As the economy moves towards recovery, coping with spending cuts is the big challenge facing HR in the public sector. Guy Sheppard reports, in the latest of a series of sector focuses.
It is a common refrain among HR professionals in the public sector that, despite continued sniping in the media, adjustments are being made to cope with recession.
Mary Canavan, HR director at the British Library, says: “People out there have the impression that the public sector is lost in time and has not moved forward or changed at all in the last few years.”
Pay is one of the main factors adding weight to this opinion. As well as stories about fat-cat public sector executives earning more than the prime minister, more junior employees seem to have escaped belt-tightening, too.
The latest labour market statistics, published by the Office for National Statistics (ONS), show that average public sector pay with bonuses was £459 per week in November 2009 – up nearly 4% on a year earlier. The equivalent figure for the private sector was £447, a drop of 0.1%.
Mike Cooke, who leads on pay for the Public Sector People Managers’ Association (PPMA), says: “Obviously, in a recession, when the private sector is bearing down on costs and there is more competition for jobs, the harsh reality is that local councils look as if they are paying too much.”
A 1.25% pay rise for the lowest paid local council workers was agreed in September – Cooke says there is a tendency to pay this group more than in the private sector.
The IRS guide to public sector pay, published exclusively by XpertHR last week, shows that the government imposed pay restraint on the most senior public sector staff in 2009, while many other groups accepted lower offers than in previous years against the background of negative inflation and the severe economic downturn.
The report concludes that although staff in long-term deals have been given government reassurance that the awards will be honoured, other public sector groups will be subject to severe pay restraint in 2010 and beyond, regardless of who is in power after the election.
The ONS statistics also show a disparity in the availability of work. Between September 2008 and September 2009, the number of jobs in the public sector rose from 5.8 million to nearly 6.1 million, while the number in the private sector fell by 720,000.
Canavan concedes the public sector has yet to face the huge restructuring that the private sector has undergone. As a result, she says, there has been a large increase in candidates applying for jobs.
But she denies that, when spending cuts do begin to bite following the general election, it will be a huge shock to the system. “Since I joined here in 2003 with a new management team, we have been looking at delivering an organisation that is flexible, agile and able to adapt to changes both in the economic and political environment.”
During that period, her department’s headcount has dropped from 40 to 30. “What I have done is realign the service and looked at the new skills I needed to bring to deliver a people strategy for the library.”
Birmingham City Council, the largest local authority in the UK, also provides evidence that HR will not be found wanting when spending cuts bite. HR director Andy Albon says a business transformation programme, designed to achieve greater flexibility in remuneration and redeployment of staff, was being prepared before the recession. “The credit crunch gave a certain frisson and spur to what we were doing.”
He says the transformation programme will cost around £99m over 10 years, with planned savings of more than £180m. Savings in HR have been considerable, with the number of posts dropping by 110 to 330. This has been achieved partly by up-skilling staff to deal with strategic work, and using new technology to do much of the department’s transactional work.
“It’s not HR’s job to pass bits of paper around between line managers and payroll,” explains Albon. “It’s a repositioning of the function that recognises the centrality of HR to the efficiency and effectiveness of the council.”
One challenge for HR will be to convince the workforce of the merits of any change programme, according to the PPMA’s Cooke, who is also director of organisational development at Camden Borough Council. “It’s about the health of the organisation that gets left behind, how employees are engaged and motivated in the new world,” he says.
Another challenge will be to meet a need for more targeted recruitment. Rebecca Beardwell, director of the HR team at public sector recruitment specialist Morgan Law, says this will not be easy because HR “can’t be seen to be getting the wrong person in post” when new appointments are so important. But she warns that, in a labour market where there is an unwillingness to change jobs, it will be difficult to recruit the best people.
Linda Scott, HR director at British Transport Police, predicts that one impact of staff “hunkering down and taking fewer risks” is that they end up less satisfied with their jobs.
“From our point of view, there is less new blood and talent coming through. We have to take some action now to address this and make sure we are fighting fit in the life after this recession.”
Scott’s department has responded by carrying out an audit to see where skills are going to be needed in future, while looking at raising the recruitment bar to attract more able people. This partly involves running an experimental graduate recruitment programme in association with the National Policing Improvement Agency.
Sian Thomas, director of employers’ body NHS Employers, believes a more austere financial environment should benefit HR. She believes its role in the private sector has been enhanced by finding ways of doing jobs more effectively and at a lower cost, and expects the same to happen in the public sector. “We know that in the past when we have had to save money, HR people have come into their own.”
Westminster City Council HR director Graham White predicts fundamental change throughout the public sector, saying there is a growing realisation that “the next 10 years are going to be very different from the last 10 years”.
He anticipates HR moving away from delivery to commissioning of services as the public sector operates with much-reduced financial resources. “Commissioning is going to be at the core of future public sector survival.” He warns that unless HR embraces this and makes it succeed, it will lose relevance.
White also predicts that the public sector’s relationship with customers will change significantly to cope with budget cuts. “In future, it does not matter whether it’s a local authority, primary care trust or the police, the relationship with the customer should be a once-only relationship. That’s not how we operate at the moment. That can’t be efficient.”
White believes HR’s role in achieving this transformation will be crucial.
“If we get it wrong, the whole thing will go wrong. We are in a vice grip, needing to be realistic, creative and, at the same time, wanting to stay at the forefront of best practice,” he says.
Career prospects in the public sector
With HR functions in the public sector reducing their headcount ahead of any big spending cuts, career opportunities might seem limited. But the consensus among HR leaders is that the challenges ahead make the sector ideal for new entrants to the profession.
As Cooke from the PPMA says: “In a way, all of the public sector is going to have to reinvent itself because of the challenges of public finances. There are some classic people management challenges in supporting organisational change but also making sure that organisations are supremely effective.”
There is also a general conviction that the level of job satisfaction is unmatched. The British Library’s Canavan, who has spent much of her career in local government, describes the public sector as “an amazing place to work”. “No day is the same and I think the challenges are far more complex than you would have in the private sector.”
This is down to having to deliver more with reduced resources and working within a much more unionised environment. “With the trade unions, it’s about having a fruitful partnership that can deliver change,” she explains, adding that being funded by the taxpayer means the reasons for spending money have to be very carefully thought through.
For Albon, the reward of working for Birmingham City Council is the knowledge that HR directly affects the lives of more than a million people. In addition, he says, HR professionals gain some transferable skills that are much more honed than they would be in the private sector. “All organisations have a political side to them, but we happen to have one with a big ‘P’. Understanding and being able to negotiate your way round the political environment is vital for any senior management.”