Issue 7: Nov 2013

PEOPLE POWER: WHY EMPLOYERS SHOULD INVEST FOR SUCCESS

By Gareth Williams, Head of Policy, SCDI

“We are in a global race” is the Prime Minister’s overarching economic theme, one which first came to prominence in the wake of British successes in the 2012 Olympics. We must compete against the fittest and most talented if our economy is to win the prizes of growth, investment and jobs.

It is generally agreed that the UK cannot compete with emerging economies on costs and we can only succeed if the skills of our people are “faster, higher and stronger”. However, as every sporting side knows, you can have all the talent in the world, but if not everyone feels part of team and contributes to their fullest capabilities, you have little chance of victory. So it is a concern that some surveys report that only 20% of employees in the UK feel engaged at work. Imagine if that had been true for the gold-winning GB rowing or cycling teams – we would have had few medals to celebrate!

The risk is that competiveness is permanently impaired and the economy languishes in a low skills equilibrium, with stagnating or falling real wages for many and rising in-work poverty and inequality.

The UK’s poor performance is clear from international comparisons. The cross-sector “Engage for Success” movement has said that the UK has “an employee engagement deficit” with a ranking of 9th among the world’s 12 largest economies. It finds a clear correlation with the UK’s productivity deficit as engagement crucially links business strategy with employee performance and skills utilisation. The UK’s productivity on an output per worker basis was 20% lower than the rest of the G7 in 2011.

This is not a new problem, but there is evidence that it has got worse since the recession. The number of employers whose approach to people management is an integrated part of their business strategy fell from 29% in 2007 to 19% in 2011. The percentage of employees who say that they have more skills to offer has risen to 64%. Hourly productivity has fallen well below pre-recession levels.

The risk is that competiveness is permanently impaired and the economy languishes in a low skills equilibrium, with stagnating or falling real wages for many and rising in-work poverty and inequality.

While a focus on immediate challenges was inevitable, there is strong evidence that improving employee engagement should be a higher priority for businesses. Companies with engagement scores in the top quartile had twice the annual net profit of those in the bottom quartile. Marks and Spencer’s stores with improving engagement had, on average, delivered £62 million more sales every year than stores with declining engagement. Top performing companies have higher customer advocacy, higher productivity and greater creativity. When ScotRail’s Employee Engagement results increased from 25% to 75%, staff attendance increased by 7% and staff turnover reduced by 6%.

So what is excellent employee engagement in practice? A review for the UK Government identified four key enablers. Senior leaders have a big impact through their vision and communication, managers empower people, employees have a voice and are central to the business, and the values on the wall are reflected in day-to-day behaviours. The global evidence is that teamwork is critical – employees are most engaged when their co-workers try their hardest and do their best work.

As noted, many of our businesses are already reaping the benefits in better performance. More effective creation and utilisation of skills gives them a competitive edge and enables them to adopt new technologies and innovate more successfully. But there is a difference between an economy with knowledge businesses and a knowledge economy. The Scottish Government is ahead of the UK in acknowledging the importance of skills utilisation, but there is room for further improvement – for example, one in seven apprentices claim to have done neither on-the-job nor off-the-job training.

...there is a difference between an economy with knowledge businesses and a knowledge economy. The Scottish Government is ahead of the UK in acknowledging the importance of skills utilisation, but there is room for further improvement...

What can we do now? Securing high levels of employee engagement is an increasing workforce priority, but it is becoming more complex. With older workers retiring later and firms desperate to attract and retain bright, technologically savvy young workers who demand to be treated meritocratically, engaging and satisfying different generations with different expectations can be a challenge. Workplaces have been evolving to promote informality, collaboration and inclusivity, but this has to be balanced with structure, internal competition, decision-making and allowing people to concentrate on their jobs.

Technology creates opportunities for distance learning and is changing our idea of the workplace. More people are working flexibly from home, and the London School of Economics has found that they are more productive and happier. But it does not suit everyone. And the culture of presenteeism is hard to breakdown – managers still tend to rate and promote office-based employees, regardless of their work’s quality. There is no “one-size-fits-all” way of engaging effectively and fairly with all employees. Businesses need to learn from their peers and from a range of models - such as employee ownership businesses, often ranked in the best to work for. This is the purpose of the “People Power: Invest for Success” conference SCDI is organising with Scottish Gas.

Government has, since the 1980s, been wary of getting involved in the workplace, but given its critical importance to private and public sector productivity that might be about to change.

Government has, since the 1980s, been wary of getting involved in the workplace, but given its critical importance to private and public sector productivity that might be about to change. Professor Ewart Keep describes it as “opening the black box”. The Scottish Government, led by Permanent Secretary Sir Peter Housden, is bringing a refreshed focus to the issue. What could it do?

Professor Keep proposes a joined-up approach. It can help employers to help themselves - supporting workplaces that provide good quality training and identifying and offering help to those which do not. It can develop interventions which improve the transition from education and training to the labour market – the subject of a review by Sir Ian Wood – and encourage training in and around the workplace in partnership with trade unions. The public sector can take a lead and encourage good practice through its supply chains and investment. And it can work with universities, colleges and trainers to strengthen their organisational development services for employers.

Sporting excellence will again compete at the Ryder Cup and Commonwealth Games in Scotland next year. And we should remember that the winners will not just be those who are the most athletic or skilful, but those individuals and teams who demonstrate world-class commitment and performance in using their skills to the fullest extent. Let us be inspired to do the same in all our businesses.

 

The “People Power: Invest for Success” conference, organised by SCDI and Scottish Gas, will take place on 14 November at Murrayfield Stadium in Edinburgh and is free to attend.  It will explore new ways and thinking to invest in workforce and workplace development to help drive sustainable economic growth in Scotland.  For further information contact claire.miller@scdi.org.uk 

By Gareth Williams, Head of Policy, SCDI

Issue 7: Nov 2013

Issue 7: Nov 2013

HEALTH, WELL BEING AND AGEING: SCOTLAND 2020

Re-energising the move towards integrated care

Scotland's move to integrated care can learn from elsewhere by focussing on two key differentiators between successful partnerships and those paying lip service to integrated working: Shared outcomes and common language is one, the other is demonstrating mutual investments and mutual benefits.

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