Performance-related pay: Creating a buzz

The business

Busy Bees is the fifth largest nursery chain in the UK, with 47 facilities providing just over 4,000 childcare places. The company was set up in 1984 when three couples needing childcare for their own children pooled the proceeds from the sale of their houses to finance the first nursery in Lichfield, Staffordshire.

The company is also the UK’s biggest supplier of childcare vouchers – enabling employees to obtain some tax and national insurance relief on childcare costs – with 55% of market share according to HM Revenue & Customs. Both Busy Bees businesses, which employ a total of 1,600 staff, were bought for £71m in December 2006 by Australian-based ABC Learning Centres – the largest childcare company in the world.

The challenge

HR director Clare Phizacklea says the introduction of the national minimum wage means that nurseries are increasingly competing for ‘non-academically qualified’ employees with call centres and the retail sector. As a result, demand for staff outstrips supply, and private childcare providers also face a challenge from government-funded Sure Start programmes, which are able to offer higher wages.

In 2004, staff turnover at Busy Bees was 37% and it remained stuck at that level the following year.

In such a labour-intensive industry, staff pay amounts to at least 45% or 50% of the running costs of a nursery, and Phizacklea says privately owned nurseries increasingly have to balance the need to pay enough to recruit and retain staff while not jeopardising their viability by passing on large fee increases to parents.

The solution

In 2006, the company launched an action plan to reduce staff turnover. Following a staff survey, it introduced a new pay mechanism that allied its traditional annual cost-of-living wage increases with a payment based on performance.

Phizacklea says that staff were asked to grade themselves according to certain levels of competence. For example, a qualified nursery nurse was judged on issues such as timekeeping, attendance, uniform, ability to respond to children’s needs, communication with parents, and knowledge of childcare practices. Nursery managers then verified the responses.

The company developed its own pay scales and, depending on how staff scored against the competence criteria and in the manager assessments, employees could progress up the ladder.

Phizacklea says the company also realised that the largest number of leavers were in the bigger nurseries.

“In larger nurseries, we have staff teams of 50 people so it is very difficult for one manager to actually spend time with every member of staff and check whether their needs are being met and they are happy,” she adds.

The company decided to create ‘a new layer of supervisor’ through the appointment of ‘room leaders’ in some of its bigger nurseries as a way of backing up the existing structure of a manager, deputy and third in command.

“The room leaders are responsible for guiding, mentoring and line-managing staff,” says Phizacklea. “They can tackle absenteeism and timekeeping more easily and they can go to managers with specific issues and quickly deal with any niggles. Where a room leader is in place, employees feel that they are taking ownership.”

Phizacklea acknowledges that in the past the company’s attendance bonus failed to reduce absenteeism, which can undermine staff morale and teambuilding.

“In childcare, when someone is absent you have to bring in another person to meet adult-to-child ratios. They may not be familiar with the routines in a nursery, so other staff may have to look after children and show this newcomer the ropes.”

Another element in the recruitment and retention strategy has been the launch of staff induction DVDs and regional induction meetings, so that employees from different nurseries can meet and share their experiences and ideas. The DVD includes a message from the founding directors outlining the history of the company as well as its philosophy.

Discounted childcare places – just over 50% for managers and 20% for other employees – coupled with a range of training courses delivered in partnership with the Learning and Skills Council, including levels 2 and 3 in early years, are also key components in securing staff loyalty.

The outcome

Staff turnover was reduced to 29% in 2006, exceeding a company target of 30%. And a staff survey has shown that 77% of staff prefer to have the performance-related element to their salary rather than simply a cost-of-living rise.

Phizacklea says this greater optimism is matched by excitement about the takeover by ABC, especially news that it could mean opportunities for staff secondments to Australia, the US and New Zealand to experience the childcare giant’s methods of working in these countries. Being part of the largest childcare company in the world has also been a source of pride and “tremendous excitement” for the staff, she adds.

Busy Bees has been acquired as ABC’s UK base, and there are plans for further expansion, either through the development of new provision or the acquisition of existing nursery businesses in the UK and across the rest of Europe.

Phizacklea says the takeover may involve making changes to Busy Bees’s existing reporting systems and may entail implementing a new HR database system so ABC can have the same information provided from all the countries where it has operations. There will also be further opportunities for staff to progress their careers as there will be a need for more operations and area managers.

Employee perspective

Jeanette Healey manages the St Matthews nursery in Burntwood near Lichfield, and has worked for Busy Bees on and off for 20 years. She has also worked for two other major nursery chains – Bright Horizons Family Solutions, and Leapfrog, which is now part of the Nord Anglia group.

She says that while staff undergo an annual appraisal, linking part of the salary to performance has meant that ‘performance review tools’ are used all year round.

“It means we have a good ongoing dialogue with the team about how they are progressing and really iron out any rough spots as we go along,” explains Healey. “We have really benefited from these measures in the past six months and they have helped us to retain staff,” she says.

Regular meetings with room leaders ensure that issues such as occupancy, parental concerns and staff perspectives can be discussed.

She says: “There may be someone with a crisis at home who is not confident talking about it. We will then hold individual meetings to look at the particular problem and find a solution.”

Guide to Sound recruitment and retention in 10 steps

  1. Offer advantageous terms and conditions, robust HR processes and a positive working culture.
  2. Include employees in the recruitment process by asking interview candidates to spend some time at the nursery.
  3. Ensure sound induction processes, ongoing coaching, team training, regular supervision and appraisal.
  4. Manage a mentoring programme to develop team members.
  5. Value people to develop staff morale, motivation and teamworking.
  6. Recognise and reward individual achievement privately and publicly.
  7. Create a transparent and visible career pathway that acknowledges competencies and knowledge as well as qualifications.
  8. Create a culture of empowerment and risk taking.
  9. Ensure a culture, as well as systems, of sound communication.
  10. Offer flexible working where possible.

Source: Nathan Archer, The Children’s House nursery and consultancy

If I could do it again…

Nursery managers have a central role to play in tackling staff turnover and development. Implementing the company’s strategy may have been more swift and effective if employees had been engaged in the process at an earlier stage, concedes HR manager Clare Phizacklea.

“We started this process in 2005 and now we have tidied up many of the competence criteria and improved them,” she says. “We possibly should have involved the managers at the start and perhaps, with hindsight, we were slow to respond.”

She emphasises that whatever HR policies and procedures are adopted, they must have “a pound sign next to them” as a recognition that the financial, as well as the human, implications have been taken into account.

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