Managing reward is difficult enough at the best of times in the public sector. How is it best done during challenging times?
HR faces a difficult balancing act in the public sector. The recession is putting increased pressure on services, so the need for a well-led, motivated workforce is at a premium. Yet using financial incentives to achieve this will be difficult when government borrowing is so high and public servants are widely seen as poor value for taxpayers’ money.
With big reductions in spending looming from 2011 onwards, Christopher Johnson, principal at HR consultancy and services provider Mercer, says sweeping change is necessary. “It’s all about improving the performance of our people but also restructuring the workforce.”
Johnson, who gave evidence to a Parliamentary select committee on executive pay in the public sector in May, argues that there needs to be a shift away from incremental pay increases every year and a reform of the reward system to drive “a more high-performance workforce”.
But Ann Cummins, director of reward and pay at consultancy Humanus, says there is scepticism about introducing performance-related pay when money is so tight. She argues that organisations need to tell staff how serious the financial constraints will be and use more imaginative methods to motivate and retain them.
She suggests ‘no cost’ options such as rewarding them through increased flexibility of working hours. “Don’t lose faith with the performance message simply because there won’t be money to deliver substantive rewards,” Cummins says.
One area the public sector is well-placed to exploit is the way employees can identify with its purpose and values. Peter Reilly, HR research and consultancy director at the Institute for Employment Studies, believes the recession could be a good time to emphasise this as part of a ‘total reward package’ incorporating other benefits apart from financial ones.
“In my experience, you tend to get a more transactional relationship at the bottom of an organisation but, having said that, people there can be quite proud of who they work for. At the top end, people respond to the whole organisational message,” he says.
Stephen Moir, former president of the Public Sector People Mangers’ Association, says total reward is not particularly well embedded in the public sector but it could help counter the demoralising effect of redundancies and pay cuts. “Keeping the workforce engaged, enthused and productive is going to be very important during a downturn.”
Moir explains how implementing total reward would involve being honest about organisational problems, and leaders becoming good role models in a more austere environment. “You don’t want to see the chief executive travelling around first-class.”
At Cambridgeshire County Council, where Moir is corporate director for people, policy and law, he says vacancy levels have dropped by 18% among children’s social workers after a total reward concept was introduced two years ago. Good administrative and IT support was particularly valued here because it meant staff could concentrate more on their core work.
But trying to incentivise a particular section of the workforce could end up demotivating the rest of the staff, according to Cummins. She says communication has to be thought through carefully to avoid giving the impression that only one sector of the workforce is valued.
Andy Philpott, marketing director of Capital Incentives and Motivation, advises against a ‘one-size-fits-all’ approach to incentives because each department will have different targets to achieve. “It may be worthwhile to have smaller, short-term programmes tailored to individual departments,” he suggests.
Unions will inevitably be suspicious that employers try to use low-cost incentives as an alternative to pay increases, but John Sylvester, executive director of motivation and benefits specialist P&MM, says they can tip the balance when people decide who they want to work for.
He believes the public sector is waking up to benefits such as childcare vouchers and green travel schemes as a way of motivating and retaining staff. “I would estimate its involvement in that sector has grown from 5% of our new clients to nearly 50% over the past two years.”
However, Johnson is sceptical that the public sector is prepared for the more far-reaching changes he feels are necessary. “I think the HR profession in the public sector is good at administering well-established processes but it’s much less good at dealing with change.”
Case study: Kent County Council
Kent County Council has won awards for its reward scheme, which is designed to be both inclusive and flexible.
Reward manager Colin Miller says the council wants to compete more effectively in the labour market. “Hopefully, the more quality candidates we can choose, the better quality services we will deliver to the people of Kent.”
With a workforce of 44,000, the council is wary of being too prescriptive about its offer, and rewards range from discounts on health club membership fees, healthcare provision and flexibility on working hours.
In the first year of a discount shopping scheme run through Asperity, 15,000 employees registered to take part. The council is now about to launch an online ‘reward viewer’, where individual staff can see clearly how each scheme could benefit them.
“If they engage with those rewards that work particularly for them, they are likely to feel more engaged with their employer and go that extra mile in terms of service delivery,” explains Miller. “If money is tight, it makes it all the more important to make sure people are getting as much benefit as possible from whatever’s in the employment package.”
Public sector pay
Public sector pay deals appear to be holding up better than the private sector since the recession began. Last year, three-year pay deals were agreed for the police and NHS staff that averaged 2.6% a year. Although a deal agreed this year gave senior civil servants, top NHS managers and judges a 1.5% increase, a survey of 75 private sector organisations published in May by Mercer found that nearly half had instituted a pay freeze.
The Treasury says government pay policy is intended to reflect the recruitment and retention position of the workforce, be affordable, provide value for money for taxpayers and be consistent with achieving the inflation target of 2%.