Lithuania – a relatively large share of employees has extra variable pay based on both individual performance following management appraisal and performance of the team, group or department (OECD, 2020[25]).

The low use of skills is partly driven by a low demand for skills in the labour market. Lithuania has a comparatively large share of the workforce that is over-qualified (i.e. a higher qualification than required for the job) and over-skilled (i.e. higher skills than required for the job) (Eurofound, 2020[23]; OECD, 2016[2]). This shows that employees often cannot find jobs where they can optimally use their skills.

A low demand for skills is partly driven by a small share of businesses characterised by high value-added activities with high levels of productivity and competitiveness. High value-added sectors and jobs represent only a small share of the total economy – in 2018, only 8% of the workforce was active in the information and communication, finance and insurance, and professional scientific and support services sectors, compared with 12% across OECD-EU countries (Figure 4.4) (OECD, 2020[27]; Ministry of Economy and Innovation, 2019[28]). The small size of the high-tech sector is considered a main weakness for the adoption of technologies and industrial innovation in Lithuania (Adlyte, Valanciene and Krusinskas, 2015[29]). And while sectors with medium levels of technology in Lithuania grew between 2001 and 2017, the contribution of frontier businesses (i.e. the most technologically advanced businesses) still remained unchanged (National Productivity Board, 2019[30]).

There are, however, positive developments that are already helping to strengthen the demand for skills in some specific high value-added sectors in recent years. For instance, by reducing FDI regulatory restrictiveness – Lithuania is currently among the most open economies for investment in the OECD – Lithuania and Invest Lithuania successfully managed to attract FDI in sectors such as information technology (IT) and finance and accounting, often in the form of service centres (OECD, 2020[11]; OECD, 2020[31]). This inflow of FDI, combined with a variety of public interventions that helped to create favourable conditions for businesses ecosystems (e.g. favourable regulations promoted by the Bank of Lithuania), helped to turn Lithuania into a hub for financial technology (fintech). In Vilnius in particular there has been a rapid growth of operation centres and offices of international businesses and new start-ups in this sector. As discussed in Chapters 2 and 3, the development of skills to support the growth of these high value-added sectors has been, and will remain, essential for the creation of these jobs. However, high value-added sectors still represent only a small share of total output, and inward FDI as a share of gross domestic product (GDP) still remains comparatively low (36%, compared with 57% across the EU) (OECD, 2020[32]).

Another driver of the low use of skills is the weak adoption of digitalisation in workplaces. The adoption and use of digital tools has the potential to further enhance efficiency of work processes, and thereby help to drive skills use. However, despite the improvements acknowledged by the officials and stakeholders consulted during this skills strategy project (project participants), there is still room to further strengthen digitalisation in Lithuanian workplaces. For example, less than one in five employees use a computer in 59% of Lithuanian businesses (compared with 25% in the EU), only a small share of business could be considered highly digitalised (11% vs. 26% in the EU), and only 11% of enterprises provide training to employees to develop ICT skills (the EU average is 23%) (Eurofound, 2020[23]; Eurostat, 2020[34]). Moreover, 14% of businesses analyse big data, which is slightly above the EU average (12%), but below that of top-performers such as the Netherlands (22%) and Ireland (20%) (Eurostat, 2019[35]). These data also hide large regional differences, with digitalisation being highly centralised in Vilnius. In addition, digitalisation in Lithuanian business is often characterised by high levels of robotisation rather than a broader adoption of computers and IT solutions in workplaces. According to a survey by Eurofound, digitalisation emphasises the “high use of robots and other digital technology, but limited computer use” in 41% of Lithuanian business, compared with only 20% across the EU (Eurofound, 2020[23]). Technological innovations therefore appear to be strongly focused on automating existing tasks instead of on developing the digital edge that could help to drive the creation of new high value-added, technology intensive jobs.

The dominance of low value-added activities and the low adoption of digital technologies are also reflected in the weak average performance of Lithuanian businesses. Lithuania has more than doubled labour productivity in the past two decades, but it still remains relatively low (75% of the EU average) and shows room for improvement. For example, labour productivity growth has been largely driven by the performance of the Vilnius region, which is almost 145% of the national average, and the productivity gap between urban and rural areas is widening (Invest Lithuania, 2020[36]; National Productivity Board, 2019[30]). Moreover, with wages growing faster than productivity over the past few years, overall competitiveness has been declining (OECD, 2020[11]). Business growth is also often weak – only 2.6% of enterprises are considered to have high-growth (at least 20% growth), compared with an OECD average of 4.7% (OECD, 2018[37]). These challenges need to be faced in the context of COVID-19. In the short term, the drop in demand in many sectors will make it difficult to realise strong growth, and in the medium to long term COVID-19 is expected to affect business performance by reinforcing existing megatrends, such as by accelerating the process of digitalisation. As a result, unless Lithuania responds effectively and growth and innovation are stimulated, there is a risk of falling into the middle-income trap (Invest Lithuania, 2020[36]). Better using skills and adopting HPWP could be a vital part of the required policy response.

To improve Lithuania’s skills performance, the country should aim to make better use of employees’ skills to strengthen business performance in both the short and long term. A range of factors should be considered to achieve this. However, three critical opportunities for improvement have been identified based on a review of literature, desktop analysis, and data and input from officials and stakeholders consulted in conduct of this project.

The OECD considers that Lithuania’s main opportunities for improvement in the area of using people’s skills more effectively in workplaces are:

  1. 1. Enhancing the use of skills by supporting businesses to adopt HPWP.

  2. 2. Strengthening management and leadership skills to drive the transformation of workplaces.

  3. 3. Empowering and engaging the workforce to make better use of their skills.

Lithuania is already very aware of the challenges faced by the business sector, as described in the performance section, and several strategic documents aim to address these challenges. Moving towards more high value-added activities is one of the main objectives of the Draft Lithuanian Programme 2021-2027 (Ministry of Finance, 2020[38]), and the digitalisation of businesses is the main topic of the Digitalisation Agenda 2010-2020 (and in the forthcoming follow-up agenda for 2020-2030) and the Lithuanian Industry Digitisation Roadmap 2019-2030 (Ministry of Economy and Innovation, 2019[28]). However, to achieve these objectives, skills policies play an important role, and in addition to strengthening the development of skills (as discussed in Chapters 2 and 3), Lithuania could more actively consider the role of skills use in its policy response. As previously mentioned, better using skills by adopting HPWP has the potential to improve productivity, growth and innovation, and could therefore be considered when supporting the move towards better business performance and more high value-added activities.

Lithuania has already made great progress in supporting businesses to achieve better performance through a range of programmes and initiatives run by government ministries or agencies (Table 4.3). These programmes and initiatives cover a broad variety of topics, ranging from support to start-ups and young businesses (e.g. co-working spaces “Spiecius” [Bendradarbystės centras “Spiečius”]) and developing innovative products or services (e.g. Regio Invest LT+), to adopting technologies and digital solutions (e.g. Regional Potential LT [Regio Potencialas LT]) and strengthening exports (e.g. the Export leaders programme “SPARNAI” [Eksporto lyderių programa “Sparnai”]) (Government of the Republic of Lithuania, 2020[17]). To enhance digitalisation in businesses, Lithuania also implemented digital innovation hubs, which are one-stop shops to support the adoption of technologies (European Commission, 2020[39]). However, a stronger emphasis on support targeted at the level of workplaces could further strengthen and complement the current policy response to transform the business sector (OECD/ILO, 2017[3]).

Lithuania could enhance skills use by better supporting businesses to adopt HPWP in order to achieve the strategic objectives of moving towards better businesses performance, higher levels of digitalisation and more high value-added activities. To this end, Lithuania should raise awareness of the relevance of skills use and related HPWP, provide accessible and targeted business support to adopt HPWP, and leverage employer networks and collaboration at the sectoral level to promote the adoption of HPWP.

Participants in this project often referred to a lack of awareness and limited motivation in businesses, most notably SMEs, as a barrier for strengthening skills use and adopting strong workplace practices. Policies that aim to make businesses aware of the relevance and benefits of effective skills use and HPWP could be a relevant first step towards improving the performance of businesses in Lithuania. In this context, to support organisational change the adoption of soft regulation (non-binding persuasive policy intervention) could be especially effective (Alasoini, 2016[40]).

To start, the Lithuanian Government could play a vital role in ensuring that all businesses have access to relevant information on how to organise their workplaces and strengthen business performance to optimally use the skills of their employees. However, based on discussions in the consultations, a great deal of information and resources for businesses on practices (including some HPWP) and support programmes already exists, and improvements have been made (e.g. the website of Enterprise Lithuania brings together a lot of relevant information for SMEs); however, information still appears to be rather fragmented. As a result, it can be difficult for businesses to find accessible and relevant information, and it can be complicated to understand the large number of available programmes, projects and support mechanisms (as presented in Table 4.3). By consolidating information resources, Lithuania could make the fragmented provision of information more accessible.

Online government portals for businesses are often used as a tool to centralise relevant information, such as guides and tools on skills use, adopting HPWP, improving business performance, and business support programmes. Many OECD countries have already set up variations of such platforms, but in Lithuania there is currently no central point with information for the business sector. For many project participants, a central portal was considered one of the most important ways to strengthen skills use and the adoption of HPWP in Lithuanian businesses. However, another group of participants expressed that there is already sufficient information available and considered a central portal not necessarily effective, and a potentially expensive proposal. There is certainly some validity to these concerns as various countries do face difficulties with ensuring the active use of these portals by businesses. For example, Northern Ireland (United Kingdom) has a comprehensive portal for businesses, nibusinessinfo.co.uk, but only a small number of employers actively use the website (about 1% of employers regularly use the portal).

The OECD recommends that a central portal could be helpful for Lithuania, but only with certain conditions. First, the portal should be especially useful for, and targeted at, the businesses most in need of support, i.e. SMEs. It should include targeted information for these businesses on how to adapt workplaces and improve business performance and should be presented in a business-friendly way, for example with concise information on good practice, success stories and simple guides on implementing HPWP.

Second, the portal could play a crucial role in informing, guiding and supporting employers to participate in business support programmes through the inclusion of diagnostic tools (see Box 4.2 for an example). These tools are an increasingly common way to support SMEs and are especially suitable for providing basic business advice (OECD, 2018[41]). The tools could help businesses identify their business needs, challenges and opportunities through benchmarking their performance, and provide direct links to relevant HPWP and/or business support programmes. Enterprise Lithuania is currently developing such a self-diagnosis tool for SMEs and sees diagnostic tools as a necessary step in the application process for public support, especially financial aid, by informing businesses about the relevance and benefits of programmes and by providing an opportunity for the impact evaluation of programmes (e.g. by comparing findings from diagnostic tools with the actual outcomes of programmes).

Third, the portal should be supported by strong governance structures that help to provide clarity and to position it as the only central portal for business support. To this end, the portal should have a clear owner, and there should be a clear system for the provision of information as well as clear links to other relevant sources. The OECD also proposes linking or integrating the portal with the portal on adult learning, as proposed in Chapter 3. Potentially, a regional, sectoral and/or business ecosystem approach could be applied to promote the portal. For example, participants in this project noted the potential role of a planned “centre of competencies” consisting of experts and bodies that supply regional development councils with research, analysis, forecasting and consulting services (Seimas of the Republic of Lithuania, 2020[42]).

Furthermore, since the provision of information will only partially help to raise the low motivation in many businesses to adopt HPWP and improve business performance, Lithuania might want to introduce additional measures to incentivise businesses. For instance, to complement the dissemination of information, the Lithuanian Government and stakeholders (e.g. Enterprise Lithuania) might want to expand initiatives to raise motivation through targeted campaigns on transforming workplaces, which could be promoted on the proposed portal. This could, for instance, involve high-quality and well co-ordinated campaigns in business media to raise general awareness of the need to adopt HPWP, accompanied by outreach by relevant government agencies and employer organisations to their users, members and partners. These campaigns could complement existing campaigns in Lithuania, such as the Innovation Awards by the Lithuanian Innovation Centre (LIC), by focusing on adopting HPWP.

Promoting HPWP by raising awareness of its relevance can facilitate the adoption of HPWP in workplaces. However, this may not be sufficient as for many businesses, especially SMEs, it is not a lack of motivation and awareness that prevents them from adopting HPWP, but insufficient resources and limited know-how (OECD/ILO, 2017[3]). Participants in this project expressed that the capacity of businesses to transform workplaces is one of the main weak points of the Lithuanian business sector. Therefore, to improve the use of skills and the adoption of HPWP, governments should also provide more active, targeted and accessible support to all businesses in need of support.

To start, Lithuania should take steps to introduce and/or expand existing measures to support the adoption of HPWP. The adoption of HPWP in Lithuania is comparatively low, as described in the performance section, and there are indications that businesses have been moving away from innovative new measures to improve the organisation of workplaces – e.g. the share of businesses implementing non-technological organisational innovations decreased by a third in recent years (Strata, 2020[43]). In addition to driving skills use, strengthening workplace performance through the adoption of HPWP has the additional advantage of driving innovation. Applying a more bottom-up approach to innovation, as in some Scandinavian and other Northern European countries (see Box 4.3 for an example), by promoting measures for the adoption of HPWP and broader workplace innovations could potentially be beneficial for Lithuania. This workplace-focused approach is also supported by the Draft Lithuanian Programme 2021-2027, which highlights the need to transform SMEs through organisational innovation and improved business models and processes (Ministry of Finance, 2020[38]).

Despite clear benefits and signs that the performance of workplaces could be enhanced, few of the current support programmes (as listed in Table 4.3) affect activities at the level of the workplace. One example of a programme that does have, to some extent, an emphasis on HPWP is Process LT (Procesas LT), which encourages SMEs to adopt innovative management methods and management systems to strengthen productivity. Lithuania could potentially consider expanding such programmes, making support for improving workplace practices part of existing programmes, or introducing new programmes targeting HPWP and workplaces. To ensure that these programmes have a strong impact on workplaces and their performance, Lithuania should consider a number of factors, as explained in the following sections.

To start, in the context of the digital transformation, Lithuania should emphasise digitalisation in the business support programmes aimed at strengthening workplace performance. In addition to developing the right skills for digital workplaces (as described in Chapters 2 and 3), Lithuania should continue to strengthen the adoption of technologies and the use of digital skills (as described in the performance section). A variety of sectors have already successfully adapted and expanded digital activities – Lithuania even successfully managed to create a competitive advantage in the digital and technology intensive Fintech sector – but a large share of the business sector is still lagging behind. Participants in this project indicated that many businesses are in need of stronger support measures to adapt their workplaces to digital trends. To this end, Lithuania should consider introducing digitalisation in programmes that target workplaces and build on existing initiatives (e.g. digital innovation hubs) to strengthen support for the adoption of digital technologies.

To raise the impact of business support programmes that target the workplace through the adoption of HPWP, Lithuania should aim to make these programmes targeted and tailored to the needs of employers. Different types of business (e.g. by firm size, age, stage of development and sector) require different types of support, and a differentiated approach to business support could take this into account. For instance, while larger businesses could benefit most from more tailored and specialist advice, smaller businesses could benefit more from getting the basics right, including management best practice and the adoption of new low-risk technologies in their workplaces (OECD, 2018[41]). Therefore, Lithuania could potentially reserve more intensive and specialised support for the larger (often internationally operating) businesses, and offer more widespread and basic support on adopting HPWP to smaller (often locally operating) businesses (see Box 4.3 for an example) (OECD, 2018[41]). For example, in Ireland there is a clear division in support for businesses, with small businesses primarily receiving support provided by local enterprise offices, and larger businesses with export potential primarily receiving support provided by Enterprise Ireland (OECD, 2019[44]).

While participants in this project were supportive of a differentiated approach to business support, some participants noted that differentiation should not be primarily based on the size of the firm, but on the challenges they face. While challenges are often correlated with firm size, there are many exceptions. For example, businesses of different sizes often have comparable issues (e.g. the adoption of HPWP is a challenge in both smaller and larger businesses), and businesses of the same size can be very diverse and face different challenges (e.g. there is large heterogeneity in the group of young and small businesses). To some extent, Lithuania has already aimed to create differentiation in business support for the latter example. A law from 2019 makes a distinction between start-ups and other starting companies, where the former is defined by not only being young (less than five years) and small, but also by performing innovative activities and having the potential for innovation. These start-ups often face similar challenges to larger businesses, and by making the distinction clear by law Lithuania can promote and provide tailored support to these young, fast growing businesses with high value-added potential.

Addressing the challenge of fragmented responsibilities across organisations and mechanisms could help to achieve such a differentiated approach. As mentioned, the fragmented nature of the available business information is largely the result of a deeper fragmentation of business support responsibilities (Table 4.2). As an example, science, technology and innovation policies are spread over nine agencies and institutions in Lithuania, with each organisation having rather narrow goals, and without a single organisation or body overseeing these initiatives (Invest Lithuania, 2020[36]). This structure results in potential co-ordination challenges, overlapping responsibilities, as well as institutional and administrative inefficiencies. Consolidating programmes across a single or smaller number of organisations could help to overcome these issues (Invest Lithuania, 2020[36]). The Lithuanian Government has already launched initiatives in the past with this objective (e.g. the Lithuanian Innovation Reform), and it plans to consolidate business and innovation support agencies under a unified agency that will provide financial services for small firms (OECD, 2020[11]). These consolidation efforts could also help to achieve a differentiated approach to business support by reorganising the organisations to address the needs of different groups of businesses. Strong monitoring and evaluation systems for business support programmes will be essential to guide this consolidation process (e.g. by providing insights on overlapping actions and impact).

Lithuania could also consider expanding access to mentoring and coaching for businesses to strengthen their adoption of HPWP. Mentoring and coaching programmes are by nature tailored, and are often successful in changing organisational practice by supporting and guiding the responsible management in adopting HPWP (OECD/ILO, 2017[3]). Mentors and coaches could bring the required specialised, technical expertise on work organisation, job design, and HR development practices to the company, help to ensure employer buy-in, and positively affect change. Lithuania could already build on, and possibly expand, various existing mentorship programmes. Enterprise Lithuania, for instance, runs the National Mentorship Network, which is a virtual platform where over 100 businesses get help from experienced mentors.

Finally, to raise the impact of support measures that help to strengthen the adoption of HPWP, Lithuania should reduce the administrative barriers that prevent businesses from participating in existing programmes. Participants in this project considered administrative burdens to be a significant barrier for businesses, and in the context of innovation policies, business representatives see the administrative burden as a main barrier to obtaining funding (Invest Lithuania, 2020[36]). The Lithuanian Government has already launched various initiatives to reduce the administrative burden and bureaucracy, such as a proposed innovation fund to reduce bureaucracy, and it is mentioned in its strategic documents such as the Programme of Government, but there still appears to be room for improvement.

Lithuania could undertake several actions to further reduce administrative barriers. First, it should review existing legislation to identify excessive and overlapping regulations, and subsequently consolidate and streamline these regulations (Invest Lithuania, 2020[36]). In this context it will be important to minimise the occurrence of situations where EU standards (since many programmes are funded by EU structural funds) are complemented by unnecessarily stringent national legal standards. To co-ordinate these efforts, Lithuania could consider establishing an independent regulatory oversight agency.

Second, enhanced digitalisation in the public sector could help to reduce administration. Much of the requested information in application procedures already exists in administrative databases (e.g. tax declarations), and better integrating governmental information systems could help with the access and use of this information. In addition, ministries and agencies that run programmes check all applications, often manually, which results in long procedures and regular delays. More automated checks (e.g. for more high-risk groups) have the potential to speed up these application processes. To incentivise innovation in the public sector, Lithuania could consider introducing a public governance innovation fund to help finance the implementation of innovative methods and technologies in the public sector (Invest Lithuania, 2020[36]). The Draft Lithuanian Programme 2021-2027 and Programme of Government already put a strong emphasis on the digitalisation of public services (Ministry of Finance, 2020[38]).

Third, to reduce administration, Lithuania could introduce measures to improve the relationship between business recipients and business support providers. Participants in this project expressed that the current relationship is characterised by a lack of trust, which drives extensive admission procedures and monitoring. Enhancing trust will help to reduce these procedures and could facilitate the introduction of more automated checks in the admission process, as described above. Some project participants indicated that government organisations that provide business support should change their role from “inspector”, which is characterised by a top-down controlling of business activity, to more of a “competence centre”. In such a role, the business support provider actively supports and works together with businesses to identify their needs and experiments with new support tools.

Finally, Lithuania could consider providing more active support to businesses to help them with administrative procedures, especially SMEs that do not always have the required capacity or resources (OECD/ILO, 2017[3]). In this project, some participants noted that associations and clusters could have a more active role in supporting businesses with administrative procedures. For instance, a specific point of contact within these organisations could potentially help businesses with support applications.

Providing support to businesses through collaborative networks could be an effective way to raise the impact of programmes that help to strengthen skills use and the adoption of HPWP. Evidence suggests that approaches which leverage employer networks or collaboration at the sectoral level are cost efficient and more effective at catalysing change in workplaces than centralised approaches (OECD/ILO, 2017[3]). These collaborative networks can take a number of forms, ranging from informal networking to formal networks with a central hub organisation and formal governance arrangements.

Clusters could be considered a type of formal support network where businesses are interconnected, often in the same sector and with a strong geographic concentration. In Lithuania, MITA is the main organisation responsible for cluster policy. Clusters were developed initially in 2004-2010, and Lithuania has since been working on strengthening their growth, maturity and internationalisation (Ministry of the Economy and Innovation, 2020[46]). In 2019, MITA identified 57 clusters in Lithuania, almost all of which bring together businesses from different sectors (MITA, 2019[47]). The project InoLink by MITA, in collaboration with LIC, offers expert consultation and information and matchmaking events to encourage businesses to form clusters that will strengthen their maturity and promote their growth and international co-operation (MITA, 2020[48]). There are also various other types of collaborative networks in Lithuania. For example, science and technology parks provide infrastructure for collaborative innovation in businesses, and Invest Lithuania runs 78 global business services centres where international businesses work together. (Ministry of the Economy and Innovation, 2020[49]; Invest Lithuania, 2020[50]). Lithuania also has several research, higher education and business valleys, where higher education institutions (HEIs) and research centres collaborate, as well as territorial organisations, incubators, technology transfer centres, and private business centres (e.g. Quadrum).

Lithuania should continue to strengthen clusters and other types of collaborative networks, which could help to raise the impact of initiatives to improve skills use and the adoption of HPWP. While participants in this project noted that the networks and clusters are generally strong, they also expressed that they could be strengthened in several ways. For clusters specifically, only a small share are at the stage of maturity, providing sufficient room for policy makers to further strengthen them (MITA, 2019[47]). To ensure that networks become more naturally operating business ecosystems, the Lithuanian Government should especially support them in the early stages.

To start, Lithuania should aim to enhance trust between members of collaborative networks. For clusters, a lack of mutual trust among members is considered to be one of the main reasons why many have not reached high levels of maturity (MITA, 2019[47]). Active collaboration between members could help to create trust, and cluster co-ordinators need to have access to sufficient resources (including funding) to achieve this. However, there are indications that Lithuania currently lacks sufficient support aimed directly and specifically at clusters and their development, and more emphasis is needed on initiatives designed to facilitate co-operation between members of clusters.

Collaboration and co-ordination between the many collaborative networks could also be improved to help spread good practice related to skills use and the adoption of HPWP. Project participants indicated that there is not always a culture of collaboration between the various platforms. Better co-ordination between collaborative networks could potentially help to address this challenge. To this end, Lithuania could potentially create new initiatives, either formal (e.g. a body with representatives of different networks) or informal (e.g. networking events with networks), to strengthen links between collaborative networks. For example, for collaboration between science and businesses specifically, some project participants expressed that focal points could be needed to help businesses develop and adapt efficient value-oriented business models and to co-ordinate the strategic priorities of these networks with industry needs.

Participants in this project also emphasised that collaborative networks could play an important role in facilitating knowledge spillovers between stronger and weaker performing businesses. Project participants noted the relevance of supporting the adoption of HPWP and stronger business cultures in state-owned companies, which could share these practices in their broader business ecosystems and thereby help drive innovation and growth. International businesses, the number of which is increasing in Lithuania, often bring a different set of skills and practices to countries, which could be spread across small, local businesses. There is evidence of a positive relationship between a country’s openness and economic growth, which is often attributed to knowledge spillovers – i.e. the foreign multinational creates positive productivity externalities to domestic firms. These spillovers appear in different forms, including direct knowledge transfers through partnerships, and opportunities to observe and learn the technologies of foreign firms (Alfaro and Chen, 2013[51]). Lithuania could make better use of the presence of large foreign enterprises and intensify the transfer of technological knowledge and expertise to local businesses, including by stimulating co-operation between these businesses, especially within their supply chains (OECD, 2019[52]) (see Box 4.4 for an international example).

To effectively catalyse change in Lithuanian workplaces, the government should not only utilise collaborative networks to spread good workplace practices, but also target specific sectors to optimise the impact of policies and programmes on the adoption of HPWP. Identifying and targeting support at strategic priority sectors could help to direct support programmes to the sectors that would benefit the most from the adoption of better workplace practices, and could help to build competitive advantages in specific sectors (see Box 4.4 for an international example of such an approach). Lithuania already specialises in a number of specific fields, for example finance (especially Fintech), IT services, innovative biotechnology, laser manufacturing, and photonics, and while the relative size of these sectors is still small, they provide a good starting point for further specialisation (Invest Lithuania, 2020[53]; 2020[36]).

For the upcoming Smart Specialisation Strategy, which sets out the funding priorities of the EU Structural and Investment Funds for the period 2021-2027, Lithuania will identify priority areas that correspond to broader areas of specialisation. In the previous cycle, the Smart Specialisation Strategy priorities covered sectors such as energy and sustainability, health and bio-technologies, agro-innovation, and food technologies. However, Invest Lithuania has indicated that the smart specialisation priority sectors have been too broad and do not ensure that the limited state resources are channelled to the sectors with the highest growth potential (Invest Lithuania, 2020[36]). Therefore, within the priorities set in the Smart Specialisation Strategy, Lithuania should identify more narrowly defined priority sectors of specialisation.

Furthermore, for each of the priority sectors, Lithuania should apply an integrated approach with long-term strategies, which could also involve prioritised and targeted business support for these sectors (see Box 4.4 for international examples). Potentially, Lithuania should create central bodies within its government or one of its agencies for each of the priority sectors. Such bodies could bring together relevant representatives from the government, private sector, research institutes and more, to co-ordinate and target business support for the sector. Moreover, as part of its strategic approach, Lithuania should aim to align skills development policies with the skills needed in these specialised sectors.

Strong and effective management and leadership has many benefits for businesses, including higher levels of employee engagement, more innovation and higher productivity (Bloom et al., 2019[56]; UKCES, 2014[57]). As a result, strong management and leadership skills can support the transformation of workplaces to better use skills, strengthen business performance, and support the move towards more high value-added activities.

There are indications that management and leadership skills can be improved in Lithuania. While managers’ skills, as measured by the Survey of Adult Skills (PIAAC), are higher than average skill levels in the population, they are below that of their peers in other OECD countries. For example, 22% of managers have low skill levels, compared with 15% across the OECD (Figure 4.5). The share of managers with low levels of problem solving skills is especially high in international comparison (OECD, 2019[18]).

The low skills are reflected in the comparatively low overall quality of management in Lithuania. The need to improve management quality is evidenced by the fact that many businesses do not yet rely on professional management (i.e. selected on merit and qualifications), a large share of employees give a low score for the overall quality of management, and there is evidence that the management style is generally top-down (World Economic Forum, 2019[58]; Eurofound, 2020[23])s. Moreover, participants in this project noted several other challenges related to management, including broad shortages of skilled managers, especially middle managers, and a public sector that faces difficulties in filling some senior positions. However, since internationally it has been observed that larger businesses and high value-added sectors tend to have more highly skilled managers and rely more often on professional management, the comparatively weak performance by Lithuania can partly be explained by its comparatively large share of business with fewer than 10 employees and the small share of businesses in high value-added sectors (as described in the performance section) (OECD, 2020[22]).

To strengthen management and leadership skills, Lithuania should raise the profile of management and leadership skills, strengthen the initial development of management and leadership skills, and promote adult learning opportunities to strengthen management and leadership skills.

For participants in this project, strengthening management and leadership skills in businesses was considered one of the most important factors for increasing skills use and improving workplace practices. Participants generally agreed with the perception that the skills of managers need to be improved, and considered skilled management a precondition for several other opportunities to raise skills use. However, despite clear room for improvement and broad support in consultations, the topic of management and leadership skills has not been addressed in strategies by the Lithuanian Government – apart from management skills in the public sector, as discussed in both the National Plan for Progress (NPP) 2021-2030 and Lithuania 2030.

For Lithuania, it could be beneficial to develop a strategic vision, accompanied by an action plan, for management and leadership. This could help to raise awareness of the challenge, put the topic on the policy agenda, provide a co-ordinated approach by involving stakeholders, and provide clarity on the direction, objectives, and actions needed to strengthen performance. Project participants noted that such a strategic vision could especially be important for Lithuania by contributing to more systemic change for organisations and by bringing more co-ordination to the existing measures for management and leadership. Project participants stressed the need for a real action plan with concrete measures. These measures, as will be explained in subsequent sections of this opportunity, could include specific actions on a range of relevant topics, such as management education, training for experienced managers and dissemination of information. Furthermore, the OECD recommends that this vision, or at least elements of it, are part of a broader skills strategy for Lithuania (as proposed in Chapter 5). To support the implementation, the action plan could be supported by the inclusion of quantitative and measurable targets that are understood and supported by all stakeholders to strengthen monitoring and evaluation.

The vision could also play an important role in identifying the skills that managers and leaders in Lithuanian organisations should develop. In addition to strengthening foundational skills (as shown in Figure 4.5), various studies show that managers and leaders should have diverse skills sets, with strong leadership and entrepreneurial skills especially important for good management practice (BIS, 2015[59]). During consultations with stakeholders, the need to strengthen entrepreneurial skills and the entrepreneurial mindset in particular was discussed. While Lithuanians do have a positive view of entrepreneurship and are willing to start a business, many are reluctant because they think that they do not have the right skills and a high fear of failure (GEM Consortium, 2014[60]). Other relevant skills for management and leadership that should be addressed are the ability to build teams, motivate, communicate, mentor, think strategically and assess risk (OECD, 2011[61]; OECD, 2010[62]).

It is important to take into account the changing context that affects management and leadership. For instance, COVID-19 and the related expansion of remote working creates a new range of challenges for managers and requires management approaches with more emphasis on motivating employees, building trust and open communication. Furthermore, project management approaches and concepts (e.g. agile working, Lean Six Sigma) already applied in many Lithuanian businesses also require new skills and attitudes by management and leadership. In this context, project participants noted the relevance of 21st century skills, as well as attitudes, broader behaviours and managers’ ability to change.

Managers and leaders need to have the right skills and attitudes to seize the potential opportunities for improving workplace practices that might arise from the COVID-19 crisis and ongoing megatrends (e.g. enhanced digitalisation). These include opportunities related to increased skills use and HPWP. To ensure the development of the right management and leadership skills, a long-term approach is needed, with interventions across the life course.

As part of a long-term and lifelong approach to learning, it is essential to start early in life (OECD, 2019[1]). Building strong foundations in the early years will support a lifetime of learning (as also discussed in Chapter 2), where learning at every stage of the lifecycle builds on learning outcomes from previous stages. The education system could help to develop the skills needed to strengthen future management and leadership. For Lithuania, the development of management and leadership skills in initial education could be improved in two specific areas: 1) entrepreneurship education in schools; 2) business and management education in HEIs.

Entrepreneurship education can help to strengthen overall management and leadership performance. Entrepreneurial skills are an important driver of strong management practice, as discussed in the previous section (BIS, 2015[59]). The entrepreneurial skills developed as part of entrepreneurship education cover both a variety of soft skills (e.g. persistence, networking and self-confidence) and hard skills (e.g. business planning and managerial skills) that are all relevant, and often essential, for strong management and leadership performance. The objective of entrepreneurship education is not solely to strengthen the capacity and raise motivation to start businesses, but to develop a set of skills that benefit society more broadly. Various studies provide evidence of the relevance of this approach. For instance, there is a strong correlation between the early development of entrepreneurial skills and positive effects on job creation, economic success and innovation (OECD, 2015[63]).

Entrepreneurship education is not a new phenomenon for Lithuania; it is already part of the Lithuanian school system, and since 2003, Lithuania has been including entrepreneurship education in its education strategies. For example, the Entrepreneurship Action Plan of Lithuania for 2014-2020 included various actions to ensure the consistent growth of entrepreneurship, and the National Education Strategy for 2013-2022 also highlights entrepreneurship as a topic that needs to be included at all levels of education (EACEA National Policies Platform, 2018[64]; Seimas of the Republic of Lithuania, 2013[65]). Entrepreneurship education is also part of the curricula in both primary and secondary education – for example, the subject “Economics and Entrepreneurship Education” (grades 9-10) is compulsory, and in the new curricula (see Chapter 2 for a discussion on the implementation of the current curricula reform), entrepreneurship education is discussed under the competency of creativity and socio-emotional skills. The recent Programme of Government also addresses the need to raise children's entrepreneurship skills (Seimas of the Republic of Lithuania, 2020[14]). While there are different providers of entrepreneurship education, Junior Achievement Lithuania (JAL) (Box 4.5) could be considered the most significant organisation as most programmes in secondary schools are in co-operation with JAL.

Despite this progress, entrepreneurship education in general education could still be strengthened. In Lithuania, 25% of adults indicate having taken part in a course or activity at school related to entrepreneurship. While this share is above the EU average of 23%, it is still far below that of top-performers such as Finland (39%) and the Netherlands (36%) (European Commission, EACEA and Eurydice, 2016[66]). Although from 2014, the Global Entrepreneurship Monitor shows comparatively weak performance in entrepreneurship education in Lithuanian schools (GEM Consortium, 2014[60]). Participants in this project also mentioned that the overall quality of entrepreneurship education could be improved, and that JAL is not active in all schools. There appears to be broad support in Lithuania to strengthen entrepreneurship education in schools.

To strengthen entrepreneurship education, project participants stressed that entrepreneurial skills should be expanded and become an even more important part of the curricula, i.e. not just one course. There is the need for a more common approach in schools, where entrepreneurship education is more consistently applied as a competence within a broader introduction to practical learning in schools (see also the discussion on curricula in Chapter 2). In this context, Lithuania should build on existing good examples, in particular JAL, strengthen the monitoring of current programmes, and ensure that educators have the right skills and access to the right tools to teach entrepreneurship education (e.g. by creating training courses and developing methodological tools) (Invest Lithuania, 2020[36]). The need to learn from international best practice was also highlighted by project participants (see Box 4.5 for an example). These various opportunities to improve entrepreneurship education require a more strategic approach. To this end, as part of the vision and action plan for management and leadership skills, Lithuania should introduce a clear plan of action for entrepreneurship education that describes the actions needed to meet Lithuania’s ambitions for entrepreneurship education across all levels of education. This plan of action should also be supported by a common institutional framework and centralised implementation (Invest Lithuania, 2020[36]).

Lithuanian HEIs also have an important role to play in developing management and leadership skills. Management and business education is considered to be well-developed overall, and a comparatively large share of students are enrolled in management and business fields – in 2018, 25.6% of graduates finished a business study, slightly above the OECD average of 24.8%. However, management and business education in HEIs could still be improved in a number of ways (OECD, 2020[67]).

Studies in management and business are offered by 33 HEIs, but there appears to be a gap between the study offer and market needs (Vaiginienė et al., 2018[68]). According to chief executive officers and HR managers, management and business education could be enhanced by updating teaching practices and putting more emphasis on international methods and experiences. Furthermore, project participants noted a shortage of management programmes in the vocational education sector, and that there are large differences in the quality of business and management courses between institutions. While the responsiveness of education (as also discussed in Chapter 2) is driven by many factors (e.g. funding incentives), more collaboration between businesses and HEIs – for instance in the form of partnerships, internships, mobility and research – could potentially help to address this challenge (Vaiginienė et al., 2018[68]). Stronger collaboration between the private sector and HEIs that offer management and business education could help to ensure that teaching methods and topics are aligned with current needs. Participants in this project noted that business representatives are already involved in the co-ordination of programmes at HEIs, but that more and better communication between businesses and HEIs is needed.

The development of management and leadership skills could also be a more broadly applied objective of HEIs. To this end, HEIs could make business and management courses more widely available and accessible to students not studying management or business. They could potentially deliver these courses and programmes in optional modules or as a “parallel” study form. Entrepreneurship programmes, which could introduce students to various aspects of running a business, are generally not included in higher education studies outside of business schools. While some HEIs offer optional courses on business and entrepreneurship (see Box 4.5 for an international example), project participants considered this offer not very well developed, and somewhat fragmented (EACEA National Policies Platform, 2018[64]). HEIs could also consider embedding management and leadership skills, as well as entrepreneurial skills, across the curriculum of different study programmes – i.e. not as a standalone subject, but as part of other subjects.

In addition to starting early with developing the right skills and attitudes, managers and leaders need to continue learning throughout life to increase overall skill levels and to adapt to changing skills requirements over time. In the context of a rapidly changing society and economy due to megatrends and COVID-19, lifelong learning by managers and leaders will likely become even more relevant for businesses to adapt to and potentially reap the benefits of these developments.

The participation of Lithuanian managers in adult learning shows room for improvement: 62% of Lithuanian managers participated in formal and non-formal adult education and training in the last 12 months, compared with an average of 67% across the OECD (Figure 4.6) (OECD, 2019[18]), and looking at participation in the last four weeks in 2019, only 13.6% of managers participated, compared with an average of 18.1% across the EU (Eurostat, 2020[71]). Participants in this project expressed that for managers, the adult learning situation reflects the broader adult learning situation in Lithuania (see Chapter 3 for a full assessment) – low participation and low motivation, and room for improvement on both the supply and demand side – and that continued learning is likely a bigger challenge than initial management education.

There are indications that the supply of learning opportunities that help to strengthen management and leadership skills could be improved. Participants in this project indicated that the scope of learning opportunities appears to be relatively small, and mainly in the private sector, the quality is not monitored, and the groups most in need are not well-targeted (e.g. SMEs in low value-added sectors). While some project participants expressed that the government and its agencies could do more on the supply side (e.g. by helping to ensure the good supply of training opportunities and executive training units), there generally appears to be limited interest in expanding existing or introducing new public programmes for management and leadership skills. There are, however, various examples from other countries where government agencies are actively engaged in the provision of training for managers (Box 4.6).

To raise participation, Lithuania should ensure that targeted and relevant learning opportunities are available to different types of managers (e.g. for different firm size, sectors and management level). To start, Lithuania should locate the gaps in the current provision of learning by assessing which groups of managers do not have access to relevant training opportunities. Participants in this project, for example, highlighted a lack of opportunities to train middle management. Subsequently, Lithuania should aim to fill these gaps by creating incentives for private sector providers to deliver relevant courses, or by introducing new programmes by government agencies. As for broader business support, a differentiated approach for the provision of learning opportunities could be beneficial, as managers from different types of businesses need different types of learning opportunity (OECD, 2018[41]). For example, business owners from small, local SMEs will likely need programmes on more basic managerial skills, whereas managers in larger (often international) businesses might need more specialised managerial support. Courses and programmes offered by HEIs could potentially help to fill some of the gaps in the provision of learning opportunities by making these courses and programmes more widely accessible through optional, ideally part-time, modules (as discussed in the previous section) for adults who have left the education system.

For managers, the most significant barriers to participation in training are related to the time and location of the training offer – e.g. 45% of managers who did not participate in training gave the reason that they were too busy at work (OECD, 2019[18]). To this end, Lithuania should aim to make learning opportunities even more accessible for managers by expanding the flexible training offer. This was strongly supported by participants in this project. COVID-19 and the related expansion of online learning (as also discussed in Chapter 3) provide a great opportunity to raise flexibility by reducing both financial and time-related barriers to participation (OECD, 2019[72]; Kshirsagar et al., 2020[73]). Building on this development, Lithuania could assess if available online courses for developing management and leadership skills could be expanded. In addition, for online learning to be valued, Lithuania should ensure that there are effective testing methods and certificates, and establish quality assurance mechanisms to ensure that online courses provide value for money/time to participants (OECD, 2020[74]). These actions could be included in the proposed strategic vision and action plan on strengthening managerial and leadership skills (as recommended earlier in this opportunity).

Low participation in learning by managers also appears to be largely driven by low motivation. For two out of three Lithuanian managers who did not participate in education or training, the reason given was that they did not want to participate (OECD, 2019[18]). There are, however, indications that the motivation to participate in training has improved in recent years. First, the recent arrival of international businesses has brought a different set of management standards to Lithuania. The spillover effects of managerial skills and practices through collaborative networks or across the supply chain (as discussed in Opportunity 1) have already helped to raise awareness of the need to upskill among many managers in Lithuania. Second, COVID-19 has also helped to raise awareness of the need to upskill as it is forcing managers to rethink their practices, organisation and managerial behaviours (e.g. how to manage remote working employees). Enterprise Lithuania has experienced a lot of interest in the webinars it organised in response to COVID-19.

To build on this foundation, and to further strengthen the culture of learning for managers in Lithuania, soft measures could play an important role. A targeted campaign on the benefits of strong management and leadership skills, which potentially shares success stories (most notably from the international businesses), could help to raise awareness and change the mindsets of managers. These efforts could be supported by the effective dissemination of information on training, including by sharing information on the training offer, good practices, the benefits of training and by helping them to assess their skill needs. This information could be disseminated or linked to the proposed central portal with information on practices and programmes to support businesses (as recommended earlier in this chapter), and included in the strategic vision and action plan for strengthening management and leadership skills.

Ensuring that the skills acquired through non-formal learning are also recognised could help to raise the overall motivation of learners (OECD, 2019[1]). For managers who are not formally trained as managers, the recognition of the skills they have acquired through experience and other types of non-formal learning could help to motivate them to learn more and could allow them to access learning opportunities for which certain qualifications are required (see also Chapter 3 regarding the recognition of prior learning). Lithuania, like most OECD countries, could benefit from adopting a broader perspective of learning, where not only learning in formal education, but also non-formal and informal learning (e.g. business missions, internal coaching, networking) is considered and valued. In this context, as discussed in Chapter 3, the use of “alternative credentials” such as micro-credentials and digital badges could be considered, which could help adults to signal the skills they already have, as well as the skills they acquire in courses and programmes (Kato, Muros and Weko, 2020[75]).

Finally, for some groups of managers, more active measures (e.g. financial support and incentives) might be needed to enhance the motivation to participate in learning (see also Chapter 3 on adult learning). Lithuania stands out by having a comparatively large share of managers who did not participate in learning because education or training was too expensive – 24% of non-participating managers, compared with 9% across OECD-PIAAC countries (OECD, 2019[18]). There was strong support among participants in this project for providing more financial support for training. Project participants also raised the idea of expanding the scope of the competence voucher (see Chapter 3 for a recommendation on streamlining the application process of these vouchers) to allow them to be used for the development of higher skills, including bachelor’s and master’s degrees, and thereby cover management and leadership programmes. Enterprise Lithuania, which administers the competence vouchers funded by the European Social Fund (ESF), supports this proposal, and highlighted the relevance of this measure for SMEs, as well as the need to cover programmes linked to adopting HPWP and workplaces cultures.

In addition to the skills and attitudes of management and leadership, empowering and engaging the broader workforce also needs to be considered when transforming workplaces to use skills more effectively (OECD/ILO, 2017[3]). Engaged employees display higher organisational and citizenship behaviours, more proactive innovative behaviour, lower absenteeism levels, as well as report higher job satisfaction and personal well-being (OECD/ILO, 2017[3]). An empowered workforce that is motivated and willing to actively contribute to the success of businesses could play an important role in strengthening skills use by tapping into the full potential of their skills.

There are various indications that the empowerment and engagement of the workforce in Lithuania could be improved. As mentioned in the performance section, Lithuania is near the bottom of the EU ranking in terms of the share of employees feeling involved and engaged in improving the work organisation or work processes (Eurofound, 2019[19]). Furthermore, only 10% of employers express that their employees are very motivated, compared with an average of 17% across the EU, and 43% in top-performing countries such as Denmark and the Netherlands (Figure 4.7). Various levers that could help to drive employee motivation are not widely adopted by businesses. For instance, only a small share of employers communicate visions and missions that help to provide meaning to work, and only 6% of employers indicate providing interesting and stimulating work to motivate and retain employees very often, which is the lowest share of all EU countries (Eurofound, 2020[23]).

A changing business environment creates additional challenges for employee engagement. First, empowering employees is even more important in times of COVID-19. Employees need to adapt to a situation where teleworking becomes a more systemic part of working life, and this will require approaches with more emphasis on motivating employees, building trust and open communication. Second, new workplace methods such as agile practices and techniques require other methods to engage and empower employees, including a greater role for raising the motivation at the individual level, as well as more coaching and mentoring, autonomy and work transparency (Macionytė, 2020[78]).

In this project, participants showed strong support for opportunities related to employee empowerment and engagement. Some project participants even indicated that many Lithuanian employers still see the engagement and empowerment of employees as a burden. As a result, Lithuania should aim to improve the empowerment and engagement of employees in both the private and public sector through a range of measures. While the broad adoption of HPWP in businesses is already discussed in Opportunity 1, this opportunity will assess the adoption of HPWP more specific to employee engagement and empowerment, as well as related policies and practices.

A cultural change is often needed in businesses to strengthen the engagement and empowerment of the workforce. Employers should aim for so-called “high-road strategies”, where employees and their skills are viewed as an integral part of a business’ competitive advantage, rather than “low-road” strategies, where labour is considered a commodity and a cost to be minimised (OECD/ILO, 2017[3]). In Lithuania, an increasingly large share of businesses appear to be moving in the direction of high-road strategies. Shortages in various sectors due to emigration and the growth of the economy have helped to make employers more aware of the need to invest in the workforce, and managers indicate that their most challenging issues are related to HR management, including attracting, recruiting and maintaining employees (Vaiginienė et al., 2018[68]). However, despite these positive signals, the lack of engagement and low overall motivation of employees, as shown by Figure 4.7, indicate that many employers still have not yet adopted these high-road strategies.

To empower and engage the workforce there are specific types of HPWP that businesses should consider taking on. To start, businesses should adopt various types of HR practices and people management approaches to motivate employees, including practices for performance measurement (e.g. performance reviews), work flexibility and autonomy (e.g. possibility for remote working), as well as financial incentives to improve performance (e.g. performance-based bonuses). As discussed in the performance section, apart from a broad adoption of the latter type of practice (i.e. bonuses), the adoption of these HR and people management practices is comparatively weak in Lithuania (Eurofound, 2020[23]).

The role of pay systems should also be considered to empower and engage the workforce. In addition to incentive pay, such as performance-based bonuses, it is important that the skills acquired on the job are both recognised (as discussed in Chapter 3) and rewarded with appropriate salaries. Data from the OECD Survey of Adult Skills (PIAAC) show that the effect of skills proficiency (both literacy and numeracy) on hourly wages, over and above the effect of education levels, is comparatively weak in Lithuania, and that the contribution of work experience to variation in hourly wages is the smallest of all OECD countries (OECD, 2016[2]; OECD, 2019[4])s. These are indications that skills acquired on the job are not sufficiently rewarded, or at least less so than in other OECD countries. This could negatively affect the motivation to both gain new and use existing skills. When developing a more advanced system to recognise prior learning (see Chapter 3), Lithuania should also aim for the adoption of remuneration and pay systems in businesses where these recognised skills are rewarded. Some participants in this project also noted that the Lithuanian Government could do more to promote related practices and support businesses to adopt these remuneration and pay systems.

Workplace practices that promote and support mobility in businesses could empower employees by helping them to move to jobs better matched to their skills sets. In addition to upward mobility, the allocation of skills could be improved through horizontal mobility within the organisation (i.e. to a job at a comparable level). Several workplace practices could support mobility, for example: job shadowing, where an employee can spend time learning through watching others perform a job; stretch assignments, where the employee performs tasks beyond existing expertise; and supervision of employees over time, for instance in the form of talent programmes. The fact that only a comparatively small share of Lithuanian workers indicate having good prospects of career advancement – only Italian workers state having weaker prospects in the EU – is an indication that the adoption of these practices could be enhanced (Eurofound, 2019[19]).

To promote the adoption of these different types of HPWP, pay systems and practices for mobility in organisations, various soft measures need to be considered. Raising awareness of the relevance of empowering and engaging the workforce – through the adoption of these advanced HR practices and people management approaches, remuneration and pay systems, and practices for mobility – could stimulate a broader cultural change in businesses. To this end, good practices and the benefits of valuing and encouraging staff for business performance and growth could be emphasised in campaigns (OECD/ILO, 2017[3]). For example, emphasising the strong performance of selected businesses in these campaigns could encourage employers to change their mindsets and help to create peer pressure. Moreover, the dissemination of information on good examples and guides on how to adopt these practices and pay systems could also contribute to greater awareness of the need to empower the workforce, and guide managers with the implementation of these measures. This information could be included in the central portal on HPWP and related support programmes, as recommended in Opportunity 1. The campaign on empowering and engaging the workforce could be part of the broader awareness-raising campaign on adopting HPWP and transforming workplaces.

Furthermore, Lithuania could potentially put more emphasis on accredited standards, charters and pledges to change workplace cultures. There are various examples of accredited standards for people management (see Box 4.7 for an example) that help to raise awareness of adopting strong management practices and approaches, and that give businesses the opportunity to be recognised for strong performance. Moreover, Lithuania could raise awareness of employee engagement and empowerment by introducing charters or pledges for businesses, where individual businesses or employer organisations formally endorse principles concerning employees and their working conditions. In Scotland, for instance, the Scottish Business Pledge gives businesses the incentive to improve workplace and job quality by signing up to a number of pledges linked to fairness, equality and sustainable employment (Scottish Government, 2020[79]).

Legislation for employers and employees plays a vital role in promoting and steering practices in workplaces. The Labour Code of Lithuania (Government of the Republic of Lithuania, 2020[17]) has been important in this context, as amendments have already helped to improve workplace practices in recent years. The OECD welcomes these amendments, which have supported more flexible working time arrangements, new forms of employment contracts, new regulations for fixed-term employment contacts, better work-life balance, and learning opportunities (OECD, 2018[80]). Studies that aimed to monitor the impact of the Labour Code revisions have shown its positive effects on workplace practices, and these results have informed several amendments that entered into force on 1 August 2020. Lithuania should ensure that the Labour Code will continue to support the adoption of these practices that help to strengthen employee engagement and empowerment by monitoring and evaluating the impact of new amendments of the Labour Code based on a selection of indicators and objectives, including for skills use and HPWP.

In addition to adopting HPWP, pay systems and practices for mobility, businesses should also involve the workforce in decision-making processes to further empower and involve employees. The collective representation of workers and collective bargaining could help to raise the involvement of employees, including by contributing to improving working conditions (OECD, 2018[80]). Institutions with strong collective bargaining and unionisation are associated with a higher utilisation of workers’ skills in the workplace (OECD/ILO, 2017[3]).

Lithuania appears to perform relatively well already in providing employees the opportunity to be involved in decision-making processes. In 2019, 44% of organisations indicated having a recognised body for employee representation, which is far above the EU average of 26% (Eurofound, 2020[23]). Moreover, almost two out five employees are represented by appointed representatives (i.e. trade union, work councils, trustee), and a relatively large share of enterprises indicate that employee representation can influence management decisions on work processes to a (fairly) large extent. Finally, largely as a result of the revised Labour Code which introduced changes in the area of employee representation (e.g. works councils) and collective bargaining, the coverage of collective agreements is rapidly increasing, from 7% in 2015 to 15% in 2019 (Government of the Republic of Lithuania, 2020[17]).

For Lithuania, it will be essential to build on these strong recent reforms and continue to further strengthen employee representation. Participants in this project proposed various actions on how to improve the current system, with several focusing on the capacity of employees to be actively involved, i.e. ensuring that representatives have the right skills, information, time and resources for effectively representing workers. To this end, the Lithuanian Government and employers could potentially improve information for employees on how to effectively participate in the various forms of employee representation (works councils, trade unions and trustees). There are already some initiatives with this objective, including an EU funded project by the State Labour Inspectorate that involves the various trade union confederations. This project, named Pattern of Co-operation between Trade Unions and Employers through Social Dialogue, aims to promote and monitor co-operation between trade unions and employers, and includes capacity building and training activities for social partners (State Labour Inspectorate, 2020[81]).

Finally, for the engagement and empowerment of employees, and to raise their motivation to actively participate in employee representation, participants in this project expressed that a cultural change and shift in the mindset of workers is needed. There is a need to create an environment where proactive behaviours are stimulated through a broad awareness of the advantages of being empowered, for both individual careers and the community. Lithuania should aim to make citizens more self-confident and active members of communities. As a result of being more actively engaged and aware that an individual can make a difference, the attitudes and behaviours of adults in workplaces will be positively affected. In addition to expanding and strengthening the role of entrepreneurship education (as discussed in the previous opportunity), the education system has an important role to play in terms of empowerment by focusing not only on developing knowledge, but also on core values such as self-confidence, responsibility and being active members of a community.

Several project participants stressed the importance of improving skills use, workplace practices and employee engagement in the public sector. There are several good reasons to make practices in the public sector a policy priority. To start with, the better use of skills, increased adoption of HPWP, and more engaged and empowered civil servants could improve the effectiveness, quality and efficiency of government. Moreover, better practices in the public sector could show strong leadership and strategic direction, and the public sector could set a good example and potentially spread and promote good practices by adopting them.

Data show that the use of skills in the public sector could be improved. For example, Lithuania is the only OECD country where the use of problem-solving skills is lower in the public sector than in the private sector. Regarding the use of numeracy skills, although this is lower in the public sector in most OECD countries, for Lithuania the difference is relatively large (see Panel A, Figure 4.8) (OECD, 2019[18]). These findings remain valid even when correcting for relevant factors (e.g. skills levels and hours worked), and when doing so, the intensity of use of all types of skills in the public sector ends up below that of the private sector (see Panel B, Figure 4.8). For reading skills, Lithuania is the only country across the OECD where the adjusted use is lower in the public sector than in the private sector (OECD, 2019[18]).

There are also other indications that Lithuania could strengthen the overall performance of the public sector. For instance, the World Economic Forum ranks Lithuania 83rd in a global competitiveness ranking (out of 141 countries) for policy stability, and 90th for the government’s long-term vision (World Economic Forum, 2019[58]). The Lithuanian Government also does not perform strongly in the adoption HPWP, and it is a challenge for the government to attract and retain talent (Ministry of the Interior, Strata, 2020[83]).

The Lithuanian Government aims to enhance public sector performance, and this is highlighted as an objective in the Programme of Government (Seimas of the Republic of Lithuania, 2020[14]). Lithuania 2030 highlighted the need to enhance leadership and management skills and standards, and the National Plan for Progress 2021-2030 discusses the efficiency of the public administration. A recent strategic document by Invest Lithuania (2020[36]) also sees strengthening state institutions as one of the four main strategic directions.

Lithuania has introduced reforms in recent years to address some of the challenges within the public sector. For the civil service specifically, a new Law on the Civil Service entered into force in 2019 and aims to increase the competitiveness of the civil service, attract the most talented employees, and increase its efficiency. In addition to various changes regarding the regulation of civil servants' salaries, the law strengthened the adoption of various HPWP. For instance, it introduced regulations for remote working, the mentoring institute, and it streamlined procedures for evaluating civil servants (Ministry of the Interior, Strata, 2020[83]). The Lithuanian Government has also prepared draft amendments for the Civil Service Law, developed a strategy for remuneration increases until 2025, and has stated an ambition to reduce fragmentation and unify the remuneration system in the public sector (Ministry of the Interior, Strata, 2020[83]). Furthermore, several other relevant initiatives are being implemented in the civil service, including competency based human resource management (HRM) that includes an assessment tool that allows for the objective assessment of managerial, leadership and general skills.

Lithuania should now build on these initiatives (especially the Law on the Civil Service) and continue to further strengthen the adoption of HPWP and improve the overall performance of the civil sector. In particular, Lithuania should continue to strengthen HRM and other workplace practices, and possibly expand practices implemented in the civil service across other public sector organisations and agencies. Lithuania should ensure that all public sector organisations provide clear career paths that are supported by performance reviews, skills mapping and professional development to transform the organisational culture and better attract and retain talent (Invest Lithuania, 2020[36]). Monitoring and evaluating the impact of these efforts will be essential to ensure that the initiatives have the desired impact. A survey of public sector employees could possibly help to inform policies and to evaluate the engagement and empowerment of employees in the public sector (see Box 4.8 for an example). Potentially, all these measures could be combined in a comprehensive public administration reform to improve the effectiveness, quality and efficiency of government.

As for the whole Lithuanian society, a culture of lifelong learning could also be strengthened in public sector organisations to help raise the use of skills by reducing imbalances and to further enhance the capacity of the public sector (Ministry of Finance, 2020[38]). There are several indications that this culture of lifelong learning could be enhanced in the public sector. For instance, in the last four weeks of 2019, the participation rate in the public administration was 16.7%, which is comparable with the EU average, but far below that of top-performers such as Sweden (43.1%) and Estonia (42.8%) (Eurostat, 2020[84]). Moreover, participants in this project indicated that the quality of training greatly varies.

Lithuania has already made an effort to create a culture of lifelong learning in recent years. In 2019, the Law on the Civil Service helped to reorganise in-house training by decentralising civil service training. At the moment, civil servants can participate in national and international training programmes, and approximately 0.5% of the annual appropriations set for the salaries of civil servants are allocated for the improvement of skills (Ministry of the Interior, Strata, 2020[83]). In recent years, the Civil Service Department under the Ministry of the Interior also implemented three EU-funded projects to train civil servants: 1) professional ethics and anti-corruption training, in which 3 000 civil servants have been trained so far; 2) training to strengthen the strategic competences of middle-level managers, heads of unit of state and municipal institutions, including to strengthen their leadership skills, strategic thinking and workload planning; and 3) training for strengthening leadership for top managers and heads of institutions (109 participants so far), including the sharing of experience, personal training with a private company of trainers, and discussions on how to improve performance. Furthermore, some online training is already provided in the public sector (e.g. on civil security) (Ministry of the Interior, Strata, 2020[83]), and it is encouraging that Lithuania is developing an online portal with information on training for civil servants and the possibility to undertake online training. According to project participants, this information is definitely needed, as a lack of guidelines and support on skills and training was mentioned as a main challenge.

However, despite these improvements, Lithuania appears to lack a more long-term, strategic approach to skills development in the public sector, which could potentially be part of a more comprehensive public administration reform. Lithuania should set clear objectives on how to raise participation, better assess and evaluate what skills need to be developed (potentially informed by the survey among public sector employees – as mentioned above), ensure that there are sufficient training opportunities, and provide incentives to employees to participate (e.g. by linking training to performance appraisal and career pathways). COVID-19 creates a new momentum for remote and self-learning (as also discussed in Chapter 3), and online learning is likely to become an even more central part of this approach.


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