The public sector faces terrifying challenges

But innovative HR departments are ready to meet them

Being an HR leader in the public sector over the past few years hasn’t, it’s fair to say, been a bed of roses. If the seemingly constant waves of austerity – and the plunging morale and rounds of redundancy that followed – weren’t enough, pay has been frozen and a gradually recovering private sector is back on the hunt for high-performing staff.

Of course, not everyone in public sector HR is mired in a slough of existential despond. Some have emerged from fiscal tightening relatively unscathed. Others, such as Barry Pirie, the president of the Public Sector People Managers’ Association (PPMA), are accentuating the positive. Pirie says austerity has in many ways been useful, by allowing HR professionals in the sector to tackle difficult questions in a new way. “It has been a spur to innovation and creativity,” he says. “We have been able to have conversations with politicians, unions and staff, saying: ‘Look guys, things have to change radically.’ We have talked about how to change to deliver better services, and more services, at significantly less cost. That is quite an exciting proposition for people who want to be excited.”

But before the excitement comes the challenge. The UK government’s cuts in public spending since 2010 have been the biggest in the G7 group of major developed economies, relative to GDP, says Mark Beatson, the CIPD’s chief economist. Alongside this was a pay freeze, followed by the tiny thaw of a one per cent year-on-year cap. There have also been a lot of job losses in the last five years – even when exceptional events like RBS and Lloyds TSB going into public ownership and being heavily downsized are removed from the figures.

“We have seen a reduction of around 400,000 jobs in the public sector in the last five years and, looking ahead, the Office for Budget Responsibility is expecting to see general government employment reduce by another 400,000 between 2014-15 and 2019-20, by which time the overall budget is expected to have balanced,” says Beatson.

CIPD research on the public sector workforce, to be published this autumn, shows how these constraints have affected the mood: 38 per cent of HR professionals questioned said staff morale was lower than five years ago, with another quarter describing it as much lower. However, anecdotal reports suggest that, when cuts began to bite in 2011, headcount reductions happened faster and somewhat more easily than predicted, meaning many organisations got through the worst of the changes more quickly than expected.

“The recession hit hard,” agrees Dr Vijay Pereira, a senior lecturer in organisation studies and human resource management at Portsmouth Business School. “The sector had no choice but to trim expenses, staff, training, promotions and [pay] increments. All of these tools that were being used for recruitment, retention and motivation were stopped.”

The question, says Beatson, is what happens next. Over the past five years, many organisations have battened down the hatches and concentrated on cutting costs rather than investing in the future. This could begin to have repercussions as ‘more of the same’ cost-cutting becomes ineffective, leaving genuine transformation as the next option – moving more services online, for example, or completely rethinking how to approach delivery.

“Some of the more transformational changes in the delivery of public services are likely to require significant investments in terms of technology and capital, and may also require very different skillsets,” says Beatson. “One issue that most public sector organisations will face is that they will have to do this with the workforce they have. Perhaps in the past when you needed to change, you could let employees go and recruit new ones – that is how the private sector might approach it – but in the public sector the redundancy costs involved make that very difficult and very expensive.  So the challenge is how to get existing employees to do different jobs.”

It is this kind of transformational innovation that gets Pirie excited, and which he argues is happening at numerous councils. “We are seeing things like radical leadership changes. Many organisations have looked at their senior management structure and asked: ‘Do we really need it?’” he says.

“We now have models across local government where there is no chief executive, or there is a chief executive or even a senior management team shared across three or four councils. At my council, Wiltshire, we don’t have a chief executive – we have three corporate directors who work together, with the political cabinet and the leader of the council setting the strategic direction.”

Such approaches are challenging, and do not work for everyone. “Some boroughs have tried it and have ended up going back to not having it. But not all innovative ideas work, or maybe not in a particular organisation or at a particular time,” says Pirie. “Innovation is about creative thinking. It is not about saying everything will be successful. My hat goes off to anyone who tries, otherwise we would stagnate and not succeed. Some radical things that people might think wouldn’t work can be very positive.”

Beatson is more cautious about how much innovation is really possible in the sector, particularly across central government departments and agencies, which operate under tight political and official controls as well as budgetary restrictions: “The danger is that we will only see change as a result of things going wrong… and a lot of the innovations that we are seeing are either cosmetic or are a drop in the ocean.”

But HR can still have an impact even in the most constrained circumstances, he says. “A lot of it is about explaining why things are happening. There is often a political message and a leadership message, and they are not always saying the same things. I am sure employees would love [HR leaders] to speak truth unto power, but HR needs to be credible with politicians. Finding the balance between realism and a positive forward direction is where HR can help.”

Bright idea #1

Use social media to recruit smarter: NHS Leadership Academy

More than 200 graduates each year used to pass through the doors of the NHS Leadership Academy. But these days the number is half that, says Rob Farace (above), its senior programme lead for resourcing. It also has less to spend on recruitment, and can only offer a starting salary of just under £23,000 per year – much less than other employers that are competing for top young talent. “Budget cuts mean we do not necessarily compete with other big grad schemes,” he says. “We can’t do giveaways on campus, we have stopped doing things like brochures and we no longer go all around the country doing assessment days.”

Instead, the scheme now runs fewer, bigger events, allowing it to see more people on a single day. Before that stage, however, it is social media that leads the way. “We have tried to be much more innovative with things like Facebook and Twitter. This cuts advertising costs, but it also allows us to interact more with candidates in a way that they want and appreciate,” says Farace. “In a traditional model, you would have a call centre or similar answering candidate queries by phone or email. Given that we get around 15,000 applications, that can be a lot of queries.” Running Q&A sessions on Facebook means each question need only be asked and answered once, as all applicants can see it. Having a conversation, rather than treating social media as a marketing platform, has increased levels of engagement significantly: even rejected candidates find the process better, says Farace.

“This approach has saved us money, but we did not let that shape everything we did. We were determined not to damage the brand or weaken the experience. This is getting us better candidates and improving their experience.”

Bright idea #2

Train staff as coaches to change your culture: Cafcass

Cafcass’s work affects some of the most vulnerable people in the UK – it represents children in family court cases – but that hasn’t protected it from swingeing cuts. In the five years to 2015, its budget was reduced by £20 million, its workforce was cut by 11 per cent and there was a significant increase in demand for its services. It was also dealing with the aftermath of the Public Accounts Committee declaring it “not fit for purpose” in 2010.

Against that background, senior HR business partner Julie Bury (left) introduced a talent management strategy designed to develop and retain high performers, while making Cafcass an employer of choice. “In the past, there had been leadership management development where we paid consultants to come in and do programmes,” she says. “People enjoyed them but we didn’t see a huge impact.”

Operating under financial constraints meant making sure the organisation got maximum value from its investment – which is where coaching came in. High performers were given the opportunity to train as ‘strengths coaches’ with leadership development company Strengths Partnership; this developed their skills and raised their profile. It also benefited employees more widely, as tapping into the strengths of Cafcass’s internal experts improved their ability to support colleagues.

“When we trained 30 people in the first phase, we found they really enjoyed it,” says Bury. “But equally, when they went out and had strengths conversations with colleagues, it encouraged others to do it too – it has a cascade effect. We’ve found it a really cost-effective way to start to change the culture in Cafcass.”

Bright idea #3

Sell your HR competences to raise extra cash: Dudley City Council

Dudley City Council has seen its funding from central government cut sharply in recent years; by 2018-19, it will be half of what it was in 2010, says Teresa Reilly (above), assistant director of HR and organisational design. She and her HR colleagues have responded by protecting their department’s professional advisory service, recognising it has a critical part to play in managing the new financial reality.

That also means selling its strengths to partners (in this case, schools), reasoning that this would in turn secure jobs in the HR team, ensuring it retained the size and base of expertise needed to perform. “Schools can buy services such as HR and payroll from wherever they choose,” says Reilly. “About 90 per cent buy them from us. We were keen to keep that business, but it was potentially under threat because schools, like everyone, are looking to get more for their money.”

Rather than get into a price war, the council decided to take advantage of its buying power to offer schools more. “We are part of a scheme run by West Midlands Employers, so we gave schools the chance to join that too. They can advertise jobs on a system and build a shared talent pool so if one school interviews multiple good candidates, others know about it,” says Reilly. The system also makes it more efficient to do everything from background checks to preparing employment contracts, saving the schools money and making sure they want to keep buying from the council.