The human capital imperative : valuing your talent [1st ed.] 978-3-319-49121-9, 3319491210, 978-3-319-49120-2

Table of contents :
Front Matter ....Pages i-xv
Front Matter ....Pages 1-1
Introduction (Alan Coppin)....Pages 3-9
Human Capital and Employee Engagement—Global and National Viewpoints (Alan Coppin)....Pages 11-22
Board Capital and Leadership Capital (Alan Coppin)....Pages 23-34
Front Matter ....Pages 35-35
Strategy and Culture (Alan Coppin)....Pages 37-43
Organisation Structure and Design (Alan Coppin)....Pages 45-49
Recruitment (Alan Coppin)....Pages 51-56
Learning and Development (Alan Coppin)....Pages 57-62
Employee Engagement (Alan Coppin)....Pages 63-70
Communication (Alan Coppin)....Pages 71-74
Performance Management (Alan Coppin)....Pages 75-81
Health and Safety and Psychological Wellbeing (Alan Coppin)....Pages 83-92
Diversity and Inclusion (Alan Coppin)....Pages 93-97
Technology (Alan Coppin)....Pages 99-103
Remuneration (Alan Coppin)....Pages 105-110
Front Matter ....Pages 111-112
Public Sector Leader Insights (Alan Coppin)....Pages 113-152
Private Sector Leader Insights (Alan Coppin)....Pages 153-176
Not-For-Profits’ Leaders Insights (Alan Coppin)....Pages 177-202
The Outliers (Alan Coppin)....Pages 203-218
Institutes and Associations (Alan Coppin)....Pages 219-237
Front Matter ....Pages 239-239
Introduction (Alan Coppin)....Pages 241-243
The Human Capital Metrics (Alan Coppin)....Pages 245-259
Front Matter ....Pages 261-261
Final Thoughts (Alan Coppin)....Pages 263-265
Back Matter ....Pages 267-271

Citation preview

The Human Capital Imperative

Alan Coppin

The Human Capital Imperative Valuing Your Talent

Alan Coppin Bourne End, Buckinghamshire United Kingdom

ISBN 978-3-319-49120-2 DOI 10.1007/978-3-319-49121-9

ISBN 978-3-319-49121-9 (eBook)

Library of Congress Control Number: 2017943374 © The Editor(s) (if applicable) and The Author(s) 2017 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: smartboy 10 Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Springer International Publishing AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

This book is dedicated to Gaynor and Ed, the human capital I most value, with all my love.

Preface

The reason for writing this book is my belief in people, an understanding of their critical importance to organisational performance and my conviction that currently, despite corporate rhetoric, they are not truly valued. All major organisations claim that staff are their greatest asset and yet, at the first sign of problems, often the first action they take is to fire people. Why? Because employees are also an organisation’s biggest liability in terms of cost—and their cost is much easier to quantify than their value. But, like any asset, human capital will only deliver its full potential if it is properly understood, measured and managed. The approach I have taken in this volume is to draw on my own experiences in order to interpret the research and literature on the topic and, importantly, to interview twenty-five leaders across sectors. These unique leadership insights comprise about two thirds of the book, and provide a resource for the reader to compare different strategies and personal insights into human capital management. Apart from providing relevance, these insights set out the theory I cover from my research in practical contexts. I have also consulted some of the leading institutes and experts in the field. The reason for taking a tri-sector approach is that my fifteen-year association with the Windsor Leadership Trust, a charity that provides transformational leadership programmes for senior leaders across all sectors of society, has taught me that the key common challenge for these leaders is people and how to optimise their contribution to the organisation, whether public, private or non-profit. The Human Capital Imperative identifies a range of elements to get the best from people and in doing so improve productivity and competitive vii

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advantage, all based on common sense. It is written for boards and chief executive officers (CEOs) and their aspirants by a former CEO and current chair and non-executive director, and it argues that a mindset change is needed by this target market: to take greater interest in and direct responsibility for its most important asset. There are numerous recent examples of boards treating human capital inappropriately. An extreme instance is Sports Direct, the FTSE 100 £2.9 billion turnover sporting goods retailer, which employs 27,000 people. In its July 2016 report, the Business, Innovation and Skills select committee of parliament reported on its inquiry into the organisation: ‘Sports Direct is the country’s largest sports retail outlet, but that size and success is founded on a business model that enables the majority of workers in both the warehouse at Shirebrook and at the shops around the UK to be treated without dignity or respect.’ The report continues: ‘Although Sports Direct is a particularly bad example of a business that exploits its workers in order to maximise its profits, it is unlikely that it is the only organisation that operates in such a way.’ All boards need to be mindful of these comments and at least be aware of how staff are treated and managed. Obviously, the vast majority of organisations cannot be associated with the ethos and operating methodologies of Sports Direct but, from my own cross-sector experience and research, many directors and trustees have been poorly equipped and trained in dealing with human capital, which is left to human resources (HR) professionals who, in corporate terms, are not on the same level of the pecking order as, for example, finance directors. The natural default is to ‘go to the numbers’, which often do not include human capital metrics and are lag rather than lead indicators of performance. This book seeks to address a gap in the available literature by focusing on the people matters and analytics for which directors and trustees need to take responsibility—it is incumbent on boards and their individual members to be as versed in human capital issues as they are in reading the balance sheet. During my research, I have found that a great deal has been written on the topic of human capital and its numerous influencing elements but that it is mainly aimed at HR professionals. A literature review was undertaken, and the bibliography at the end of each chapter sets out some of the principal sources; this also included extensive internet research as well as review and synthesis of corporate reports, together with a fair number of academic references, for robustness. I have tried to demystify and amalgamate this research and sometimes complicated theory, to clarify the key issues with which boards should be concerned.

Preface

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In all of this work, the overriding requirement is to focus on performance and productivity and not on abstract HR notions—described recently by one of my former co-directors as ‘airy fairy HR’. The same colleague also asserted that there were no real measures of people input. I trust Chapter 21 on human capital metrics will convince him otherwise. I hope this tour of the human capital landscape throws some new light on the topic and offers sensible suggestions on innovative ideas and approaches for how to get the best from people.

Acknowledgements

The first people to thank for allowing me to write this book are my family, my source of inspiration—I truly hope that they feel it was worth the effort, and the time I spent closeted away at least has an end result! Ed, my son, has a special mention for his deep interest in the topic and the significant pointers he has provided. I am very grateful to a range of people and their institutions for helping me; together, they (and I) have amassed about 500 years of leadership experience from which to draw. I greatly appreciate assistance from a number of institutes, associations and consultancies, and I am particularly grateful for the wise counsel of: Lesley King-Lewis, CEO of the Windsor Leadership Trust; Ann Francke, an interviewee, and CEO of the Chartered Management Institute (CMI); and Patrick Woodman also from the CMI (who provided access to their ‘Valuing your Talent’ research); Steven Carter, interviewee, and business/ performance psychologist, partner at Apter Development LLP; Kevin Green, interviewee and CEO of the Recruitment and Employment Confederation; Sarah Messenger, interviewee and head of workforce, Local Government Association; Andrew Ninian, Director Corporate Governance and Engagement, the Investment Association; Les Pyle, interviewee and CEO of the Institute for Collaborative Working; Aleyana Singh, interviewee, from the Chartered Institute for Personnel and Development; Simon Walker, interviewee and director general of the Institute of Directors; Richard Williams, interviewee and director of National Council for Voluntary Organisations; Sally Winston, interviewee and global head of employee research for ORC International, Inc., for access to ORC research.

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Acknowledgements

I undertook in-depth interviews with leaders from the private and public sectors, not-for-profit, military and faith organisations. These are featured prominently in the book as they provide fascinating insights into different strategies and approaches to getting the best from people. I am particularly grateful to the following leaders: Sir Howard Bernstein, CEO, Manchester City Council; Diana Brightmore-Armour, CEO, ANZ Bank UK, Europe and Middle East; David Brown, CEO, Go Ahead Group Plc; Martyn Coffey, CEO, Marshalls Plc; Dr Philip Goodwin, CEO, Voluntary Service Overseas; Sir Harpal Singh Kumar, CEO, Cancer Research UK; António HortaOsório, CEO, Lloyds Banking Group Plc; Michael Lockwood, CEO, Harrow Council; John Manzoni, CEO of the Civil Service; Dame Martina Milburn, DCVO CBE, CEO, The Prince’s Trust; Alison Nimmo, CBE, CEO, Crown Estates; Seyi Obakin, OBE, CEO, Centrepoint; Sue Owen, CB, permanent secretary, Department of Culture Media and Sport; Jane Percy, Duchess of Northumberland, businesswoman and Lord Lieutenant of Northumberland; Julia Robertson, CEO, Impala Group Plc; Steve Robertson, CEO, Thames Water; Major General Chris Tickell, director general, Army Recruiting and Training Division; John Timpson, CBE, chairman, Timpsons Ltd; Karen Wheeler, national director: Transformation and Corporate Operations, NHS England; Very Revd Dr Pete Wilcox, Dean of Liverpool Cathedral; Rear Admiral Simon Williams, CVO, naval secretary, assistant chief of naval staff (personnel), Royal Navy. Thank you to Sir Gerry Grimstone for reading the book and providing comments and an endorsement. Finally, thanks to Stephen Partridge, editorial director, business, economics and finance at Palgrave Macmillan, who had faith in me by commissioning the book and empowering me to just get on and write.

Contents

Part I Introduction, Definition, National and Global Perspective 1 Introduction

3

2 Human Capital and Employee Engagement—Global and National Viewpoints

11

3 Board Capital and Leadership Capital

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Part II The Eleven Critical Elements of the Human Capital Imperative 4 Strategy and Culture

37

5 Organisation Structure and Design

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6 Recruitment

51

7 Learning and Development

57

8 Employee Engagement

63

9 Communication

71

10 Performance Management

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Contents

11 Health and Safety and Psychological Wellbeing

83

12 Diversity and Inclusion

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13 Technology

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14 Remuneration Part III

105

Cross-Sector Leaders’ Insights

15 Public Sector Leader Insights

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16 Private Sector Leader Insights

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17 Not-For-Profits’ Leaders Insights

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18 The Outliers

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19 Institutes and Associations

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Part IV Institutes and Associations 20 Introduction

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21 The Human Capital Metrics

245

Part V Human Capital Analytics 22 Final Thoughts

263

Index

267

List of Figures

Fig. 11.1 Fig. 15.1

The business in the community Workwell model The Crown Estate Pictorial Strategy

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Part I Introduction, Definition, National and Global Perspective

1 Introduction

Definition of Human Capital It took some time before the decision was made to include ‘human capital’ in the title of this book. It is not a construct readily appreciated in boardrooms, although it is used widely in academia. In 1992, Professor Gary Becker, who received the Nobel Prize for his work on human capital and allied topics, said that human capital is accepted and therefore ‘uncontroversial’, although he went on, somewhat controversially, to allude to the potential of the human capital approach to the treating of people as machines (Becker 1993). One key reason for deciding to use the term was to appeal to the target audience of boards of directors, chief executive officers (CEOs) and those aspiring to board membership; given the finance-centric composition of boards and the debates within them, a book with ‘capital’ in the title would surely be more appealing. It was also an intent, upfront, to show that my focus is on productivity and performance rather than on more abstract factors sometimes associated with the human resources (HR) discipline. Finally, the term was settled on also because there are some relevant objective measures already in place at the macro level, along with a body of academic research which can be drawn on to inform the discussion. There is even a Human Capital Global Index published by the World Economic Forum, although it is a little too general in nature to be of use in this organisational performance treatise. Human capital has been defined as the ‘knowledge, skills, competencies and attributes embodied in individuals that facilitate the creation of personal,

© The Author(s) 2017 A. Coppin, The Human Capital Imperative, DOI 10.1007/978-3-319-49121-9_1

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1 Introduction

social and economic well-being’ (‘The Well Being of Nations: The Role of Human and Social Capital ’, Organisation for Economic Co-operation and Development 2001). Ernst and Young, one of the ‘Big Four’ accounting and consulting firms, which has a human capital practice, defines it as referring to the skills and know-how of an organisation’s professionals as well as their commitment and motivation and their ability to lead, cooperate or innovate. The success of an organisation is tied to proper management of its teams and care for their motivation and well-being. Excessive employee turnover or inadequate remuneration policies can damage reputations and impair an organisation’s ability to create value.

It is interesting to note that in its publication ‘Human Capital Estimates: 2015’, the Office for National Statistics (ONS) (2016) considers it necessary to measure human capital at a whole economy level, [so] we can also consider the contribution of human capital to economic output. Growth in an economy can be driven by increases or improvements in either: • land—the natural resources that we have at our disposal, for example, coal, wood • labour—our workforce • capital—the buildings and machines we use to produce goods and services. In this context, human capital refers to labour and captures both the number of people in the workforce and the abilities they bring with them.’

The ONS estimates that the value of employed human capital was £19.23 trillion in 2015, a significant contributor to the UK economy as a whole and, of course, to its cross-sector organisations. However, it needs to be pointed out that despite its usage in official reports, along with the academic and other work undertaken on the topic, there is no widely accepted definition of ‘human capital’. Accordingly, there is some latitude to applying my own definition. I have settled on one based on a 1966 definition provided by the instigators of the term—Gary Becker, the Nobel Prize winner referred to above, Jacob Mincer and Theodore Schultz. They suggested an explication, referring to ‘the stock of knowledge, habits, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value’. The refinement of this in the present book is derived from an assessment of a wide variety of

Diversity

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human capital elements, the ‘soft capital’ that drives the hard capital, and their underlying methodologies, impacts and metrics. There are a number of reasons I have chosen to take a cross-sector approach in writing this book. The first is that I am extremely fortunate to have significant experience of all three sectors: public, private and not-forprofit. In particular, I have been associated with the Windsor Leadership Trust as a patron and have seen first-hand the real benefits gained from sharing leadership experiences. Always at the heart of the programmes is the perennial question of how to engage people and optimise their performance. That is not to say that there are not structural and size differences as well as similarities between the different sectors’ human capital dimensions, as shown by the workforce analysis set out below.

Cross-Sector Workforce Analysis To give some sense of the scale of the differences in human capital resource between the sectors, I provide a tri-sector workforce analysis using data from the ONS ‘Labour Force Survey’, ONS Statistical Bulletin, 2016 and the UK Civil Society Almanac 2016, published by the National Council for Voluntary Organisations (NCVO). ONS data indicate that the public sector employed 7 million staff in 2014, an increase of 32,600 (0.5%) since 2004. The private sector employed 22.2 million people, an increase of 1.4 million (7%) in approximately 2.55 million active businesses, an increase of 102,000 active businesses from 2013. The UK Civil Society Almanac 2016 states that the headcount of the voluntary sector’s 2015 paid workforce in the 162,965 voluntary organisations was 827,000; of these, 62% were full time and 38% part time. These numbers are swelled by volunteers, and the almanac suggests that in 2014/15 the proportion of people volunteering once a month was 27%, and at least once a year 42%—thus demonstrating another informal link between the sectors.

Diversity According to the ONS, by March 2014, women comprised 40% of the private sector workforce. By comparison, women make up 68% of the notfor-profit sector workforce and 65% of public sector staff. Some 8% of voluntary sector employees are from black and minority ethnic groups, a lower proportion than both the public (10%) and private sectors (11%).

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Age Profiles Voluntary sector employees are on average slightly older than those in other sectors. Those aged fifty and over comprise 38%, compared with 34% in the public sector and 28% of private sector employees.

Contractual Bases By the end of March 2014, 89% of not-for-profits’ employees were on permanent contracts, a lower percentage than both the private (95%) and public sectors (92%). In terms of fixed contracts, 67% of not-for-profits’ temporary workers were on one, which was a higher number than in the public sector (60%) and considerably more than in the private sector (30%). With regard to temping through an agency, the private sector percentage was highest at 25% followed by the public sector at 12% and not-for-profits at 4%.

Part-Time Employment At the end of March 2014, about 40% of not-for-profit sector employees, some 323,490 individuals, were part time. The comparable percentages for the private and public sectors were 25% and 30% respectively. In terms of the reason for working part time, 73% of not-for-profits’ employees did not work full time because ‘they did not want to’. The comparable percentage for the private sector was 62%, and 80% in the public sector.

Size of Organisation One major difference is in the size of organisation for which cross-sector staff work: 48% of not-for-profit sector employees work at organisations of fewer than twenty-five employees. Employees in the private and public sectors are far more likely to work for large organisations, 13% and 34% respectively. The National Council for Voluntary Organisations points out that only 300 charities have a turnover exceeding £30 million per annum and only 20,000 have a turnover exceeding £100,000 per annum, so the sector is not homogenous.

Some Personal Insights

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Finances According to the NCVO, the total income of the voluntary sector in 2013/14 was £43.8 billion, with net assets of £105.1 billion—so these represent some significant businesses, making an added contribution to the economy of about £12.2 billion. Moreover, net assets, along with human capital, require similar leadership and management skills to optimise performance as they do in the private and public sectors, particularly since the government funds the not-for-profit sector to the tune of £15 billion a year. There is little doubt that the three sectors have similar issues to deal with in terms of managing human capital and that there are transferable approaches between them that can add value; for example, and as will be explained in Chapter 3, the way public limited companies deal with corporate governance. Furthermore, the interdependency between the sectors is shown by the government’s funding of the not-for-profit sector, to the tune of around £15 billion per annum. There are signs that a cross-sector approach—collaboration between public, private and not-for-profit sectors—is increasingly required to help resolve some of the key economic and social problems faced by countries around the world. As the Singapore Management University puts it, ‘we have tri-sector problems which require tri-sector solutions’. The university goes on to say that this will only happen if ‘our leaders are tri-sector athletes able to engage and collaborate with business, government and civil society’.

Some Personal Insights I thought an outline of a few of my own human capital philosophies and personal approaches to getting the best from people might provide readers with an understanding of where I am coming from in writing this book. My views on the people who make an organisation successful are unchanged since they were set out in Timeless Management, the book I cowrote with John Barratt for Palgrave Macmillan. They hinge on the fact that results are always achieved by people and that, whatever the sector, organisations should always be about people and relationships. It is these human dimensions that make the difference between sustained success and obscurity. People and relationships bring joy, learning and pleasure. They are also capable of bringing pain and frustration. At work and at home, it is easy to be drawn into valuing things more than people. (Coppin & John Barratt 2002)

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Furthermore, I consider that people at work are using up their most precious, finite asset and therefore the institution that employs them has a sort of moral duty to offer them more than just money. As James Autry wrote in Life and Work: A Manager’s Search for Meaning’, Avon Books (1995), ‘Work can provide the opportunity for spiritual and personal, as well as financial growth. If it doesn’t we’re wasting too much of our lives on it.’ You will be able to contrast and compare numerous corporate and individual methodologies for optimising human capital—getting the best from people—and below are three attitudes and devices (hopefully, all incredibly simple and easy to understand) which I like to think are in my toolbox and which I have tried to call upon throughout my career.

Positivity My keyring includes a dog tag I had to wear while I visited Afghanistan when I served on the Royal Air Force Board, and on this tag is my blood group, B positive. My own personality structure has, in my view, been blessed with a ‘be positive’ attitude to work and life, reflecting the description of my blood group. I should point out that my family is not always sure that constant positivity is a good thing but I am buoyed by the remark made by General Colin Powell (the former US secretary of state and four star general): ‘Perpetual optimism is a force multiplier.’ Some academic research suggests that there really can be a quantification of this and that a praise to criticism ratio of 5:1 is most effective in helping motivate people to keep doing well, but that a blend with constructive criticism is also important. But I think my attitude to life, as reflected on my tag, is in my DNA and not something I have learnt or worked on. It has stood me in good stead and has conditioned my approach to dealing with and managing people. Furthermore, I hope and believe it has helped to make me more of an energy zapper than an energy sapper.

Respect and Listening I should like to share two particular methods that I have found useful and effective. The first I have used since becoming a manager of people for Strutt & Parker on Lord Montagu’s Beaulieu estate when I was twenty-one. It is a method of putting ‘respect’ into practice and is simply about treating older people as you would treat your parents, people of the same age as your siblings and, as you age, younger people like your children.

References

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I consider listening to be the most underrated leadership tool and I have always wondered why we are taught to read, write and add up at school but not taught to listen—it is a teachable skill and one that we will return to in the final section of this book. I have twinned it here with ‘respect’, as listening to people is a mark of respect and, indeed, in my view should be on the job specification list of every board director and trustee of a company. There follow two examples of how I have used this tool. At both Historic Royal Palaces where I was CEO and at the Royal Air Force (RAF) where I was a non-executive board member, I asked people the same two questions: what is great about working here and what could we do a little better? In the first instance, the response helped me, on taking up the appointment, to understand the ambitions of the staff and some of the key issues to tackle; in the second, it gave me a feeling as to how RAF people felt, in order that I could report back to the board.

Gratitude I have always found that being lavish with thoughtful and deserved praise is a no-brainer. If genuinely meant and communicated, this is a no-effort and nocost device. Not only does praise make colleagues feel better but it has a doublewhammy effect in making the giver of praise feel better themselves—at least according to psychologist Deborah Serani, who writes: ‘studies show that consistent positive interactions, particularly ones that involve gratitude, increase happiness and decrease levels of depression’ (Serani 2012). I believe the impact is also much greater if thanks and praise are given face to face or by handwritten letter, rather than through email. This is a conclusion I arrived at by observing how positively people reacted to receiving one of the ‘black spider letters’ from HRH The Prince of Wales when I chaired one of his charities. I believe ordinary mortals can impart and evoke a similar reaction too.

References Autry, J. (1995). Life and Work: A Manager’s Search for Meaning. Avon Books. Becker, G. (1993). Human Capital: A Theoretical and Empirical Analysis (third edition). Chicago: University of Chicago Press. Coppin, A. & Barratt, J. (2002). Timeless Management. Basingstoke: Palgrave Macmillan. Office for National Statistics. (2016). Human Capital Estimates for 2015. www.ons. gov.uk Serani, D. (2012)._How Gratitude Combats Depression. Psychology Today, November. UK Civil Society Almanac 2016. National Council for Voluntary Organisations.

2 Human Capital and Employee Engagement—Global and National Viewpoints

In this chapter, UK productivity performance is reviewed in order to provide context for a book which, in essence, is about improving productivity. This analysis is also undertaken to demonstrate the criticality and relevance of human capital management to the national interest. In the words of Klaus Schwab, Executive Chairman of the World Economic Forum (2013), ‘the key to the future of any country and any institution lies in the talent, skills and capabilities of its people’. Other sources drawn upon will be reports from the World Economic Forum 1 (WEF), regarding the international consideration of human capital, the work of two consultancies (AON Hewitt and ORC International) and several professional institutes, with respect to global employee engagement.

The Productivity Gap How efficiently countries manage human capital is vital for the prosperity of their citizens, as gains in labour productivity (in a nutshell, how much money employees make for their business every hour they work) are required for living standards to increase sustainably. In its 2015 report ‘The Missing Pieces: Solving the UK’s Productivity Puzzle’, independent think tank the Institute for Public Policy Research quantifies the United Kingdom (UK) as having a productivity gap ‘of between 23 and 32 per cent between it and the otherwise comparable economies of Germany, France, the Netherlands and Belgium’. The fifty-two-page report © The Author(s) 2017 A. Coppin, The Human Capital Imperative, DOI 10.1007/978-3-319-49121-9_2

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2 Human Capital and Employee Engagement—Global . . .

sets out demand- and supply-side theories and a sectoral analysis on the reasons for this gap, but one of its conclusions is: ‘economists have a poor understanding of productivity and what causes it to accelerate and decelerate—the UK’s productivity puzzle is not the first to confound them’. A survey of UK manufacturers published in The Times in November 2016 identified the factors that manufacturers believe make the biggest difference to productivity. These include investing in equipment, research and technology (highlighted by 37%); creating demand for products and opening new sales channels (34%); and optimising supply chains and processes (17%). Only 8% considered skills training for the workforce and management to be a key factor. The ONS underlined the importance of management practice for productivity: ‘Our analysis shows that on a scale of 0 to 1, a 0.1 increase in management practice score is associated with a 6.7 per cent rise in productivity’ (6 January 2016). In his 2016 article for the Chartered Management Institute, Matt Scott is less equivocal. He acknowledges the issue (‘the UK’s poor productivity is a well-known and vexing conundrum’), and cites Organisation for Economic Co-operation and Development (OECD) research which estimates that other G7 members are on average 18% ahead of the UK (the Export Market 2016 puts the UK at sixteenth in the international productivity league). He writes that this is the widest shortfall in UK productivity since 1990 and interprets the OECD analysis as putting the blame for this situation ‘squarely on leadership and management skills’. A corporate take on this issue was provided by John Neill, Chairman of Unipart, a provider of manufacturing, logistics and consultancy services. In a November 2016 Raconteur article for The Times, he said that the answer to the UK’s productivity gap is summarised in a simple phrase, ‘creativity before capital’, or ‘grey matter before the greenback’. He explained: ‘You have to harness the talent and the creativity of your people to take waste out of the system by working in teams, using problem-solving tools and thereby improve productivity.’ A number of findings from a UK Commission on the Future of Management and Leadership report (July 2014) support Scott’s assertion. The report concludes that ‘poor management could be costing UK businesses over £19.3 bn a year in lost working hours’ and ‘low levels of engagement are damaging productivity’. It also found that although ‘the quality of managers plays a crucial role in productivity, performance and ultimately growth’, research suggests that ‘many of today’s managers are simply not up to the

The Productivity Gap

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job’. At the heart of this is poor human capital management, including the management of managers by CEOs and boards. Another dimension has been introduced to the productivity debate through substantive recent research by the University of Cambridge (Centre for Business Research) and the University of Manchester (Global Development Institute) that indicates a strong link between maintaining and developing employee rights and productivity and profit growth, as well as to greater equality in society. Cambridge University’s Judge Business School asserts: ‘Giving workers employment rights increases productivity and profitability’ (October 2016). This quantitative and qualitative research looks at changes in labour laws across 117 countries over forty-four years. Its clear implication is that restricting employee rights can actually damage productivity, which appears to contradict conventional business wisdom that the reverse is true. A different perspective on the productivity issue was set out in a report by the Smith Institute (2016). In research supported by seven trade unions, it asked employees for their views on the productivity conundrum. It is somewhat refreshing to ask the views of people actually involved in the issue—as the report points out, the opinions of those at the coal face are seldom heard on macro issues. And yet, understanding what the workforce thinks about productivity, how it affects them and their views on how to improve the situation, seems to be common sense. After all, productivity is measured in terms of output per employee. The report provides fascinating insights into human capital management, and increases our understanding of productivity in the workplace and its many influencing factors. The key findings are itemised here as they are consistent with many of the themes covered in this book: • Employee awareness of productivity is high but they perceive it often to be thought of as too remote an issue to discuss with the workforce. • A majority of employees believe that they are working harder than two years ago; 41% think that they are working both harder and more (or much more) productively, suggesting that their higher productivity may be closer linked to working harder than working smarter. A further 27% say that they are working harder without seeing productivity increases. Only 16% of employees think that there is a clear link between the productivity of their organisation and the pay and rewards that they receive. • Employee views on the role of technology in improving productivity are highly positive. An overwhelming majority of employees (87%) say that

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2 Human Capital and Employee Engagement—Global . . .

they are keen to embrace new technology and maximise its benefits in the workplace, while 73% believe that it has the potential to improve productivity. Many public sector employees comment that they simply need greater investment in technology to do their jobs better. Only 23% of employees agree that their employer gives them a say on how technology impacts their work. A minority of employees think that they are routinely listened to—only 14% think that their employer ‘always’ listens to suggestions from staff for workplace productivity improvements and one in four (26%) report that they never do so. Some of the management issues that employees see as relevant to productivity include: demotivating line manager behaviour in the retail sector, a sense that people management is not taken seriously, especially when line managers are overwhelmed, and the importance of having fair and effective performance management practices. In terms of training that would most benefit the organisation, more employees selected ‘management training’ than training options that would more directly benefit their own skill sets. Overall, higher pay was not rated at the top of the list of factors that would improve productivity, but a sense of unfairness over pay was seen as a powerful demotivator and source of potential disengagement. Employees voice desires for a sustainable, longer-term approach to productivity that values quality. Rather than focusing productivity improvement on cutting staff input costs or meeting short-term indicators, which is the experience of many employees to date, they want to see employers build higher long-term value through an approach that invests in both capital and labour. Employees want organisations to value and invest in their staff to deliver products or services of which they are proud.

Implications of the Analysis Poor leadership and poor management of people—human capital—are key reasons for the poor national productivity record. They are therefore crucial responsibilities of company boards, not just of the CEO or his/her senior leadership team, let alone just the HR department. Not listening to the workforce is a missed opportunity.

Global Trends in Employee Engagement

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Many of the deficiencies identified in this analysis will be addressed by adopting methodologies set out in this book.

Global Trends in Employee Engagement Having people who feel positive about their work and want to do a good job is, of course, a critical element of human capital management in any organisation, regardless of sector. Staff engagement is a subject that we will explore in greater detail, including clarifying its definition (there are over a hundred I have found) and sub-sets, throughout this book. Because of its importance, a global picture of employee engagement is provided in this scene-setting section. In its publication ‘A Global Investigation into Employee Engagement Trends 2016’, global business intelligence firm ORC International (2016) undertook a survey of 8,000 employees across twenty countries and measured the employee engagement level in a range of workplaces. The United States of America (USA) scored 72%, an increase of 4% since the 2015 survey, and Asia Pacific scored 68% (but with marked differences between countries—India scoring 81%, for example, and Japan 45%—whilst Australia maintained its score at 49%). The UK’s score was 58%, the same as in 2015; within this, a fifth of employees surveyed said they would not recommend their organisation as a place to work. We will return to this measure in a later part of the book. Aon Hewitt, a global provider of risk management, insurance, human resource solutions and outsourcing services, published ‘2015 Trends in Global Employee Engagement’ (2015) which indicates similar worldwide engagement levels as those found in ORC’s report. Aon Hewitt claims a research database of 8 million employee records that show differences in engagement between the UK, Germany and France (in the low to mid-50% band) and the USA (62%) and Asia Pacific (64%), but again this latter region shows marked country differences, such as in India (81%). A less rosy picture is painted by Effectory International (2016), the independent employee survey specialist which has created the Global Employee Engagement Index. The index maintains a database (I have used data from summer 2016), which provides national measures of not just engagement but also employee commitment. According to this research, globally, 29% of employees are engaged in their work and committed to their organisation. The percentage of engaged and committed employees

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varies by region. Africa, North America and South America all reach levels of around 40%, whereas Asia, Europe and Oceania all fall somewhat below the global average. Effectory International points to major differences within the regions. The biggest extremes at the lower end can be found across Asia. In Japan, just one in ten employees is engaged and committed. Across Singapore and Taiwan, engagement and commitment levels are less than 15%. Comparatively, 48% of employees in India and 41% of employees in Thailand are engaged and committed. Within Europe, there are also noticeable differences. Employees in Southeast Europe, especially in Bulgaria and Turkey, tend to be significantly more engaged and committed than the average. In comparison, engagement and commitment levels in France and Belgium fall some way below the average. According to this same survey, engagement and commitment levels in the USA are 35.4% and in Germany 32.8%, with the UK lagging behind at 29.8% and, as in the USA, scoring much higher for commitment than engagement. The Chartered Institute of Personnel and Development (CIPD) (2015), the professional body for HR and people development, publishes its own employee outlook survey, conducted by YouGov, surveying 2,523 employees in the private and public sectors across the UK. In its May 2014 survey, the proportion of engaged employees was measured at 35%, virtually unchanged from the previous survey. Job satisfaction levels (+42%) are up on spring 2013 (+40%). Employees in the not-for-profit sector continue to be the most satisfied with their jobs (+48%), with a decrease from previous surveys (autumn 2013: +54%; spring 2013: +52%). Job satisfaction in the private sector has shown an increase (+42% compared with +39% in autumn and spring 2013) but is still below winter 2012–13 levels (+45% and +48% respectively). While job satisfaction has decreased in the public sector (+37%), it is up on 2013 levels (spring 2013: +25%). On the other hand, Gallup, a provider of analytics and advice, published an article entitled ‘The Worldwide Employee Engagement Crisis’ (2016) by Annamarie Mann and Jim Harter. This asserted that ‘the world has an employee engagement crisis with serious and potentially lasting repercussions for the global economy’. The authors went on to suggest that employee engagement levels have remained virtually static for over ten years and that 32% of American employees are involved in, enthusiastic about and committed to their work, while this figure is only 13% worldwide. Gallup claims to have ‘pioneered the employee engagement movement’ and introduced a specific tool for measuring key workplace elements that link to performance improvement.

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In its publication ‘State of the Global Workforce’, Gallup (2013) claims that the bulk of employees worldwide (63%) are ‘not engaged’, meaning they lack motivation and are less likely to invest discretionary effort in organisational goals or outcomes. Furthermore, 24% are ‘actively disengaged’, indicating that they are unhappy and unproductive at work, and liable to spread negativity to co-workers. In rough numbers, this translates into 900 million not engaged and 340 million actively disengaged workers around the globe. For the UK, in 2012 the survey estimated that 17% of employees were engaged, 57% disengaged and 26% actively disengaged. There are significant differences in the results from these various surveys. Sally Winson of ORC International explains the divergence: I think it’s likely to be because each agency uses a different method and is also basing their findings on different populations. The ORC winning workplace report is based on a representative sample of UK employees, the Gallup data will be based on their client list (primarily large private sector businesses) and I am not sure about the IPD study. They also almost certainly use different methods to calculate ‘engagement’—ORC’s approach takes the positive scores across measures of employee engagement as an outcome (Are people proud? Do they recommend the company? Does working there inspire them?) whereas Gallup combines outcomes with inputs—so all questions in their Q12 model are combined together to form a score—which includes inputs and outputs.

Edward Houghton of CIPD believes that the difference in results derives from ‘the number of definitions. Essentially there are so many variations that common measures for the construct are hard to come by. This is exacerbated by the fact many vendors use their own proprietary data/system which exists behind walls, so very little is known about exactly how the measures are developed for these surveys.’

Ramifications of the surveys All the international surveys quoted above point to significant issues around engaging workforces. These are dealt with later in Chapter 8 on employee engagement. International readers might wish to use the data to compare their country’s performance with other featured states, while global businesses can make comparisons between their own overseas subsidiaries and the relevant national scores. However, the critical point arising from this analysis is the reliability and robustness of the employee engagement measure itself

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(we also touch on this later). Before boards will rely on survey scores as a major method to judge staff engagement and satisfaction, and, by extension, the ability of their senior leadership team to get the best from its human capital, they need to be certain of the robustness of the measure. There is a real danger that organisations are fooling themselves on this critical performance metric; the wide variation in the scores of the organisations whose leaders were interviewed for this book only serves to highlight the potential problem.

Governmental Interest and Potential Intervention A number of the themes discussed in this book featured in a speech Theresa May gave in Birmingham on 11 July 2016, as she launched her national campaign to become leader of the Conservative Party and UK prime minister. The speech was entitled ‘We Can Make Britain a Country that Works for Everyone’. May’s theme was the need to ensure the economy works for, and is perceived to work for, all sectors of society; she referred to exploitation by ‘unscrupulous bosses’ and the need to ‘get tough on irresponsible behaviour in big business’. Her sentiments probably, in part, reflect the widespread reaction to Sir Philip Green’s dealings at British Home Stores (BHS) and, in particular, the BHS Group’s pension deficit. She also identified the issue of the productivity gap in the UK and that its improvement is an important objective for the Treasury. To correct what Mrs May sees as the inadequacy of big business boards and, particularly, ‘the narrow social and political circles they are drawn from’, as well as the fact that they come under insufficient scrutiny, she said she would ensure that employees are represented on boards. There appears to have been some row-back on this idea, following opposition on grounds of practicality from business groups such as the Confederation of British Industry (CBI) and the Institute of Directors (IoD), and also in a written statement from the employee-owned John Lewis Partnership. The actions of these business groups were reportedly backed by the Treasury. Nevertheless, in a speech to the CBI (21 November 2016) the prime minister insisted she still favoured worker representation on company boards, dismissing suggestions that comments she had made during the speech marked a watering-down of the idea. But she did say that there were ‘other routes’ to providing worker representation, including setting up advisory councils or panels. May went on to explain that it would be a question of

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finding a model that works and she promised consultation with business on this issue. Business leaders interviewed for this book were asked for their views and, as the reader will see later, there was little support for the prime minister’s proposals. At the same conference, the leader of the opposition, Jeremy Corbyn, said he wanted to see worker representation on boards. A second proposal from Mrs May of relevance here is her aim to deal with excessive executive pay, which, in her words, has caused ‘a growing gap between what companies pay their workers and what they pay their bosses’. She reinforced this point in her speech at the Conservative Party conference in October 2016: ‘so, if you are a boss who earns a fortune but doesn’t look after your staff…I’m putting you on warning. This can’t go on anymore.’ Her specific plans to deal with this issue include making shareholder votes on corporate pay not just advisory but binding; full disclosure of bonus targets and publication of ‘pay multiple’ data (the ratio between the CEO’s pay and that of the average company worker); and better alignment of bosses’ incentives with company and shareholder interests. During the interviews for this book, cross-sector leaders’ views on these issues were canvassed and current practices documented. To provide momentum for the prime minister’s proposals, the Business, Innovation and Skills (BIS) Select Committee launched an inquiry in September 2016 on corporate governance, focusing on executive pay, directors’ duties and the composition of boardrooms, gender balance in executive positions and, notwithstanding the changing government position as outlined above, it will also cover worker representation. All of these areas are considered in later chapters of this book. In November 2016, a green paper was published entitled ‘Corporate Governance Reform’. In her introduction to it, the prime minister wrote: This Government will build an economy that works for everyone, not just the privileged few. I strongly believe in the power of businesses and markets to improve our collective prosperity, and the Government I lead will be unequivocally and unashamedly pro-business. Because for Britain to thrive in a global economy, we need to support strong businesses that focus on long-term value creation and command public confidence and respect. But for people to retain faith in capitalism and free markets, big business must earn and keep the trust and confidence of their customers, employees and the wider public. For many ordinary working people—work hard and have paid into the system all their lives—it’s not always clear that business is playing by the same rules as they are. And when individual businesses lose the

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confidence of the public, faith in the business community as a whole diminishes—to the detriment of all. It is clear that in recent years, the behaviour of a limited few has damaged the reputation of the many. It is clear that something has to change.

As a consultation document, the green paper seeks views on three areas to consider the options for updating the UK’s corporate governance framework: • First, on shareholder influence on executive pay, which has grown much faster over the last two decades than pay generally and also faster than typical corporate performance. • Second, on whether there are measures that could increase the connection between boards of directors and other groups with an interest in corporate performance such as employees and small suppliers. • Third, whether some of the features of corporate governance that have served us well in our listed companies should be extended to the largest privately held companies at a time in which different types of ownership are more common. Furthermore, Francis Elliot in The Times (November 2016) reported that there is government interest in increasing state support for employee ownership, a business model considered in the ‘Outliers’ section of this book in Chapter 18. Separately, the government’s business secretary is expected to tighten existing regulatory codes in order to clamp down on abusive working practices, such as those revealed at Sports Direct’s Shirebrook warehouse. Among other moves in this general area, both the Conservative and Labour parties have set out their policies on the minimum wage—currently at £7.20 per hour—in a sort of bidding war. The Conservatives have set a target living wage going forward, with the total wage reaching 60% of median earnings by 2020, equating to £9.00 per hour. In a speech at the 2016 Labour Party Conference, John McDonnell, the Labour Party’s shadow chancellor, favoured an independently set national living wage likely to be above £10 an hour by 2020. Government policy on matters affecting organisations is always subject to change, and boards and CEOs need to be alive to the impact that legislative pressure will have on their organisations. A current example is the Conservative government’s intent to crack down on white-collar crime. At an international symposium entitled Economic Crime—Where Does the Buck Stop? Who Is Responsible—Facilitators, Controllers and or Their Advisers? (University of Cambridge 2016), the attorney general

References

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said that ministers would consult on plans with a view to introducing new legislation. This appears to be in line with Theresa May’s stance on curbing ‘boardroom excess’. In the future, companies could face prosecution for failing to prevent their staff from committing fraud. If the change takes place, there will be consequences for the way organisations manage their human capital and develop measures to prevent wrongdoing. Interestingly, BAE Systems plc, one of the companies studied for this book, already has a strategic key performance indicator (KPI) regarding trust and integrity in its workforce, which is reported on in its annual report. This is considered in the ‘Human Analytics’ section in Part Three of this volume. How all these new approaches will actually play out in practice, of course, remains to be seen. Affordability might well prove to be an issue, as will corporate influence on government—particularly when the UK moves into Brexit transition and other concerns could enter the limelight. Yet, boards need to be aware of the intent that exists and the prominence being given to human capital issues, and then decide within their own human capital strategies how they will respond and adapt. Some early stances are set out in the chapters on leadership insight in Chapter 3. It is an interesting time to publish this book, since it could be argued that adopting the human capital imperative as a modus operandi is the best way not only of maximising workforce engagement, performance and productivity, but also of dealing in a comprehensive and logical manner with the questions being asked by government.

References ‘2015 Trends in Global Employee Engagement’, authorship unattributed published by Aon plc (2015). ‘Economic Crime—Where does the Buck Stop? Who is Responsible—Facilitators, Controllers and or Their Advisers?’ a symposium held at Cambridge University (September 2016). Effectory International. (2016). Global Employee Engagement Index. http://www. employee-engagement-index.com/. Gallup. (2013). State of the Global Workplace. www.gallup.com Institute of Personnel and Development. (2015). Employee Outlook Survey, 2014. www.cipd.co.uk Mann, A. & Harter, J. (2016, January). The Worldwide Employee Engagement Crisis. Published by Gallup in its Business Journal.

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ORC International. (2016). A Global Investigation into Employee Engagement Trends, 2016. Smith Institute. (2016). Working Harder not Smarter: The Employee Contribution to Meeting the UK’s Productivity Challenge. http://www.smith-institute.org.uk/ book/working-harder-not-smarter-employee-contribution-meeting-uks-produc tivity-challenge/. ‘The Human Capital Report’ with multiple contributors from World Economic Forum, Harvard University, Mercer published by the World Economic Forum (2013). We can Make Britain a Country that Works for Everyone’ speech by Theresa May, published on press.conservatives.com (July 2016).

3 Board Capital and Leadership Capital

Board Capital Board capital is a construct introduced in a study by Hillman and Dalziel (2003) of Arizona State University. They defined board capital as ‘as the sum of the human and social capital of the board of directors, and a proxy for the board’s ability to provide resources to the firm’. Obviously, in terms of providing resources to the organisation, board directors give advice and counsel on key areas, such as the formulation of strategy (which boards then approve), using their skills and expertise. Human capital awareness and management skills are not typically in a board director’s toolkit; since people are an important asset of the organisation and an essential driver of performance and productivity, this needs to be addressed. Board capital is a critical element of human capital management and, therefore, of organisational performance, yet this is not a concept found in the corporate vocabulary. In my own cross-sector experience, a company’s board, rather than the CEO and executive team, is the truly critical determinant of success. After all, it is the board that hires and fires the CEO and financial director and thereby sets the leadership style and culture of the organisation. Furthermore, boards approve the corporate strategy. Of course, operating methodologies of boards differ across the sector, although, in recent years, there has been a convergence of private and public sector ways of working, through the introduction of non-executive directors (NEDs) on government departmental boards (interestingly, sourced from both the private and not-for-profit sectors). Such appointments are becoming the norm across Whitehall, including to most arm’s-length bodies, as

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they are already on the boards of charities. Lord Browne of Matingley has led this initiative. In 2010, Lord Browne was appointed the government’s lead NED. He oversaw the assimilation into the Civil Service of the NED construct and the masterminded NEDs playing a more prominent role in governance. In a January 2015 speech at the Institute of Government, prior to relinquishing this role, Lord Browne said that ‘the new cadre of nonexecutives were appointed not to turn government into a business, but to make government more business-like in its methods’. One of the five highlevel themes Lord Browne had initially identified was the importance of developing talented people. In his speech he stated: there is more work needed to improve the management of talent.… Many CEOs say that people are their most important asset, which means that they should be spending their most important time assessing and developing those people.… Senior leaders must spend more and better quality time on encouraging, nurturing and rewarding talent in their departments. It is critical that the Civil Service gets this right and at the very top, and it must be an important part of the criteria to evaluate the effectiveness of senior civil servants.

These comments support the rationale behind this book and, as Lord Browne alluded, are equally valid for the private sector. There is now widespread use of board effectiveness processes across the sectors. The Financial Reporting Council (FRC) guidelines on board effectiveness are widely used and adapted by tri-sector organisations. The FRC is currently considering how these guidelines need to be amended in order to take account of business culture, a theme central to the human capital imperative. Key topics in this review, outlined by Sir Winfried Bischoff, chair of the FRC, include ‘the relationship between performance drivers and values, and how companies’ behaviour measures up against the culture, values and ethics they purport to espouse’. They will also examine how a company’s culture stands up under pressure; ask if different parts of a business can have different cultural approaches, as well as looking at how the induction of new hires ensures that the culture is embedded in the entire workforce’. Specific work streams currently being undertaken include: • Delivering sustainable success: this includes the role of the board and alignment between the company’s purpose, values, strategy and culture. • People: including the role of recruitment, training and reward, and the alignment with values of policies and processes. • Stakeholders: includes a company’s relationship with suppliers, customers and shareholders, and its impact on communities and the environment.

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• Embedding and assurance: includes measurement and indicators of culture, monitoring culture and providing assurance to the board and management on culture. Kevin Green, CEO of the Recruitment and Employment Alliance, believes that there needs to be a different approach and mindset at board level to HR and people issues. He claims that adopting a different approach would mean the topic needs to be higher up the board agenda (if it is on there in the first place). Green asserts that management of the people asset needs to move from being a defensive function concerned with compliance, to a positive one of securing and developing greater talent to give organisations competitive advantage. Spencer Stuart, a global executive search firm, suggests two issues (board composition and time spent in the role) that boards might review in order to improve their human capital management: The 2015 Spencer Stuart UK Board Index (2016) reveals the following data on board composition: Only fifty-eight FTSE 150 directors have a black, Asian and minority ethnic (BAME) background (3.9%). Only nineteen out of 1,012 directors with UK nationality (1.9%) have a BAME background; women comprise nearly 30% of all non-executive board members. There are now seven women chairing FTSE 150 companies; all but one have a background in financial services. A key question here for boards is whether their current composition allows sufficient diversity of thinking. Spencer Stuart also suggests directors must spend more time in the role and have fewer commitments. The average number of scheduled board meetings is 7.7 per year. Directors should have the necessary skills, experience and understanding of the business to engage effectively and critically with management on strategy but also concerning human capital; if people truly are the organisation’s most important asset they must spend time on its deliberation. I also believe that NEDs and trustees should be more visible in the workplace and ‘get out and about’ by visiting operations and meeting and listening to employees. Clearly, this needs to be done in a controlled manner, coordinated with the executives, but if conducted in the right way, for example as listening exercises, it could provide valuable feedback to the CEO. My own document review of FTSE 100 companies annual reports, undertaken at the start of the research for this book, indicated that these boards are heavily weighted to financial expertise (257), compared with directors who have people management or HR backgrounds and expertise

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(only thirteen, with just three of these HR directors sitting on the main board). In the debate on board composition, the focus hitherto has been on diversity, principally in terms of gender; little attention, if any, seems to be given to discipline composition. With such weighting towards the finance component, it is little wonder that there is a tendency for boards to ‘go to the numbers’ as a default position, rather than pay proper regard to human capital management. It is difficult to see how boards comprised of directors with the same professional training and area of expertise can offer diversity of thought. Perhaps awareness of discipline diversity should rank alongside gender and ethnic diversity when board recruitment is undertaken.

Leadership Capital As with the construct of board capital, the application of leadership capital has a marked effect on corporate performance. Investors and boards have long been aware of the importance of leadership but it is something that has been very difficult to evaluate. A paper by Freed and Ulrich, entitled ‘Calculating the Market Value of Leadership’ (2015), proposed the creation of a Leadership Capital Index to provide some structure for investors to assess leadership when acquiring or investing in businesses. This also has wider, trisector applicability for boards and stakeholders, as it provides a useful template for nominations committees and chairs to use when recruiting and appraising executive directors. Freed and Ulrich’s leadership ratings index has two parts—individual and organisational. As to the former, it includes the personal qualities, competencies, traits and characteristics of the CEO and his/her team. The organisational elements refer to systems used and their application. The two domains developed by Freed and Ulrich, both with human capital elements, each have five parts, as follows. Individual: 1. Personal proficiency: To what extent do leaders demonstrate the personal qualities to be an effective leader (e.g. intellectual, emotional, social, physical, and ethical behaviours)? 2. Strategist: To what extent do leaders articulate a point of view about the future and accordingly adjust the firm’s strategic positioning? 3. Executor: To what extent do leaders make things happen and deliver as promised?

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4. People manager: To what extent do leaders build competence, commitment, and contribution of their people today and tomorrow? 5. Leadership differentiator: To what extent do leaders behave consistent with customer expectations? Organisational: 1. Culture capability: To what extent do leaders create a customer-focused culture throughout the organisation? 2. Talent management: To what extent do leaders manage the flow of talent into, through, and out of the organisation? 3. Performance accountability: to what extent do leaders create performance management practices that reinforce the right behaviours? 4. Information: To what extent do leaders manage information flow throughout the organisation (e.g. from top to bottom, bottom to top, and side to side)? 5. Work practices: To what extent do leaders establish organisation and governance that deal with the increasing pace of change in today’s business setting?

Leadership Styles The ‘individual’ elements identified by Freed and Ulrich touch on the issue of leadership style. Put simply, leadership style is the way in which a leader accomplishes his/her purposes. It can have profound effects on an organisation and its workforce, and can even impact on whether the organisation performs effectively. Therefore, boards should have some understanding of the topic. There is a dizzying array of leadership styles in the management and academic literature, including the leadership continuum, situational leadership, action-centred leadership, autocratic leadership and, more popularly, transactional leadership, as well as transformational leadership. Daniel Goleman, pioneer of the concept of ‘emotional intelligence’, identified a further six styles in his book Primal Leadership: Unleashing the Power of Emotional Intelligence (2013): visionary; coaching, affiliative, democratic, pacesetting and commanding. He argued that leaders can move between these styles and adopt the one that meets the needs of the organisation at a particular time. This might well be true but could

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also be incredibly confusing for the workforce. What, of course, is key is that the leader be ‘authentic’, that is, genuine, honest and trustworthy in their leadership style. Authentic leaders must ‘live their values’, showing that they practise what they preach, in order for their followers to see them as such. In the book From Transactional to Transformational Leadership: Learning to Share the Vision (2003), Bernard Bass differentiated between two of the most commonly applied leadership models: transactional leadership and transformational leadership. He explained that transactional leaders concentrate on the employment transactions themselves, by providing tasks and resources to perform them, along with giving some ‘consideration’ to staff. In this case, ‘consideration’ relates to satisfying the self-interest of employees who work well. On the other hand, transformational leaders go beyond mere transaction by developing wider and deeper links within the organisation. The implications for managing an engaged workforce are clear. People working for transactional leaders will, most likely, only be motivated to do their basic job, honour their contract of employment and just do what they are instructed to—essentially, work in return for pay. Conversely, employees of transformational leaders will be enabled and encouraged to develop deeper emotional relationships with the organisation, yielding greater and more discretionary activity and eliciting superior performance. Thus, transformational leadership appears to be most relevant for this book on optimising human capital. Bass argues that leaders can be trained to learn the appropriate techniques and to obtain the qualities they need to become transformational leaders who inspire, energise and intellectually stimulate their employees. The Civil Service has introduced a requirement from the summer of 2017 that all civil servants applying to become permanent secretaries must have attended a leadership training programme. The qualities of a transformational leader were identified by Bennis and Nanus (2004): having a clear vision for the future; being ‘social architects’ for their organisations, that is, communicating a direction and form that others could follow; developing trust, created by consistency and clarity, and by making their positions clear and standing by them; positive self-regard— having an awareness of one’s strengths and weaknesses—and concentrating on what one is good at, rather than dwelling on the weak points. Boards will need to bear in mind these qualities and perhaps use them as a checklist when scoping specifications for executive positions as well as during executive appraisal.

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Servant Leadership and Inclusive Leadership One aim of this book is to introduce, for boards’ consideration, concepts from outside the mainstream. There are a number of other leadership styles gaining some currency and which purport to get more from the workforce. In his book Leadership Styles (2002), Tony Kippenberger argues that a combination of three forces has created a need for different leadership styles. These are the shift from manual to knowledge-based work, the changing aspirations of employees and a less deferential and more egalitarian society. One of these different styles is ‘servant leadership’. It is not a new concept, as it was first coined by Robert Greenleaf in his book The Servant as Leader (1970). To the transformational leadership concept, he adds the element of social responsibility. More than any other leadership style, servant leadership stresses the importance of the needs of the workforce. One of the principal notions within servant leadership is the humility of the leader. This is something that chimes very much with best-selling business author Jim Collins, as set out in Good to Great: Why Some Companies Make the Leap…and Others Don’t (2001). Collins’ extensive research for his book brought him to the conclusion that ‘all good to great executives were cut from the same cloth…they all had Level 5 characteristics’. Collins explains that ‘Level 5’ leaders ‘build greatness through a paradoxical blend of personal humility and professional will’ and that they demonstrate ‘compelling modesty’ as a common personal traits. He says that when he embarked on research he was not intending to focus on particular leadership qualities but he simply could not avoid the criticality of humility in the make-up of highly effective leaders. How many boards even have this quality on their interview checklists when recruiting CEOs; indeed, would they in fact see such a trait as a negative? Another more recent construct, inclusive leadership, was suggested by Gloria Moss (2016). In her research, inclusive leadership is portrayed as an amalgam of two other leadership styles—transformational and servant leadership. Inclusive leaders are aware of their own biases and preferences, and they actively seek out and consider different views and perspectives to inform better decision-making. They see diverse talent as a source of competitive advantage and inspire diverse people to drive organisational and individual performance towards a shared vision.

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Moss’ study identified fifteen core competencies attributed to the inclusive leader. This is a long list but, again, one that introduces some fresh thinking and terminology into a subject of prime organisational import. A condensed version is set out below: • Individualised consideration—showing individual interest and offering one-to-one support for people. • Idealised influence—providing an appealing vision that inspires others. • Inspirational motivation—encouraging others to develop ideas and be challenging. • Intellectual stimulation—encouraging creative thinking. • Unqualified acceptance—showing acceptance of everyone without bias. • Empathy—being able to appreciate the perspective of others and endeavouring to understand how others feel. • Listening—truly listening to the opinions of others. • Persuasion—having an influence on people’s actions without force or coercion. • Confidence building—providing positive feedback to boost people’s selfefficacy. • Growth—providing opportunities for all employees to realise potential, make autonomous and unique contributions and progress within the organisation. • Foresight—being able to consider the views of others about possible outcomes. • Conceptualisation—being able to focus on how employees contribute to long-term objectives. • Awareness—having self-awareness of how preconceived views can influence behaviour towards others. • Stewardship—showing a commitment to leading by serving others for the good of everyone rather than for self-gain. • Healing—showing a respect for the wellbeing of all employees. Importantly, the study by Moss indicated various positive outcomes from implementing the inclusive leadership approach. These included improved performance and productivity, enhanced loyalty, the advance of under-represented groups, enhanced creativity, better services to clients, customers and service users, better teamwork, greater motivation to go the extra mile, higher retention and a more diverse talent pool.

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Middle Management There is an extra dimension to this consideration of leadership capital that should also be on the radar of directors and trustees. This is the perception of the leadership team by middle managers. Clearly, middle managers play a vital role in building trust throughout an organisation. However, a research report commissioned by the CMI, ‘The Middle Manager Lifeline: Trust and Communication in the Heart of Your Organisation’ (2016), suggests that although the constant task of communicating in order to create a trusting environment and workplace culture often falls to middle managers, there are many senior leadership teams who fail to recognise this, with significant consequences. This research indicated that trust in leadership by middle managers is poor. Its findings included: • Trust is believed to be critical to organisational performance by 85% of middle managers and 88% of senior leaders. • Only 36% of UK middle managers say they trust their business leader to a great extent. • Just 53% of middle managers believe they can trust what their organisation tells them. • Only 57% of middle managers say their immediate boss trusts the leadership team. • Of middle managers, 41% describe the management style in their organisation as bureaucratic and 35% describe it as authoritarian. • Only 37% of middle managers agree that their leadership team is transparent in its decisions and actions. What comes across is that middle managers know they are vital to building trust but they do not feel that their role is valued or supported. Leadership style and poor communication are key factors affecting trust. Thus, middle managers doubt the integrity of senior leaders. The CMI research concluded that middle managers require a set of behaviours from their leaders to address the shortcomings identified above. Trust is a key component, and the five behaviours middle managers most desire in leaders to generate this are that they 1. reveal their thinking about important issues (63%); 2. admit their mistakes (54%); 3. encourage people to raise issues (51%);

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4. inspire them regarding the business ambition and strategy ( 48%); 5. act consistently with the company’s values (46%).

Public Sector Leadership Approaches Boards also need to be alert to changes in effective leadership characteristics that might be required in the future. Research undertaken by Catherine Needham, Catherine Mangan and Helen Dickinson regarding public sector leader attributes should be considered. Their report, ‘The 21st Century Public Service Workforce’ (2014), identifies a number of potential changes necessary. Some of these could also apply across the sectors: ‘The traditional individual leader approach is not one that will be effective in the context of complex, adaptive problems facing society. The skill sets of leaders in the future need to be different, and the type of leadership approach also needs to change in favour of distributed and collaborative models of leading.’ The concept of systems leadership to replace the traditional notion of the leader as the sole source of power and authority with a version of leadership which reflects the complexity of modern society and the decline of deference. The argument is that ‘in these troubled, uncertain times, we don’t need more command and control, we need better means to engage everyone’s intelligence in solving challenges and crises as they arise’. “This new leadership model is about creating conditions in which others can thrive’. The leaders themselves recognise this shift, with a recent survey of council chief executives finding that public services can only be more responsive to the needs of service users if employees on the front line are trusted to innovate and empowered to act with more autonomy. This requires a fundamental culture change away from traditional command and control models of leadership to one in which leadership is distributed across organisations.

‘The concept of leadership is changing from being one where leaders are expected to perform to one that enables others to be effective.’ This is an approach which, ‘requires being with people and allowing them to be themselves, listening, noticing, observing and deploying yourself accurately in situations…it’s about making teams and networks effective.

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The report asserted that, although an organisation needs someone to act as the face of the institution, it ‘doesn’t require a charismatic leader’, and differentiated between the old fashioned notion of the domineering leader, whose power comes from their willingness to coerce others, and the requirement on a modern leader to be a member of a team, making their presence felt by their ability to achieve a collective sense of purpose’. However, the report also accepted that the traditional models of leadership and the associated ‘macho’ type behaviours still exist and tend to be rewarded within the public sector.

Conclusion on Leadership Styles Notwithstanding the discussion on leadership styles in this chapter, there is no ‘best’ style, since its application depends on the leader’s and the organisation’s conception of what leadership is, the specific organisational imperatives and the leader’s own choice of leadership methods. Yet, it needs to be remembered that, at its core, leadership is by example and if leaders do not act in exemplary ways this, in itself, can have negative organisational consequences. A number of examples of where this could happen are given in the chapters that follow. Although boards need to be aware that there is no ‘one size fits all’ panacea, leadership style can have a profound effect on organisational outcomes and it is a subject worthy of serious study, particularly by any nomination committee looking to replace senior executives. The impact of that style on staff further down the organisation should be of ongoing interest and concern to the whole board; at the very minimum, it should know or find out if the worrying CMI research on middle management attitudes outlined above apply to its organisation.

References Bass, B. (2003). From Transactional to Transformational Leadership: Learning to Share the Vision. ScienceDirect. Bennis & Nanus. (2004). Leaders—Strategies for Taking Charge. Collins Business Essentials. ‘Boards of Directors and Firm Performance: Integrating Agency and Resource Dependence Perspectives.’ 2003 study by Hillman and Dalziel of Arizona State University (2003).

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Chartered Management Institute. (2016, September). The Middle Manager Lifeline: Trust and Communication in the Heart of Your Organisation. www.managers.org.uk Collins, J. (2001). Good to Great. New York: Harper Collins. Freed & Ulrich. (2015, April). Calculating the Market Value of Leadership. Harvard Business Review. www.hbr.org/2015/04 Goleman, D. (2013). Primal Leadership: Unleashing the Power of Emotional Intelligence. Harvard, USA: Harvard Business Review Press. Greenleaf, R. (1970). The Servant as Leader. Atlanta, USA: Greenleaf Centre for Servant Leadership. Kippenberger, T. (2002). Leadership Styles. Minnesota, US: Capstone Publishing. Moss, G. et al. (2016, March). Inclusive Leadership Driving Performance Through Diversity. Bucks New University and Employers Network for Equality and Inclusion. www.enei.org.uk Needham, C. & Mangan, C. (2014). 21st Century Public Servant. Birmingham, UK: Birmingham University funded by the Economic and Social Research Council. Spencer Stuart. (2016). 2015 Spencer Stuart UK Board Index. Spencer Stuart. www. spencerstuart.com.

Part II The Eleven Critical Elements of the Human Capital Imperative

In this section, the main components of the human capital effectiveness puzzle are identified – these being the critical elements on which boards and CEOs should focus in order to optimise contributions from their most important asset. None of these things will be new but, taken together, they provide an overview of relevant topics, which can serve as a checklist for directors and trustees, who may use it to ensure their organisations manage appropriately, preferably as part of a human capital strategy. Inevitably, in a book of this length it is not possible to undertake a comprehensive review of the elements—each topic would easily fill a book in itself. So, the approach has been to introduce each one, explain its importance in terms of the available evidence, suggest particular methodologies for management and, in the process, to pull out the points which, as a board director, trustee and former CEO myself, I believe would be pertinent or might stimulate interest.

4 Strategy and Culture

Definitions Strategy is simply a plan of action designed to achieve a long-term or overall aim. In essence, it should be rational and logical, and clear, simple and easy to understand. Strategy is an organisational guide and it is concerned with future goals, objectives and activities. However, we live in turbulent social and economic times where the future is no longer reasonably predictable based on history, is liable to change rapidly and be fundamentally different from even the immediate past. Accordingly, boards need to be alive to these facts and continuously to review their strategy processes to ensure plans are agile, in order to create adaptive strategies. Culture is essentially human and is rather more difficult to define, as it means different things to different people. In his book Organizational Culture and Leadership (1992), Edgar H. Schein defined culture as ‘a pattern of shared basic assumptions that the group learned…that has worked well enough to be considered valid and therefore, to be taught to new members as the correct way to perceive, think, and feel’. Culture is a topic sometimes misunderstood or subordinated at board level in many organisations, because board composition is typically weighted more to the financial and rational side of the strategy equation. And yet, culture, as already outlined in the Chapter 3, is a key organisational driver, concerned with values, behaviours and practices. ‘The Investment Association Productivity Plan’ (2016) points to the importance of culture;

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in creating long-term value for a company and its shareholders and that it is increasingly being recognised. There is strong evidence that where employees feel that their company has integrity, companies see an increase in productivity and profitability of the company. Conversely, there are numerous examples where the wrong culture has led to companies putting the short-term interests first and jeopardising the long-term prospects of the company.

Human Capital Strategy There is a strong case for including a human capital strategy within the overall corporate strategy. Currently, there seems to be a deficit in planning with regard to organisations’ most important asset, as such strategies simply do not feature in mainstream planning processes. Of course, the same is not true of the typical corporate approach to managing financial or manufacturing assets. I support Bradley W. Hall’s assertion (2008) that a human capital strategy should be developed to determine how an organisation will use its human assets to beat competitors and optimise profits. Hall splits such strategy, which should set out how organisations will produce sustained competitive advantage through their people, into several components: human capital theory, a cause-and-effect description of how people create business value; human capital vision, a blueprint of success; what sustained competitive advantage looks like upon completion; and strategic components, the most important results for delivering the human capital vision. Within a human capital strategy, the implications and potential advantages of outsourcing and offshoring need to be assessed as growing mechanisms for devolving the people asset.

Outsourcing and Offshoring An organisation can decide to abrogate direct responsibility for at least some of its people through outsourcing/offshoring—the contracting out of a business function to an external supplier. This can involve transferring employees and assets from one organisation to another. It can also entail handing over control of the operational management of a public service to for-profit companies. One of the most widely promulgated benefits from such practice is the financial saving due to lower staff costs, particularly from lower international wage costs when offshoring. Another benefit is gaining access to specialist expertise, such as information technology (IT) and digital.

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However, there are a number of caveats to the proliferation of outsourcing, which is already a huge sector (in the UK 3.3 million people work in outsourcing, which is equal to 10% of total workforce, according to a 2015 Business Services Association/Oxford Economics study). At the macro level, 2015 research by the Statistic Brain Research Institute cited the views of leading economists, with 89% apparently considering that outsourcing of jobs hurts the economy. Meanwhile, according to research by Populous (2012), about 22% of those surveyed list ‘outsourcer’ as a profession they dislike and 89% do not think outsourcing helps UK Plc. Members of the public, in other words end customers, also have perceptions of outsourcing relating to job losses and cost cutting. When organisations outsource an entire department, obviously, management and control of that function passes to another company—one driven by different values and a different mission—and so there could be a knock-on effect to morale and engagement for the core workforce. In such cases, potential reputation risks need to be assessed. For example, Sports Direct suffered significant reputational damage from outsourcing its workforce at its Shirebrook warehouse. Conceptually, outsourcing and offshoring are business options beyond the remit of this book, since it is concerned with optimising the human capital directly under the control of an organisation. Despite the popularity of these options, the potential internal and reputational downsides need to be carefully weighed up, as farming out personnel seems to counter a central theme of this book—the imperative of valuing people.

Mission and Vision Statements Most organisations have board-approved mission and vision statements. Desmidt & Heene (2006), found that up to 85% of Western, profit-oriented companies have their missions written in the form of a statement. A study by consultants Bain & Company supported this research and showed that 90% of the 500 firms they surveyed issue some form of mission and vision statements. Typically, these statements set out the company’s strategy and at least allude to cultural components, such as corporate values. It is worth businesses regularly reviewing these statements and outlining opportunities for improvement, as they synthesise organisational strategic thinking. Their composition forces an organisation to consider its essence and its key underlying characteristics.

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To clarify, a mission statement defines a company’s business, objectives and approach to achieving those objectives. A vision statement describes the desired future position or end state of the organisation. Elements of mission and vision statements are often combined to provide an overall statement of the company’s purposes, goals and values. It is generally agreed that clear internal communication of these statements is necessary to help inspire staff, provide focus, guide decision-making and to lay the foundations for performance standards. Various other Bain & Company research indicates that managers perceive mission statements as one of the most important managerial tools. A 2015 study by Iseri-Say et al. (2015) revealed that 84% of managers cite mission statements among the most important management tools they have adopted. At the ‘Management, Knowledge and Learning International Conference’ in 2012, Valerij Dermol presented a paper entitled ‘Relationship Between Mission Statement and Company Performance’. This included reference to research by Kenneth and Baetz which found that ‘mission statements and some of their specific characteristics are selectively associated with higher levels of organisational performance’. However, a number of commentators have alternative views on the effectiveness of mission statements, some even asserting that they are a complete waste of time. Most of the criticism relates to the process for developing them. The critics assert that creation of mission statements generally does not involve staff and that they are typically written by a committee, which results in banal statements; furthermore, they can be very similar in content, failing to identify the uniqueness of the organisation, and the vocabulary is often abstract and difficult to really understand. As a consequence, poorly drafted statements come across as just opinions and promises with little emotional content; they are not read by and neither inspire nor motivate the workforce.

Enhancing Mission Statements Given their generally accepted importance within the human capital landscape, it is worth considering some simple ways to improve these statements. The effort of conveying an organisational mission succinctly in four or five sentences is a worthwhile exercise but it must be done in a way that is compelling to employees as well as external stakeholders.

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Set out below are three ideas for improving these statements: • involving the workforce; • understanding the importance of including ‘why’; • writing better.

Involvement of the Workforce If organisations want to increase employee engagement then staff need to be part of the process of strategy creation, particularly apropos the mission statement and values elements. This is easier said than done in a large organisation but taking time to involve and meet employees in large and small meetings, to get their input and feedback, is the ideal scenario. Clearly, the by-product is likely to be a more collaborative culture and sense of ownership by employees. There are examples of this in the ‘Leaders’ Insights’ section of this book, for example, at Crown Estates, where the staff produced a pictorial representation of the organisation’s strategy.

The Importance of ‘Why’ Intrinsic to an effective strategy and mission statement is an articulation of purpose or cause. In his best-selling book Start with Why: How Great Leaders Inspire Everyone to Take Action (2011), Simon Sinek hit the nail on the head by stressing the importance of companies clarifying why they do what they do: ‘When I say why, I don’t mean to make money—that’s a result. By why I mean what is your purpose or cause or belief? Why does your company exist? Why do you get out of bed every morning and why should anyone else?’ Sinek emphasises that less successful organisations know what they do and know how they do it but do not necessarily know why. He argues that this ‘why?’ is much more important than ‘what’ or ‘how’. Bartlett and Ghoshal (2014) write that Purpose is the embodiment of an organisation’s recognition that its relationships with its diverse stakeholders are interdependent. In short, purpose is the statement of a company’s moral response to its broadly defined responsibilities, not an amoral plan for exploiting commercial opportunity…Purpose—not

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strategy—is the reason an organisation exists. Its definition and articulation must be top management’s first responsibility.

Reviewing an organisation’s purpose and how this is articulated in its mission statement should be an action point to take from this book. Comparing how the leaders interviewed for this book deal with this issue in their own organisational strategies would be a useful benchmarking exercise.

Write Better Statements There are a few ways to ensure mission and vision statements are more compelling for all staff and other stakeholders, simply by improving the way they are written. First, ensure they are easy to understand. There are a number of readability tests that can be accessed online. These include the SMOG (simplified measure of gobbledygook) test, which provides a measure of readability of a text. Readability is an attempt to match the reading level of written material to the ‘reading with understanding’ level of the reader. Its measures are based on research into different readability tests commissioned by the National Institute of Adult Continuing Education and carried out by Colin Harrison at Nottingham University. A more established version developed in the United States, the Flesch-Kincaid test, is used by the US Department of Defense in writing military manuals, and a number of American states set a Flesch-Kincaid score for legal documents. It is an easy process to use this methodology to measure the readability of mission statements and, indeed, create a version to assess the understandability of corporate messaging generally, including websites and internal communications. Second, consider the use of vocabulary as a potential differentiator and a method of inspiration. Erica Mills (2016) points to research by Russell Poldrack, a professor of psychology at Stanford, who believes that organisations can get more interest from people by using words that others are not. Mills herself analysed the words on over 2,500 US not-for-profits’ websites and found they are using only 5% of the one million words in the English language. She has designed a free tool, the ‘Wordifier’ (www.claxonmarket ing.com/wordifier/), particularly to help not-for-profits expand their vocabularies and, in doing so, differentiate themselves in the people and consumer marketplaces.

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Third, in writing values, use verbs more than nouns. Simon Sinek argues this point most succinctly: we remind ourselves of our values by writing them on the wall…as nouns.… But nouns are not actionable. They are things.…It’s nearly impossible to hold people accountable or build systems or develop incentives around things.… It’s not “integrity,” it’s “always do the right thing”.…Articulating our values as verbs gives us a clear idea…of how to act in any situation.

References Bartlett & Ghoshal. (2014). Beyond Strategy to Purpose. Harvard Business Review. www.hbr.org Desmidt & Heene. (2006). The Relationship Between Mission Statements and Financial Performance: A Meta-analysis. Belgium: Ghent University. Hall, B.W. (2008). The New Human Capital Strategy. New York: AMACOM. Iseri-Say et al. (2015). Strategic Management Tools and Techniques and Organisational Performance. Journal of Competitiveness 7(3), 19–36. Mills, E. (2016). Great Mission. Bad Statement. California: Stanford University. Schein. (1992). Organisational Culture and Leadership. New Jersey: John Wiley and Son. Sinek, S. (2011). Start with Why: How Great Leaders Inspire Everyone to Take Action. Westminster: Portfolio Penguin. Populous. (2012). Public Perception of Outsourcing. Missouri: Populous. The Investment Association. (2016, March). The Investment Association Productivity Plan.

5 Organisation Structure and Design

Definition and Importance In their 2007 book Organisational Behaviour: An Introductory Text (2013), David Buchanan and Andrzej Huczynski define organisation structure as ‘a formal system of task and reporting relationships that controls, co-ordinates and motivates employees so that they work together to achieve Organisational goals’. In his seminal book The Practice of Management (2007), Peter Drucker recognised the link between organisation structure and productivity: ‘Organisation structure is an indispensable means; and the wrong structure will seriously impair business performance and may even destroy it.’ In Management and Organisational Behaviour (2016), Laurie Mullins asserts that organisation structure ‘affects not only productivity and economic efficiency but also the morale and job satisfaction of the workforce’. Research done in 2016 by Deloitte, the multinational professional services firm, suggests that there is a resurgence of interest in how businesses are designed and the importance they attach to the process; as a result, traditional structures are being changed. Deloitte (2016) states: Our findings in this area are startling: 92% of companies believe that redesigning the organisation is very important or important, making it No. 1 in ranked importance among this year’s respondents. Companies are decentralising authority, moving toward product- and customer-centric organisations, and forming dynamic networks of highly empowered teams that communicate and coordinate activities in unique and powerful ways. © The Author(s) 2017 A. Coppin, The Human Capital Imperative, DOI 10.1007/978-3-319-49121-9_5

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Accordingly, organisation structure is an important factor to consider when planning human capital strategy.

Design Directly aligning an organisation and its people to its strategy is the key to an organisation design that leverages workforce performance. Organisation structures are a function of the organisation’s size, sector and, importantly, history. There are three main types of organisation structure: functional or hierarchical structure, set up so that each portion of the organisation is grouped according to its purpose; divisional structure, typically used in larger companies that operate over a wide geographic area or that have separate smaller organisations within the umbrella group in order to cover different types of products or market areas; and matrix structure, a hybrid of divisional and functional structures, and most relevant for large multinational organisations. There are proponents of each type of design. In The Future of Work: Attract New Talent, Build Better Leaders, and Create a Competitive Organization (2014), Jacob Morgan asserted that the traditional hierarchical structure, still adopted by many organisations globally, has many faults, including top-down communication, which stifles innovation, negatively impacts engagement and severely reduces collaboration. He explains that such a structure is bureaucratic in nature and is very sluggish. Moreover, it puts organisations still using it at a severe competitive disadvantage. Rather, Morgan promotes ‘flatter organisations’ that aim to open up the lines of communication and collaboration by the removal of internal layers within the organisation. These are the most practical measures to employ for larger and medium-sized organisations, without completely re-engineering themselves. Thus, he argues, flatter structures negate many of the problems inherent in the more traditional set-up.

New Mode of Organisation Structure The new research by Deloitte mentioned earlier this chapter echoes the arguments made by Jacob Morgan. Deloitte goes on to say that there is a trend away from functional organisation structures and that its survey shows that only 38% of companies

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(24% of companies with more than 50,000 staff) are organised by function today. Moreover, in excess of 80% of global survey respondents said that they are either actively restructuring or have recently restructured. Certainly, organisation structure design should be a board agenda item. It might be worth starting the debate by comparing how an organisation is currently structured with the new mode proposed by Deloitte. This new mode is based on a ‘network of teams’ with a high degree of empowerment, strong communication and rapid information flow. Deloitte suggests that this new mode is a cross-sector phenomenon and that it ‘is now sweeping businesses and governments around the world’. It lists a number of fundamental principles that should be followed in designing such a structure: • “Move people into customer-, product- or market and mission-focused teams, led by team leaders who are experts in their domain (not ‘professional managers’). • Empower teams to set their own goals and make their own decisions within the context of an overarching strategy or business plan, reversing the traditional structure of goal and performance-related management. • Replace silos with an information and operations centre to share integrated information and identify connections between team activities and desired results. • Organise these teams around mission, product, market or integrated customer needs, rather than business function. • Enable people to move from team to team as needed—similar to the way experts come together on Hollywood movie sets or in global consulting firms—and then ensure that people have a home to return to once a teambased project is done. This changes the concept of a ‘job description’ to that of a ‘mission specialist’ or ‘technical specialist’. • Shift senior leaders into roles focused on planning, strategy, vision, culture and cross-team communication. • Replace silos with an information and operations centre to share integrated information and identify connections between team activities and desired results. • Organise these teams around mission, product, market or integrated customer needs rather than business function. • Teach and encourage people to work across teams, using techniques such as ‘liaison officers’, ‘hackathons’, open office spaces that promote collaboration and job rotation to give teams a common understanding of each other.”

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Organisation Size In their paper ‘Size and Organizational Effectiveness: Maintaining a Balance’ (2013), Edwinah Amah, Mildred Daminabo-Weje and Roberta Dosunmu point to the importance of considering organisational size to ensure human capital optimisation and assert: ‘The size of organisation can affect its effectiveness. The need for organisations to right size cannot be over emphasised. Organisational effectiveness increases with increase in responsiveness and flexibility associated with small size. Big organisations can achieve this through the opening of several branches and the decentralisation of activities in order to be more responsive to its customers. Managers can achieve the goals of their organisations through ensuring that they draw from the gains of large size and small size. Organisations can increase in size and determine to retain the characteristics of small organisations that ensures responsiveness. Organisations should have a ‘big company/small company hybrid’ that combines a large corporation’s resources and reach with a small company’s simplicity and flexibility.’

Another factor to consider is the optimum size of an organisation for humans to operate within. Common sense suggests that smaller corporate units will enable people to know each other better and thus help with interpersonal communication. Research by Robin Dunbar, a sociologist at Oxford University, supports this thinking. His theory, summarised in the Dunbar Number, or Effect, posits that the optimum number of people any individual can know and communicate with well is about 150. This limit is a function of brain capacity, the size of the human neocortex, and it is this that naturally limits group size. Other research has come up with different numbers, the maximum being around 290. W. L. Gore & Associates, manufacturers of Gore-Tex, actually run their business on this principle. When a division expands beyond 150 employees they split it up into two smaller ones. This may seem extreme; however, the company believes that it makes communication better and helps to manage an efficient business.

References Amah, E., Daminabo-Weje, M. & Dosunmu, R. (2013). Size and organisational effectiveness: Maintaining a balance. Advances in Management & Applied Economics, 3(5).

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Buchanan, D. & Huczynski, A. (2013). Organisational behaviour: An introductory text. Cambridge, UK: Pearson Publishing. Deloitte UK. (2016). Global human capital trends report, 2016. Drucker, P. (2007). The practice of management. London: Routledge. Morgan, J. (2014). The future of work: Attract new talent, build better leaders, and create a competitive organization. New Jersey: Wiley. Mullins, L. (2016). Management and organisational behaviour. New Jersey: Prentice Hall.

6 Recruitment

Recruitment Implicit in the statement ‘our people are our biggest asset’ is that the people are the right people and, therefore, recruiting the right people in the first place is an essential corporate activity. It is also a continual process: in the UK the average staff turnover rate is approximately 15% per annum according to XpertHR and one third of UK organisations experience staff turnover rates above 21% per annum. High rates of turnover represent a significant cost. For example, research by the Hay Group revealed that it is costing each company with 100–249 employees over £138,000 per annum. Improving recruitment is just one mechanism to reduce staff turnover, others are included in succeeding chapters of this book, but five ways to consider ensuring effective recruitment are ensuring that the CEO is the chief recruiter; employing person specification models; recognising the impact of poor job descriptions; exploiting psychometric testing; and, of special intereste to Nomination Committee members recruiting executive directors, considering CEO turnover impact.

CEO, Chief Recruiter Because of the criticality of ensuring the right people are on board, Joell Tramell, author of the book The CEO Tightrope, believes that CEOs ‘must own the recruiting process’ (2013) and ‘lead by building a well-managed recruiting © The Author(s) 2017 A. Coppin, The Human Capital Imperative, DOI 10.1007/978-3-319-49121-9_6

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function that is closely monitored and measured’. However, Richard Fairbank, the CEO of Capital One, the credit card and bank holding company, in an article for Forbes Magazine, is quoted as saying: ‘At most companies, people spend 2% of their time recruiting and 75% managing their recruiting mistakes.’ In my experience the majority of CEOs spend very little time themselves on recruiting. It is typically seen as a subordinates HR function instead of a core component of the company’s strategic plan. Many now see this is a mistake and argue that CEOs must lead by building and being involved in best-of-class recruiting functions that are closely monitored and measured. Among CEOs with whom this approach is gaining significant traction are the following: • From the Leaders Insights sections of this book the Group CEO of Lloyds Bank explains the time he devotes to recruitment and the CEO of Harrow Borough Council attends every staff induction programme. • David Gilboa, co-founder of Warby Parker, a US spectacle manufacturer and distributor, revealed at an event organised by the Wall Street Journal, Secrets of Tech Recruiting, that he devotes a quarter of his time to recruiting for his 44 operations and asserted that a CEO should also be the organisation’s chief recruiting officer. • According to Nicholas Carlson in Business Insider magazine, Marissa Mayer, the CEO of Yahoo (2012), the multinational technology company, said that she reviews all potential new employees. Yahoo employed 10,400 staff in 2015, so no mean task. • In his book The Start-up of You: Adapt to the Future, Invest in Yourself, and Transform Your Career (2013), Reid Hoffman, the co founder of LinkedIn, revealed that Mark Zuckerberg, the CEO of Facebook, spends up to 50% of his time recruiting talent. • Reportedly, Arianna Huffington interviewed all new hires each and every hire when editor of The Huffington Post (which employs about 200 people).

Person Specification Models A person specification is a profile of the personal skills and characteristics to look for in the recruitment and selection process. Because of the criticality of recruitment, boards at least need to be aware of person specification models

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used by their organisations and might compare them with two frequently used ones: the Rodger seven-point plan and the Munro five-fold grading system. Rodger’s seven-point plan: • • • • •

Physical make-up: health, appearance, bearing, speech and manner. Attainments: education, qualifications, experience. General intelligence: ability to define and solve problems. Special aptitudes: skills, attributes or competencies relevant to the job. Interests: work-related or leisure pursuits that may have a bearing on the job. • Disposition: influence over others, steadiness, dependability, self-reliance. • Circumstances: any special demands of the job, such as ability to work unsocial hours, travel abroad, etc. Munro’s five-fold grading system: • Impact on others people: similar to Rodger’s ‘physical make-up’ specification. • Qualifications and experience: similar to Rodger’s ‘attainments’ specification. • Innate abilities and aptitude: quickness of comprehension and aptitude for learning. • Motivation: individual goals, consistency and determination to succeed in the workplace. • Adjustment: emotional stability, ability to stand up to stress and ability to get on with people.

Improving Job Descriptions Boards also need to be aware of any element of recruiting which might contribute to staff turnover, and poor job descriptions is a prime example. Research by Hay Group from 2015 shows that 51% of HR managers believe poor job descriptions can mislead employee expectations, resulting in them being a poor fit and ultimately driving them to leave. Furthermore, 68% say poor job descriptions contribute to weak candidate pools, and 59% believe they result in wasted time with irrelevant candidates who have the wrong skills. Alarmingly, these are the views of HR managers, who are largely responsible for preparing the job descriptions in the first place. Adam

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Burden of Hay Group pointed to other negative impacts from something so easy to remedy: ‘The lack of clarity is demotivating for individuals, and affects engagement and loyalty to the organisation. This has a knock on effect for teams, which are much more likely to perform when each member has an accurate picture of their role.’

Psychometric Testing There are basically three questions the employer really has to have answered during the selection process: Do the candidates have the appropriate skills and experience? Do they possess the necessary enthusiasm and motivation? Will they fit in, in terms of their personality, attitude and general working style? Personality has a big role to play in providing answers to the second and third of these questions and this is why personality tests can be of value. In my own experience it is the personality of co-workers and managers that affect the day-to-day success of the organisation, regardless of sector. If a team cannot work well together or if a manager can’t motivate their people, then inevitably productivity and quality of service will suffer. This is why personality or psychometric testing can help with recruiting. As described by the Psychology Department of the University of Westmister, psychometric tests are assessment techniques designed to measure a range of human characteristics, including intellectual ability/aptitude, personality, motivation, interests and values. Psychometric tests are structured, written or computer-based exercises. They should have been carefully designed to measure whether people have the specific abilities or personal qualities in relation to a particular job specification. The score (or profile) is compared with the scores of previous, successful applicants and/or successful employees to predict the potential for performing effectively in the job. Alternatively, psychometric tests may be used at the final stage of selection, as part of an assessment centre. In this case, the tests may not carry any more weight than the other elements of the selection procedure but can be a useful final check. I have used them and found them to be of great use, particularly when validating gut judgements and, as explained later, also for board development. I concur with the Chartered Institute of Professional Development which recommends that tests be combined with other forms of assessment and that they should be used as a guide rather than an absolute cut off. Two of the tests that are widely used are Myers–Briggs and the Big Five.

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Myers–Briggs Myers–Briggs in their book ‘Gifts Differing’ believe that each individual is born with different gifts and a unique way of behaving, using their minds and feelings in every day living. The Myers–Briggs Type Indicator (MBTI) argues that people have specific preferences, which in turn influence their behaviour. The way people use their minds, make judgements and perceive a situation will shape their personality. The MBTI is based on Jungian theory. It is a self-assessment questionnaire requiring the respondent to answer true or false to a serious of questions in relation to their preference.

The Big Five Paul Costa and Robert McCrae (at the National Institutes of Health), Warren Norman (at the University of Michigan) and Lewis Goldberg (at the University of Oregon) developed the personality theory of The Big Five. The research teams concluded that most human personality traits can be boiled down to five broad dimensions of personality, regardless of language or culture: agreeableness, conscientiousness, extraversion, emotional stability and openness. It is the most recent personality theory that appears to have been most accepted by personality psychologists. An August 2005 editorial in People Management quoted research which indicated that 81% of the seventy-three FTSE organisations surveyed said they currently use some form of psychometric testing to recruit and develop employees, and 76% said they used both ability and personality tests. Over one-fifth (22%) said their use of psychometrics had increased substantially compared with five years ago. So there might be some preaching to the converted here—the reason that I feature the matter in this book is that I have not seen it applied in most of the organisations I have been involved with directly and indirectly, and I rate it as a process.

CEO Turnover Research on the world’s largest 2,500 public companies by Price Waterhouse Coopers (PWC 2015) provides salutary information for getting top corporate recruitment decisions right and also the sense of looking inside first. PWC found that simply having a CEO turnover reduces median total shareholder return to −3.5% in the year after the turnover takes place.

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When a CEO turnover is not part of a planned succession, the cost is especially high (median total shareholder return drops to −13%). The percentage of CEO successions that are planned climbed to 82% in the 2012–2014 period from 63% in the 2000–2002 period, according to the research. Further, 78% of companies undergoing planned successions in 2014 promoted someone from within the company to fill the CEO post. Interestingly, outsider CEOs have been forced out of office 44% more often than insider CEOs. This research has two clear implications for CEO recruitment: plan the succession properly and look inside the organisation first for potential candidates.

References Carlson, N. (2012, September). Marissa Mayer Reviews Every New Hire At Yahoo. Business Insider Magazine. Hoffman, R. (2013). The Start-up of You: Adapt to the Future, Invest in Yourself, and Transform Your Career. London, UK: Random House. Trammell, J. (April, 2013). CEOs Must Own Recruiting: 10 Rules For Building A Top-Notch Function Forbes Magazine. www.forbes.com ‘FTSE-100 firms turn to psychometrics’ editorial in ‘People Management’, The Journal of the CIPD. (August 2005). www.cipd.co.uk Korn Ferry Hay Group. (2015). Poor Job Descriptions Driving Staff Turnover in UK. Philadelphia USA. London office. Price Waterhouse Coopers. (2015). Fifteenth Annual Study of CEOs, Governance, and Success by Strategy. www.pwc.com

7 Learning and Development

The capability to learn faster than the competition is now widely considered a (yet another) mission critical capability. But organisations do not always recognise the link between investing in people and possible gains in productivity and other business outcomes. This might well arise because of a lack of understanding of the potential return from investing in people, including problems with evaluating the return.

Organisational Benefits In ‘Measuring the Contribution of Skills to Business Performance’ (2005), Penny Tamkin said that a number of studies have highlighted to organisational performance benefits associated with increasing training activity. For example, Dearden, Reed and Van Reenen (Who Gains When Workers Train, Institute for Fiscal Studies, March 2000) analysed the impact of training on performance and found connections between more training and higher labour productivity across a number of sectors. A study in France (d’Arcimoles 1997 A Qualitative Approach Using Longitudinal Data. Article in ‘Organisational Studies’ 18(5):857) found that the more training given, the better the economic performance. Raising the proportion of workers trained in an industry by 5% (say, from the average of 10% to 15%) was associated with a 4% increase in value added per worker. They note that this level of increase has also been found by other researchers. Other research suggests; a link between offering good © The Author(s) 2017 A. Coppin, The Human Capital Imperative, DOI 10.1007/978-3-319-49121-9_7

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quality of training and attracting good quality recruits; and, a reduced chance of firm closure resulting from increased investment in training. In its report entitled ‘Management 2020, Leadership to Unlock Future Growth’ (2014), the Commission on the Future of Management and Leadership identified the link between poor training provision in organisations in decline: almost 60% of organisations in decline do not train their staff or do so poorly, compared to in around a quarter of growing organisations; and, only about 13% of managers in declining organisations say training of staff immediately after a promotion is good or very good, compared to almost 30% of growing organisations. Those that are struggling also use mentoring and coaching programmes far less. The use of mentoring and coaching also appears very limited, rated good or very good by only 24% of organisations, despite persuasive testimony about its effectiveness in helping managers improve their practical skills and make an impact at work. The CIPD’s (2015) Learning and Development survey shows current practices and trends within learning and development (L&D), and the survey results point to some areas for organisations to review and compare with their own provision and to determine whether the right approach is being taken to this mission critical capability.

Alignment with Strategy According to the CIPD survey, a quarter of organisations report that L&D strategies are aligned with the corporate strategy; a further two-fifths report that they are ‘broadly aligned, with some discrepancies’. Just 6% report no alignment. Lack of clarity is a common barrier to alignment—respondents are evenly split regarding whether or not they have experienced barriers in achieving business alignment. The most common barriers are L&D practitioners’ lack of clarity regarding the business strategy and lack of resources, but also lack of interest or understanding of the purpose and capability of L&D from business leaders. Common sense dictates that it should be a corporate priority to ensure this alignment.

Trends in Learning and Development In-house methods remain most common—on-the-job training, in-house development programmes and coaching by line managers or peers remain

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the most popular development methods, in line with findings from previous years. Many also expect their use of these methods to grow. Learning technologies are more common in larger organisations—they are more likely than smaller organisations to include e-learning courses and blended learning among their most common L&D practices and to anticipate growth in the use of various learning technologies. Encouragingly, coaching and mentoring are common—three-quarters of organisations currently offer coaching or mentoring and an additional 13% plan to offer it in the next year. Most expect to increase their use of coaching.

Learning Technologies Three-quarters of organisations use learning technologies—but the extent to which they use them varies widely and face-to-face delivery remains dominant. Most anticipate an increase in the use of learning technologies, but the use of face-to-face delivery will remain widespread. Many lack confidence in their ability to use learning technologies—just a quarter of respondents feel ‘extremely’ or ‘very’ confident in their ability to harness technology to increase the effectiveness of their L&D interventions.

Leadership Development Most organisations plan to conduct leadership development activities in the next twelve months—the key areas they will be focusing on include equipping line managers to improve staff performance, changing/enhancing the organisational culture, and improving the skills of existing leaders to think in a more strategic and future-focused way. This is an encouraging indicator.

Talent Management There is little change in the prevalence of talent management activities— nearly three-fifths undertake talent management activities, with larger organisations most likely to do so. Views on which talent management activities are most effective have changed little over the last few years—high-potential in-house development schemes, coaching, mentoring and buddying schemes

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are among the most commonly used and most effective talent management activities.

The Development of L&D Most organisations encourage and enable the development of L&D capability to some extent, but more than one in five feel this happens only to ‘a little extent’ or ‘to no extent’.

Assessing the Impact of Learning and Development Activity • One in seven do not evaluate the majority of their L&D initiatives. • Over a third limit their evaluations to the satisfaction of those that take part. One in five assess the transfer of learning into the workplace and a small minority evaluate the wider impact on the business or society. • Learner and manager reflection and feedback are most commonly used to assess the effectiveness of L&D interventions—other metrics are more likely to be used where L&D is more aligned with business strategy. • Only three in ten quantify the impact of L&D on productivity—they use a range of metrics including sales, profit, performance/productivity figures, efficiency savings and quality measures as well as behavioural and cultural indicators. • Evaluations are mostly used to update the L&D intervention and review the delivery method. ‘Other business priorities’ is the most common barrier to evaluating L&D. Many also report barriers within L&D/HR, in particular the quality of L&D data collected, L&D/HR capability to conduct the evaluation and other L&D/HR priorities. It seems a real indictment on the value organisations attribute to investing in people that such patchy evaluation is undertaken and that statements are frequently made such as ‘other business priorities is the most common barrier to evaluation’—a thin excuse.

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Economic Situation and Training Spend There is a significant difference here in the response between private and public sector organisations and at heart a lack of understanding in the potential productivity gain from investing in people: • Changes to L&D resources are related to organisations’ general economic circumstances. More than half of the public sector report their L&D budget has decreased over the last year, while the picture is more mixed in the private sector. • A quarter report that their budget has decreased and a quarter that it has increased. • L&D headcount increasing in the private sector—private sector organisations are twice as likely to report that L&D headcount has increased rather than decreased. They are also more likely to report that the use of external associates has increased rather than decreased. In contrast, those in the public sector are twice as likely to have reduced their headcount and use of associates than increased them. • There are mixed views regarding the future of L&D funding—over a quarter of the private sector anticipate an increase in the overall funding of L&D over the next twelve months, while 15% expect a decrease. The public sector is far less positive, with half anticipating a decrease.

Board Development It is important to invest in board capital by ensuring all board members undertake continuing professional education of some type, and, given the stance taken in this book, sessions on human capital should be heavily featured in such programmes. In my view, personal development should be a requirement set out in individual director’s contracts. It would show by example the importance an organisation places on learning and development, against the patchy and slightly concerning backdrop painted by the CIPD survey. There are numerous courses available, including those by the major accounting firms, often offered at no cost which, thankfully, do not focus solely on financial management skills.

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Furthermore, people who work together should train together and that should apply to boards too. There should be work on the board as well as in the board. Some of this provision could be ensuring directors and trustees are up to speed with changes in legislation, such as the Bribery Act, when it was introduced, or be deep dives, for example into Health and Safety. In my view, board training on listening skills and reading body language should be core, along with teaching on technology. But time should be set aside for more creative joint learning. At one of the companies where I was an NED, I found a day-long session on psychometric testing to be particularly useful. Each director received an individual Myers– Briggs assessment on personality type and these were shared openly with other directors in a plenary session. It helped us understand each other better as people which in turn helped with board dynamics and debate.

References Chartered Institute for Personnel and Development. (2015). CIPD’s 2015 Learning and Development Survey. www.cipd.co.uk/strategy/surveys Commission on the Future of Management and Leadership. (2014). Management 2020, Leadership to Unlock Future Growth. www.managers.org/policy-papers Tamkin, P. (2005). Measuring the Contribution of Skills to Business Performance. Institute for Employment Studies. www.employment-studies.co.uk-files

8 Employee Engagement

Understanding Motivation There is a symbiotic relationship between motivation and staff engagement, and so critical to understanding and improving engagement is first to fully understand what motivation is and what actually motivates people. The Oxford English Dictionary defines motivation as ‘A reason or reasons for acting or behaving in a particular way’ and ‘Desire or willingness to do something’. However, there is a popular misconception that people can be motivated (a common attribution of football managers’ qualities), but motivation is not something one person does to another. The only person who can motivate you is you, as in the end it is a question of individual will. What boards and leaders can do is to provide a work environment which helps people stay positively charged, and this includes all of the elements of engagement featured in this chapter. Professor Abraham Maslow’s (1943) theory of hierarchy sets out the key basic human needs. Although first published in the 1943 and later updated in 1970, Maslow’s theory of hierarchy has been selected to provide a readily understandable introduction to the topic. Contemporary research, such as that by Tay and Diener (2010) of the University of Illinois, tested and supported Maslow’s basic theory. However, psychologists now consider motivation is a pluralistic behaviour which can operate on a number of levels simultaneously, which is why I have not shown Maslow’s pyramid chart as it implies the lower levels need to be satisfied before moving up the pyramid. S. A. Mcleod (2007) (simplypsychology) provided the best explanation of the eight-stage Maslow model that I uncovered during my research:

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1. Biological and physiological needs—air, food, drink, shelter, warmth, sex, sleep and so on.illness 2. Safety needs—protection from elements, security, order, law, stability and so on.illness 3. Love and belongingness needs—friendship, intimacy, trust and acceptance, receiving and giving affection and love; affiliating, being part of a group (family, friends, work).illness 4. Esteem needs—self-esteem, achievement, mastery, independence, status, dominance, prestige, managerial responsibility and so on.illness 5. Cognitive needs—knowledge and understanding, curiosity, exploration, need for meaning and predictability.illness 6. Aesthetic needs—appreciation and search for beauty, balance, form and so on.illness 7. Self-actualisation needs—realising personal potential, self-fulfilment, seeking personal growth and peak experiences.illness 8. Transcendence needs—helping others to achieve self-actualisation.illness The model has clear implications for understanding what motivates people at work. The key higher element of self-actualisation is based on people seeking fulfilment and change through personal growth. Self-actualised people are those who are fulfilled and doing all they are capable of.

Employee Engagement Defined There are lots of definitions of employee engagement which is confusing for those wishing to measure and manage it, and benchmark comparisons with other organisations. This problem was also highlighted in the introduction to this book in relation to measuring the construct internationally. The definition by Gemma Robertson-Smith and Carl Markwick (2009) of the Institute for Employment Studies in their report ‘Employee Engagement A review of current thinking’ appears to be the most comprehensive. They wrote: Engagement is consistently shown as something given by the employee which can benefit the organisation through commitment and dedication, advocacy, discretionary effort, using talents to the fullest and being supportive of the organisation’s goals and values. Engaged employees feel a sense of attachment towards their organisation, investing themselves not only in their role, but in the organisation as a whole.

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So, employee engagement is a far wider construct than simple job satisfaction as engaged staff are deeply, even emotionally, committed to and enthusiastic for the success of the organisation. It is the real driver and predictor of corporate performance and most of the tactical elements in this section contribute to employee engagement—it is important to understand that it is not a single activity based on an annual survey but requires an engagement culture. In addition to defining engagement it is important to consider disengagement. As explained in the introductory chapter, Gallup measures actively disengaged employees and defines them as follows: ‘they aren’t just unhappy at work; they’re busy acting out their unhappiness. Every day, these workers undermine what their engaged coworkers accomplish.’ In the same way, 2006 research by HR services company Penna (2007) found that some organisations contain particularly disengaged individuals who would actually discourage others from joining their current organisation. These individuals are referred to by Penna as ‘corporate terrorists’. They have also been described as the organisation’s silent killers. Employee disengagement is the board’s and CEO’s fault and the costs of it can manifest in numerous ways, including more sick days and lateness for work; disengaged employees, whp are less productive and will impact on the engagement levels across the piece in a number of ways, such as by constant complaining and moaning; talent loss and the cost of replacement; spreading disengagement to other employees; missed deadlines and poor sales results; increased customer complaints with disengaged staff passing on their negativity; and, the inevitable consequence, a drag on corporate productivity and performance.

The Difference Between Motivation, Satisfaction and Engagement As alluded to above, put in simple terms, employee motivation is staff getting something in return for their efforts. So they might be motivated by getting a bonus or some other benefit. But this is a personal transaction and to do with personal gain of some sort, and that might not always be in the best interest of the organisation. Employee satisfaction is really concerned with whether employees are happy at work, content with their job and conditions of employment. But they are not likely to ‘go the extra mile’ for the organisation. As explained above, engaged employees have a completely different attitude—in terms of

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connection with the organisation and preparedness to go above and beyond the base requirements of the job in order to contribute to organisational success. Under these definitions, both motivated and satisfied staff can perform well in their jobs and they can perform their work at the level expected of them by the organisation. Engaged employees have a different level of commitment, and this is a high bar. At a practical level, in his book Carrots and Sticks Don’’t Work (2010), Paul Marciano identified from his own research ten ways to recognise an engaged employee. He or she will: • • • • • • • • • •

bring new ideas to work; be noticeably enthusiastic about work; take their own initiative; actively seek to improve self, others, organisation; consistently outperform; be curious and interested; encourage and support other team members; be optimistic and positive (smiles); overcome obstacles and stay focused on task; be committed to the organisation.

Why Employee Engagement is Important There is significant research linking positive employee attitudes and levels of engagement with enhanced business performance. Some of the research evidence follows. The Aon Hewitt 2014 employee engagement survey found that when ranked by engagement score, organisations in the top quartile outperformed average returns to shareholders across those surveyed by 4%, whilst those in the bottom quartile underperformed by 8%.

Gallup undertook a significant study in 2016 by accumulating 263 research studies across 192 organisations in 49 industries and 34 countries. In total they were able to study 49,928 business/work units, including 1,390,941 employees. Gallup researched nine different performance outcomes including customer loyalty/engagement, profitability, productivity, turnover, safety

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incidents and absenteeism. It concluded: ‘The relationship between engagement and performance at the business/work unit level is substantial and highly generalisable across organisations.’ Research on the ‘100 Best Companies to Work for in America’ by Alex Edman (2011), a professor of finance at the London Business School, analysed the relationship between employee satisfaction and long-run stock returns. He concluded that a value-weighted portfolio of these companies earned an annual four-factor alpha of 3.5% from 1984 to 2009, and 2.1% above industry benchmarks. The best companies also exhibited significantly more positive earnings surprises and announcement returns. These findings have two main implications. First, consistent with human capital-centred theories of the firm, employee satisfaction is positively correlated with shareholder returns. Second, the stock market does not fully value intangibles, even when independently verified by a highly public survey on large firms. The ‘WorkUSA’ survey, carried out by global consulting firm Watson Wyatt, showed a 26% total return to shareholders (TRS) for high engagement companies, an 18% TRS for companies with committed staff, and a 12% TRS for the average company in the survey. Thus, building an engaged workforce for these participating companies translated to a more than 100% improvement in TRS. Several similar sources concur. A 2004 study by the Corporate Leadership Council of 50,000 employees found that engagement is the key to performance and retention. Highly committed employees try 57% harder, perform 20% better and are 87% less like to leave than employees with low levels of commitment. Employee engagement is clearly an organisational requirement and should be a corporate priority, and it benefits from being based on basic common sense. However, the method of assessing engagement needs to be carefully selected, and properly managed and measured, something considered further in the human capital analytics section below. There is some evidence that the public sector and big business are both increasingly interested in the topic. I was told by the DCMS permanent secretary that engagement scores now form part of a permanent secretary’s annual appraisal. Also, according to a Hay Group report, about 85% of European-headed multinationals survey their employees. Of these, about 50% specifically address the matter of ‘engagement,’ albeit to varying degrees. However, Hay Group (2012) points out that surprisingly few then go on to action the data they collect in a way that is linked to specific business outcomes. In most cases organisations try to improve individual scores but they neither prioritise areas that need to be addressed nor

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do they focus their efforts in an efficient manner so that the greatest gains are made from ever decreasing resources.

Clearly this matter needs addressing by directors and trustees. Seeking views of the workforce, measuring the responses and not doing anything about them is almost certainly a contributor to disengagement. In a 2008 study for Kingston Business School, Katie Truss (2008) pointed to there being more disengaged employees than there are engaged employees in organisations. She also assertd that a result of little industry or cross sector standardisation of employee engagement along with it being seen as a tactical requirement based on doing the minimum required to go through the motions, has worked against understanding and driving the core elements of engagement that enable people performance.

Truss’ points are well made, and, because of the lure of the engagement ideal but the twofold deficiency of a common definition and a proper understanding of the construct, many organisations might have delusions of high engagement achievement—as mentioned above, proper staff engagement is on a high bar setting. in the absence of such standardisation, it is incumbent on the board and CEO to ensure they have the right approach to dealing with this key aspect of human capital management. There is significant literature on employee engagement and its drivers, although it should be pointed out that all manager activity impacts staff effort. As far as the senior team is concerned, this can be as simple as having an ‘open door’ approach. Work by the Corporate Leadership Council (‘Employee Engagement Survey 2004’) found that ‘senior executives who are open to input and commit to their employees receive heightened effort in return’. According to a Penna research report, meaning at work has the potential to be a valuable way of bringing employers and employees closer together. Allowing employees to experience a sense of community, the space to be themselves and the opportunity to make a contribution maximize their ability to find meaning. The Penna researchers have also developed a new model they call ‘hierarchy of engagement’, which resembles Maslow’s hierarchy model. At the bottom line there are basic needs of pay and benefits. Once an employee satisfied these needs, then they look to development opportunities, the possibility for promotion, and then leadership style will be introduced into the mix in the model. Finally, when all the above cited

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lower-level aspirations have been satisfied, the employee looks to an alignment of value-meaning, which is displayed by a true sense of connection, a common purpose and a shared sense of meaning at work. However, the review of the literature revealed over 100 separate drivers of employee engagement which I found incredibly confusing, soI have boiled this down to just four common factors: • Trust and integrity: the extent to which employees feel that management are concerned about their well-being, are honest, and demonstrate the published company goals and values through their own leadership style and behaviours. • The nature of the job: the degree to which the employee gets emotional and mental stimulation from their job, including the level of autonomy and the ability to participate in decision-making. • The link between company and individual goals: how well the individual understands organisational goals, and his/her contribution to them. • Career opportunities: ehether an employee feels there are opportunities for job growth and promotion within the company. • Once understood, organisations will need to determine how policies to activate these levers are designed, implemented and measured/monitored.

The Unipart Way Example Unipart is a manufacturing, logistics and consultancy business with a turnover of £496.4 million (2015) and it employs 5,308 staff. It has developed a particular philosophy, ‘the Unipart Way’, which is an example of how a company can drive employee engagement by unlocking the capability of people at all levels of the organisation. Unipart say that ‘some of the best examples of employee engagement come from our many problem-solving teams that deliver innovative solutions to business problems’. Their approach to creative problem solving has been developed over a twenty-year period featuring a bespoke company programme which they call ‘Our Contribution Counts Circles’. This is a six-stage approach to enabling people to work in teams to solve problems at their own level, and it delivers improved ways of working by involving staff and increasing their confidence and knowledge. This method of problem solving has resulted in reduced costs, while improving job performance and making people’s jobs more satisfying. The scheme

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has been so successful that it is offered to Unipart’s customers, who see the advantages of ‘performance through engagement’. It is delivered by using the Unipart Way model inside their own companies.

References Edman, A. (2011). Does the Stock Market Fully Value Intangibles: Employee Satisfaction and Equity Prices? Journal of Financial Economics. www.elsevier. com/locate/jfec Gallup Group. (2016). The Relationship Between Engagement at Work and Organisational Outcomes. www.gallup.com/services/q12-meta-analysis Hay Group. (2012). Why Does Employee Engagement Matter to CEOs? Philadelphia: Hay Group. Marciano, P.L. (2010). Carrots and Sticks don’t Work: Build a Culture of Employee Engagement with the Principles of Respect. New York: McGraw Hill. Maslow, A.H. (1943). A Theory of Human Motivation. Psychological Review, 50, 370–396. Maslow, A.H. (1970). Motivation & Personality (2nd Edition). Joanna Cotler. McLeod, S.A. (2007). Maslow’s Hierarchy of Needs. Retrieved from www.simplypsy chology.org/maslow.htm. ‘Needs and Subjective Well-being Around the World’, Tay and Diener of the University of Illinois (2010). Penna. (2007). Employees want to Work in the Organisations in Which they Find Meaning at Work. Penna. ‘Employee Engagement A review of current thinking’ a report by Gemma RobertsonSmith and Carl Markwick of the Institute for Employment Studies (2009). Truss, K., et al. (2008). Employee Engagement, a Literary Review. England: Kingston University Business School.

9 Communication

Communication plays a fundamental role in all aspects of organisations. Accordingly, it is critical that both internal communication within organisations and the communication skills of staff are effective. Internal communication is a key subset and enabler of employee engagement. In 2006, the Chartered Institute of Personnel and Development (CIPD) (2006) undertook a survey of 2,000 employees from across the UK, which indicated that communication is the top priority to lead employees to engagement. There is a clear link between organisational success and an effective internal communications strategy. However, there has been a tendency to view top-down messaging as communication, such as in newsletters and all staff emails, which typically communicate decisions rather than involving employees in them. Furthermore, there is a mistaken assumption that messages passed down are opened, read and understood. In the Chapter 13 on technology the use of email as the primary communication method explores why leaders need to be careful about making such assumptions. Communication is very much a two-way activity. Gregory Bateson, the anthropologist and social scientist, famously said: ‘the meaning of communication is in the response you get’. Feedback and listening should be built into the corporate communication process. This view is supported by the 2006 CIPD report, which singles out having the opportunity to feed their views and opinions upwards as a key driver of people’s engagement. Communication should be a significant part of a leader’s role, not one delegated to the PR or HR department. Clear, jargon-free

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communication should be part of the leader’s repertoire and, indeed, the organisation’s culture. We have too often seen communications to the workforce which are written for city analysts rather than to be understood by the workforce. In an article entitled ‘Want Your Staff to Trust You? Communication’s the Key’ (2016), Jermaine Laughton stressed the link between internal communication and trust, asserting that ‘a trusting working culture is a building block for growth and that trusting working culture is built on good communications’.

Listening In his book People Skills, Robert Bolton (1986) described the critical difference between hearing and listening. ‘Hearing is the physiological sensory process by which auditory sensations are received by the ears and transmitted to the brain. Listening refers to a more complex, psychological procedure involving interpreting and understanding the significance of the sensory experience.’ Dr Ralph Nichols of the University of Minnesota, who is an expert in this area, wrote in 1957 in Harvard Business Review: ‘it can be stated with practically no qualification that people in general do not know how to listen’. In my view, listening is the most underrated leadership and management tool. We are taught to read and write and do maths, but not taught to listen, and yet it is a teachable skill. And it typically takes up more of everyone’s waking hours than any other activity. Effectiveness at work depends in large measure on the ability to listen. And yet I have served on numerous boards and I have seldom seen effective listening in practice—most people are poor listeners and most of the time. The reasons for this might be manifold: we are too smart and already have the response before the person stops speaking; we are too busy to spend the time; and, almost certainly, we have not been trained how to listen. There are a number of effects of poor listening. For example: • • • • •

You are seen as uncaring and even untrustworthy. Your people are not prepared to be open with you. Poor decisions might result from misunderstanding the issue. Your reputation is damaged, as is your overall effectiveness. Potentially damaging or even dangerous situations can be missed.

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The following pyramid diagram shows the hierarchy of listening: empathetic listening active listening selective listening pretend listening ignoring The different levels in the hierarchy, from the bottom up, can be explained as follows: • • • •

Ignoring is simply not hearing at all. Pretend listening is not paying attention but feigning listening. Selective listening involves only tuning into certain words or phrases. Active listening is fully listening to what is being said, only giving some eye contact and occasional words or sounds of encouragement (and this might be appropriate when factual information is being imparted). • Empathetic listening is when more is required than just transmitting purely factual information and involves paying deep attention to what is being said, including evaluating tone of voice and body language; not interrupting the speaker; giving eye contact; asking open questions to elicit real meaning; and providing a summary of what has been said. As alluded to above, a fundamental part of listening is reading body language, which, again, is an underestimated, underused yet trainable management skill. Bolton describes this as ‘attending skills—non-verbal communication that indicates that you are paying attention to the person who is talking’. Such skills include ‘a posture of involvement and eye contact’. In a September 2011 article for Psychology Today, Dr Jeff Thompson (2011) said: if there were ever numbers associated with body language and non-verbal communication, 55, 38 and 7 would be it. The numbers represent the percentages of importance that varying communication channels have. The belief is that 55% of communication is body language, 38% is the tone of voice, and 7% is the actual words spoken.

Of course, this just reinforces the need for leaders and board members to be authentic, be themselves—staff will read through the words used to assess what is actually being said.

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In Chapter 13, the chapter on technology, the impact of email and where it should fit in to the corporate communications chain is considered.

References Bolton, R. (1986). People Skills. New York: Simon & Schuster. ‘Working Life: Employee Attitudes and Engagement’ a survey published by the Chartered Institute of Personnel and Development (2006). Laughton, J. (2016, October). Want Your Staff to Trust You? Communication’s the key. London: Professional Manager. Thompson, J. (2011, September). Is Nonverbal Communication a Numbers Game? Psychology Today.

10 Performance Management

Definition The fundamental goal of performance management is to promote and improve employee effectiveness, so it is a key ingredient of human capital management. It should be a continuous process where managers and employees work together to plan, monitor and review an employee’s work objectives or goals, and his or her overall contribution to the organisation. Many organisations mistake the annual performance review for performance management, but it is a process, not a once-a-year event. It should operate as a continuous cycle. Cranfield University describes this cycle: ‘Making the management of performance an organic part of everyday life, not a series of mechanical tasks and processes.’ Continual feedback and ongoing coaching are important parts of a potent performance management process. There appears to be a managerial deficiency in giving feedback. The CIPD found (‘Recruitment, Retention and Turnover Survey’) that fewer than half of employees state that their line manager usually or always provides feedback on their performance, but those that could claim they always received feedback were more satisfied with their job. As with most human capital elements and influencers, there is no one-sizefits-all approach to performance management—it needs to be geared to the organisational culture and business context. Corporate strategic goals provide the starting point for the process, followed by business and departmental operational goals that are linked to agreed individual performance and development priorities. Individuals and managers can then draw up plans to monitor performance.

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Performance appraisal should be coupled with employee development discussions, and there is significant evidence that the combination of the two can impact beneficially on performance. Most large employers operate some kind of performance management process, including most of the leaders interviewed for this book. An exception is Dr Philip Goodwin, CEO of Voluntary Service Overseas, who reflects recent criticisms of not implementing performance reviews. The reason for this is explained in more detail in his leadership insight piece in Chapter 17. For smaller organisations, the simple process of constant feedback replaces the more formal, structured and sometimes bureaucratic process that can be found in large organisations.

Role of Leaders It is important to stress that performance management is not just an HR department responsibility—boards and CEOs need to be aware of and involved in the process, apart from undertaking their own board performance appraisal. There is significant evidence that points to the vital role of leaders in ensuring effectiveness of the process: • Thomas Buchner (2007) of the University of Minnesota’s Carlson School of Management wrote in HR Development International (February 2007) with regard to successful implementation of performance appraisal systems: ‘success begins with top-down support but requires bottom-up support for it to work’. • In 2003, Monica Franco & Mike Bourne (2003) of Cranfield University found that top management agreement and commitment was a crucial factor related to the effective implementation of performance management. Alongside this, they identify the ‘three Es’ that are central to implementation—empowering, enabling and encouraging behaviours from senior management. • In a 2008 article for Performance Improvement, Suana Wikina (2008) of Indiana State University argued that senior management needs to show leadership and set the tone for performance management, ‘building the right culture based on efficient delivery of service, organised and multidisciplinary teamwork, and effective communication at all levels’. She also states that the leadership needs to provide and allocate tools necessary for performance management and improvement.

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• Senior leaders should also play a role in ensuring that performance management aligns corporate strategy and objectives to individuals, so that employees know how what they do fits with the organisation’s overall strategy. This is described as the ‘golden thread’ of performance management in an Improvement and Development Agency 2004 paper ‘Performance Management: The People Dimension’. Although developed ostensibly for local authorities, this concept has clear application across the sectors. Performance management is not an isolated process and it is clearly influenced by a number of the other human capital elements covered in this part of the book, such as training and communication.

Training, a Critical Enabler Proper training of both appraiser and appraisee is also a necessary component of successful appraisal systems to enable regular and high-quality discussions. Again, academic studies support this contention: • Purcell’s research at the University of Bath identified this as key in ‘bringing HR policies to life’. John Purcell and Sue Hutchinson in an article in Change Agenda (2003) included appraisal as one of a number of HR practices investigated for their potential links to performance. This report found that employees were more likely to ‘go the extra mile if managers stimulate and encourage positive attitudes’. Purcell concluded that appraisal is a practice worth paying attention to because it offers line managers the opportunity to bring about ‘commitment, job satisfaction, and motivation…which in turn lead to discretionary behaviour’. • An Institute for Employment Studies Performance Management Literature Review by Catherine Chubb et al. (2011) cited a study by the Internal Revenue Service (IRS) in 2005 on the use of appraisals that found a common concern was that if managers are not adequately trained and committed to the appraisal system, the performance review becomes ‘just a paperwork exercise’. While this illustrates the need for managers to be committed, it is equally important for managers to possess the skills needed to conduct effective appraisals. While it is acknowledged that individual managers must have the skills required to conduct appraisals effectively, only just over half (57%) of respondents to a 2005 CIPD

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survey of performance management reported that they train appraisers. Some 34% train all staff. However, a greater proportion of all staff in the public sector (49%) are likely to receive training. • In the IRS study, Virgin Mobile reported that good training of appraisers and appraisees was key to making its appraisal system succeed, along with positive communication to ‘pitch it as a benefit’. • Patrick Cunneen (2006) of the University of Limerick in an article in People Magazine highlights that training is needed to overcome a key barrier—managers’ perceptions of the process: ‘Not only do managers dislike carrying out performance appraisals but many admit that it is the most dreaded task in their calendar. Too often it leads to a shallow discussion, with both parties colluding to meet the organisation’s prescribed administrative procedure and, in doing so, avoiding the more fundamental issue of performance improvement.’

Communication In addition to aligning employee’s efforts with company objectives is the need to clearly communicate the organisation’s performance expectation of its employees. The Corporate Leadership Council (2002) concluded in a 2002 study that employee understanding of performance standards and objectives is more influential than specific features of the performance management system itself in driving performance.

Other Performance Management Methodologies Despite the advantages of the appraisal technique, there has been some debate about its deficiencies, including an annual process not synching with the speed of change in business. Specific criticisms concern the frequency of annual appraisals that does not match the speed of change in business priorities; the time and resources required to administer a proper system; its tendency to focus on past performance; and, usually a single source feedback mechanism (that of the immediate manager rather than peers, customers and stakeholders). This has resulted in the development of alternative methodologies, as outlined below.

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360 Degree Feedback 360 degree feedback is increasingly used as an alternative approach to traditional appraisal arrangements based solely on the assessment of a line manager. Surveys suggest that over 25% of employers use such a system. It collects performance data from multiple sources, which could include, in addition to the line manager, team colleagues, and internal and external customers.

Coaching Coaching as an employee development method is a prime managerial tool. However, as with appraisal, managers need to have or acquire proficient coaching skills. In a Brandon Hall Group ‘Performance Management Study’ (2014), 64% of organisations stated that ‘training managers to be effective coaches was their greatest performance management priority’.

Learning and Development Employee development is an important contributor to improved organisational performance. New approaches to reviewing performance attach much greater importance to learning and development, separating these conversations from discussions of past performance and performance-related pay.

Pay The relationship between pay and performance is a widely debated aspect of performance management. Linking levels of pay to individual, team and organisational performance (performance-related pay or PRP) is a traditional, and still common, approach. It is a topic dealt with in the Rewards chapter of this book.

Board Evaluation The board should not be immune to effectiveness evaluation. Some detail has been provided above on the performance management process applied to the

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workforce, and many of the constituents should similarly be features of the board performance process. In the private sector, the Financial Reporting Council (FRC) (2016) in its UK Corporate Governance Code limits its expectations for UK FTSE 350 companies to an annual process, as paraphrased here: • The board should undertake (or explain why it has not) a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors. • Boards should state in the annual report how performance evaluation of the board, its committees and its individual directors has been conducted. • Board evaluations of FTSE 350 companies should be externally facilitated at least every three years, and any other connections between external consultants and the company disclosed. • NEDs, led by the senior independent director, should be responsible for performance evaluation of the chairman, taking into account the views of the executive directors. Performance evaluations have been in the code for some time but a threeyearly external facilitation element is an extra provision and one that listed companies will have to implement. As with employee performance evaluation, board appraisal should not be confined to a once-a-year review; it should be a continuous process. Board assessment is too often viewed as a necessary evil—a mechanical process of checking off items on a list that ultimately has little real value for the board apart from meeting compliance requirements. But, undertaken well, it has benefits for individual directors, boards and the companies for which they work. Boards also need to recognise that the evaluation process is an opportunity for team-building, and inculcating a positive board and organisation culture. Leadership is by example, and by developing and implementing effective measurement of its own effectiveness, a board can show it is in tune with the workforce and also external existing and potential stakeholders. Increasingly, stakeholders and shareholders assess the quality of the board prior to investing in a company or funding a not-for-profit. The process of board evaluation is one that is equally relevant to organisations across the sectors. It is a process that the Department for Culture Media and Sport has introduced for its Arms Lengths bodies (one of which I chair), although as yet it is not widespread across Whitehall. Not-for-profits and

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public sector organisations can access and adapt the tried and tested process set out by the FRC rather than reinventing the wheel.

References Brandon Hall Group. (2014). Performance Management Study. www.brandonhall. com/performance-management Buchner, T. (2007, February). Performance Management Theory: A Look from the Performer’s Perspective with Implications for HRD. HR Development International. Chubb, C., Reilly, P. & Brown, D. (2011). Performance Management Literature Review. Brighton Sussex: Institute for Employment Studies. ‘Effective Performance Improvement and Management Strategies for the Information Technology Industry’ by Suana Wikina of Indiana State University in an article published in ‘Performance Improvement’ (2008). ‘Factors that Play a Role in Managing through Measures’ a study by Monica Franco & Mike Bourne of Cranfield University (2003). Financial Reporting Council. (2016). The UK Corporate Governance Code. www.frc. org.uk/Codes-Standards. ‘How to Improve Performance Management’ by Patrick Cunneen of the University of Limerick in an article in ‘People Magazine,’ (January 2006). Purcell, J. & Hutchinson, S. (December, 2003). Bringing Policies to Life: The Vital Role of Front Line Managers in People Management. London: Chartered Institute of Personnel Management. The Corporate Leadership Council. (January, 2002). Building the High-Performance Workforce - a Quantitative Analysis of the Effectiveness of Performance Management Strategies (Corporate Leadership Council Executive Briefing, Corporate Executive Board).

11 Health and Safety and Psychological Wellbeing

Health and Safety Definition Organisations will already be well aware of their responsibility for health and safety. In the UK, under the Health and Safety at Work Act (1974), ‘It shall be the duty of every employer to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all his employees’ and ‘it shall be the duty of every employer to prepare and as often as may be appropriate revise a written statement of his general policy with respect to the health and safety at work of his employees’. It is common practice for boards to approve the organisation’s health and safety policy.

Involvement of the Workforce It is commonly regarded that workplaces where staff are directly involved in taking decisions about health and safety are safer and healthier: employees impact directly on health and safety through their own actions. They are undoubtedly the best people to consult as they understand the risks in their workplace. Employees who believe their views are valued and who are involved in decision-making play a big part in a high-performing workplace generally, but none more so than in health and safety management. Data show that benefits from such an approach include lower accident rates; a more positive © The Author(s) 2017 A. Coppin, The Human Capital Imperative, DOI 10.1007/978-3-319-49121-9_11

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health and safety culture; greater awareness of workplace risks; and, better control of workplace risks.

The Big Picture According to the Health and Safety Executive, the UK has an enviable record in health and safety at work. And yet the statistics present a challenging picture: 1.2 million people suffering from a work-related illness; 2,515 mesothelioma deaths as a result of past asbestos exposure (2014); 144 workers killed at work (2015/16); 76,000 other injuries to employees reported under RIDDOR (Reporting of Injuries, Diseases and Dangerous Occurrences Regulations); 611,000 injuries occurred at work according to the Labour Force Survey; 27.3 million working days lost owing to workrelated illness and workplace injury; and £14.3 billion estimated cost of injuries and ill health from current working conditions. When Justin Tomlinson, minister responsible for health and safety, launched a new strategy for health and safety in March 2016, called ‘Helping Britain Work Well’, he further stressed the link between a healthy and safe working environment and human capital optimisation when he wrote: ‘When people are harmed at work it leads to pain and suffering for individuals and their families, disruption and damaged reputations for companies and costs to the whole economy that make businesses, and Britain, less competitive.’ The chair of the Health and Safety Executive, Dame Judith Hackett, introduced seven priority themes for the new strategy, promoting broader ownership of health and safety in the UK as integral to everyone’s role. The themes are: • strong and visible leadership within organisations; • tackling ill health, with health being given the same priority as safety across the system, so that the benefits of reducing workplace ill health will reach beyond the health and safety system, helping cross-government initiatives to improve Britain’s wellbeing and prosperity; • managing risk well; • supporting small employers’; • giving SMEs simple advice so they know what they have to do; • keeping pace with change; • sharing our success—it’s about sharing best practice both at home and abroad.

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The implications of this strategy for all sectors include strong and visible leadership; collaboration and partnership, including, as mentioned above, genuine worker engagement; and directors, managers, supervisors and workers having the competence to identify and control the risks created by their work activities. Resources also need to be applied to measurement, a topic covered in the Metrics chapter of this book. I would add a further one: guarding against complacency, which, as stated by Lord Taylor in his report on the Hillsborough Stadium disaster, ‘is the real enemy of Health and Safety’. A particular technique that organisations might wish to consider is that of ‘visible felt leadership’, as practised at Marshalls Plc.

Visible Felt Leadership at Marshalls Plc Marshalls plc is a market-leading FTSE 250 landscape transformation company. It manufactures natural stone and concrete hard landscaping products, supplying the construction, home improvement and landscape markets. Its revenue in 2015 was 386.2 million and it employed 2,236 people. It has a network of manufacturing sites and operates its own fleet of 44 tonne delivery vehicles. I served as a NED at Marshalls Plc for six years, leaving the board in May 2016. Whilst there I witnessed at first hand the highly successful application of visible felt leadership in the company’s management of health and safety. Martin Coffey, CEO there, has provided the following insight into how the company applied visible felt leadership and its impact on health and safety metrics: In 2013, Marshalls wanted to make a step change in its approach to Health and Safety in order to seriously reduce its accident rates and its culture. The senior team realised this was not simply a case of passing down targets but also being pro-actively involved. It is widely acknowledged that the first principles of ‘Visible Felt Leadership’ (VFL) originated within the DuPont organisation following a review of their historical accident data over a number of years of the internal accident investigations undertaken. This revealed that over 90% of injuries were caused by unsafe acts. It was reasoned that dealing with injuries and incidents is a reactive response and by relying on this principal an organisation was doomed to fail as it had to wait for further incidents before they could react. Conversely, if an organisation can focus its resources on

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identifying unsafe acts it can react in a proactive manner before an incident actually occurs. At Marshalls plc, we used as a template the work undertaken by Bird/ Heinrich in their accident triangle model, which asserts a fixed ratio between the worst accidents in a workplace and the smallest ones, and it became apparent that there were significantly greater numbers of unsafe acts to challenge than there were near misses or incidents. It was considered imperative to involve the Directors and Senior Managers at Marshalls in the review of health and safety processes as fundamental change would be required including adapting the culture of the Group. We considered how individual and collective behaviours could be influenced in such a way so as to minimise the number of unsafe acts within the workplace. This was the birth of what became known as VFL—a tool that focuses on Senior Management being more actively involved in promoting a positive H&S culture within the business via an obvious presence in the workplace. Bradley analysed the development of a positive safety culture within an organisation and observed that there were four distinct phases: • reactive (safety by natural instinct; compliance is the goal; delegated to safety manager; lack of management involvement); • dependent (management commitment; training; rules and procedures; supervisor control; terms of appointment; discipline; value all people; • independent (personal knowledge commitment and standards; internalisation; personal value; care of self; practice, habits; individual recognition) • interdependent (help others conform; others keep; networking contributor; care for others; organisational pride). We understood that, to drive towards zero injury performance, a truly interdependent stage had to be attained. Marshalls realised to achieve this stage and consequently zero harm by eliminating accidents in the workplace altogether required, above anything else active involvement by the company leadership. This meant increasing leadership visibility in the workplace. This process allows leaders to ‘feel’ the safety culture within their organisation and influence it through two way communication revolving around safety. The main vehicle for this within Marshalls is for Directors and Senior Managers to undertake site visits where they observe workplace processes and then discuss the H&S implications with those undertaking the process. We

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have termed these ‘Incident Prevention Talks (IPTs). Senior Management have demonstrated the importance of Health and Safety by undertaking these visits, supported by extensive communication across the company of lessons learnt. It has been far from a fault-finding exercise—praise and acknowledgement take place where safe working practices are evident and procedures are being adhered to and these are also communicated. Feedback from the workforce on VLT is very positive and the accident statistics demonstrate the success of the process. Since the VFL/IPT concept was introduced within Marshalls in May 2013, the following improvements have been achieved (up to end August 2016) • 69% reduction in LTI severity rate • 66% reduction in LTI frequency rate • 55% reduction in reportable incident frequency rate.’

Psychological Wellbeing Definition Although clearly another subset of engagement and, indeed, of health and safety, psychological wellbeing is considered on its own because of its direct and specific connection to productivity, which might not be readily apparent to boards. First it is necessary to define a concept that might not be known or understood by readers—presenteeism. This is reduced productivity when employees come to work but do not perform properly or are not engaged as a result of ill health. In 2011 the Centre for Mental Health (CfMH), the UK’s leading authority in mental health research, estimated that presenteeism from mental ill health alone costs the UK economy £15.1 billion a year, whilst absenteeism costs another £8.4 billion. White-collar workers are more prone to presenteeism than blue-collar workers. Mental health problems such as depression are particularly likely to take the less visible form of presenteeism, possibly because employees wish to avoid being labelled mentally ill. The costs to business caused by health-related presenteeism appear to be larger, perhaps significantly so, than the costs of sickness absence. The CfMH (2011) goes on to assert that although research is clear about the huge cost of presenteeism to employers, it is often ignored by them, yet

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managing it not only saves money in the short and long term but also improves workforce engagement and productivity. In their book Well-Being: Productivity and Happiness at Work (2011), Ivan Robertson and Cary Cooper point out that ‘people with higher levels of Psychological Well Being (PWB) perform better at work than those with lower PWB; indeed the results show that well-being predicts job performance more effectively than job satisfaction does’. They quantify the relationship between positive psychological wellbeing and productivity by estimating a one point increase on the PWB scale results in an increase of 8.8% in productivity. In its guide ‘Building the Business Case for Managing Stress in the Workplace’, the Chartered Institute of Personnel reported that stress is the number one cause of long-term absence for non-manual employees and the fourth biggest cause for manual workers. In addition, stress-related absences are frequently long, averaging twenty-one days per spell of absence. The impact on UK plc is significant. The HSE’s ‘Self-Reported Work-Related Illness Survey 2004/2005’ found that 12,820,000 days were lost to stress, anxiety and depression in 2004–2005, with an estimated cost to the UK economy of £3.7 billion a year. A significant proportion of the working population are at risk from the negative effects of stress on a daily basis. According to a CIPD survey of 1,000 employees in 2006, 22% of respondents described their jobs as either very or extremely stressful and 15% reported that they felt under excessive pressure at work every day. Robertson and Cooper identify five clusters of workplace factors they deem important for PWB: work and its context; work demands, access to resources and equipment, effectiveness of communication in the organisation; relationships at work and the work–home interface, relationships with colleagues, social support; purpose and meaning, clarity about work goals, feeling that the goals are worthwhile; and leadership, management and supervision, impact that manager has on the workgroup, and leadership commitment to employee PWB. The Health and Safety Executive (2012, http://www.hse.gov.uk/stress/ standards/) set out management standards that ‘define the characteristics, or culture, of an organisation where the risks from work related stress are being effectively managed and controlled’. Six key areas of work design are identified that require proper management in order to avoid the key sources of stress at work and the consequent ‘poor health and well-being, lower productivity and increased sickness absence’. In other words, the six management standards cover

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the primary sources of stress at work. These act as a guide for action for organisational leaders: • Demands—issues such as workload, work patterns and the work environment. • Control—how much say the person has in the way they do their work. • Support—such as the encouragement, sponsorship and resources provided by the organisation, line management and colleagues. • Relationships—such as promoting positive working to avoid conflict and dealing with unacceptable behaviour. • Role—whether people understand their role within the organisation and whether the organisation ensures that they do not have conflicting roles. • Change—how organisational change (large or small) is managed and communicated in the organisation. It is not possible, nor is it the intent of this book, to cover this important topic in greater granularity than to ensure it is a topic for board attention. However, one aspect of relationships not covered above and of particular interest to me as the former chair of a charity that helped young people affected by it, is bullying. Research by YouGov (2016) for the TUC in 2015 suggests that 29% of people have been bullied at work, that women (34%) are more likely to be victims of bullying than men (23%) and that in 72% of cases the bullying is carried out by a manager, with the consequence that 36% of people who report being bullied at work leave their job because of it. In terms of the effects of workplace bullying, 46% of people say that it has an adverse impact on their performance at work, and the same proportion believe it has a negative effect on their mental health. More than a quarter (28%) say it has a detrimental effect on them physically, and around one in five (22%) have to take time off work as a result of being bullied. ACAS (2014) publishes a useful guide for employers on how to best manage this issue; Bullying and harassment at work.

The Workwell Model Business in the Community asserts that their Workwell model has been developed by business for business and that it is based on robust evidence. Importantly for the purpose of this book is that it demonstrates a strategic

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and proactive approach to wellbeing for employers, across the sectors. The model is considered to be the gold standard by business, with many organisations using it to guide their wellbeing strategy. One of the five inner segments of the wheel points to the need for board involvement in developing the culture required for a wellbeing strategy to work within, and such involvement is a theme common to the success of most of the eleven critical human capital imperative elements. To explain the wheel diagram: • The outer wheel shows the cycle of business benefits that result from promoting wellbeing and the link between other issues featured in this book, such as engagement and productivity. • The inner wheel outlines the complementary employee-led element of the model. Demonstrating and supporting how employees can take action to support their own wellbeing and that of others, this element is based on the ‘Five Ways to Wellbeing’ framework developed by the New Economics Foundation. • The five inner segments of the model cover the broad areas that businesses need to address to create a culture of wellbeing, where employees can thrive. By taking action across all of these elements, businesses can create a comprehensive approach to wellbeing that drives business productivity and employee engagement: • Better physical and psychological health: creating a safe and pleasant work environment by promoting a physically safe working environment and promoting healthy behaviours, both physical and mental. • Better work: creating a happy, engaging environment of good work, which is underpinned by good job design, autonomy, variety, employee voice, talent management, employment security, and a management style and culture that promotes mutual trust and respect. • Better relationships: promoting better communication both inside and outside the workplace, to ensure employees maintain the social capital they need for good mental health wellbeing. • Better specialist support: ensuring teams manage health issues at work in a proactive way, and facilitate a more efficient return to work for those off work, by equipping specialist teams, line managers and all employees with information and skills to maintain their own health and support others.

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RODUCT IVIT HER P HIG Y

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The BITC Workwell Model

The business in the community Workwell model

Source: Business in the Community

• Working well: positioning employee wellbeing as a boardroom issue, creating a culture of wellbeing where employees feel trusted, respected, with a strategic proactive approach to wellbeing, underpinned by strong governance and reporting arrangements. (Fig. 11.1)

References ACAS. (2014). Bullying and Harassment at Work. Retrieved from: www.acas.org. uk/media/pdf/i/t/Bullying-and-harassment-in-the-workplace-a-guide-for-man agers-and-employers.pdf Health and Safety Executive. Health and Safety at Work etc Act 1974. Retrieved from www.hse.gov.uk/legislation

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Health and Safety Executive. (2012). Management Standards for Work Related Stress. Retrieved from http://www.hse.gov.uk/stress/standards/ Robertson, I. & Cooper, C. (2011, April). Well-being: Productivity and Happiness at Work. Basingstoke: Palgrave Macmillan. The Centre for Mental Health (CfMH). (2011). Managing Presenteeism, a discussion paper. www.centreformentalhealth.org.uk TUC. (2016, November). YouGov Poll on Bullying at Work. www.tuc.org.uk/healthand-safety

12 Diversity and Inclusion

Definitions Diversity Broadly, diversity is any aspect that can be used to differentiate groups and people from one another. In practice, it means respect for and appreciation of differences in ethnicity, gender, age, national origin, disability, sexual orientation, education and religion. But it is more than just a list. We all bring with us diverse perspectives, work experiences, life styles and cultures. As a source and lever of innovation, diversity and in particular ‘diversity of thinking’ has a critical part to play. At board level it is a dimension that negates ‘group think’.

Inclusion Inclusion goes hand in hand with diversity. Simply, it is a state of being valued, respected and supported. An inclusive workplace ensures that the right conditions are in place to meet the needs of every individual so they can achieve their full potential. Diversity is the mix and inclusion is ensuring the mix works well. They each need to be included in an organisation’s culture, practices and procedures.

© The Author(s) 2017 A. Coppin, The Human Capital Imperative, DOI 10.1007/978-3-319-49121-9_12

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Why Important If people are the most important asset of any organisation, to succeed, organisations must make the most of all of their human capital. Optimising the potential of a diverse staff is at the same time a social imperative and a source of competitive advantage. Lord Browne of Madingley (2016), the former CEO of BP, argued in an article for The Times that it is good business to run a company that embraces diversity and inclusion, and he links this with employee engagement and performance. He said: Many long-running studies show companies that have inclusion as a fundamental part of their leadership have great engagement of teams. And engaged teams produce abnormal returns, over and above those of average companies. On average it is about 2% more profit a year, so 20% more in 10 years. That’s tough to get any other way.

Lord Browne’s view is very much supported by research undertaken by global management consultancy firm McKinsey (2015). In a report (‘Why Diversity Matters’) it suggests that ‘it has become increasingly clear that companies with more diverse workforces perform better financially’. McKinsey has been examining diversity in the workplace for several years. Its 2015 report examined proprietary data sets for 366 public companies across a range of industries in Canada, Latin America, the UK and the USA. In this research it looked at metrics such as financial results and the composition of top management and boards. The findings were clear: • Companies in the top quartile for racial and ethnic diversity are 35% more likely to have financial returns above their respective national industry medians. • Companies in the top quartile for gender diversity are 15% more likely to have financial returns above their respective national industry medians. • Companies in the bottom quartile both for gender and for ethnicity and race are statistically less likely to achieve above-average financial returns than the average companies in the data set. • In the USA there is a linear relationship between racial and ethnic diversity and better financial performance: for every 10% increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes (EBIT) rise 0.8%. In the UK, greater gender diversity on the

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senior-executive team corresponded to the highest performance uplift in McKinsey’s data set: for every 10% increase in gender diversity, EBIT rose by 3.5%. • While certain industries perform better on gender diversity and other industries on ethnic and racial diversity, no industry or company is in the top quartile for both dimensions. • The unequal performance of companies in the same industry and the same country implies that diversity is a competitive differentiator, shifting market share towards more diverse companies. An interesting part of the McKinsey study was an international comparison of gender and racial diversity. Women—accounting for an average of just 16% of the members of executive teams in the USA, 12% in the UK and 6% in Brazil—remain underrepresented at the top of corporations globally. The UK does comparatively better in racial diversity, albeit at a low level: some 78% of UK companies have senior leadership teams that fail to reflect the demographic composition of the country’s labour force and population, compared with 91% for Brazil and 97% for the USA. These issues are gaining importance with shareholders. A 2016 report by Hermes Investment Management, one of the UK’s largest pension funds, stated that most UK investors believe that gender diversity is important for the long-term future of the businesses in which they invest. Hermes research showed that in 2016, 51% of investors said that gender diversity among senior managers is important or vitally important; in 2015 it was 25%. However, the same study indicated that demand by shareholders for other types of diversity is less advanced: 30% of investors believe racial diversity is important and 19% that socio-economic diversity is useful in boards and among executives. These attitudes might change following publication of the government-backed Parker Review (2016). Their report (‘Beyond One by ’21’) states that the UK’s biggest firms should have at least one non-white director by 2021, and the next 250 largest firms should aim to appoint one non-white board member by 2024. The review concluded that FTSE 100 boardrooms are not representative enough of their workforces, nor their supply chains or indeed customer bases. Government is taking other action on the issue. In April 2016, Sajid Javid, secretary of state for business, innovation and Skills, established a review to examine progression of black and ethnic minority (BME) people within the labour market. Of course, the diversity and inclusion issue is a cross-sector one and the public sector is not immune from public scrutiny. A January report by the Higher Education Standards Authority (2017) revealed that

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there have been no black academics in senior management at any university for the last three years. Of senior officials, 510 of the 535 are recorded as white, 15 are Asian and a further 10 recorded as ‘other including mixed’. David Lammy, the MP and former higher education minister, was reported in the Guardian (20 January 2017) as saying: ‘Universities talk about widening participation and fair access but the complete lack of diversity in senior positions sends out an absolutely dreadful message to young people from ethnic minorities who find themselves wondering if university is for them or not.’ With regard to gender diversity, businesses of more than 250 employees will be required to report on gender representation at all levels from April 2017. A Harvard Business Review (Harvard Business Review 2014) article by Dr Christine Riordan set out some of the major factors that prevent an inclusive approach from being implemented, along with some common sense actions for boards and CEOs to consider: 1. People gravitate toward people like them. We’ve long known that similarity makes people like and identify with each other. In organisations, leaders often hire and promote those who share their own attitudes, behaviours, and traits. Thus, many organisations unknowingly have ‘prototypes for success’ that perpetuate a similarity bias and limit the pool of potential candidates for positions, important assignments and promotions. To counteract this natural tendency, leaders must focus on the systems in place, look at basic statistics, and ask deeper questions, such as: Who is getting hired? Who is getting promoted at the highest rate? Why don’t we have more diversity in various positions or on teams? Who is not being included in these decisions? Am I building relationships with people who are different from me? 2. Subtle biases persist and lead to exclusion. When minority-group employees are hired, they may experience more subtle forms of discrimination such as being excluded from important conversations, participation in a supervisor’s or peer’s in-group of decision-makers and advisers, and may be judged more harshly. Dissimilarity might lead supervisors to favour people who are similar (in terms of race, gender, etc.) and demonstrate bias against people who are different. Researchers refer to this phenomenon as ‘subtle bias’, which is often a result of unconscious mindsets and stereotypes about people who are different from oneself.

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To neutralise exclusion, leaders need to proactively review the access of all groups of employees to training, professional development, networks, important committees and other opportunities. 3. Out-group employees sometimes try to conform. Often, as a coping strategy, those who are different from the majority will downplay their differences and even adopt characteristics of the majority in order to fit in. To reduce conformity, leaders need to talk authentically about the issues, seek out and encourage differences. 4. Employees from the majority group put up resistance. Majority employees often feel excluded from diversity initiatives and perceive reverse favouritism. Many companies have experienced backlash when leaders do not engage majority members in the conversation on diversity and inclusion, explain why change is necessary, and make everyone accountable. PwC chairman and CEO Robert Morwitz has said that diversity and inclusiveness are major priorities for him. He prefers to serve as a role model and lead from the front. He pushes to have a diverse team on all major issues. Further, he believes that critical thinking comes from inclusion —that is, from the diversity of perspective. Leaders need to put inclusion, not just diversity, at the top of their agendas and mean it. They need to actively talk about its importance, notice when it is present and absent, and set the agenda for the organisation.

References Browne, L. (2016, October 31). The Importance of Being Yourself in Life and Work. Times Newspaper. McKinsey. (2015). Why Diversity Matters. McKinsey. ‘A Report into the Ethnic Diversity of UK Boards: Beyond One by ’21’ a report by the Parker Review (2016). www.gov.uk Riordan, C. (2014, June 5). Diversity is Useless Without Inclusivity. Harvard Business Review. ‘Staff at Higher Education Providers in the United Kingdom 2015/16’ a report by the Higher Education Standards Authority (2017). www.hesa.ac.uk

13 Technology

In a speech to the Trades Union Congress in November 2015 (‘Labour’s Share’), Andy Haldane, chief economist of the Bank of England, said that about 15 million UK jobs were at risk of being taken over by robots in the coming decades. Research undertaken by the Bank of England estimated the probability of a range of jobs being automated over the next twenty or thirty years and came up with the 15 million number by multiplying the probabilities by the number of people employed in each sector. This is about half of the total number of people in work in the UK today. Haldane caveated his estimates by saying they were broad brush and may be too pessimistic, and pointed out that previous assessments of the impact of technology on employment had proved unreliable since the industrial revolution. However, there might be a major difference this time, which might support greater ‘technological unemployment’ in the future. Machines in existence and, more importantly being developed are and will be smart/er machines propelled by modern computing, thinking machines as well as doing. So they will have the potential to substitute for human brains. Accordingly, they will cover a much bigger part of the distribution of skill than before and, of course, as labour-saving devices they will by definition substitute capital for labour. Clearly, directors and trustees need to be alive to this trend and understand and plan for the implications for their organisations—all sectors will be affected. Deloitte (2016) suggest that in the public sector, administrative and operative roles are highly likely to be automated over the next two decades. They estimate that 861,000 jobs could be lost by 2030. This graphically illustrates the conflict over viewing staff as assets rather than liabilities since

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this job reduction would lead to an estimated saving of about $17 billion in the public sector wage bill in 2030 compared to 2015. Another research report, by Carl Frey and Michael Osborne (2013) from Oxford University, employed a new methodology to estimate the probability of computerisation for 702 detailed occupations with the primary objective of analysing the number of jobs at risk. According to their estimates ‘around 47 percent of total US employment is in the high risk category. We refer to these as jobs at risk—i.e. jobs we expect could be automated relatively soon, perhaps over the next decade or two.’ Similar predictions could be applied to other Western economies.

The Use of Technology in the Workplace Science and technology are undoubtedly beneficial contributors to our world. They have enabled us to control our environment, fight disease, revolutionise communications, ‘shrink’ the world, increase the rate and level of knowledge, and provide mass entertainment and standards of living that historically were the preserve of a tiny elite. At work, if correctly deployed, these advantages can be sources of productivity and competitive advantage. However, technology can also be seductive. It can lead us to believe that it is the solution in itself, when usually it is no more than a tool. It draws us away from what is really important: the fact that the results are always achieved by people. Organisations should always be about people and relationships. It is these human dimensions that make the difference between sustained success and obscurity. In a report, the Commission on the Future of Management and Leadership (2014) estimated that by 2020 each person will have six different devices connected to the internet, which translates, globally, to 50 billion connected devices compared with 500 million in 2003. Organisations need to understand how to manage technology to ensure it improves productivity and does not damage it. Sir Cary Cooper, psychologist and professor of organisational psychology at Lancaster University Management School, warned in a speech to the British Psychological Society in 2015 that an email epidemic was damaging UK productivity. He asserted that ‘E-mails and social media are very useful and important for business but I think the difficulty is that we are not managing it, it is managing us.’ Professor Cooper argues that the UK’s relatively low productivity is in part attributable to email overload because organisations and managers are ‘getting into this thinking that emails are an end unto

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themselves…They are not; they are a means to an end.’ Cooper wants limits on internal email: ‘We need to ban emails [sent and received] within the same building’ advocating instead for face-to-face meetings and phone calls. His concern is reinforced by other research on the volume of email traffic: The Radicati Group, a technology research company, estimated the number of business emails sent and received per user per day in 2015 totalled 122. They reported that this figure continues to show growth and is expected to average 126 messages sent and received per business user per day by the end of 2019. These figures do not include the amount of spam received. This research also indicates spam that is delivered (bypassing all spam and security filters) and also ‘graymail’—newsletters/notifications once signed up for but no longer wanted) —amounted to twelve emails per day in 2015, and Radicati predict that this will rise to nineteen per day by 2019.

Michael Mankins (2015), a partner at Bain & Company, also connects part of the decline in productivity growth to questionable corporate investment in technology. Mankins points to the annual increase in external email communications to about 30,000 in the 2010s from more like 1,000 in 2007, attributing much of this to the growth of layers of networks. His research indicates that a typical frontline supervisor or mid-level manager devotes eleven hours a week to processing e-communications. This doesn’t include any emails sent during meetings, which Mankins asserts is a common practice in many companies. The average manager has less than six and a half hours per week of totally uninterrupted time to get work done. The impact of out-of-hours email usage on managers was assessed in a study published by the Chartered Management Institute (2016). One of the key findings of this study was that 61% of managers said that technology has made it difficult to switch off from work. Around one in five managers say they now check their email all the time outside of working hours; over half check frequently. Nearly 40% of managers are looking to employers to restrict outof-hours email access, including 43% of those who check email all of the time. The knock-on effects of this is that those who struggle to switch off report lower personal productivity and job satisfaction and more frequent high stress levels. Despite evidence to the contrary, many organisations appear to accept Metcalfe’s Law (named after Robert Metcalfe, co-inventor of Ethernet). This law states that the value of a network increases disproportionately to the number of users because of the increase in connectivity. The paradox here, though, is that with the exponential increase in communications, the time needed to process them increases too.

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Directors and trustees need to engage more with this topic because of its impact on human capital optimisation and not leave the issue to the IT department, even though it is a topic outside the comfort zone of many board members, and even some CEOs. First, they need to ask some simple questions to find out how much time their people spend using email and social media to ensure this is time well spent and productive. Metrics need to be in place to facilitate monitoring email usage and its impact on issues, such as health and wellbeing. Second, if alarm bells ring, they should enquire what is being done to prevent dysfunctional behaviour. This might include issuing guidelines on use of email, such as use of email at night, on holiday and over the weekend; not allowing emails to be sent to colleagues in the same building; not copying people into emails unless critical; and categorising emails as to their importance. It is a given that technology will evolve and that it will have significant impacts on organisations across the sectors and in the way they manage their human capital. For example, it will impact on flexible and independent working, and new techniques will need to be considered such as holographic teleconferencing; the use of big data to provide tools to analyse emails and social media accounts to assess staff engagement and measure performance; and new methods such as virtual reality, blockchain and the ‘Internet of Things’, which have the potential to deliver measurable impact to attract and retain employees and bring real innovation to the processes. But, in assessing investment in new technology, boards need to really understand the impact it will have on productivity and, in particular, whether it will enable staff to do more in less time and to ensure Metcalfe’s Law paradox is taken into account. Having human capital on the main board agenda is one way to make sure boards monitor technological trends with respect to their impact on people and become involved, at least at the strategic level, in dealing with their effect. Because of technology’s importance to the productivity of staff and therefore the success of the enterprise, boards will need to undergo training in this area and not just leave it to the geeks.

References The Commission on the Future of Management and Leadership. (2014). Management Ideas 2020. www.managers.org.uk Chartered Management Institute. (2016, January). The Quality of Working Life. www.managers.org.uk Deloitte. (2016, October). The State of the State 2016–2017. www.deloitte.com

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Frey, C. & Osborne, M. (2013). The Future of Employment: How Susceptible are Jobs to Computerisation. www.oxfordmartin.ox.ac.uk/view Mankins, M. (2015, February). Is Technology Helping Us Get More Done? Harvard Business Review.

14 Remuneration

There are a number of ways in which pay, rewards and benefits are described in the corporate world. We have wages, pay and base pay; compensation (usually describes base pay plus bonuses); and total compensation, encompassing all forms of pay and benefits. To simplify things, a definition of ‘remuneration’ in WorldofWork (2014) is used: ‘the sum of the financial and non-financial value of an employee’s package (i.e. salary, incentives, benefits, perquisites, job satisfaction, organisational affiliation, status, etc.) and any other intrinsic or extrinsic rewards of the employment exchange that the employee values’. Although it often is the largest single component of total operating costs, remuneration should be managed as more than just a business cost because remuneration practices can directly influence the choice of prospective employees and have an impact on staff engagement. Accordingly, along with many of the other influencers of employee engagement, remuneration should be integral to an organisation’s human capital strategy—it is one element that enables competitive advantage. However, the importance of remuneration in getting things done through people can be overestimated. From experience, probably the majority of board members, at least in the private sector, consider pay to be the greatest motivator of staff. This seems to be reflected in often extremely high, sometimes excessive, pay that boards pay their CEOs (more on this below.) Yet, research does not support this view. Timothy Judge and his colleagues (2010) undertook extensive research on the topic, published in 2010, and reviewed over ninety studies. The key

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results of the research were that there is a very weak correlation between salary and job satisfaction; this is true across nations with virtually the same results—for example, in the UK, the USA, India and Australia. The researchers also concluded that ‘employees earning salaries in the top half of our date range reported similar levels of job satisfaction to those employees earning salaries in the bottom half of our data range’. Other significant research, for example by the Gallup organisation, found in its extensive global engagement research that there is no significant difference in employment engagement by pay level. Research from 2016 by the Workforce Institute at Kronos and Coleman Parkes (2016) shows that pay rates tenth out of eleven reasons for leaving a job. Number one is feeling undervalued. So, if money does not buy engagement, what does? In November 2011, J. Wiley and B. Kowske (2011) published a book entitled Respect: Delivering Results by Giving Employees What They Really Want. The wide-ranging research covered over 200,000 employees in some of the world’s most powerful economies including the UK, the USA, China, France, Germany and Japan. They synthesised these results into an acronym—respect. They assert that the fundamental desires of employees can be broken down into seven parts: recognition (praise from managers and the organisation at large); exciting work (a job that is interesting, challenging and fun); security of employment, job security; pay, fair compensation for a day’s work; education and career growth, opportunities to develop skills and career; conditions at work, a workplace that is comfortable physically and socially, and well equipped; and truth, frank, honest and transparent leaders.

The Importance of Pay Fairness The issue of pay fairness is explored by R. Busch and M. Szypko of the Xenexa High Performance Institute. In their paper ‘Perception is Reality: The Importance of Pay Fairness to Employees and Organisations’ (2013), they conclude: Fairness is in the eye of the beholder, and pay fairness is no different. The perceived fairness of an employee’s compensation is based on objective components (e.g. the extent to which pay rate is logically tied to the external market) and subjective components (e.g. an employee’s emotional response to the implied value statement made by compensation).

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Regardless of whether an employee’s perception is rooted in objective or subjective measures, the perception of pay fairness is just as important as the reality of it.

In essence, the authors’ research indicates that employees who believe they are fairly paid are more engaged, are less likely to quit, experience less stress at work, feel healthier physically and psychologically, and are more satisfied with their personal life. And, as Jac Fitz-enz (1997) pointed out in a 1997 paper, turnover intentions may also be reduced, and the hefty cost of replacing an employee may be avoided, by paying employees fairly. These are important lessons for organisations to take into account when determining remuneration policies. The issue of pay fairness is brought into sharp focus when considering two contemporary issues: zero-hours pay and executive pay.

Zero-Hours Pay At the bottom end of the pay spectrum are people paid on zero-hours contracts. Such contracts do not offer guaranteed hours or sick pay. The number of UK employees on zero-hours contracts has increased by 20% in one year, to over 900,000 in 2015—that is, 2.9% of the working population. This number has increased from just over 100,000 people in 2004. TUC research indicates that the average worker earns 50% more an hour than those on zero-hours contracts. The median hourly rate for a zero-hours worker is £7.25, compared with £11.05 for all employees, according to the TUC. Zero-hours workers are only paid the minimum wage for the hours actually worked, not for time on call, which serves to increase income insecurity. On average, people working on zero-hours contracts worked twenty-five hours a week according to the ONS, but 31% wanted to work more (compared with 10% in other forms of employment). In March 2015, in New Zealand the government banned the use of zero-hours contracts after a public campaign, and from 1 April that year, employers had to guarantee a minimum number of hours a week. There is no sign that the UK government will follow this lead, although, if other cases such as the one with Sports Direct hit the media headlines this, might well change.

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Executive Pay How much executives are paid is a live and controversial political as well as business issue, and across the private and even charity sectors. In December 2016 the media spotlight was on the £3 million annual salary paid to an unidentified employee of the Wellcome Foundation, which far exceeded the £400,000 per annum of the foundation’s CEO. Also that month, the Marie Stopes Foundation was featured in The Times under the headline ‘Marie Stopes Boss Was Paid £420,000’. In the same newspaper (6 January 2017), an article on university vice-chancellors’ pay carried the headline: ‘University Vice-chancellors Accused of Hypocrisy over Bumper Pay Rises’. The public sector is by and large immune from the debate because pay rates are determined by independent bodies. But even that does not make them immune from media scrutiny and criticism, witness the front-page headline from the Daily Mail (6 January 2017): ‘SIR HUMPHREY’S BREXIT GREED, Shameless Civil Servants Want a Pay Rise—to Get Us out of EU.’ However, private sector executive remuneration growth is the main focus for media and political scrutiny for the upper echelons of managment increasing public condemnation. At heart, this is because the pay of CEOs of public companies has far outstripped the pay of ordinary workers or inflation. The High Pay Centre found in its ‘FTSE 100 CEO survey’ 2015 that the average pay ratio between FTSE 100 CEOs and the average wage of their employees was 147:1, with CEO pay of £5.5 million. The gap between top pay and that received by the average worker in the business has roughly tripled, from around 50x in the late 1990s to about 150x today. The explanations offered for this rise—globalisation, technological change, the so-called ‘war for talent’, the growth in the size of companies or in the alleged complexity/difficulty in having a top job—are not seen as convincing. Sir Philip Hampton, now the chair of GlaxoSmithKline but previously of Sainsbury’s and the Royal Bank of Scotland, told the High Pay Centre that the larger a business was, arguably, the less credit a CEO deserved: there is so much corporate infrastructure in place, with all sorts of crucial decisions being taken by others far from the CEO’s office. In its written evidence to the Business, Innovation and Skills Select Committee in October 2016, The High Pay Centre suggested the following way to deal with the issue of executive pay: • A new, properly resourced regulator is needed. Business should not have a ‘comply or explain’ relationship with the law.

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• A cultural and legislative shift is needed to make shareholders play a more active part in holding directors to account for their decisions, especially on the question of pay. It is unclear whether all shareholders are willing or able to act like responsible owners. • Executive pay is out of control and action is needed. Important first steps would be making the publication of pay ratios mandatory, including employee representatives on remuneration committees, and making shareholder votes mandatory and binding. But these would be the precursors to necessary cultural change, which is the key to lasting improvement. • Boards are not diverse enough. There are not enough women in executive roles, and not enough people from ethnic minorities. Directors are drawn from too narrow a social circle. • We need employee representatives on remuneration committees (and probably on full boards as well). The ‘shop floor’ perspective in the pay discussion would bring a much-needed reality check. Clearly, senior executive pay across the private and not-for-profit sectors is a subject which is likely to stay on the political agenda and also that of shareholders for some time. Saker Nusseibeh, chief executive of Hermes Investment Management, reiterated on the company’s website: We strongly believe the time is right for companies and investors to fundamentally rethink their approach to executive remuneration we are confident that there is now a significant appetite for change among many to consider how they may more closely align pay with the interests of their long-term owners, as well as broader society, in order to restore trust and position themselves best for future success. The investment management industry must recognise its responsibility to engage with companies effectively as interested owners and, where necessary, use shareholder rights collectively and consistently.

Furthermore, in a December 2016 hearing of the Business, Energy and Industrial Strategy Committee, Amra Balic of Blackrock, the world’s biggest fund manager, pledged to hold boards’ feet to the fire when it comes to executive pay, and as mentioned in the introduction to this report, the prime minister, Teresa May, has promised to tackle fat cat pay to create a Britain that ‘works for everyone—not just the privileged few’. All boards already have executive pay on their agenda and typically have remuneration committees, one of the few human capital activities they concern themselves with. They have no mandate to consider issues such as zero-hours contracts but perhaps they need to in order to ensure pay fairness.

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At the same time they will need to be firmer in setting remuneration rates if they are to keep shareholders, politicians and the public onside, and avoid the triple threats of shareholder revolt, legislation and public condemnation.

References Fitz-enz, J. (1997). It’s Costly to Lose Good Employees. Workforce Magazine. Busch, R. & Szypko, M. (2013). Perception is Reality: The Importance of Pay Fairness to Employees and Organisations. World at Work Journal. www.worldat work.org. Timothy Judge et al. (2010). The Relationship Between Pay and Job Satisfaction: A Meta-analysis of the Literature. Journal of Vocational Behaviour. www.science direct.com. ‘The £60bn Question Report’ by The Workforce Institute at Kronos and Coleman Parkes (2016). www.workforceinstitute.org Wiley, J. & Kowske, B. (November, 2011). Respect: Delivering Results by Giving Employees What They Really Want. New York: Pfeiffer Publishing.

Part III Cross-Sector Leaders’ Insights

This section, the most substantive of the book, presents insights from leaders of public, private and not-for-profit organisations (seven, five and six insights respectively), in addition to those of a number of leaders of relevant professional bodies. Insights from John Timpson, Chair of Timpsons, are featured in Chapter 18. These insights resulted from in-depth interviews, usually involving face-to-face meetings but sometimes on the telephone. All interviewees were given the opportunity to review and comment on the draft copy I provided. There was no scientific method adopted in the selection of the interviewees, other than that there should be a balance between the three sectors and that the leaders should have strong reputations with regard to their approach to people. Concerning private sector choices, it was deemed that the organisations selected should include both public limited companies and private companies. Many of the interviewees are known to me personally or were introduced through my contacts, although several were contacted out of the blue. I tried to ensure gender balance in structuring the contributions. Interestingly, none of the seven FTSE 100 female CEOs I contacted were prepared to provide interviews, which I found disappointing. Everyone else, apart from the Charity Commission (as is explained below) enthusiastically gave of their time. All contributors were asked roughly the same questions, which included outline information on their organisation, their strategy and their organisational and personal approaches to human capital management. A few contributors kindly provided vignettes, brief evocative pieces to illustrate their approach to people.

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Although the contributions have been analysed by sector, readers who are keen really to learn from the insights should not stick to their own sectors. Just as with the experiential learning at the Windsor Leadership Trust, significant benefits can arise from considering different perspectives and ways of doing things, because, in essence, it is all about managing people and there is no single right way, regardless of sector.

15 Public Sector Leader Insights

Insights from Michael Lockwood, CEO Harrow Council The Council and Context Harrow Council is the local authority for the London Borough of Harrow, with a population of about 250,000. Its 2015/16 budget is £588.5 million. It employs about 4,500 staff. A Cabinet comprised of ten elected members (six men and four women, three BAME members), from the majority (Labour) group on the council, including the leader and deputy leader, form the executive. They are responsible for carrying out most of the local authority’s functions. There are five men on the management board: Michael Lockwood, CEO, and four directors, including a people services director. Harrow operates a multiple link between average staff pay and CEO pay, and it is one of the metrics they report and publish annually. The pay multiple— that is, the ratio between the highest paid salary (me) and the median salary of the council’s workforce—is 1.7. It does not have a worker on the board as Harrow is largely trade unionised and this is actively managed, including regular meetings with union representatives between management board members and elected members. A self-organised staff board (‘Making a Difference’ group) provides feedback on staff views and ideas. Michael set out the context in Harrow, which included, as with most local authorities, a severe reduction in funding from government with 700 different services, including responsibility for 200 children in care with all the © The Author(s) 2017 A. Coppin, The Human Capital Imperative, DOI 10.1007/978-3-319-49121-9_15

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potential reputational consequences. Harrow has a diverse population and is a borough where 147 different languages are spoken.

Human Capital Approach Michael said the Harrow administration publicly recognises that the council’s staff are its greatest asset. This is something that he also champions as head of the paid service (which has statutory responsibility for the workforce), and it is the principle that underpins his approach to staff engagement. In a world where he has many competing priorities, it remains amongst the highest. In Michael’s view, the key to taking Harrow Council from worst performing local authority to best performing local authority is its approach to its people. When starting his job, he realised a new approach was needed. His first impressions were that the council had acquiesced in adequacy; there was no clarity of where the council was going; there was low staff morale and a blame culture; and there wa not an environment to flourish. Michael embarked on a seven-point set of guidelines to run the council on a more business-like basis: • Clarify purpose, mission and values, ‘Be Courageous, Do it Together & Make it Happen’, the latter decided largely by the workforce to reflect what they believe makes Harrow Council a great one to work for. • Restructure to support the council’s priorities and deliver services better (this required some people changeover). • Invest in people, focusing on middle managers with conferences and practical skills, and frontline staff with training in sorting practical problems; a national vocational qualification (NVQ) programme for staff; a management development programme; a leadership development programme to identify future leaders; and a senior leadership development programme. • Get the work–life balance of the workforce in synch. • Instigate a new performance management system, which included encouraging people to take risks and looking at how to deal with failure, and not penalising staff for trying to innovate. • Instigate cultural change, from hierarchical/blame and risk averse to one that genuinely values people. This included another conference with the middle managers to understand what needs to stop being done/done differently to support values. In addition, there is a ‘Workforce

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Ambition’ developed around the staff being commercially minded, innovative and collaborative. • Improve communication, internally and externally, with good and bad news as it happens. This engendered trust. Michael pointed out that the approach set out in his seven-point programme was reflected in Harrow’s new ‘Our Harrow Ambition’, and the new values underpin the vision of ‘Working together to make a difference for Harrow’ and the strategic objectives of ‘Building a Better Harrow’, creating the places and the opportunities that all residents deserve: a thriving, modern, inclusive and vibrant borough; being more business-like and business friendly with an aim for the council, eventually, to be self-financing; and protecting the most vulnerable and supporting families.

Diversity and Inclusion The council actively promotes diversity and has an equalities strategy that has been agreed at Cabinet in the last year. They have a Corporate Equalities Group and also a cabinet member for equalities. Harrow celebrated Black History Month in 2016. The council measure the diversity of its workforce and report it to Cabinet quarterly. Their equalities strategy has a focus on LGBT in 2016 so they also celebrated LGBT History Month. The council have signed up to the Stonewall Workplace Equalities Index and attended London Pride.

Health and Wellbeing Harrow run regular health awareness sessions for staff and also specialist sessions focusing on women’s health and men’s health. They have a Health at Work Group, which advises them. In 2016 they ran a series of events to celebrate World Mental Health Day and to raise awareness and understanding of mental health in the workforce. Harrow has run manager training sessions on how to spot and manage workforce mental health issues and they have an officer champion for mental health who is also on the executive board. Michael says that the seven-point plan and strategic people-centred focus of Harrow has resulted in significant performance improvements. He specifically referred to the measures of staff satisfaction and advocacy doubling; staff sickness levels being down by 30%; having some of London’s best

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schools and one of the best adoption services; resident satisfaction levels going up by 15%; that recycling levels are among the nation’s best; and that Harrow is one of the safest boroughs in London. It has been a pioneer and frequent national award winner for its work on digital channels, channel migration and a customer contact centre.

Metrics With regard to human capital metrics, Michael and his team focus on staff sickness; percentage of the workforce that has had an appraisal; percentage of senior managers (i.e. top 5% earners who are women, have a disability, are BME); and percentage of staff who have a disability, are BME. Harrow runs a regular staff survey that includes a range of measures about workforce engagement—measuring ‘positive affect and identification’, ‘strategic understanding’ and ‘discretionary effort’. Harrow also measures the diversity of the workforce and reports this to Cabinet quarterly. Michael explained that, corporately, Harrow has signed up to Investors in People, which is their formal accreditation approach. Parts of the council have already achieved IIP Gold.

Personal Style In terms of Michael’s personal style in getting the best from people, he listed the following: • spending upwards of 40% of his time with people; • attending every staff induction event where he speaks to capture the Harrow way of working, setting expectations at the outset, including the desire that everyone should enjoy coming to work, thereby ensuring a link between the shop floor and the board room, and ensuring that everyone knows him; • spending half a day a month in a department and ensuring that he visits all of them; • using listening as part of his approach, but it is equally important to do something about what he hears; • treating everyone with respect; • randomly picking twelve staff for a ‘cup of tea and a biscuit’ in a confidential session where he asks for advice; • presenting to everyone twice a year through staff forums;

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• holding a number of one-to-one sessions and trying to be available and accessible to staff; • making regular visits to wards in the borough to make sure he is connected to the issues that residents face.

Michael’s Vignette Rather uniquely, having left Harrow I made the decision to accept the challenge and return to the borough because of the staff within it. Instead of spending the first week relooking at the structures of the senior management or agreeing its priorities, I decided to spend the whole first week speaking to every member of staff in the organisation both within the main office as well as other locations (i.e. the depot). A key element was listening to what had affected them, how they felt the council had changed during the period I was away and what they felt need to change. I made a number of simple decisions as a result of their feedback. It was great to know that staff actually missed me and valued the time and effort I spent talking to them at such a difficult period of time at the council. The message is the little big things are important to staff.

Insights from Alison Nimmo, CBE, CEO, the Crown Estate The Crown Estate has a unique and complex ownership structure which needs some explanation. It is an extensive collection of land and property holdings in the UK, the origins of which date back to 1066. The legal owner of the estate is the sovereign, but all profits are returned to HM Treasury for the benefit of the nation’s finances. This arrangement dates back to 1760, when King George III gave up his hereditary land and revenues and, in return, Parliament voted him an income called the Civil List (now the Sovereign Grant) to fund the Royal Household. Despite this unusual and historic context, these days the Crown Estate’s extensive portfolio is overseen by an independent board, with a commercial remit, established by an act of Parliament. The Board of Commissioners are formally accountable to the Parliament of the UK, which is why it is included in the public sector insights part of this book. Having said all this, the organisation is run as an independent, modern and progressive

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business. Alison Nimmo, the CEO, is also the second commissioner (the chairman is the first commissioner), and she sits on the nine-member board of commissioners as well as chairing the executive committee. This board, whose make-up is prescribed by statute, has three female members and one person of BAME status. The head of HR is not a member of either body but is a member of the senior leadership team. For the financial year of 2015/16 the Crown Estate’s net revenue profit was a record high of £304.1 million and it employed around 458 people. Alison explained the context for her leadership of the organisation as one of accelerated culture change from a traditional historic or landed estate to one with a progressive and commercial approach, which she defines as ‘conscious commercialism’. This means delivering long -term sustainable growth with people, purpose and performance at its heart. She considers people are the Crown Estate’s most important asset, notwithstanding the organisation’s unique and extremely valuable (£12 billion) property portfolio. Not only is managing people/talent a big organisational concern but it is her own personal priority as, in her view, it creates the difference between ‘good and great’ performance. She explained that when she joined the business it felt like a series of silos, or distinct portfolios, perhaps lacking a clear and shared sense of purpose. As part of creating a new ten-year strategy, Vision 2022, the whole business took part in creating a ‘big picture’—a drawing which encouraged everyone to stand back and look at the whole business,to draw out what was special and different, and to see how all of the bits worked together to create success. Alison smiled as she recollected the process of creating the picture, saying that this was as important, if not more so, than the actual outcome, as it engaged everyone in a very rich, engaging and fun process. This big picture formed the foundations of the new ten-year vision. As you can see below, the team sits right at the heart of the big picture (Fig. 15.1). The Crown Estate’s vision is to be a progressive commercial business creating significant value beyond just its financial return. This is underpinned by four strategic objectives, of which one is people centred: actively manage our core assets; encourage a high-performance culture; ensure high levels of customer satisfaction; and create a sustainable and resilient business. However, Alison believes that values, culture and behaviours are fundamental to performance; often far more important than strategy. The Crown Estate’s values—commercialism, integrity and stewardship—have been embedded strongly for a long time and are chiselled into the stone walls of each floor of the office. However, more recently the values have been added to with a set of behaviours, developed ‘bottom up’ by staff. These are: we

Insights from Alison Nimmo, CBE, CEO, the Crown Estate

Fig. 15.1

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The Crown Estate Pictorial Strategy

Source: The Crown Estate

respect and are open and honest with each other and the people we work with; we work collaboratively with colleagues and partners, connecting people, ideas and opportunities; we are enterprising in how we create value, agile and considered in how we do business; we do what we say and tackle our work with spirit and commitment, empowering ourselves and others. Alison explained that the organisation’s corporate plan sets out, at the beginning of each year, how the business, from individuals to teams to whole portfolios, will keep moving towards the vision, with clear targets and key performance indicators. She said that the board discuss human capital management at a strategic level, supported by the remuneration. committee and a (relatively new) nominations committee. Reward, recognition and succession planning have been key issues for the business in recent years as it has sought to grow and attract a deep pool of talent and to overcome ‘risk of flight’ as a major risk. Alison described a huge change in the approach to HR from one which was principally focused on process and compliance to one much more

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strongly focused on people and performance. This change included the recruitment of a new HR team who could operate very much as business ‘partners’. As part of this change, Alison spoke of a number of methodologies to optimise human capital productivity and these are set out in a specific HR action plan for each year. This includes a clear sense of priorities; a programme of active staff engagement and feedback—including a detailed annual survey of all staff; a dashboard of measures actively managed (turnover, sickness, time to hire etc.); a leadership programme—connected leadership—for twenty of the most senior staff, including Alison and her directors; a new performance management system based on behaviours and a focus on talent development and succession planning; being accredited as a living wage employer; family-friendly policies, including shared parental leave and flexible working; a very active social committee; and annual open forum/s for all staff. She pointed to a ground-breaking BUPA programme which is part of a health and safety and wellbeing focus. The programme includes private medical insurance, fast access treatment for musculoskeletal care, a 24/7 health line, and mental health/mindfulness programmes and support. Whilst it is early days for this programme, there is already evidence of significant business benefits in terms of reducing absence and improving morale. The most significant next major change for the business is that it is moving its headquarters (HQ) (into one of its most recent development projects). The clear rationale behind the move is to continue to modernise and to encourage more collaboration, productivity and cross-business working. The move will mean the whole HQ team of 250 consolidating from four separate floors onto a single floor with agile working and a range of different workstations, configurations and meeting spaces. The popular café with shared tables and healthy food options has been named and designed by staff, and there has been a high level of engagement and consultation on much of the office layout, materials and priorities—even including showers and cycle-towork facilities. With regard to measures, the key strategic people measures for the Crown Estate are employee survey results and hours worked without a Riddor incident. However, the organisation publishes a number of other key human capital metrics which feature on the organisation’s HR dashboard, including pay multiples (band of the highest paid director’s total remuneration as a multiple of the median total remuneration of all employees (in 2015/16 this was 14.6)); sickness; exit interviews; the number of female managers and male managers; the number of female and male FTE

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employees; employee salary ratios by gender; employee turnover; average hours of training per year and the total number of training events; and One Voice survey results (participation rates, satisfaction, scores on key indicators—broken down by level, gender, ethnicity, sexual orientation etc.). As part of its commitment to excellence and being an equal opportunity employer, the Crown Estate is an active member of Stonewall, the RICS diversity programme, the Business Disability Forum and Real Estate Balance. Alison sees her role as being primarily one of team coach/conductor rather than distant command and control. This does not mean it is not necessary at times to be tough—,for example within the last twelve months she has restructured the business, including reducing her most senior leadership team from seven to four. Interestingly, Alison has her own coach/mentor. She devotes over 50% of her personal time to people issues, which includes recruiting talent; town hall and smaller Q&A type meetings with staff; ‘Ask Alison’ lunches to which she invites staff from across the business; and a weekly Friday blog for all staff, and an active programme of ‘guest bloggers’ telling great stories from right across the business. Three key aspects Alison uses to optimise human capital are: finding the right people—hire slowly and hire the best—she considers that building the right team is the most important part of the CEO’s role; trust and empower staff to get on with the job (and champion and support them, give them credit for success); create a clear framework for people to work within and, as she already pointed out, this is as much about behaviours and values as it is about a clear vision and direction.

Insights from Sue Owen, CB, Permanent Secretary and Accounting Officer Department for Culture, Media and Sport and Civil Service Diversity and Inclusion Champion The Department for Culture, Media and Sport (DCMS) is a UK Government department with responsibility for arts and culture, heritage, tourism, gambling and sport in England, plus creative industries, telecoms, broadcasting and the digital economy throughout the UK. The department was also responsible for the delivery of the 2012 London Olympic Games and Paralympic Games, and it is currently overseeing the rollout of broadband infrastructure to rural areas. The DCMS oversees forty-five arm’s-length bodies, from the BBC to the British Museum

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and Visit Britain to Sport England. It now employs directly 580 people and has a budget of about £1.6 billion. The ministerial team of six includes three women, and the executive board, which Sue chairs, has ten members, including five women. Sue does not have a room but has a desk in the open office. The DCMS vision is ‘driving growth, enriching lives and promoting Britain to the world’. Sue pointed out that this vision was developed with the involvement of all staff. The department’s priorities are growing the economy; connecting the UK; encouraging participation; sustaining excellence and promoting Britain; supporting our media; and ensuring social responsibility. Performance is tracked with a series of dashboards and metrics organised under these priorities. Sue said that ‘our people are our strategy’, with the department covering a huge footprint in terms of responsibilities, which were extended in 2015. These now include the whole of the digital economy, and the office of civil society, altogether contributing over 13% of the UK economy, and including some of the fastest-growing sectors, such as tourism and the digital and creative industries. But with so few people employed in the DCMS, they have to use their influence on the 34,000 people who are employed by the DCMS’s forty-five-strong army of arm’s-length bodies. The relationships which are key to this influence are helped by an active programme of secondments into and out of the department. One of Sue’s initial major challenges on appointment in 2013 was to address the DCMS’s staff engagement score, a key human capital metric, which had dropped from 54% in 2011 to 45% in 2012. Part of the reason for this was post-Olympic blues, said Sue, but also part of it was that that was the beginning of the next phase of the civil service-wide change programme and more staff reductions. At that time there was no new post it-Olympics vision to guide the department and align the people behind. One important thing that Sue instigated as soon as possible was to change the way hot desking worked from a free for all to a team hub arrangement, so that staff sit with team colleagues and it is for team leaders to manage the fact that there are only seven desks for every ten people through planning of leave and days working from home. This enabled teams in DCMS to give each area an identity by decorating their hubs. This also helps others and visitors to understand what each team is working on, and generally makes the place look vibrant and interesting. In addition, she cites another four changes she enacted that focused on people and getting the leadership right, as described below.

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Senior Visibility and Openness Sue has made a big effort to ensure the executive team and senior leaders are visible and accessible to staff through things like more frequent ‘stand-ups’ and Q&A at the all-staff away days. This makes it easier for people to identify with their leaders, and it offers them the opportunity to challenge them, and to hear what DCMS is about and what the vision for the organisation is.

Making Sure People Have Time Together Away from the Day Job When everyone is very pressed delivering day-to-day business, it can feel like an indulgence to set aside half a day now and then to spend time together as a leadership team, whether as executive board, the senior civil service or indeed all staff. DCMS staff conferences happen over a day twice a year, usually at an iconic venue such as Wembley stadium. These help the top team present itself as a cohesive team to the department, to look hard at what needs to be done to improve how things work, and to foster a sense of collective responsibility around the DCMS vision. Sue considers that the product of that approach and time is that the department’s people survey results now score highly on leadership and managing change. Other ways the whole of the staff get to know each other as people are through several in-house clubs, two self-financed all-staff parties a year, and a staff awards event, typically with a celebrity presenting the awards.

Prioritising Internal Communications The DCMS had cut back its resource for internal communications to almost nothing in the budget reductions the department went through after the 2012 Olympics. Sue ensured this grew again, given the criticality of communication to staff engagement, and while her team is naturally still a small one, the three people who deliver the DCMS internal comms are innovative and energetic. They make departmental communications engaging and unstuffy, such as blogs and intranet articles, one of which is called ‘Chips or Mash’ and interviews a staff member (from any level) each week. This ends with the question: Which do you prefer—Chips or Mash? Sue’s monthly town hall meeting covers

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a range of subjects, with frequent appearances by ministers or people promoting issues such as Mental Health Week, Digital Learning Week or Black History Month. Each team has a weekly stand-up meeting (forty or fifty people on Tuesdays) to cascade information on what is going on in their area and the rest of the department. Sue thinks this approach has contributed significantly to ensure that people in the department know that they are cared about and listened to, and that they have the information they need to do their jobs.

Investing in People The DCMS had looked to make its corporate functions as streamlined as possible when it reduced its staff by 50% as part of government spending reductions. However, ultimately, it does not help departmental performance if staff don’t get the right HR support with the right learning and development opportunities. So, through a rigorous process of resource prioritisation and looking hard at what activities were essential, Sue strengthened the DCMS HR team and created strong HR partnerships within the business. The people survey scores for learning and development were poor, so the HR director created the DCMS Academy, complete with a ‘freshers’ week’. The emphasis is on learning from within, so staff give masterclasses on areas of expertise, lessons learned from particular projects and so on. Sue considers the impact of all of this work is reflected in departmental productivity and performance, but also in civil service people survey results— for the second year running the DCMS had the biggest gain and it is currently third among all Whitehall departments with an engagement score of 66% in 2015, up from 45% in 2012. Whilst she points out it should be easier to effect changes in engagement and morale in a small department, and in a department with such a positive vision, it is nevertheless a remarkable improvement. Sue rates the engagement survey as a way of defining key human capital metrics. She puts a great deal of effort into maximising participation and the DCMS completion rate is over 95%, which compares with under half that before she arrived. Surveys are analysed very closely for lessons and changes—for example, the push on learning and development, and consideration of work–life balance issues. Important issues affecting productivity, such as bullying and harassment scores, are cut by BAME, disability, gender and LGBT. Sue and other permanent

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secretaries are appraised partly on the results of the survey. In addition to the full annual survey, the DCMS also undertakes its own Pulse survey— for instance, after the Brexit referendum to understand how staff were feeling. Sue highlighted the importance of good health and wellbeing not only because they improve an individual’s quality of life but also because they can play an important role in increasing workforce motivation, engagement and productivity. She has a personal civil service-wide interest in such matters in her role as chair of the civil service occupational charity, the Charity for Civil Servants, and leading on diversity across the whole civil service. In terms of her personal style with people, Sue revealed: ‘I like to know about people and them to know about me (e.g. they all know of my support for Everton and that my Dad’s ashes are buried under the pitch)’. She thinks it important personally to attend every induction and speak for about half an hour about vision and things like her insistence on a no-blame culture in the department: ‘we share responsibility when things go wrong, but accept individual praise when they go right’, and her key tools are having good internal comms; walking the talk; and having personal confidence and resilience. Sue estimates between 40% and 50% of her diary time is spent on people issues.

Sue’s Vignette 24 June, the day after the Brexit vote, was my husband and son’s joint birthday; I had planned a day off, but went into work by 8am. The atmosphere was dreadful. Of course, some will have voted to leave, but most had not and were frankly in a classic state of shock, many were crying. Those whose careers had focused on Europe, and non-British EU nationals were especially stunned. This was indeed not a result we had planned for, and the prime minister stepped down at 9:00am. By midmorning I felt some responsibility to rally folk round, and called an impromptu ad hoc town hall meeting. I said that as civil servants it was our duty to be professional, to set personal views aside and focus on helping the government find the best way through. It was after all a democratic decision, more people had voted to leave than to remain, and we needed to respect that. But I also said now was a time to look out for each other, to comfort those most personally affected and generally step up to this new responsibility. I felt pretty exhausted doing this, and after,

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but I received a welter of personal emails thanking me, and not only from our EU staff.

Insights from Sir Howard Bernstein, CEO, Manchester City Council Manchester City Council is the local government authority for Manchester, a city and metropolitan borough in Greater Manchester. It is Labour controlled and composed of ninety-six councillors. It employs 14,000 staff across central services and schools with an annual budget in 2016/17 of £529 million. Meetings of the council and committees are organised within an eight-week cycle, with the council itself meeting six times a year. The council’s role is to debate its budget, constitution and policy framework. The council appoints the executive, a cabinet of members, which is the principal decision-making body. There are nine members of the executive, six men and three women, and one of the men is BAME. Overview and scrutiny committees are set up to monitor decisions taken and to hold decision-makers to account, as well as to review council policies and make recommendations on future policy options. There is a Health and Wellbeing Board and a Finance and HR Committee. The council publishes a salary multiple between the highest paid officer (Sir Howard Bernstein) and the median rate for all officers, and the ratio published in March 2016 was 8.89:1. Sir Howard is CEO and provided his insights shortly before he decided to retire from his position, after forty-five years at the town hall. Many people paid tribute to him following publication of his decision, including the former chancellor George Osborne, who wrote: I have worked with lots of very clever civil servants in Whitehall and come across lots of officials in local government. But Sir Howard is one of the very, very best public servants I’ve ever come across. I just think in lots of different ways he’s the star of British local government and frankly I can’t think of anyone who comes close to him.

For Sir Howard, ‘An organisation is only as good as the people it employs.’ The context for the Council’s People Strategy is the city’s new Our Manchester Strategy, which has recently been developed following a citywide consultation process. The key elements of the revised strategy, which

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involved a very deep consultation exercise with the people of Manchester, is set out below.

Our Manchester Strategy Key Elements: Objective To support the delivery of the Manchester Strategy through the Manchester Partnership. Our vision is for Manchester to be in the top flight of world-class cities by 2025, when the city will • have a competitive, dynamic and sustainable economy that draws on our distinctive strengths in science, advanced manufacturing, culture, and creative and digital business—cultivating and encouraging new ideas; • possess highly skilled, enterprising and industrious people; • be connected, internationally and within the UK; • play its full part in limiting the impacts of climate change; • be a place where residents from all backgrounds feel safe, can aspire, succeed and live well; • be clean, attractive, culturally rich, outward-looking and welcoming. This strategy will require a new approach and a new way for the council and its partners to work with and listen to the people of Manchester. Under the new ‘Our Manchester’ approach we will focus on what we can all do working together, building on the great strengths of the city and the people that make it up, to work towards this vision. An important thrust of the new strategy is something Sir Howard has long championed—partnerships. The Manchester Partnership brings together public, private and third-sector organisations to work together to deliver the strategy, another example of tri-sector collaboration which is promoted in this book. Sir Howard said that engaging the people is a part of his personal philosophy and approach, and for this to be successful it is important to embed the philosophy with trust. However, by way of background, he points out that in Manchester, as in other local authority areas, it has not been easy to do this with several thousand staff out as a result of a £200 million revenue cut by government, and this has undoubtedly eroded the organisational development effort. Over the last few years the council has been rethinking its approach to human capital, not just as employers but to address a cross-

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sector people/relationships approach to their public service reform agenda. Sir Howard is unsure about the effect of having a worker on the board as an effective way of pursuing that agenda, particularly in Manchester, which has an excellent relationship with trade unions. Sir Howard kindly shared early thinking with me on revising the council’s people strategy, developed by its senior leadership team in August 2016, in order to demonstrate how the council approaches the critical topic of human capital management. The people strategy will be led by the requirement to support the delivery of the ‘Our Manchester Strategy’. It has been informed by sessions with SMT, elected Members, WLT, the listening in action workshops, feedback from trades unions and the BHeard survey. It is also cognisant of the environment in which we work in terms of the local government landscape as a whole, as well as the very specific challenges and opportunities created by the devolution arrangements in Manchester and the significant emphasis on partnership and collaboration across the whole of the city region landscape. The emerging themes identified by Sir Howard’s team are shown below. Creating a Culture for People to Flourish • aligning all our key strategies into a coherent approach so that colleagues see and understand the synergies; • providing excellent leadership and management; • engaging the workforce; • embedding continuous Improvement through lean systems; • helping people to work and Think in a more flexible way. Sourcing and Keeping Talented People • • • • •

developing workforce plans; recruiting, resourcing and retaining talent; creating a learning organisation that values development for all; developing the skills and competencies that we require; supporting Manchester people furthest from the jobs market. Creating Energy, Enthusiasm and Rewards for Great Performance

• • • •

developing transparent and fair approaches to reward; benchmarking and reviewing our reward decisions; creating a culture that encourages recognition of good performance; tackling poor performance appropriately;

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• supporting workforce health and wellbeing. Importantly, the Manchester SMT considered the people strategy in the context of organisational performance and they identified a number of important factors that need to be taken into account when drawing up the strategy, as set out below—it did not live in isolation of these but had to be designed to support and deliver them. ‘Our Manchester’ This is a key driver for the people strategy and the catalyst for culture change. This strategy calls for the development of a different relationship with residents, businesses and communities and from the council’s perspective the people who will deliver that new approach are our colleagues in the organisation. Our colleagues cannot deliver that new approach if they are not managed and led in a way that is congruent with a style of openness, visibility and high trust and if they do not have the right skills and competencies to take the new style forward. Devolution and Partnerships Manchester’s devolution deal, more than any other, is rooted in an imperative for true partnership in the city region and particularly across the public sector workforce. This has a huge impact on people at an individual and professional level, and it will call for people to consider and embrace fundamental changes to their working lives and we know that isn’t easy. In addition, it will create challenges for trade unions and professional bodies as well as HR professionals to create systems and processes that will facilitate change rather than block it. Leaders will be challenged to in terms of creating the right environment for change to happen and for teams to collaborate, and there will be a whole range of development needs identified for staff at all levels to be able to function in this new world.

A Public Sector Workforce In line with the devolution deal there is work in progress which is considering developing a much more flexible workforce that works right across the public sector. As part of this work, new business models for service delivery are being considered, joint leadership programmes are emerging and pilots are developing. The council’s desire to create a culture where there is a more flexible workforce that is engaged and well led needs to be supported through enabling cross organisational workforce movement.

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The Economy Manchester is a city that is vibrant and growing where businesses are attracted to be and talented people have options about where they choose to work. The council is an attractive employer with a strong reputation as a great place to work but many other organisations can make that claim too. We have already started to see an increase in reliance on agency staff to fill roles that can’t be filled through the usual recruitment methods, and, areas where market supplements are needed to attract and retain staff. It may be a small price to pay in the context of the economic success of Manchester but it will impact on the council’s costs and desire to attract and keep talent.

Supporting Manchester People Although the economy is significantly stronger in Manchester than in many other parts of the country, there are some residents of Manchester who are not benefiting from that growth and are far from feeling able to join the competitive jobs market. Manchester City Council has been at the forefront of work to support those people for many years and will continue to fill entry-level council roles by targeting specific groups of people offering apprenticeships, temporary and permanent roles, and work experience programmes to help support their transition to work.

M People There are a number of elements to the M People framework that impact on how the organisation works at present and which need to be reviewed. The original purpose of M People and its early successes were rooted in a desire to create a more flexible workforce that could move around the departmental structures, was hungry for development and looking for opportunity. Those ambitions must not be lost but the processes that have grown up around them need to be reviewed. Any cross-organisational approach to support a ‘one public sector workforce’ will also widen the potential range of opportunities available for people. Measurement and methodologies The Council participates in the BHeard engagement survey and Sir Howard considers this a useful tool, which is analysed with its actions

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being fed back to staff. BHeard is a national survey developed and managed by Best Companies which allows the council to measure levels of engagement across different parts of the workforce and different hierarchical levels overall, and by a range of factors. The organisation first took part in the survey in 2015 with a 30% sample of its staff being invited to participate. The survey provides a number of positives for the council: • Compared with other comparable organisations, staff feel more positive about their pay and benefits and think they are getting a ‘fair deal’. • Staff value and work well with their team members. • Staff want to be heard—the council’s response rate was higher than the average. However, there were also a number of areas where the need for focus on improving engagement was identified specifically: • Relationships with managers are important but sometimes direct line managers are not offering the support required to help people do a good job. • Staff are not clear or excited about where the organisation is going • Staff feel that their leaders are not visible enough and need to do more ‘listening’ rather than ‘telling’. • Staff feel that there are limited opportunities for personal growth and development. • Staff are not positive about their wellbeing and have concerns about their job security. The council has developed a plan to respond to these findings and more local plans have also been put in place across directorates and services: • A strong focus of all this work is on strengthening communication and engagement across the council and on improving core people management practice. • This work includes a fundamental review of the council’s approach to appraisals and a move away from an annual appraisal to a more flexible framework of tools and support, which encourages more regular strengthsbased conversations between managers and their staff. The workforce measures within the corporate dashboard provide an overview of key trends in relation to the workforce across a number of

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areas. It is recognised that significant further work is needed to improve data and analysis on workforce skills and qualifications. An organisationwide skills audit is being planned which will support improved data in this area with, in the longer term, a new corporate talent management system enhancing this capacity further. Further work will be undertaken to refine the people measures once the new people strategy has been finalised. The core workforce metrics that are currently included in the comprehensive corporate dashboard are: • total FTE size of the workforce; • projected year-end variance against workforce budget; • average days lost in a standard working month per FTE, for the quarter; • percentage of employees not absent; • percentage of current employees qualified level 2 and above and level 3 and above; • progression rate of apprentices and graduate trainees; • difference between progression rate of BME and non-BME employees; • difference between progression rate of disabled and non-disabled employees. Some of these measures are not standard, such as the progression rates, and I comment further on this in the human analytics chapter. Sir Howard singled out improving the council’s sickness absence as being identified as a significant issue by both senior officers and members, and a priority area of focus. Mental health issues (stress, anxiety and depression) continue to be the main contributor to absence levels, and a series of new development modules for managers and staff have now been made available to support mental health awareness. This forms part of the organisation’s overarching approach to employee health and wellbeing, which has been an area of focus for at least the past three years and is overseen by a group of officers representing services across the council. Sir Howard is head of the paid service and so has significant influence on the human capital approach, but he pointed out that members take decisions on resources. He considered that key to optimising human capital was hiring the right people by recruiting for passion, and for people who want to make a difference and a positive contribution to improve people’s lives. If it is just money that is wanted then this is not the place for them. In terms of future

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developments, along with confirming the people strategy, an organisationwide skills audit is being planned which will support improved data in this area with, in the longer term, a new corporate talent management system enhancing this capacity further.

The Armed Forces My own six-year service as an NED of the Royal Air Force brought me into close contact with the operating methodologies of the RAF and how it gets the best from its people. During my time on the board, I witnessed at first hand some world-leading methodologies, some of which are, in my view, applicable to business and charitable organisations. So, I considered it important to include a section in this book on how the military manage their people but, rather than focus on the RAF, I have secured contributions from the Army and the Royal Navy.

The Context The Ministry of Defence published a ‘Single Departmental Plan: 2015 to 2020’ on 29 July 2016, which sets out the principal armed forces context for the interviews I undertook.

The Vision for the Armed Forces We will protect our people, territories, value and interests, at home and overseas, through strong armed forces and in partnership with allies, to ensure our security and safeguard our prosperity.

The Strategic Objectives 1 Protect our people 2 Project our global influence 3 Promote our prosperity 4 Maintain a strategic base and integrated global support network, and manage the Department of State. The government has committed to spending 2% of GDP on defence, which amounts to some £35.3 billion in the financial year 2015/16. This

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includes £27.2 billion resource departmental expenditure limit (DEL) and £7.1 billion capital DEL, the latter spend making the department a big customer of the private sector. To set the people context, in the last ‘Annual Personnel Report’ published by the Ministry of Defence in April 2014, there were 159,630 UK regular forces personnel, of which 27,850 were officers and 131,770 were other ranks. The percentage of women in the UK regular forces was 9.9% and BME personnel comprised 7.1%.

The Army As of 1 April 2016 there were 79,750 full-time trained strength in the army but, within its Single Departmental Plan, the Ministry of Defence committed to maintaining the size of the regular armed services and not reduce the army to below 82,000. The percentage of women in the British Army and Army Reserve as of April 2016 was 10.1% and BME personnel was 6.7% (Defence Statistics—Tri-Service).

Insights from Major General Chris Tickell, General Officer Commanding the Army Recruiting and Training Division General Tickell said: The Army views people as its most important asset. We differentiate from the other services in that we equip the man and they man the equipment. The Chief of the General Staff, General Sir Nick Carter, has highlighted our responsibility to maximise our talent and has directed that a strategy is developed and implemented to do so.

People Strategy People issues feature on the agenda of every army board. A new personnel strategy for the army will be completed by 17 March 2017 but will be based on six lines of development:

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▫ achieving full manning, which includes furnishing the army with the best talent available; ▫ identifying and developing talent through personal and professional education and training; ▫ improving behaviours by inculcating cultures that strengthen the army; ▫ maximising opportunities by removing unjustified structural barriers and enabling career agility; ▫ optimising mental and physical performance; ▫ providing input into the Defence Personnel Programme. The army sergeant major sits on the Army Board and is able to give a soldier’s perspective on the items discussed. There are similar arrangements in place with other forces boards. Interestingly, arguably the three services are the first exponents of Theresa May’s suggestion of having workers on boards.

Attributes of Leaders to Manage People General Tickell stressed the importance of the Army Leadership Code and pointed to its seven leadership behaviours: • Lead by example. You cannot lead people beyond where you can and are willing to go yourself. All leaders are role models, and Army leaders must actively demonstrate our Values in everything they do. On operations, on exercise, in camp, on the sports field and off-duty you must demonstrate behaviour that aligns with our six values. By consistently doing so, they will be considered an authentic leader who ‘Walks the Walk’ as well as ‘Talking the Talk’. • Encourage thinking. The brain, like a muscle, develops through use. Leaders must encourage those they lead to think by giving them problems that stretch them. ‘Thinking outside the box’, finding an innovative solution to problems is a fine quality in a soldier and must be encouraged. Giving people the opportunity to think and suggest ideas generates trust and confidence. • Apply reward and discipline. It is human nature to enjoy being praised, and reward recognises effort, inspiring further endeavour and motivation to do even better. Leaders must apply a full range of rewards, from formal recognition to timely and regular verbal praise. We try to never underestimate the value of a ‘Well Done’ or ‘Good Effort’. Reward should be constructive and support the soldier or team in further optimising performance.

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• Demand high performance. Soldiering is a high stakes game, it can literally be a case of life or death. High performance isn’t therefore desirable it is critical. Leaders must have high performance expectations and communicate them to their teams. This applies to every Army role, we are all of one team, and we all must perform our duty to the highest standard in order to support one another. But performance expectations must be tuned to the team and achievable, otherwise they can be de-motivational. • Encourage confidence in the team. Leaders must inspire and motivate their teams to achieve. This is done by demonstrating confidence in their abilities, and talking enthusiastically about success. It is important to reinforce the importance of teamwork, and show trust in the Chain of Command. • Recognise individual strengths and weaknesses. Every soldier has something to offer the team, and everybody has areas requiring development. Leaders must identify these individual strengths and weaknesses and address them accordingly, to ensure that the team fulfils its potential and achieves all it can achieve. Strengths must be played to, and challenged to inspire confidence and motivate additional effort to stretch even further, always seeking to optimise performance. Weaknesses must be addressed and discussed, in an understanding and considerate manner. Focus on the root of the problem, and the potential to improve rather than the current impact of the weaknesses. • Strive for team goals. Teams will always achieve more than the individual, but the difference between good and great teams is usually the degree of team spirit that bonds them together. Challenging the team to accept and strive for shared goals will create shared purpose, bind them together and foster esprit de corps. Goals can be military, sporting or otherwise (e.g. charitable), but must inspire the team. The Army Leadership Code is itself founded on the army’s core values. General Tickell stressed that, ‘to us Courage, Discipline, Respect for Others, Integrity, Loyalty and Selfless Commitment are much more than words on a page, they are what the British Army stands for, and what sets us apart from society’. HE expanded further on these points: • Soldiering has always demanded physical courage, to knowingly go into harm’s way on behalf of the nation. Physical courage is required to risk life, take life, show restraint, endure hardships and focus on the task; soldiers depend on each other for it. Equally important is moral courage, the strength and confidence to do what is right, even when it may be

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unpopular and to insist on maintaining the highest standards of behaviour and decency. This earns respect and fosters trust. Discipline is the primary antidote to fear and maintains operational effectiveness: it is supported by team loyalty, trust and professionalism. Discipline instils self-confidence and self-control. Good discipline means soldiers will do the right thing even under the most difficult of circumstances. Respect for others, both those inside and outside of our organisation is not only a legal obligation; it is a fundamental principle of the freedom that our society enjoys. Teams that embrace diversity, and value each individual for their contribution and viewpoint are always stronger for it. We have to treat everyone we encounter as we would wish to be treated. Integrity means being truthful and honest, which develops trust amongst individuals and welds them into robust and effective teams. Integrity is therefore critical to soldiering, as soldiers must have complete trust in one and other as their lives might ultimately depend on it. Trust in the Chain of Command is also key, and demands integrity from those in positions of authority. Loyalty binds all ranks of the Army together, creating cohesive teams that can achieve far more than the sum of their parts. The Nation, Army and Chain of Command rely on the continuing allegiance, commitment and support of all who serve. But loyalty is not blind and must operate within the parameters of the other Values; it should not stop appropriate action to prevent transgressions by subordinates, peers or seniors. Selfless commitment is a foundation of military service, soldiers must be prepared to serve where and when required and always give their best. The needs of the mission and the team come before personal interests. Ultimately, soldiers may be required to give their lives for their country, which is true selfless commitment.

General Tickell explained that, equally important are the army’s standards, the way in which they put their values into practice, ensuring that everything they do is appropriate, lawful and totally professional. He said they must avoid behaviour that risks degrading their professional ability or which may undermine morale by damaging the trust and respect that exists between teams and individuals who depend on each other: • Appropriate Behaviour. The imperative to sustain team cohesion and to maintain trust and loyalty between leaders and those they lead requires a

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standard of social behaviour more demanding than those required by society at large. This is equally necessary both on and off operations, on and off duty. When building tightly knit teams it is important to acknowledge the need for mutual respect and the requirement to avoid conduct that offends others. Unacceptable behaviour undermines trust and cohesion, directly impacting operational effectiveness. • Lawful. To maintain our legitimacy, the Army is required to operate within the law. UK criminal law applies wherever soldiers are serving, and military law has embraced all civil offences. When deployed on operations, soldiers are subject to international law, including the laws of armed conflict, the prescribed rules of engagement and in some cases local civil law. Taken together, such laws establish the baseline for the standards of personal conduct of the soldier as a citizen. • Totally Professional. Army personnel must always conduct themselves in a manner that is totally professional. Firstly, this approach is critical to maintaining operational effectiveness and achieving the mission they are set. Secondly, it is necessary to protect and promote the Army’s proud reputation, which has been hard won by endeavour and sacrifice.

Key Elements of Getting the Best from People General Tickell said that the most important point in optimising performance is to genuinely invest in your people. This means, above all, giving them your personal time. For him, that means ensuring that every soldier and officer has clear personal and professional objectives that have been agreed between all parties. Personnel must be given time to complete the requisite courses and have the right amount of leave to spend with their loved ones. All his experience tells him that if you get this ingredient right then your people will always go the extra mile for you when the pressure is on. Second, he asserts the importance of building confidence in the chain of command. Subordinates must see that their superiors are calm under pressure, are able to react to unforeseen events quickly and without histrionics, and are not afraid to challenge their own superiors if direction is poor, misguided or, frankly, putting people in harm’s way unnecessarily. Third, General Tickell pointed to the need to be able to adapt your leadership style to the circumstances and the audience. Sometimes you

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need to be very directive and sometimes you need to be more consultative. The balance between the task’s requirements, the team’s needs and individual needs is really important. Not everyone working for or with you will necessarily be a ‘direct report’. Thus you need to understand the players involved and the context within which they are operating, and work out the levers you have over them and thus how best to influence or guide them. Finally, he warned that as you become more senior within the organisation, there is always a danger that one talks more and listens less. The opposite should be true. The people want to have a voice (and more often than not their input is incredibly valuable and pertinent), so therefore listening to them is critical. It may not always be possible to do what they wish but it is crucial to hear them. There is nothing worse than a senior officer pontificating when a soldier has a really important point that he or she wishes to make. Everyone needs to feel valued. General Tickell quoted Warrant Officer Lord (Academy Sergeant Major at RMA Sandhurst in 1963, who was famed for his extraordinary war record), who put it very succinctly: I agree with Emerson when he said, ‘Trust men and they will be true to you. Treat them greatly and they will show themselves great.’ It’s jolly easy to say that and it’s jolly easy to think that all you’ve got to do is give an order and we’ll go out and get on with it. Well, it’s not so, because to do that, you’ve got to train with them, you’ve got to get to know one another, you’ve got to give them your best, and set the standards. Then you can trust them and they will trust you. You treat men greatly by briefing them properly or working with them or bringing them along the right lines. Now that, I firmly believe, should be the approach of soldiers and leaders throughout all armies and all services.

Performance Metrics General Tickell is a great supporter of the army appraisal system. A performance report is written on every individual annually. It covers both performance and potential, and it is written by both the line manager and the line manager’s boss. There are also mid-term reports that provide early guidance as to an individual’s strengths and weaknesses. Reports are then scrutinised by promotion boards (made up of senior officers) annually to decide who should be promoted and which new job people should be assigned to. This is a very significant commitment by the army to its personnel and is highly regarded by all. Moreover, the boarding process and the proceedings are

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transparent and thus any suggestion that individuals may be being favoured through patronage is quickly dispelled. Two departmental surveys take the temperature of the organisation every year: the Armed Forces Continuous Attitude Survey (AFCAS) and the ‘Your Say’ Survey for the Civil Servants (General Tickell is responsible for some 2,000 in his current appointment). The surveys are taken very seriously and he explained: We pick these apart to focus on those areas that are in our gift to do something about (pay is not one of them but it does allow us to try and influence the Armed Forces Pay Review Body by using the surveys as evidence). Feedback is given by the Chief of the General Staff and other commanders in letters and briefings to staff.

There are numerous other forms of measure, such as medical (health/dental), fitness and housing reports which are areas within the moral component of fighting power. These are reported on quarterly to assess the overall ‘health’ of the army.

Personal Approach to Getting the Best from People General Tickell considers he spends about two thirds of his time on people and people-related issues. He set out his particular leadership style as follows: When I start a new job, I try to set out my stall early—what I view as important and what I stand for—in essence my personal style and tone. I like to do this by talking face to face but as my responsibility has grown it has become very difficult to do so. Amongst other things, I tend to stress the importance of responsibility, accountability and authority and who I see as the key brokers in those three areas. My early days in an appointment tend to be ones of listening and watching – unless there is a ‘burning platform’ I try not to make early changes. One’s command style is very personal but it is really important that your subordinates understand what makes you tick and that you are consistent in its application. Secondly, I try to trust my instinct. Most of us are pretty good at judging people and as commanders we are selected on our experience and ability—thus trusting one’s instinct is the right thing to do. We all have strengths and weaknesses and a commander needs to recognise them both in himself and in others and work with them. However, particularly weak performance, a disruptive team member or toxicity needs to be removed

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early to avoid the corrosive effect on the wider team. Whenever I have failed to trust my instinct (on people or in a given situation) I have always regretted it. It is really important to build a strong, relatively diverse team around you. If you get the team dynamic right then you can overcome all kinds of obstacles and even have some fun whilst doing so! The latter is really important—being able to vary the pace and tone of work gives people a breather when required—and laughing, even when under significant duress, is a fantastic tonic. Delegation is also incredibly important; it is the only way to develop subordinates and it strengthens their confidence and that of the team. It also gives you more depth in an organisation and thus the ability to deal with crises when they arise. Thus, my mantra tends to be ‘delegate til it hurts (i.e. you are personally uncomfortable with the perceived risk you are taking in doing so) and then delegate some more’. I have very rarely been let down when doing so and people grow before your eyes. The right people with the right spirit can achieve anything. I invest heavily in relationships—upwards, downwards and sideways. This needs time but the right relationships act as a force multiplier. Doors are opened, opportunities are created and early warnings given. Most importantly the right relationships will normally create a larger ‘operating space’ for your subordinates to work within. If you are trusted personally so too will your team be and they will be given additional latitude which the right team (see above) will exploit. It is also important to be loyal upwards—it is often very easy to criticise one’s boss or his team. This will win cheap and easy applause from your own team but breeds distrust; the superior HQ operate to a different set of constraints to one’s own and they are sometimes unseen so they won’t always be able to agree a request or make things happen in the way that you want. That said they are still good men and women doing their best. Understanding your personal attitude to risk is also very important— because it will shape your decisions and your own team needs to understand their likely operating window when formulating plans. But all activity has risk (physical, financial etc.) and the most important thing is to identify the risk(s), mitigate them as far as possible and then to crack on. Critical throughout is the need for excellent communication. It minimises uncertainty and fosters trust in an organisation. There are, of course, multiple methods but the best way is face to face. Emails and so on are great but there is no substitute for talking to people. Most of us are involved in a people business in one way or another and people need to be inspired—that happens by physical presence not by sending a memo. So, talking and listening is very important.

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General Tickell synthesises the key strategic tasks as a focus on doing four things: • • • •

making the big decisions; shaping events; electrifying the circuits; thinking more than doing.

Impact of Diversity and Inclusivity The army has an Inclusivity Strategy that is nested within a Diversity and Inclusion Action Plan. Recent moves to accept women into all elements of the organisation including the infantry and the Royal Armoured Corps and Stonewall’s 2016 placing of the army as thirty-second in the top 100 employers of the LGBT community both point towards tangible progress in this area.

General Tickell’s Vignette The biggest challenge in leadership that I see, and that I have wrestled with myself sometimes, is demonstrating the necessary moral courage to deal with a situation. After a series of false starts in my youth (i.e. failing to grip a very experienced senior non-commissioned officer who took delight in undermining me in public and, indeed, allowing an end of tour party to go ahead when all my instincts told me to stop it—and which duly ended in poor behaviour and recriminations) I am now comfortable in ‘doing the right thing rather than the easy thing’. Perhaps one of the greatest challenges I had was in 2003 just before we invaded Iraq. It became apparent at quite a late stage that one of my ‘direct reports’, a squadron commander, was struggling with his responsibilities. His Squadron was not adequately trained for the tasks ahead, his people were nervous and they clearly lacked confidence in their ‘boss’. However, there was little time before the invasion was due to start, he and his wife were close personal friends and I should have spotted that he was struggling earlier. After some serious soul searching, I discussed the situation with the said officer. He was clearly relieved to be able to talk about it (there was nothing I said that he didn’t know himself in his heart) and a pressure valve was released. I was clear that he needed to go home and he did not demure. He was quickly replaced and the new incumbent rapidly made good the shortcomings in the organisation he inherited. It was one of my most difficult days in command and in

Insights from Rear Admiral Simon Williams, CVO, Naval Secretary . . .

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many ways the failure was mine—I should have provided greater mentorship to him. That said removing him was the right thing to do for the needs of the mission and for the sake of his soldiers.

Insights from Rear Admiral Simon Williams, CVO, Naval Secretary, Assistant Chief of The Naval Staff (Personnel) and Flag Officer Reserves About 30,000 men and women serve in the naval service. The main aim of the Royal Navy (RN)is ‘to protect our nation’s interests’. The navy says: ‘at the heart of our effectiveness, amplifying the impact of our specialist equipment, are people of the highest calibre’. The Naval Service with its fleets of ships, submarines and aircraft also includes the Royal Marines, the Royal Fleet Auxillary, the Royal Marines Band Service, the Royal Navy Reserves and the Royal Marine Reserves. The Navy Board is the body responsible for running the RN. Members are responsible for assisting the first sea lord in discharging his responsibilities as head of service and RN top-level budget holder. Principal among these is to ensure that the navy is fit to fight and can deliver the military capability required to defend the UK and its interests. The Navy Board meets monthly, or more often as required, and currently comprises the following members: four senior naval officers, including the first sea lord, one civilian finance director and two non-executive directors, one of whom is a woman. The composition will soon change and will include four NEDs, plus four senior naval officers, including the first sea lord. There is a rigorous process for selecting NEDs, including multiple interviews, such as one with the MOD’s lead NED, Sir Gerry Grimstone, and the permanent secretary and, finally, the first sea lord. Admiral Williams said that NEDs are highly valued and get the people agenda. One recently suggested that personnel should be a standing order board agenda item. Admiral Williams said that, in business speak, the navy is one of three wholly owned subsidiaries of the MOD. Someone said to him when he joined the navy that ‘the most important factor is our people.’ He subscribes to this, notwithstanding the ‘hard capital’ assets deployed by the navy.

Values Admiral Williams stressed the importance of the core values of the navy, which are inculcated into all personnel: courage, commitment, discipline

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(structure/rules), respect for others (two-way process includes diversity ad inclusivity), integrity and loyalty;

Recruitment Admiral Williams explained that to attract the right people and team workers from the outset, the recruitment test for all navy applicants includes psychometric testing. He said that most navy people start at the lower end and are put through a rigorous initial training process. For the RN this first phase is ten weeks of immersive training and basic character development, during which 12% of candidates do not proceed. For the Royal Marines the equivalent is a thirtytwo-week programme (combining both Phase 1 and Phase 2), during which 45% do not proceed, or, as Admiral Williams puts it, ‘are lost’. The selection process for officers involves more intense psychometric testing as well as a three-day ‘interview’ with practical tests, when their performance is observed and assessed.

Divisional Management Approach Admiral Williams said that there is a special approach to managing people: a divisional system which divides into groups of about fifteen people, this seen to be a manageable number of those likely to be on board navy ships. A leader of the division of each set of fifteen is responsible for their welfare, development and support. Most matters that arise are those contained within a ship, although the range of issues dealt with include personal as well as navy-related matters. Personal issues are often complicated by the fact that they relate to home life, which could be thousands of miles away.

Training and its Impact The naval service is, in essence, a learning organisation, with continual training through the career of the people, and the output of this is seen in contingent operations where the personnel are prepared to face the ultimate personal risk. There are a range of factors governing why people are prepared to take this risk, but perhaps the most powerful is a wish not to let their team mates down, such is the team ethos that is generated

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during training. (The same is true of the army.) ‘Team mates’ extend beyond the immediate division to the ship, perhaps 180 people, or unit, which could be 600.

Engagement and Communication Admiral Williams said that the navy reviews the All Forces Continuous Attitude survey along with the navy families version and the MOD civilian staff survey (he felt it important to manage the workforce together). The preferred method of communication is face to face (e.g. Navy Sec issues a personnel support brief sent to divisional heads and this is then discussed face to face with officers and cascaded to smaller groups for mini town hall-type meetings; feedback is encouraged and action taken locally where possible to address issues identified, but back to the Navy Sec where is intervention is necessary). The Commanding Officers of the ships regularly visit the mess deck to chat with personnel, usually dealing with HR matters. In addition, the Navy Sec deploys a special team to separately ‘take the pulse’ of the staff. Senior enlisted personnel visit ships, submarines, air squadrons, Royal Marine units and shore establishments to do this. The navy tries to limit email communication to more urgent messages. Perversely, a consequence of this comprehensive communications set-up is that it results in a lower participation rate in the MOD engagement survey than desired—personnel think they are already being listened to (and on a more regular basis than is afford by the survey).

Worker on Board As with the army and Royal Air Force, there is a worker on the board. In the case of the navy it is the senior warrant officer.

The Admiral’s Personal Toolkit With regard to personal tools to get the best from people, the admiral mentioned genuine, personal commitment to people; effective communications, multiple channels up and down; ensuring good data for decisionmaking; listening and respecting individuals, totally connected—but respect has to be earned, no matter what the rank.

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Insights from Karen Wheeler, National Director— Transformation and Corporate Operations, National Health Service (NHS) England The NHS is a system of national medical care in the UK, paid for mainly by taxation and started by the Labour government in 1948. For 2015/16 the overall NHS budget was around £116.4 billion. The NHS employs more than a million people, putting it in the top five of the world’s largest workforces. Responsibility for healthcare in Northern Ireland, Scotland and Wales is devolved to the Northern Ireland Assembly, the Scottish Government and the Welsh Assembly Government respectively. The NHS in England remains free at the point of use for all UK residents. This currently stands at more than 64.6 million people in the UK and 54.3 million people in England alone. The NHS in England caters to a population of 54.3 million and employs around 1.2 million people. Of those, the clinically qualified staff include 150,273 doctors, 40,584 general practitioners (GPs), 314,966 nurses and health visitors, 18,862 ambulance staff, and 111,127 hospital and community health service (HCHS) medical and dental staff. NHS England (NHSE) manages £101.3 billion of the overall NHS budget. Its role is to lead the NHS in England. It sets the priorities and direction of the NHS, and encourages and informs the national debate to improve health and care. It holds organisations to account for spending this money effectively for patients and efficiently for the tax payer. There are sixteen members of the NHSE Board, comprising nine nonexecutive directors, with six women, including Karen Wheeler, and one member of the BAME community. The NHSE itself employed 5,017 people directly in 2015/16 and a further 594 on ‘off-payroll arrangements’. The offpayroll staff consist of some—secondees and contractors—who are very much like employees and treated as such. Some complete the staff survey but others are contracted for very specific clinical roles and therefore are more like consultants than employees. Karen explained that the published mission and purpose of the NHSE (set out below) is being rewritten in work led by the executive team as it is not really reflective of current practice. A new people strategy for the NHS is also being developed. The key components of the existing strategy are summarised below.

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Our Mission Health and high quality care for all, now and for future generations.

Our Vision Everyone has greater control of their health and their wellbeing, supported to live longer, healthier lives by high quality health and care services that are compassionate, inclusive and constantly improving.

Our Purpose We create the culture and conditions for health and care services and staff to deliver the highest standard of care and ensure that valuable public resources are used effectively to get the best outcomes for individuals, communities and society for now and for future generations.

Our values The values enshrined in the NHS Constitution underpin all that we do: • • • • • •

Respect and dignity Commitment to the quality of care Compassion Improving lives Working together for patients Everyone counts.

Our Behaviours: Leading by Example • We prioritise patients in every decision we take: everything we do is directly connected to our purpose of improving outcomes—not a process, not an organisation, not a profession—but the people who are at the heart of all that we do.

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• We listen and learn: we believe everybody has good ideas and has the right to be listened to carefully and thoughtfully. We respect and support each other, building trust and empowering one another and staff across the NHS, to achieve the highest standards. • We are evidence-based: we listen to the people and communities we serve, we look at insight and evidence and we measure our outcomes, so that our decisions are objective and we understand their impact. • We are open and transparent: we are accountable and we take individual and collective responsibility for our actions. We act with integrity and we are transparent about the decisions we make, the way we operate and the impact we have. • We are inclusive: we work in partnership with patients, clinicians in the NHS, the public and our partners because we get the very best outcomes when we work together with common purpose. • We strive for improvement: we believe we can always do better for patients and will challenge and seek challenge. We share ideas and knowledge and take risks because we believe in innovation and learn from our mistakes.

People Focus Karen said that there is no question that people are the organisation’s biggest asset: ‘they are the key to getting things done but of course our other important assets are the NHS commissioning funding of £100 billion which we use to ensure the right services are procured and organised for NHS patients, and our mandate and authority which allows us to lead and influence the wider NHS’.

Board The NHSE board comprises a number of NEDs who bring a range of experience, including finance, governance and health policy. Having HR expertise is not a requirement of any of these posts but the NEDs are recruited against the organisational values and with a collaborative approach very much in mind. To ensure direct engagement with staff, executive and board meetings are held in different locations, and NEDs take time to visit operations to talk to people, as well as attending engagement and recognition events. Two board members are ‘champions’ of different people dimensions—

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for example, organisational engagement and leadership/behaviours and whistleblowing. Furthermore, there is a strategic HR and remuneration committee that provides the board with assurance and oversight of all aspects of strategic people management and organisational development, and it also considers some issues in relation to all staff. The committee members are the chair, the chief executive Karen, and two NEDs. In 2015/16 the work of the committee work included the NHSE’s organisation and core capabilities, and NHS England staff engagement, talent management and first-year outcomes of the Workforce Race Equality Standard.

Methodologies With regard to methodologies, the biannual staff engagement survey was seen by Karen to be the most important tool and one which the whole organisation takes very seriously. The survey has some synergy with the wider NHS survey but has just been refreshed and contracted to ORC, one of my interviewees. Of staff, 66% participated in the current survey in 2015/16, of which 63% responded positively about working in the NHSE. Karen revealed that the latest survey, which has not yet been published, suggests increased participation of about 70% and also increased workforce engagement. Another important human capital management tool that Karen pointed to was the performance development process, which is undertaken annually but with a mid-year review. ‘We aim for 100%—but our metrics tell us we have about 70% of staff going through this process.’ Along with the formal processes, Karen recognised the need to have continual improvement in the management cadre, and the organisation has developed a management skills programme. One aim of this is to ensure that employees know managers care about them, and a core skill required is listening and humility, a critical behaviour.

Metrics In addition to the staff survey which is the NHSE’s main mechanism and measure, the organisation publishes a number of other human capital metrics: the number of staff in each pay band; senior management by gender (51.6% female); all staff by gender (70% female); senior management by ethnicity (72.5% white 5% BME 22.5% unknown); all staff by ethnicity (72.4% white 11.2% BME 16.2% unknown); and senior management and all staff breakdowns by disability and sexual orientation. The NHSE also publishes the banded remuneration of the highest-paid member of the board.

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In the financial year 2015/16 it was £205,000–210,000 (2014/15: £205,000–210,000). This was 5.42 times (2014/15: 5.66) the median remuneration of the workforce, which was £38,300 (2014/15: £36,666). Other human capital elements routinely measured include vacancies, turnover, sickness rates and talent.

Communication Karen said that the organisation uses multiple communication channels —everyone has access to the intranet site and this includes all news and staff-related information. In addition, the NHSE publishes regular electronic newsletters and briefings for all staff, which are also circulated by email. The CEO holds regular al-staff calls and Q&As, and a quarterly leadership forum with the top 120 leaders gathering physically for a day. As the organisation is spread geographically, great use is made of videoconferencing. One of the keys to improving engagement scores has been focusing on making internal communications more effective, particularly by improving the connection between the top team and the rest of the staff.

Staff involvement To involve staff in creating a fairer and more diverse workforce, Karen mentioned that the NHSE has introduced four staff networks to help them create a fairer and more diverse workforce: the BME network; the Lesbian, Gay, Bisexual, Trans + Network; the Disability and Wellbeing Network; and the Women’s Development Network. Karen said the purpose of these is to make clear to all staff the organisational need to be fully inclusive, and to ensure that all staff feel well supported. The networks let people who feel in some way marginalised or unfairly treated and have specific issues to raise them in a safe way with colleagues of like mind, and ensure the messages get to senior management in a powerful way so that they can be addressed. The organisation also has a more general staff engagement network to ensure that all staff in every location have a way of feeling both supported locally and part of NHSE, and, importantly, feeding views and ideas/issues into national teams for consideration. Developing people, Karen said that investing in people is a critical activity for the organisation and that, in October 2015, they

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implemented a new online portal for learning and development solutions, providing access to over 3,000 courses and programmes. These are procured through the government’s wider public sector framework agreement to achieve economies of scale and maximum value for money. They have also continued to extend talent management through the organisation, completing 780 talent development conversations with people in Band 8c and above.

Wellbeing As a health service itself, it is perhaps not surprising that the NHSE actively promotes health and wellbeing for their people, including tools to help staff develop their resilience, and has a network of mental health first aiders, with over 300 colleagues trained across the organisation to provide timely and accessible peer support. This policy seems to be yielding improvements in productivity. For example, in 2015/16, the average number of sick days taken by whole-time equivalent employees was 6.1 days, an improvement of 1.4 days on the previous year.

Karen’s Vignette: My Current Challenges Staff engagement—I am still trying to create a single organisation out of many disparate groups. How to connect staff in very localised offices, when they feel disconnected from centre is a particular focus; Managing in an organisation under pressure—we need to deliver, and move fast with a changing role, high expectations, and a lot of top down changes in direction. When people are under pressure this can sometimes result in poor managerial behaviours—when managers under stress they can also put their staff under pressure. As a consequence, there is an unacceptably high level of people who feel ‘bullied’ The challenge is to ensure management behaviours and skills change, starting with a recognition that poor personal behaviours have bad effects on people and on organisational performance; Connecting leadership with staff—as a high-profile organisation of continual interest to the media, make sure staff know what is going on before they read in newspapers or online! And we need to relate leadership behaviours to the values of the organisation. Sometimes there is a disconnect.

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Personal Approach Karen thought she spent between 10% and 20% of her diary time on people issues. In terms of the most important skills to get the best from people that she applies from her personal toolbox, she put listening at the top. Also, ‘making time to be available to people, providing advice and direction to my teams, setting standards and expectations and being really clear about them’.

16 Private Sector Leader Insights

Insights from António Horta-Osório, CEO Lloyds Banking Group Plc Lloyds Banking Group Plc is a FTSE 100 company that provides financial services to individual and business customers primarily in the UK. The company’s business activities include retail and commercial banking, longterm savings, protection and investment. It is the UK’s largest financial services group. The total income of the group in 2015 was £17,636 million, and it has a workforce of 75,000. The company is governed by a main board comprising thirteen members, including three women. António HortaOsório is group chief executive and sits on the main board, as well as chairing the fourteen-member group executive committee, which has two women directors and a chief people, legal and strategy officer.

Importance of People António said that people are undoubtedly a corporation’s or project’s most important asset as everything is done through them working together as a team, and this is true at Lloyds. He sees that a critical role for him is to make sure he has the best people for a given job who work together in teams with complementary skills to deliver more than the sum of their individual competencies. He needs to ensure they are all pointed in the right direction and act faster than their peers in order to leverage competitive advantage. But key to making sure these elements function effectively is ensuring that the © The Author(s) 2017 A. Coppin, The Human Capital Imperative, DOI 10.1007/978-3-319-49121-9_16

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group values are bought into and portrayed by all colleagues. One of António’s key personal objectives is for Lloyds to be a source of pride for its employees.

Lloyds’ Strategy António set out the elements of the strategy which he and the board have developed:

Our Purpose Helping Britain Prosper by helping people, helping communities and enabling business. We are a financial services group focused on retail and commercial customers—with millions of customers in the UK, and a presence in nearly every community. Our ambition is to be the best bank for customers.

Our Strategy Through to 2017, this has three priorities; creating the best customer experience, becoming simpler and more efficient, and delivering sustainable growth, all underpinned by building the best team.

Our Values and Culture António again stressed the importance of Lloyds’ values: Underlying all the strategy, there needs to be a complementary set of values and a culture that permeates throughout the organisation, reinforcing the underlying behaviours that we have articulated /communicated to help guide colleagues. These are my values and they are the values that I’ve asked our staff to live by: putting customers first, keeping it simple, and making a difference together. These Values and our Codes of Responsibility are embedded within key people practices across the business, from recruitment through to performance management and training and development.

António considers it critical for him to be the ‘torch bearer of the corporate culture’ and, as part of this role, he personally interviews two

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candidates for roles that report to his direct reports, whether they are external or internal. He does this to ensure that the people appointed to senior positions are ‘corporate citizens’, and appreciate and buy into Lloyds’ values. In addition, he personally mentors three senior executives, currently all women, given the group intent to ensure greater gender diversity in senior leadership positions. António considers it important to attend events with groups of emerging graduate talent to ensure they hear directly from him about the company culture and what that means for a Lloyds employee. He estimates he spends in excess of a third of his work time on people issues.

Communication António believes that communication needs to be undertaken all of the time and ‘even more than you think’—it a major part of his cultural torch-bearing role. He considers standard message cascades a process of the past and believes it necessary for as much face-to-face communication as possible, subscribing to the theory that staff need to read your body language to really understand what you are saying. He leads on this in a number of ways: twice a year he conducts a real-time video exchange with 45,000 staff, usually at Christmas and at the time of the annual results; once a year 5,000 leaders are brought together for a full day to review achievements and consider future actions; the 200 strategic leaders of the group meet twice a year to review strategy and culture; and the top team visits the bank’s regions every six weeks, bringing local colleagues together to celebrate achievements, discuss current issues and meet directly with local business customers.

Performance Management António said that the two annual engagement surveys (with appropriate follow-up action) and regular future-focused, robust performance discussions are critical tools for instilling a culture of high performance in the group. He pointed to the engagement survey response rate of 84% in 2015, which was above that for the UK sector, and the engagement scores achieved, again above the UK sector score, and his aim to see year-on-year improvement. He said that, importantly, the results of the surveys suggest that colleagues are increasingly guided and inspired by Lloyds’ values. More detailed scores are: Engagement Survey Response Summary (2015/6)

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Response Rates • 2015 Best Bank for Customers Survey—83% • 2015 Building the Best Team Survey—85% • 84% is quoted for 2015, which appears to be an average of the two survey response rates • 2016 Best Bank for Customers Survey—response rate 88% • 2016 Building the Best Team Survey—response rate 84% • Industry Best in Class—response rate for this type of survey is widely acknowledged as 80%.

Employee Engagement Index (EEI) Scores • • • •

2015 Best Bank for Customers Survey—69 (6 points above UK norm) 2015 Building the Best Team Survey—71 (8 points above UK norm) 2016 Best Bank for Customers Survey—70 (6 points above UK norm) 2016 Building the Best Team Survey—71 (7 points above UK norm).

Note that the UK norm for EEI increased from 63 in 2015 to 64 in 2016. The UK norm is based on EEI scores of approximately 140 UK companies across all sectors.

Values Historically Lloyds have only measured values in Best Bank for Customers Surveys which contribute to an overall Best Bank for Customers Index:

2015 Best Bank for Customers Survey Scores • • • •

Best Bank for Customers Index—78 Putting Customers First—78 Keeping it Simple—69 Making a Difference Together—85.

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2016 Best Bank for Customers (BB4C) Survey Scores • • • • •

Best Bank for Customers Index—78 Putting Customers First—79 Keeping it Simple—70 Making a Difference Together—85 In 2015 Building the Best Team Survey—Lloyds reported on a ‘Temperature check’ of the Best Bank for Customers Index (based on seventeen of the questions used in the overall BB4C Index)—78.

In the 2016 Building the Best Team Survey, Lloyds reported on a New Best Bank for Customers Index Score—based on twelve questions only (four linked to each value) supporting the Group Culture Dashboard Behaviours: • • • •

Best Bank for Customers Index—77 Putting Customers First—80 Keeping it Simple—77 Making a Difference Together—75.

Lloyds implement twice-yearly formal performance reviews, which are very detailed and assess performance and potential. These are reviewed by the executive committee as a succession tool to spot strengths as well as identify areas for improvement.

Building a Responsible Culture António explained that, in 2015, Lloyds set up a new cross-functional Group Customer First Committee, led by senior leaders from across the business. The committee is driving the development of a new culture framework with progress measured through a culture dashboard. Of Lloyds staff, 97% have completed training on its codes of responsibility and culture. In building a customer-centric culture, colleagues’ pride in the group and other key factors are measured through two engagement surveys: ‘Best Bank for Customers’ and ‘Building the Best Team’. In 2015, 85% of Lloyds staff responded. A new statement was included in 2015—‘I understand how my team is supporting the group’s purpose “Helping Britain Prosper” ’ which achieved an 81% favourable score.

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Learning and Development In terms of the group’s learning and development activity, António pointed to a recent development—the launch of the ‘Line Manager Academy’, an award-winning development solution aimed at increasing the capability of their line manager cadre, which reinforces how they apply the group’s values and codes in their day-to-day roles. Lloyds employees logged onto the company online learning system, ‘Discover Learning’, more than 10 million times and over 96% of staff undertook formal learning.

Colleague Wellbeing Lloyds provides online tools to support common health topics, such as fitness, smoking, diet and mental health. They also issue monthly newsletters on relevant issues. They provide access to their people to an occupational health service, an employee assistance programme and to private medical cover. In 2015 the bank extended the company paid private medical provision to include all permanent colleagues.

Agile Working In 2015 the group launched its ‘Agile Working’ programme—all staff can apply to work flexibly to support their preferred work–life balance, whether they are parents, carers or have other priorities. In addition, they can buy extra holiday time and purchase other 2015 family benefits through a flexible benefits scheme.

Inclusion and Diversity António is determined to ensure progress with group gender diversity targets, and the common sense need to value the unique differences and diversity of thinking that will make the bank stronger. In 2015, women comprised 31% of senior managers (up from 28% in 2013). Lloyds was the first FTSE 100 company to establish a public gender target, which is that women should comprise 40% of the senior workforce by 2020. Significant resources are allocated to ensure this thinking is embedded in the business. For example, all of Lloyds line managers completed inclusion and diversity capability training in 2015, and an additional

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200 staff were trained to deliver disability awareness sessions with customers. The company’s 2015 ‘Words Count’ campaign encouraged all employees to challenge non-inclusive language and behaviours, and over 20,000 staff are members of four diversity networks, which are open to everyone. As external measures of Lloyds’ efforts on diversity, the group retained its leading position as the top private sector company for LGBT people in the Stonewall Top 100 and was named in The Times Top 50 Employers for Women. In addition, they retained the Gold Standard in the Business Disability Forum Benchmark.

Union Relationships Lloyds has recognition agreements with two trade unions, Accord and Unite, which collectively negotiate and consult on behalf of around 95% of the workforce. The relationship between the group and its union partners is seen as pragmatic and constructive on both sides.

Biggest People Challenge When António was appointed CEO about five years ago, his key task was to turnaround an underperforming and high-profile institution. His biggest people challenge was to tell the then staff complement of 115,000 the hard truths about the fragile financial situation and performance of the group, and the need to slim down and refocus. From this a sense of positive dissatisfaction was cultivated and staff began to recognise that major change was required, which resulted in 30,000 fewer jobs. Importantly, change was made by António to the top team as well— only one of them and only thirty-five of the top 200 leaders were in post a year after he joined. Fifty new senior managers were recruited to provide fresh perspectives and to help drive the required changes. However, the organisational changes bore fruit and under António’s leadership there has been a turnaround at the bank.

Personal Tool Kit António said that his three most important tools for getting the best from people are

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• hire the best people with common values for each position and provide clarity of direction; • stretch everyone to develop and improve themselves and their contribution, but balance this ambition to ensure they are not pushed to fail; and be meritocratic and fair.

Operation of the Main Board Lloyds is open about the way the board is managed and they employ a number of best-practice procedures and processes.

Non-Executive Directors The estimated minimum time commitment set out in the terms of appointment is 35–40 days per annum, including attendance at committee meetings. For committee chairmen and the senior independent director, this increases to a minimum of 45 to 50 days. The time devoted to the group’s business by the NEDs is, in reality, considerably more than the minimum requirements. Outside formal meetings, they meet regularly with senior management, and they attend briefing sessions and more informal events. In addition to attending board meetings, NEDs regularly meet with senior management and spend time increasing their understanding of the business through formal briefing sessions or more informal events, such as breakfast briefings, dinners and site visits. Two site visits are built into the board programme. NEDs receive regular updates from António’s office, including a weekly email, which gives context to current issues. In-depth and background materials are regularly provided via a reading room on the board portal. The board held eight ‘deep dives’, a two-day strategy offsite meeting and a strategy meeting at one of the group’s Bristol sites reviewing the operating plan. The group operates to a three-year planning cycle. They are about to commence the third of these cycles, a core part of which will involve consideration of ‘the Bank of the Future’ within the changing context of consumer trends, technology developments, competitor analysis and macroeconomic /political factors. To support the NEDs in fulfilling their role, untypically, the group provides an office, administrative support and a meeting room for their use.

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Chairman’s Town Hall Sessions The group chairman supports António’s communication imperative by undertaking his own town hall meetings, typically with in excess of 200 staff in attendance.

Professional Development and Training of the Board The chairman leads the learning and development of directors and the board generally, and regularly reviews and agrees with each director their training and development needs. Site visits and conversations at board dinners are also recognised as effective ways of learning, since they give directors an opportunity to consider business areas and experiences outside their direct areas of expertise. Site visits in particular provide ‘shop floor’ experiences and reconnect directors and senior management with the business and with staff. The board also receives regular refresher training and information sessions throughout the year to address current business or emerging issues. The company secretary maintains a training and development log for each director.

Board Effectiveness As is common with other FTSE companies, Lloyds complies with the governance requirements regarding board performance reviews.

New Responsible Business Committee In 2015 an important new board committee was established to focus on responsible business. It oversees the work of the Responsible Business Division. The committee provides oversight and challenge to executive management on those activities which impact on Lloyds’ reputation as a trusted, responsible business. In terms of responsibilities, the committee oversees: • the expression, measurement, communication and maintenance of our culture and values;

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• the design and development of the Responsible Business Plan and the Helping Britain Prosper Plan, the measurement of performance against such plans and their internal and external communication; • the development of policies relating to the responsible treatment of customers and their implementation, including measurement of trust, customer satisfaction and advocacy. This includes policies for access and inclusion and responsible lending including our customer vulnerability agenda; • our engagement with communities and charitable and philanthropic activities; • our approach to the control of our environmental impact, including measurement and internal and external reporting; • the policies relating to the responsible treatment of employees and their implementation, including inclusion and diversity, and our codes of responsibility; and • the engagement of employees in relation to the group’s ‘Responsible Business Plan’.

Insights of Diana Brightmore-Armour, CEO of ANZ for UK, Europe and the Middle East Australia and New Zealand Banking Group Ltd (ANZ) provides a range of banking and financial products and services to over 9 million customers and employs over 50,000 people worldwide. Diana’s role as CEO for the UK, Europe and the Middle East is to run a number of ANZ’s foreign branches within their overall strategic remit. The group has recently appointed a new CEO, Shayne Elliott, and has embarked on a values-led transformation. Diana said that people are a very important constituent of the group’s operations and a ‘people pillar’ is one of five in the group strategy. However, she points to the difficult landscape in the international banking sector, which ANZ has not been immune from, and which has inevitably created job uncertainly for many at ANZ: As a leader with over 30 years working in Financial Services, my experience has shown that open, honest and regular communication with colleagues is the best way to manage restructures and headcount reduction initiatives. Making myself accessible and visible to my teams during these times is important and listening to them and providing opportunities for them to have their say too.

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Diana’s approach to business, not just during difficult times, is very much people focused. On appointment she moved out of a large corner office to be nearer to the people and remove the physical barrier with them (three sets of double doors), ‘so now I sit with my team’. There is open access to Diana and she believes in regular communication with staff, holding town hall meetings, including one recently in Dubai where the company only has nine staff. When the London office has visits from senior group personnel from overseas, she suggests they also participate in town hall meetings as a way of linking and humanising the group. Diana also holds breakfast sessions with staff, when she talks for the first ten minutes, to either confront an issue head on or to update on any HQ news, and this then triggers questions from her colleagues. Diana commits to being open and honest, and to seek answers or further explanation if she cannot answer a question herself, which she responds to within forty-eight hours. ANZ Europe also undertakes annual staff appraisals as a key performance method. The approach is consistent across the group, with all colleagues understanding what is expected of them throughout the year and during the review process. Sourcing comprehensive opinions from seniors and direct reports, 360 degree feedback is mandatory for senior managers. For more junior levels, anecdotal feedback is sought from stakeholders and colleagues by their line manager. The aim of these exercises is to help benchmark a colleague and identify areas in which they are excelling or need to develop. In addition to performance targets, ANZ colleagues are also required to evidence ways in which they have ‘lived’ the group values in their approach to working with colleagues and servicing client needs. These values are: • • • • •

integrity collaboration accountability respect excellence. Diana says: Fostering the right culture in terms of how colleagues conduct themselves at work, treat other colleagues and service our clients is all part of developing a high-performance team. It’s important to me that we strive to continually meet these values, not only to achieve great business results but raise the bar among the workforce too.

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A final and key element of staff appraisals is that all colleagues are required to have a learning and development plan, setting goals for specific areas for professional development that a colleague will achieve in that financial year. Diana is a huge advocate of developing talent, and will champion individuals and support them to realise their potential through domestic and international secondments, in addition to recommending them for group mentoring and fast-track programmes. She says: ‘A great piece of advice I was given early on in my career at the Coca-Cola Company by an HR professional was to write a development plan for the job you want next, not the one you have. That advice has served many of my teams well over my career.’ In terms of incentive for achieving and exceeding performance targets, remuneration has always been important in the banking sector and, like most banks, it is directly linked to the overall bank performance by end of financial year. A particular people target for Diana is to lift staff engagement so that ANZ Europe can be a truly great place to work and become a talent incubator, within the group, for high-potential employees. ANZ undertakes an annual employee engagement survey and takes the results very seriously. The survey asks about colleague satisfaction with many areas of working at the bank, from IT systems to involvement in decisions which affect them, senior leadership communication, training and so forth. Diana involves staff in the solutions to any issues that are identified and, for example, has set up 12 work streams and focus groups following the last survey, whose work is fed back to staff for input. She outlined measures of performance that the ANZ Group uses, which are based on a balanced scorecard to measure performance. The measures include workforce diversity, which is seen as essential to delivering on the organisation’s super regional strategy; workforce engagement, which improved globally to 76% in 2015 compared with 73% in 2014; and, a particular measure from the engagement survey, the overall assessment of senior leaders as role models regarding the group’s values. She sees the scorecard as a means of ensuring a broader long-term strategic focus on driving shareholder value as well as a focus on annual priorities. Diana is, and has long been, a champion for gender diversity, both within ANZ via the bank’s ‘Plus One Pledge’ scheme and externally through her involvement with the 30% Club, City Women’s Network and First Women Awards. She helped establish the 30% Club, launched in the UK in 2010 with a goal of achieving a minimum of 30% women on FTSE 100 boards, and is pleased that ANZ take gender diversity seriously and the group actually has specific strategic measures for gender employment. Diana also

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points to the company supporting the LGBT agenda and, for example, supported Gay Pride in Australia by badging its ATMs as another strand to its diversity policy. As a result of her people-centred style, Diana estimates that between 30% and 40% of her time is spent on people issues and that this is a wise investment to lever human capital productivity.

Insights of Steve Robertson, CEO of Thames Water Utilities Ltd Thames Water Utilities Ltd, branded as Thames Water (TW), is a private utility company responsible for the public water supply and wastewater treatment in large parts of Greater London and the Thames Valley. TW is the UK’s largest water and wastewater services company and has about 14 million customers—about 27% of the UK population. Owned by a consortium of pension funds and other long-term investors, It is managed by a fourteen-strong board, eleven of whose members are non-executive, with two women and one BAME member. TW’s executive team is led by Steve Robertson and comprises ten directors, including one woman who is also HR director. It employs around 5,000 directly employed staff. Steve only joined TW in September 2016 from mobile operator Truphone, so he has fresh perspectives to bring to his new role, which he recognises has to take a long-term view, given the value of its infrastructure and its significance to London’s growth in particular. Accordingly, TW has published its 2015– 2040 strategy to set out its thinking on the big issues it is likely to confront over the twenty-five-year period. One of the group’s key human capital challenges is to ensure it recruits the right people to succeed an ageing workforce, with particular emphasis on graduate and recruitment programmes. Steve set out TW’s purpose, key objectives and organisational values as follows:

Purpose TW is a water and sewerage services business, delivering the highest-quality drinking water to its customers and recycling their wastewater safely back to the environment.

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We provide an essential service to our 14.4 million domestic and business customers and with more than 400 years of heritage, we’re here to provide excellent service in an ever changing environment.

Objectives TW aims to provide the best-in-class water and sewerage service, to be profitable and sustainable, and to act in the long-term interests of the wider community by: • • • • • • • • •

Working closely with customers and stakeholders Delivering services at a reasonable cost Doing what we say Developing the best team Being innovative Investing in the right tools to get the job done well Educating and informing the public Improving financial performance Being efficient and completing projects on time

Values Steve explained that the company’s six values were created by people from across the business to supplement TW’s code of conduct, and honest and ethical behaviour policies. Involving everyone has ensured buy-in from the whole workforce, and the values are a fundamental part of the people strategy and communication strategy. • Passionate about everything we do. We commit ourselves wholeheartedly to everything we do. We approach our work with enthusiasm, energy and positivity. We do what we do because we love it and this passion shines through for our customers and colleagues. • Reach higher, be better We are always learning and challenging ourselves and each other to be the very best we can be. We have the courage to improve the way we do things at work and exceed expectations

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• Be respectful and value everyone. We take time to listen to each other and treat people in the way they want to be treated. We are supportive, inclusive and recognise everyone has their own skills and experience to offer. All our family has a voice. • Take care We look after ourselves, our customers and our business. We have a zero compromise approach to health, safety and wellbeing. • Take ownership We take responsibility and never walk on by. We are proactive—focusing only on solutions instead of problems. • Be proud, be blue (this is a reference to our blue logo and to water itself) We celebrate our past, we are proud of what we do today and we are excited about our future.

Board Operation Although not a plc, TW adopts the FRC’s report or explain process, and it also follows Ofwat’s (its regulator) principles of board leadership. The board recently visited three key operational sites (as well as a business partner), which provided insights into group culture and the implementation in practice of the company’s corporate values. The HR director presents to the board talent and succession plans along with employee engagement details. The people strategy is a key part of how the business engages and develops its people, and this is shared with the board annually. The HR director consults the remuneration committee on wider company remuneration policies, and the company reports the age change in CEO remuneration compared with all employees.

Organisational Capability as Key Driver Steve explained that it is superior organisational capability that gives the only sustainable competitive advantage, rather than people per se. This approach requires the right people contributing fully to the business, with individuals

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bringing their whole selves to work, and for individuals working in teams to be fully aligned with the objectives of the organisation. Steve considers diversity of thought, which is often a by-product of the traditional diversity descriptors (gender, ethnicity etc.), to be a vital business asset in ensuring problem-solving behaviours. In terms of standard diversity measures, TW’s profile includes 32% female staff across management grades and, in 2016, 70% of the new graduate intake was female. The company has a pipeline programme for women, developing those with potential. Inclusion is a key priority, and there is a whole programme of work to achieve a diverse workforce and an inclusive environment. One example of this is unconscious bias training for managers.

Communication The importance of recognising communication as a two-way process is stressed by Steve. Everyone has built-in ‘bullshit meters’ to judge the message which includes, in terms of face-to-face messaging, reading body language and tone of voice, as well as the strict content. Steve opts for multiple communication channels at TW, and these include webcasts; web chats when literally a couple of thousand staff can be online to question Steve on group matters; and his own ‘ask Steve’ mailbox. He cites the power of stories and narrative to get messages across to staff, far better and more memorable than a slick ten-slide presentation. The company’s Source magazine, produced entirely in-house, has a large, loyal readership and there are Your Voice engagement initiatives in the large business units.

Employee Engagement TW undertakes a detailed annual employee engagement survey which had a response rate in 2015 of 78% with an engagement index of 70%. Key initiatives called ‘the magnificent 7’ were introduced to respond to key areas raised at the executive roadshows and through the engagement survey. Steve says: ‘The 2016 survey is not like for like but we have a response rate of 74% and an engagement index of 69%. We are just analysing the results.’ The annual survey is supplemented by pulse surveys in different parts of the business. But Steve believes the most reliable measure of workforce engagement is face-to-face interaction with managers, including himself and his senior leadership team but also, importantly, first-level managers.

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TW has three employee award events each year: customer spotlight, excellence in health and safety, and ‘be proud, be blue’, along with reward vouchers, business unit recognition events and a long-service river cruise.

Performance Management TW has a performance appraisal programme which has been designed to take account of the values across the business, but Steve acknowledges that such processes do not always work fully as intended and require significant training of both appraisers and appraisees, particularly on the part of the former in how to coach. Despite the difficulties in operating appraisals, Steve is not prepared to give up on them as he recognises that a system of assessing and providing feedback on performance is important to delivery.

Health and Safety Health and safety is of prime importance at TW. In its 2015 employee survey, 90% of respondents agreed that TW takes health and safety seriously, and in the same year 12,000 days of health and safety training was delivered, up from 4,500 days three years earlier. In addition, over 400 frontline operations managers completed National Examination Board qualification in occupational training. Animated incident learning has been introduced. Wellbeing was a key focus in 2015/2016, with the company instigating health checks for all staff. In 2015 over 2,600 employees had personal medical assessments and the company has introduced a ‘Cycle to Work’ scheme. It has also introduced workshops for managers to understand how to manage and help employees suffering from stress-related illnesses. Wellbeing stand downs took place across the business with the focus on mental wellbeing.

Steve’s Role and Personal Tools to Get the Best from People Steve believes an important function for him is to develop a strategic narrative that is simple to understand by all stakeholders, including employees, but not simplistic. His three key tools for getting the best from people are: • be authentic at all times; • as a consequence, ensure there is the basis for trust, of him and of the organisation;

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• constantly communicate, including eliciting feedback to improve engagement. Steve estimates he spends about 40% of his diary time on people issues, particularly at this early time within TW—for example, he has spent 90 minutes with each of the fifty-two members of the group’s senior leadership executives to get to know them, understand their roles and share his vision for the business, and he has set up management conferences to engage with all managers and supervisors in the business.

Insights of David Brown, CEO Go-Ahead Group Plc The Go-Ahead Group is one of the UK’s leading public transport companies, providing more than a billion journeys each year on its UK bus and rail services. It is the largest passenger rail provider, with over 30% of UK train services and carrying more commuters into London every weekday than any other national operator. Go-Ahead is also the largest operator of bus services in London, running around a quarter of the capital’s buses on behalf of Transport for London. The group has an annual revenue of £3,361.3 million (2016) and is included in the FTSE 250. Go-Ahead employs 27,500 people and is governed by a board of six directors, which includes one woman.

Go-Ahead’s Vision, Beliefs and Attitudes Our Vision A world where every journey is taken care of.

Our Beliefs We believe in trusting people, being can-do people, building relationships and being one step ahead.

Our Attitudes We are accountable, down-to-earth, collaborative and agile.

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‘We provide a vital public service’ said David Brown when asked to describe his company’s activity. ‘Our transport services help people travel to work, education, important events, visit friends, family, go shopping and on days out. Our services underpin local as well as the national economy and all our local operating companies play a strong role in the communities they serve.’ ‘A strong focus on colleagues is at the heart of the group’s success,’ he said. ‘They work to keep the business and people moving—literally!—and, for our customers, they are the face of Go-Ahead. Investment in our people always reaps rewards as engaged employees will go the extra mile for their colleagues and for customers.’ He explained he was leading the introduction of new vision, beliefs and attitudes across the whole group. But he was at pains to stress this was not a top-down exercise. The group’s culture change programme was developed in collaboration with colleagues at all levels and across all divisions: ‘Everyone working in line with our beliefs and attitudes is the only way we will achieve our vision. Also, being able to articulate a clear, strong, vision helps us when we bid for work, because stakeholders know exactly what “buying GoAhead” means.’ David went on to break down the vision further: We say ‘a world’ because that says we’re thinking big and not restricting ourselves; we say ‘every journey’ so that could be on a bus, on a train, or in fact any other form of transport we might provide in the future; but for me ‘taking care’ is the most important part of the vision as it’s about being focused on our customers’ needs first and foremost. I’m confident, if we really live by our new beliefs and attitudes, our vision will become a reality. We’ll be creating a world that’s better for our customers and better for us too.

Go-Ahead uses the Investors in People management framework—believing organisations succeed by realising the potential of their people. David explained that the group has a devolved management approach with its subsidiary operating companies so the IIP framework provides a standard that its bus and train operating companies can measure themselves against as it defines clearly what it takes to lead, support and manage people for sustained success. He said: I want Go-Ahead to be a great place to work. and we want to attract strong candidates to join us, as well as ‘grow our own’ managers and leaders internally. I’ve had a rewarding career in the transport industry and I want more people to have

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a similar experience. But I’m not pretending that it’s easy. Managing large teams of people means you need to have robust processes in place and a performance culture that is underpinned by regular reviews, appraisals and, at times there will be difficult conversations. Managing in line with our beliefs and attitudes means we will hold ourselves and each other accountable. If someone’s not behaving in the right way— I expect others to call them on it but to do it in a constructive way.

He continued: Retaining skilled professional people with the right attitude is important to us. We spend millions every year recruiting, training and developing our people so it makes economic sense to keep them with us. We benefit from the value they add as well as keeping recruitment costs as low as possible.

David added that he is proud that the group introduced the voluntary living wage in 2015. ‘We are a fair employer and we adopted the Living Wage which exceeds the government’s National Living Wage.’ The organisation has a common appraisal system in place across the group, and for the majority of senior managers’ remuneration is linked to their performance. In fact, at a time when one of the group’s operating companies, Southern Railway, was not providing the required levels of passenger service, and had received a great deal of negative publicity with its industrial relations problems, David made it clear to the board that he did not wish to be considered for an annual bonus and declined a salary increase. He explains that the organisation also looks for alternative ways to recognise and reward people: Remuneration is, of course, an important way to motivate and retain colleagues but there are other ways that we can supplement this and create long term benefits for employees. Over the past few years we have run Sharesave schemes giving our people the chance to benefit financially and increasing their vested interest in the group doing well. This is basically about sharing in success.

Another area that the group is focusing on is increasing gender diversity as part of a wider diversity and inclusion workstream: We recognise the value of diversity in all areas and all levels of the business. Over the past few years we’ve established a group diversity forum with people from all across the group. Traditionally transport companies have had a strong bias towards male employees. Go-Ahead is no different we have a large percentage of men working roles such as bus and train drivers and engineering operational roles. We have across

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the whole organisation about 14% women working here. This of course will take time to address, and our operating companies work hard to consider different ways to advertise vacancies so they appeal to a wider range of people. Our senior managers are having unconscious bias training. We all have them whether we realise it or not—but the training helps us be aware of them and less likely to fall into them. We are working to ensure that there is no bias towards either gender and all appointments and internal promotions are made on the basis of merit.

Despite the industrial relations issues at one of the group’s larger operating companies, David insists that experience of the industrial action has not and will not impact on his philosophy of valuing people and his assessment that they are the businesses’ greatest strength. He says it is difficult to quantify how much of his time is spent on people issues because most of work has some sort of people connection. As to the people management style that he personally uses, he says: ‘Demonstrating personal integrity, including having the courage to tell people the truth, albeit that it’s sometimes a message that can be both difficult to deliver and hard to hear, and through fundamentally treating people with respect will come trust.’ He adds: I’ve had some excellent managers in the past…I could see that the leaders that were respected by everyone were the ones that worked hard themselves and were out and about speaking to people, finding out things for themselves, being interested in all aspects of the company, and not just sitting at a desk. I’ve tried to emulate them and I hope that the people around me think that’s a good description of how I work today.

Insights of Julia Robertson, CEO Impellam Group Plc Impellam is a FTSE AIM listed managed services and specialist staff company operating in the UK, North America, Asia Pacific and mainland Europe, the sixth largest in the world. Its annual revenue is about £1.8 billion and it employs over 3,200 people. Impellam’s main board consists of ten directors, including four women, one of whom is the CEO, Julia Robertson. There is no HR/people specialist on the main board other than Julia. The board does not have a policy with regard to multiples of CEO pay to median pay, but Julia pointed out that she is not the highest paid executive. The group has an employee council and transformation teams but no plans for a worker on the board.

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Julia thinks Impellam staff are one of four important elements creating success, not the most important, and this is reflected in the corporate vision, which is to be the world’s most trusted staffing company—‘trusted by our people, our candidates, our customers and our investors in equal measure’. Julia explained that a main economic driver behind Impellam’s business model is the economic value of our high-retention strategy depends on a high retention of stakeholders —clients, candidates, employees and investors. We can only achieve this by earning their trust that we will fulfil our promise, every day, to take care of their futures. This is both simple and hard: everyone wants something different. Clients look for the best possible work at the lowest price. Employees and candidates want the most interesting work for the best pay. Investors want to maximise their returns. To win the trust of them all, we must build a reputation for making and keeping fair but attractive promises. This is why they place so much emphasis on recruiting and retaining the right people to become staffing industry professionals. Reliability that comes through attracting the right people, talent development and promise-management excellence is a key value driver.

The group board regularly reviews strategy and did so after the Brexit referendum result but concluded that they were on the right track, including the importance of people and trust. As it is one of the strategic imperatives, human capital management is regularly discussed at the board and with investors. Furthermore, people due diligence, which Julia leads, is a key factor when considering acquisitions because cultural compatibility is considered critical to the success of mergers/acquisitions. Julia stressed the importance of the success of the business model of embedding the right culture within the group. She singled out four signature practices that drive competitive advantage: tuning in to customers; producing stars (about candidate approach); all Impellam people to make keep and deliver their promises every day; and high-integrity leadership. Julia recognised a cultural transformation programme was required to deliver this model and said that this is now well under way. This started with the Top 50 leaders who have been introduced to the skills of entrepreneurial, commitment-based leadership and have been trained in everyday promise management in Impellam’s ‘High Integrity Leadership Programme’. Rather than follow a classroom-based model, she decided that leadership development should be tailored to the needs of each individual

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as they identified, advocated and won support for a leadership project to improve the business. All leaders received coaching in transformational and everyday promise management, and won sponsorship from an executive leader for a transformational project personal to them. They then presented the results of their projects to Julia and, apart from learning and development outcomes for the individual leaders, this programme has led to real business benefits to the group, with some important human capital gains, including new user-friendly and self-service business performance metrics and dashboards for the US business, allowing for faster adjustment to trading risks and opportunities; the introduction of clearer and more usable legal and commercial advice on both sides of the Atlantic, reducing future commercial risks and improving the development of high-retention sales solutions; the introduction of SMART employee relationships (ER) practices in the UK that will reduce future ER costs; and cultural alignment of the UK and US guidant businesses. She said: ‘This was essential to retain key clients, and has opened new sales opportunities due to our sharper sales proposition; the turnaround of Carbon60’s operational performance and organisation resulting in improved EBITDA for the year and a more robust business going forward.’ In addition, over 300 Impellam people have embarked on a development programme based on effective promise management. Julia has created two new roles on the executive board: group transformation officer to help drive this cultural change, and a new director of talent from within Impellam’s management cadre. Going forward, Julia said the company will strengthen the selection and introductory training for new recruits, and support their ongoing professional development with a company-wide ‘learning management system’. In terms of methodologies to manage human capital, in addition to the leadership and cultural change programmes, Julia picked out four principal ones applied in the group: • a cultural values survey, 2,000 responses to determine the level of advocacy; • excellent communication, including the use of film rather than purely email to communicate key messages; • ensuring each individual has a transparent career path so they can see how they can develop; • one-on-one reviews, including satisfaction, happiness and work–life balance (the whole person coming to work).

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Julia said that having human capital metrics is important to the group and, given their high retention strategy, staff turnover is a strategic KPI (‘Put simply, the longer you keep people the more you retain customers—there is an absolute correlation’). The annual engagement survey was also an important device, with the key questions measuring the likelihood of recommending Impellam to a friend as a place to work and the likelihood of recommending Impellam services to a friend or colleague to whom the services might be applicable. In addition, independent ‘measurement’ is noted—for example, three group companies’ brands were placed in the 2015 Sunday Times Top 100 Best Companies to Work For survey, and two subsidiaries won Investors in People Gold Awards. Julia reports people measures to investors, linking these to economic value in her twice-yearly presentations. As to the tools she thinks important for getting the best out of people, she highlighted talking/listening to people—walk the floors; ensuring that every year every person should look forward to (rather than fear) annual appraisal; being accessible—get out and be authentic in meeting people; saying so when you get it wrong.

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Insights from Jane, Duchess of Northumberland, Trustee of the Alnwick Garden Trust, Businesswoman and Lord Lieutenant of Northumberland The Alnwick Garden is a complex of formal gardens adjacent to Alnwick Castle in the town of Alnwick, Northumberland, England. The gardens have a long history under the Dukes of Northumberland, but they fell into disrepair until revived at the turn of the twenty-first century by Jane, the current Duchess of Northumberland. I met Jane and visited the gardens a few years ago, witnessing at first hand her inspirational vision, commitment and incredible imagination, which have combined to create one of the North East’s leading visitor attractions. The garden now features various themed plantings, including a Poison Garden, and is designed around an imposing central water cascade. The Alnwick Garden Trust, a former Sainsbury’s Charity of the Year, was established in 2003 and has four trustees, including two women, one of whom is the Duchess of Northumberland. The annual income of the trust is about £4.3 million;. It employs 123 staff and 80 volunteers. Jane explained the strategy for Alnwick developed by the trustees, which includes socially important signature programmes:

© The Author(s) 2017 A. Coppin, The Human Capital Imperative, DOI 10.1007/978-3-319-49121-9_17

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The Alnwick Garden Strategy Vision To cultivate communities and raise aspirations in a place of beauty.

Mission Fearlessly inspiring and connecting people in an inclusive garden environment that creates learning opportunities and enriches lives.

Values • • • • •

Community Charity Access for all Bold Imagination Innovation

Goals • • • • • •

Embed our roots in the surrounding community and grow together. Provide a social and educational space for those in need. Promote inclusivity with access for all abilities. Enrich people’s lives with memorable experiences. Create engaging and learning opportunities for all ages. Maintain an outstanding quality, service and beauty of the space.

Three signature programmes Elderberries—Helping to ensure Northumberland is a great place to grow old. Sprouts—A series of activities that enhance education for all younger people in Northumberland. Enterprise—Working to ensure that every young person in Northumberland has a chance to succeed.

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Importance of People and getting the right senior team Jane set out her approach to people within the organisation: Without the right people our business would fail. I’ve often been told that the biggest challenge I faced was in fundraising and in keeping a team of designers together who each wanted to leave their mark. Wrong! The biggest challenge has been handing over what I’ve built to senior management and watching them f…it up. I rely on staff across the board to care as much as I do about the customer. But why should they care? The right person at the top who can work well with me needs to get his staff to buy into the values behind the project. That senior manager is only going to be able to do this if he understands and buys into the vision. It is also necessary to surround yourself with people who buy into your vision. Replace any negative thinkers who will bring down others. If you would enjoy having a drink with all your team individually then they’re probably the right people!

Personal Role As Founder and Trustee of Alnwick Garden, Jane revealed that it has been necessary to adapt her own style to deal with the operational head of the organisation: I’ve learnt to step back from getting too involved. I design and build and explain the thinking behind my ideas and hand over what I’ve built to the Director. He has to ensure it’s financially sustainable so I need to allow him headroom to change things accordingly. I meet with the Director weekly, hear what’s going on and he’ll ask me what I think etc. I will sometimes give him ideas or suggestions but leave it to him to decide if he wants to implement those suggestions. But if I were to see things going wrong then I’d jump right back in.

Personal Philosophy and Most Effective Tools She also set out in very clear terms her personal approach to getting the best from people and the three most effective tools she uses: People need to feel involved. As someone who prefers to do things myself, this has been challenging. Some of our most successful ventures have been where

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I’ve had an idea; found the funding and implemented that idea and then handed the project over to others to operate as they wish. For people to want to be involved they need to buy into your idea and you have to sell it to them. They need to see that there is no job I wouldn’t do myself at any point and that I genuinely care. Enthusiasm, commitment and honesty are the three tools I regularly employ. But it is also necessary to be true to yourself.

Impact of Having the Right Trustee on Board Alnwick Garden has had five directors in a relatively short space of time. Jane explained how recruiting the right trustee who has acted as a mentor has helped her with rationalising this position and also led to a different approach to recruiting this critical appointment: Ken McMeikan, CEO of Brakes was a key appointment. Before that he was CEO of Greggs and he became a Trustee of The Alnwick Garden. He’s taught me so much. He told me that I shouldn’t feel that I’d failed by having five CEOs in a row; that he’d had 10 good people over his working career who were capable but that the chemistry wasn’t right. He insisted I meet the new Director for breakfast, lunch and dinner several times over a week to see how much I liked him before offering him the job. Until Ken came on board I used to say to other Trustees that football clubs replaced their managers if they didn’t deliver so why shouldn’t we? (They didn’t like that analogy but I think there’s truth in it!) The result of these initial endless meals is Mark Brassell, our Director who I envisage will be with us long term. Ken has offered to teach me how to get the best out of people but I suspect that we all realise the problems in the past were due to having the wrong people.

Jane’s Vignette I am keen to ensure Anwick has the right policies and procedures for across the board diversity. But I am keen to ensure it takes real effect at the individual level This was brought home to me with the case of one of our valued staff members, Tom. Tom, who has Cerebral Palsy had been working as a labourer in a chicken factory since leaving school. During his fifteen years at the factory he was bullied and chastised by the mainly female workers. Tom left the factory in 2003 to volunteer at the garden. It was Tom’s intention eventually to find paid work at The Garden as a gardener.

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There were no vacancies in the garden team at that time so Tom eventually secured a job on Visitor Services checking tickets until a vacancy in the Gardening Team became available. To help Tom in the work place we secured machinery from John Deere that was power assisted enabling Tom to drive a tractor and gator despite having a withered right arm. Tom was encouraged to do some formal training and studied for the RHS certificate in Horticulture and NVQ levels 1 and 2 in Gardening techniques which he passed. During his time as a gardener, Tom married his wife who was working in The Alnwick Garden shop and they now have two lovely daughters. Tom continues to be a very valuable member of the gardening team and is still keen to learn undertaking weekly plant identification training sessions with the rest of the gardening team. I am proud of Tom and of his team who show what diversity in practice is all about.

Insights from Dame Martina Milburn, DCVO, CBE, CEO, The Prince’s Trust The Prince’s Trust is a charity, incorporated by Royal Charter, and thought leader that helps 13–30-year-olds who are unemployed or struggling at school to transform their lives. It was founded in 1976 by HRH The Prince of Wales. The Prince’s Trust is governed by a board of nine trustees, including three women and three trustees who are BME. Although currently there is no trustee with specific HR experience, Martina considers it does have the diversity of thinking required for their task. The council does not have a regular human capital agenda item or training on human capital issues per se, as HR is delegated to Martina and the executive team, which includes a people and learning director. In 2015 it helped 56,000 people turn their lives around, with 70% achieving a positive outcome. In 2014/15 the trust achieved record income of £66 million. About 30% of the Prince’s Trust funds come from the public sector, demonstrating cross-sector interdependence. It currently employs 1,250 staff and has about 6,000 volunteers. People, staff and volunteers are ‘110% the most important asset’, according to Martina, and this assessment is endorsed by the Prince of Wales and supported by the trust’s strategy, which Martina provided (below). The strategy includes ‘people’ as one of four core organisational pillars.

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Importantly for Martina, against each strategic aim, the trust developed a set of organisational priorities for the year linked to the trust’s annual budget and business plans. The strategy is circulated to staff and, as can be seen below, includes a statement on how the organisation values its people.

The Prince’s Trust Strategy Our Vision Every Young Person should have the chance to succeed.

Our Mission To help disadvantaged young people in the UK to change their lives and get into work, education, training or volunteering.

Our Ambition To help more young people into a positive outcome each year. People are one of the plan’s four pillars: • • • •

Programmes Resources People Reputation

But people run through every strand. Under the People Pillar ‘Our high quality, dedicated, staff, partners and volunteers are integral to the success of the Prince’s Trust. We will empower all our people to succeed together, strengthening our partnerships and increasing recognition. We will: – help our staff develop further by broadening their experiences across the trust; – better engage and recognise our partners and volunteers;

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– optimise the specialist skills and knowledge of our partners and our staff for the benefit of the trust; – provide a clear framework for decision making at all levels to ensure the best outcomes for young people – ensure that volunteers are effectively aligned to supporting young people at each stage of their time with the trust. Martina said that the human capital management approach permeates every level of the organisation and is guided by a set of values which staff themselves voted for. These are used as a recruitment tool to assess new staff against, and they are also linked to performance management. The senior management team’s objectives are centred on how they work as a team, a key component of leadership capital. Martina explained that this methodology is very much supported by the Prince’s Trust Council, which is accountable in law for the work of the trust, which includes approving the strategy and agreeing the business plans and budget. Apart from measuring financial performance, another key area for regular council review is the outcomes for the young. Martina points out that although the council does not have a worker representative on the board, they have a staff committee called Trust Exchange, chaired by the people and learning director, who feeds back to the board and executives relevant issues raised. Council members are also very involved with the charity beyond the board room (meetings are every two months)—they visit the programmes as a part of their induction, they sit on the advisory board of which the first half of the day is always a site visit, they attend events and they sit on committees. Although there is no conscious multiple link between average staff pay and CEO pay, Martina thinks there probably should be. They also have performance-related pay for those who exceed expectations on KPIs which are related to values. No bonuses are paid to anyone in the organisation.

Human Capital Management Measures and Methods The methodologies and measurements used to manage human capital which Martina outlined were: • There is an annual staff survey that is done externally, is anonymous and not mandatory, the results of which are fed back to staff and actions taken on areas suggested for improvement.

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• Investors in People assessment is undertaken (the trust received a silver award and it has just been reaccredited). • The trustees and senior team look at details around staff, including staff retention rates, maternity cover, long-term sickness, stress-related absentees and diversity, plus health and safety data. Collectively, this builds a picture of which programmes are performing well, where any concerns may be regarding staff issues and, as a result, what action needs to be taken. • The quality of what they produce for young people is a key metric. They usually have output qualities of 70% and upwards. • They undergo extensive communications with people, which included ‘Trust exchange’, a web chat (which is an excellent barometer of how staff are feeling) and an annual staff day for each region. Martina and two senior management team leaders attend these, and the programme includes a team-building element. • They carry out a biennial volunteer survey, the last one achieving a record response rate. This aims to find out what it is like volunteering for the trust and provides information on areas which may need to be improved, such as with additional training on a particular subject, safeguarding being a particularly key one at present. With regard to diversity, the Prince’s Trust now has an internal group called Pulse, which is for LGBT staff.

Personal Tool Kit Strong leadership is key to ensuring productivity across the organisation, according to Martina—she thinks that it does not matter if the staff like her but they need to trust her, and vice versa. In terms of engendering trust, Martina tries to treat people how she wants to be treated, and to be open and honest with all staff and volunteers. She estimates that about 50% of her time is spent on people-related issues.

Insights from Dr Philip Goodwin, CEO, Voluntary Service Overseas Voluntary Service Overseas (VSO) is a charity established in 1958 to fight poverty in some of the poorest communities in the world through the power of volunteering. Incoming resources for VSO were £81.2 million (2015/16),

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about 27% core funded by the UK government, giving an example of public/ voluntary sector cooperation. VSO employs 750 full-time equivalent staff and over the course of a year is involved in managing over 1,000 international volunteers working around the world and many more as national volunteers. All this provides VSO with particular human capital management challenges. VSO is governed by an international board of trustees and an executive board. The international board has ten trustees, of whom six are women and three of these are of BAME heritage. There is not an HR qualified member on the trustee board currently (VSO used to have one) but Philip Goodwin believes the board ‘get it’, and have the diversity of experience and thinking required. The executive board is the main decision-making group within VSO. It has responsibility for quarterly setting and reviewing of objectives, budgets and the ultimate strategic direction of VSO. It is five strong and includes two female members, one of them the people and organisational development director. Philip explained that he thought people (staff and volunteers) were VSO’s biggest asset and that he and his organisation fundamentally believed people matter; ‘change depends on people and for VSO there needs to be an internal and external congruence; our brand identity is heavily linked to people.’ Furthermore, VSO’s historic business model depended almost entirely on funding from UK government, but is now significantly reduced and bridging the gap depends on the ingenuity and commitment of VSO people. Philip shared a recently agreed strategy which demonstrated that people were at the heart of everything VSO did and integral to delivering the organisation’s vision and mission, and he pointed to the inspirational power of the vision which fuels high levels of engagement. Philip passionately believes that everything his organisation does needs to be focused on its mission. What happens in the frontline of its work must drive its strategy. Rather than starting with a strategic discussion—which he feared would lead staff to look internally and risked losing organisational energy— Philip began his tenure as CEO by asking what were the key shifts in operational performance that the organisation believed it needed to deliver? This caught the mood of the organisation, which was eager to deliver more. Out of that quick and iterative discussion with the wider leadership of the organisation came a simple, clear operational plan. As the focus of the operational plan emerged, it became increasingly clear across the organisation where the strategic challenges and opportunities for VSO were. More importantly, it ignited a passion and commitment amongst both staff and volunteers for making some key strategic shifts. This has been a remarkably

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painless and rapid exercise, helped by a strong strategic alignment between executive and non-executive.

VSO’s Strategy Our Vision: A world without poverty Our Mission: To bring people together to address marginalisation and poverty

VSO: Doing Development Differently At VSO, we think that people matter. There are enough resources in the world that no-one need be poor. There is enough opportunity that no-one should be side-lined. Exclusion and poverty are the result of what people do and the decisions they make. We also know that people are the ones who can change this. VSO brings people together to generate insights, ideas and action on poverty and exclusion. Those people offer to each other a wide range of skills, backgrounds and experience. They volunteer to bring about positive social change. Our understanding of the places where we work means we are able to place volunteers where they can best catalyse change. We mobilise an extraordinary diversity of volunteers: community, national and international. They come from all parts of the world. They work with communities, with organisations, with government institutions and with businesses. Our volunteers act as advisors and animators embedded in communities and institutions. They act as trainers and facilitators transferring skills and knowledge. They act as mentors, role models and change agents. They connect people across different levels in institutions and communities. Our volunteers experience first-hand what people live with. As a result, VSO is able to better understand the complex stories of exclusion and marginalisation behind poverty. This in turn allows us to design and deliver programmes that can respond with innovation and scale to the complexity of poverty.

Values • By thinking globally, we can change the world • Progress is only possible by working together

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• Knowledge is our most powerful tool • People are the best agents of change At the heart of the People First Strategy is what VSO call a VSO People First Approach. This has six principles which VSO see as critical to delivering high performance in it work: 1. Putting people at the centre of our work; 2. Being reflective about what we do and how we do it 3. Being collaborative in our approach 4. Making sure we are accountable to those we seek to serve 5. Ensuring we are an effective organisation 6. Making sure we make decisions based on evidence The importance of partnerships and relationships were stressed by Philip in describing VSO’s ‘Theory of Change’ to show that ‘the organisation makes a distinct difference to poor communities and ensure our contribution is a lasting one’. VSO believe progress is only possible when ‘we work together. Partnerships lie at the root of all the positive transformation that VSO creates. Together, we work on programme development and delivery, research, advocacy and fundraising.’

Leadership Style Philip considers dispersed leadership is essential, particularly in an international organisation: ‘You can’t know or control what people are doing thousands of miles away. They have to be aligned to strategy, operations and values if they are going to make smart decisions to deliver the mission.’ He went on to share his own particular approaches to people engagement. He practises what he calls ‘appreciative enquiry’, so, when he interacts with people to find out what works well and what is great in order to discover the ‘Crown Jewels’, he tries to ask what went well rather than simply trying to identify what went wrong. He suggests this is a harder approach to implement than the typical one of critical enquiry, which is what humans are hard wired into. This does not mean not holding people to account but, in his experience, it is a way of getting the best from them. This he feels is particularly important when you’re trying to get people to buy into a new approach or when you’re trying to get a step change in performance. It is not that he does not believe that critical enquiry does not work; it is just that he believes the approach which tries to

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build on what works, opens people up to exploring new ways of working, and leads to a more resilient and better-performing team in the longer term.

Communication Also, when in the office, he has an open-door policy: anyone can come in and, he says, they do. He also makes sure he is out and about—not just in the London HQ but in the VSO offices around the world, and travelling to the field to speak with volunteers, partners and staff. He feels as though getting under the skin of the ‘business’ and engaging with VSO people gives him greater insight into the work of the organisation and helps him to build advocates for his strategy and vision for VSO. He estimates he spends over 50% of his time on people issues. This includes time on Skype to interact with colleagues overseas, a necessary tool for a global business and one which he much prefers to email as it provides face-to-face contact, albeit via a screen. In terms of other forms of communication, VSO provides information to its employees through ‘chatter’—the VSO intranet—and organisation-wide emails, webinars and online learning sessions. Philip said that VSO has a well-used internal chatter site which allows staff to talk to each other very well and fosters a vibrant culture of online collaboration. In addition, the organisation has a lot of town hall meetings, including international ones. Philip himself has an ‘Ask Philip’ emails address and he replies personally to all people using it. The online collaboration has helped build a strong sense of alignment to the strategic direction of the organisation and its key operational themes. It is helping to build a real understanding of the work of VSO amongst all of the staff and volunteers crucial to delivering future plans.

Performance Management Philip and his team do not believe formalised performance appraisal systems are effective. There is enormous time and money spent in setting up and maintaining processes and systems, filling in forms and training people, but with very little evidence that people are getting real value from the process. So VSO has abandoned them. Instead, VSO is promoting a continual feedback culture with constant review of performance objectives, rather than storing up issues for a once-a-year session. The executive board reviews its priorities every quarter and assesses its performance against those priorities as well as against its overall business targets. This fits with the People First approach, which encourages reflection, accountability and effectiveness. If

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people and/or teams are not effective then the operating culture is for this to be raised early and clearly. If a formal process needs to kick in because of poor performance, this is managed in keeping with formal performance management approaches.

Staff Engagement Staff engagement processes were explained by Philip. Employees, through their ‘Unite’ union representatives, and volunteers, through representative forums, are consulted on issues that affect them, although Philip thinks VSO could still do much more to engage with its volunteer base to unlock even more of its potential. VSO’s annual ‘You First’ survey, which monitors levels of engagement among employees and volunteers, asks if people feel they can communicate openly with each other regardless of position. The latest survey showed 80% confidence in leadership, a key measure for the organisation. VSO does a full staff survey every three years and a pulse survey of ten key engagement questions in the intervening two years. These pulse questions focus on areas where VSO believes it needs to make improvements or assess the direction of travel. But VSO’s most critical measure on performance is simply to achieve budgeted results, disseminated via a quarterly reporting process. There is no link of CEO pay to average pay in VSO.

Recruitment Reflecting the breadth of its international operations, Philip said much of VSO recruiting now has to be done on line, and they interview for innovative thinking and attitude as well as technical capability. To help them, VSO has had a partnership with the Randstad recruitment agency since 2004. This helps them to match the right people with the right jobs—specifically matching the skills of volunteers with the communities in the developing world. This partnership extends to providing financial, strategic and practical support, which includes Randstad people taking up voluntary placements. The recruitment process is backed up by extensive on-boarding/induction processes.

Philip’s Vignette Everywhere I go to visit VSO programmes, I take my mobile phone and take photographs of staff, volunteers and beneficiaries. I tweet my

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impressions and the ideas and insights of those that I’m meeting. At the end of each visit, I share ten things that I’ve learnt or that I’m curious about or I’m reflecting on as a result of that visit. I share this with all of the senior leadership around the world. I try to build a narrative between one visit and another, to build up an organisational story that I’m encouraging others to join in. In doing so, I am building up a photostory of the strategic shifts that VSO is seeking to make and I’m illustrating them in action. It helps bring our strategy and operations to life. It shows the intimate connection of the senior leadership—the CEO—with our work on the frontline. Employees and volunteers see themselves in the photos—as part of our story of success and change. And people know that I know them, their place of work, their challenges, their successes as well as their failures. They know that I am passionate about our mission and about their part in delivering it.

Insights from Seyi Obakin, OBE, CEO Centrepoint Centrepoint, founded in 1969, is the UK’s leading charity for homeless young people, supporting more than 7,800 16–25-years-olds a year with housing, learning, health and life skills, and it works to influence policy. Some 89% of these young people move on positively. Total incoming resources for 2014/15 were just under £22 million, a proportion funded by government and local authority contracts. The average number of full-time equivalent staff employed in 2015 was 301, and more than 670 volunteers contributed 46,500 hours of their time to Centrepoint. There are thirteen members of the board of trustees, including four women but with no BAME representation. The executive board of six is all female, one of whom is the director of people, skills and employability, and there are two BAME representatives, including the CEO, Seyi Obakin. Seyi told us that Centrepoint people are exceedingly important since everything they do at the charity is people based. He said: We rate them along with our Brand, involvement of the Duke of Cambridge and our relationships with donors, volunteers, politicians and, of course, most importantly, with the young people we support. A Centrepoint Parliament has been established to involve young people themselves and give them a voice in everything we do as an example of our inclusive approach to people.

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Strategy Seyi thought that having a five-year strategy (currently 2015–2020) which stressed the importance of people was a necessary precursor to effective human capital management and he summarised this as follows: Our overall vision is to end youth homelessness. Our more immediate mission is to give homeless young people a future. • We value above all being inspiring, innovative, empowering and professional. These values shape our behaviours, both internally and externally and, for example, drive our performance appraisals. • Centrepoint’s strategic and business plans are supported by strategies that fall into four main areas: property, people, financial and IT. Among people measures that are reported monthly are staff absence and staff turnover. He continued; ‘Undoubtedly, Centrepoint’s vision and mission which explain why we exist are of appeal to staff and potential staff and particularly millennials and assist greatly with our recruitment, retention and people engagement and performance. One of the strategies core objectives ‘pursuing excellence together’ encapsulated the people approach.

Culture When asked what he is most proud of accomplishing during his period as Centrepoint CEO, Seyi said: ‘It isn’t something we’ve finished, but a journey we’ve started: changing the culture of Centrepoint. How do we create an organisation that enables us to release our collective creativity to solve the problem of youth homelessness—whether it’s tackling literacy and numeracy, health issues or finding work? It’s a journey we started eighteen months ago and we’ve made great headway but we are not there yet. Interestingly, the environment now has made this even more important. So in order to ensure we enable everyone in the organisation, we’ve set-up an Innovation Fund. Everyone can innovate and be creative—whether that is doing something entirely new or taking something we already do and creating a better process to achieve it. We’re in a position to say ‘yes, go and try that’. And if they need resources or need to be released from their role to make it happen, we have provided in our budget to release such resources. A great example of this is of

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a colleague working in Camberwell who felt we would be able better to engage the more difficult young men there if we could create a gym, so found some space in the building, bought some equipment and it worked! Now, great support and development conversations are taking place that would otherwise not happen.

The Board The main board members are encouraged to get out of the boardroom to visit operations and attend events to ensure their visibility within the charity and to provide them with a detailed understanding of Centrepoint. Having HR experience/expertise is a requirement for one main board member, currently Mike Westcott, who is global human resource director for the National Grid. This is an added organisational comfort that the human capital imperative is also an imperative for the trustees, although there is no specific HR training provided for them. There is a multiple link between highest and lowest pay in Centrepoint, which is enshrined in company policy—the multiple is eight.

Metrics Including Engagement Seyi pointed out that the ‘pursuing excellence’ strategic objective has four strands: • how to lead and manage people, metrics include talent management, succession planning, appraisal, staff survey once every eighteen months, but pulse survey every three months (see below); • how Centrepoint relates to its people; • how efficient the tools are to get the job done (physical/processes); • how good the technology is that underpins the other three. With regard to human capital reporting, Seyi explained that, in addition to the topic being discussed at the executive board, every quarter there is a report to the board of trustees on progress against strategic pla,n which includes the important people. The Pulse employee engagement survey (undertaken every three months) trend is also reported. Seyi thought the Pulse survey was an important tool. It asks twenty-five questions about how staff are feeling. A key one is whether they recommend Centrepoint as a place to work to a relative or friend. For this survey, a quarter of staff are selected at

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random across all teams (pro rata size of teams) and 100% participation is sought. This helps to build a real-time picture of what is going on and enables the executive board to analyse, spot trends and take corrective action if necessary. Centrepoint also benchmarks survey results against other those of organisations. Seyi considers a key element to human capital effectiveness to be involvement and gave the example of Centrepoint staff, young people and external stakeholders contributing to a comprehensive review of Centrepoint’s new support model. As to worker representation on the board, Seyi believes that it has some merits but says that Centrepoint has a staff forum which includes representatives from all of the different teams who elect their own chair, and that chair regularly attends the executive board meetings. This arrangement exists notwithstanding Centrepoint has trade union involvement with the Unite union, with whom they have an excellent relationship

Seyi’s Personal Approach In terms of his personal philosophy on getting the best from his people, Seyi sees his role as servant leader. His primary task is to serve his team in such a way that they can be the best people they can be. He looks for leadership throughout the organisation and not just by hierarchy, and he tries to be an influencer, believing that if people are treated well then they in turn treat customers well. In doing this, Seyi thinks it necessary to invest emotionally in the success of Centrepoint.

Insights from Sir Harpal Singh Kumar, CEO of Cancer Research UK Cancer Research UK is the world’s leading cancer research and awareness charity and the largest in the UK. It was formed in February 2002 by the merger of the Cancer Research Campaign and the Imperial Cancer Research Fund. Its aim is to reduce the number of deaths from cancer. As the world’s largest independent cancer research charity, it conducts research on the prevention, diagnosis and treatment of the disease. Research activities are carried out in institutes, universities and hospitals across the UK, both by the charity’s own employees and by its grant-funded researchers. It also provides information about cancer and runs campaigns aimed at raising awareness of the disease and influencing public policy. Cancer Research UK has an annual

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income of over £630 million, employs 3,600 staff and has 40,000 volunteers. It funds over 4,000 scientists, doctors and nurses. The charity is governed by a twelve-member council of trustees, which includes three female members but no BAME representative. The eleven-member executive board includes an executive director of HR and three female members. This latter is chaired by Sir Harpal. In addition to his Cancer Research UK chief executive role, Sir Harpal is trustee of the Francis Crick Institute. Based on his previous experience in the private sector, Sir Harpal explained his view that there is an 80–90% overlap in terms of the things a CEO of a charity and a CEO of a commercial business have to do, the two differences being some metrics and the nature of the people. This similarity in job role is an interesting and relevant observations for this book, which is targeted at cross-sector leaders. Sir Harpal thinks that generally people who come to work in a charity are already extremely motivated by the mission. Often they forgo higher salaries elsewhere and are compelled by the cause. As a consequence, he never has to speak to anyone about putting in the hours—they tend to work every hour under the sun. The management issue is that passionate staff do not always distinguish between what is of really high value organisationally and the less high-value matters. Sir Harpal’s management challenge is ensuring that energies are channelled into areas that produce the greatest mission impact. Constantly evaluating activities against the overall charity objectives helps to achieve this. He explained that although the charity’s mission statement, set out below, does not specifically refer to people, the charity’s beliefs underpin a culture that encourages focus on doing what matters. He is particularly pleased that he got buy-in for changing the key objective of the charity—saving lives— not carrying out research for the sake of it. Throughout 2015, Sir Harpal oversaw a programme to streamline organisational effectiveness to ensure close alignment to the strategy and operational goals. This included reducing some management layers to reduce hierarchy, empower people more and speed up decision-making.

Cancer Research UK Mission Statement Vision Our vision is to bring forward the day when all cancers are cured.

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Our Ambition Is to accelerate progress and see three-quarters of people surviving the disease by 2034.

Our Strategic Objectives 1. Prevent—reduce people’s risk of developing cancer 2. Diagnose more cancers earlier 3. Treat—develop new cancer treatments 4. Optimise—make treatments more effective for each patient By way of background, Sir Harpal explained that the charity has two cohorts of people: staff and fundraisers/volunteers on the one hand and 4,000 researchers whose salaries Cancer Research UK pays. In terms of the latter, they are not immune from performance management (e.g. researchers’ contribution is typically reviewed after three or five years—a longer lead time than staff because of the nature of research).

Importance of the Right People He says that, without question, people are Cancer Research UK’s greatest asset. It is the quality of its people that determines the charity’s progress at the centre of the research community, enabled by its success in raising the necessary funds. In particular, Sir Harpal commends certain Cancer Research UK people attributes and rates them as inspiring because of their amazing commitment and their fabulous creativity, and because they are so smart. He cites the critical importance of recruiting the right team and quotes a former chairman as commenting on his approach; ‘The thing you’ll always realise is that you never hire fast enough and you never fire fast enough.’ Sometimes this translates into hiring people with outstanding potential even if a particular role has not yet been identified—good people always contribute. He recognises the necessity of getting a really good team of people, and equally, if people do not perform, dealing with it quickly. Last year Sir Harpal strengthened the executive board with the appointment of five new directors, of whom four were promoted internally. In terms of methodologies to optimise human capital effectiveness, Sir Harpal considers two related matters are important: spotting talent and

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bringing them into the organisation, sometimes even when you do not have an opportunity for them; and giving these people the opportunity to perform. Really good people will create opportunities for an organisation that are not necessarily visible to the board or the executive. That is why one of the things he looks for is creativity, because they will create opportunities that you might not see otherwise. It is about spotting talent and then giving them the space to develop their ideas and to work with them.

Metrics A key method for measuring human capital used by Sir Harpal is an engagement survey, which the charity runs every fifteen months, typically with an 85% participation rate, and that is where the high levels of commitment to their work and the charity are measured. Any measures where the charity scores below benchmark are actively followed up by the leadership team. Overall engagement scores tend to be towards the top, across all sectors. In addition, as an external benchmark, Cancer Research UK participates in the Bloomberg Index of Top 400 Best Employers in the UK (achieving twelfth place) and the Guardian UK Best Employers (voted third for its graduate programme).

Training and Development Sir Harpal outlined the charity’s approach to investing in its human capital: it has a comprehensive learning and development offering for both office-based and regionally based staff, including coaching and mentoring programmes; secondment opportunities; a range of online resources; and group workshops. All are designed to give people the tools they need to take ownership of their own development, build expertise in their particular area of responsibility and, importantly, work effectively with others. Also, current and future leaders are offered leadership programmes and a number of twelve-month talent development programmes, with focused and tailored modules for furthering careers

CEO Pay Link and Worker on Boards Cancer Research UK does not formally link CEO pay with median staff wage but Sir Harpal points out that no bonuses are paid to any staff. Although

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there is no staff representation on the boards, scientists are trustees of the council and they could be called workers in the generic sense.

Personal Tools In terms of other personal insights into getting the best from people, Sir Harpal mentioned honesty; there is never perfect information, so it is necessary to make decisions on imperfect information; having the courage of your convictions; being able to spot when it was the wrong decision, admit it and quickly change course if you need to. He finds roadshows that he holds around the country, typically each lasting around four hours, to be an important way of connecting with staff. Although he does not walk the floor for the sake of it, he thinks being accessible is extremely important. Sir Harpal’s office is located in the centre of one of the floors with glass walls and he has an openpdoor policy.

Insights from the Very Rev Dr Pete Wilcox, Dean of Liverpool Cathedral The Church of England is the established or state church in England. It is divided into two provinces—Canterbury in the South of England and York in the North. Each province has a head or primate—the archbishops of Canterbury and York. The Church of England is led by forty-two diocesan bishops and its practices are decided by the General Synod. Each of the fortytwo dioceses has a cathedral, which is the ‘seat’ of the bishop but is run independently of him. Deans are in charge of cathedrals, assisted by clergy and lay canons. The Church of England is part of the Anglican Communion, which is a worldwide family of churches in more than 160 different countries. On any one Sunday more than a million people attend Church of England services, making it the largest Christian denomination in the country. Liverpool Cathedral, Britain’s largest cathedral, is a worshipping community and a major cultural venue. It attracts about 500,000 visitors a year. There are eighty people on the payroll and a volunteer team of 250. The cathedral depends heavily on its volunteers and seeks to maximise their contribution by deploying them in roles about which they are passionate. Volunteers are expected to sign agreements which

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set out what they can expect from the cathedral, and what the cathedral can expect from them. The responsibility for the strategic direction and good governance of the cathedral rests with the chapter. Led by Dean Pete Wilcox, this consists of the senior cathedral clergy as well as lay members—twelve people in total, including four women. Dean Pete told us that people were the cathedral’s most important asset and that ‘a congregation’ literally means ‘a gathering’, ‘so people is what we do—we are our people’. And he went on to say that mission achievement was absolutely dependent on their committed people. The cathedral has developed a ten-year strategic plan (2014–2024), which includes the following people elements:

Our Values • heightening our Cathedral Spirituality (looking upwards) • deepening our Cathedral Community (looking inwards) • widening our Cathedral Service (looking outwards) Up, in and out are the three dimensions of every authentic Christian church: we look up to God, in at one another and out at the world. The middle of these three values is a challenge to the quality of our community life: do we model the sort of relationships with one another, in mutual love and care, to which Christ called his disciples. The way we treat one another has to be consistent with the faith we proclaim. So we amplify that value as follows:

We Value • people, seeking to ensure that staff and volunteers enjoy what they do, are respected cared for and are enabled to develop their full potential; • an environment of shared ownership and reciprocal responsibility, nurtured by good teamwork and mutual encouragement; • individual accountability as a means of learning, striving to avoid a culture of blame, but embracing respectful and constructive criticism.

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Dean Pete set out the the Four Foundations of the strategy as being: • • • •

finance fabric communications care of personnel

He said that under the fourth foundation, care of personnel, there was a clear set of targets, the key one being, as a committed and responsible employer, to have a diverse, talented and high-performing staff and volunteer team. In order to do this, Dean Pete told us that that the cathedral aims to: • Honour salary commitments (and in the current financial year that has meant introducing the living wage for all staff). • Broaden the recruitment base of staff and volunteers. We are convinced that diversity is enriching: so we want to draw staff and volunteers from as wide a range of backgrounds as possible. • Ensure excellent pastoral care and personal development of staff and volunteers. In the case of our volunteers, responsibility for this rests with a dedicated staff member (our volunteers’ manager). It includes, for instance, an annual service of thanksgiving for the work of our volunteers, which is followed by a meal paid for (and served!) by the cathedral chapter. In the case of our paid staff, the responsibility rests on our HR team—and directors are expected to take the lead in caring for the staff in their team, including annual appraisals. I try to give a lead, by writing ‘warm fuzzy’ postcards to staff week by week, to highlight particular achievements; or cards of encouragement and consolation in hard times. • Put volunteer working arrangements in place, renewable bi-annually, • Maintain effective policies to ensure the health and wellbeing of staff and volunteers, Holiday entitlement is monitored, not so much to ensure noone takes more than their proper holiday entitlement, but to make sure that everyone takes it fully. • Increase opportunities for placements, trainee schemes and ‘back to work’ training, • Review annually development/training needs for all staff and volunteers. Because of the unique appeal of Liverpool Cathedral, Dean Pete explained that they are far more committed to commercial enterprise tied into the

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visitor economy of Liverpool than perhaps other cathedrals in the Church of England. This is taken very seriously because of the contribution the cathedral makes to Liverpool in economic as well as in religious terms. For example, the cathedral has been a winner of the ‘Liverpool City Region Major Visitor attraction of the Year’ competition in both 2014 and 2016, ahead of venues such as Liverpool Football Club and the Beatles Museum. On the TripAdvisor website, the cathedral is the top recommendation for ‘Things to do in Liverpool’. Pete said that the cathedral’s success in achieving awards like this depends on a warmth of welcome from his people, mainly volunteers.

Pay Differentials The Church of England does have a policy with regard to pay differentials. Among clergy, for example, in 2014–15 the Archbishop of Canterbury received a stipend of £76,280. This was only a shade over three times the stipend received by the lowest-paid members of the clergy, who are the newly ordained curates. In 2014–15 they received a minimum of £24,520. At Liverpool Cathedral, a similar policy of low differential is in place.

Performance Management Dean Pete explained that the cathedral uses a number of methodologies to manage human capital, including: • Performance reviews focused on fulfilment in the workplace and beyond job satisfaction to job delight: directors are seeking to ensure not only that their staff are content in their work but that they experience high levels of fulfilment. • An annual staff team building event (2 x 0.5 days). • Every Tuesday at 9.15, any member of staff team and all directors/ managers attend diary meeting to review last week and look forward to next two weeks: first ten minutes about what has delighted them in last week; also saying what went wrong, honestly and without blame. In terms of building morale and consolidating values, this weekly gathering is priceless. In terms of appointing a worker to the board, Dean Pete said that by statute this is not allowed.

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Personal Toolkit Dean Pete described his personal philosophy/approach to getting the best from his people: • Cultivate trust of direct reports: prompt feedback and fair dealing; real prompt praise but not to avoid difficult conversations. • Model the values by being as Christ-like as possible: in a Christian institution, anything less lacks authenticity. One of the advantages of leading a faith-based organisation is the public recognition of the values on which it is based. This means that leadership which embodies those values has credibility. • Putting hand up when wrong: his staff know that mistakes are inevitable where risk-taking is encouraged; poor judgement is also mostly not a problem when the staff member is quick to take responsibility. What is not acceptable is poor behaviour, especially in the treatment of other people. • Spending time with peopleface to face: including undertaking nine one-to-ones a month (an hour each meeting), plus contact with all levels of the staff structure and other people work. Again, an advantage of the organisation is that the cathedral itself is effectively a huge open plan office: by talking from one part to another, the dean encounters many staff and volunteer colleagues daily. But in an ordinary working week, pastoral attention to staff and volunteers could take up about 20% of his time.

Dean Pete’s Vignette Visibility is key to my leadership. This week, however, I have been away from Liverpool Sunday to Wednesday. So today, Thursday, I made a priority of ‘walking the beat’. Tomorrow, one of our staff will work her final day before she begins a period of maternity leave. But Friday is my weekly rest day, so today I made a point of finding her to wish her well. Her office is at the opposite end of the cathedral floor to my own—so just walking from my desk to hers made it highly probable that I would bump into other staff and volunteers en route. And so it proved. On the way there I stopped to chat to three of our vergers who were busy moving furniture. On the way back, I spoke to two of the staff in the cathedral shop, and one of our volunteers

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(who was interpreting the organ console to some visitors) introduced me as I passed. These are the ways in which the wheels of cathedral life are oiled. As it happens, the office in which the member of staff works, for whom I’d particularly gone looking, was under some pressure yesterday. A film company had been on site, making a documentary. This had involved closing the cathedral to the many tourists and visitors who had come calling that day. They had done a great job both getting the message out in advance through social media and so on, that access to the cathedral was restricted, and on the day, dealing with the disappointed. So my call at that office had a dual purpose: I was also able to say, ‘How did it go yesterday?’, and ‘Thank you, good job’.

18 The Outliers

Our wretched species is so made that those who walk on the well-trodden path always throw stones at those who are showing a new road. Voltaire

During the research phase I discovered a number of human capital management outliers. In this context, an outlier is a philosophy or approach that is detached from the main body of organisational thinking. Outliers are included here because it is incumbent on boards, in the words of Voltaire, to consider those ‘showing a new road’ or ‘think outside the box’. Needless to say, the featured case studies will not be applicable to all organisations across the tri-sector spectrum. The outliers were selected because they offer a number of alternatives to the mainstream in terms of philosophies, business models and processes: • I interviewed John Timpson, Chairman of Timpson Group Plc in his head office in Wythenshawe, Manchester, to get his take on his company’s ‘upside down management’ approach. • I researched the employee ownership model, famously applied by the John Lewis Partnership and Arup, but also cite small public sector organisations that have adopted it. It is one referred to by politicians as worthy of consideration. • I reviewed the philosophy of ‘employees first, customers second’, principally as introduced by Vineet Nayar and still applied at HCL technologies, an ideology that runs counter to the usual primacy of customer theory. © The Author(s) 2017 A. Coppin, The Human Capital Imperative, DOI 10.1007/978-3-319-49121-9_18

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Insights of John Timpson, CBE, Chairman, Timpson Group Timpson is a leading UK retail service provider employing over 4,000 staff, with 1,510 owned stores and 110 Snappy Snaps franchises located throughout the UK and Ireland. Annual sales were £222 million for the year ending September 2015. Timpson has been established since 1865. The company has five directors, including John and his son, James, who is CEO.

Backstory John Timpson is chairman of the Timpson shoe repair and key cutting chain of stores and is the great grandson of the company founder, who opened the company’s first shoe shop in 1865. The company grew and was taken over by United Drapery Stores in 1973, when it had 260 shops and 150 shoe repair operations. In 1983, John bought the business back and later sold the shoe shops to concentrate on the shoe repair business. The company then extended its range into key-cutting, dry cleaning, watch repairs and photo printing. Its most recent expansion has been led by opening pods in supermarket car parks following deals with Tesco and Sainsbury’s. John realised that getting the best from people was not achieved by slogans and signs on noticeboards but required a fundamentally different approach to business, one requiring trust. This was confirmed when he read a book on Nordstrom, the US fashion retailer, which included an inverted organisational pyramid, and this is when he thought that ‘upside down management’ could be applied at Timpson.

Philosophy John Timpson is a passionate believer in his people. He said it struck him early on in his career that you can’t have business without great people as they are the secret behind great customer service and in turn great financial results. His overarching philosophy is that ‘If you treat people well, it is blindingly obvious that they will do a good job’. He considers that too much of today’s world is driven by process, but it is people not processes that produce real success. He realised that he had to change the recruitment process to hire frontline people for attitude rather than particular technical skills. However, it took around five years to change the mindset of his staff

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and to embed ‘upside down management’ in the business, and to show that the key to doing this was to make sure the right personalities were working for him on the ground.

A New Approach Although the upside down management approach and Timpson style could be defined as paternalistic, John said: ‘as you change you will leave some people behind, there will be some who can’t hack it’. He had to let go the people who did not measure, up as John recognised that selecting the best people is one of the biggest decisions the company has to make. His son, James, who John says thinks very like him, took over the running of the business and they were at one on the new approach. Together they changed the manager’s role—managers were not there to issue orders but to help the colleagues who look after the customers, and they had to get middle managers to accept the need to delegate but still accept responsibility. It took time to stop them issuing orders and put their efforts behind giving praise, help and support rather than operating a policing a process. It is not easy for managers to delegate authority while keeping responsibility; most do it the other way round. John said they had to give some clear examples to show how colleagues could use their initiative—,for example spending £500 to settle a complaint, using the price list as a guide (they can vary it) and ordering the stock they need, not being dictated to by a computer. Part of the new way of doing things was to abandon the rule book and give real freedom to the colleagues that serve customers. The people in store are given the power to run the operation as if it was their own business, and Timpson has only two ‘must dos’: • look the part; • put the money in the till.

John’s Personal Role John sees his main job at Timpson as setting the corporate strategy, reflecting on trends and ethos, and predicting the future. Once or twice a year he acts like a futurist and writes a report to the company predicting what the business might be like in twenty years or so. As an example, in one of these reports, he wrote: ‘We prefer initiative to process, and shop visits to

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meetings, we like working hard and having fun, we don’t have secrets and we don’t do politics, we like lots of ideas, and very low overheads, we keep it simple and do it straight away.’ This statement has been converted into a poster and fixed to the head office wall. Importantly, John and his son separately visit the shops two days a week on average (he estimates visiting 800 a year), not to interfere but to chat to staff and see how things are going. They do not issue orders but get a feel for how the businesses are going, using their ‘noses to detect star performers but also poor service and even fiddling’. John asserts that ‘the better you know your people, the more you know about the business and the more they know you, the more they trust you’. In making these visits John says it is important to praise staff and that ‘99% of the time praise does nothing but good’.

Recruitment and Retention John summarised his approach to recruitment: ‘I can teach a person with character to repair shoes but I can’t put personality into a grumpy cobbler.’ He acknowledged that when they first implemented the ‘upside down’ management approach their recruitment was inappropriate, so they devised new assessment forms. These were set out in pictures not words—a collection of Mr Men caricatures of characters that included Mr Quick, Mrs Keen and Miss Happy, as well as less positive people such as Mr Grumpy, Miss Slow and Mrs Scruffy. Under each picture was an empty box. When interviewing they simply ticked the boxes under the pictures closest to the candidate. But, behind this apparently fun device, they apply a strict test of only recruiting people who rate 9/10 or 10/10 for attitude. They found this simple method worked in practice with a resultant improvement in new recruits. James Timpson has a deep interest in helping ex-offenders (he was awarded the OBE in 2011 for ‘Services to Training and Employment for Disadvantaged People’). One in ten Timpson employees is an ex-offender. In the last fourteen years, James has established contact with over seventy prisons and opened eight prison workshops. Of the colleagues currently working in Timpson shops, 250 left prison within the last five years. John said that ‘the best way to start is ROTL (Released on Temporary Licence) where prisoner colleagues work during the day and go back to prison at night. 360 members of staff in Timpson are either current or former prisoners. Now that upside down management has been embedded in the company, staff themselves are encouraged to recommend people to join Timpson.

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Through the scheme, employees get £100 bonus if they recommend a new recruit who stays in the job for sixteen weeks. The amount rises to £200 if the friend completes a year’s service. The philosophy to reward at Timpson is to ‘pay colleagues as much as the business can afford rather than as little as they can get away with’. A bonus system is operated and widely communicated. On our visit to the Wythenshawe HQ there was a sign at the entrance which updated colleagues on the latest individual value of the office and warehouse bonus (available for every member of staff and visitor to see). The reward and bonus schemes along with the application of upside down management also have beneficial impacts on staff retention, with a staff turnover rate of 15%.

Managing Performance However, the Timpson philosophy does not mean that the business is a ‘soft touch’ operator; in fact it rigorously manages performance although it does not use appraisals. John said that even with the interview technique, Timpson’s doesn’t always get recruitment right as some people only show their true character after they start work. John said that management spends far too much time with the poor performers and that there is no need for warning letters—often a devious device to keep the paperwork neat for a possible tribunal. At Timpson they simply tell their ‘passengers’ that their best will never be good enough, and to borrow a phrase from Disney say they will help them to find their happiness elsewhere—as nicely and quickly and as generously as possible.

Engagement A ‘happy index’ is undertaken every year, which lets John and James know what their colleagues really think about how colleagues think the business is being run and how they are being treated. They take this very seriously and regularly make changes to the way they do things, depending on what has been raised.

Training and Development Training and development are key to the Timpson approach, and from day one the aim is to develop people and to fill senior appointments from within

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the company (all of the senior managers have been promoted from within the business), which John sees as motivational for all staff as well as cost-effective. All new recruits are assigned a mentor and have an individual training plan. They attend, after two to three months with the company, ‘The Residential’, a two-day course. There is usually a cohort of 50–60 people at these events, which typically take place in the Wythenshawe head office. Either John or his son attend the course and talk about the culture of Timpson. this ensures that all staff are properly inducted into the values and unique operating ethos, and John sees this is a way of protecting the culture.

Communication John’s philosophy on internal communication is ‘to tell everyone everything (unless personal information) as they have the right to know’. Low-tech rather than high-tech is John and Timpson’s preferred communication process; telephone rather than email is the default method. Indeed, communication with shops is not by email, and voicemail is banned as a real timewaster. The rule is: when the phone rings, pick it up. Apart from the shop visits made weekly by John and his son, which are a key part of the communication hierarchy at Timpson and enable listening face to face, the company publishes a sixteen-page weekly newsletter which is full of stories about the people in the business.

Psychological Wellbeing John himself has suffered from stress and understands how the condition impacts negatively on the lives of colleagues who have the condition. This personal experience has shaped the way Timpson views and manages psychological wellbeing.

The Timpson Upside Down Management Checklist The Timpson approach to people will not be applicable to every cross-sector organisation but boards and CEOs might find it useful to review some of the Timpson methods, including inexpensive and easy to implement ones, to determine whether some could be used in their organisations to improve employee engagement and thereby productivity.

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John described a whole range of these methodologies, including: • Even chairmen should get out and about visiting operations to meet the people who make the organisations successful, and when doing this should be patient and sympathetic listeners. • Use praise as a motivational tool and praise ten times more than criticism. • At Timpson all colleagues get their birthday off—they believe nobody should have to work on their birthday. • Colleagues are offered free use of the company’s nine holiday homes throughout the UK. • The company limousine is made available if colleagues get married, as well as a special £100 bonus and a week off work. • John and James really believe in flexible working so that work fits in with the rest of their colleagues’ lives; all that matters is that the work is done. • Timpson does not have an HR department; rather, it is a colleague department and one of the programmes it runs is a ‘Dreams Come True’ scheme to make a dream of one of the employees come true. • A gym, hairdresser (on Thursday), tennis court, canteen and tuck shop are provided at the head office, the reception layout resembling a shop to remind everyone at head office and visitors what the business is about. The decor at head office is quirky and colourful. • Each colleague receives a signed certificate after one, three, five years and so on with the business to recognise their commitment. • Every year, colleagues are selected at random to have dinner with John Timpson at his house. • Colleagues can also apply for sponsorship for community activities. ‘We have a mythical figure called Captain Cash who gives out sponsorship money. It could be for anything: a charity climb up Kilimanjaro or new shirts for a local football team.’ • John writes thirty letters a year to colleagues. • Colleagues receive a pay increase with each new level of skill they achieve. John says: ‘It’s very motivational.’ • On the first day of summer, employees are treated to an ice cream. And when the Timpson’s tie-o-meter (or thermometer) reaches a certain temperature, staff are allowed to take their company ties off at work and are given free soft drinks. • Colleagues get a bottle of bubbly to mark their milestone birthdays—18, 21, 30, 40, 50 and 60—that and everyone receives a birthday card.

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John considers the above methods coupled with the ‘upside down’ management approach help to provide a stress-free environment, which is good for colleagues wellbeing and has a direct knock-on effect on performance, whereas traditional management methods produce stress.

John’s Personal Toolkit John shared a number of his personal tools that he considers important to get the best from people: • He sends a handwritten letter of praise when justified to the member of staff’s home address. (This works with customers too, as does picking up the phone to them if they provide a phone number.) • However, generally he prefers to use pictures and images when communicating with staff in preference to just words. • He believes it’s important to keep taking the temperature of the business by looking at the cash in the business—the simplest of metrics is to compare cash takings with the same day in the previous year.

Employee Ownership Models Employee Ownership There appears to be a growing trend in employee-owned businesses in the private and from the public sector. Such businesses are owned completely or significantly by their staff. The Employee Ownership Association (http://employeeownership.co.uk) set the reasons for considering this model to include broadening ownership as a method of retaining and attracting highperforming talent; some founders of a business might want to embrace this philosophy at the outset; private owners, such as entrepreneurs, might see this route as an appropriate exit from the business; an, businesses that are facing severe financial problems might consider employees buying out the business. Employee-owned businesses (EOBs) are also called mutuals, and they can be spun-off from public services. Such ownership could take a number of forms. For example, direct employee ownership—using one or more tax advantaged share plans, employees become registered individual shareholders of a majority of the shares in their company; indirect employee ownership—shares are held

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collectively on behalf of employees, normally through an employee trust; and, combined direct and indirect ownership—a combination of individual and collective share ownership. A study by Professor Joseph Lampel, et al (2012) of City University quantified the size of the employee ownership sector. It estimated the worth of the sector to be about £25 billion annually or about 2% of UK gross domestic product. The study found that employee-owned businesses are more preoccupied with efficiency and costs; there is 30% employee representation at board level, which of itself can improve organisational performance; they invest more in human capital than non-employeeowned businesses; and employee commitment/engagement supports the strategic imperatives of the organisations. This study also found that firms where employees own stake both individually and collectively through a trust are more resilient, display less sales variability, and deliver more stable performance over business cycles. The report showed that the profitability of EOBs correlates with giving employees greater autonomy in decision-making. EOBs that adapt their organisational structure and empower their front-end employees are more likely to sustain their performance as their size increases.

However, the study points to some disadvantages of the EOB model, such as facing ‘greater problems when it comes to raising capital and dealing with regulatory requirements’. Two successful EOBs, both moving from the public sector, were reviewed to understand how they manage their human capital: CSH Surrey and Sunderland Home Care. Document reviews were also carried out on larger-scale businesses, the John Lewis Partnership and Arup, which are owned by their employees.

CSH Surrey Government ministers recognised the power of the employee-owned model in transforming public sector services, and thus its mutuals taskforce and policy were introduced to enable more groups of public sector workers to set up their own businesses. CSH Surrey (previously known as Central Surrey Health) was the first of its type to spin out from the public sector in 2006. It is an example of a successful employee-owned social enterprise. It has been operating for about

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ten years and it provides community nursing and therapy services in midSurrey, and has also diversified into offering private care services. CSH is run by a twelve-member board, which includes five women and no BAME representatives. The board meets monthly and starts every session by hearing a patient’s story. Members of the board, both executive and nonexecutive, regularly ‘walk the floors’, speaking with service users and coowners so that they keep in touch with what’s happening on the frontline within clinical and support services. The executive board has seven members (no BAME), including four women, one of whom is the HR and communications director. CSH’s turnover in 2015/16 was £31.3 million, with 73% being spent on staff costs. The corporate values are people first, integrity, enterprising and exceptional delivery. CSH asserts that an EOB approach has led to significant culture change by involving, empowering and listening to its co-owners in all aspects of the business, from redesigning clinical services to defining CSH’s values and behaviours, and recruiting new executive directors. The result is that CSH Surrey’s annual employee survey results now consistently outstrip the NHS staff survey in all key areas, with CSH’s 2014 overall ‘engagement score’ standing at 86%. In particular, they rate team working, relationships and the quality of managers highly. Furthermore, the organisation claims that 81% of co-owners would recommend CSH Surrey as a healthcare provider to friends and family compared with 69% of staff in the wider NHS, and that 94% enjoy their work (74% in equivalent NHS community trusts). Learning and development provision within the company means that 83% of co-owners believe they receive the training they require to do their jobs, up from 76% in 2014 and far higher than the 25% of NHS staff who say this (NHS staff survey 2015). This includes providing diploma-level courses accredited by the Institute of Leadership and Management, and supporting people to attend. In December 2015, CSH introduced a health and wellbeing programme, which offers co-owners access to great value, on-site exercise classes and massage. They have also provided free health checks and relaxation sessions, as well as advice and resources to better support co-owners’ physical and emotional wellbeing. CSH’s services have been recognised through an array of awards, most recently being named Finalist in the Nursing Times Awards 2014 and also reaching the finals of the 2014 Integrated Care and Patient Safety Awards, and having achieved the Skills for Health accreditation in March 2015 in recognition of the quality of training provided. The shares in CSH Surrey are held indirectly on behalf of the owneremployees by guardian shareholders, four employees selected by their peers.

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A trust ensures that the values and principles of employee ownership are upheld by the guardian shareholders. No dividends are paid to employeeowners; instead, all profits are invested back into patient care and into CSH’s community fund, which was set up to fulfil its social enterprise ethos. The community fund awards grants to local groups to support health and wellbeing projects in CSH’s local communities. CSH’s employee-owners are represented on the board by a co-ownership council called The Voice. The Voice’s elected co-owner representatives challenge the board on strategy and performance on behalf of all the employee-owners. The questions and answers are shared throughout CSH as part of its commitment to openness and transparency. The Voice is responsible for the appointment of one NED to the board.

Sunderland Home Care Associates 20/20 Ltd Student Home Care Associates (SHCA) was formed in 1994 as a co-operative of twenty people providing home care to elderly and disabled people in and around Sunderland. SHCA now employs 470 staff, with a turnover of around £7.22 million, and operates out of an office in Sunderland and, more recently, one in South Tyneside. It has eight directors, all women. In 2015 it employed 440 people at a cost of about £6.4 million. The model is now being replicated in other cities in the north of England through an umbrella company, Care and Share Associates. A decision was taken to convert from a co-op into an employee-owned company in 1998 for tax and philosophical reasons. Setting up an employee benefit trust (EBT), supported by an Approved Profit Share Scheme, was at the time a tax efficient way of passing shares to employees. The founders also felt that employee ownership would give employees a real, growing stake in the company, rather than just allowing them to hold a £1 share in the co-op. Staff have the opportunity to build up a stake over time with a consequent increase in their organisational commitment and improvements in both staff retention and the quality of service provided. The share value has increased by 515.4% in the twelve years of operation. The EBT will always hold at last 51% of the shares, and employees have to sell the shares back to the EBT when they leave the company. Shares are distributed to employees in relation to their service to the company. The EBT board consists of five employees, the founder and a taxation/ legal expert. Board members are elected by the workforce in rotation so that

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two stand down each year after serving a three-year term. The board of the company is allowed to run the day-to-day business of the company and is responsible to the EBT, which governs the long-term aims and policies.

The John Lewis Partnership The John Lewis Partnership (JLP) is the largest EOB in the UK and one of the UK’s most successful retailers, with gross sales of £10.9 billion in 2015. The partnership is owned in trust for all of its 91,000 permanent staff are partners who work for John Lewis and Waitrose stores. The partnership board comprises fourteen members, including five women and one BAME representative. It is different from most other boards, bringing relevant skills and experience to the table through a mix of appointed and democratically elected partners. The profits and benefits generated by JLP are shared by the partners, the name itself indicating JLP’s human capital approach. JLP has a written constitution and its first principle states: The Partnership’s ultimate purpose is the happiness of all its members, through their worthwhile and satisfying employment in a successful business. Because the Partnership is owned in trust for its members, they share the responsibilities of ownership as well as its rewards—profit, knowledge and power.

The three aims of the organisation are to increase the advantage of partners, which means define and enable the worthwhile and satisfying employment of partners; realise market potential; and grow efficiently. With regard to the human capital management of JLP, two of the key principles are knowledge, to provide partners with the knowledge they need to fulfil their responsibilities as co-owners of the partnership; and power, to enable the partners to influence the business at all levels through a structure and representative bodies that are set out in the constitution. The mechanics of this are through PartnerVoice representatives at the local level who represent views at regular meetings with senior leaders, through to the partnership council. Among other benefits enjoyed by the partners are six hotels and holiday centres located throughout the UK, which they can access after three months’ service with the group. Partners pay six pounds a month for this benefit. JLP’s strategic KPIs include human capital metrics; a job satisfaction survey (in 2014; 72% staff satisfaction, 86% advocacy recommending John Lewis as great place to work, 92% understand how their work contributes to

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company success); gross sales per average FTE; partnership profit per average FTE; a staff turnover percentage; and the gender, length of service and number of partners.

Arup Arup is an independent firm of designers, planners, engineers, consultants and technical specialists offering a range of professional services with offices in forty countries. It is a wholly independent organisation owned in trust for the benefit of its employees and their dependants. Arup Group is run by a board of twelve directors, including two women and three BAME representatives. The organisation employs 12,143 staff and in 2015 its income was £1.13 billion, with staff costs of approximately £662 million. Each of Arup’s employees receives a share of the firm’s operating profit each year.

Values Arup describes its ethos as being ‘built on clear, shared values. Derived from the beliefs of our founder Sir Ove Arup, they shape our goals and our behaviour, wherever we are working. Quality, integrity, humanity and usefulness are the underpinning principles—driving forward a firm that constantly strives to make a difference.’

Human Capital Management As to its approach to human capital management, Arup asserts the importance of ‘attracting and developing exceptional people who share our ambitions and our values’. It conducts ‘working at Arup surveys’ annually in order to get feedback from staff. Arup says that it provides ‘best-in-class learning for every member of staff’, and this includes access to hundreds of training opportunities. These cover everything from personal development and presentation skills to improving creative thinking and understanding the Arup culture. Employees have the option to develop their interests further by enrolling in Arup’s own university, where they can study modules at doctoral, masters and professional levels. In 2014/15 it recruited 630 graduates around the world, of whom 34% were women.

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Strategic KPIs People metrics are seen as key strategic KPIs. Turnover and profit per person is a financial KPI used to monitor the continued contribution to the group. In calculating this measure, profit is stated before tax, dividends and staff profit share. Staff turnover is seen as a key non-financial measure of business performance, and for the year ended 31 March 2015 it was 11%.

HCL’s ‘Employees First, Customers Second’ Strategy Vineet Nayar was CEO of HCL Technologies, a major IT service company, between 2007 and 2013. He led the company though a sustained period of growth. When he took the reins the annual operating profit was $700 million, and the company grew, employing 100,000 people, working in eighteen countries and achieving a turnover of $6.4 billion. In 2016, Nayar did this by changing the philosophy and strategy of HCL Technologies to put employees at the top of the hierarchy, and he explained his outlying approach to human capital management in a book entitled Employees First, Customers Second: Turning Conventional Management Upside Down. Nayar (2010) contends that this approach is transferable to ‘any team, company, industry or culture with the same results’. In his book, Nayar outlines the four steps he implemented to change HCL Technologies: creating the need for change; creating a culture of change; building a structure for change; and transferring the responsibility for change. Step one involved a major communication exercise, which Nayar undertook personally, travelling to various parts of the company to talk honestly and to listen to as many staff at all levels as possible. He considered the core purpose of this first step was to create positive dissatisfaction with the status quo and the corollary—building a desire for change. Step two introduced the new ‘employee first, customers second’ approach as part of a new strategy for 100 of the company’s brightest managers from around the world. This cadre was assessed as mission critical and real agents of change. Methods to achieve this change included sharing previously confidential financial information across the group; opening up a portal called U&I which gave staff direct access to the CEO and senior leadership team; and initially explaining the new thinking to the company’s customers at a meeting in New Delhi, attended by 300 customer representatives. Step three inverted the organisational pyramid from the traditional command and control approach which had senior managers on top, a thick layer

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of middle managers and support functions in the middle and the frontline workers on the bottom. Nayar also used a number of methodologies to embed the changes, includingestablishing a Smart Service Desk concept as a problem management system to resolve issues between enabling functions and employees; introducing a comprehensive and broad 360 degree survey process as a development tool, independently certified and audited, which included Nayar’s survey; and continuing the communication process including ‘Directions’ for all staff face-to-face group meetings. Step four involved recasting the role of the ‘all powerful’ CEO, which involved Nayar personally soliciting ideas/help from staff via the U&I portal called ‘My Problems’. HCL’s employee survey was rejigged to measure staff passion rather than simply engagement or satisfaction, and it was renamed the Employee Passion Indicative Count. Virtual Employee First Councils were established around an area of passion across the organisation but with an employee elected as a representative in each physical location. At the time of writing, HCL had a network of 2,500 council leaders around the world. The purpose of the councils developed to include business issues and, even more fundamentally, about 8,000 managers became involved in reviewing strategic plans virtually through a concept called ‘My Blueprint’—only involving the senior management and CEO at the end of the process. The aim of sharing high-level responsibility with staff was soon extended to the evaluation of potential mergers. Benefits from the recasting of the CEO role were summarised by Nayar as combatting the negative concentration of power in the office of the CEO; removing hierarchy; increasing the speed of decision-making; and, spreading knowledge throughout the company. Nayar left the organisation in 2013, but the strategy seems embedded at HCL and is included in its latest mission statement: ‘We will be the employer of choice and the partner of choice by focusing on our stated values of Employees First, Trust, Transparency, Flexibility and Value Centricity.’

Other ‘Staff First, Customers Second’ Companies HCL is not the only organisation to implement an employee-first approach. As stated above, the constitution of JLP puts it in this category and three further examples follow. Southwest Airlines, the $18.8 billion turnover passenger airline business, promotes its employee-first human capital management methodology. In a blog about its company culture the airline states: ‘We believe that if we treat

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our employees right, they will treat our customers right, and in turn that results in increased business and profits that make everyone happy, ‘the airline explains in a blog post about its company culture.’ Industrial Scientific, the global provider of gas-detection services and equipment, also asserts that ‘putting the needs of employees ahead of shareholders and even customers’ ensures ‘they can’t help but do their best work for our customers’. It states that ‘employees are more than the company’s most important asset. We believe they are the only asset worth mentioning.’ Underpinning this philosophy are a detailed set of corporate values labelled ‘Our Way’. This is distilled into these values: humble, hungry and smart; seek truth; speak truth; serving others is our greatest joy. In an article for Inc magazine by Oscar Maymundo (October 28, 2014), Sir Richard Branson, the founder of Virgin, the multinational branded conglomerate, said that Virgin does not put the customer first and that employees are the company’s main priority. Sir Richard said that he was surprised that more companies do not adopt an employee-centric management strategy. He said: ‘It should go without saying, if the person who works at your company is 100% proud of the brand and you give them the tools to do a good job and they are treated well, they’re going to be happy.’ This is reflected in a simple formula: happy employees = happy customers, and conversely unhappy employees can ruin the customer brand experience.

References Branson, Sir Richard (2014, October). Richard Branson: Companies Should Put Employees First. Inc magazine. Lampel, J., et al. (2012). The Employee Ownership Advantage: Benefits and Consequences. London: City University. Nayar, V. (2010). Employees First, Customer Second. Harvard, MA: Harvard Business Press.

19 Institutes and Associations

There follow insights from the leaders of five institutes and associations with members from the three sectors. But I also interviewed them in order to gain perspectives from leaders in their own right, who operate away from the coal face.

Insights of Simon Walker, Director General of the Institute of Directors The Institute of Directors (IoD) is a members organisation for company directors, senior business leaders and entrepreneurs that represents the views of businesses and IoD members, including on good corporate governance, in the media and with government. The IoD has about 35,000 members, including directors in the public sector. The stated philosophy of the IoD is to support, represent and set standards for directors, as ‘high standards of excellence and professionalism in the boardroom are essential for businesses to succeed’. The IoD is a Royal Charter body and one of its objectives is to promote, for the public benefit, high levels of skill, knowledge, professional competence and integrity on the part of directors, and equivalent office holders however described, of companies and other organisations. The IoD runs its own professional development programmes, including one for trustees in the not-for-profit sector. Its income in 2015 was £27.8 million. It employs 283 people; 60% are women and 54% are managers, and it has 500 volunteers. The IoD Board comprises fourteen directors, eleven of them non-executive, with Simon Walker as one of two executive directors. © The Author(s) 2017 A. Coppin, The Human Capital Imperative, DOI 10.1007/978-3-319-49121-9_19

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The executive committee, which Simon chairs, comprises six people, three of them female, one of whom has HR within her remit. Simon believes that employees are very important for organisational success but their importance varies according to the industry they are in and they are one of many elements. He saw first-hand, whilst working for British Airways, the ‘liability’ side of workers when the company suffered from prolonged industrial action. He also thought it important to be aware of changes to the traditional ways of working looking forward and pointed to Andy Haldane’s presentation at a Bank of England event when he predicted significant job losses in the future due to robotisation and technological advancements. This will change the balance of the organisational importance of people. However, within the IoD itself, Simon acknowledged that superior performance is achieved through the combined efforts of their employees and volunteers. Simon and his executive team have been championing the concept of a high-performance culture at the IoD—one that is aligned with its members. Specifically, the executive has identified that all members of Team IoD need to possess three essential characteristics: resilience, agility and entrepreneurialism. Simon pointed to recent work by his team to equip the staff with the knowledge, skills and mindset to operate at a high performance level. In 2016, this was continued with a programme for people managers, ‘Leading the IoD Way’, and a series of ‘All Staff Workouts’, which are short learning bites on the fundamentals of high performance. Furthermore, the IoD has, for the first time, created dedicated ‘performance champion’ roles to support organisational development, and they will be measuring the impact of this programme on the organisation through a series of ‘pulse’ surveys in 2016. Whilst driving organisational performance, Simon and his team recognise the need to assure the mental wellbeing of the IoD workforce. In 2015 it held a mental health event for staff and members. In conjunction with inviting staff to attend the event, the IoD actively promoted ‘Time to Talk Day’, providing employees with information and guidance (leaflets, posters, games and checklists) to raise awareness of the importance of managing mental health. In addition, IoD training workshops for managers and supervisors made a particular feature of understanding and dealing on a practical basis with mental health issues at work, and how to manage these difficult issues effectively. Articles on mental wellbeing also followed in the IoD’s Director magazine. In terms of worker representation on boards, Simon thought the proposal was simplistic, and there needs to be a case which sets out the methodology to overcome obvious implementation issues and, of course, the business benefits. He cited the co-determination philosophy in Germany as one that

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didn’t work. However, he said that in a recent survey more than half of the IoD’s members identified public anger over executive pay as the biggest threat to trust in British companies, with a potential knock-on impact on profitability. He didn’t agree with the notion of making it mandatory for boardroom remuneration committees to include a union representative. However, he considered that bringing an employee on to the board and the remuneration committee as an observer, on a voluntary basis, could be a good step as it would make the process more transparent and would make executives consider how their pay requests are going to go down with employees and with the public. With regard to high executive pay, Simon thought that although performance-related pay can be a key driver of success, there was a duty for CEOs to explain directly to employees why it should be the case. He points to research by the High Pay Centre, which found that executive Long Term Incentive Plans increased in value by 250% between 2000 and 2013, five times as fast as returns to shareholders, at the 350 biggest companies on the stock market. Simon does believe there is more to business standards than a rule book. He says It’s not enough to say ‘we didn’t break the law’ or ‘it wasn’t illegal’. There are other questions like ‘was it ethical?’, ‘was it treating your staff, customers and suppliers with respect?’ What is the likely impact on staff engagement and through that the performance of the organisation? That I think is at the heart of business. Because business is about voluntary exchanges between willing participants—suppliers on one side and the people they are supplying on the other, and it’s important that both sides feel they are getting something out of it. You can’t rip off customers and treat employees badly and say ‘oh, but we weren’t breaking the law’.

He also pointed to IoD research which concluded that ‘Excessively high pay for big business leaders is the biggest threat to public trust in business.’ Simon vows that the IoD will keep the pressure on big business until it takes note. His own remuneration is fully disclosed in the Annual Report, but there is no linking of his pay to median pay in the IoD. Simon is a sponsor of Engage for Success, a movement with the mission to ‘raise the profile of employee engagement and shine a light on good practice’. He supports its purpose: ‘commitment to the idea that there is a better way to work; a better way to enable personal growth, organisational growth and ultimately growth for our country by releasing more of the capability and potential of people at work’. Simon is keen to encourage managers and

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leaders to take action to create engaging places for people to work. He also thinks that employee engagement, key as it is for improving company performance and productivity, is not just an HR game anymore and leaders need to be actively involved themselves. If the people strategy is left on the sidelines, employee engagement and the business itself will both be left there alongside it. Of course, this is very much a theme of this book. As to employee involvement and ‘having skin in the game’, Simon and the IoD, through holding conferences, for instance, are actively promoting employee share ownership. With an increased choice of governmentapproved models available, employee share ownership is the flexible and powerful business structure where employees buy or are gifted shares in their company. Creating employee owners in this way is achievable and can empower employees and drive growth. Employees’ ownership of shares in the company for which they work can be the tangible core of a culture of ownership and engagement. Binding dynamic, growing companies are employees with a stake and a strong sense of that stake. Regarding board composition, Simon supports the gender diversity agenda but also points to the need to ensure boards that have diversity of thought. He said, for example, that age profile should be a consideration and noted that the age characteristic of FTSE boards unde represented those under forty—only four people of this age are FTSE directors. Regarding diversity of thought, the IoD address this in their training, including discussing the possible approaches to recruiting for diversity of thinking. The IoD considers that ensuring that board members are not all from the same industry/sector is advisable, that they reflect a range of experience/qualifications, and they recommend looking beyond a sole focus on age, gender, ethnicity and so forth (although ensuring effective representation from all these groups continues to be important, especially as there is still such a huge imbalance on boards generally). Simo explained that the IoD provides three tiers of qualifications for directors (‘certificate’, ‘diploma’ and ‘chartered director’), which attract a cross-sector uptake and also appeal to people who are not yet on boards, as well as those who are new to boards and are mid-career. These programmes have two different types of training delivery—open courses and bespoke workshops/teach-ins which are held at the clients’ premises. There are four areas covered in the course modules: strategy, leadership, finance and governance. Whilst human capital is often discussed during the courses, it is not offered as a particular module, but engagement with people (including the board, peers, staff and wider stakeholders) is woven through all IoD modules as a theme and does feature more strongly in the leadership module. As we focus on the key

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needs of directors and boards generically, there will be many detailed aspects of business operations/functions which we will not delve into in our training. Simon said that the modules are currently being revised with a greater focus on ‘understanding self as a leader and its impact on organisational performance’. He pointed out that the IoD teaching approach is very much to raise awareness and facilitate productive discussion and debate, rather than to prescribe methodologies or tools. Accordingly, he considered that this book would be a welcome addition to the literature, aimed as it is at boards and CEOs (although, as with the IoD programmes, of interest to a wider catchment). However, Simon thought the new competency framework which the IoD had recently refined, although broad ranging and high level, will help to ensure that directors are tuned in to some of the important personal elements of human capital management. The framework is built around three dimensions: knowledge—the director’s understanding and appropriate application of essential practical and theoretical information; skills—the expertise that a director brings to their role; and mindset—the attitude and disposition that shapes a director’s responses and behaviour. The purpose of the mindset competency is to ensure that directors have an insight into their own emotions and behaviours, and a sensitivity to the feelings and responses of others, in order to be good leaders and high performers. Simon thought that two other matters were worth considering. Directors should not just stay in the board room but, in a planned way and with the buyin of the execs, need to get out and about to truly understand the business and engage with people. Also, ideas such as reverse mentoring should be considered, particularly in areas such as understanding and exploiting social media opportunities where younger members of teams can train their bosses. Simon’s personal tools to optimise human capital are having energy and encouraging energy within the organisation; being prepared to take risks and back others in the organisation who are risk-takers; and being yourself because authenticity is easily read through body language by staff and all whom you meet.

Insights of Ann Francke, CEO, Chartered Management Institute Ann Francke is CEO of the Chartered Management Institute (CMI), the professional body dedicated to promoting the highest standards in management and leadership excellence. The CMI works with employers across all

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sectors, with partners in higher, further and private education, and with a member community of 130,000 managers, to achieve its vision of ‘a world where we see better-led and managed organisations’. Ann set out the following context for the interview: • UK managers are underqualified, often assuming their roles as ‘accidental managers’ with two thirds of employers not training or providing inadequate training for new managers. • As many as 43% of UK managers rate their own managers as ineffective. • This leads to low levels of workforce engagement and ultimately is to the detriment of British economic productivity, which lags the G7 average by 18% (output per hour), and Germany by as much as 35%. The clear conclusion, Ann says, is that more needs to be invested to develop leaders and managers in the UK. Improving the use of human capital management is closely linked— companies that have a better understanding of the link between people performance and business performance are more likely to make that investment. The CMI has been a partner in the ‘Valuing your Talent’ initiative, collaborating with partners across the HR and management accountancy professions to put the spotlight on the value of people. Ann emphasises the importance of people metrics: People are a unique organisational resource and fundamental to value creation. They can learn, develop and grow, and therefore they are the only part of the business that can actually improve itself. Your organisation’s people are a unique resource, and companies that manage their staff well typically generate excellent returns for shareholders. Human capital analytics are a key management device to help understanding on how workforces can improve productivity and organisational performance.

She also considers that corporate strategies should be framed to be relevant to staff and be linked via initiatives that are reflected in everyone’s work, and this is often the missing piece in the strategy puzzle: ‘I believe in synthesising strategies in one page. I’m a big fan of communicating them as pictures or simple cards to help everyone in the organisation understand where they’re going.’ With regard to the operation of the strategic board, Ann considers diversity of board composition—in all its senses—to be an issue. Too often, FTSE boardrooms have been ‘a boy’s club’, she argues, pointing out

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that fifty-five CEOs of the FTSE 100 are from a financial background. This has several implications. For one, it means that finance is the default lens for assessing business performance and it dominates board agendas. A more rounded view of performance needs better use of human capital management metrics. There is also the absence of women on boards and in senior executive positions, about which she feels strongly. She describes this as ‘the glass pyramid’, which sees women becoming rarer and rarer at senior levels near the apex of the organisation: ‘Too often, women are simply put off by their business’s culture, and they opt out.’ With enlightened organisations working hard to tackle these deep-rooted issues, the CMI launched its new CMI Women initiative in late 2016 and is building a crowd-sourced online ‘Blueprint for Balance’, which helps employers and individuals alike. Indeed, Ann says that one of the causes of the problem can be a relative lack of aspiration among some women, fed by the absence of senior role models. She argues that ‘diversity is here to stay’, not least because of the hard economic facts. At a macro-economic level, the latest McKinsey analyses suggest that improving gender equality could add $12 trillion to the global economy and as much as £150 billion annually to the UK’s economy. Critically, it also promises competitive advantage: Credit Suisse research, for example, has found an 18% return on equity premium for companies with gender diverse leadership teams. Ann also notes that the lack of diversity can be linked to a widespread lack of emotional intelligence among leaders, an important trait in the toolbox of effective management of human capital as outlined by psychologist Daniel Goleman (author of Emotional Intelligence). These aspects are empathy, being culturally aware, and social skills. Negative perceptions of organisation’s top managers are also having a negative knock-on effect on firms being able to attract, develop and retain a diverse, engaged and skilled workforce that has trust in the companies it works for. Ann asserts: ‘It’s high time leaders realised that people now work as much for a sense of purpose as they do for money’. Ann says that reform is required. First, that includes setting simpler pay and performance metrics. As former BP boss Lord Browne of Madingley said recently, ‘Executive pay packets have become so confusing no one can figure them out.’ Second, employers should publish clear reports on executive pay and pay ratios. Third, businesses should adopt bonus caps that are limited to a sensible proportion of salary. In Ann’s view, that proportion should be for shareholders or responsible boards to vote on, and their vote on remuneration packages should be binding.

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Combined, these issues have harmed business’s reputation as a whole and undermined the ‘critical ingredient in successful organisations—mutual trust between employees, line managers and senior leaders’. CMI research shows that four out of five employees think their boss sets a poor moral example and only a third of middle managers fully trust their senior leadership teams. That undermines efforts to improve productivity. As a result, human capital management, measurement and reporting are becoming increasingly important in helping investors and other external stakeholders understand an organisation’s intangible assets, developing a clearer line of sight to how a company’s workforce generate value and how they sustain business performance and growth. Accordingly, it is something for the board and CEOs to understand and actually engage with themselves. While different commercial methodologies are available, Ann suggests that the open-source Valuing your Talent framework is a valuable asset for any companies at the start of measuring their human capital, providing a clear outline for the areas that any organisation should consider. The vision of the CMI ‘that inspires us is a world where we see better led and managed organisations’, and its mission as an education charity is to increase the number and standard of professionally qualified managers and leaders. The CMI is governed by a board of trustees, chaired by its president and including Ann as the CEO, and a six-strong executive leadership team. It employs around 150 people and had an annual turnover of £12.7 million in 2015/16, with some 24,000 people registering for CMI-accredited courses over the year. Of course, Ann emphasises that people are at the heart of CMI’s success— as much as for any other business. In its 2016 annual report, the CMI cites employee engagement as one of its four organisational KPIs. It achieved an increase from 71 to 76/100 between 2014/15 and 2015/16, as measured through an independent, externally run online annual survey, backed up by regular ‘pulse point’ mini-surveys. The CMI is also proud to have achieved Gold Standard accreditation from Investors in People in 2014. In addition to its full-time staff the CMI relies on a network of more than 150 voluntary supporters, and the techniques it employs to optimise their contribution includes holding several highly productive board and committee days each year. The workshop-style events showcase good practice in supporting members locally. The largest is an annual engagement day for 100 regional board and central committee members. This one-day meeting and workshop offers the chance for the CMI’s senior management to brief the most engaged volunteers on its strategy and objectives, and for learning to be shared.

Insights of Andrew Ninian, Director, Corporate Governance . . .

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Insights of Andrew Ninian, Director, Corporate Governance and Engagement Investment Association To gain an insight into the views on human capital of UK investment managers who are increasingly influential in the plc corporate government landscape, the views of Andrew Ninian, one of the leaders in the field, were sought. The Investment Association (IA) is the trade body that represents UK investment managers. It has 200 members who collectively manage over £5.7 trillion on behalf of clients in the UK and around the world. It promotes UK investment management, which is the largest industry of its kind in Europe and the second largest in the world. The industry is a significant exporter for the UK, representing over 6% of total net exports over the past ten years, and it employs roughly 35,000 people. The IA produces daily circulars on legal and regulatory developments, and it creates guidance enabling UK investment managers to build effective business structures. They engage actively with policymakers and other stakeholders in the UK and globally to ensure that the industry remains among the world’s most competitive. Its turnover in 2015 was £11 million when it employed sixty-four people; the staff costs were £7.29 million. The IA is governed by a seventeen-member board, including four women and one BAME member. There are seven executive directors, including one woman. The IA’s strategic aim is to improve investment for clients so they achieve their financial goals, which is better for companies so they get the capital they need to grow, and better for the economy so that everyone prospers. Its values are integrity, professionalism and teamwork. Within the strategy the IA says it helps to create value for employees by offering continuous professional development; providing equal opportunities for all; and creating a rewarding place to work. It does not have a people metric among its six KPIs. The IA publishes information on its own style with regard to employee engagement: Consultation with employees is held with the aim of ensuring that their views are taken into account when decisions are made that are likely to affect their interests; and achieving a common awareness on the part of all employees of the financial and economic factors affecting the Company’s finances. Communication with all

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employees continues through day-to-day contact, team briefings and the internal distribution of written communications.

Andrew referred to the IA’s ‘Productivity Action Plan’ (2016) to boost the UK economy through long-term investment. Human capital, culture and other intangibles are covered in the plan. The company’s workforce is seen as a key driver of improving corporate productivity and in particular whether the workforce is deployed efficiently, including the development of skills and competencies. The plan refers to mounting research that links improvements in human capital management with improvements in company performance and productivity. However, it describes company reporting on human capital and other intangibles as ‘nascent’. In turn, consideration of this by the investment industry has historically been limited. In the last year or so, though, there has been a growing interest in human capital reporting. Andrew said that his Investors are increasingly of the view that they should incorporate how well a company manages its workforce into their investment decision-making process. However, for investors to do so, they need companies to improve their reporting. This should enable investors to understand the approach taken and, more directly, how a company’s human capital management has impacted its productivity and long-term prospects. Andrew said that currently an important factor for improving company productivity is neither being reported on by companies nor sufficiently integrated into analysis by investors. This is problematic as it means a material contributor to company productivity is not being recognised in the investment process. Paradoxically, nevertheless, investors are prepared to apply a market premium to those companies that successfully demonstrate improvements or make appropriate long-term investments in human capital. Andrew considered a first step was an education programme for boards and institutional investors to take more account of the human capital topic. Human capital needs to change from being a mainly HR issue to a management issue for the whole board and one the CEO should manage, something I hope to address by targeting this book at boards and CEOs. Andrew pointed out that already in law, companies must take account of employees’ interests as key stakeholders when running the business, sohe did not see any need to change the legal structure. However, he thought there were a number of ways boards could do a better job, including ensuring that they have directors with more diverse backgrounds to ensure diversity of thinking; understanding and getting the right information on human capital;

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getting out and about to understand more about how the business works at the coal face; and getting a wider set of data points. In terms of metrics, the IA does not subscribe to a standard set number of human capital metrics as proposed by Valuing Your Talent and PLSA, which are further discussed in the human capital analytics chapter of this book. Andrew thought it important that any measures should be explained with regard to the context, strategy and performance of the company. Just including a measure without such explanation was of little use to investors, as was comparing measures between companies because, for example, they may have completely different methodologies for data collection. He pointed to a successful example of this as Halfords, which has a simple strategic measure of the number of people who have completed its Gear 2 training programme. But the IA have taken a stronger line with regard to executive pay. On 31 October 2016, Andrew wrote an open letter to all companies in the FTSE 350, setting out new shareholder expectations on executive pay. He said: Issues surrounding executive pay are a growing concern for investors, politicians and society as a whole. Following the work of the Executive Remuneration Working Group, the Investment Association and its members felt that it was vital to update our principles to ensure that we are not only acting as responsible stewards for our clients but also show that we are aligned with the current climate. The increasing complexity of remuneration structures has been the driving force behind these issues and our new Principles are designed to offer a marketbased solution to add simplicity and flexibility. It is vital that companies have the opportunity to choose the right structure for their business and this must be done in close partnership with their shareholders.

The guidance includes a new section on the importance of improving shareholder consultation, ensuring that it is based on the strategic elements of remuneration and leads to consultation rather than affirmation of the company’s position. In terms of levels of remuneration, the new principles state that: the level of remuneration awarded to Executive Directors continues to be an area of particular concern for members, as well as society as a whole, with the current economic and political climate also contributing to the level of scrutiny. Members continue to pay close attention to levels of remuneration, and it is essential that companies adequately justify the level of remuneration awarded to Executives. This should be both in terms of the maximum potential

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remuneration as set out in the Remuneration Policy, but also payments actually made to the Executive during the year in the context of the company’s performance.

In particular, members believe that any salary increases or increases to variable remuneration should be justified with clear and explicit rationale. Companies must be sensitive to the prevailing mood regarding executive remuneration, and take into account the effect of executive pay levels on all stakeholders. Bonus disclosure: Shareholders require the retrospective disclosure of bonus targets so that they can ensure that there is an appropriate link between pay and performance. Our members’ beneficiaries continue to seek explanations as to why we support the remuneration packages of investee companies; therefore, we need this information to justify supporting remuneration packages to our clients. In recent years, we have seen improvements to the retrospective disclosure of bonus targets. For 2017, members expect the following: Financial Targets: Full retrospective disclosure of the threshold, target and maximum performance targets, the level of performance achieved against these targets and the resulting bonus outcome. Where targets are not disclosed or the Company has not made a commitment to disclose the target range in future, Investment Association members have asked IVIS, our Corporate Governance research service, to highlight this issue on a Red Top. As without such disclosures there is insufficient information to make an informed voting decision. Personal and Strategic Performance Targets: Members expect a thorough explanation as to why personal or strategic targets have paid out, not just a description of non-financial performance indicators. Where IVIS deems there to be insufficient information on non- financial targets, members have asked IVIS to Amber Top the report. Where financial metrics do not warrant a bonus payment, members will scrutinise the payment and rationale for the payment of any personal or strategic elements to ensure that such a payment is warranted. Policy Renewals: A majority of companies will be seeking a Remuneration Policy vote at their 2017 AGM. We would like to remind companies that Investment Association members expect companies to have maximum limits on each aspect of variable remuneration. Whilst discretion is an important part of the Remuneration Policy, members do not expect companies to seek discretions to provide payments outside the scope of the policy. Finally, shareholders will review closely the recruitment provisions within the

Insights of Richard Williams, A Director of The National Council . . .

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Remuneration Policy. In normal circumstances, they would expect the Remuneration Policy to contain sufficient flexibility to recruit individuals. Any additional recruitment limits should be clearly justified. Pensions—For a number of years, the IA and our members have highlighted the disparity in Executive Director pension provision compared to that provided to the general workforce. Members are concerned with the lack of progress which has been made on this issue. Therefore, members continue to reiterate that, in instances where contribution rates for Executives and the general workforce differ, that the differences should be clearly justified.

Insights of Richard Williams, A Director of The National Council for Voluntary Organisations The NCVO connects, represents and supports voluntary organisations, including generating and identifying the best knowledge and expertise. Richard Williams describes the NCVO as similar to a ‘trade body’. It has a diverse membership of over 12,500 organisations, both very large and small, that collectively employ a third of the voluntary sector workforce in England. In addition, it has relationships with a further 42,000 charities and community groups. The NCVO is governed by a board of twelve trustees, six men and six women, with one BAME trustee, plus one disabled and three honorary officers (chair, vice-chair and treasurer). The chair, treasurer and seven trustees are directly elected from the membership. Additional trustees are co-opted by the board to ensure the right mix of skills and experience. There is a remuneration committee, an audit and risk committee, and a nominations committee with an advisory council. Richard is one of four executive directors, one of whom is female, who manage the organisation. The annual income of the NCVO is around £9 million, with the 105 staff costing about £5.3 million. The NCVO is a London Living Wage employer and publishes the ratio of its highest salary, £130,631, to its median salary, £34,314, and this was 3.8:1 in 2015. Richard said that in March 2014 the NCVO launched its latest five-year strategy, ‘Together We Make a Bigger Difference’, following a year of consultation with its members, partners and staff. This sets out the organisation’s priorities for the next five years, with five strategic aims: ‘We will champion volunteering and the voluntary sector; We will strengthen voluntary organisations; We will grow and enhance volunteering, wherever it takes place; We will connect people and organisations; We will be a sustainable

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and socially responsible organisation.’ It also set out the values that govern their work: use evidence: we base what we say and do on the best research and our members’ experiences; be creative: we explore new ideas and approaches, looking for what will add real value; be collaborative: we work with our members and partners to achieve the best results; be inclusive: we value diversity and work to make sure that opportunities are open to all; work with integrity: we are open and honest and do what we believe is best for our members, volunteers and the voluntary sector.

Richard told me that the NCVO absolutely believe people are its biggest asset along with being the biggest cost base, typically 60% to 65% of a charity’s costs. He pointed out the difference in scale of individual organisations in the voluntary sector: most are small, and therefore the advice offered by the NCVO needs to be similarly tailored. He explained that the NCVO website is a key way of providing information and support for members. During the year there were around 460,000 visitors to the website and 100,000 to their blogs site. They started a programme of webinars and they continue to run online Q&As. The NCVO StudyZone platform is available on a subscription or pay-per-view basis, is free to members and provides a range of suitable resources including, for example, managing staff through difficult times; a new manager’s guide to planning, delegating and setting performance goals; recruiting and selecting your charity staff; supervising and appraising your charity staff; the cohesive team cycle—five steps to building cohesive teams; organisational values: how to practise what we preach; and getting the perfect volunteer—creating volunteer roles. The NCVO also produces a range of ‘Good Guides’ that are free to members, including ‘The Good Guide to Employment’, which helps voluntary and community organisations to successfully employ, manage and develop their staff, giving small charities the confidence to apply good employment practice whether in recruiting the right person, managing a diverse workplace, producing employment contracts or writing essential policies for their organisation. Another example of an online publication is the NCVO member’s quick guide to equality and diversity, which gives expert advice on the practical aspects of equality and diversity, and signposting to further sources of support. Furthermore, Richard pointed to the NCVO’s quality standards that help underpin good practice. Fifty organisations achieved the Investing in Volunteers standard and seventy-two volunteer centres registered for

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the new Wave 4 Volunteer Centre Quality Accreditation. This covers five core functions: • • • • •

strategic development of volunteering; good practice development; developing volunteering opportunities; voice, and brokerage

Human capital elements within the standards include: • • • • •

knowledge of cross-sector agencies and partnerships volunteer management and good volunteer experience; knowledge of local issues and expertise; matching; and, helping organisations be more inclusive

This work was reinforced by a new National Volunteering Forum that brings together over 200 charities to debate the big issues in volunteering and to share good practice. Topics included internships, volunteering in public services and diversity, and highlighting the value and benefits of an inclusive approach that adds value to both the organisations, their staff and the communities with which they interact. The NCVO’s Institute for Volunteering Research continues to be a leader in its field and Richard said that last year it launched the third edition of its ‘Volunteering Impact Assessment Toolkit’ to help organisations measure and demonstrate the difference that volunteering makes. The toolkit refers explicitly to human capital as ‘people’s knowledge, skills and health. This could include understanding of an issue, an ability to do new things, increased confidence and reduced stress levels.’ It gives a substantial role to understanding human capital when identifying how volunteering makes a difference. Relating this directly to volunteers, organisations, beneficiaries and communities, it translates these into indicators. The NCVO has recently developed the ‘Step on Board’ programme that is delivered with their collaborative venture, Trustees Unlimited, and addresses personal development, behavioural and value issues that are at the heart of human capital management.

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The programme evolved from working with a major corporate that wanted to align the behaviour and values of their top directors with the organisation’s stated values and mission. The NCVO and Trustees Unlimited were asked to help senior individuals to become trustees to broaden their experience of working with the community and to have a greater impact on both themselves and the charities they could support. Step on Board is still in its early years and is evolving to meet customer need, but as of September 2016 more than 170 senior individuals have been through the programme with eighty trustees placed, and the original client is so delighted with the impact that they have increased the programme tenfold. The NCVO is currently working with Barclays Bank, Credit Suisse, Google, two law firms, Mishcon de Reya, Weil, Gotshal and Manges, PA Consulting, Interserve, Ingeus and British Airways, and it is in discussions with a further thirty companies, including a well-known technology business, an international insurance group and a well-respected international consultant organisation, not to mention a number of internationally recognised law firms. The objective of Step on Board is threefold: it helps prepare staff for more senior board-type roles, broadens their experience in a non-executive role, and introduces them to individuals and organisations they may not normally engage with. It improves their diversity of thought, allows them to align their personal values and interests with the corporate mission and values and has a very real and positive impact on both their motivation and the abilities of the charities they support. Individuals can use their business skills in a new environment, leverage their networks to assist the charities they support, and bring knowledge, experience and skills to bear with an understanding of the context and a recognition of the responsibilities and behaviour that are needed to function as an effective trustee. As to its own human capital management processes, Richard explained that all staff and trustees including the NCVO chief executive and directors participate in annual performance appraisals as part of the same feedback, and this is supplemented by monthly supervision for staff. Appraisals are agreed by both people involved, signed off by the appropriate line manager, and the identified training and development needs are aggregated by the HR unit, The overall training and development needs form the basis of an organisational people development plan, and individual development needs are discussed and agreed with the appraiser and appraise. A range of formal, mentoring and shadowing plus trusteeship opportunities are included in the more informal training elements. In the case of the chief executive, this includes seeking detailed feedback from board members, colleagues and external contacts. The NCVO has a range of staff benefits to support personal development and working conditions, including compressed working hours;

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remote and home working; part-time working for staff with dependants; six days volunteering leave; an additional childcare allowance; stress and wellbeing counselling and training to deal with difficult thoughts; self-defence training; personal counselling; a discounted gym membership; and core hours of working with an office closure of 7.00 pm. The NCVO subcontracts a biannual staff engagement survey. This has around eighty questions, but many of these include requests for further comments. The response rate for 2014 was 84% with an engagement score of 66 out of 99, which is 5% below the benchmark. There is an important contextural point to be borne in mind when considering these results: the NCVO has been through a challenging two years prior to this survey involving two megers with Volunteering and CES and also has undergone significant restructuring. Most organisations in the benchmark group have a mission which directly addresses a particular social need or works with a particular client base. As an infrastructure body, the NCVO has a mission that is much broader and perhaps less engaging for some people. The NCVO takes its engagement survey very seriously and makes the results available to all staff through workshops and internal communications. The survey influences the people development plan that emphasises positive ways forward in helping to address any issues and improve engagement. With regard to his three personal tools for getting the best from people, Richard cited leading by example; letting people know where they stand; and respecting others for the skills and diversity of thought that they bring. These personal approaches are underpinned by a collaborative approach that relies on trust, equity and transparency.

Views of the Local Government Association (LGA) The LGA is a politically led, cross-party organisation that works on behalf of councils to ensure local government has a strong, credible voice with national government. It aims to influence and set the political agenda on the issues that matter to councils so they are able to deliver local solutions to national problems. The senior management team has eight members, including three women. The LGA is a membership organisation and almost all English councils are members of it. Membership also includes the twenty-two Welsh councils via the Welsh LGA, thirty-one fire authorities, ten national parks and one town council. Sarah Messenger is head of Workforce for the LGA. Her key responsibility is to lead work programmes to support, promote and improve local government with a clear focus on its workforce, shaping national pay and workforce

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policy on behalf of councils and representing the LGA and the sector on workforce issues. This includes identifying and promoting initiatives that will drive productivity, engagement and performance within the local government workforce, defining and pursuing policy objectives for the Local Government Pension Scheme and negotiating the pay of almost two million public sector workers with a pay bill of over £40 billion. Sarah said that the LGA recognises that the workforce are fundamental to the design and delivery of excellent public services, and the public service ethos and purpose of the sector is helpful in ensuring employees are engaged and committed to the people they serve. Although ‘human capital’ is not the terminology used within the sector and is disliked by some, the effective, innovative and empowering deployment of people working in the sector is very important to councils and many are implementing a range of initiatives to achieve this end. The fundamental changes experienced by the public sector over recent years in terms of both levels of funding and the changing expectations of the general public has driven innovation and new strategic thinking about the sort of workforce we need and how we develop and recruit for the future. Many councils have made great strides in this regard but there is more to do to ensure that concepts and new thinking become a reality. The workforce is integral to the redesign of public services and must go on the journey with the LGA. Sarah considered ‘human capital’ to be a thread through many of the programmes and initiatives run by the LGA in its support to councils and councillors. These programmes include the four described below.

Peer Challenge This is a tool for improvement. It is a process commissioned by a council and involves a small team of local government peers spending time at the council to provide challenge and share learning. The process (typically four days) involves engaging with a range of people connected with the council and the findings are delivered immediately. Since it was launched in 2011, the LGA has delivered more than 600 peer challenges. In 2014 an independent evaluation by Cardiff University endorsed the value of peer challenge. This process could have implications for the public sector more widely and the not-for-profit sector, although it is difficult to see its applicability in the private sector.

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National Graduate Development Programme This is a development programme run by LGA for high-calibre graduates wishing to pursue a career in management in local government. It is about investing now in the chief executives of tomorrow and is designed to develop and refine critical skills in leading, inspiring, responding to, persuading and enabling people both within the workforce and more widely in local communities

Information Resources and Events The LGA produce a range of resources and events for councils to support them in leading and managing their people professionally and effectively. These include information and best/innovative practice on employee engagement, workforce planning, performance management, wellbeing, organisational and job design, cross-organisational working, flexible working, and equality and inclusion. There is recognition that councils will make their own decisions about what approaches will work best for them but the LGA has an important role to play in identifying and sharing innovative practice from across the sector and beyond.

Innovative Councils Knowledge Hub Group This is a group ‘for all things innovation in local government’. It builds on a previous Creative Councils Group, which highlighted work through which six councils and their partners received funding to develop, implement and spread transformation.

Reference The Investment Association. (2016, March). Supporting UK Productivity with Longterm Investment—Investment Association’s Productivity Action Plan.

Part IV Institutes and Associations

20 Introduction

‘If the metrics you are looking at aren’t useful in optimising your strategy – stop looking at them.’ Samuel Langhorne Clemens, better known by his pen name Mark Twain (1835–1910), writer, entrepreneur and publisher

Business measures are, of course, critical tools for success in any organisation, public, private or non-profit. They enable boards and executives to understand whether the organisation is on the right path to success. Without measurement there is no real understanding or control, and without control there is little opportunity to improve. The right metrics, properly undertaken and linked to strategy, help decision-makers to understand performance in key areas of the organisation and take action when areas are not on track. The use of advanced analytics and big data is commonplace among larger organisations, particularly in the private sector, and in areas such as marketing and finance. As with any other business metric such as profitability, sales per square metre, reliability and units produced, companies need to be measuring human capital, the metric that most influences business performance outcome, and then deal with the findings in a way that makes a difference. People measures are, obviously, just one part of the corporate scorecard, so it is necessary to understand and measure a range of other data, such as on financial performance and customer satisfaction. But all too often human capital metrics—‘measures of the organisations most important asset—are missing from the scorecard. One reason for this is that many boards do not believe there are appropriate measures that capture the people dimension but, as this section of the book will reveal, this is a grave mistake in terms of both relevance and number of metrics available. © The Author(s) 2017 A. Coppin, The Human Capital Imperative, DOI 10.1007/978-3-319-49121-9_20

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For organisations that already do apply human capital measures, it really is a ‘no brainer’—they will testify that it’s one of the few remaining largely untapped areas of significant organisational improvement left available to CEOs today. The advantages this measurement offers are immense—CEOs are already pressing the buttons called ‘cost efficiency’, ‘innovation’, ‘sales’ and ‘production’ amongst others, but to what extent are they pressing the one labelled ‘employee engagement’? One clear differentiator between human capital measures and financial ones is that the former are typically lead indicators of performance with genuine predictive power—for example, if staff are not engaged, this will translate into future negative impacts on productivity and profitability (and, as shown separately in this book, the reverse is true.) Customer satisfaction is another lead indicator—,if customers are not satisfied they will reduce their order or find another supplier. Financial measurement, on the other hand, mainly revolves around historical reporting of what happened last month, last quarter or last year. It appears solid, real and comforting, and it is typically totally within the comfort zone of the financially trained members of the board. Unfortunately, it’s also not a very good indicator of what might happen next. Jack Welch, the legendary chairman and CEO of GCE, understood the importance of lead data when he wrote in his book Jack Welch Speaks (2001): The three most important things you need to measure are customer satisfaction, employee satisfaction, and cash flow. If you’re growing customer satisfaction, your global market share is sue to grow, too. Employee satisfaction feeds your productivity, quality, pride and creativity. And cash flow is the pulse-the vital sign of a company.

Human capital data, now including employee engagement and commitment rather than just Welch’s preferred staff satisfaction measure, enables organisations to evaluate the effectiveness of their people activities and workforce investment, and to steadily improve their human capital strategy. Corporate strategic thinking should come first, rather than retrofitting strategy to existing measures. People metrics, like other key performance indicators, need to provide data on what we really need to know in order to be able to optimise workforce performance. A technique to ensure that measures linked to strategy are chosen is proposed by the Advanced Performance Institute (API), the UK-based independent think tank and consultancy. The technique is to ask key performance questions (KPQs), which are management questions derived from the organisation’s strategic objectives capturing what leaders need to answer in order to

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achieve them. It is a logical precursor to defining KPIs. The API suggests that between one and three KPQs are asked for each objective, although the fewer the better in order not to overcomplicate the process—each KPQ will result in performance indicators. For this process toH` work properly, organisations need to ensure that KPQs are performance related and use them to deliver relevant and meaningful KPIs; colleagues are engaged in the process; KPQs are succinct and written as open questions; KPQs are used to challenge and perhaps amend existing KPIs; and KPQs are reviewed and changed over time. Another point worth bearing in mind is that many things can be measured, and it is possible to collect and report data on numerous (sometimes too many) aspects of an organisation’s operations, and the danger here is encapsulated in the idiom ‘can’t see the woods for the trees’. Research, again by the API, has found that ‘less than 10% of all the metrics that are collected, analysed and reported in businesses are ever used to inform decision-making. 90% of the metrics are wasted, or worse, used to drown people in data while they are thirsting for insights.’ Jack Welch also commented on this danger when he wrote: ‘Too often we measure everything and understand nothing.’ So the collection and publication of measures per se are nugatory activities. The data need to be interpreted, their likely effects analysed and, where appropriate, action taken. In Chapter 21 I set out a range of information about key human capital metrics. This includes workforce engagement metrics; human capital formulae; engagement measures; absenteeism; health and safety; and diversity. Also set out are four sets of composite metrics recommended in turn by Dr Fitz-enz; the Pension and Lifetime Saving Association; the Valuing Your Talent consortium; and from an HR manager perspective. These are supplemented by a number menu of individual people measures. The list of metrics is long, although not exhaustive, and this reflects the breadth of the definition I have ascribed to human capital. It is not for me to prescribe the exact metrics required; it is for boards to consider which are the few key measures that link to their strategy and are the most appropriate for them. Every type of organisation will have or should have its own set of critical people statistics.

Reference Welch, J. (2001). Jack Welch Speaks: Wisdom from the World’s Greatest Business Leader. Wiley.

21 The Human Capital Metrics

Workforce Engagement Metrics The key employee engagement measure is the percentage of the workforce who are engaged—that is, committed to delivering the vision and mission of the organisation—or disengaged. The importance of the measure has been explained in earlier chapters. Employee engagement surveys are widely used as a means to measure employee engagement levels and to determine the extent to which staff are committed to delivering the corporate strategy, and to productivity and, ultimately, sustainable financial performance, as opposed to merely measuring staff satisfaction. Interestingly, the actual process of undertaking an employee survey can, of itself, improve engagement and commitment— simply asking staff their views (and then taking action) is a signal that the organisation values staff and take their views seriously. This, of course, assumes that some action is taken following the survey. Surveying also creates a new method of developing two-way employer–employee interaction. There are a great many different surveys in the marketplace. The longest running and one of the simplest is a Gallup survey which typically asks 12 questions requiring ‘yes’ or ‘no’ responses. Based on this sort of survey the organisation is able to assess the percentage of employees who are engaged, disengaged or actively disengaged, and from this form a view as to the productivity and the organisational financial consequences. Given the criticality of this measure, some time needs to be taken over the questions asked in surveys and not just left to advisers and consultants. In my

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view they should avoid the ‘small stuff’—the tastiness of the food in the staff canteen or the parking arrangements. Surveys should be bespoke to the organisation and its strategic priorities. According to a Society for Human Resource Management guide by Dr Robert J Vance (2006), there are ten common question themes that have the strongest correlations with business results: pride in employer; satisfaction with employer; job satisfaction; opportunity to perform well at challenging work; recognition and positive feedback for one’s contributions; personal support from one’s supervisor; effort above and beyond the minimum; understanding the link between one’s job and the organisation’s mission; prospects for future growth with one’s employer; and intention to stay with one’s employer. As Vance points out, ‘This broad array of concepts has come to be labeled employee engagement by virtue of linkage research, which relates survey results to bottom-line financial outcomes.’ Accordingly, it is linkage research which should be a prime consideration by boards and CEOS when designing workforce surveys. Engagement surveys are usually undertaken on an annual basis (and share this characteristic with appraisals), with the danger that the data collected lacks currency, particularly from midway through the survey year. However, it is possible and perhaps preferable to sample the staff across the organisation on a monthly basis in order to make data more actionable and phased. In this way, trends can be identified. It is vitally important to share the survey results with employees, follow up with actions and provide regular feedback on progress: to do nothing is likely to actually increase disengagement. To assure staff of independence, the use of an external supplier should be considered, although this is an expensive option. There are online tools coupled with electronic data collection and analysis which can reduce costs but, clearly, these will not suit the demographics of every organisation. The efficiency with which such an approach is implemented is obviously important and can skew results—for example, if getting access to the survey site is unduly complicated. However, there are a number of issues with such surveys. Some relating to collection and process were identified in an earlier chapter in which national statistics were analysed, where differences were spotted in results between the various surveying organisations, resulting ostensibly from different surveying methodologies. Having said this, consistent use of the same survey process could mitigate concerns. It is also important to consider the number of people not completing the survey and what that implies for the result. Could these employees simply

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not be bothered? What does that say about engagement and should this be factored into the results? No answer is also an answer. To give a simple illustration, an organisation employs 100 people, with 30 not responding, but it achieves an overall engagement score of 70% from those responding. When non-respondents are taken into account the revised score is 49%. Boards need to question non-response rates. As the use of these surveys has developed and they have become important organisational tools, there is also the danger that management puts undue pressure on staff to complete them in positive ways, particularly if management is incentivised on the results. I have seen a letter to staff from the CEO of a major international company (not one we interviewed) and note that in the communication he stressed the importance of responding to a particular question in the survey (from 32), even suggesting to staff they should give a high score (9 or 10). The question concerned is also highlighted in the staff magazine and in a video promoting the survey, all of this influence is, of course, likely to skew the results. Perceptions of anonymity might also be a factor in determining how truthfully respondents answer survey questions. Anecdotally, when I was a non-executive director on the RAF board, I visited RAF stations to talk to people (without senior officers present). I was surprised at the number who told me that they did not believe the online survey was confidential. A number of staff said they were contacted when they didn’t respond to the survey, which indicated to them that they were being tracked and it was not confidential. Boards and CEOs must be alive to these potential problems in order not to be lulled into making judgements based on faulty data. Employee Commitment or Advocacy measure The score from this is usually calculated by deducting the percentage of staff who are detractors of the organisation from the percentage who are advocates. Usually the score for this measure is derived by asking just one or two questions regarding the likelihood of recommending the organisation as a potential employer to a friend. However, it will not answer the ‘why?’ question. To get a real understanding the question needs be supported by some simple back-up questions that interrogate what is good about the member of staff’s job and what can be done differently/better. This metric is an important way of understanding how staff feel about the organisation and, in particular, to what extent they are advocates of it. Usually it is included in the annual employee engagement survey.

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In his book 25 Need to Know Key Performance Indicators, Bernard Marr (2014) provided an interesting guide to rating advocacy score performance, as follows: • score 9–10 = loyal and enthusiastic employees who will promote you as a potential employer. • score 7–8 = satisfied but unenthusiastic employees who are vulnerable to competitive offerings. • score 0–6 = unhappy employees who can damage your brand and impede growth through negative word of mouth.

Human Capital Formulae • Per employee metrics are used to understand the financial value of staff, recognising that employees are typically the organisation’s biggest expense as well as its key asset. From personal experience, very few organisations use this measurement and it is an easy one to make as the information is usually readily accessible. Such measures can be quite basic and yet are used by big organisations such as the John Lewis Partnership. The company divide gross sales by the average number of full-time equivalent partners and use this as a key strategic measure, indicating productivity within the organisation. In 2015 this was £181.6k. A similarly apparently basic measure is also used by JLP: profit before partnership bonus, tax and exceptional items divided by the average number of full time equivalent partners. This is another strategic KPI used by the board as a measure of the profit generated per average FTE, and it is therefore a useful gauge to assess whether they are growing efficiently. In 2015 this was £5.7k per employee. • A Human Capital Value Added (HCVA) measure is derived by adjusting operating profitability by taking out all expenses except for staff expenses from the total revenues and then dividing by the headcount. • Human Capital Return on Investment is a metric of the company’s investment in its staff and therefore is a method of assessing the added value from making investments in the organisation’s people. This is measured by taking the HCVA adjusted profit calculation and then dividing it by human capital costs (except for training).

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• Human Economic Value Added is a method of measuring the profit contribution per employee as an average. This is measured in the private sector by deducting 10% of the shareholder’s equity from the net profit and dividing this by the organisation’s headcount.

Absenteeism Absenteeism is an employee’s intentional or habitual absence from work. When people are absent from work and this is unauthorised, there is a direct cost and potentially disruptive impact for the organisation but there are indirect costs too, such as replacement personnel. A number of studies indicate that these indirect costs can be up to 200% of the direct cost, and this has a potential significant impact on productivity and profitability and a range of other issues, such as safety (e.g., inadequately trained staff filling in), lowered morale among ‘fill ins’ and diversion of management time. There are numerous causes of absenteeism, including bullying and harassment; stress and low morale; personal stress; childcare and care for the elderly; depression (a leading cause); disengagement; injuries, illness and medical appointments (the most commonly reported reasons for missing work, though not always the actual reason); injuries and accidents; and job hunting. Most of these topics have already been touched on. Data to monitor and manage absence are probably already located within the HR systems of most organisations but there are a number of standalone software applications or modules that are designed specifically for the recording, monitoring and managing of absences that are available in the marketplace. The Chartered Institute of Personnel and Development undertakes an absence survey and the results suggest that ‘fewer than half of employers say they monitor the cost of absence and just under half of organisations have set a target for reducing absence’. This appears to be a potential target for productivity gains for significant numbers of UK organisations.

The Standard Absenteeism Measures The same institute in its Absence Measurement and Management Factsheet (October 2015) set out a number of measures for absenteeism, as discussed below.

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‘Lost Time’ Rate The lost time rate expresses the percentage of total time available which has been lost as a result of absence. It can be calculated separately for different departments to identify areas of concern. The lost time formula is: total absence (hours or days) in the period × 100 possible total (hours or days) in the period

Frequency Rate This measure shows the average number of absences per employee expressed as a percentage. It gives no indication of the length of each absence period or any indication of employees who take more than one spell of absence. The frequency rate formula is: No. of spells of absence in the period x 100 No. of employees

The Bradford Formula The Bradford Formula (or Factor) enables organisations to weight unplanned absence from work by staff. The name is derived from research undertaken by Bradford University School of Management in the 1980s. Its importance is predicated on the assertion that repeat work absences are more disruptive organisationally and have a greater negative impact on productivity than long-term sickness. The formula is calculated at an individual level by looking at absences over a period, usually but not necessarily a year, by identifying the number of absences and then multiplying them by the squared number of actual absences. The data are usually readily available from HR records. As a guide, individual members of staff should be reviewed if they produce a Bradford Formula score of 80+ annually, 27+ quarterly or 12+ monthly.

Health and Safety Measures As already covered in this book, ensuring the health and safety of its employees is a statutory organisational requirement. On the boards that I served on, the first item on the agenda was always health and safety. It is also a legal

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requirement that applies to most workplaces that staff should be consulted. A key aim of the regulations and consultation is to enable management and staff to work together: to develop, maintain and promote measures that ensure health and safety at work; and, to check the effectiveness of such measures. In its publication A Guide to Measuring Health and Safety Performance, the Health and Safety Executive (2001) state that organisations need to recognise that there is no single measure of health and safety performance but that a basket of measures is required as part of an overall health and safety management system, and we saw earlier the Visible Felt Leadership system used by Marshalls plc. The Health and Safety Executive assert that health and safety performance measurement should seek to answer such questions as: • Where are we now relative to our overall health and safety aims and objectives? • Where are we now in controlling hazards and risks? • How do we compare with others? • Why are we where we are? • Are we getting better or worse over time? • Is our management of health and safety effective (doing the right things)? • Is our management of health and safety reliable (doing things right consistently)? • Is our management of health and safety proportionate to our hazards and risks? • Is our management of health and safety efficient? • Is an effective health and safety management system in place across all parts of the organisation (deployment)? • Is our culture supportive of health and safety, particularly in the face of competing demands? The prime focus for health and safety performance measurement is obviously to reduce accidents in the workplace in order to meet the internal requirements of the organisation. However, there is an increasing requirement to show the organisation’s external stakeholders that appropriate arrangements to control health and safety risks are in place and are effective. Not dealing properly with health and safety can bring huge personal costs as well as repetitional and financial ones to organisations. BP is an extreme example but in July 2016 it estimated that its 2010 Deepwater Horizon accident and oil spill in the Gulf of Mexico would end up costing about $62 billion before taxes. The group has set up a special committee of the board, the Safety,

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Ethics and Environmental Assurance Committee. It has two strategic safety KPIs: the recordable injury frequency (number of reported work-related employee and contractor incidents that resulted in a fatality or injury, per 200,000 hours worked), which gives BP an indication of the personal safety of its workforce; and loss of primary containment (LOPC), the number of unplanned or uncontrolled releases of oil, gas or other hazardous materials from a tank, vessel, pipe, railcar or other equipment used for containment or transfer. By tracking these losses they monitor the safety and efficiency of their operations as well as their progress in making improvements. Other published safety metrics are day away from work case frequency and the severe vehicle accident rate. Traditionally, the key measure regarding the effectiveness of health and safety policies and procedures has been a negative one—injury statistics which actually are measures of failure and reflect outcomes rather than causes. So, in this respect health and safety measures have been different from most other organisational metrics, which are generally ‘positive’ measures. It is useful for organisations to consider two different types of health and safety metric: lagging indicators that show the number and severity of events which have already occurred; and leading indicators which can be measured without an incident or accident happening—these are often linked to processes or targeted activities and are useful in terms of predictive power. Examples of leading indicators are safety audits, training delivered against plan, attitude survey results and the number of senior management safety visits against plan. Some positives of lead indicators are that they are an absolute measure of performance, are relatively easy to collect, allow benchmarking and are easy to understand. Examples of lagging indicators are the number and type of incidents; lost time as a result of accidents or injuries; accident frequency rates; investigations closed within 14 days; and absence data.

Workforce Turnover An organisation’s staff turnover is measured as a percentage rate, which is referred to as its turnover rate. This is the percentage of employees in a workforce that leave during a certain period of time. Impellam plc consider this is a strategic KPI and report it in its annual report, as does Capita, the FTSE 100 international business process outsourcing and professional services group, which has a strategic measure on maintaining overall employee

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retention at above the industry average. Capita claimed 81% for this measure in 2015, which it says is key as ‘our people are vital to our success in delivering high quality, efficient services to our clients’. A small minority of organisations translate their view of the importance of their people into a published strategic KPI. Within the general measure of staff turnover and taking the point made below by Dr Fitz-enz, a measure of the turnover of key mission critical staff might be considered. Capita pl, do this and have been ‘maintaining a high retention rate for senior managers (Executive Directors and senior management teams)’ as a strategic KPI. The group states that they need to have the right leadership and skills to deliver their long-term growth strategy and publish a 98% measure for 2015.

Diversity Gender Diversity and Gender Pay Metrics A number of organisations report annually the number and/or the percentage of female employees in their workforce—for example, ANZ Bank and BAe Systems plc. Both of these publish these measures as strategic KPIs. Go Ahead Group measure and publish board gender diversity and senior management diversity Depending on parliamentary scheduling, it is likely that from April 2017 businesses with more than 250 employees in the private and voluntary sectors will be required to report how they pay men and women (under Section 78 of the Equality Act 2010.) That means that the regulations will cover around 7,850 employers, employing more than 11 million people—approximately 40% of the UK workforce. In addition, in October 2016 a commitment was made to extend these requirements to the public sector via the public sector equality duty—. Together these regulations will affect nearly half of the cross-sector workforce.

Ethnic Diversity An increasing number of organisations are also reporting the percentage of BAME staff. For example, the BBC reports a corporate average for all staff at 14.2% and with employee targets set at a divisional level relevant to the division.

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Age Diversity This is measured and published by BAe Systems plc, the FTSE 100 multinational defence, security and aerospace company. Staff age diversity 60 years and older = 7,000 50–59 years = 24,000 35–49 years = 25,000 25–34 years = 14,000 24 years and younger = 5,000

Composite Metrics Composite Metric View, 1 from Dr Fitz-Enz Having said that there is no generic set of measures, I start by sharing the view of Dr Jac Fitz-enz, who is generally acknowledged as the father of human capital strategic analysis and measurement. During the 1970s he carried out the original research which led to the first human resources metrics in 1978, and he founded the Saratoga Institute in 1980. At a 2013 conference of the HR Academy entitled The Next Generation of HR Metrics, Fitz-Enz’s (2013) presentation was called ‘The 5 Most Important Things to Measure in HR’. In his lecture, which can be dowloaded from the internet, he seemed to synthesise learning from his many books on the topic when e chose the following five critical measures: • Mission-critical employee turnover: Fitz-enz thought this was the single most important measure and questioned the value of company-wide turnover measures. He commended the approach of ‘going one down’ with data to interrogate what it actually means as a precursor for action. • Total cost of labour as a percentage of turnover. • Amount of money spent on learning and development: If these areas are not pushed there will probably be problems organisation-wide in the future in terms of sustainability. • Engagement on productivity: The numbers on the standard engagement survey are not of much use on their own but of interest if tied to productivity.

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• View of leadership by employees: If employees don’t like or respect their leaders when things go wrong, they are likely to drop out psychologically or physically.

Composite Metric Approach 2, PLSA PLSA Metrics In June 2016 the Pension and Lifetime Saving Association (PLSA 2016) published an important report entitled ‘Understanding the Worth of the Workforce: a Stewardship Toolkit for Pension Funds’, which recommended particular human capital metrics that should be adopted by corporates. This is the national association of the pensions industry and is supported by over 1,300 pension schemes and 400 other supporting businesses that control hundreds of billions of pounds worth of savers’ money invested in listed companies across the world. The PLSA describes their members’ investee companies workforces as a critical determinant of their members’ capacity to provide secure, sustainable incomes for their beneficiaries in later life. This view was derived from an earlier National Association of Pension Funds paper, ‘Where is the workforce in corporate reporting?’ (2015), which highlighted the importance of a company’s workers, and how the way in which they are recruited, retained, developed and inspired relate to its ongoing success. The report indicated that ‘In a “knowledge economy” where intangible assets, such as brand recognition or “human capital”, are becoming more important than physical assets, such as plant or property, performance in this area is likely to become increasingly vital.’ The report continued: ‘Despite this body of evidence however, and the ostensible acceptance of the importance of a company’s workers to its long-term performance, reporting in this area is generally not of sufficient quality to enable investors to identify risks or opportunities relating to a company’s workforce and target their engagements accordingly.’ The 2016 PLSA paper stresses the importance of human capital analytics and the PLSA ‘recommends that our members encourage investee companies to report against seven Human Capital metrics as standard, at group level and across relevant markets, businesses and levels of the company hierarchy’. The PLSA hope that adoption of the measures in itself will lead to better scrutiny for workforce issues by investors, and as a consequence to improved productivity and investment performance.

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There are seven core workforce-related performance measures which PLSA considers companies should adopt, and report as standard at group level and across relevant markets, businesses and levels of the company hierarchy. These core metrics should be included in Annual Reports: • • • • • •

gender diversity; employment type—for example, full-time, part-time or agency workers; staff turnover; accidents, injuries and workplace illnesses; investment in training and development; pay ratios between the highest paid and the median and lowest quartile workers across the company; • employee engagement score.

The PLSA commends the three key themes underlying these metrics— stability; skills and capabilities; and employee engagement—and suggests that they will give an insight into ‘how secure this employment model is; how different people in the company are treated; and thus how motivated and committed to corporate goals they might be.

Composite Metric Approach 3—Valuing your Talent Valuing Your Talent The benefits of using a human capital analytical approach are also included in the ‘Valuing your Talent’ report (2015). Valuing your Talent is a collaborative, industry-led movement to build a greater understanding of how people create and drive value in business. The partners are the UK Commission for Employment and Skills, the Chartered Institute of Management Accountants, the Chartered Institute of Personnel and Development, the Chartered Management Institute and Investors in People. This report cites research by Deloitte which points to more that 75% of companies believing that using people measures was important to their business but only 8% thought their organisation was ‘strong’ in this area. Furthermore, the research suggested that companies with advanced capabilities in human capital analytics are outperforming their competition in many areas, including quality of hire, retention and leadership capabilities, and it can report up to 30% higher stock prices than their peers. The ‘Valuing your Talent’ report states: ‘With human capital reporting,

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companies can gain new understanding of every element of their workforce’ and, ‘above all, a fundamental shift in the mind-set of businesses and investors alike, driving a shared interest in transforming how we value our people’. Importantly for our cross-sector approach to human capital, the Valuing your Talent team consider that although the main thrust of their work is aimed at private sector corporates, the people-centred approach and principles employed are equally important for non-profits and the public sector. The ‘Valuing your Talent’ report proposes four key generic measures drawn from data that many organisations already collect: • Total cost of workforce employed (including contingent labour): Why are some organisations able to obtain greater returns on their investments in people than others? Such questions cannot be answered until organisations agree upon and report on a common denominator for people measures: headcount. • Recruitment costs: The extent to which employees remain in or leave the organisation (their staff ‘churn’) provides an important insight into the operational momentum of the business. • Total investment in training and development: To understand why people stay at or leave their organisation, stakeholders must look into the scale of investment made in the development of talent. • Employee engagement survey scores: Since evidence suggests that employee engagement is positively linked to an organisation’s financial performance, it is important for stakeholders to understand this relationship between a business and its people.

Composite Metrics Approach 4—The HR Managers Perspective I found it interesting to compare the above composites with those set out in a January 2017 article written by Michael Carty (2017), the editor of XpertHR Benchmarking. The article was entitled ‘Essential People Analytics: Seven Key HR Metrics for 2017’. Carty asserts that these are the seven essential metrics for 2017 based on the most frequently accessed data for users of the XpertHR Benching HR metric tool: • number of employees per HR staff member; • labour turnover (voluntary resignation rate);

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• absence rate; • annual leave (basic holiday entitlement for full-time employees, excluding bank/public holidays); • pay awards (expected value); • absence cost; • graduate starting salary. Mr Carty also revealed in the article that ‘getting started with HR metrics and analytics’ was one of the most accessed topic pages. According to XpertHR research, 97% of HR departments gather or hold metrics data but 95.5% of HR professionals have experienced problems in gathering and analysing the data. Key problems include poorly integrated data systems, a lack of resources to gather data and uncertainty over what to measure. Clearly, following one of the key suggestions in this book, people metrics should be an issue for the CEO and not left to the HR manager to ensure that the metrics measured are those that matter to him/her and which have strategic import.

Other bespoke measures The Advanced Performance Institute set out a number of other ‘employee perspective’ measures in its KPI Library, including the following, which are not covered above: • • • • • • • •

average employee tenure employee core competency profile performance review completion ratio salary competitiveness ratio executive to employee pay ratio time taken to hire training return on investment leaver attitude score

Outlying measure anecdote Finally, to demonstrate that one size really does not fit all in this consideration of human capital metrics, and that individual organisations need to develop their own bespoke measures, it is interesting to note BAe Systems

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plc’s strategic non-financial KPIs of trust and integrity in its workforce. These measures (and the quantum published) might seem strange and totally inappropriate to some organisations. The measure is the number of ethics enquiries and number of dismissals relating to unethical behaviour. In 2015 the number of ethics enquires was 1,148 and the number of dismissals for reasons of unethical behaviour was 257.

References ‘Absence Measurement and Management Factsheet’ Chartered Institute of Personnel and Development (October 2015). Carty, M. (2017, January). Essential People Analytics: Seven Key HR Metrics for 2017. XpertHR Benchmarking. Health and Safety Executive. (2001, December). A Guide to Measuring Health and Safety Performance. www.hse.gov.uk Marr, B. (2014). 25 Need to Know Key Performance Indicators. Financial Times Publishing. National Association of Pension Funds. (2015, June). Where is the Workforce in Corporate Reporting? www.napf.co.uk Pension and Lifetime Saving Association. (2016, July). Understanding the Worth of the Workforce: A Stewardship Toolkit for Pension Funds. www.plsa.co.uk ‘The 5 Most Important Things to Measure in HR’ presentation by Dr Fitz-enz at ‘The next generation of HR metrics’ conference (2013). ‘Valuing Your Talent: Reporting Human Capital, Illustrating Your Company’s True Value Report’, a collaborative project of UK Commission for Employment and Skills, Chartered Institute of Personnel and Development, Investors in People, Chartered Institute of Management Accountants and Chartered Management (2015). Vance, Robert J. (2006). A Guide to Understanding, Measuring and Increasing Engagement in Your Organisation. PhD published by Society for Human Resource Management.

Part V Human Capital Analytics

22 Final Thoughts

The way you see people is the way you treat them, and the way you treat them is what they become. Johann Wolfgang von Goethe (1749–1832), writer and statesman.

Final Thoughts My background is not that of an HR practitioner and, as far as I can see, I am the only non-HR specialist to have written a book about human capital. I have approached the topic from the perspective of a practising chair and trustee with private, public and non-profit experience at directorial, including CEO, levels. I am very aware of the multitude of information, generic and specific, that directors and trustees have to absorb, but I hope this book will be digestible, and its key themes understood and acted upon. I must confess to some sympathy with HR leaders. In The New Human Capital Strategy (AMACOM 2008), the author, Dr Bradley Hall, quotes a study by the University of South California Centre for Effective Organisations, saying that only 9% of HR leaders report that their company is effective or very effective in connecting human capital practices to organisational performance. That is why there needs to be a mindset change and boards need to be more connected. Intuitively I have always believed in people and I have seldom been let down. I have also observed at first hand that human capital is not typically a main board agenda item but somewhat down the list of corporate priorities, and I think this needs to change. I believe it is time for a new systemic way to

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manage and grow human capital for all organisations, regardless of sector, and that it needs to feature at board level. Writing the words ‘people are our biggest asset’, which populate virtually every tri-sector annual report, is a rather hollow exercise if it is a once a year action. Real progress in human capital optimisation requires a mindset change at board and executive suite levels, underpinned by a real belief that it is the organisation’s people who are the key to future success and that employees can be leveraged for competitive advantage in a win:win alliance of staff and organisation. Expectantly, I hope that a number of messages have got through, but principally the following 10 and consequently that: • readers understand that valuing people and managing human vapital proactively will result in organisational performance gains and, if the actions are widespread, will actually impact on the UKs productivity gap; • nomination committees might consider the discipline make-up of boards, as well as gender and, particularly, ethnicity, to ensure real diversity of thought, and have other traits on their check list, such as humility, when searching for executive directors; • new perspectives have been gained on the eleven critical elements and influencers of human capital as well as an improved understanding of their individual and cumulative impact and why they should be on the radar of directors and trustees and that a human capital strategy should be part of the strategic plan; • boards and their remuneration committees should take note of the basic common sense notion of fair pay policies when deciding on executive pay and take heed of public and governmental concern over this matter as well as wider governance issues; • the constructs of board capital and leadership capital are of interest and take forward board and senior executive thinking about their own contributions to human capital management; • there is significant learning from the way leaders from organisations in other sectors manage their human capital and the sense of comparing approaches across the sectors (e.g. non-profit and public sector bodies reviewing FRC board governance guidelines and governmental agencies learning from the peer review process undertaken by local authorities as a cheaper and better alternative to appointing expensive external consultancies); • the pieces on the institutes and associations provide different and interesting views on how leaders not in the operational firing line see how best people should be managed and for these organisations to

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include more on human capital and its management in the advice and training they provide and the guidance they circulate, including important regulators such as the Charity Commission; • all board members should review how their own learning can be enhanced individually and work on the board as well as in the board, with particular attention perhaps being paid to learning about human capital and its elements as well as personal skills, which in my experience board members generally are so poor at, such as listening and reading body language; • the shibboleth that there are no appropriate people measures has been dispelled and boards understand that it is possible to apply the same metric disciplines as those for financial management, and that the CEO takes responsibility for this important issue instead of leaving it solely to the HR department and includes human capital lead measures in the corporate balanced scorecard; • thinking out of the box with regard to subjects such as corporate philosophy and organisation structure and considering outlying approaches are considered worthwhile activities from time to time.

Index

A Absenteeism, 67, 87, 243, 249 Alnwick Garden Trust, 177 importance of people, 174 strategy, 174, 176, 177, 178 Army, 122, 133, 134–140, 142, 145 getting best from people, 7, 8, 116, 146, 152, 159, 169, 179, 197, 204, 210, 235 leadership code, 135–136 performance metrics, 18, 139–140 Australia and New Zealand Banking Group (ANZ), 162–165, 253 values, 162–164

B Bernstein, Sir Howard, 126–134 Board capital, 23, 26, 61, 264 Board development, 54, 61–62 Board evaluation, 80–81 Bradford formula, 250 Brightmore-Amour, Diana, 162–165 people-centred approach, 165

Brown, David, 170–173 working style, 171 Browne of Matingley, Lord, 23 Bullying and harassment, 124, 249 Business in the Community WorkWell model, 91

C Cancer Research UK, 193–196 mission statement, 194 strategic objectives, 115, 118, 133–134, 192, 242 Centrepoint, 190–193 Culture, 191–192 Chartered Management Institute, 12, 101, 223, 256 Coffey, Martyn, 85 Communication, 31, 40, 42, 46–48, 71–74, 76, 77, 78, 86, 87, 88, 90, 100, 101, 102, 115, 123, 131, 145, 150, 155, 161, 162, 163, 164, 166, 168, 175, 184, 188, 199, 208, 212, 216, 217, 235, 247

© The Author(s) 2017 A. Coppin, The Human Capital Imperative, DOI 10.1007/978-3-319-49121-9

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Communication (cont. ) listening, 9, 25, 30, 32, 62, 71, 72–74, 116, 117, 128, 131, 139, 140, 141, 145, 149, 152, 162, 176, 208, 212, 265 Coppin, A, personal insights, 7–8, 197 Corporate Governance Green Paper, 19–20 Cross sector workforce analysis, 5 Crown Estate, The, 41, 117–121 pictorial strategy, 119

D Department of Culture Media and Sport, 121–126 investing in people, 124–125 strategy, 122 Diversity and inclusion, 93–97, 115, 142, 172 why important, 94–97

E Email use, 71, 102 Employee engagement, 11, 15–17, 41, 64–69, 71, 76, 90, 94, 105, 164, 167, 168, 192, 208, 221, 222, 226, 227, 237, 242, 245–247, 256, 257 Employee ownership, 20, 203, 210–211, 213 Arup, 203, 211, 215 CSH Surrey, 211–212 John Lewis Partnership, 214–215 Sunderland Home Care, 211, 213–214 ‘Employees first, customers second’ philosophy, 203, 216–217 Executive pay, 19, 20, 107, 108–110, 221, 225, 229, 230, 264

F Financial Reporting Council guidelines on board effectiveness, 24, 80 Francke, Ann, 223 Freed and Ulrich’s Human Capital Index, 26 G Go Ahead Group plc, 170–173 vision, beliefs, attitudes, 170–171 Goodwin, Dr Philip, 76, 184–186 leadership style, 187 vignette, 189 H Harrow Council, 113–115 council and context, 113 human capital approach, 114 HCL Technologies, 203, 216–217 Health and safety, 62, 83–90, 120, 169, 184, 243, 250–252 the big picture, 84 involvement of workforce, 83 visible felt leadership, 85–87 Horton-Osario, Antonio, 153–161 biggest people challenge, 159 personal tool kit, 159–160 Human capital analytics, 67, 224, 229, 255–257 definition, 3–4 and employee engagement, 11–21 I Impellam Group plc, 173–176 cultural transformation, 174 Institute of Directors, 18, 219–223 Institutes and associations, perspectives, 219–237, 264 Investment Association, 37, 227–231 executive pay, 229–230 productivity action plan, 228

Index

L Leadership capital index, 26 Leadership styles, 27–33 inclusive leadership, 29–30 public sector leadership, 32–33 servant leadership, 29–30 transformational leadership, 27–28 Learning and development, 57–62, 79, 124, 151, 158, 161, 164, 175, 196, 212, 254 alignment with strategy, 58 assessing the impact, 60 board development, 61 organisational benefits, 57 trends, 58–59 Listening, 8, 9, 25, 30, 32, 62, 71–74, 116, 117, 128, 139, 140, 141, 145, 149, 152, 176, 208, 212, 265 Liverpool Cathedral, 197–200 values, 198 Lloyds Banking Group plc, 153–160 NEDs, 160 new responsible business committee, 161 performance management, 155–156 strategy, 154 Local Government Association (LGA), 235–237 peer challenge, 236 Lockwood, Michael, 113–117 personal style, 116–117 vignette, 117

M Manchester City Council, 126–134 people strategy, 128 strategy, 126 Marshalls plc, approach to health and safety, 85–87, 251 Maslow’s theory, 63 May, Theresa, 18, 21, 135 Metrics, 245–259

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absenteeism, 249–250 bespoke measures, 258–259 composite metrics, 254–258 diversity, 253 health and safety, 250–252 human capital formulae, 248–249 workforce engagement, 245–248 workforce turnover, 252 Middle management and trust, 31–32 Milburn, Dame Martina, 181–184 personal tool kit, 184 Mission and vision statements, 39–40, 42 enhancing, 40 involving the workforce, 41 ‘why?’, the importance of, 41 writing better, 41

N National Council for Voluntary Organisations, 6, 231–235 National Health Service England, 146–152 communication, 150 metrics, 149–150 mission purpose and behaviours, 147 Nayar, Vineet, 203, 216–217 Nimmo, Alison, 117–121 role and optimising human capital, 120 Ninian, Andrew, 227–231 Non-profit sector leader insights, 177–202 Northumberland, Duchess of, 177 personal role, 179 philosophy and tool kit, 179–180 vignette, 180

O Obakin, Seyi, 190–193 personal approach, 193

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Office for National Statistics, value of human capital, 4 Organisation structure and design, 45–48 new mode of structure, 46–47 organisation size, 48 Outliers, 203–218 Outsourcing and offshoring, 38–39 Owen, Sue, 121–126 personal style, 125 vignette, 125

P Pay fairness, 106–107, 109 Performance management, 14, 27, 75–81, 114, 120, 154, 155, 169, 183, 188, 189, 195, 200, 237 board evaluation, 80–81 definition, 75 role of leaders in, 76 Presenteeism, 87 Prince’s Trust, The, 181–184 human capital management and measures, 183–184 strategy, 181 Private sector leader insights, 153–176 Productivity gap, 11–14, 18, 264 Psychological well-being, 83–91, 208 bullying and harassment, 89 presenteeism, 87 stress, 84 workwell model, 89–90 Public sector leader insights, 113–152

R Recruitment, 24–26, 51–56, 75, 120, 130, 144, 165, 183, 189, 191, 199, 204, 206, 207, 230, 231, 257

CEO chief recruiter, 51 improving job descriptions, 53 person specification models, 52 psychometric testing, 54 Remuneration, 105–110, 119, 120, 149, 150, 164, 167, 172, 221, 225, 229–231, 264 executive pay, 108–110 importance of pay fairness, 106 zero hours pay, 107 Robertson, Julia, 173–176 personal tool kit, 184 Robertson, Steve, 165–170 role and personal tool kit, 169 Royal Navy, The, 133, 143–146 engagement and communication, 145 values, 144 S Singh Kumar, Sir Harpal, 193–197 personal tools, 197 Spencer Stuart UK Board Index, 25 Strategy, 37 human capital strategy, 38 strategy and culture, 37 T Technology, 12, 13, 14, 38, 52, 59, 62, 71, 74, 99–110, 160, 192, 234 Thames Water Utilities Ltd, 165–170 purpose, 165–166 values, 166 Tickell, Major General, 134–143 personal approach to getting the best from people, 140–142 vignette, 142 Timpson, John, 203–209 personal role, 205 personal tool kit, 210

Index

philosophy, 204–205 upside down management, 203–210

U Unipart Way, the, 69 Upside down management, 203–210

V Visible felt leadership at Marshalls plc, 85 Voluntary Service Overseas, 184–190 performance management, 188 strategy, 186

W Walker, Simon, 219–223 personal tool kit, 223 Wheeler, Karen, 146–152 personal approach, 152 vignette, 151 Wilcox, Dr Pete, 197–202 personal tool kit, 201 vignette, 201 Williams, Rear Admiral, 143–145 personal tool kit, 145 Williams, Richard, 231–235 personal tool kit, 235 zero hours pay, 107

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