State Of Hr Report 2011

Austerity or prosperity?
The state of HR in this challenging
economic environment

SURVEY 2011

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

www.speechlys.com/employment

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.

www.kcl.ac.uk/hrmlb

The state of HR survey 2011 2

Profiles

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.


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


Introduction and summary findings

The results of our third annual State of HR survey demonstrate that the difficult economic conditions over
the past year have created highly challenging circumstances and have exacerbated the problems facing
organisations. This continues to place a real strain on the workforce, as organisations strive to move
forward. Much uncertainty also remains for organisations, particularly as the current period of economic
austerity 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 whether
survey, identifies the key workforce issues and highlights some organisations perceive any adverse changes as a result of a
important trends since the onset of the recession. One of the change to government policy or legislation. There are some
most significant and potentially worrying finding for interesting and unexpected results in relation to age. Even
organisations is the relationship between increased working though the default retirement age will be phased out from April
hours and increased absences, sickness levels, stress related 2011, only one-third of organisations expect it to be a major
problems and the number of grievances lodged (see section 3 of issue for 2011, despite the fact that 78% of organisations have a
this 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 combined
not yield the economic outcomes expected. Conversely it may with the fact that HR professionals are predicting a major
increase the burden placed on HR and the business as increase in the number of age related grievances, may mean
anticipated future increases in working hours are also linked that age will be a key issue for organisations in 2011. Another
with 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 within
The 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 when
address these critical HR challenges. One of the key challenges organisations are required to publish such data, there may be
facing organisations in 2011 is a skills shortage which, coupled interesting and unexpected findings.
with the tightening of immigration legislation and the
introduction of the interim cap on the number of non-EU In this report, we have been able to compare the survey results
migrants employed by organisations, will serve to further with what was reported to us in previous years and we have
exacerbate the problem (see section 2 of this report). For those identified emergent trends. Whilst the prevailing economic
organisations with a skills shortage, the situation is likely to difficulties are clearly having a negative impact on organisations
become worse with potential increases in staff turnover and (77%), the private sector and the public sector have traded
absence related to such shortages. places this year (see section 1 of this report). The story for 2010
was not completely bleak and there were modest
The 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 worrying
disconnect between management and staff with a rise in The report has also identified some positive trends. Employee
employee grievances for the third successive year and the major engagement continues to embed itself as a central tenet of HR
source coming from poor management and staff relations. strategy with more organisations measuring it (66%) (see
While organisations are again attempting to foster better section 5 of this report). Our analysis again found that many
management/staff relations, the survey highlights that such initiatives intended to improve employee engagement appear
initiatives 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.


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


2. Workforce size, skills shortages and resourcing strategy

One of the key challenges for the previous three years and which is now a bigger issue for this year’s
survey is a skills shortage, with 1 in 3 organisations reporting a skills gap. With the introduction of the
interim immigration cap and the tightening of immigration legislation, the skills gap is unlikely to
decrease. 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 size
size increasing. Unfortunately redundancies are still Organisations providing information for this year and last year’s
commonplace with 7 in 10 organisations making redundancies survey, have seen an average increase of 3.57% in workforce size
in 2010. However, organisations have also shown more between November 2009 and October 2010. However, this
willingness to consider and implement alternatives to varies between sectors, highlighted in the table below. From
redundancies, 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



Charities and NFP

Health (private)

Education (private)

Retail and leisure

Other public sector

Financial services

Health (public)


Manufacturing


Utilities

Education (public)


-5 0 5 10 15 20 25 30 35 40
% change in workforce size across sectors


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


3. Effects on workforce and HR management

Our survey gathers insights into a range of workforce outcomes that have arisen from the current
economic environment and the picture presented is potentially worrying for all organisations. It is clear
from our results that working hours have increased across all sectors. For those organisations using
additional working hours as a means of achieving efficiencies, our analysis shows that increased working
hours actually corresponds to increased absences, sickness levels, stress related problems and the number
of grievances lodged. For those organisations using additional working hours as a means of achieving
efficiencies, this may prove to be a false economy.

“
Staff fatigue and potential burnout
This year the survey asked about additional hours worked by staff.
As shown in the table below, across all sectors, there is a very
clear message that workforces are being asked to work far harder
during the prevailing economic conditions. Of all factors
measured 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 increase
additional hours worked by staff saw the largest increase.

Figure 4. % of organisations in which number of additional hours worked by staff have increased



Health (private)


Utilities

Education (private)

Manufacturing

Charities and NFP


Other public sector

Retail and leisure

Education (public)


Health (public)

Financial services

0% 20% 40% 60% 80% 100%


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.


Figure 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


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


Recruitment and resourcing Pay, benefits and budgets
In last year’s survey respondents had anticipated that The general trend from the last two years continues and shows
recruitment activity would pick up, with staff turnover expected a further overall reported reduction in pay rises for 2010, as well
to increase. This did not happen to the extent necessary to make as a reduction in bonus pool size. Again, the size of budgets for
much difference to recruitment activity. Recruitment has training and development has fallen.
remained depressed and workforces have remained
relatively static. With the Equality Act being introduced, the survey also asked
specific questions on pay inequality. 84% of respondents stated
An interesting dynamic that has continued from the previous that there was no material pay inequality from a gender
two years has been the increase in the use of flexible and perspective, while 10% did report a significant inequality. It is
part-time working as employers have reduced payroll cost not clear whether this is an accurate reflection of the true
through methods other than redundancy. We again reiterate extent of gender pay differences, particularly as only 32% of
that the recession may have acted as a catalyst for a sustained respondents advised that they had implemented some kind of
shift 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 that
For graduates, there is no good news, with three consecutive there is no material pay inequality without any formal
years of our survey showing falling graduate recruitment levels. mechanism to provide evidence to back this up. Those planning
As students are now faced with having to borrow more to fund to assess and monitor pay inequality in the next 12 months
their education, the picture remains gloomy. amounted to 20% of respondents.

Workforce stress and employment relations Staff discontent
Stress continues to be a significant problem, recording a third Our two previous surveys identified that many organisations
successive reported increase. Again, higher levels of stress were experiencing a deterioration in the relationship between
correlate 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 are
In this year’s survey, 46% of senior HR professionals report an
again key outcomes of this year’s survey. However, the main
increase in levels of stress among employees compared with
indicator of a management/staff disconnect is that the biggest
38% last year. This suggests that while more and more
source of grievances relates to staff relations with senior and
organisations are likely to have seen stress increase over the
line managers, (see page 13). This apparent disconnect is clearly
preceding three years, many organisations may have seen stress
causing potentially serious workplace problems.
worsen within their own workforce during the course of the
downturn. Worryingly, stress related problems are set to The outcomes of tougher management in a poor economic
increase again for 2011. environment and the creation of more dissatisfied staff are
recognised by organisations as many are attempting to foster
Employment relations problems also remain a significant issue,
better relations between management and staff. The potential
similarly recording a third successive increase above the
effect of this and the role of line managers is examined further
previous 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 employee
For HR professionals and front line managers the economic
grievances, as with last year’s survey, 30% saw grievances rise in
conditions 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 next
well being.
12 months. Aside from relations with management, the biggest
Employee engagement cause of grievances has been bullying and harassment. It is
Our previous surveys have highlighted employee engagement interesting that HR professionals expected bullying and
as the HR function’s key workforce priority for 2009 and 2010. In harassment to fall in each year of our survey, but actual
this year’s survey, the overall reported employee engagement incidences remain stubbornly high and are increasing. In this
level shows a slight decrease. This supports the view reported in respect, strategies to reduce bullying and harassment are
our surveys that while maintaining engagement remains a high apparently not working.
priority it is a difficult challenge in the current climate. We look
at engagement in more detail in section 5.


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.


In terms of future expectations for 2011, the main causes of
grievances all feature again. The mix is slightly different, with
pay, stress, work practices/allocation, career development and
working hours all expected to feature more strongly in the
coming year. 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 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 cases

With a significant number of organisations still making
redundancies, we again examined the management of
redundancy. 70% of organisations reported having made
redundancies (either compulsory and/or voluntary) in the
previous 12 months. This compared to 72% in the previous year.
The extent of redundancies was small for many – 34% of
organisations made fewer than 10 people redundant and 59%
of organisations made up to 500 employees redundant while
7% made more than 500 staff redundant.

62% of those who made staff redundant in the past year
engaged in some form of collective consultation, compared with
64% last year. 41% of these reported that this was something
that management volunteered to carry out, even though it was
not required by legal rules or union/workforce agreements.

As with last year, the criteria for selecting people for redundancy
varied widely:

G 52% used performance assessment undertaken specifically
for this purpose

G 45% used a general performance assessment

G 41% used disciplinary records

G 32% used absence records

G 16% used length of service (despite the potential age
discrimination implications).

These responses are similar to those reported in last year’s survey.


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%


Managing growth and expansion is identified by 44% of equitable reward structures, such as those advocated in the
respondents. This again signals a cautious optimism coming current Hutton Review.
from those who anticipate that recovery should continue during
2011, and also confidence from those who feel that the It is interesting to note that of the 78% of organisations that
economic conditions are having a positive effect on their have a retirement age of 65, only one third of those are
organisation. Reward and remuneration remain a key priority for expecting it to be a major issue for 2011. With impending
HR, with 25% citing reward schemes and 38% citing changes to legislation change to retirement age, it may be that many
remuneration and benefits as a major issue. This may again organisations are not prepared for the impact of the changes on
reflect the pay retrenchment that has occurred, the ongoing their organisation.
focus on pay inequality in the media, and calls for more

We also sought the views of HR professionals in relation to a number of key areas outlined below, to try and establish whether
they 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 1

From these responses, we can highlight some interesting challenging organisational management problem. For those
potential trends. First, there is an expectation that organisations expecting an increase of additional hours being worked, these
will continue to require staff to work additional hours. We can organisations tend to be experiencing lower employee
also see that employee relations, stress and grievances will engagement, greater working days lost to sickness and lower
again increase. In this sense, the workforce will remain a highly financial performance.


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


Does HR make a difference? employee engagement were those organisations that provided
Using 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, improved
engagement and its impact. The chart below shows the various learning and development opportunities or better staff relations
HR activities identified by organisations to try to drive with line managers. It is interesting to note that the more
engagement and the comparison in the level of engagement important factors found here for encouraging employee
between those who undertook such an activity (“Yes”) and engagement are those practices least likely to have been
those that did not (“No”). utilised. Strategies that seek to drive engagement with work (as
opposed to the organisation) have been found by academic
The 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 is
increased level of engagement over the previous 12 months. again with more effective job design.
However, the only organisations which saw an increase in

Figure 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


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.


6. The HR function – satisfaction levels and role requirements

While the main body of our survey is concerned with issues affecting the workforce, we also asked a
number of questions in relation to the HR function itself. The majority of respondents are fairly satisfied
with the resources allocated to HR, the HR practices in place and the performance of the HR team and also
the 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 with
the 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 4

Overall, these results indicate that senior HR professionals are learning and development, and 23% have a shared services
broadly 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 and
with a range of indicators of HR performance. In essence, they As with last year, many HR professionals reported that their
believe that HR is doing a good job with the resources and roles and responsibilities are broadening. 92% advised that
support they have. there had been no cessation of in-house HR activities, while
27% advised that HR had commenced a new practice or
Is the HR role changing? procedure, or had in-sourced it during the year. The nature of
This year’s survey again looked at HR functional structures. activities identified relate mainly to core HR activities eg
The current structures continue to reflect elements of Ulrich’s recruitment, appraisal or employee development. What this
model2. 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


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


8. The survey process and the sample

A questionnaire was distributed to senior HR professionals in November 2010. Of the 550 responses
received to both the paper and online versions of the questionnaire, 437 responses were usable within the
analyses performed. A broad cross-section of sectors and organisational sizes were represented in the
sample. 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 sample
2009 to October 2010) and tell us what was likely to happen in
the forthcoming year (November 2010 – October 2011). The
survey 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

Speechly Bircham LLP HRM Learning Board
6 New Street Square King’s College London
London EC4A 3LX Department of Management
Tel +44 (0)20 7427 6400 150 Stamford Street
Fax +44 (0)20 7427 6600 London SE1 9NH
DX 54 Chancery Lane Tel +44 (0)20 7848 3313
information@speechlys.com www.kcl.ac.uk/hrmlb
www.speechlys.com

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