4. Leveraging skills to drive innovation and strengthen firm performance in Ireland

The degree to which skills are used in the workplace, across the economy and in society has important implications for the returns countries can expect to receive from their investments in skills. Previous studies have shown that better skills use1 is associated with higher wages and job satisfaction for employees; high rates of productivity and innovation within firms; and stronger economic growth (OECD, 2016[1]; OECD/ILO, 2017[2]).

In the context of dramatic changes in the world of work, as set out in Chapter 1, countries must strive to ensure skills are used as intensively as possible in the economy, workplaces and society. Technological advancement, globalisation, demographic change, the green transition and, more recently, Brexit and the coronavirus (COVID-19) pandemic continue to challenge Ireland to raise productivity, innovative capacity and competitiveness.

To respond to these challenges and position economies to move to higher value-added and innovation-intensive activities, education, lifelong learning and labour-market-related policies need to be accompanied by policies supporting firms’ research and development2 (R&D), innovative activities and entrepreneurship (OECD, 2019[3]). This enables countries to simultaneously stimulate both the demand for skills among employers and ensure they can find the talent they need in the labour market.

Rising to this challenge is crucial to Ireland’s future success. Better leveraging skills to drive innovation and strengthen firm performance will be central to supporting its economic renewal, promoting resilience to global megatrends and ensuring Ireland can achieve the twin aims of digital transformation and a just transition (DPER, 2021[4]).

While skills utilisation is often overshadowed by a policy focus on skills development (Keep, 2016[5]), Ireland has quickly recognised the importance of using skills in the workplace. The National Skills Strategy (NSS) 2025 identifies “the effective use of skills to support economic and social prosperity and to enhance the well-being of our country” as a key component of its vision (Department of Education and Skills, 2016[6]).

The analysis included in this chapter enables an assessment of progress towards this ambition and considers developments in the economic backdrop and policy landscape since the NSS 2025 was launched in 2016. It further offers examples of international practice and recommendations to inform the NSS 2025 follow-up, particularly concerning the NSS 2025’ second objective on employer participation in developing and using skills to drive improvements in productivity and competitiveness (see Box 4.1).

In reviewing how Ireland can better leverage skills to drive innovation and strengthen firm performance, a wide range of policy areas is relevant, spanning education; economic; industrial; research and innovation; and regional growth policy. This chapter focusses on three skills-related policy areas: the utilisation of Ireland’s research talent and public research and innovation (R&I) system to drive innovative capacity in the economy, management and leadership capability, and workplace practices that make effective use of skills. These three policy areas were selected based on an examination of relevant literature, feedback from the public consultation and insights from stakeholders consulted during this Skills Strategy project (hereafter “project participants”) shared through bilateral interviews, workshops and roundtables.

Policy areas discussed in other chapters will also be important in better leveraging skills in Ireland. Effective skills use requires strong alignment between workers' skills and those needed in their roles. This “skills match” is predicated on granular and forward-looking labour market information (LMI) (discussed in Chapter 5), an agile and responsive skills system and strong career guidance to inform decisions on what skills to develop and which employment opportunities to pursue (discussed in Chapter 2). Ongoing investment in workforce skills is vital to ensure firms can adapt to changes in the market and innovate, which is discussed in Chapter 3 on lifelong learning.

This chapter begins with an overview of current arrangements and performance indicators on the extent to which Ireland is leveraging skills. Subsequently, it examines three skills-related policy areas – or opportunities – for better leveraging skills to drive innovation and strengthen firm performance:

  1. 1. better utilising Ireland’s research talent and public research and innovation system to drive innovation within firms

  2. 2. promoting the continuous improvement of leadership and management skills within enterprises

  3. 3. incentivising and enabling enterprises to make better use of the skills of their workers through innovative workplace solutions.

When considering how skills are put to use in the economy, relevant strategies and policies span a range of policy domains and connect with the mandate of various agents within and beyond Ireland’s skills system.

The formation of the Department of Further and Higher Education, Research, Innovation and Science (DFHERIS) and the transfer of national R&I policy responsibility from the Department of Enterprise, Trade and Employment (DETE) into DFHERIS brought the portfolios for skills, R&I under the umbrella of the same department. Ireland has also adopted a whole-of-government approach to developing and implementing policy initiatives (see Chapter 5 for a broader discussion on collaboration and co-ordination between departments). In developing key strategies, such as Impact 2030, there is strong collaboration between DFHERIS, DETE and the Department of Education (DEP EDU), for instance, on issues such as entrepreneurship education at primary and post-primary levels, enterprise innovation and regional economic development. These departments have a range of arms-length government agencies charged with policy design and implementation. They also engage with a wide range of stakeholders in carrying out their mandates, including representative and advocacy bodies for education providers and businesses and regional agencies responsible for skills. Table 4.1 provides an overview of the key actors concerned with skills, R&I and enterprise in Ireland and details their roles and responsibilities.

Relevant strategies and programmes advanced by these agents are discussed further under the opportunities below, and Chapter 5 provides a comprehensive review of governance arrangements in Ireland.

The European Innovation Scoreboard classes Ireland as a strong performer, ranked 6th out of 27 EU member states (see Figure 4.1) (European Commission, 2022[7]). In 2022, Ireland exceeded the EU average across several domains of the Innovation Index but lagged leading innovation economies, such as Sweden, Finland, Denmark and Belgium. Further, Ireland’s performance lead over the EU average is weakening, attributed to reduced relative performance on measures of government support for business R&D, and non-R&D innovation expenditures, employment in innovative enterprises, product innovators, patent and trademark applications and environment-related technologies (European Commission, 2022[7]). Ireland’s place in the Global Innovation Index has also fallen from 7th place in 2016 to 23rd place in 2022 out of 132 countries, with significant deterioration in relative performance across a range of human capital and research indicators, including expenditure on education, gross expenditure on R&D and research talent in the business enterprise sector (WIPO, 2022[8]).

Human capital is a key strength of Ireland’s R&I system. As discussed in Chapter 1, the share of the population with tertiary education is relatively high and positions Ireland ahead of other European countries. Ireland also benefits from a strong stock of doctoral graduates and above-average rates of lifelong learning (although still significantly below that of top performers in the European Union) (European Commission, 2022[7]). In Ireland, collaboration rates between enterprises and between academia and industry are also significantly above average. For example, data from the Community Innovation Survey 2020 suggest that more than 40% of innovative enterprises in Ireland had collaborated with other enterprises or organisations when undertaking R&D or other innovation activities – among the highest collaboration rates in Europe (Eurostat, 2020[9]).

On other measures, Ireland’s innovation system performs less strongly. Gross expenditure on R&D (GERD) in Ireland falls short of the EU and OECD average, including when based on gross national income3 (GNI) (DFHERIS, 2021[10]). At 0.92%, the R&D intensity rate in Ireland is also below the EU average (1.39%) and around half the rates of leading innovators, such as Sweden (2.40%), Austria (2.14%) and Germany (2.11%). Private expenditure on R&D is also heavily concentrated among larger firms, with the top 100 largest firms in Ireland accounting for 81.8% of spending, 78.1% of which is attributed to foreign-owned enterprises. Investment in R&D is considerably lower among SMEs, who account for 99% of all businesses in Ireland, but only one-third (33.9%) of total business expenditure on R&D (BERD) (Central Statistics Office, 2021[11]; OECD, 2022[12]).

Evidence from the Community Innovation Survey suggests that between 2016 and 2018, firms in Ireland were less likely to have introduced new or improved products (28.6%) or business process innovation (38.5%) than their European counterparts (29.8% and 41.0%, respectively). When exploring the factors that hamper innovation, enterprises in Ireland are less likely to report constraints to innovation, across almost all categories, including a lack of qualified employees within the enterprise, and a lack of collaboration partners. The only exception is “different priorities within the enterprise”, which might suggest a need for Irish firms to attach greater priority to innovation (Eurostat, 2018[13]).

Further evidence from the European Company Survey suggests Irish enterprises are less likely to have introduced an innovation that is new to the market or to their establishment (43% of enterprises) compared to the EU average (49%) and are also less likely to have a product market strategy orientated around innovation (Figure 4.2) (Eurofound/CEDEFOP, 2019[14]). Just 5% of firms view developing products, services or processes that are new to the market as the most important factor for the competitive success of their business.

Ireland has been a strong and consistently improving digital performer in Europe, ranking 5th out of 27 EU member states in the Digital Economy and Society Index (DESI) 2022 (Eurostat, 2022[15]). Ireland is ranked as a top performer for human capital, ranked 3rd and exceeding the EU average across all metrics, with strengths grounded in its information and communications technology (ICT) graduates and ICT specialists. Ireland also scores well for its digital public services (ranked 6/27), including services for citizens and business and open data, and for its connectivity (ranked 6/27), reflecting coverage of fast broadband, very high capacity networks and 5G (Eurostat, 2022[15]).

The integration of digital technology in business is also above average in Ireland, particularly in areas such as e-commerce, cloud services, social media and big data. However, there is room to further improve the adoption of advanced digital technology and systems to support e-business. Ireland lags behind other EU nations in adopting a range of advanced systems to support internal processes (e.g. enterprise resource planning and customer relationship management software); supply chain management (e.g. e-invoicing software); and production (e.g. 3D printing, robots, Internet of Things) (Eurostat, 2021[16]).

Data from the European Company Survey categorises enterprises based on their use of a range of digital technologies, grouping firms based on the extent of digitalisation, ranging from highly digitalised firms (defined as having high computer use and being likely to have purchased customised software) to limited digitalisation (defined as having below-average computer use and being less likely to have purchased customised software or to use robots). The survey confirms earlier findings that the use of advanced digital technologies is more limited in Ireland (Eurofound/CEDEFOP, 2019[14]). Ireland has a relatively low share of highly digitalised enterprises (21% of firms, compared with 28% in the European Union) and businesses that have a high use of robots and other digital technology but limited computer use (14% versus 19% in the European Union) and a higher share of firms that have high computer use, but limited use of other technology (34% versus 26% in the European Union) and that have limited digitalisation (31% versus 27% in the European Union) (see Figure 4.3).

Like other countries, the adoption of digital technology is lower among SMEs, but disparities between Ireland and the EU average are most pronounced for small firms (10-49 employees). For instance, 28% of small firms in Ireland have high computer use but limited use of other digital technology – a 10 percentage-point difference compared to small firms across Europe (Eurofound/CEDEFOP, 2019[14]).

Therefore, there is room for further enhancing digital adoption and innovation across large and small enterprises. A key challenge will be to ensure that these issues are viewed as an important priority within organisations, that there is an appropriate pipeline of skills to meet employer needs and sufficient expertise within enterprises to successfully implement new technologies and advance new products, services and business processes that strengthen firm competitiveness and performance.

Strong leadership and management capabilities are important drivers of organisational change, helping to optimise the use of skills in workplaces and drive innovation, productivity and performance of firms. Previous studies have highlighted a need to improve management capability in Ireland, particularly among smaller enterprises (OECD, 2019[17]). While the share of firms with professional management, defined as managers chosen for merit and qualifications, is comparatively high in Ireland (World Economic Forum, 2018[18]), data from the Survey of Adult Skills (a product of the OECD Programme for the International Assessment of Adult Competencies, PIAAC) from 2012 suggests that the numeracy, literacy and problem-solving skills of managers are slightly below the OECD average (OECD, 2019[19]).

Evidence from the Continuing Vocational Training Survey suggests that the demand for management skills among enterprises in Ireland is higher than in most other European countries (see Figure 4.4). Just under one-third (32%) of enterprises in Ireland identify management skills among the top-three skills needed for developing their organisations, compared to 23% of firms across the European Union. Analysis of the skill requirements of companies participating in Enterprise Ireland’s Spotlight on Skills also identified people management as among the most highly sought skills (Enterprise Ireland, 2022[20]). Further, up-to-date job postings data suggests that in 2020, management skills were among the most requested skills in online job postings (CEDEFOP, 2020[21]).

The quality of management practices in Ireland has also been found to lag other advanced economies. For example, data from the World Management Survey place Ireland 13th out of 15 nations – significantly behind the highest-performing countries, such as the United States, Germany and Sweden (World Management Survey, 2014[23]).

In part, weak management and leadership capability reflect the structural features of Ireland’s economy. While the strong presence of multinational enterprises (MNEs) acts to drive up average managerial performance, Ireland has a relatively large share of SMEs that typically display weaker management skills and practices. Past research has shown that structural factors – including firm size, ownership type, skills and qualifications and labour market flexibility – account for 38% of the gap between management practices in Irish firms compared to firms in the top performer (the United States). Remaining disparities in managerial performance were found to relate to non-structural factors, such as operational, performance and people management (McKinsey & Company, 2009[24]).

There is evidence that employers in Ireland could be more effectively using the skills of their workers. Data from the Survey of Adult Skills (PIAAC) suggest that on measures of skills use in the workplace, Ireland performs in line with the OECD average but lags economies like Australia, Finland, New Zealand, Norway, the United Kingdom and the United States, where firms tend to use the skills of their employees more intensively (OECD, 2019[19]).

Various factors influence the extent to which skills are effectively used in the workplace. These include macroeconomic conditions, labour market demand, skills supply and the extent of skills imbalances. In addition, organisational practices are an important but often overlooked determinant of how effectively skills are deployed in the workplace. The adoption of HPWPs, including staff training, autonomy, teamwork, performance incentives and mechanisms to promote strong employee voice are vital in enabling employees to fully apply their skills at work, promoting strong employee engagement and eliciting discretionary effort that drives innovation, productivity and performance of firms (OECD/ILO, 2017[2]).

Across the OECD, a little more than one in four workers are employed in jobs with high HPWPs. In high-productivity, high-innovation economies like Denmark, Finland and Sweden, the share of jobs in the economy adopting HPWPs is considerably higher, with around 40% of jobs displaying high HPWPs (Figure 4.5). In Ireland, one in five jobs adopts high HPWPs, below the OECD average (26%).

Once again, the structural makeup of the Irish economy is a factor at play, given that SMEs tend to have weaker management capability and often lack dedicated human resources functions. Wider evidence also suggests a more mixed picture of workplace practices in Ireland, with strong performance on some metrics but scope to improve on others – which is discussed in greater depth in Opportunity 3. However, Ireland’s performance suggests that a stronger focus on work organisation and management practices could be an important lever for driving innovation and strengthening firm performance.

To better leverage skills to drive innovation and strengthen firm performance, Ireland could consider a number of policy actions. The selection of such policy actions below is based on input from literature, desk research, discussions with the Cross-Departmental Project Team and discussions with a broad range of project participants – e.g. government departments and organisations, employer organisations, educational establishments and other interested parties – during workshops, group discussions and several related meetings. As a result, the following opportunities are considered to be the most relevant for Ireland’s specific context:

  1. 1. better utilising Ireland’s research talent and public research and innovation system to drive innovation within firms

  2. 2. promoting the continuous improvement of leadership and management skills within enterprises

  3. 3. incentivising and enabling enterprises to make better use of the skills of their workers through innovative workplace solutions.

Investment in research, development and other knowledge-based assets, such as higher education institutions (HEIs) and research centres, plays an important role in securing advanced economies’ success, developing high-level, cutting-edge skills and supporting firms’ innovation activities through knowledge transfer and spillovers.

Ireland’s public R&I system is one of its key strengths. As noted earlier, Ireland benefits from a strong base of research talent relative to the size of its labour force. Its quality-of-life offer attracts leading academic researchers from all over the world. International collaboration, measured in terms of co-inventions and co-authorship, is also high.

Despite these knowledge assets, R&D intensity in Ireland is comparatively weak, and rates of innovation in firms in Ireland, particularly among small, indigenous enterprises, are relatively low.

Project participants regularly identified a need to better leverage Ireland’s public R&I system to drive innovation within firms. This is also identified as a key priority in Impact 2030, Ireland’s Research and Innovation Strategy published in 2022 (DFHERIS, 2022[25]).

There is a range of potential avenues for driving innovation among Irish firms, many of which have been the subject of previous OECD reviews; see OECD (2019[17]) and OECD/European Union (2017[26]). The skills and knowledge vested in Ireland’s research talent and public R&I system can be better leveraged to improve the innovative capacity of the Irish economy and strengthen the performance of firms in Ireland, including by developing skills for innovation across the education system to strengthen Ireland’s adaptive capacity and competitiveness, as well as by better activating the skills of graduate and doctoral researchers in the workforce to strengthen the innovation capacity of Ireland’s economy.

Skills are vital for innovation. Skilled people generate new knowledge, adopt and evolve existing ideas; can adapt to changing circumstances, learn new skills and develop new approaches; and complement and make use of other inputs, such as digital technology, to spur innovation (OECD, 2011[27]).

The interplay between skills, R&D and innovation is well acknowledged in Ireland’s economic and R&I strategies. For instance, “Talent” is a central pillar of Impact 2030, including strengthening emphasis on the careers, mobility, inclusion and impact of research talent in Ireland. The strategy also seeks to better leverage Ireland’s knowledge assets to broaden and deepen enterprise innovation capacity (DFHERIS, 2022[25]). Skills feature as an important input across a wide range of other strategies in Ireland, particularly those concerned with ensuring Ireland’s economy remains competitive, is well-positioned to respond to global megatrends and capitalise on opportunities to expand knowledge-based industries. This includes Ireland’s Industry 4.0 Strategy (DBEI, 2019[28]), the Digital Ireland Framework (Department of the Taoiseach, 2022[29]) and the Climate Action Plan (Government of Ireland, 2021[30]).

Despite this good practice, project participants suggested there was scope to further strengthen strategic connectivity and alignment between skills policy and other policy domains. In particular, this related to the skills needed to support the development and adoption of emerging technology and the need to promote alignment with Ireland’s new National Smart Specialisation Strategy (S3) (Government of Ireland, 2022[31]), to ensure the skills system is well placed to deliver the skills required to support sectoral specialisms identified in different regions. In addition to ensuring wider economic and innovation strategies to acknowledge skills as an important framework condition, project participants emphasised a vital role for the NSS 2025 in demonstrating the centrality of skills, crucial to delivering a broad range of Ireland’s long-term aspirations and policy objectives. This was seen as important to ensure the prioritisation of skills in the policy discourse and to secure adequate investment in skills in the years ahead.

Ireland, like other OECD countries, also requires an in-depth understanding of the skills and attributes that are needed to support innovation, smart specialisation, digitalisation and climate transition and how these can best be developed through the skills system (see also Chapter 2 for a section on identifying skills of strategic importance, and Chapter 5 on improving skills data). The literature identifies a wide range of skills that contribute to innovation, emphasising the specific importance of technical, transversal and social skills (OECD, 2011[27]; 2015[32]).

Project participants suggested that nurturing an “innovation mindset” and developing transversal skills needed for innovation was an important priority for Ireland. Research examining international surveys of tertiary graduates five years after graduation found that the transversal skills that most distinguish workers that innovate were creativity, critical thinking and communication (Avvisati, Jacotin and Vinvent-Lancrin, 2013[33]). A range of social skills is also considered important, including self-confidence, risk-taking, leadership and teamwork (OECD, 2016[34]). The development of these skills is an integrated part of learning in Ireland, featuring in the Key Skills Frameworks for both the Junior and Senior Cycle (NCCA, 2015[35]; 2009[36]). In addition, Science Foundation Ireland (SFI) runs a range of programmes to inspire interest in science, technology, engineering and mathematics (STEM) subjects and promote high-quality, inquiry-based teaching, for example, through its Curious Minds (previously Discover Primary, Science and Maths) programme (Box 4.2). The Creative Ireland Programme, now extended to 2027, features a number of initiatives to support the arts, culture and creativity in education at every level. This includes the Creative Schools Programme, which supports the development of tailored projects to reinforce creative education in schools; the Creative Clusters scheme, where schools work together to shape arts and cultural projects; continuing professional development (CPD) programmes for teachers and creativity programmes for young people in disadvantaged communities; and a new Creative Youth Plan 2023-2027, which will facilitate collaboration between early years and school-age education and childcare professionals, those involved in youth and community work and relevant support services to promote the development of creativity among children and young people (Government of Ireland, 2018[37]). Entrepreneurship education is incorporated into curriculum time, as well as through project-based activities, including during the Transition Year (OECD, 2019[17]). Ireland also offers a range of entrepreneurship initiatives at the primary and secondary levels, including the Junior Entrepreneur Programme and Student Enterprise Programme delivered by Local Enterprise Offices (LEOs) in partnership with local schools.

However, given evidence that three-quarters of adults in Ireland lack the problem-solving skills required for technology-rich environments (OECD, 2019[19]) and that one-third of Irish employers are not satisfied with the entrepreneurial skills of higher education (HE) and further education and training (FET) graduates (Fitzpatrick Associates, 2019[39]), there remains scope to further strengthen the development of these skills across the education system in Ireland. DFHERIS, DETE and DEP EDU should review how best to extend existing innovation and entrepreneurship initiatives, including exploring the potential for new pedagogical practices, capacity building for teachers or reforming teaching methods, as seen in many OECD countries in efforts to broaden the skills and culture for innovation (OECD, 2016[34]; 2016[40]). One example is Germany’s STEM education initiative, Little Scientists’ House, which blends participatory learning for primary-aged children with a CPD programme for early-years educators (see Box 4.3), which is now available in 73% of primary schools in Germany. There may also be scope to draw on new entrepreneurship education initiatives being led by HEIs and funded by the Higher Education Authority (HEA), which seeks to expand and enhance existing institution-led activities (Higher Education Authority, 2022[41]). Furthermore, the redevelopment of the Senior Cycle also offers a timely opportunity for Ireland to consider how best to nurture transversal skills crucial to innovation across the second-level curriculum through Transition Year and wider entrepreneurship initiatives (NCCA, 2022[42]).

Alongside developing transversal skills, Ireland also needs an in-depth understanding of the academic and technical skills required for innovation. Ireland’s ability to exploit emerging technologies and other innovations will largely depend on an adequately skilled labour force and the adoption and utilisation of these skills within enterprises. Past research suggests that both tertiary and vocational education produces skills valuable for innovation but that there is also significant sectoral variation (Jones and Grimshaw, 2012[44]). For instance, despite the common focus on STEM, the importance of different fields of study varies by type of innovation and sector of activity. This emphasises the need to complement efforts to forecast changing skills needs across the economy (for example, research progressed by the Expert Group on Future Skills Needs [EGFSN], discussed further in Chapter 5) with more granular insight on the job roles, skills and competencies required in different sectors, occupations or with regard to specific innovations. This is particularly important for frontier innovation and, more generally, where skills needs are changing rapidly, often as a consequence of the disruptive effects of global megatrends.

National or regional sectoral clusters can serve as an important vehicle for promoting collaboration between employers, providers and wider actors in the skills system to identify and respond to changing skills needs. Project participants highlighted several examples of where clusters in Ireland had successfully worked together to refine existing or develop new education and training provisions in response to emerging regional or national skill shortages. Sometimes this activity was led by the government and initiated in response to policy needs, as in the Modern Methods of Construction Leadership and Integration Group (Box 4.4). Other clusters had developed more organically, reflecting regional sectoral specialisms and networks – some dependent on voluntary staff time, some with formalised management structures funded by county councils, and others supported through Enterprise Ireland’s Regional Technology Clustering Fund. Ireland’s forthcoming National Clustering Programme will provide a platform to promote a more strategic approach to cluster development, greater consistency and sustainability of funding and stronger strategic oversight of regional sectoral clusters. This also offers the opportunity to sharpen focus on the role of clusters in shaping Ireland’s skills system.

Regional sectoral clusters supported through the new National Clustering Programme could have a clear mandate for strengthening and systematising the process of identifying and responding to emerging technical skills needed to support innovation in their specialist areas, working with wider actors in the skills system, including the EGFSN, the Regional Skills Fora (RSF), Skillnet Ireland, FET and HE providers, R&I centres, employer representatives and sector bodies. There are international examples from which Ireland can draw lessons, including the development of “cluster pacts” by “Spearhead” clusters in Flanders, Belgium, and the activity of the United Kingdom’s “Catapults” across the skills value chain, supporting collaborative foresighting exercises, identifying gaps or a need to update current provision, shaping and supporting the uptake of new learning options (Box 4.5).

Ireland’s public R&I system provides high-level, cutting-edge technical skills for innovation, but mechanisms that enable access to talent and promote collaboration between public, private and academic sectors are vital to foster knowledge transfer and maximise innovation.

Past research suggests that these mechanisms for knowledge exchange and innovation diffusion are relatively well developed in Ireland (EGFSN, 2020[47]; OECD, 2019[17]; OECD/European Union, 2017[26]). Knowledge Transfer Ireland (KTI), established in 2013, promotes business engagement with the state-funded research base through Technology Transfer Offices (TTOs), enabling access to expertise, equipment and facilities in Ireland’s HEIs and supporting university spin-outs. Ireland also benefits from a strong network of R&I centres, including 16 academic-led research centres supported by Science Foundation Ireland (SFI), 9 enterprise-led technology centres and 15 technological gateways, both supported by Enterprise Ireland, which offer access points for industry-focused researchers and specialist equipment and facilities across a range of key technologies. The forthcoming European Digital Innovation Hubs (EDIHs), part of the European Commission’s Digital Europe Programme and led by the DETE through Enterprise Ireland, will further strengthen this landscape, supporting the digital transformation of smaller enterprises and public sector organisations in key technologies such as cybersecurity, artificial intelligence and high-performance computing. Enterprise Ireland and SFI also offer funding for specific R&I projects; for instance, the Enterprise Ireland Innovation Partnerships Programme provides expertise and financial support to offset the cost of developing new or improved products, processes or services (see Table 4.2 for a more detailed list).

Reviews and evaluations of Ireland’s public research, development and innovation (RD&I) system suggest that programmes are well aligned to policy priorities, are achieving their aims and delivering a positive impact on innovation and wider performance indicators for beneficiaries and Ireland’s economy. This includes positive engagement with SMEs, with small firms comprising 56% of beneficiaries of Enterprise Ireland RD&I financial support and 66% of R&D agreements between research-performing organisations and Irish SMEs (Technopolis/ESRI, 2020[48]; Knowledge Transfer Ireland, 2021[49]; Indecon, 2017[50]). Yet, relative to the size of the SME population, uptake is more limited among smaller enterprises, suggesting there is scope for TTOs and R&I Centres to further broaden the base of firms with which they engage. Enterprise Ireland, KTI and the SFI should explore the scope to further strengthen existing targets or incentives for SME engagement, as well as simplify and speed up the application process as well as minimise the administrative burden of monitoring activities, which have been cited as areas for improvement in past evaluations (Indecon, 2017[50]; OECD, 2019[17]; Technopolis/ESRI, 2020[48]). The 2019 OECD review of SME and Entrepreneurship Policy in Ireland also identified a potential role for LEOs in directing small firms to RD&I support available in regions (OECD, 2019[17]).

Project participants also emphasised that simplifying the language used to describe Ireland’s public R&I system and support programmes was important to better engage smaller enterprises. It was felt there was a need to “demystify” the concept of innovation and build awareness of the value of incremental improvements in products, services or business processes (incremental innovation) alongside more transformational innovation. Technological universities (TUs) and institutes of technology (IoTs) were viewed as playing a vital role in widening participation, as institutions well embedded in regional economies and with strong networks with local businesses. However, project participants emphasised the relatively limited resources or incentives for engagement activities – both in terms of specialist staff and the time allocation of academic staff. Previous reviews of Ireland’s higher education (HE) system have also found that current pay structures, the workload model and progression or promotion criteria do not sufficiently incentivise or reward academic staff for industry engagement, with some notable exceptions within specific HEIs (OECD/European Union, 2017[26]). DFHERIS and the HEA should work with the research-intensive and TUs and IoTs to examine how best to adjust staff teaching and research workloads to accommodate increased industry engagement, particularly ensuring that the TUs are adequately resourced to manage greater levels of activity envisaged in Impact 2030 (DFHERIS, 2022[25]).

Beyond strengthening mechanisms that enable access to research expertise and foster collaboration between academic, public and private sectors, there is also a need for Ireland to consider how to improve the mobility of research talent between academia, industry, the public and voluntary and community sectors. Ireland invests considerably in graduate and doctoral researchers who are among the most highly skilled workers in the economy. The knowledge vested in these individuals is considerable, as is their capacity to drive R&D intensity and innovation within firms. Studies of innovation systems over a number of decades have demonstrated the importance of the movement of skilled research personnel, within and between sectors, as a vehicle for the transfer and diffusion of formal and tacit knowledge (OECD, 2001[51]).

This has not escaped Ireland’s attention and improving the mobility of research talent has been a priority in Ireland for several years. The National Strategy for Higher Education to 2030 called for secondments, consultancy and greater parity in the esteem afforded to knowledge transfer and commercialisation activities in performance reviews and metrics and promotion criteria to promote greater mobility of research staff (Department of Education and Skills, 2011[52]). Innovation 2020 established an explicit target of increasing the number of research personnel working in enterprises from just under 25 000 in 2013 to 40 000 in 2020 (Interdepartmental Committee on Science, Technology and Innovation, 2015[53]). Impact 2030 reaffirms this commitment, with a strategic objective to promote researcher mobility and to raise the number of researchers relative to the size of the labour force from 9.52 (in 2019) to 15.00 in 2030 (DFHERIS, 2022[25]). This would position Ireland among the leading innovation economies, such as Korea, Sweden, Finland and Denmark. However, as illustrated by Figure 4.6, the number of enterprise researchers has been increasing at a modest pace in Ireland and has reduced, relative to the size of the labour force, over the past five years – with a more significant decrease in Ireland than in any other OECD country.

The continued policy focus on the mobility of research personnel is important to ensure Ireland does not lose ground on leading innovation economies. However, Ireland lacks detailed intelligence on enterprise demand for research talent and the movement of graduate researchers between sectors across their careers and the factors that inhibit and enable these transitions. Addressing these evidence gaps could prove crucial in better aligning the supply of research graduates with labour market demand and refining current interventions that promote research graduate mobility.

Ireland should prioritise regular forecasting of the demand for research graduates (National Framework of Qualifications [NFQ] Level 9 by research and Level 10) as an integrated part of the wider LMI framework in Ireland (see Recommendation 5 in Chapter 5 for further discussion of the need to reinstate regular model-driven quantitative forecasting of labour demand at all levels). This would then provide the basis for a more detailed understanding of current and future needs for research graduates from different disciplines and by different sectors of Ireland’s economy, complementing detailed foresighting activities progressed by EGFSN.

In addition to better anticipating labour demand, Ireland needs to examine research graduate outcomes and onward transitions of research talent in the labour market. The most detailed studies of labour mobility have been undertaken in Nordic countries due to the availability of highly detailed registers that capture the educational background of employees and their subsequent movement between jobs over time (Nas et al., 2001[56]). However, over the past decade, more countries, including Ireland, have invested in linking administrative datasets. The Central Statistics Office (CSO) Higher Education Outcomes collates data from various public bodies, including salary data from Revenue, benefits data from the Department of Social Protection, and graduate data from the HEA, enabling a longitudinal view of the mobility of research talent in the labour market. The planned development of a research graduate tracking system in Ireland, as part of the Impact 2030 work programme for 2022-24, would explicitly address this evidence gap. There is an opportunity for Ireland’s plans to align with efforts by the European Commission to develop a European graduate tracking mechanism (European Commission, 2020[57]). Such approaches could also be further enhanced through new sources of “big data”, including those drawn from social and professional networks, which provide new opportunities to track graduate transitions throughout their career, as seen in the OECD’s work benchmarking the performance of HE systems (OECD, 2019[58]).

In addition to more detailed insight into the demand for research talent and postgraduate career pathways, project participants emphasised the importance of careers education, information and guidance for research talent. As noted earlier, career advice plays an important role in minimising skills imbalances in the economy and is considered vital to signposting researchers towards opportunities in the economy and building awareness and motivation to pursue careers outside of academia. Further discussion on careers education, advance and guidance can be found in Chapter 2.

The development of transversal skills among research graduates has been shown to have a significant impact on labour market outcomes (CESAER, 2020[59]; OECD, 2012[60]); features as one of the European Commission’s seven principles for innovative doctoral training (European Commission, 2011[61]); and have been the subject of detailed study [see, for example, Eurodoc (2018[62])]. Past research has also shown that SMEs tend to attach greater value to PhD graduates’ transferable skills than larger companies do (Borrell-Damian, 2009[63]).

Developing transversal skills among researchers is also a priority in Ireland. This is noted in the 2020 review of Ireland’s Higher Education Research System (Higher Education Research Group, 2020[64]), and Impact 2030 commits to fostering transversal skills development, especially for early-career researchers, to enable career pathways outside academia. Graduate employability is also a key objective in the Higher Education Authority Strategic Plan (Higher Education Authority, 2017[65]); the development of transferable skills is central to the Irish Research Council (IRC)’s Career Development Policy (Irish Research Council, 2017[66]); and Science Foundation Ireland set out plans to align more PhD training to the National Framework for Doctoral Education to ensure doctoral researchers develop a breadth of skills, including entrepreneurship (Science Foundation Ireland, 2021[67]).

The OECD’s review of Entrepreneurship and Innovation in Ireland’s HE system notes that HEIs in Ireland undertake a range of activities to promote the development of transversal skills, including through teaching and learning, projects and work placements, competitions and prizes. HE work placements and job placement assistance have been found to support the development of employability skills, reducing the mismatch between graduates' skills land those needed by employers (OECD/European Union, 2017[26]). Ireland offers a range of such schemes. For example, the IRC Employment-based Postgraduate programme co-funds collaborative research with HEIs, while research master’s and doctoral candidates are based within a range of organisations, and the SFI Industry RD&I Fellowships Programme supports academic researchers in undertaking a temporary placement in industry to address industry-informed challenges (see Table 4.2 for a more detailed list). There are also institution-led initiatives, such as University College Cork’s Odyssey Programme (discussed further in Box 4.6).

Despite these initiatives, project participants suggested that further work is needed to strengthen the transversal skills of graduate researchers and the perceived value of academic researchers among smaller enterprises. Data from the Irish National Employer Survey also suggest that while employers tend to rate HE and FET graduates highly across a number of workplace and personal attributes, commercial awareness and entrepreneurial skills are perceived as weaknesses (Fitzpatrick Associates, 2019[39]).

The HEA, IRC and SFI should work collaboratively to strengthen research graduates’ transversal skills, including by: further integrating transferable skills development into PhD programmes and Centres for Research Training; specialist doctoral schools and residential transferable skills training courses for postgraduate students; and collaborative doctoral programmes (Technopolis, 2011[70]; OECD, 2012[60]; Eurodoc, 2018[62]). The IRC and SFI should also prioritise SME engagement in these programmes, exploring the further scope for jointly supervised collaborations at the master’s level, given that master’s projects are typically shorter in duration and closer to market, addressing the distinct resource and financial constraints of smaller enterprises and maximising the commercial value of such collaborations (Borrell-Damian, Morais and Smith, 2015[71]). In recent years, there has also been growing interest in Doctoral Networks, where a partnership of universities, research institutions and businesses (including small firms), often from different countries, facilitate a series of short-term fellowships for researchers across the network (Borrell-Damian, 2009[63]). The Marie Sklodowska-Curie Actions (MSCA) Doctoral Networks provide one such example available to Irish researchers. There is an opportunity for the IRC and SFI to expand and enhance Doctoral Networks in Ireland, including exploring the scope for doctoral candidates to be “shared” by several companies, such as the SEPnet Doctoral Training Networks in the United Kingdom (Box 4.7), which support cost and risk sharing among SMEs (Borrell-Damian, 2009[63]).

Strong management and leadership skills are vital to the success of Irish firms, underpinning their ability to adapt to many of the global megatrends set out in Chapter 1. Well-managed firms tend to perform better across a range of indicators: they are more productive, grow faster and have higher survival rates (Bloom and Van Reenen, 2010[75]). Skilled managers are more likely to innovate, adopt quality-orientated product market strategies and implement HPWPs (UKCES, 2014[76]). Managers' attitudes, particularly in small firms, have been shown to significantly influence the prioritisation and investment in training for workers (discussed further in Chapter 3).

For project participants, addressing weak management and leadership skills is key to driving innovation and strengthening firm performance in Ireland.

Management development has been a policy priority in Ireland for a number of years. The report of the Management Development Council proposed wide-ranging reforms to establish a national system for management development (Management Development Council, 2010[77]). More recently, the Expert Group on Future Skills Needs’ report Leading the Way sets out a vision for management development in Ireland and makes a range of recommendations (EGFSN, 2020[47]), which are being taken forward by an inter-departmental group, working with business representative organisations (discussed in more detailed below).

Improving management capability is also acknowledged as vital to improving the productivity and competitiveness of Ireland’s firms (National Competitiveness and Productivity Council, 2021[78]), enabling the digital transformation of enterprises (Department of the Taoiseach, 2022[29]) and in maximising the benefits and mitigating the risks of the growth in hybrid working following the COVID-19 pandemic (DETE, 2021[79]).

Despite this policy focus, there are still various areas for improvement. Based on the assessment of the evidence, bilateral interviews and workshops, there is scope to extend flexible, subsidised and customisable development opportunities for Ireland’s managers to maximise the accessibility, relevance and value of support; and to strengthen incentives for management development to raise the motivation of Ireland’s managers to upgrade their skills and participate in lifelong learning.

Existing research suggests that there is a range of measures available to support management development for businesses in Ireland (see Table 4.3 for an overview). LEOs act as a first-stop-shop offering management development programmes and mentor programmes for micro and small-sized firms. Enterprise Ireland offers a wide array of programmes to support Irish enterprises to grow, innovate and internationalise, including Leading 4 Growth and Go Global 4 Growth programmes, alongside grants for mentoring and strategic consultancy. Enterprise Ireland also runs a Mentor Network, which connects Irish businesses with experienced business leaders. IDA Ireland offers support for their client base, including the new Leading with Strategic Intent programme and the Future Subsidiary Leaders Programme, developed with the Irish Management Institute. Skillnet Ireland offers Management Development programmes through its 72 learning networks across Ireland and has recently launched Mentors Work with the Small Firms Association (SFA) to enhance leadership capability within smaller enterprises.

Government programmes sit alongside a wider offer of support for start-ups and SMEs offered through business representative organisations such as Ibec, the SFA and the Irish SME Association (ISME), as well as a range of management development programmes tailored to the needs of businesses operating in different sectors of the economy.

Despite initiatives like the LEO Making it Happen campaign, not all businesses, particularly SMEs, are aware of the opportunities available to them. Project participants viewed the complexity of the landscape of support for management development in Ireland as a critical factor inhibiting the take-up of management training and support programmes. Concerns were also raised that organisations were often presented with different management development opportunities depending on the agency they first contacted. This often reflected the suite of programmes that the agency was funded to deliver rather than signposting enterprises towards support that was best suited to their needs.

Following the OECD review of SME and Entrepreneurship Policy in Ireland (OECD, 2019[17]) and the Leading the Way report (EGFSN, 2020[47]), the SME and Entrepreneurship Implementation Group is progressing a range of important measures to enhance the availability, relevance and navigability of support for enterprises. This includes widening eligibility of existing schemes to address identified gaps, establishing micro-credentials for entrepreneurs and developing a Single SME Portal that will provide information on support available; diagnostic tools to guide managers to development opportunities most aligned to need; and access to a national mentoring programme for SMEs (SME Taskforce, 2021[80]). In addition, during the stakeholder engagement process, there was significant support for strengthening referrals between regional agencies, with the scope to develop a “no wrong door” policy or one-stop-shop where businesses can access a consistent offer. This was seen as a vehicle for accessing all training and development options (including management development), as also covered in Chapter 3.

While at first glance, there appear to be plentiful management training options in Ireland, there is evidence of potential gaps in support and underserved or unmet need for management development. One example relates to established, mid-sized enterprises employing 50 to 249 employees with limited export potential (OECD, 2019[17]). These firms would be ineligible for the support offered through the LEOs, which is targeted towards micro firms, and recently extended to small businesses with fewer than 50 employees (Government of Ireland, 2022[81]). They may also fall outside of Enterprise Ireland’s client groups, which include high-potential start-up companies with the capability to start a business and sell in export markets; established manufacturing and internationally traded services businesses that are SMEs; Irish-based food and natural resource companies that are overseas-owned or controlled; and large companies (with 250+ employees). Mid-sized, locally traded service companies may therefore be ineligible for Enterprise Ireland and LEO support programmes. However, these firms may still be able to benefit from open-access resources like the EILearn e-learning platform and participate in wider management development opportunities, such as Mentors Work.

Another identified gap relates to community, voluntary and social enterprises (CVSEs). These organisations are acknowledged as making a vital contribution to Ireland’s economic and social prosperity and are increasingly deploying new technologies and creative approaches to address societal and environment challenges. However, many programmes listed in Table 4.3 are not available to charities or not-for-profit organisations. Research suggests that there are very low levels of awareness, a variable offer of support and limitations to the programmes available through the local enterprise support offer (The Wheel/Carmichael, 2021[82]; DRCD, 2019[83]).

Addressing these unmet needs should be considered a priority in Ireland. DETE and DFHERIS, working with Enterprise Ireland, the LEOs, Skillnet Ireland, the Regional Skills Fora and employer representative organisations such as Ibec and The Wheel, should review the relevance of their existing management development programmes to these organisations and the feasibility of widening the eligibility criteria for accessing support and developing targeted management development opportunities. Delivering commitments made in the Department for Rural and Community Development (DRCD) National Social Enterprise Policy to compile a list of business support available to social enterprises, identify gaps in provision, improve access to mainstream support (such as that offered by LEOs) and provide tailored training for social enterprises will be important in improving business and leadership support for the CVSE sector. The launch of the Leadership Academy (see Box 4.8 further below), which offers resources and support tailored to the needs of non-profit leaders, is a noteworthy addition to the landscape of support and illustrates the value placed on customised and targeted support for groups of businesses that share common management challenges.

Several factors have been found to inhibit participation in management training. International evidence and research undertaken with businesses in Ireland identify time constraints as a major barrier to the take-up of management development opportunities, particularly among SMEs (Figure 4.7) (EGFSN, 2020[47]; Management Development Council, 2010[77]). Smaller firms are also less likely to have a dedicated budget for management development, meaning financial constraints are an additional concern. The EGFSN’s Leading the Way report found that less than half (48%) of small firms have a budget for management development, and 32% of micro-sized firms do (EGFSN, 2020[47]).

Chapter 3 discusses in great depth the barriers to lifelong learning and the need for flexible, modern learning options. In the context of significant time and cost constraints faced by managers in SMEs, this is particularly relevant, and project participants emphasised the need for substantially or fully subsidised training that is delivered flexibly, including short-term, modular and blended learning, online training and training delivered at times suited to business leaders.

Project participants also stressed the importance of engaging businesses in the co-design of management training and building a degree of customisation into the delivery of programmes. In particular, strong support was shown for the SFA/Skillnet Ireland Mentors Work programme and Enterprise Ireland Spotlight on Skills, which both enable participants to shape their learning journey and are also fully subsidised by the government and free to access for participants (in the case of the latter for EI clients only). Project participants viewed this as vital to ensure the relevance of management training to business needs, to maximise the business benefits of management development and to offer learning options that accommodate the time and cost constraints felt most acutely by SMEs. Another example of this in Ireland is the ISME / UCD Professional Academy which offers accredited, subsidised management development for SMEs, delivered flexibly through an interactive online study environment (Box 4.8).

An international example of relevance here is the Polish Agency for Enterprise Development (PARP) management development programmes, which are notable for the scale of subsidies (equivalent to 80% of programme costs), the breadth of online learning options and their scale – reaching 180 000 small businesses since 2006 (Box 4.9). Indeed, in addition to advancing new, flexible and targeted management training, Ireland should review the scope to scale up or draw lessons from successful existing development programmes. However, consultations with project participants suggest that there is a need for further measures that stimulate demand and uptake among managers, particularly in SMEs (see Recommendation 4).

Data from the European Labour Force Survey suggests that in Ireland, managers are less likely to have participated in training than is average across the European Union. In 2021, 14.9% of Irish managers had engaged in education and training in the past four weeks, compared to 16.6% in the European Union and over 40% of managers in countries like Finland and Sweden (Eurostat, 2021[88]). As in other countries, participation in management development increases with firm size, with 67% of micro-businesses engaging in formal management development between 2017 and 2020 compared to 88% of medium-sized enterprises (EGFSN, 2020[47]).

Recent research also suggests there has been a deprioritisation of leadership development in Ireland, as firms have focused on the impact of COVID-19 and economic uncertainty (CIPD, 2021[89]). The impact of the COVID-19 pandemic on management skills needs was also identified by project participants. COVID-19 has accelerated the shift towards more flexible forms of working (Microsoft, 2020[90]), and more than half (56%) of organisations in Ireland have incorporated remote and hybrid working into strategies to attract and retain talent (CIPD, 2022[91]). However, there is evidence that managers find it more difficult to manage remote teams (McCarthy et al., 2021[92]). The DETE Making Remote Work strategy acknowledges that dedicated training to support management skills development will be important to enable the successful adoption of remote working (DETE, 2021[79]). However, while 75% of Irish firms had invested in technology to support remote or hybrid working, less than half (41%) of line managers had received training on how to manage remote or hybrid teams (CIPD, 2022[91]).

There is evidence that smaller enterprises may lack awareness of the value of management training and have unrecognised management development needs. For instance, evidence from the Leading the Way report suggests that business leaders in Ireland identify developing management capability as a priority but are more likely to identify management and leadership development as a top priority for their management teams than themselves (EGFSN, 2020[47]). In order to build a culture of continuous improvement in management development in Ireland, there is a need to build awareness and commitment at the very top of organisations and to develop the skills of the entire management community, including junior team leaders and middle managers as well as senior executives and leaders. A lack of evidence on the return on investment in management training has been identified as a further barrier to participation, both in the literature and among government and industry stakeholders in Ireland. This suggests a need to improve awareness among businesses, particularly SMEs, of the business benefits of management development for productivity, innovation and business performance. The EGFSN Leading the Way working group could build on the recently launched Skills for Better Business campaign, which includes an online assessment of management development capabilities and signposts businesses to suitable support, to provide stronger quantitative evidence and case studies demonstrating the return on investment associated with management training.

Alongside soft measures like awareness campaigns, project participants were also interested in the potential for management standards, accreditation and quality marks and how these might support stronger incentives for management development. Internationally, a few such standards exist, often focused on specific aspects of management, particularly human resource management in the case of the Investors in People Standard (see Box 4.10). An overriding benefit of such approaches is that employers are supported to make management improvements in becoming accredited and often report a range of benefits as a result in terms of attracting talent, promoting staff retention, and strengthening employee engagement. National and local enterprise agencies, qualifications and standards authorities such as Quality and Qualifications Ireland (QQI) and the National Standards Authority of Ireland (NSAI), providers of management training, employer representative organisations such as Ibec, ISME, the SFA and The Wheel, large organisations and SMEs should work collaboratively to develop new management standards and quality marks to professionalise management in Ireland. It will also be important to co-design the standards with employers (particularly smaller enterprises) to work through implementation challenges and to maximise relevance and impact. For instance, the accreditation journey can be time-consuming and costly, and many existing standards are, for example, tiered to support employers of all sizes to engage with standards as part of a journey and encourage their ongoing participation – progressing through standard, silver, gold and platinum award levels in the case of Investors in People.

Ireland should review the scope to advance incentives that promote the take-up of these standards, for example, by making accreditation a condition for accessing public funding or support – particularly for larger businesses that have greater resources to invest in management development. Internationally, there are examples of employment standards being integrated into public procurement frameworks, such as the Fair Work Standard in Scotland (Box 4.10). There are also examples of banks offering discounted interest rates for small businesses that have completed management training, as seen in the United Kingdom in the mid-to-late 1990s (OECD, 2002[95]). There is some practice of this nature already underway in Ireland. For example, Micro Finance Ireland (MFI) offers a 1% discount to standard interest rates for loan applications made through LEOs, and once MFI approves the loan, businesses are provided with a mentor from the LEO Mentor Panel (Box 4.11). Extending such schemes could help to drive the take-up of management training and support a culture of continuous improvement in management skills in Ireland.

While investment in R&D and the presence of R&D professionals within organisations are crucial factors in business innovation, an important but often overlooked determinant of innovation in smaller enterprises is organisational design and culture. How firms organise their workplaces has a significant impact on their ability to stimulate ideas from the workforce, transform these into innovation, and facilitate the absorption of knowledge from other firms and research organisations (Bloom and Van Reenen, 2010[75]; Flood et al., 2008[97]; Lorenz and Potter, 2019[98]). In the context of relatively low rates of innovation in Ireland discussed earlier in this chapter, work organisation warrants considerable focus in Ireland.

Research suggests that small firms that offer greater autonomy, teamwork, performance-related pay and appraisal, and regular staff meetings between employees and their supervisors innovate more and co-operate more for innovation. The positive impact of participative forms of work organisation on firm-level productivity are well documented and substantial. For example, Swedish surveys suggest an uplift of between 20-60% in addition to reduced staff turnover and staff absence (Totterdill, 2015[99]). In Nordic countries like Sweden and Finland, most SMEs design workplaces in these ways, but in Ireland, the share of firms adopting these organisational models is much lower (Lorenz and Potter, 2019[98]).

Research carried out by Dublin City University and the University of Limerick demonstrates the powerful effect that combining strategic human resource management with employee involvement and participation systems has on the performance of Irish firms. When employing this multi-dimensional model of HPWPs, firms were found to realise significant performance advantages, both in terms of labour productivity and workforce innovation (Flood et al., 2008[97]).

As set out earlier, data from the Survey of Adult Learning (PIAAC) suggest a smaller share of jobs in Ireland adopt these HPWPs. However, evidence from the European Company Survey and European Working Conditions Surveys suggests a mixed picture of workplace practices in Ireland (Figure 4.8) (Eurofound/CEDEFOP, 2019[14]; Eurofound, 2016[100]). On the one hand, employees in Irish firms report that working conditions are good; they tend to rate their line managers highly, are more likely to have undergone training, and report being able to apply their own ideas in their work. In addition, employers in Ireland assign greater value to training, more regularly communicate their vision and mission to staff, and take steps to ensure their employees are engaged in the decision making of the business. However, on the other hand, Ireland performs less well on measures of job design: workers in Ireland are more likely to report that their work involves monotonous tasks and work long hours. They also tend to experience less autonomy on some measures and are less likely to work in self-directed teams. Other studies suggest that small firms in Ireland struggle with more formal and strategic human resource management, particularly target setting and incentivisation, performance management and dealing effectively with underperformance (EGFSN, 2020[47]; McKinsey & Company, 2009[24]).

These findings suggest there is an opportunity for Ireland to stimulate SME innovation by driving improvements in workplace organisation through greater adoption of HPWPs. In particular, Ireland could reinvigorate strategic focus on workplace innovation as a key vehicle to improve the productivity and performance of firms; and extend funding and support for peer-to-peer learning to maximise knowledge exchange and innovation diffusion between Ireland’s MNEs and SMEs.

Despite the well-evidenced positive impacts of HPWPs, many European countries lack a strong strategic focus on modernising workplaces. While there is considerable potential for public programmes to strengthen workplace organisational practices, work organisation can often be viewed as the private concern of enterprises and social partners rather than an issue for public intervention (OECD/ILO, 2017[2]).

The benefits of strengthening workplace practices have not gone unnoticed in Ireland. In the 1990s and early 2000s, Ireland was one of few liberal market economies to set out a strategic focus on HPWPs and workplace innovation, taken forward through the Irish government’s National Workplace Strategy. The National Centre for Partnership and Performance (NCPP) was established to support and drive change in the Irish workplace. The NCPP subsequently launched a specialist Workplace Innovation Fund, which included public awareness campaigns to disseminate knowledge of HPWPs and running enterprise-level projects to foster social partnerships in advancing HPWPs within enterprises. However, both the NCPP and its Workplace Innovation Fund were abolished in 2009 as part of wider austerity measures (Totterdill et al., 2016[101]).

While the NSS 2025 acknowledges skills use as an important objective, there is scope for DFHERIS to strengthen the focus on HPWPs as a means to improve the use of skills in the workplace, drive innovation, improve productivity and strengthen firm performance. The NSS 2025 follow-up offers the opportunity to reinvigorate the strategic focus on organisational practices and workplace innovation4 in Ireland as a driver of innovation, productivity, competitiveness and digitalisation. While engagement activities undertaken during the recommendations mission for this project did not rate potential policy directions concerning workplace practices as highly as others, the mixed picture of workplace practices in Ireland and the potential uplift in productivity, innovation, and firm-level performance associated with participative forms of work organisation (noted above) justifies a sharper focus on enabling enterprises to make better use of the skills of their workers through innovative workplace solutions.

Lessons from those countries that have prioritised the diffusion of HPWPs over a number of decades also emphasise the importance of repositioning workplace innovation from a traditional industrial relations sphere to a mainstream policy priority (Totterdill et al., 2016[101]). There is a need to embed workplace innovation more strongly within the NSS 2025 and the wider policy framework for economic development, industrial development, innovation and digitalisation in Ireland. One such example of this was Future Jobs Ireland 2019, which notes that the full productivity gains of new technology will only be realised if complemented with changes in organisational processes (Government of Ireland, 2019[102]). This could include the government broadening its definition of innovation to include “organisational innovation”, spanning the adoption of productivity and efficiency-enhancing processes, including potentially redefining the Revenue Commissioners’ qualification requirements for the R&D tax credit. The IRC and SFI could also provide additional funding to support R&D projects that seek to blend technological innovation with investment in staff training, work reorganisation and job redesign to maximise the productivity benefits realised through the adoption of digital technology by Irish firms.

There are also potential learnings from workplace innovation programmes run in other European countries, particularly in countries like France, Germany and some Nordic countries, which have progressed a variety of strategies and interventions over the past 30 years, while other countries, like Canada, have relatively recently established organisational practices as a policy priority (Box 4.12). Evaluations of longstanding programmes identify a range of implementation challenges, including how best to allocate finite resources, deliver significant and sustained shifts in organisational practices, and successfully transition concepts and approaches from traditional manufacturing environments to meet the needs of knowledge-based service industries. They also offer lessons on how to successfully overcome many of these challenges, for example, through more inclusive framing strategies, involving workers and social partners in programme design, utilising collaborative learning networks to embed and diffuse learning and allocating sufficient resources for dissemination and capacity building (Totterdill et al., 2016[101]).

The strategic prioritisation of workplace innovation in Ireland should, in turn, influence public funding allocation and programme design. As noted earlier, and in Chapter 3, Ireland benefits from a relatively well-developed offer of programmes to strengthen management capability and promote employer investment in skills. Several of these programmes develop skills required to drive improvements in organisational practices. For example, the Skillnet Ireland/Small Firms Association Mentors Work Competency Framework includes performance management, work culture, communication, and “motivate for growth” (among others), which equip participants with the skills to advance high-performing workplaces. The Ibec Academy offers a variety of relevant management courses on issues such as employee engagement and workplace well-being. Resources and programmes designed to support businesses in improving their organisational practices also exist. For instance, Enterprise Ireland’s Workplace Innovation Toolkit enables organisations to examine performance in areas such as employee engagement, training, innovation and productivity and signposts companies to relevant support. This includes, for example, Enterprise Ireland’s Lean Business offer, which enables firms to build the capability of leadership and staff to identify opportunities to improve operations and drive workplace innovation. Scaling up these existing initiatives, particularly promoting take-up among smaller enterprises, would help to secure improvements in workplace practices in conjunction with the digitalisation agenda.

DFHERIS and DETE, working through Enterprise Ireland, IDA Ireland, Skillnet Ireland, the RSF and LEOs and working with wider organisations such as Ibec, the SFA, ISME and The Wheel, should also examine the opportunity to update the content of wider programmes to strengthen the focus on workplace transformation and HPWPs. For instance, with the LEOs now servicing firms with up to 50 employees, programmes such as the Accelerate Management Development Programme could be strengthened by adding modules focusing on building high-performing workplaces. In addition, Ireland could consider advancing new pilots that take well-established, innovative programmes, such as Skillnet Business Networks or Spotlight on Skills and apply them to improving work organisation within smaller firms. Similarly, additional funding and support planned for Industry Consortia looking to deploy Industry 4.0 technologies in firms could be extended to include organisational practices (DBEI, 2019[28]).

Alongside the opportunity to strengthen the strategic focus on workplace innovation, there is a need to raise the awareness and motivation of employers (particularly smaller enterprises) to implement HPWPs. Despite the well-documented positive impact of HPWPs on firm performance, the adoption of these practices across Europe remains limited, particularly in Ireland. Low levels of take-up tend to be attributed to low levels of awareness of what constitutes good practice, lack of awareness about the benefits of HPWPs and poor access to resources and support to improve organisational practice and enable workplace innovation (OECD/ILO, 2017[2]; Totterdill et al., 2016[101]).

Project participants suggest that while Irish firms generally demonstrate a strong appreciation of the need to invest in training and development for staff (an important component of HPWPs and discussed in detail in Chapter 3), their awareness of wider organisational practices that could improve employee engagement and firm performance (e.g. job design, target setting, incentivisation and mechanisms for employee participation) is much lower. There is, therefore, a need for Ireland to advance awareness campaigns that build an understanding of the steps that small firms can take to stimulate better work organisation practices and to strengthen the evidence base on the business case for the adoption of HPWPs. Many other OECD countries have faced similar challenges and advanced relevant initiatives from which Ireland could draw lessons, including awareness-building activities that demonstrate leading practices around work organisation and job design, e.g. social media campaigns, the sharing of success stories, networking and diagnostic tools that help firms identify where improvements can be made (Box 4.13).

In addition to strengthening government support for improving workplace practices, past research and project participants show considerable interest in the role of employer networks in enabling peer-to-peer learning and fostering enduring communities of practice that can embed learning and share good practice on an ongoing basis (OECD, 2019[17]; SME Taskforce, 2021[80]).

Large and persistent dispersion exists in Irish firms’ productivity performance (Papa, Rehill and Connor, 2018[106]). Ireland benefits from the presence of many global frontier firms, and there is growing interest in how to support the diffusion of knowledge, technology and management practices between these leading performers and the long tail of low-productivity firms (Government of Ireland, 2019[102]). Future Jobs Ireland 2019, for instance, identified the opportunity to increase the absorptive capacity of Ireland’s small, indigenous enterprises by promoting stronger collaboration between MNEs and SMEs (Government of Ireland, 2019[102]).

Ireland already benefits from well-established mechanisms that promote collaboration and enable peer learning. For instance, peer-to-peer support is at the heart of Skillnet Business Networks, of which there are now 72 across Ireland. The PLATO Business Development Network has at the core of its programme carefully curated participant groups and monthly sessions facilitated by large parent companies (Box 4.14). Skillnet Ireland’s recently launched Innovation Exchange is another example of fostering collaboration between smaller enterprises and large multinationals to improve their understanding and capacity across the innovation process. At the same time, IDA Ireland and Enterprise Ireland’s Disruptive Technologies Partnership Portal provides a platform for companies in Ireland to collaborate around disruptive, digital and sustainable technologies. Skillnet Ireland, EI and IDA Ireland, as well as wider providers of management training, should consider how wider aspects of HPWPs, such as new forms of work organisation and direct employee participation, could be more strongly embedded within the design of peer-to-peer learning programmes in Ireland or to advance similar initiatives to support improvements in workplace practices.

Given the strong presence of large MNEs, Enterprise Ireland and IDA Ireland should also examine the potential to further promote knowledge transfer between these organisations and their supply chains. Again, there are several international examples from which Ireland could learn. For example, in Korea, the POSCO National Human Resource Development (HRD) Consortium partners with local vocational education and training (VET) providers to offer leadership education to smaller enterprises in their supply chain. In Japan, J-Good Tech is an online business-matching site that aims to support information exchange and forming strategic partnerships between SMEs and larger domestic companies (Box 4.15).

There is one other area of focus Ireland could extend support to foster established or emerging business learning networks or communities of practice that seek to promote workplace innovation. These encapsulate a range of networks or forums that take varying forms, being sector-focused, supporting different professional groups, and often being geographically based. They can be vital in binding groups of businesses together, alongside other respected partners and experts, around a common purpose. These collaborative business networks often develop organically to advance specific short-term industry needs or business interests. However, if network activities support strong ties over time, this can boost the conditions for sustained and productive partnerships over the long term. Enterprise Ireland, IDA Ireland and Skillnet Ireland should review the existing landscape of networks and forums to identify the scope to further support these communities of practice and sharpen their focus on workplace practices. This could include extending networking activities for alums of existing programmes such as PLATO, Skillnet Business Networks or EI leadership programmes and IDA Innovation and Talent Forums, as well as offering targeted funding and support to collaborative business networks seeking to deploy innovative workplace solutions – an approach taken by France through its Competitive Clusters programme (Box 4.15).


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← 1. In this report, “skills use” is defined as the frequency with which individuals use their skills at work (measured in the Survey of Adult Skills [PIAAC]). Skills use may reflect workers’ skills levels, their motivation, the skills required to carry out the job, and employers’ practices aimed at increasing the productivity of their staff.

← 2. Research and development (R&D) is defined as the creative and systematic work undertaken in order to increase the stock of knowledge – including knowledge of humankind, culture and society – and to devise new applications of available knowledge.

← 3. Gross national income (GNI) is used to control for the strong presence of foreign-owned companies in Ireland, which can distort ratio analysis based on gross domestic product (GDP), particularly when benchmarking against other countries.

← 4. The 2012 Dortmund-Brussels Position Paper on Workplace Innovation defines workplace innovation as a social process that shapes work organisation and working life, combining their human, organisational and technological dimensions. This participatory process simultaneously results in improved organisational performance and enhanced quality of working life. See www.workplaceinnovation.org/kennis/dortmund-brussels-position-paper-12th-june-2012/.

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