Impact of Skill Mismatch on Organization’s Performance
IMPACT OF SKILL MISMATCH ON ORGANIZTION”S PERFORMANCE
Impact of Skill Mismatch on Organization’s Performance
Maryum Khan
Iqra University, Karachi
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
1
Impact of Skill Mismatch on Organization’s Performance
2
ABSTRACT
This study has been conducted to observe the effects of skill mismatch on organization’s
performance. Skill Mismatch is one of the major issues being faced by developing countries
today. Rising inflation rates, high unemployment rates, low CPI, job market instability, adverse
economic conditions have given hype to skill-job mismatch. Use of technology and increasing
demands of customers have compelled organizations to work on a faster pace hence giving them
with lesser amount of time to search for the best suitable candidate for a job. Now individuals are
hired on a first come first serve basis. In his study Demographic, Educational and Employment
characteristics of the employees have been observed. The interest is in identifying how these
individuals perform on job. On analysis it is discovered that the performance of employees
having a skill mismatch is mostly unsatisfactory and it has adverse effects on organization’s
performance.
KEYWORDS: Skill mismatch, demographic characteristics, educational characteristics,
employment characteristics.
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
1
1.1
2
INTRODUCTION
BACKGROUND:
In Pakistan most of the people are living below poverty line. Here the basic purpose of living is
to generate income rather than professional advancement. The rising unemployment rates in the
country have decreased options for the individuals to get job of their own choice.
Unfortunately a trend of preference based hiring exists in our society due to which many
qualified and deserving individuals are left behind and jobs are given to those coming with a
good reference. This injustice and many other factors give birth to education-job mismatch.
These skill mismatches can in the longer run create huge costs for the organizations and the
society. Skill shortages, obsolete skills, over qualification, under qualification and difference
between skills possessed and skills required; all of these factors create mismatches.
A bulk of individuals graduate from Universities and Institutes every year but none of these
institutions guarantee a job for them once they enter the job market. When these qualified
professionals do not get the job of their choice they have no option but to ought for any job, even
if its below their expectations and caliber.
Another problem which arises is that many individuals working in organizations for several
years have come to a point where their skills have become obsolete as per the job requirements.
And due to the poor HR Policies they cannot be fired from the job. The only way to get rid of
such individuals is to wait for the completion of their job tenure and wait for their retirement.
Until then they are liabilities for the organization.
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
1.2
3
IMPORTANCE:
This study will give a clear view of what happens when organizations hire people having a skill
mismatch. It will help organizations to understand the adverse effects of skill mismatches on
organization’s productivity. It will help to understand the trend followed by our labor market
regarding job searches and skill mismatches
1.3
1.3 OBJECTIVE:
The purpose of this study is to analyze the impact of job-qualification mismatch on
organization’s performance.
In Pakistani job market it is usually seen that individuals tend to select a job on the basis of the
salary offered regardless of what the job requires from them and whether it matches their prior
qualification or not.
On the other hand there are a variety of jobs available in the market but educational institutes
have only a limited amount of specialization courses to offer. And when these graduates go in
the market they don’t get their option of interest and are offered such jobs that are quite different
from what they have learned and specialized in their graduation or masters period.
Sometimes HR officials make great blunders by hiring graduate level individuals for a master’s
level job or a master’s level individual for a graduate level job due to time and cost constraints
that create a mismatch.
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
4
All of these phenomenon effect employee performance which ultimately affects the overall
performance of the organization.
The study will basically search for the following:
To come up with options that can minimize the effects of skill mismatch
To analyze the factors which tend to decrease the productivity of employees having a
skill mismatch
1.4
1.4 TOPIC:
“The impact of employees’ skill mismatch on organization’s performance”
(A study of commercial banks of Pakistan)
1.5
1.5 OBJECTIVE:
To study the impact of employees’ skill mismatch on organization’s performance
1.6
1.6 HYPOTHESIS:
This research paper revolves around the following hypothesis:
Skill mismatch of employees has adverse effects on organization’s performance.
1.7 OPERATIONAL DEFINITIONS:
Skill Mismatch: Mismatch due to over education, under qualification and unrelated skills.
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
5
Organization’s Performance: Performance in terms of employee’s productivity (Quality of Work,
Goals achieved during the year and avoidance of errors).
Assumption: Here other factors other than employee performance that affect the organization’s
performance are kept constant.
2. REVIEW OF LITERATURE
The job market today is going through harsh times and most of the people are unable to get a job
of their choice.
Asian workers in the US Labor Force face job mismatch problem due to ethnic differences.
[Madamba A.B., De Jong G.F, 1997]
The basic reason for inception of concepts like over education and occupational mismatch is that
organizations are less updated with the new theories as it takes time for them to implement them.
This brings a gap between the individual’s education and job requirements. Declining wages is
also one of the factors that have encouraged such a situation. Individuals in order to earn higher
amount of wages and to support their families let go off their field of specialization. [Charles N.
Halaby, 1994]
Overeducated workers are less likely to remain at the same job for a longer period of time, they
seek for change but this may not necessarily improve the quality of match. A person if reenters
the labor market after a gap will probably face a skill match. [Cedefop Research Arena, CEDRA]
3. METHODOLOGY
3.1 SUBJECT:
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
6
Subjects are selected from a population of 625 Departmental Heads present in the Commercial
Banking Sector of Pakistan.
The population is multicultural involving people from different sects, religions, gender and
cultures. The age of these individuals ranges from 25-50 years.
3.2 INSTRUMENT:
Questionnaires have been used as a data gathering instrument. This instrument has helped to
gather data regarding three major areas of my research which involves the deficiency areas
present in such employees that have a skill mismatch, its effect on organization’s performance
and possible solutions for it.
3.3 DESIGN:
Data has been collected data from 23 Commercial Banks that are present in Pakistan.
3.4 PROCEDURE:
The population of 650 Departmental Heads was identified using personal contacts (people
working in most of these banks) web sites of these banks, www.linkedin.com contacts. A sample
of 65 individuals from the identified population was taken.
The questionnaires were sent to the relevant individuals in a printed format or through e-mails
using personal contacts and references and getting the questionnaire filled online.
The questionnaire had questions related to the performance of employees that have a skill
mismatch and who work under these departmental heads from whom the questionnaire was
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
7
filled. Responses were taken on a five point scale from “Unsatisfactory” (1) to “Greatly Exceeds
Expectations” (5).
Unsatisfactory: Consistently falls short of performance standards.
Needs Development: Sometimes meets the performance standards. Performance has
declined significantly, or employee has not sustained adequate improvement.
Meets Expectations: Meets all relevant performance standards. Lacks appropriate level of
skills or is inexperienced/still learning the scope of the job.
Exceeds Expectations: Consistently meets and often exceeds all relevant performance
standards. Shows initiative and versatility, works collaboratively, has strong technical &
interpersonal skills or has achieved significant improvement in these areas.
Greatly Exceeds Expectations: Consistently exceeds all relevant performance standards.
Provides leadership, fosters teamwork, is highly productive, innovative; responsive and
generates top quality work. Active in industry-related professional and/or community
groups.
The questions were asked related to three major characteristics of these individuals.
 Demographic Characteristics: Age, gender and marital status
 Education Characteristics: Level of education
 Employment Characteristics: Work Schedule, Job Tenure and salary
The sampling technique used over here is cluster sampling. A sample of 65 Departmental Heads
is chosen. In order to assure that the sample space is a true representation (proportionality) of the
target population stratified random sampling is used so that the percentage of Departmental
heads shown in the sample is the same as in the population.
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
8
4. STATISTICAL TECHNIQUE
Independent Variable
Skill-job mismatch
Dependent Variable
Organization’s performance based on four variables: Productivity of employees, quality of work,
goals achieved during the year and avoidance of errors.
Equation:
Organizational Performance (Productivity + Quality of Work + Goals Achieved During the
Year+ Avoidance of Errors) =Skill-Job Mismatch
Productivity=β1 Skill-Job Mismatch
Quality of Work =β2 Skill-Job Mismatch
Goals Achieved During the Year =β3 Skill-Job Mismatch
Avoidance of Errors =β4 Skill-Job Mismatch
4.1 IMPLEMENTED TECHNIQUE
The purpose of this research was to identify the substantive relationship between Skill Mismatch
and organizational Performance.
Here Categorical Regression is used as the testing technique and the collected data is in
categorical form recorded on a scale of 1-5.
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
9
4.2 IDENTIFIED RESULTS
The results show that there is a significant relationship between skill mismatch and Productivity,
Quality of work, goals achieved during the year and avoidance of errors. The Beta value of
productivity (-0.773), quality of work (-0.674), goals achieved during the year (-0.542) and of
avoidance of errors(-0.617) shows that skill mismatch and organization’s performance are
negatively related to each other.
Hence the hypothesis is termed to be true that Skill Mismatch has adverse effects on
organization’s performance.
4.3 EXPLANATION OF TABULAR DATA:
On collection of data it is found that 48% of the individuals having skill mismatch are graduates
who start seeking for jobs and as their first experience select whatever job they can get.
69% of them are males because they are the earners for the family, females usually do not have
the responsibility to bear the household expenses so they can wait for the job of their interest.
42% of them are earning between Rs.20,000-30,000 and 46% are associated with their current
organizations for 1 year or less time period. They are at the initial stages of their career and are
eager to switch their jobs because they don’t tend to be associated with a job which does not
match with their qualification for a longer period of time and they don’t consider it as their main
career.
74% are un-married and 80% of them fall under the age group of 20 – 29 years therefore these
individuals are passionate and quick decision makers so they probably don’t go for long-term
planning and select whatever job they can get.
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
4.4 CATEGORICAL REGRESSION RESULTS
PRODUCTIVITY
Model Summary
Multiple
Adjusted
R
R Square R Square
.773
.597
.577
Dependent Variable: PRODUCTIVITY
Predictors: SKILL-JOB MISMATCH
Coefficients
Standardized
Coefficients
Std.
Beta
Error
df
F
Sig.
-.773
.081
3
90.350
.000
SKILL-JOB
MISMATCH
Dependent Variable: PRODUCTIVITY
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
10
Impact of Skill Mismatch on Organization’s Performance
According to the results, R-Squared =0.597 which implies that about 59% of the variation in
Productivity is explained by Skill mismatch
The regression model established is
Prod= -0.773 SJM
This shows that 1% increase in skill mismatch decreases Productivity on average by 0.773%
QUALITY OF WORK
Model Summary
Multiple
Adjusted
R
R Square R Square
.674
.455
.428
Dependent Variable: QUALITY.OF.WORK
Predictors: SKILL-JOB MISMATCH
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
11
Impact of Skill Mismatch on Organization’s Performance
12
Coefficients
Standardized
Coefficients
Std.
Beta
Error
df
F
Sig.
-.674
.095
3
50.832
.000
SKILL-JOB
MISMATCH
Dependent Variable: QUALITY.OF.WORK
According to the results, R-Squared =0.455 which implies that about 45% of the variation in
Quality of Work is explained by Skill mismatch
The regression model established is
QOW= -0.674 SJM
This shows that 1% increase in skill mismatch decreases Quality of Work on average by 0.674%
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
GOALS ACHIEVED DURING THE YEAR
Model Summary
Multiple
Adjusted
R
R Square R Square
.542
.294
.259
Dependent Variable: GOALS.ACHIEVED.DURING.THE.YEAR
Predictors: SKILL-JOB MISMATCH
Coefficients
Standardized
Coefficients
Std.
Beta
Error
df
F
Sig.
-.542
.108
3
25.396
.000
SKILL-JOB
MISMATCH
Dependent Variable: GOALS.ACHIEVED.DURING.THE.YEAR
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
13
Impact of Skill Mismatch on Organization’s Performance
14
According to the results, R-Squared =0.294 which implies that about 29% of the variation in
Goals Achieved during the Year is explained by Skill mismatch
The regression model established is
GADY = -0.542 SJM
This shows that 1% increase in skill mismatch decreases Goals Achieved during the Year on
average by 0.54%
AVOIDANCE OF ERRORS
Model Summary
Multiple
Adjusted
R
R Square R Square
.617
.381
.350
Dependent Variable: AVOIDANCE.OF.ERRORS
Predictors: SKILL-JOB MISMATCH
Coefficients
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
15
Standardized
Coefficients
Std.
Beta
Error
df
F
Sig.
-.617
.101
3
37.534
.000
SKILL-JOB
MISMATCH
Dependent Variable: AVOIDANCE.OF.ERRORS
According to the results, R-Squared =0.381 which implies that about 38% of the variation in
Avoidance of errors is explained by Skill mismatch
The regression model established is
AE =-0.617 SJM
This shows that 1% increase in skill mismatch decreases Avoidance of Errors on average by
0.617%
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
4.5 Tabular Representation Of Results Gathered
Proportio
VARIABLES
n/mean
Skill-Job Mismatch Characteristics
Skill-Job Mismatch
1.
Minimally Related
0.10
2.
Averagely Mismatched
0.18
3.
Extremely Mismatched
0.72
Equivalence of Salary Package
1. Yes
0.66
2. No
0.34
Education Characteristics
Level of Education
1.
Below matric
0.11
2.
Matric
0.08
3.
Intermediate
0.12
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
16
Impact of Skill Mismatch on Organization’s Performance
4.
Graduate
0.48
5.
Masters and above
0.22
Employment Characteristics
Type of Contract
1.
Permanent
0.63
2.
Temporary
0.37
1.
Less than 1 year
0.46
2.
Between 1 to 5 years
0.42
3.
Between 6 and 10 years
0.08
4.
10 years and above
0.03
1.
Below 10000
0.03
2.
10000-below 20,000
0.26
3.
20,000-below 30000
0.42
4.
30,000-below 40,000
0.17
5.
40,000 and above
0.12
Work Tenure
Monthly Salary
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
17
Impact of Skill Mismatch on Organization’s Performance
Demographic Characteristics
Age Group
1.
20-29
0.80
2.
30-34
0.09
3.
35-39
0.08
4.
40-44
0.03
5.
45 and above
0.00
1.
Unmarried
0.74
2.
Married
0.26
1.
Male
0.69
2.
Female
0.31
Marital Status
Gender
Organizational Performance Characteristics
Productivity
1.
Unsatisfactory
0.42
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
18
Impact of Skill Mismatch on Organization’s Performance
2.
Needs Development
0.29
3.
Meets Expectations
0.17
4.
Exceeds Expectations
0.08
5.
Greatly Exceeds Expectations
0.05
1.
Unsatisfactory
0.31
2.
Needs Development
0.25
3.
Meets Expectations
0.26
4.
Exceeds Expectations
0.12
5.
Greatly Exceeds Expectations
0.06
Quality of Work
Goals Achieved During The Year
1.
Unsatisfactory
0.42
2.
Needs Development
0.28
3.
Meets Expectations
0.14
4.
Exceeds Expectations
0.09
5.
Greatly Exceeds Expectations
0.08
Avoidance Of Errors
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
19
Impact of Skill Mismatch on Organization’s Performance
1.
Unsatisfactory
0.40
2.
Needs Development
0.32
3.
Meets Expectations
0.15
4.
Exceeds Expectations
0.09
5.
Greatly Exceeds Expectations
0.03
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
20
Impact of Skill Mismatch on Organization’s Performance
21
5. CONCLUSION
On applying statistical techniques and interpreting the collected data it is identified that there is a
significantly negative relationship between Skill Mismatch and Organization’s Performance.
Measures shall be taken to rectify the problem of skill mismatches as it gives life to personality
related issues, health issues and makes the organization and economy as a whole to suffer. These
issues can be rectified through proper training sessions of individuals in their respective job
fields, motivation and moral support.
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
22
6. RECOMMENDATIONS
Management can apply job rotation techniques and place such individuals on a position that is
well matched with their qualification and skills. An isolated environment would help them think
and learn things on their own. On the contrary experience would make them better once they get
consistent with their work along with on job assistance, training and a chance to generate self
motivation and passion towards work.
Departmental Heads should organize detailed discussions with such employees so that a solution
can be identified to boost up their moral and increase their efficiency. Their job description can
be enhanced up to the level of their qualification and skills. A roadmap could be established to
guide them with the necessary skills required to do their daily tasks and they can be provided
with advanced training in their lacking areas. And later on their performance can be matched
with the established goals.
Recruitment and Selection Teams should be capable enough to find out right person for the right
job and go through a number of resumes and interviews before hiring an individual for a job.
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
23
REFERENCES
Cedefop research arena (Cedra) “Skill mismatch identifying priorities for future
research”, , Thessaloniki, May 2009. Available
at: http://cedefop.europa.eu/etv/Upload/Information_resources/Bookshop/537/6103_en.p
dfAccessed on July 28, 2011 at 23:00
Charles N. Halaby ”Overeducation and Skill Mismatch”, Sociology of Education, 1994,
vol. 67
European Centre for the Development of Vocational Training (Cedefop) ”The Skill
Matching Challenge(Analyzing Skill Mismatch and Policy Implications)”,
, Thessaloniki, ISBN 978-92-896-0485-7, 2010.
Madamba A.B., De Jong G. F., ” Job mismatch among Asians in the United States”,
Social Science Quarterly, ISSN: 0038 4941, 1997, vol. 78, pp.524-542
Research Institute for the study of labor “The Determinants of Education-Job Match
among Canadian University Graduates”, , University of Montreal, IZA DP No. 4513,
October 2009.
Richard Desjardins, Kjell Rubenson, “An Analysis of Skill Mismatch Using Direct
Measures of Skills”, 2011, ISSN: 1993-9019
Ronald Bachmann, “Skill Mismatch in Equilibrium Unemployment”, Department of
Economics, Humboldt University of Berlin, Germany, SFB 649 Discussion Paper 2005034, August 9, 2005.
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
24
APPENDIX A
QUESTIONNAIRE
How close is the main job of this individual mismatched with his professional qualification
(Degree) and skills?
1. Minimally mismatched
2. Averagely mismatched
3. Extremely mismatched
Is this individual’s salary package equivalent to the package of those whose qualification
matches their job requirements?
1. No
2. Yes
Do you feel there is a communication gap between you and this individual?
1. No
2. Yes
Does this individual find difficulty in completing the given job assignments?
1. No
2. Yes
EDUCATION CHARACTERISTICS
What is the level of education of this individual?
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
Impact of Skill Mismatch on Organization’s Performance
1. Below matric
2. Matric
3. Intermediate
4. Graduate
5. Masters and above
EMPLOYMENT CHARACTERISTICS
What is the type of contract this individual is in?
1. Permanent
2. Temporary
Since when is this individual working for your organization?
1. Less than 1 year
2. Between 1 to 5 years
3. Between 6 and 10 years
4. 10 years and above
What is the monthly salary of this employee?
1. Below 10000
2. 10000-below 20,000
3. 20,000-below 30000
4. 30,000-below 40,000
5. 40,000 and above
DEMOGRAPHIC CHARACTERISTICS
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
25
Impact of Skill Mismatch on Organization’s Performance
Which age group does this individual fall in?
1. 20-29
2. 30-34
3. 35-39
4. 40-44
5. 45 and above
What is the marital status of this individual?
1. Unmarried
2. Married
What is the gender of this individual?
1. Male
2. Female
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
26
Impact of Skill Mismatch on Organization’s Performance
APPENDIX B
POPULATION SEGMENTATION
HOD's
8
20 13
9
32
38
30
ABL
37
ARIF HABIB BANK
50
30
35
36
22
39
31
26
FAYSAL BANK
40
21
BANK AL-HABIB
BANK ALFALAH
45
30
ASKARI COMMERICAL BANK
HBL
7
HABIB BANK
27
24
JS BANK
SAMPLE SEGMENTATION
HOD's
1
1
1
3
4
2
ABL
4
ARIF HABIB BANK
6
3
ASKARI COMMERICAL BANK
3
3
3
2
3
4
BANK AL-HABIB
BANK ALFALAH
2
1
5
2
3
2
5
2
FAYSAL BANK
HBL
Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)
27