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Experts are warning Australian companies will have to increase their spending on staff training and develop more innovative practices if they want to remain competitive amid the current skills shortage.

The comments come in the light of last week's Australian Industry Group survey of chief executives that said the shortfall of up to 240,000 workers was hampering innovation in the nation's industry.

Associate Professor Peter Gahan of the Monash University department of management said that companies seemed loath to invest in formal in-house education, despite the increased need for skilled workers and the benefits of an innovative workforce.

"There is a paradox that, some see the skills shortage as endemic and at a critical point, and they say the best way to handle that is on-the-job training up current employees, but they see the costs attached to that as too great," Professor Gahan said. "And that seems like a bit of a paradox: if it is so important, so valuable, why is it so costly for them to invest in this kind of thing?"

Professor Gahan said that companies feared investing in improving existing workers' skills because the tight labour market meant that others were poaching employees after a company had already invested money in training.
 
Tom Imbesi, a Deloitte partner who worked on the Ai Group report, said Australian CEOs would have to create working environments that encouraged innovation to retain skilled staff.

"There are too few companies that actually have innovation embedded in their organisation," Mr Imbesi said.
 
"There need to be frameworks for innovation and reward mechanisms for people who are innovative and who come up with very clever ideas.

"Given that the skills shortage is not going to go away, CEOs have to provide the best possible working environment, and retention becomes critical."

The Ai Group report last week tabled a series of results from a survey of CEOs in the Australian industry sector about the constraints of the skills shortage, including to innovation.

The results revealed that 60% of CEOs said the skills shortage had restricted their ability to innovate as a company.

Mr Imbesi said the benefits of having an innovative workforce were indicated by one company that was surveyed for the report, ANCA Australia, which two years ago redesigned its manufacturing processes to decrease its output for each product built, from 28 days to eight.

Peter Boland, joint managing director of ANCA, a high-end machinery manufacturer, said the company had revamped its design processes during a natural downturn in the market and the move increased productivity, accuracy and reliability, which in turn reduced warranty claims.

The move meant that ANCA had to retrain its workers to keep them up to speed with the new design and other emerging technology in the industry.

He said the company did this through investing in internal training programs, including hiring experts to train shop floor workers.

Mr Boland also said the lack of skilled workers had become more evident to the company as it had grown over the past five years.

"We certainly now have a very high migrant level to us as a company . . . for a number of our key engineering appointments we recruited from overseas," Mr Boland said.

"On the shop floor, quite a number of people we have been hiring have been reasonably recent migrants (who have come in) under the skilled migration scheme.

"Probably the sharpest end for us most recently has been at the engineering level.

"Getting high-quality professional engineers into the organisation has not been so easy," he said.