Future Forecast: Expectations for 2013


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Future Forecast: Expectations for 2013

  1. 1. Future Forecast:Expectations for 2013December 2012Ben Musgrave & Patrick Woodman
  2. 2. Introduction 2012 was another difficult economic year for the UK. But could management confidence be – at long last – on the up? The answer, according to the results of this year’s Future Forecast survey of CMI members, is a cautious ‘yes’. Examining managers’ experiences over the last 12 months and their expectations of the year ahead, the findings reflect the difficult year that many organisations have experienced, with widespread redundancies and restructuring. Many managers still have a tight focus on controlling costs and the mantra of delivering ‘more for less’ still resonates with most managers. Many of these trends are set to continue – not least because the UK’s economic prospects remain relatively gloomy, with official forecasts predicting weak growth at best. Yet the survey also shows that a growing number are optimistic about their organisation’s prospects for the year ahead. Many are focused on improving employee engagement and developing their people’s skills to get the best from their teams, a strategy which is surely right and is to be applauded. The challenge will be converting this welcome sign of management optimism into tangible results. Engaging the talents and motivation of all staff in pursuit of that goal will be a huge advantage. Methodology Twenty thousand CMI members were invited to complete an online survey during November 2012. A total of 595 responses were received from across the UK, drawn from industry sectors across the economy and from managers at a range of levels of seniority up to directors and chief executives. For consistency of analysis, the commentary in this report refers primarily to the Future Forecast report of one year ago. Some reference is also made to relevant data from CMI’s Economic Outlook series of reports, the most recent of which was published in October 2012.Copyright Chartered Management Institute ©First published 2012Chartered Management Institute2 Savoy Court, Strand,London WC2R 0EZAll rights reserved. Except for the quotation of short passages for the purposes of criticism andreview, no part of this publication may be reproduced, stored in a retrieval system, or transmitted,in any form or by any means, electronic, mechanical, photocopying, recording or otherwise,without prior permission of the publisher.British Library Cataloguing in Publication DataA CIP catalogue record for this report is available from the British LibraryISBN 0-85946-453-9 2
  3. 3. Executive Summary •• Fifty-three per cent of managers feel optimistic about their organisation’s prospects for next year, up from 43 per cent a year ago. •• Managers’ top priorities for the year ahead include controlling costs, managing performance, developing strategic partnerships, developing their people and improving employee engagement. •• Managers have substantial concerns over their organisations’ people capabilities. Some 43 per cent do not believe their organisation has the right people to fulfil business objectives in 2013. The most common problem is a shortage of key skills which along with poor morale, general lack of manpower and poor leadership, are substantial concerns. These factors are up considerably from last year, by 19, 15, 14 and 13 percentage points respectively. •• Managers’ priorities for their own professional development include strategic decision making, negotiating and influencing, change management and coaching and mentoring. •• Feelings of job insecurity have reduced, with 33 per cent of managers feeling insecure compared to 39 per cent a year ago. Public sector managers remain most pessimistic about their continued employment. Confidence in the jobs market remains low, with only 47 per cent of all managers believing that they could find comparable employment within three months should they be made redundant. •• Fifty-nine per cent of those surveyed experienced redundancies in their organisations over the last twelve months – including 96 per cent of those working in the public sector. •• Looking at the prospects for the economy as a whole, 25 per cent report that they are optimistic about the year ahead – up 17 percentage points since last year. •• The restructuring of the public finances, technological change and the price of energy are the top external factors expected to have a damaging impact on organisations in 2013. •• Skills and employment policy are seen as priorities for government action. Integrating management and leadership development into the education system, ensuring that interns receive the minimum wage, and tax incentives for investment in management and leadership development are the most widely supported employment law and labour market policy initiatives among survey respondents. •• Family-oriented policies such as extending the right to request flexible working and reforming parental leave are also popular, although more so among women managers than their male counterparts. 3
  4. 4. Survey Findings Performance Asked about the performance of their organisation over the past 12 months, 33 per cent in 2012 reported growth, slightly more than those reporting decline (27 per cent), with 41 per cent describing their organisation as stable. Comparison with the figures from last year’s Future Forecast survey1 suggests a small improvement, as the number of those reporting decline has decreased by five percentage points and the numbers reporting growth has increased by 3 percentage points. Within the private sector specifically, 39 per cent of respondents report growth, up from 36 per cent in the previous two years. Meanwhile, fewer report decline: 22 per cent, compared to 29 per cent last year. The not-for-profit sector showed considerable change on last year, rising from 27 to 38 per cent reporting growth. In the public sector, only 19 per cent report growth (compared to 17 per cent in the last two years), an unsurprising difference. The majority of managers (60 per cent) reported that the performance of their organisation was in line with targets (an increase by five percentage points from 2011), while just over a quarter (27 per cent) reported that their organisation’s performance was worse than had been forecast (a decrease by 4 percentage points). This compares with just 14 per cent of organisations that exceeded their targets. Star performers The survey asked managers for their verdict on the best managed organisation in the UK in 2012 over the last year. As was the case in 2011, John Lewis was voted the winner, with managers impressed that they “kept to [their] mission and values while making minor adjustments to [the] changing environment”, with staff who “seem to care about performance of the business”. John Lewis was closely followed by Virgin Group which, came across as being an “open and honest” company, winning admiration from some for fighting the government’s decision on the West Coast Mainline franchise and winning a review. One respondent viewed Virgin’s courage as an example to other companies: “We need brave leaders, now more than ever, to revitalise the corporate world and the economy”. The success of the London Olympics and Paralympics was also reflected in the voting, with numerous managers citing the Games as a whole, or the Olympic Delivery Authority and LOCOG specifically. Meanwhile, in the battle between the supermarket chains, Sainsbury’s leapfrogged Tesco. Best managed company 2011 Best managed company 2012 John Lewis Partnership John Lewis Partnership Tesco Virgin Group Sainsbury’s London 2012 Games (joint third) Marks and Spencer (joint fourth) Sainsbury’s (joint third) Ryanair (joint fourth) Tesco Table 1 (above) and Figure 1 (below) Best managed companies 2012 1 earson, G. Woodman, P., (2011) Future Forecast: P Expectations for 2012, Chartered Management Institute 4
  5. 5. Prospects The survey asked managers how optimistic they are about their prospects both for their for 2013 organisation and for the economy as a whole during the next year. As with last year, the results to these two questions tell very different stories. Just over half – 53 per cent – feel optimistic about their organisation’s prospects, up by ten percentage points, while only 25 per cent feel the same way about the economy as a whole (albeit up from eight per cent). 60% 53 50% 48 Your organisation 40% The economy 30% 28 25 25 21 20% 10% 0% Pessimistic Neither Optimistic Figure 2 Levels of optimism for organisational and economic prospects in 2013 Public sector managers are much more pessimistic about their prospects for next year, while optimism in the private and not-for-profit sectors is stronger (62 and 54 per cent). Organisational optimism amongst public sector managers is however 13 percentage points higher than in 2011 so this is at least a move in the right direction.External threats In spite of this increased confidence, it is clear that managers are still operating in ato performance tough external environment and could face numerous potential threats in the coming year. We asked which of these topical threats managers felt would have a negative impact on their organisations’ performance. 80% 70% 60% 58 54 50% 40% 36 33 33 30% 26 22 20% 19 10% 0% Restructuring Energy Technological Instability of Social Competition Trade union Capacity of of UK public prices change the euro unrest from emerging activism UK transport finances economies infrastructure Figure 3 Agreement that factors will have a negative impact on organisational performance 5
  6. 6. As with last year’s findings, the restructuring of UK’s public finances are causing concern for managers across all sectors. This is particularly apparent for those in the public sector – 78 per cent of whom agree that this will have a negative impact on their organisation’s performance. It is also the top concern for not-for-profit sector managers (62 per cent) and the second biggest concern for private sector managers (47 per cent). As shown in Table 2 below, the cost of energy is the primary concern for private sector respondents (51 per cent agreement). Forty per cent of this group expect the instability of the euro to have a negative impact on performance, although this number falls to 30 per cent and 22 per cent in the not-for-profit and public sectors respectively. Bigger issues for the public sector include the impact of social unrest (49 per cent), technological change (46 per cent) and trade union activism (41 per cent). Private sector Public sector Not-for-profit sector Energy prices Restructuring of Restructuring of UK UK public finances public finances Restructuring of Energy prices Energy prices UK public finances Instability of the euro Social unrest Social unrest Technological change Technological change Instability of the euro Competition from Trade union activism Technological change emerging economies Table 2 Top factors expected to have a negative impact on organisational performance by sector Organisational As at the start of 2012, there are two major priorities for managers going into 2013: priorities controlling costs and managing performance. Developing strategic partnerships, ‘developing our people’ and improving employee engagement are all up in this year’s survey (by 4, 5 and 7 percentage points respectively, compared to last year).80% 78 7570%60%50% 49 48 48 4740% 39 3730% 28 24 19 1820% 1610%0% Controlling Managing Developing Developing Improving Increasing Developing Restructuring Rebuilding Expanding in Exploiting Exploiting Becoming more costs performance our people strategic employee turnover new products trust in international online business the rise of environmentally partnerships engagement and services management markets channels social media sustainable Figure 4 Factors seen as a high priority in the next 12 months 6
  7. 7. Unsurprisingly, the priorities are different for managers in different sectors (see Table 3). The need to develop strategic partnerships is greater for those in the public and not-for-profit sectors (57 and 50 per cent respectively) than for those in the private sector (42 per cent), reflecting moves towards new models of public service delivery. Restructuring is again the third highest priority for public sector managers, described as a high priority by 58 per cent. Private sector Public sector Not-for-profit sector Managing performance Controlling costs Controlling costs Controlling costs Managing performance Managing performance Increasing turnover Restructuring Developing our people Developing our people Developing strategic Improving employee partnerships engagement Improving employee Improving employee Developing strategic engagement engagement partnerships Table 3 Top organisational priorities by sector As shown in Table 4, controlling costs and managing performance are the top priorities for organisations of all sizes. However, small organisations (1-50 employees) have a greater focus on managing performance, increasing turnover and on developing strategic partnerships. Medium and large organisations, appear to be more focused on improving employee engagement and developing their people. Only 40 per cent of managers in small organisations describe improving employee engagement as a high priority, compared to 52 per cent across medium and large organisations.1-50 employees 51-250 employees 251-1000 employees 1000+ employeesControlling costs Managing performance Controlling costs Controlling costsManaging performance Controlling costs Managing performance Managing performanceIncreasing turnover Improving employee Improving employee Restructuring engagement engagementDeveloping strategic Developing our people Developing our people Improving employeepartnerships engagementDeveloping our people Increasing turnover Increasing turnover Developing our people Table 4 Top organisational priorities by sizeFulfilling business Having looked at the organisational challenges and priorities for next year, we alsoobjectives in 2013 asked managers whether they believe they have the right people in place to meet their objectives in 2013. Overall, 47 per cent of respondents answered yes to this question, three per cent fewer than last year. However, 43 per cent of managers believe that their organisation does not have the right people in place. The view of private sector respondents is more optimistic, where a small majority – 55 per cent – do believe they have the right people in place (see Figure 5). 7
  8. 8. Private sector 35 55 No Public sector 57 33 Yes Not-for-profit sector 41 45 Negative % Positive % Figure 5 Managers’ views on whether their organisation has the right people to fulfil business objectives in 2013, by sector To help explain these findings, the survey asked what issues managers faced as a result of not having the right people. Shortages of key skills are reported by 79 per cent of all managers: worryingly, this is up by 19 percentage points on last year. The number of managers reporting poor morale and poor leadership also went up substantially (by 15 and 13 percentage points respectively). As Table 5 shows, there are once again substantial differences between the sectors. Overall Private Public Not-for-profit Issue % % % % Shortages of key skills 79 82 79 63 Poor morale 65 61 76 56 Poor leadership 63 63 59 70 Not enough manpower 54 51 62 44 Lack of ability to innovate 49 47 48 67 Lack of experience 44 49 38 52 Personality clashes 39 46 29 56 Lost people through redundancy 38 29 49 30 Too many people 10 11 9 11 Table 5 Issues faced by those who feel they do not have the right people Job security, job Sixty-eight per cent of respondents report feeling secure or very secure in their jobs,market confidence compared to 62 per cent last year. The overall number of managers feeling insecure has and morale dropped six points to 33 per cent but remains higher among public sector respondents, at 44 per cent. Managers’ confidence in the jobs market has increased but remains low. Only 47 per cent believe that they could find comparable employment within three months if they were to lose their job. As with the findings from last year, public sector managers – the group who feel least secure in their jobs – feel least confident about finding new work, with only 38 per cent believing that they could get comparable work within three months. This is however up from 29 per cent points last year. Managers from the public and not-for-profit sectors are most likely to look for a new job in 2013, with 46 and 42 per cent of managers in these sectors indicating that they will seek new employment. This compares to 33 per cent in the private sector. In all sectors, these numbers are slightly lower than last year. 8
  9. 9. Our survey also asked for the first time how optimistic managers are about the prospects for staff morale in their organisation in 2013. Overall, 46 per cent are optimistic, compared to 31 per cent who are pessimistic. Again, public sector managers are the least positive group: only 30 per cent optimistic with 49 per cent pessimistic. This compares to optimism of 54 per cent in the private sector and 52 per cent in the not-for-profit sector (with pessimism at 21 and 25 per cent respectively). Redundancies Fifty-nine percent of all respondents report that their organisation has made redundancies and headcount in 2012 but there were enormous differences between sectors. An enormous 96 per cent of public sector respondents had experienced redundancies in their organisation in the last year. Across the board, the experience of redundancy was higher than expected at the start of the year – a noticeable difference compared to the previous year’s data, which showed that expectations noted in this survey in December 2010 were largely borne out over the following year. As Table 6 also shows, some 80 percent of public sector managers predict further redundancies in 2013 as austerity continues to bite. On a more positive note,more managers are not expecting redundancies in 2013 than are expecting them (49 per cent versus 45 per cent). Managers whose Managers expecting organisations made Managers expectingSector redundancies in 20122 redundancies in 2012 redundancies in 2013 % % %Public 69 96 80Private 18 41 26Not-for-profit 38 47 44 Table 6 Expectation vs experience of redundancy in 2012, expectations for 2013 In terms of hiring expectations, 33 percent of private sector managers are expecting an increase in their organisation’s headcount, compared to 28 per cent within the not-for-profit sector and only 8 per cent among public sector respondents. In comparison to 2011, the private sector has seen a slight increase by two percentage points whilst the not-for-profit sector percentage remains static and the public sector figure is down by 8 percentage points. Priorities for As in 2011, the top priority area for managers looking to strengthen their skills is professional strategic decision making, highlighted by 47 per cent of managers across all sectors. development Negotiating and influencing skills are the second most common area where managers want to improve their abilities, especially for private sector managers. 2 earson, G. Woodman, P., (2011) Future Forecast: P Expectations for 2012, Chartered Management Institute 9
  10. 10. 45% 4440% 35 3435% 33 32 32 3030% 28 2525% 23 2220%15%10% 5% 0% Strategic Negotiating Change Coaching Project Financial Performance Developing Team Political Communication decision and management and management management management others leadership astuteness making influencing mentoring Figure 6 Professional development priorities for 2013 Change management is more of a priority for managers in the public and not-for-profit sectors reflecting the higher levels of restructuring and redundancies that have taken place (43 per cent and 33 per cent). Project management skills are also a more common focus for public sector managers (39 per cent). When examining development needs according to management level, strategic decision making is highlighted by all managers from junior roles through to directors. As Table 7 shows, coaching and mentoring skills become more of a priority from middle management levels upwards while team leadership and negotiating and influencing are more of a requirement for junior managers. Directors also gave more varied responses than other managers, with performance management, negotiating and influencing, and change management ranked jointly as the 4th highest priorities. Senior Manager/ Middle Manager/ Junior Manager/Director/Partner Principal Consultant AdvisorStrategic decision making Strategic decision making Strategic decision making Strategic decision makingCoaching and mentoring Negotiating and influencing Change Management/ Project Management Project ManagementFinancial management Financial management Negotiating and influencing Team LeadershipPerformance management/ Coaching and mentoring Coaching and mentoring Negotiating and influencingNegotiating and influencing /Change managementDeveloping others/ Political astuteness Performance management Performance management/Political astuteness Change management Table 7 Priorities for professional development by managerial level 10
  11. 11. Approaches to The most popular approaches for managers developing their own skills in the coming development year are set to be on-the-job learning, CPD programmes, training and short courses and self directed learning. Chartered Manager also features highly on the list, identified by just under one in five. This reinforces the positive findings from CMI’s recent Professionalising Management about the experiences of those managers who have attained Chartered status and the impact they have on their organisations’ performance.3 Development method % On the job learning 51 Continuous Professional Development (CPD) programme 50 Training and short courses 47 Self directed learning 45 Coaching/ mentoring 29 Chartered Manager 20 Professional qualification 20 Voluntary opportunity 14 Academic/ business school 13 Secondment/ job rotation/shadowing 10 Table 8 Managers’ approaches to personal skills development Team This year’s survey also looked at the likely approaches for managers to developing their development teams in the coming year. The table is topped by in-house training, while on-the-job learning and coaching and mentoring put a particular onus on managers to examine how they can directly support development and learning among their team members. Development method % IIn house training 72 On the job learning 68 Coaching/ mentoring 63 Continuous Professional Development (CPD) programme 47 Self directed learning (e.g. e-learning) 43 Secondment/ job rotation/shadowing 24 Professional qualification 23 Voluntary opportunity 16 Academic/ business school 14 Chartered Manager 4 Table 9 Managers’ approaches to team development 3 rofessionalising Management: the impact of Chartered Manager, P Chartered Management Institute (2012) 11
  12. 12. Public policy in With economic growth still high on the political agenda, this year’s survey assessedthe year ahead CMI members’ support for a range of policy options relating to employment law and economic policy. Despite the pressures on businesses to manage their costs, as with 2011, the survey results again show there is strong support for the National Minimum Wage for all workers, including interns who are currently often unpaid, and maintaining its level for young people. With the Government due to take forward its Modern Workplaces agenda for workplace reform, it is notable that 65 per cent back reform of parental leave to enable more equal sharing of the leave entitlement between both parents. A similar number, (66 per cent) back the extension of flexible working rights. Among a number of questions related to skills policy, there was strong support for integrating management and leadership development into education and skills systems at all levels from schools to higher education (87 per cent), as recommended in the Heseltine Review4. It suggests a recognition from practising managers that management and leadership skills can be nurtured from an early age. There is widespread support from CMI members for tax incentives to encourage business investment in management and leadership development and increased employer ownership of skills funding, as noted a year ago and also in CMI’s Economic Outlook series. With extensive political and media focus on the question of women’s under-representation in senior management roles, it was notable that a majority reject quotas for women on company boards). This is in line with CMI’s preferred route of ensuring that women are able to enter the boardroom on merit through good management and leadership that utilises talent effectively. Ensuring interns receive 9 81 the minimum wage Offering National Insurance holidays for 20 65 businesses taking on additional employees Offering National Insurance holidays 20 65 for businesses taking on young people A moratorium on new regulations 16 62 affecting small businesses Reforming parental leave to enable 26 65 more sharing between parents Integration of management and leadership development into education and skill system, 6 87 at all levels from schools to higher education Increased employer ownership of skills funding 8 75 Extending the right to request flexible working 28 66 Support Local Enterprise Partnerships taking a lead on local Oppose initiatives to improve leadership and management 11 72 Tax incentives for employee share ownership 40 38 in exchange for reduced employment rights Tax incentives for investment in management 9 81 and leadership development Requirements for companies to report on 35 58 gender diversity at senior management levels Mandatory quotas for the number of women on company board 57 34 Reducing the minimum wage 81 13 for young people Negative % Positive % Figure 7 Support for potential policy measures 4 o stone unturned in pursuit of growth (2012), Department for Business, Innovation and Skills. N www.bis.gov.uk/heseltine-review 12
  13. 13. Conclusion: another challenging year ahead For the last two years, our survey has told a story of insufficient skills, poor leadership and a lack of manpower negatively affecting organisational performance. This year’s results have much in common with those findings. Many of the challenges facing the UK economy remain: weak consumer demand, prolonged economic uncertainty and weak performance in the Eurozone, and – as confirmed in the Chancellor’s Autumn Statement at the start of December 2012 – a fiscal picture that is worse than anticipated a year ago. There is no doubting the seriousness or scale of the factors shaping the environment in which managers are operating. Yet it is not an unremittingly bleak picture. The economy emerged from its double dip recession and while a triple dip is still feared, most predictions are for very modest growth next year. Some 39 per cent of private sector managers report that their companies did achieve growth in the last year and a majority performed in line with their targets. Managers’ optimism in this survey is up ten percentage points compared to a year ago, with more than half of those surveyed now expressing a positive outlook. This is not a picture of an economy in freefall. The conclusion for managers has to be that lean times still lie ahead for many, if not most, parts of the economy. There will continue to be a premium on the skills needed to deliver organisational priorities in this tough climate. Cutting costs and managing change will again be important themes this year. The importance of negotiating and influencing skills might be a result of the growing need to build strategic partnerships – or of the need to protect scarce internal budgets. There is also an important role for managers in getting the most from their people. Improving employee engagement is a priority for many in the year ahead. Raising performance levels might mean developing team members’ skills, and many managers are interested in developing their own coaching and mentoring skills which will help in this regard. It also implies a focus on better performance management. The challenge will be to reconcile these priorities, ensuring that the pressure on employees to perform – including on those in management roles – does not simply lead to a resurgence in command and control, authoritarian management styles. Empowering staff, giving them a real voice in business decisions and finding ways to innovate despite limited resources may seem like a more difficult prospect. For those that can rise to the challenge, the rewards will be far greater. 13
  14. 14. Chartered Management InstituteThe Chartered Management Institute is the onlychartered professional body in the UK dedicated topromoting the highest standards of managementand leadership excellence. CMI sets the standardthat others follow.As a membership organisation, CMI has beenproviding forward-thinking advice and supportto individuals and businesses for more than50 years, and continues to give managers andleaders, and the organisations they work in, thetools they need to improve their performance andmake an impact. As well as equipping individualswith the skills, knowledge and experience to beexcellent managers and leaders, CMI’s productsand services support the development ofmanagement and leadership excellence acrossboth public and private sector organisations.Through in-depth research and policy surveys ofits 90,000 individual and 450 corporate members,CMI maintains its position as the premier authorityon key management and leadership issues.For more information please contactthe Policy and Research Department on:Tel: 020 7421 2721Fax: 020 7497 0463Email: research@managers.org.ukWebsite: www.managers.org.ukor write to us at the address below.Chartered Management Institute2 Savoy Court, Strand,London, WC2R 0EZRegistered charity number 1091035Incorporated by Royal CharterISBN 0-85946-453-9© Chartered Management Institute, December 2012 4679 12/12