State Of Hr Report 2011


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In partnership with the HRM Learning Board at King\'s College we have once again teamed up to produce the annual State of HR survey.

The survey, which draws on the view of HR directors and senior HR professionals from across the UK, provides invaluable information for HR practitioners on the State of HR in the UK.

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State Of Hr Report 2011

  1. 1. Austerity or prosperity? The state of HR in this challenging economic environmentSURVEY 2011
  2. 2. 1 The state of HR survey 2011 Organisations involved Speechly Bircham Speechly Bircham’s Employment group is a leading employment law practice meeting the diverse needs of a broad range of employer and senior employee clients. Employer clients include public and private companies, partnerships and other organisations, based in the UK and overseas, across a wide range of business and professional sectors, with a strong focus on financial services, professional services, media and entertainment, as well as larger corporates. The team handles sensitive and complex issues across the spectrum of the employment relationship. The group has specialist expertise concerning immigration issues and works closely with the firm’s pension and employee benefit teams. The team is highly regarded for its experienced, discreet and practical approach King’s College London HRM Learning Board The HRM Learning Board is unique in the way it connects organisations to the latest academic research and thinking on contemporary workforce issues. Through its workshop and seminar programme, bespoke learning and advisory activities, and through a variety of other forums and media, the Learning Board is an innovative thought leader on contemporary people management practice. It also enhances the experience of King’s postgraduate student talent pool by developing work placements, internships and projects with our partners on key workforce development interventions and strategies.
  3. 3. The state of HR survey 2011 2Profiles Richard Martin, Partner and Head of Employment at City law firm Speechly Bircham LLP Richard advises employers and senior employees on all aspects of the employment relationship and has 15 years’ experience in the field. He has particular experience and expertise in handling high value claims for breach of contract, unfair dismissal (including whistle-blowing) and discrimination as well as advising on the drafting of relevant contractual documentation and remuneration schemes. He advises regularly on the enforcement of restrictive covenants and confidentiality obligations including the particular issues arising on team moves as well as the employment related aspects of business transfers. Richard works closely with the HR teams in the employer clients for which he acts and understands the strategic role of HR in those organisations. Richard lectures regularly on employment law issues (including at King’s College London). Stuart Woollard, Managing Director of King’s College London’s HRM Learning Board Stuart established the HRM Learning Board with King’s in 2007, connecting organisations to the latest academic research and thinking on contemporary workforce issues. Prior to this, he gained 10 years’ senior level business and consulting experience with Arthur Andersen, and created a management consultancy in 2000 advising a number of major corporations on strategic human resource initiatives. He also worked for several years in a global HR director role in the financial services industry and was Managing Director of UK operations. Stuart’s areas of expertise include business strategy, people strategy and performance, change management, policy design and implementation. He has also published research on the role of HR in international mergers and acquisitions (CIPD). Stuart has made regular contributions on HR issues through various media and to a variety of industry and special interest groups. Dr Michael Clinton, King’s College London Michael is a lecturer in Work Psychology and Human Resource Management at King’s College London, teaching at both undergraduate and postgraduate levels. Michael has been researching the employment relationship from a number of angles for over eight years. This has included work on the perceptions of HRM within the workplace, psychological contracts and employment contracts and performance management systems, and has involved working with organisations across a broad range of sectors, including large projects with the Department of Health and the Ministry of Defence. In 2008, he completed his PhD examining the issue of uncertainty within organisations and its impact on employees. Michael publishes his research in academic journals and regularly speaks at international conferences. The authors of the survey report are Dr Michael Clinton and Stuart Woollard of the Department of Management, King’s College London.
  4. 4. 3 The state of HR survey 2011 Foreword It is with great pleasure that I introduce the third annual State of HR report. Run in conjunction with the world-class academic team at King’s College London through the King’s HRM Learning Board, the survey offers a unique analysis of the issues HR professionals have faced over the last year, together with a detailed picture of what they expect to be on their plate in the year to come. The survey had 550 respondents representing a workforce of over 2 million. It is no surprise that the public sector has fared worst over the increases and bonus awards continue to be held back. Stress last 12 months and has the bleakest outlook going forward. levels remain on the increase as do workplace disputes, The comprehensive spending review has of course presaged particularly around bullying and the relationship with line some of the most aggressive reductions in public spending on managers. This is a potent cocktail. Staff are being made to work record and the effect is certainly being felt. The third sector too ever harder without increased reward and they are suffering is suffering. Our studies over the last few years have provided from increased stress and conflict. There must be a danger of an fascinating insight into some of the more enlightened explosion of employee discontent at some stage. Further, with approaches the private sector has taken to restructuring and job the jobless total still increasing, are we seeing a fragile reductions. Many have been able to effect quite significant economic recovery built on working reduced workforces harder change in ways that have not impacted organisational and harder rather than increasing the number of jobs? That is performance or engagement and, indeed, have retained key not sustainable in the longer term. skills. There may be lessons there for the public and third sectors as they go through the pain of downsizing. Immigration issues continue to hit the headlines and the survey represents the first opportunity to gauge the effect of the In several areas there appears to be a degree of heads in sand recent clamp down on immigration into the UK. Nearly half of among senior HR professionals. Put another way, organisations respondents employ non-EU nationals and, of those, over 40% may need to shake off their cloaks of complacency and face up report a negative impact on their businesses from the changes. to some serious threats that are going to be impacting their Further changes to come in April this year will no doubt make businesses over the short and medium term. matters worse. Employers who have been reliant on employing migrants with their own immigration permission to work will With the Equality Act in mind we asked respondents to tell us be forced to go down the more complex and time consuming about gender pay differentials in their organisations. A massive sponsorship route. 84% denied there was any issue within their organisation, despite the fact that only 33% claim to be doing anything to On the positive side it is encouraging that employee measure it. This optimism is of course in sharp contrast to data engagement remains the number one concern for HR from other research. The Office for National Statistics reports professionals. Those methods that might seem more imposed the pay gap across all employees at just under 20% and in its from the top (more effective leadership, improved learning and landmark report in 2009 into equality in the financial services development opportunities, developing better relations sector the Equality and Human Rights Commission found far between staff and line managers) seem less successful than greater levels of pay differential in both salary and incentive those that involve working more closely with staff (greater payments. This is going to be an ever growing problem as employee participation in decision making, better job design, awareness levels among employees increase (together with a greater fairness in procedures). Sadly it seems the latter are less willingness to take legal action) and the push for greater likely to be used. openness on pay differentials continues. There is much in this report to learn for everyone involved in HR Respondents appear to be taking a similar approach in relation to or management. I would like to thank the teams involved at retirement issues. 78% reported that their organisations have a King’s as well as here at Speechly Bircham for their hard work and retirement age of 65 and 5% operate an alternative compulsory continued enthusiasm for the survey. I hope the readers gain as retirement age. Only a third, however, recognise this as an issue for much insight from it as we have had in putting it together. the year ahead. With the abolition of the default retirement age in 2011 and an expectation amongst most commentators that age discrimination claims will increase, employers would be well advised to be paying more attention to this issue. Perhaps even more worrying is what can be read between the Richard Martin lines about employee well being and engagement. Over 50% of Head of Employment, Speechly Bircham LLP organisations report an increase in working hours while pay
  5. 5. The state of HR survey 2011 4Introduction and summary findingsThe results of our third annual State of HR survey demonstrate that the difficult economic conditions overthe past year have created highly challenging circumstances and have exacerbated the problems facingorganisations. This continues to place a real strain on the workforce, as organisations strive to moveforward. Much uncertainty also remains for organisations, particularly as the current period of economicausterity continues and the outlook for the coming year is far from clear.This report, which is based on the findings from our 2010-11 This year’s report allows us to understand whethersurvey, identifies the key workforce issues and highlights some organisations perceive any adverse changes as a result of aimportant trends since the onset of the recession. One of the change to government policy or legislation. There are somemost significant and potentially worrying finding for interesting and unexpected results in relation to age. Evenorganisations is the relationship between increased working though the default retirement age will be phased out from Aprilhours and increased absences, sickness levels, stress related 2011, only one-third of organisations expect it to be a majorproblems and the number of grievances lodged (see section 3 of issue for 2011, despite the fact that 78% of organisations have athis report). With organisations reporting an increase in hours retirement age of 65 (see section 4 of this report). However,worked this year, which is also expected to rise in 2011, this may such optimism may prove a little premature and this combinednot yield the economic outcomes expected. Conversely it may with the fact that HR professionals are predicting a majorincrease the burden placed on HR and the business as increase in the number of age related grievances, may meananticipated future increases in working hours are also linked that age will be a key issue for organisations in 2011. Anotherwith potential staff turnover and industrial action. finding, which again is interesting and unexpected, is in relation to pay inequality. 84% have reported no pay inequality withinThe report looks to predict what are likely to be the major issues their organisation (see section 3 of this report), yet only 32%in 2011 and how a workforce strategy should be developed to record and monitor such data. This may mean that whenaddress these critical HR challenges. One of the key challenges organisations are required to publish such data, there may befacing organisations in 2011 is a skills shortage which, coupled interesting and unexpected findings.with the tightening of immigration legislation and theintroduction of the interim cap on the number of non-EU In this report, we have been able to compare the survey resultsmigrants employed by organisations, will serve to further with what was reported to us in previous years and we haveexacerbate the problem (see section 2 of this report). For those identified emergent trends. Whilst the prevailing economicorganisations with a skills shortage, the situation is likely to difficulties are clearly having a negative impact on organisationsbecome worse with potential increases in staff turnover and (77%), the private sector and the public sector have tradedabsence related to such shortages. places this year (see section 1 of this report). The story for 2010 was not completely bleak and there were modestThe survey allows us to distil valuable insights from senior HR improvements in some sectors such as financial services,professionals about what is happening to their organisation’s business services and manufacturing.workforce and to their HR function. There is a worryingdisconnect between management and staff with a rise in The report has also identified some positive trends. Employeeemployee grievances for the third successive year and the major engagement continues to embed itself as a central tenet of HRsource coming from poor management and staff relations. strategy with more organisations measuring it (66%) (seeWhile organisations are again attempting to foster better section 5 of this report). Our analysis again found that manymanagement/staff relations, the survey highlights that such initiatives intended to improve employee engagement appearinitiatives are not working to any significant extent. to work. A number of engagement strategies are also linked with superior financial performance – developing better staff/manager relations, more equitable reward systems, enhanced career development opportunities and improved learning and development are all linked to better business performance.
  6. 6. 5 The state of HR survey 2011 1. Economic impact on organisations and sector groups The prevailing economic difficulties are clearly having a negative impact on organisations, with 77% of HR professionals supporting this view. However, when compared to last year, there are modest improvements in some sectors such as financial services, business services and manufacturing. Conversely, the greatest negative impact for 2010 has been felt by the public sector which has reported greater difficulties this year when compared to 2009. Who is most affected by the current difficult estate and construction still features in the top five worst economic conditions? affected sectors, the public sector takes three of the top five As with the previous two surveys, the widespread and broadly hardest hit sectors. This result is almost a reversal of last year’s consistent impact of poor economic conditions has found a survey where the private sector dominated. similar level (77%) of respondents experiencing a negative Again like last year, a small number of organisations are impact on their organisation. Overall, results have seen 30% of thriving; for 15% of respondents, the last 12 months has been our sample reporting that the recession has had a major an opportunity to grow and these organisations report either a negative effect on their organisation and 47% have indicated minor positive (11%) or major positive (4%) effect. This is a that it has had a minor negative effect. As shown in the table slightly more optimistic picture than last year, when just 1 in 10 below, all sectors show a net negative impact from the respondents were positive. In terms of the future, there remains prevailing economic climate. much uncertainty, particularly for the public sector, where 64% However, this year there is an emerging demarcation between of respondents highlight great or very great uncertainty for their public and private sectors. Unsurprisingly, the largest negative organisation. This compares to just over one in five for the effect has been on the public sector and the NHS. While real survey as a whole. Figure 1. How has the economic climate affected your organisation in the last 12 months? Key 2009 2010 Other public sector Health (public) Real estate and construction Education (private) Education (public) Charities and NFP Utilities Transport and communications Professional services Media and entertainment Retail and leisure Financial services Other business services Manufacturing Health (private) No effect Minor negative effect Major negative effects 3.000000 3.666667 4.333334 Degree of overall net sector impact of current economic climate
  7. 7. The state of HR survey 2011 62. Workforce size, skills shortages and resourcing strategyOne of the key challenges for the previous three years and which is now a bigger issue for this year’ssurvey is a skills shortage, with 1 in 3 organisations reporting a skills gap. With the introduction of theinterim immigration cap and the tightening of immigration legislation, the skills gap is unlikely todecrease. Equally, for those with a skills shortage, staff turnover is more likely and staff absence higher,thereby compounding the problem.There has been a modest sign of recovery, with overall workforce Workforce sizesize increasing. Unfortunately redundancies are still Organisations providing information for this year and last year’scommonplace with 7 in 10 organisations making redundancies survey, have seen an average increase of 3.57% in workforce sizein 2010. However, organisations have also shown more between November 2009 and October 2010. However, thiswillingness to consider and implement alternatives to varies between sectors, highlighted in the table below. Fromredundancies, such as flexible working arrangements (48%). these results, it is evident that (excluding media and entertainment and transport and communication sectors), workforces have changed little in size overall during 2010.Figure 2. Increases and decreases in workforce size over previous 12 months Media and entertainmentTransport and communications Charities and NFP Health (private) Education (private) Retail and leisure Other public sector Financial services Health (public) Other business services Manufacturing Professional services Utilities Education (public) Real estate and construction -5 0 5 10 15 20 25 30 35 40 % change in workforce size across sectors
  8. 8. 7 The state of HR survey 2011 Skills shortages worsen Respondents have reduced the use of compulsory redundancy 1 in 3 organisations reported experiencing a shortage of key as a means of effecting restructuring and they have also staff in an area of their organisation, compared to just over 1 in increased the use of flexible working arrangements. For those 5 last year. As with last year, examples given are predominantly where downsizing was deemed necessary, organisations have professional, managerial or technical areas, and finding staff also adopted a variety of strategies. Again, the use of with very specific qualifications and skills continues to present alternatives to redundancy appears to be a successful strategy; organisations with a problem. Our findings further show that in employee engagement was more likely to have decreased in organisations where there are skills shortages, compared with organisations that had made redundancies compared with those where there are no such skills shortages, it is more likely those that had not. For the public sector, which is set to bear that staff turnover is increasing and that a greater number of the brunt of future downsizing, lessons from what has working days are lost due to sickness and absence. These happened in the private sector should be heeded in terms of issues are likely to exacerbate the skills shortages within how best to implement the change. these organisations. Figure 3. How workforce reductions were 2010 2009 Over the last three surveys, we have seen what appears to achieved by those that downsized (%) (%) be an underlying skills shortage. With immigration legislation Compulsory redundancy/severance 66 77 now tightened, making it far more difficult to bring in talent from overseas, organisations are faced with a difficult challenge Early retirement 19 17 of how to deal with a skills deficit. We asked respondents to Natural wastage 72 73 identify how their organisation was dealing with any skills shortage. 21% stated that they were unable to do anything at Outsourcing 14 10 the present time; while others were employing temporary staff Recruitment ban 43 51 (29%), developing their own employees (55%), or actively seeking to hire new staff in the UK (54%) or from abroad (25%). Voluntary redundancy 49 44 Other (eg flexible work arrangements) 8 3 This year we specifically asked questions on immigration and the introduction of the number of migrants employers are able to sponsor to work in the UK. Almost half of organisations Workforce planning surveyed (48%) employ non-EU migrants and 42% of those have In terms of future headcount expectations, there are only experienced a negative effect as a consequence of the marginally more respondents expecting an increase in introduction of the interim cap. workforce size versus those expecting a decrease. The same arises with expectations around graduate recruitment. The nature of workforce restructuring Overall workforce size is expected to be fairly flat for the next Workforce downsizing remains highly prevalent, and 7 in 10 12 months. However, there still exists much uncertainty organisations have made employees redundant in 2010. In regarding more medium term workforce requirements, with previous years we identified that organisations have attempted 87% of respondents indicating uncertainty about the size of to maintain the integrity of their workforces and retain key workforce required over the forthcoming two years and 71% talent where possible. This year’s results continue to reflect indicating uncertainty about the skills that will be required over this dynamic. the same period. “ “ Again, the use of alternatives to redundancy appears to be a successful strategy; employee engagement was more likely to have decreased in organisations that had made redundancies compared with those that had not. For the public sector, which is set to bear the brunt of future downsizing, lessons from what has happened in the private sector should be heeded in terms of how best to implement the change
  9. 9. The state of HR survey 2011 83. Effects on workforce and HR managementOur survey gathers insights into a range of workforce outcomes that have arisen from the currenteconomic environment and the picture presented is potentially worrying for all organisations. It is clearfrom our results that working hours have increased across all sectors. For those organisations usingadditional working hours as a means of achieving efficiencies, our analysis shows that increased workinghours actually corresponds to increased absences, sickness levels, stress related problems and the numberof grievances lodged. For those organisations using additional working hours as a means of achievingefficiencies, this may prove to be a false economy. “Staff fatigue and potential burnoutThis year the survey asked about additional hours worked by staff.As shown in the table below, across all sectors, there is a veryclear message that workforces are being asked to work far harderduring the prevailing economic conditions. Of all factorsmeasured in the survey that looked at workforce related changes, “ Of all factors measured in the survey that looked at workforce related changes, additional hours worked by staff saw the largest increaseadditional hours worked by staff saw the largest increase.Figure 4. % of organisations in which number of additional hours worked by staff have increasedTransport and communications Other business services Health (private) Media and entertainment Utilities Education (private) Manufacturing Charities and NFP Real estate and construction Other public sector Retail and leisure Education (public) Professional services Health (public) Financial services 0% 20% 40% 60% 80% 100%
  10. 10. 9 The state of HR survey 2011 Further analysis shows that there are significant associations between additional hours worked by staff and increased absence/sickness levels, stress related problems, and the number of grievances lodged. In terms of future expectations, those organisations with expected increases in working hours over the next 12 months are also expecting increases in absence/sickness, staff turnover, stress related problems, industrial action, and grievances. The implication is that those organisations which are running very lean in staff terms are likely to be experiencing serious workforce issues that may be affecting productivity, work quality, and potentially competitive advantage. With even modest levels of growth post recession, workforces that have been downsized will be required to do even more, potentially making the situation worse, and those organisations that may seek new hires could find that additional staff to aleviate the problem will take time to hire and embed. Key trends The findings below show the spectrum of changes that have occurred within organisations. The bars on the chart demonstrate whether organisations were more likely to report increases or decreases for each factor. For example, in 2010, more than 50% of organisations reported that the size of pay increases decreased rather than grew. From the table we can see that HR budgets for remuneration and training continue to fall. General staff recruitment, graduate and temporary worker hiring have also decreased. Consistent increases have been observed in employment relations problems, stress and grievances lodged, all of which have been significant issues in all three years of our survey. These trends are discussed in more detail on page 12.
  11. 11. The state of HR survey 2011 10Figure 5a. Please indicate whether any of the following have changed for your organisation in the last 12 months: Decrease Key 2008 2009 2010 Size of pay rises Recruitment of staff (2008/10 only) Training and development budget Size of bonus payment pool Employee engagement Number of employees receiving a bonus Number of temporary staff Staff turnover Recruitment of graduates Ability to retain key staff (2010 only) Investment in HR technology Ability to attract talent Absence/sickness levels Cost of pension provision (2009/10 only) Employment relations problems Number of staff on part-time contracts (2009/10 only)Number of additional hours worked by staff (2010 only) Number of grievances lodged (2009/10 only) Use of flexible working practices (2009/10 only) Stress related problems among staff Industrial action (2010 only) Difficulties with immigration (2010 only) 0% 10% 20% 30% 40% 50% 60% 70% 80% % organisations reporting decreases
  12. 12. 11 The state of HR survey 2011 Figure 5b. Please indicate whether any of the following have changed for your organisation in the last 12 months: Increase Key 2008 2009 2010 Size of pay rises Recruitment of staff (2008/10 only) Training and development budget Size of bonus payment pool Employee engagement Number of employees receiving a bonus Number of temporary staff Staff turnover Recruitment of graduates Ability to retain key staff (2010 only) Investment in HR technology Ability to attract talent Absence/sickness levels Cost of pension provision (2009/10 only) Employment relations problems Number of staff on part-time contracts (2009/10 only) Number of additional hours worked by staff (2010 only) Number of grievances lodged (2009/10 only) Use of flexible working practices (2009/10 only) Stress related problems among staff Industrial action (2010 only) Difficulties with immigration (2010 only) 0% 10% 20% 30% 40% 50% 60% % organisations reporting increases
  13. 13. The state of HR survey 2011 12Recruitment and resourcing Pay, benefits and budgetsIn last year’s survey respondents had anticipated that The general trend from the last two years continues and showsrecruitment activity would pick up, with staff turnover expected a further overall reported reduction in pay rises for 2010, as wellto increase. This did not happen to the extent necessary to make as a reduction in bonus pool size. Again, the size of budgets formuch difference to recruitment activity. Recruitment has training and development has fallen.remained depressed and workforces have remainedrelatively static. With the Equality Act being introduced, the survey also asked specific questions on pay inequality. 84% of respondents statedAn interesting dynamic that has continued from the previous that there was no material pay inequality from a gendertwo years has been the increase in the use of flexible and perspective, while 10% did report a significant inequality. It ispart-time working as employers have reduced payroll cost not clear whether this is an accurate reflection of the truethrough methods other than redundancy. We again reiterate extent of gender pay differences, particularly as only 32% ofthat the recession may have acted as a catalyst for a sustained respondents advised that they had implemented some kind ofshift in the growth of flexible and part-time work. assessment or monitoring of pay inequality – it appears that a large number of organisations are assuming or judging thatFor graduates, there is no good news, with three consecutive there is no material pay inequality without any formalyears of our survey showing falling graduate recruitment levels. mechanism to provide evidence to back this up. Those planningAs students are now faced with having to borrow more to fund to assess and monitor pay inequality in the next 12 monthstheir education, the picture remains gloomy. amounted to 20% of respondents.Workforce stress and employment relations Staff discontentStress continues to be a significant problem, recording a third Our two previous surveys identified that many organisationssuccessive reported increase. Again, higher levels of stress were experiencing a deterioration in the relationship betweencorrelate with higher levels of sickness absence in our survey. management and staff. Indicators of this include higher incidences of stress and employee relations problems. These areIn this year’s survey, 46% of senior HR professionals report an again key outcomes of this year’s survey. However, the mainincrease in levels of stress among employees compared with indicator of a management/staff disconnect is that the biggest38% last year. This suggests that while more and more source of grievances relates to staff relations with senior andorganisations are likely to have seen stress increase over the line managers, (see page 13). This apparent disconnect is clearlypreceding three years, many organisations may have seen stress causing potentially serious workplace problems.worsen within their own workforce during the course of thedownturn. Worryingly, stress related problems are set to The outcomes of tougher management in a poor economicincrease again for 2011. environment and the creation of more dissatisfied staff are recognised by organisations as many are attempting to fosterEmployment relations problems also remain a significant issue, better relations between management and staff. The potentialsimilarly recording a third successive increase above the effect of this and the role of line managers is examined furtherprevious year. This year 42% report an increase in employment this year, in section 5.relations problems compared with 38% last year. In terms of the nature and extent of reported employeeFor HR professionals and front line managers the economic grievances, as with last year’s survey, 30% saw grievances rise inconditions have and will continue to bring significant additional 2010. The main grounds for grievances are shown overleaf,work in dealing with employee related problems and employee together with expected causes of grievances during the nextwell being. 12 months. Aside from relations with management, the biggestEmployee engagement cause of grievances has been bullying and harassment. It isOur previous surveys have highlighted employee engagement interesting that HR professionals expected bullying andas the HR function’s key workforce priority for 2009 and 2010. In harassment to fall in each year of our survey, but actualthis year’s survey, the overall reported employee engagement incidences remain stubbornly high and are increasing. In thislevel shows a slight decrease. This supports the view reported in respect, strategies to reduce bullying and harassment areour surveys that while maintaining engagement remains a high apparently not working.priority it is a difficult challenge in the current climate. We lookat engagement in more detail in section 5.
  14. 14. 13 The state of HR survey 2011 Figure 6. Grievances expected and then reported for 2009-10 and expected for 2010-11 Key Expected Lodged Expected 2009-10 2009-10 2010-11 Relations with senior/line managers Bullying/harassment Pay and conditions Stress Work practices/allocation Career development/promotion Working hours/holidays/time off Sex discrimination Race discrimination Disability discrimination Age discrimination Whistle-blowing 1 Sexual orientation discrimination 1 Religion or belief discrimination 0 5 10 15 20 25 30 35 40 % organisations reporting grievances lodged/expected 1 The expected level of grievances in these areas for 2009-10 was not part of our survey in the preceding year and so this data is not available.
  15. 15. The state of HR survey 2011 14In terms of future expectations for 2011, the main causes ofgrievances all feature again. The mix is slightly different, withpay, stress, work practices/allocation, career development andworking hours all expected to feature more strongly in thecoming year. One interesting result is that age discrimination isexpected to feature more prominently in 2011, perhaps as theissue gets greater attention from legislative changes and as theissue gets publicity from more tribunal cases.The management of redundancy “ “ One interesting result is that age discrimination is expected to feature more prominently in 2011, perhaps as the issue gets greater attention from legislative changes and as the issue gets publicity from more tribunal casesWith a significant number of organisations still makingredundancies, we again examined the management ofredundancy. 70% of organisations reported having maderedundancies (either compulsory and/or voluntary) in theprevious 12 months. This compared to 72% in the previous year.The extent of redundancies was small for many – 34% oforganisations made fewer than 10 people redundant and 59%of organisations made up to 500 employees redundant while7% made more than 500 staff redundant.62% of those who made staff redundant in the past yearengaged in some form of collective consultation, compared with64% last year. 41% of these reported that this was somethingthat management volunteered to carry out, even though it wasnot required by legal rules or union/workforce agreements.As with last year, the criteria for selecting people for redundancyvaried widely:G 52% used performance assessment undertaken specifically for this purposeG 45% used a general performance assessmentG 41% used disciplinary recordsG 32% used absence recordsG 16% used length of service (despite the potential age discrimination implications).These responses are similar to those reported in last year’s survey.
  16. 16. 15 The state of HR survey 2011 4. Major HR and workforce challenges for 2011 Attracting, retaining and motivating key people and planning for succession are again major themes arising for 2011, with many identifying business growth/expansion as a potential major challenge. However, with the default retirement age being phased out from 6 April 2011 and completely abolished on 1 October 2011, this may prove to be a bigger problem than currently identified, as over three-quarters of organisations in our survey have a retirement age of 65. Major issues facing organisations the respondents compared with 68% last year. The second major The survey results enabled us to identify what the HR issue is again succession planning, cited by 45%, which together professionals deemed to be the major issues facing them and with the challenge of talent management (cited by 41%), their HR function over the next 12 months and as can be seen indicates that HR anticipates challenges regarding managing from the table below, maintaining employee engagement was the careers and roles of key staff, especially high performers and the major factor (65%). high potentials. This is examined further below. The table is similar to last year’s with employee engagement standing out strongly from the others. This is cited by 65% of Figure 7. Major issues facing you and the HR function in next 12 months (%) Maintaining employee engagement Succession planning Business growth/expansion Talent management Changes to remuneration or benefit arrangements Enhancing employer brand Shortage of talent/skills New employment legislation Redundancy exercises Retirement age Reward schemes Flexible working arrangements Merger/acquisition Restructuring the HR function Protection of business interests (eg team departures) Diversity and discrimination Immigration issues Outsourcing Crisis planning/disaster recovery 0% 10% 20% 30% 40% 50% 60% 70% 80%
  17. 17. The state of HR survey 2011 16Managing growth and expansion is identified by 44% of equitable reward structures, such as those advocated in therespondents. This again signals a cautious optimism coming current Hutton Review.from those who anticipate that recovery should continue during2011, and also confidence from those who feel that the It is interesting to note that of the 78% of organisations thateconomic conditions are having a positive effect on their have a retirement age of 65, only one third of those areorganisation. Reward and remuneration remain a key priority for expecting it to be a major issue for 2011. With impendingHR, with 25% citing reward schemes and 38% citing changes to legislation change to retirement age, it may be that manyremuneration and benefits as a major issue. This may again organisations are not prepared for the impact of the changes onreflect the pay retrenchment that has occurred, the ongoing their organisation.focus on pay inequality in the media, and calls for moreWe also sought the views of HR professionals in relation to a number of key areas outlined below, to try and establish whetherthey thought that there would be an increase, decrease or no change in the coming 12 months. Figure 8. What do you expect to happen over the next Significant Significant Some increase No change Some decrease 12 months regarding the following? increase decrease (%) (%) (%) (%) (%) Size of workforce 4 40 21 28 8 Recruitment of graduates 1 22 61 10 6 Ability to attract talent 2 35 43 16 4 Number of temporary staff 2 26 51 17 5 Training and development budget 2 24 46 22 6 Absence/sickness levels 2 24 55 17 2 Stress related problems among staff 4 38 51 7 1 Employment relations problems 5 35 53 6 1 Employee engagement 4 38 37 17 4 Staff turnover 3 35 42 17 3 Size of pay increases 1 29 42 17 11 Size of bonus payment pool 1 20 56 13 10 Number of employees receiving a bonus 1 16 63 11 10 Investment in HR technology 4 22 58 11 6 Number of staff on part-time contracts 1 28 64 6 1 Use of flexible working practices 2 46 47 3 2 Cost of pension provision 3 27 59 10 2 Difficulties with immigration 2 19 77 1 1 Ability to retain key staff 1 29 49 19 3 Industrial action 2 13 82 2 1 Number of additional hours worked by staff 4 40 50 6 1 Number of grievances lodged 3 26 66 4 1From these responses, we can highlight some interesting challenging organisational management problem. For thosepotential trends. First, there is an expectation that organisations expecting an increase of additional hours being worked, thesewill continue to require staff to work additional hours. We can organisations tend to be experiencing lower employeealso see that employee relations, stress and grievances will engagement, greater working days lost to sickness and loweragain increase. In this sense, the workforce will remain a highly financial performance.
  18. 18. 17 The state of HR survey 2011 5. Employee engagement, front line managers and talent management Engagement remains embedded within HR strategy. HR professionals identified employee engagement as their top priority in all three of our surveys and we have again sought to uncover further insights into the adoption and application of the concept. First, we found that 66% of respondents are measuring engagement (55% in 2009). This increase highlights that even more HR functions are utilising engagement to focus their attempts on improving the way people are managed within their organisation. The centrality of employee engagement to HR strategy in Figure 9. Methods used to enhance creating a highly motivated and committed workforce is further 2010 (%) 2009 (%) employee engagement demonstrated in this year’s findings. To reiterate from last year’s survey, in the context of the current economic climate, More effective leadership and management of 82 89 employee engagement is seen as a means of retaining the staff productivity and work quality of employees as organisations Developing better staff relations with line move from restructure to growth. Engagement is also crucial as 75 77 managers more engaged employees are likely to help organisations who are demanding more from their employees in terms Improved learning and development 72 76 opportunities of workload. Greater employee participation in decision How are organisations driving engagement? making 68 65 We again asked respondents to identify ways in which they are attempting to improve engagement levels. The results are Enhanced career development opportunities 50 57 shown in the table opposite. The same hierarchy emerged as in 2009, in which hopes are pinned upon improving engagement through leaders and line managers. Much lower emphasis (and Greater fairness in organisational procedures 38 49 a decreasing emphasis year on year) is given to issues such as fairness and equity, and improving job design. It is however the More equitable reward systems 39 43 latter that can have the biggest impact. Better job design (eg more 39 42 autonomy/flexibility) “ …hopes are pinned upon improving “ engagement through leaders and line managers. Much lower emphasis (and a decreasing emphasis year on year) is given to issues such as fairness and equity, and improving job design. It is however the latter that can have the biggest impact
  19. 19. The state of HR survey 2011 18Does HR make a difference? employee engagement were those organisations that providedUsing the data gathered from the survey, we examined whether better job design, greater fairness in organisational procedures,any association could be found between attempts to enhance greater employee participation in decision making, improvedengagement and its impact. The chart below shows the various learning and development opportunities or better staff relationsHR activities identified by organisations to try to drive with line managers. It is interesting to note that the moreengagement and the comparison in the level of engagement important factors found here for encouraging employeebetween those who undertook such an activity (“Yes”) and engagement are those practices least likely to have beenthose that did not (“No”). utilised. Strategies that seek to drive engagement with work (as opposed to the organisation) have been found by academicThe survey shows that those who did undertake an engagement research to be more powerful in terms of driving performance –enhancing activity are generally more likely to have observed an in this survey, the greatest link with increased engagement isincreased level of engagement over the previous 12 months. again with more effective job design.However, the only organisations which saw an increase inFigure 10. Link between HR activities and employee engagement Key Yes No More effective leadership and management of staff Greater fairness in organisational procedures Improved learning and development opportunities Enhanced career development opportunities More equitable reward systems Greater employee participation in decision-making Better job design (eg more autonomy/flexibility)Developing better staff relations with line managers Engagement No change in Engagement decrease engagement increase “ Strategies that seek to drive “ engagement with work (as opposed to the organisation) have been found by academic research to be more powerful in terms of driving performance – in this survey, the greatest link with increased engagement is again with more effective job design
  20. 20. 19 The state of HR survey 2011 The role of front line managers Figure 12. The allocation of HR resources and practices to the Academic research has highlighted that organisations have different types of employee often provided little support or training to line managers in their role as people managers. The performance of line Employee classification More Similar Less managers in their role as people managers is also % % % often overlooked. “High potential” employees 37 62 1 Given the importance of line managers in terms of fostering good employment relations and in driving employee engagement, this year’s survey sought to gather information on Employees who perform poorly 47 41 12 the extent to which organisations support and train line managers and whether pay and promotion is explicitly linked to Employees who perform highly 26 71 4 their performance as people managers. The table below shows the results. Employees in more senior 38 56 5 positions Figure 11. Support for line managers as people managers % Non-permanent workers 2 69 29 Provision of specific training to line managers to help 81 them manage their employees Other 4 89 6 Assessment of line managers against their people management skills and achievements in their annual 76 appraisals It is evident from this table that many organisations differentiate employees in terms of the extent to which HR Linking of line managers’ pay and benefits with their 41 resources and practices are applied to that particular group. performance as people managers The group most likely to receive the greatest attention is ’poor performers’, who are reported by almost half of organisations Linking of line managers’ promotion opportunities with 59 as receiving more HR resources than other employee groups. their performance and ability as people managers This perhaps reflects the nature of performance management It is evident from these results that while most organisations systems in these organisations in how they may manage provide some kind of training to line managers and seek to underperforming staff ’up’ or ’out’. assess their ability as people managers, far less actually embed people management in pay and promotion terms. This implies Non-permanent workers were the group most likely to receive that for many, people management is seen less as a key less HR resources and practices (29%). For those organisations performance metric as compared to other factors. relying on temporary staff, a lack of HR management may be creating additional risk and cost with respect to Talent and performance management these employees. Talent management is a relatively new HR concept that is Interestingly, 37% differentiate high potentials and 38% senior becoming more deeply ingrained in HR roles. It is also highly employees to receive more HR practices and resources, perhaps ambiguous, meaning different things to different organisations. reflecting how these organisations identify and invest in talent For many organisations, managing talent is about within their own organisation. However, analysis of the survey differentiating employees – for example, identifying and results show that there is no evidence to suggest that there is developing certain employee populations, such as high any beneficial effect of HRM differentiation (ie giving certain performers or high potentials. This survey seeks to shed light on groups of employee greater HR resources or practices). No the extent of this differentiation and to examine whether this significant associations were found in relation to overall levels strategy is effective. of staff turnover, absence or organisational performance. The table below shows the percentage of organisations Perhaps this could be due to the negative aspects of differentiating between different perceived classes of employee differentiation (eg alienation and disenfranchisement of and the allocation to them of HR resources and practices. non-differentiated employee populations). Or, it could be related to recent critical thinking that talent management focuses too heavily on the individual – rather than the management of, say, key roles or teams within an organisation. Alternatively, it may bring in to question the effectiveness of the particular methods used.
  21. 21. The state of HR survey 2011 206. The HR function – satisfaction levels and role requirementsWhile the main body of our survey is concerned with issues affecting the workforce, we also asked anumber of questions in relation to the HR function itself. The majority of respondents are fairly satisfiedwith the resources allocated to HR, the HR practices in place and the performance of the HR team and alsothe management support they receive.We asked senior HR professionals how satisfied they are with various aspects of HR activity. These are presented in the table below.Figure 13. With respect to your organisation, to what extent are you satisfied or dissatisfied withthe following: Very dissatisfied Fairly dissatisfied Neither Fairly satisfied Very satisfied (%) (%) (%) (%) (%) HR resources (budget) 5 25 29 38 4 HR resources (number of staff) 7 24 24 39 7 HR resources (quality of staff) 5 16 18 42 19 Influence of the HR function 6 20 14 45 15 Quality of HR practices in place 3 18 15 50 13 Implementation of HR practices by management 5 28 23 40 4 Delivery by the HR staff 2 10 20 49 19 Respect for HR 5 15 20 47 13 Priority given to HR/people issues 5 21 20 40 14 Management support for HR 5 18 18 45 14 The structure of the HR function 5 17 23 44 12 Use of HR services by staff 1 13 30 49 7 Engagement of staff 4 21 26 44 4 Employee performance 3 15 30 49 4Overall, these results indicate that senior HR professionals are learning and development, and 23% have a shared servicesbroadly satisfied with the quality of their staff and HR practices, centre. These results are slight increases from last year.with the level of influence of, and support for, the function andwith a range of indicators of HR performance. In essence, they As with last year, many HR professionals reported that theirbelieve that HR is doing a good job with the resources and roles and responsibilities are broadening. 92% advised thatsupport they have. there had been no cessation of in-house HR activities, while 27% advised that HR had commenced a new practice orIs the HR role changing? procedure, or had in-sourced it during the year. The nature ofThis year’s survey again looked at HR functional structures. activities identified relate mainly to core HR activities egThe current structures continue to reflect elements of Ulrich’s recruitment, appraisal or employee development. What thismodel2. For example, 50% of organisations employ HR business shows is that, from the perspective of senior HR professionals,partners, 35% have HR centres of expertise eg recruitment or the activities of HR departments are continuing to grow.2 Ulrich, D. & Brockbank,W. (2005). The HR Value Proposition. Boston,MA: Harvard Business School Press
  22. 22. 21 The state of HR survey 2011 7. Performance indicators Data was collected on some standard HR performance metrics; namely employee voluntary turnover and absence levels across the previous 12 months. Comparative data was also available from previous surveys. The average organisation was found to have around 6% voluntary turnover across 2010, however there was a large variation in this figure across participating organisations. At higher levels, it was found that around 7% of organisations had voluntary staff turnover levels in excess of 20% in 2010. A similar story emerges when absence figures are examined. In Some simple correlations were run to examine the associations 2010 on average around 3% of working days were lost through of reported organisational performance. These indicated that sickness or absence. Less than 17% of organisations recorded higher organisational performance was associated with lower sickness and absence levels above 5% across this period. levels of environmental uncertainty and higher increases in reported employee engagement and greater efforts to enhance Voluntary turnover was found to be highest in retail and leisure, employee engagement. There were also links found between private education, charities and not for profit organisations and high organisational performance, evidence of greater people real estate and construction sectors, and lowest in management training for line managers and a greater linkage of manufacturing and transport and communications sectors. line managers’ promotion opportunities to their ability as Absence was found to be the highest in utilities and retail and people managers. These findings point towards high employee leisure sectors and across the public sector and lowest in engagement and efforts of organisations to enhance professional and financial services and manufacturing sectors. engagement as potential drivers of organisational performance, as well as a more formal recognition of line managers key role We also collected perceptions of organisational performance. In “ as the active managers of people within organisations. “ this year’s survey 58% of respondents indicated that their organisation was performing financially better than other organisations in their sector. This compares to over 53% of respondents from last year’s survey, suggesting a growing confidence in the relative fortunes of these organisations over …higher organisational performance the past 12 months. was associated with … greater efforts to enhance employee engagement
  23. 23. The state of HR survey 2011 228. The survey process and the sample A questionnaire was distributed to senior HR professionals in November 2010. Of the 550 responsesreceived to both the paper and online versions of the questionnaire, 437 responses were usable within theanalyses performed. A broad cross-section of sectors and organisational sizes were represented in thesample. Almost 68% of them recognised a union or other form of employee representation.We asked people to report on the previous 12 months (November Figure 15. Size of organisations in sample2009 to October 2010) and tell us what was likely to happen inthe forthcoming year (November 2010 – October 2011). Thesurvey captured views and expectations in November 2010. 5000+ 1-50 16% 10%Figure 14. Sectors 51-100 Frequency % 9% Charities and NFP 57 13.0 1001-5000 101-200 Education (public) 16 3.7 21% 14% Education (private) 10 2.3 Health (public) 17 3.9 Health (private) 4 .9 Other public sector 22 5.0 201-500 501-1000 15% Manufacturing 46 10.5 15% Media and entertainment 24 5.5 Financial services 48 11.0 Professional services 75 17.2 Other business services 40 9.2 Real estate and construction 18 4.1 Retail and leisure 34 7.8 Transport and communications 17 3.9 Utilities 9 2.1
  24. 24. Speechly Bircham LLP HRM Learning Board6 New Street Square King’s College LondonLondon EC4A 3LX Department of ManagementTel +44 (0)20 7427 6400 150 Stamford StreetFax +44 (0)20 7427 6600 London SE1 9NHDX 54 Chancery Lane Tel +44 (0)20 7848