impact of skill mismatch on organization’s … of skill mismatch on organization’s performance 2...

Impact of Skill Mismatch on Organization’s Performance 1

Proceedings of 2nd International Conference on Business Management (ISBN: 978-969-9368-06-6)

IMPACT OF SKILL MISMATCH ON ORGANIZTION”S PERFORMANCE

Impact of Skill Mismatch on Organization’s Performance

Maryum Khan

Iqra University, Karachi



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.



1 INTRODUCTION

1.1 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.



1.2 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.



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.



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:



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



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.



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.



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.



4.4 CATEGORICAL REGRESSION RESULTS

PRODUCTIVITY

Model Summary

Multiple

R R Square

Adjusted

R Square

.773 .597 .577

Dependent Variable: PRODUCTIVITY

Predictors: SKILL-JOB MISMATCH

Coefficients

Standardized

Coefficients

df F Sig. Beta

Std.

Error

SKILL-JOB

MISMATCH

-.773 .081 3 90.350 .000

Dependent Variable: PRODUCTIVITY



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

R R Square

Adjusted

R Square

.674 .455 .428

Dependent Variable: QUALITY.OF.WORK




Coefficients

Standardized

Coefficients

df F Sig. Beta

Std.

Error

SKILL-JOB

MISMATCH

-.674 .095 3 50.832 .000

Dependent Variable: QUALITY.OF.WORK


Quality of Work is explained by Skill mismatch


QOW= -0.674 SJM

This shows that 1% increase in skill mismatch decreases Quality of Work on average by 0.674%



GOALS ACHIEVED DURING THE YEAR

Model Summary

Multiple

R R Square

Adjusted

R Square

.542 .294 .259

Dependent Variable: GOALS.ACHIEVED.DURING.THE.YEAR


Coefficients

Standardized

Coefficients

df F Sig. Beta

Std.

Error

SKILL-JOB

MISMATCH

-.542 .108 3 25.396 .000

Dependent Variable: GOALS.ACHIEVED.DURING.THE.YEAR




Goals Achieved during the Year is explained by Skill mismatch


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

R R Square

Adjusted

R Square

.617 .381 .350

Dependent Variable: AVOIDANCE.OF.ERRORS


Coefficients



Standardized

Coefficients

df F Sig. Beta

Std.

Error

SKILL-JOB

MISMATCH

-.617 .101 3 37.534 .000

Dependent Variable: AVOIDANCE.OF.ERRORS


Avoidance of errors is explained by Skill mismatch


AE =-0.617 SJM

This shows that 1% increase in skill mismatch decreases Avoidance of Errors on average by

0.617%



4.5 Tabular Representation Of Results Gathered

VARIABLES Proportio

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



4. Graduate 0.48

5. Masters and above 0.22

Employment Characteristics

Type of Contract

1. Permanent 0.63

2. Temporary 0.37

Work Tenure

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

Monthly Salary

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



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

Marital Status

1. Unmarried 0.74

2. Married 0.26

Gender

1. Male 0.69

2. Female 0.31

Organizational Performance Characteristics

Productivity

1. Unsatisfactory 0.42



2. Needs Development 0.29

3. Meets Expectations 0.17

4. Exceeds Expectations 0.08

5. Greatly Exceeds Expectations 0.05

Quality of Work






Goals Achieved During The Year






Avoidance Of Errors



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.



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.



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 2005-

034, August 9, 2005.

http://cedefop.europa.eu/etv/Upload/Information_resources/Bookshop/537/6103_en.pdf

http://cedefop.europa.eu/etv/Upload/Information_resources/Bookshop/537/6103_en.pdf



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?



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



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



APPENDIX B

POPULATION SEGMENTATION

SAMPLE SEGMENTATION

20 13

3750

35

22

39

45

24

402131

277

26

30

36

30

329

8

38 30

HOD's

ABL

ARIF HABIB BANK

ASKARI COMMERICAL BANK

BANK AL-HABIB

BANK ALFALAH

FAYSAL BANK

HBL

HABIB BANK

JS BANK

2

1

4

6

3

2

4

5

252

32

1

2

3

3

3

3

11 4

3

HOD's

ABL

ARIF HABIB BANK

ASKARI COMMERICAL BANK

BANK AL-HABIB

BANK ALFALAH

FAYSAL BANK

HBL

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