cbi/harvey nash employment trends survey, autumn 2011 · 8 staying the course – cbi/harvey nash...

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Staying the courseCBI/Harvey Nash employment

trends survey, autumn 2011

www.cbi.org.uk

For a copy of this report in large text format, please contact:Matthew Percival Policy adviserEmployment affairs directorateT: +44 (0)20 7395 8161E: [email protected]

November 2011

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Robert Grimsey Director Harvey Nash 13 Bruton Street London W1J 6QA

T: +44 (0)20 7333 0033 F: +44(0)20 7333 0032 E: [email protected] www.harveynash.com

About the sponsor:

Harvey Nash, a global professional recruitment consultancy and IT outsourcing service provider, is committed to delivering the very best talent and solutions to a broad base of international clients. The group is a trusted advisor to some of the world’s leading businesses, governments and institutions. We operate from 39 offices covering the US, Europe and Asia. Our talented professionals pursue the highest levels of integrity and quality in providing a unique portfolio of services: executive search, interim management, IT and finance recruitment and outsourcing.

For the CBI:

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3Staying the course – CBI/Harvey Nash employment trends survey 2011

Contents

Foreword by Katja Hall, CBI 4

Foreword by Albert Ellis, Harvey Nash 5

Overview 6

The employment landscape 8

1 The autumn 2011 employment trends survey 12

2 Private sector job prospects hold up – but temps take a hit 14

3 Restraining pay remains essential 20

4 Global businesses need global mobility 22

5 The next generation of business leaders 26

6 Balancing the boardroom – the picture below the FTSE 350 30

References 34

4 Staying the course – CBI/Harvey Nash employment trends survey 2011

“ The results of this survey suggest the new rules on agency workers are already acting as a brake on jobs”

UK businesses are working tirelessly, creating wealth and jobs in extremely tough times. In this survey – a snapshot of views taken in September – business leaders told us that there was a modest improvement in the overall private sector employment outlook.

Since then, we have learned more about just how tough business conditions have been – and the risks on the downside are still increasing. Growth in the first half of this year was weaker than originally reported, and the risks to the economic outlook have risen, particularly as a result of turmoil in the eurozone.

Against this backdrop the government should be doing everything in its power to boost growth and help firms to create jobs. And yet regulatory changes at the beginning of October which affect agency and older workers have been simply counter-productive. The results of this survey suggest that new rules on agency workers are already acting as a brake on their jobs, as the recruitment of temporary workers is reducing. And more than a fifth of employers cited uncertainty about current leaders’ retirement plans as an obstacle to the recruitment of future business

leaders. An effective new framework for retirement planning is urgently needed. The continued success of British businesses will depend on their ability to make the most of the talent available to them. Key to this will be addressing gender diversity issues, so that more women make it to the top.It is encouraging then to see that firms are taking gender diversity issues seriously and that as a result, the number of women in the boardroom is increasing. But what is equally clear from our results is that there remains a very great deal still to do.

Katja Hall CBI chief policy director

Foreword


“ Being able to put the right person into the right organisation is absolutely vital to companies seeking to capitalise on growth opportunities”

With so much uncertainty feeding in from the macroeconomic environment, it’s no surprise to find business leaders cautious about their approach to recruitment. But even within this climate, the survey finds cause for a degree of optimism. Respondents are reporting that pay and recruitment freezes are down from the levels reported in June and more employers expect to increase their recruitment of permanent employees than expect to cut back. Of course, a big factor in how recruitment will fare in the future is the economy. More firms expect the size of their workforce to grow over the coming year than be smaller. Recruitment plans are most robust in the ‘knowledge economy’ – highly skilled sectors such as professional services, science, high-tech and IT.

Being able to put the right person into the right organisation is absolutely vital to companies seeking to capitalise on growth opportunities. This is especially important for business leaders. The quality of leadership in an organisation is the essential ingredient for the success of that business, as the late Steve Jobs so brilliantly demonstrated. It is reassuring that ‘skills in inspiring and empowering staff’ ranked second only to a ‘drive for results’ among the characteristics

that define great future leaders. This reinforces the finding in previous editions of this survey that employers place engagement with their people at the top of their priorities. There can be no doubt that employers know their employees are indeed their greatest asset.

Recruiting future business leaders from a highly-mobile global pool of talent is no easy task, particularly for smaller businesses. This challenge highlights the importance of the UK developing its domestic skills base, particularly in management and strategic skills, thereby creating the Apples of tomorrow. It’s encouraging that employers appear ready to confront this challenge, with the vast majority reporting an increased investment in training and developing their own internal talent.

Albert Ellis chief executive officer, Harvey Nash Group plc

Foreword


Overview

The autumn 2011 employment trends survey • This survey was conducted in August and September 2011

• There were 462 respondents

• Respondents came from businesses of all sizes and sectors across the UK

• The survey was completed by senior executives. In small and medium-sized companies this tended to be the managing director, chief executive or chairman. In larger firms, it was the human resources director or equivalent.

Private sector job prospects hold up – but temps take a hit • Nearly half of employers (47%) expect the size of their workforce to be larger in 12 months’ time than it is today, while fewer than

one in five (19%) expect it to be smaller – a positive balance of +28%

• Expectations that they will be adding to their workforces are particularly widespread among SMEs, with a positive balance of +35% anticipating adding jobs compared with a positive balance of +23% among larger firms

• Job growth is expected among firms operating in every part of the UK, with a top positive balance of +28% of businesses operating in Yorkshire & Humberside expecting to have a larger workforce in a year’s time

• While two fifths (41%) of employers plan no change to their level of recruitment of permanent employees in the next six months, one in three (33%) expect to increase recruitment and fewer than one in six (16%) expect a reduction

• The outlook for temporary recruitment is much less positive as the Agency Worker Regulations kick in, with just one in six firms (16%) planning to increase temporary recruitment, while one in five (20%) expect a reduction, producing a negative balance of -4%

• Job prospects for graduates are slowly improving, with a positive balance of +11% of employers planning for higher graduate recruitment in the next six months.

Restraining pay remains essential• The extent of pay freezes has dropped sharply since the darkest days of the recession, but they have certainly not disappeared:

across all private sector businesses, one in eight (12%) plan to freeze pay at their next review, rising to 33% among those firms employing fewer than 50 people

• Where pay rises are planned, moderation is the keynote: almost half (49%) of employers are planning a general increase below the rate of inflation or targeted increases for some members of staff only.


Global businesses need global mobility• More than half (54%) of employers have used, are using, or intend to use non-EU workers to meet their skills needs

• Half (50%) of respondent organisations with experience of the operation of the permanent cap on work permits have experienced problems

• The most common difficulties encountered are the permanent cap’s increased complexity (62%) and an ongoing lack of clarity over rules (50%)

• A third (33%) of employers believe that the work permit cap is having a negative impact on perceptions of the UK as a place to invest.

Balancing the boardroom• One in five boardroom directors (21%) is female in firms employing at least 1,000 employees

• In larger firms, almost a quarter of non-executive directors are female (24%) and women account for just under one in five executive directors (18%)

• Nearly two thirds (63%) of boards of companies with at least 1,000 employees have two or more female directors

• Initiatives to boost the numbers of women among the next generation of business leaders – including board directors – are widespread but need to be more widely taken up: they include half (49%) of firms operating or actively considering mentoring schemes and over a third (37%) using or considering networking to improve gender diversity at senior levels.

The next generation of business leaders• The most important characteristics employers look for when recruiting future leaders are a drive for results (59%), skills in inspiring

and empowering staff (58%) and intellect and creativity (55%)

• Four in five firms (79%) experience at least some difficulty recruiting potential future business leaders

• The most common challenges in recruiting future top managers relate to the scale of demand for their skills. Half (50%) of respondent organisations cite the intensity of competition as an obstacle, while two in five firms (41%) point to a shortage of suitably qualified candidates within the UK or EU

• Almost three in four firms (72%) report at least some degree of difficulty in developing the next generation of business leaders, but these are typically less severe than the problems of recruitment

• Despite the challenges, almost every organisation is endeavouring to ‘grow its own’ future leaders: almost nine in ten SMEs (87%) and almost all firms (98%) with 250 or more employees operate structured policies to develop some of their employees into the next generation of business leaders. These ‘pipeline’ policies are essential to addressing boardroom diversity issues, too.


The autumn 2011 CBI/Harvey Nash employment trends survey was conducted against the backdrop of slow and uneven economic recovery. The latest economic data and business surveys suggest 2012 could be tougher than expected only a few months ago. A relentless focus on growth, jobs and skills is needed.

The employment landscape

The recovery is slow and downside risks are growingSince the publication of the CBI/Harvey Nash employment trends survey1 in June 2011, the gradual but uneven recovery has continued. Since economic growth resumed in Q3 2009, GDP has increased between 0.1% and 1.1% a quarter, with the exception of a snow-induced contraction of -0.5% in Q4 2010. But the slow pace of the recovery means that GDP is still 4% lower than at its peak in 2007/2008.2

Recent months have seen mixed messages on the UK’s economic prospects. Growth forecasts for developed economies across Europe and in North America have been reduced for this year and for 2012, meaning British businesses face a tougher trading environment.3 More positively for the longer term, the UK has moved back into the top ten most competitive places to do business, according to the World Economic Forum’s global competitiveness index.4

With household budgets squeezed by higher levels of inflation and the need to pay down debt, domestic consumer spending is subdued. And while exports and business investment have picked up, the uncertain outlook in the eurozone represents a possible threat to growth. This has led the IMF to warn there is a 17% chance of another recession in the UK.5 As a result of this deterioration in the economic outlook, the CBI’s central economic forecast has downgraded growth prospects for 2012.6


The labour market has performed relatively well...The private sector has expanded to create additional jobs every year since 1999, except for 2009 when jobs were lost during the depths of recession (Exhibit 1). But between 1999 and the beginning of the recession, public sector employment grew faster still. This led to pockets of public sector job dependency in parts of the UK.7

Alongside the rapid expansion in employment in the public sector came deeply disappointing productivity performance. While private sector services improved productivity year by year, public services experienced an average productivity decline of -0.3% a year during the decade to 2007. If public service productivity had increased by just 1% a year – roughly in line with the wider economy – over this period, spending on those services could have been £31bn a year lower by 2007-08 without a loss in quality.8

In the past 12 months, measures to tackle the budget deficit have contributed to 240,000 fewer people being employed in the public sector. As a result, excluding employees of the rescued banks, the public sector workforce is slightly smaller than it was in 2003. The reduction in employee numbers should go some way towards tackling the productivity problem.

...but slow economic growth will put more private sector jobs at riskDuring the recession, many private sector employers worked collaboratively with their workforces to safeguard jobs as far as possible.9 A variety of creative solutions – including voluntary career breaks and reductions in working hours – were used to limit redundancies. These (largely temporary) arrangements led to hours worked falling more steeply than employment.

One result was to increase the number of employees working part-time (Exhibit 2). In the short term, doing so enabled a greater proportion of the economically active population to remain in employment, ensuring their skills were not lost and improving their long-term employment prospects.

Exhibit 1 Change in employment by sector (1999=100)

100

105

110

115

120

11090705030199

Public sector employment(excl financial institutions)

Private sector employment

Public sector employment

Private sector employment(incl financial institutions)

Source: ONS

Exhibit 2 Change in the make-up of theworkforce (Jan 2008=100)

08 09 10 11Part-time employment Full-time employment Temporary employment

92

94

96

98

100

102

104

106

108

110

Source: ONS


As a consequence of these measures, output per worker decreased, pushing up unit labour costs. The assumption was that, as the economy resumed growth, productivity would pick up again and the increase in unit labour costs would be reversed. But the recovery has not yet gained sufficient traction for this to happen.

Output per worker in Q1 2011 was still below the levels of 2006, while wage costs per unit of output across the economy were 13.3% higher10 (Exhibit 3). If the pace and solidity of economic growth fail to pick up in the medium-term, businesses will need to seek to restore competitiveness and boost productivity by reducing the size of their workforces.

Good economic performance in the last decade hid significant problemsThe UK’s unemployment problems are not new, nor are they evenly spread across the country. Worryingly, there is correlation between areas of strong employment growth over 2004-07 and a rapid fall in employment over the 2008-09 recession. Pockets of stubbornly high unemployment were only temporarily covered up – rather than their problems being solved – during the last decade’s strong economic performance.11

One of the defining challenges facing the post-recession labour market will be youth unemployment. Pre-recession, one in every five 16-17 year-olds were not in employment, education or training, demonstrating that this is not a new problem. But the recession exacerbated the scale of the challenge as employers, taking steps to preserve existing jobs, cut back on offering new entry-level jobs. The unemployment rate for those aged 16-24 now stands at over 21% (Exhibit 4).

Meeting these challenges will require a relentless focus on growth, jobs and skills, similar to the focus that has been applied to the essential task of deficit reduction. The CBI has recently launched a report12 making the case for action and setting out practical steps business, government and the welfare and education systems can take to tackle unemployment (Exhibit 5).

Exhibit 3 Change in productivity and unit wage costs (2006=100)

95

100

105

110

115

Output per worker Market sector productivityUnit wage costs

07 08 09 10 11

Source: ONS


21%of young people are unemployed

Exhibit 5 Action for jobs: how to get the UK workingIn October 2011 the CBI launched Action for jobs: how to get the UK working, the second report of its Getting the UK working campaign. The report makes the case for action for jobs, through practical steps business, government and the welfare and education systems can take to tackle unemployment.

The most important way to get the UK working is to secure private sector growth, but that alone will not solve the whole problem. The labour market has significant structural problems that must be addressed.

We need to see a revolution in the way schools and colleges prepare people for work, a step-change in our approach to welfare, and real help for companies to ensure that once people are in work, they stay there. But we cannot expect government to do it alone: business, schools, colleges and welfare providers each have roles to play. The report advocates action by the key players to:

• Revolutionise school-business engagement to get people ready for the world of work, including a national roll-out of some of the excellent smaller-scale projects that are already taking place, supported by a new network of some 450 ‘business champions’

• Make the first year in the labour market count by improving the position of young people. Many young people leaving school with low skills face a daunting labour market position. The key thing is to get them into their first job. We should remove barriers to this by lowering the cost of hiring young people in the first year, and making apprenticeships open to more people from work-poor communities

• Make welfare a highway to employment, by making work pay, expecting job search and rewarding it. Too many businesses simply do not get applications from British people from communities where unemployment is rife. We recommend changing benefit rules to make work pay so that claimants who take a risk on a job do not lose out for weeks if it goes wrong, as well as improving the advice that Job Centre Plus gives claimants through a new ‘readiness for work’ assessment.

Exhibit 4 Unemployment rates by age(% of workforce)

0

3

6

9

12

15

18

21

24-64 years16-24 years

05 06 07 08 09 10 11Source: ONS


The CBI employment trends survey was first published in 1998. Since then it has monitored the main employment trends and changing practices through periods when the UK economy was performing strongly and, more recently, during the severe economic downturn. Throughout this time, the flexibility of the UK labour market has remained vital to the international competitiveness of British business and to prospects for sustained economic growth.

Since 2009, the employment trends survey has been published twice a year, to monitor more closely the impact of recession and the steps businesses were taking to respond to the challenging conditions. The bi-annual reports since then have shown the lengths firms have been going to in order to safeguard jobs where possible and retain talent during the recession13, and how businesses have been preparing for the economic recovery.14 Earlier this year, Navigating choppy waters15 revealed an improving outlook for the jobs market, with recruitment increasing and pay freezes in the private sector thawing. Now, two years after the UK emerged from the deepest recession since the second world war, this report looks at the extent to which trends in the labour market demonstrate a continuing, albeit slow, private sector-led recovery.

1 The autumn 2011 employment trends survey

This survey was conducted in August and September 2011. There were 462 respondents spanning a wide range of sectors and of varying size. The survey was completed by a senior executive in each organisation. In small and medium-sized businesses, this tended to be the managing director, chief executive or the chairman. In larger firms it was usually the human resources director or equivalent.

Sectoral analysisThere was a wide spread of responses across all sectors (Exhibit 6). As with previous surveys, manufacturing firms formed the largest single category, with a quarter of respondents (25%) coming from this sector. Also in line with previous surveys, the second largest grouping was professional services firms (15%), while ‘science, hi-tech and IT’ companies now make up nearly one in ten (9%) of the sample. Public sector participation, however, was down by comparison with the spring 2011 survey, accounting for only 5% of respondents.

Manufacturing 25

Professional services 15

Public sector 5

Retail & hospitality 5

Construction 7

Science, hi-tech & IT 9

Other services 6

Banking, finance & insurance

6

Transport & distribution

3

Other 16

Exhibit 6 Respondents by economic sector (%)

Energy & water3


Respondents by company sizeBusinesses of all sizes participated in this survey, with a larger proportion of participants employing under 50 people than in previous employment trends surveys. This group formed 21% of the sample this time, compared to 14% of the sample in the last survey. One in ten respondents (11%) employed more than 5,000 people (Exhibit 7).

Despite the increased participation by the smallest firms, they remain under-represented as the majority of UK businesses employ fewer than 50 people. But larger firms employ almost half (49%) of the workforce,16 so the survey broadly reflects overall employment views and practices. In all, small and medium-sized businesses (those with fewer than 250 employees) accounted for 43% of respondents.

Respondents by regionThe majority of respondents had employees based in several or most regions of the UK (Exhibit 8). Respondents most commonly had employees in London, with two fifths (44%) having at least some employees based there. After London and the South East (39%), the locations of respondents’ workforces ranged from a third (35%) with employees in the West Midlands to a fifth (18% in Northern Ireland.

1-49 21

50-249 22

250-999 24

1,000-4,99922

5,000+11

Exhibit 7 Respondents by company size (%)

Exhibit 8 Respondents by region (%)

East Midlands

East of England

London

North East

Northern Ireland

North West

Scotland

South East

South West

Yorkshire and Humberside

Wales

West Midlands

0 10 20 30 40 50

30

30

27

44

18

34

31

31

39

29

24

35


The recent upturn in unemployment has been driven by job losses in the public sector – private sector job creation is more robust than many realise. The private sector has created additional jobs in every year since 1999, with the exception of 2009. Despite ongoing economic uncertainty, employers in the UK expect to expand their workforces over the coming year. Optimism about job prospects is particularly strong in the ‘knowledge economy’ – sectors such as professional services and science, hi-tech and IT – provided further economic shocks do not radically change the picture.

Key findings• Nearly half of employers (47%) expect the size of their workforce

to be larger in 12 months’ time than it is today, while fewer than one in five (19%) expect it to be smaller – a positive balance of +28%

• Expectations that they will be adding to their workforces are particularly widespread among SMEs, with a positive balance of +35% anticipating adding jobs compared with a positive balance of +23% among larger firms

• Job growth is expected among firms operating in every part of the UK, with a top positive balance of +28% of businesses operating in Yorkshire & Humberside expecting to have a larger workforce in a year’s time

2 Private sector job prospects hold up – but temps take a hit

• While two fifths (41%) of employers plan no change to their level of recruitment of permanent employees in the next six months, one in three (33%) expect to increase recruitment and fewer than one in six (16%) expect a reduction

• The outlook for temporary recruitment is much less positive as the Agency Worker Regulations kick in, with just one in six firms (16%) planning to increase temporary recruitment, while one in five (20%) expect a reduction, producing a negative balance of -4%

• Job prospects for graduates are slowly improving, with a positive balance of +11% of employers planning for higher graduate recruitment in the next six months.

The results of our survey suggest the private sector in all parts of the country should be generating new jobs to help offset continued reductions in public sector employment.

Employers expect to create more jobs...Nearly half (47%) of all respondent organisations expect that their workforce will grow over the next 12 months (Exhibit 9). While a third of employers (33%) expect the size of their workforce to remain the same, only one in five (19%) respondents anticipates that their workforce will be smaller in 12 months’ time. Overall, this produces a positive balance of +28% of employers expecting to increase the size of their workforce.

“The outlook for temporary recruitment has turned negative as the Agency Worker Regulations come into effect”


Employers are inevitably cautious in their recruitment plans because of continued economic uncertainty. But even with the slow and fragile recovery the economy has experienced so far, employment in business has been rising: in the 12 months to June 2011, employment in the private sector increased by 264,000.17 Over the same period the public sector contracted by 240,000 jobs, meaning that the private sector offset this reduction. As the necessary scaling back of the public sector continues, our results signal that the private sector is again likely to create new jobs, but this survey does not predict the scale of this job creation. Nor is it clear what level of public sector job losses are to be expected next year. It is therefore difficult to predict whether the private sector will be able to entirely take up the slack.

... with the knowledge economy leading the wayBehind the overall figures are some marked sectoral variations. Jobs growth is particularly widely expected among employers in sectors such as professional services and science, hi-tech and IT. More than half of respondent organisations in professional services (58%) and science, hi-tech and IT (56%) expect their workforces to grow in the next 12 months (Exhibits 10 and 11). Highly skilled, highly innovative sectors offer great potential for future employment growth, and their global nature means their growth in the UK can underpin our wider global economic position.

Larger 47

The same 33

Smaller 19

Don’t know 1

Exhibit 9 Expected size of workforce in 12 months’ time (%)

Larger 58

The same 35

Smaller 6

Don’t know 1

Exhibit 10 Expected workforce changes inprofessional services (%)

Larger 56

The same 22

Smaller 22

Don’t know 0

Exhibit 11 Expected workforce changes in science, hi-tech and IT (%)


Exhibit 13 Expected changes in workforce size in next 12 months, by region (%) Larger The Smaller Don’t Balance same know

Yorks & Humber 50 28 22 0 +28

South West 51 24 24 1 +27

East Midlands 46 32 20 2 +26

London 50 25 24 1 +26

North East 49 27 23 1 +26

Scotland 46 30 22 2 +24

East of England 48 27 25 0 +23

North West 44 32 22 2 +22

South East 45 31 23 1 +22

West Midlands 45 31 23 1 +22

Northern Ireland 44 31 24 1 +20

Wales 44 30 25 1 +19

Exhibit 12 Expected size of workforce in 12 months’ time, by company size (%) Larger The Smaller Don’t Balance same know

1-249 employees 47 40 12 1 +35

250+ employees 47 28 24 1 +23

The only sector where more employers anticipate shedding staff than adding to their workforces over the next 12 months is the public sector. The results here produce a negative balance of -29%.

SMEs are looking to expand fastest…The balance of expectations between growing and shrinking workforces is more positive among small and medium-sized businesses than among larger firms. While equal proportions (47%) of SMEs and larger firms expect that the size of their workforce will be larger in 12 months’ time than it is today, a much lower proportion of SMEs than of larger organisations anticipate that their workforce will be smaller in a year’s time (Exhibit 12).

We know that that job creation is driven most by medium-sized businesses, which grow quickly as their product or service offering takes off. The CBI has called for more focus from government on this group, as they are the engines of growth in our economy.18

In all, just 12% of SMEs expect to cut back on the number of their employees in the year ahead, against a quarter (24%) of larger employers. This means that the positive balance between growing and contracting workforces is notably larger (+35%) in SMEs than it is in larger organisations (+23%).

…and private sector jobs growth is expected in all parts of the UKRebalancing the UK economy involves not only increasing the contribution of sectors such as high-value manufacturing, but also a geographical rebalancing to end the dependency of certain regions on public sector employment. It will be important in the coming years that growth – and the increase in job opportunities this brings – benefits all regions of the UK.

Our survey results provide some encouraging pointers to future prospects. More employers in all regions expect their workforces to grow in the coming year than expect to reduce numbers (Exhibit 13). Employers operating in the South West, Yorkshire & Humberside and London are most confident, with half (51%, 50% and 50% respectively) expecting that their workforces will grow. The overall positive balance between anticipated expansion and shrinking of workforces is greatest among employers operating in Yorkshire & Humberside (+28%) and lowest among those with workforces in Wales (+19%). This broad-based growth suggests that businesses across the country – rather than in one or two major sectors – are looking at hiring.

“It will be important in the coming years that growth – and the increase in job opportunities it brings – benefits all regions of the UK”


Fewer firms freezing recruitmentAnother measure of the improvement in job prospects is provided by the survey’s findings on the extent of recruitment freezes. The proportion of employers operating a recruitment freeze has fallen slightly since spring 2011, moving back to the level recorded a year ago. In all, fewer than one in fourteen respondents (7%) are planning to freeze recruitment in the coming six months, down from one in eleven (9%) in the spring survey.19 This proportion remains far below the levels reached in the depths of the recession, when nearly two thirds of businesses (61%) were operating recruitment freezes (Exhibit 14).

More permanent job opportunities are opening up...Despite continued uncertainty about the strength of the economic recovery, more firms are expecting to increase their levels of recruitment in the next six months than are expecting to cut them.

A third (33%) of employers expect that their recruitment of employees on a permanent basis will pick up pace in parts of, or all of, their organisation in the next six months (Exhibit 15). In contrast, fewer than one in six respondents (16%) expect their recruitment to be running at lower levels across the whole organisation or in parts of it. These findings point to further modest improvement since the last survey, when 29% expected higher recruitment in at least parts of their organisation, while 18% expected lower levels of recruitment over the coming six months. The results indicate a continued slow increase in the proportion of firms recruiting more new employees on a permanent basis.

…but the availability of temporary openings is decliningIn October 2011, the Agency Worker Regulations (AWR) 2010 came into operation. The survey results therefore measure how levels of recruitment of temporary staff were being affected on the eve of the AWR taking effect. The CBI opposed the EU directive that lies behind the regulations, as it damages the flexibility to create jobs in the UK.

As with the results in the spring, the largest group of respondents expect no change in their level of recruitment of temporary staff over the coming six months (Exhibit 16). However, the proportion of respondents planning to increase recruitment of temporary workers fell from more than one in five (22%) to fewer than one in six (16%). At the same time, the proportion of firms planning to reduce their recruitment of temporary staff has risen from one in seven (15%) to one in five (20%).

Exhibit 14 Organisations planning recruit-ment freeze over the next 6 months (%)

0 10 20 30 40 50 60 70

Spring 2009

Autumn 2009

Spring 2010

Autumn 2010

Spring 2011

Autumn 20117

9

7

5

37

61

Exhibit 15 Employer plans for permanent recruitment in the next 6 months, compared to previous 6 months (%)

Spring 2011 Autumn 2011

0 5 10 15 20 25 30Don't know

Recruitment freeze

Lower levels in part of the organisation

Lower levels across the organisation

No change

Higher in some parts but lower in others

Higher recruitment in parts of the organisation

Higher recruitment across the organisation13

10

16

1719

2623

128

8

97

12

6

23


Whereas the balance of increased versus reduced recruitment of temporary staff was +7% in spring, it has now turned negative, at -4%. There is also a clear trend that the larger the employer, the greater the likelihood of cutting back recruitment of temporary staff. In firms employing fewer than 50 employees, the temporary recruitment balance is +4%. But in firms employing between 1,000 and 4,999 people, the balance is -16% (Exhibit 17). Larger firms will, of course, have more capacity to prepare for the new regulations and change their strategies ahead of time.

These are worrying results: in the current economic environment, it would be normal for temporary hiring to be growing and for permanent recruitment to be muted. That this is not the case suggests that the regulations are having a damaging impact. It is of course early days, but the findings show why it is imperative for the government to conduct a full review of the AWR after a year of enforcement to evaluate the impact and ensure the work prospects for this important, flexible segment of the labour force have not been adversely affected.

Continuing improvement in the prospects of graduatesThe job prospects of graduates continue to improve, albeit slowly (Exhibit 18). Around half (46%) of respondent organisations expect to make no change to the level of graduate recruitment in the next six months. But among those organisations planning a change, the overall balance between higher and lower recruitment has risen from +9% six months ago to +11% today.

The gradual improvement in employment opportunities will provide encouragement for job-seeking graduates, though they still face tough competition. Because of the cumulative effect of the economic slowdown since 2008 on graduate recruitment, they are competing with 82 other applicants for every vacancy.20 This makes it all the more important for students to use their time in higher education to best effect, not only in terms of study and qualifications but also by taking up the opportunities available to develop a range of work-related skills and knowledge.21

Exhibit 17 Balance of higher vs lower temporary recruitment, by company size (%)1-49 +4%

50-249 +1%

250-999 -2%

1,000-4,999 -16%

5,000+ -12%

0 5 10 15 20 25 30 35 40

Exhibit 16 Employer plans for temporary recruitment in the next 6 months, comparedto previous 6 months (%)




Higher in some but lower in others


Higher recruitment across the organisation

Don't know

Recruitment freeze



No change



Higher recruitment across the organisation9

5

13

13

3940

8

12

97

44

4

11

11

11


Recruitment is targeted to support growthWhen asked what types of roles and skills they have been recruiting for in the past six months and how they expect this to change in the next six, it is clear that employers continue to align recruitment with targeted business strategies for growth in the recovery. The results show that those with higher-level and specific skills have the best prospects of being recruited to fill vacancies or new posts (Exhibit 19).

In the past six months, the most sought-after groups have been professionals (42%) and those working in sales and customer service (33%). In the coming months these two groups will continue to be the most in demand, with two fifths (43%) of employers expecting to be recruiting professionals and a third (32%) seeking sales and customer service staff.

“The gradual improvement in employment opportunities will provide encouragement for job-seeking graduates”

In contrast, the demand for senior managers and administrative and secretarial skills is expected to ease, with the proportion of employers seeking these categories of staff declining from 26% to 17% and from 21% to 14% respectively. One in six employers (16%) reports recruiting to skilled trade roles in the past six months, and a similar proportion (18%) expect to do so in the coming six months. In the construction sector, however, more firms expect to be recruiting skilled employees (up from 28% to 35%) as they position themselves for growth.

Exhibit 19 Employers’ past and future recruitment by employee category (%)

Last 6 months Next 6 months

0 5 10 15 20 25 30 35 40 45 50Other

Manual and transport operatives

Sales and customer service

Skilled trades

Administrative and secretarial

Technical white-collar workers

Professional

Other managers

Senior managers17

21

43

24

2114

1618

3332

1413

57

22

42

23

26

Exhibit 18 Employer plans for graduate recruitment in the next 6 months, compared to previous 6 months (%)




Higher in some but lower in others



Don't know

Recruitment freeze






0 5 10 15 20 25 30 35 40 45 50

No change

118

10

8

4746

3

36

6

810

7

12

6

9


The weak and uneven pace of the economic recovery means this is no time to take risks with labour costs to the potential detriment of the UK’s international competitiveness. Continued pay restraint is essential. While the proportion of private sector firms operating a freeze at their next pay review has dropped to one in eight (12%), pay freezes are much more common among the smallest employers who are under intense trading and broader economic pressures. Among other employers there is also widespread caution, with nearly half planning a pay rise below the level of RPI inflation or intending to target increases on only some employees.

Key findings• The extent of pay freezes has dropped sharply since the darkest

days of the recession, but they have certainly not disappeared: across private sector businesses, one in eight (12%) plan to freeze pay at their next review, rising to 33% among those firms employing fewer than 50 people

• Where pay rises are planned, moderation is the keynote: almost half (49%) of employers are planning a general increase below the rate of inflation or targeted increases for some members of staff only.

The proportion of employers freezing pay has declined... In the depths of the recession in 2009, more than half (55%) of businesses were operating a pay freeze. By spring 2010, pay freezes had thawed significantly so they were operated by only one in seven firms (14%).

Six months ago, Navigating choppy waters found an increase in pay freezes to nearly one in four (23%). The rise was primarily driven by the public sector, as a result of the government’s policy of freezing pay for those earning over £21,000 but with increases of up to £250 a year below that. (In addition to the scope for rises for the lower paid, annual increments have continued to be awarded to those qualifying, so the policy has had only a limited impact in restraining public sector earnings growth.) In the private sector, about one in six firms (16%) in the spring of 2011 planned to freeze pay at their next review.

Six months on, the proportion of pay freezes has returned to the levels (14%) reported in 2010 (Exhibit 20). In the private sector, one in eight firms (12%) is intending to apply a general pay freeze when the next pay review falls due.

...but freezes are widespread in the smallest firms Behind these figures is a stark divide by company size (Exhibit 21). There is a clear trend for pay freezes to be most common in firms with fewer than 50 employees. A third (33%) of respondent organisations of this size expect to operate a pay freeze at their next pay review, far above the extent of freezes planned among other employers. Plans for pay freezes are least common in the largest firms – those with more than 5,000 employees – where only one in twenty (5%) expects to apply a standstill at their next pay review.

3 Restraining pay remains essential


Pay restraint remains essential to minimise job lossesAmong those organisations which intend to increase pay at their next review, moderation is the keynote (Exhibit 22). Asked to describe their planned approach, one in four firms (26%) is planning a general increase below the level of RPI inflation for its workforce and a slightly smaller proportion (23%) intend to target pay increases on only some employees.

Just one in three firms (33%) intend to offer employees increases that at least match the level of RPI inflation. While this figure has risen from 24% in the spring, the fact that most firms are still not intending to match inflation indicates that containing labour costs remains a priority. The rise in those planning to match RPI may also reflect an expectation that inflation will decline during the coming year.

“Just one in three firms (33%) intend to offer employees pay increases

that match the level of RPI”

Exhibit 20 Employers planning a pay freeze (%)

0 10 20 30 40 50 60

Spring 0955

Autumn 0947

Spring 1016

Autumn 1014

Autumn 1114

Spring 1123

Exhibit 21 Pay freezes by company size (%)

0 5 10 15 20 25 30 35

250+ (non-SME)

1-249 (SME)

5,000+

1,000-4,999

250-999

50-249

1-4933

9

12

21

7

5

9

Exhibit 22 Employers’ approach to next pay review (%)

Pay freeze

Targeted pay increase for some sta� only

General increase below RPI

General increase in line with RPI

General increase above RPI

0 5 10 15 20 25 30

Other

Pay freeze

Targeted pay increase for some staff only

General increase below RPI

General increase in line with RPI

General increase above RPI

20

4

45

3

30

3026

1723

2314



To succeed in a globalised economy, the UK needs to be a great place to invest and do business. An essential part of that is mobility, enabling businesses in the UK to draw in those with the skills they need to grow in Britain. The competition to attract highly-mobile talent is fierce as other leading economies seek to position themselves for future growth by courting human talent and inward investment.

Key findings• More than half (54%) of employers have used, are using,

or intend to use non-EU workers to meet their skills needs

• Half (50%) of respondent organisations with experience of the operation of the permanent cap on work permits have experienced problems

• The most common difficulties encountered are the permanent cap’s increased complexity (62%) and an ongoing lack of clarity over rules (50%)

• A third (33%) of employers believe that the work permit cap is having a negative impact on perceptions of the UK as a place to invest.

A skilled, flexible workforce attracts vital inward investment...Being able to employ the right person with the right skills, in the right place, at the right time, are important factors for those deciding where best in the world to invest. Britain’s legacy as an industrial, commercial, financial and creative powerhouse stands it in good stead.22 The traditional flexibility of the UK’s labour market is also an important advantage, making the UK an attractive location for international projects. Firms can predominantly hire UK/EU employees and add key skilled personnel from overseas where those skills cannot be sourced domestically.

In the longer term, skills constraints in the UK must be effectively addressed to meet the growing demand for skills. But in the short term, migrant workers are needed to fill the gap. And the international businesses essential to the UK’s future need flexibility to transfer staff between locations.

... and businesses need to be able to draw in skilled peopleMore than half (54%) of respondent organisations report that they have employed, currently employ, or intend in the future to employ non-EU workers (Exhibit 23).

4 Global businesses need global mobility

Yes54

No 37

Don’t know 9

Exhibit 23 Employer use of workers fromoutside the EU (%)


Behind this overall figure, sectoral analysis highlights those fields where essential specialist skills are in short supply domestically. The sectors most reliant on overseas workers are science, hi-tech and IT (76%), manufacturing (60%) and professional services (59%) – key sectors in driving the UK’s economic recovery (Exhibit 24). This is in line with the findings of the spring 2011 survey, in which employers told us that the greatest impact of the UK’s work permit cap would be to make recruiting individuals with specific technical and higher level skills – such as STEM (science, technology, engineering and mathematics) skills – more difficult.23

Problems with the work permit cap focus on complexity and uncertaintyIn April 2011, the coalition government introduced a permanent cap on work permits. Four months after its introduction, we asked employers about their experience of the operation to date.

As a result of the decision to prioritise skilled tier 2 migration and exclude intra-company transfers from the permanent cap, many of the anticipated problems have been avoided (Exhibit 25). But some problems remain unresolved. Companies have been reporting to the CBI that their experience of the UK work permit system does not compare favourably with those of other countries. Among our survey respondents, half (50%) report encountering problems. While some teething problems are to be expected when a new system is established, the frequency with which problems have been encountered suggests that repeated tinkering with the work permits system has caused difficulties.

Yes Don’t know No

Exhibit 24 Major sectors using workers fromoutside the EU (%)

0 20 40 60 80 100

Professional services

Manufacturing

Science/hi-tech/IT76 222

60 337

59 329

Exhibit 25 Shaping the work permit capBased on a pre-election promise from David Cameron to reduce net migration, the Coalition’s Programme for Government contained a commitment to ‘introduce an annual limit on the number of non-EU economic migrants admitted into the UK to live and work’. A temporary cap on the number of workers admitted through the economic tiers 1 and 2 was introduced in July 2010 and expired in April 2011.

The design and management of the interim cap caused considerable problems for businesses and the CBI lobbied strongly on the design of the permanent system, successfully ensuring that key business concerns were heeded. As a result of the decision to prioritise skilled workers with a job offer and exclude intra-company transfers, many of the issues that arose under the temporary cap have been avoided.

However, for reasons unconnected with work permit routes, net migration has continued to rise despite the introduction of the cap. Given the value of those in tiers 1 and 2 to the UK and the fragile economic climate, business has welcomed a commitment from the government that economic factors are being considered in setting the level of the 2012/13 cap.


Among those employers who have experienced problems, nearly two thirds (62%) report that the complexity of the work permit system has increased and half (50%) say there is a lack of clarity due to the fact that there have been almost continual rule changes in this area since 2008 (Exhibit 26).

Businesses need stability and the ability to make long-term plans if they are to choose to operate in the UK rather than expand operations in another location. Already this year, the government has consulted on student visas, skill levels and occupations classed as being in shortage, settlement rights for highly skilled migrants and migration for family reasons. These changes, often at short notice, make an unreasonable demand on employers to repeatedly adjust their resourcing plans. It is therefore no surprise that more than a third (35%) of respondents who have had problems with the cap have experienced difficulties in formulating future business plans as a result.

With nearly three in ten respondents (28%) reporting problems relating to delays in processing work permit applications, it is clear that there is also a need for better customer service and a reduction in the levels of bureaucracy and red tape.

If managed badly, the work permit cap risks damaging perceptions of the UKAlongside the operational issues, there is a concern that were the cap to be lowered, it could threaten the UK’s international reputation. Despite the significant improvement in the operation of the permanent cap, the legacy of the problems businesses experienced under the interim cap and the lack of clarity around the long-term future of the system have the potential to deter investment if these improvements are not communicated effectively.

“As a result of the decision to prioritise skilled tier 2 migration and exclude intra-company transfers from the permanent cap, many of the anticipated problems have been avoided”

We asked respondents what impact they believe the introduction of the permanent cap on work permits is having on perceptions of the UK as a place to invest and create jobs. A third (33%) told us that it is having a negative impact on impressions of the UK, while only one in twenty-five (4%) said it is having a positive impact (Exhibit 27). The net balance of those believing that the UK’s reputation is being damaged by the cap is a concerning -29%.

This highlights the importance of managing not only the operation, but also the perception, of the cap. There is an impression at the moment that the system for business is too tough, whereas the reality is that all applicants who meet the points criteria have been able to enter the UK for work. To ease this concern the government must reassure potential investors that Britain remains open for business and that there is no threat from the future direction of migration policy.

This survey’s findings echo the June 2011 survey, showing that a quarter (26%) of firms were concerned that restricted access to migrant workers threatened the UK’s future competitiveness, up from just 4% in the June 2010 survey.24 With businesses and institutions beginning to make long-term investment decisions based on this impression, there are salutary international precedents for the impact this could have on the economy. Visa restrictions in the US, for example, led one global employer to

Exhibit 26 Problems encountered with permanent cap on work permits (%)

0 10 20 30 40 50 60 70Other

Difficulties in future business planning

Lack of clarity over rules

Delays in processing applications

Increased complexity62

28

50

35

10


“The government must reassure potential investors that Britain remains open for business and that there is no threat from the future direction of immigration policy”

No impact38

Negative impact 33

Don’t know 25

Positive impact 4

Exhibit 27 Impact of work permit cap onperceptions of the UK as a place to invest (%)

Exhibit 28 Impact of work permit cap on perceptions of the UK as a place to invest, by region (%) Positive No Negative Don’t Balance impact know

North East 6 39 27 28 -21

South West 6 42 28 24 -22

West Midlands 3 45 26 26 -23

South East 4 42 28 26 -24

Yorks & Humber 5 39 29 27 -24

Northern Ireland 3 38 28 31 -25

East of England 4 41 30 25 -26

London 5 37 33 25 -28

North West 3 39 33 25 -30

Scotland 3 39 33 25 -30

Wales 3 37 33 27 -30

East Midlands 5 35 37 23 -32

locate a development centre across the border in Canada in 2007, with the stated aim of recruiting those affected by immigration issues in the US. This was at the same time as legislation was being discussed – which ultimately failed – that would have eased restrictions, as there was little confidence that it could be delivered.

Affecting more than half of businesses and higher education institutions, the cap on work permits is seen as having a negative impact on perceptions of the UK as a place to invest by employers in all regions of the UK (Exhibit 28). Nearly two in five employers (37%) in the East Midlands believe that perceptions of the UK are being damaged, the highest proportion in any region. The lowest proportion was reported in the West Midlands, but even here still more than a quarter (26%) of employers fear a negative impact. The findings show that the mobility of global talent is not just an issue for businesses in London and the South East.


Achieving growth and raising productivity across the economy depend on the success of individual businesses – and that in turn depends on the quality of leadership within each business. The top-rated qualities looked for in potential leaders are a drive for results, the ability to inspire and empower staff, and intellect and creativity. Finding good business leaders with these skills has never been easy, and there is growing competition for those with the ability to lead firms effectively in a fast-changing global economy.

Key findings• The most important characteristics employers look for when

recruiting future leaders are a drive for results (59%), skills in inspiring and empowering staff (58%) and intellect and creativity (55%)

• Four in five firms (79%) experience at least some difficulty recruiting potential future business leaders

• The most common challenges in recruiting future top managers relate to the scale of demand for their skills. Half (50%) of respondent organisations cite the intensity of competition as an obstacle, while two in five firms (41%) point to a shortage of suitably qualified candidates within the UK or EU

• Almost three in four firms (72%) report at least some degree of difficulty in developing the next generation of business leaders, but these are typically less severe than the problems of recruitment

• Despite the challenges, almost every organisation is endeavouring to ‘grow its own’ future leaders: almost nine in ten SMEs (87%) and almost all firms (98%) with 250 or more employees operate structured policies to develop some of their employees into the next generation of business leaders. These ‘pipeline’ policies are essential to addressing boardroom diversity issues, too.

Focus on results, staff motivation and creativity top the wish list...Quality of management is closely associated with an organisation’s success, as measured by indicators ranging from productivity and sales growth to profitability and return on capital.25 Having the right people in place at the top of organisations is therefore critical as businesses seek to reshape for a sustainable future in a globalised economy.

We asked respondents which three characteristics they believe are most important in recruiting the next generation of business leaders. The results reveal a remarkable degree of consensus on the three leading qualities.

More than half of respondent organisations identified a drive for results (59%), skills in inspiring and empowering staff (58%) and intellect and creativity (55%) as among the three most important characteristics they look for in future business leaders (Exhibit 29). Perhaps predictably, firms see leadership potential in those who are focused on achieving results and delivering the objectives of the organisation. But they attach equal weight to future top managers recognising that business results are not achieved solely by their individual willpower – they are gained through the efforts

5 The next generation of business leaders


...and experience is not a brake on progressionOther characteristics were rated by respondents as of lesser importance. Around one in four businesses placed each of the following among their list of the top three desired characteristics: flexibility (28%), complementing the skills mix in the leadership team (26%) and resilience (25%).

Experience emerges as one of the lower-rated characteristics, with only just over one in five employers (22%) seeing this as one of the most important considerations in appointing potential leaders to the business. It therefore seems that the business leaders of tomorrow will be marked out by other qualities that they can bring to the boardroom rather than by the duration of their middle and senior management experience. This should address what has sometimes in the past been seen as a barrier to women’s progression into roles as future business leaders and senior managers. Technical knowledge (12%) and political astuteness (6%) also rank low.

Recruiting future leaders is not easy...Almost four in five firms (79%) say they have some level of difficulty in recruiting future business leaders (Exhibit 30), with two in five (40%) describing the difficulty as significant or severe. A greater proportion of SMEs have difficulty than larger firms: almost half (45%) of SMEs describe the difficulty they have recruiting future leaders as significant or severe, while just over one in three larger firms (36%) rate the extent of their difficulties at that level.

Medium-sized businesses find attracting talent most difficult as their relatively low profile means they are rarely at the forefront of job-hunters’ minds, and they struggle to reach into universities and build relationships with talented graduates at an early stage.26

of employees as a whole. Leaders of a business need to be able to engage employees, motivating and empowering them to meet the organisation’s objectives. This is an encouraging result, as we seek to improve productivity through good employee engagement across the economy. Intellect and creativity are important too, with business leaders needing to be able to generate solutions to problems, take sound decisions on the basis of fuzzy and incomplete information, and come up with new ways of doing things.

Exhibit 29 Most important characteristics for future business leaders (%)

0 10 20 30 40 50 60

Other

Political astuteness

Technical knowledge

Experience

Resilience

Complementing skills in leadership team

Flexibility

Intellect & creativity

Skills in inspiring & empowering staff

Drive for results59

58

55

28

26

25

22

12

6

3

Significant difficulty34

Minor difficulty 39

No difficulty 21

Severe difficulty6

Exhibit 30 Experience of recruiting future business leaders (%)


“ The vast majority of businesses are endeavouring to ‘grow their own’ leaders through development programmes”

...as competition for the brightest and best is intenseAmong those employers who have difficulty recruiting future leaders for their businesses, the challenges broadly divide into two categories: a shortage of suitable candidates in the face of rising demand and uncertainties hindering longer-term recruitment planning.

Creating most difficulty is the fact that global demand for highly capable leaders and their successors outstrips supply, and in an age of globalisation, this pool of talent is highly mobile and can work in a range of international business locations. Half (50%) of employers experiencing difficulty report that the intensity of competition from other businesses for suitably qualified candidates is an obstacle to recruiting future business leaders (Exhibit 31). More than two in five (41%) told us that a lack of suitably qualified candidates from within the UK and the EU is a problem.

This is cited as an obstacle by a higher proportion of those organisations which say their difficulties are significant or severe (57%) than by those who say they have minor recruitment difficulties (25%).

Uncertainty hinders recruitment planning – especially following abolition of the DRAThe second category of obstacles reported by respondent organisations is that of uncertainty impeding longer-term recruitment planning to meet future business needs. Nearly two in five firms (39%) having difficulty recruiting future leaders say that being uncertain about the future needs of their business creates an obstacle. This is largely due to ongoing economic uncertainty and the tentative, choppy nature of the UK’s recovery from recession.

Another aspect of uncertainty cited by just over one in five employers (22%) as an obstacle to recruiting future leaders is uncertainty about current leaders’ retirement plans. Since the default retirement age (DRA) was abolished on 5 April 2011, uncertainty about the retirement plans of older employees at all

levels has grown, creating a legal vacuum which has not been filled.27 The CBI believes that this vacuum must be filled by a mechanism for ‘protected conversations’, whereby firms have the ability to ask for information about retirement plans from their staff. Given the critical importance of leadership for organisations’ success, it is even more important for businesses to be able to plan in a systematic and well-informed way for succession at senior levels of management.

Developing employees can also present challenges...Given the scale of difficulty involved for many organisations in going out to seek senior talent in the external recruitment market, it comes as no surprise that most firms endeavour to develop their future leadership cadre in-house.

We asked employers how difficult, in their experience, it is to develop members of staff into the next generation of business leaders. Almost three in four respondent organisations (72%) report experiencing some difficulty in developing future leaders (Exhibit 32). The proportion ranking this difficulty as significant or severe, however, is three in ten (29%) – notably lower than the proportion of firms finding recruitment of future leaders significantly or severely difficult (40%). And over one in four (28%) report experiencing no difficulties.

Exhibit 31 Obstacles to the recruitment of futurebusiness leaders (%)

Intensity of competition for candidates

Uncertainty about current leaders' retirement plans

Uncertainty about business needs

Di�culty recruiting outside the EEA

Lack of suitable UK/EU candidates

0 10 20 30 40 50

Other

Intensity of competition for candidates

Uncertainty about current leaders' retirement plans

Uncertainty about business needs

Difficulty recruiting outside the EEA

Lack of suitable UK/EU candidates41

39

22

50

11

4


...but almost all businesses have development initiatives in placeWe also asked what methods are most commonly used to develop future business leaders. There is a clear pattern that larger organisations are more active in running schemes of internal development for future leaders than smaller firms. This can in part be explained by the increased likelihood of larger firms having an in-house dedicated HR function with the capacity to organise structured development programmes, as well as the greater number of potential vacancies to be filled at senior level in the future.

Despite their more limited capacity, still almost nine in ten SMEs (87%) told us they operate schemes to develop the next generation of business leaders from within their existing workforce. The proportion of firms doing so increases in line with company size, so that all of the largest firms (with 5,000 or more employees) have structured development programmes of some type.

The most common methods used to develop future leaders are the same for SMEs as for larger firms. These are annual development plans, followed by leadership training, coaching and mentoring (Exhibit 33). Three in five SMEs (61%) have annual development plans for their potential future leaders, while nearly nine in ten larger firms (88%) do so. Half (51%) of SMEs and four fifths (79%) of larger firms use formal leadership training.

The order of development priorities differs between SMEs and other firms where succession planning is concerned. A clear succession planning strategy is used by almost half (49%) of firms employing 250 or more employees to develop future leaders, but in SMEs the use of succession planning is much more limited (at 25%), reflecting the more restricted scope for operating formal schemes of this type. Greater reliance in SMEs tends to be placed on less formal systems such as mentoring and coaching (used by 42% and 48% of SMEs respectively).

Significant difficulty25

Minor difficulty 43

No difficulty 28

Severe difficulty4

Exhibit 32 Experience of developing futurebusiness leaders (%)

Exhibit 33 Methods for developing future business leaders (%)

SME (1-250 employees) Non-SME

None of the above

Leadership training

Networking

Clear succession planning

Management 'fast track'

Annual development plans

0 10 20 30 40 50 60 70 80 90 100None of the above

Other

Leadership training

Networking

Clear succession planning

Coaching

Mentoring

Management 'fast track'

Annual development plans

6188

629

4266

4871

2549

28

33

132

37

5179


The number of women in the boardroom is increasing...Our survey asked participants about the numbers of male and female board level directors in their organisations. Among participating firms employing 1,000 employees or above, one in five boardroom directors (21%) are women. In smaller organisations – which tend to have smaller boards – nearly one in seven board directors (15%) are women (Exhibit 34).

While not directly comparable with other survey results because of sample differences, the results seem to confirm the widely reported trend that gender diversity at board level has increased in the past 12 months, although from an unacceptably low base.

In Room at the top, the CBI recognised that businesses have been taking active steps to diversify their workforces at all levels. But we advocated more action to help this process at board level. The CBI called for a change to the Corporate Governance Code to require listed companies to report on diversity on a ‘comply or explain’ basis, using internally-set targets appropriate to the organisation’s current gender diversity position. Where companies fall short of their target, they should report on the action being taken to tackle the issue.

6 Balancing the boardroom – the picture below the FTSE 350

“Nearly a third (30%) of SMEs already have two or more female directors on their boards”

Achieving the right mix of talent, skills and experience on the board is critical for the success of a business. Women have long been under-represented in boardrooms and at senior levels of businesses, but that position is changing. Our survey comes almost a year after the CBI’s Room at the top report28 on improving gender diversity on UK corporate boards and six months after Lord Davies’ independent review into women on boards.29 Recently published Cranfield University data maps out progress in the FTSE 350,30 but our survey results offer the chance to look at the state of play across businesses not in that index, and a chance to establish a baseline for future surveys. There is much more to be done to improve the gender balance.

Key findings• One in five boardroom directors (21%) is female in firms

employing at least 1,000 employees

• In larger firms, almost a quarter of non-executive directors are female (24%) and women account for just under one in five executive directors (18%)

• Nearly two thirds (63%) of boards of companies with at least 1,000 employees have two or more female directors

• Initiatives to boost the numbers of women among the next generation of business leaders – including board directors – are widespread but need to be more widely taken up: they include half (49%) of firms operating or actively considering mentoring schemes and over a third (37%) using or considering networking to improve gender diversity at senior levels.


…with female non-executives leading the wayAn important route to improving the representation of women in the boardroom is through the appointment of female non-executive directors. Valuable as the contribution of non-executives is, however, further progress on increasing the proportion of female executive directors is also needed to ensure a fuller part is played by women at board level and that this change is replicated throughout the senior levels of the organisation.

In firms employing at least 1,000 people, women hold nearly one in five executive directorships (18%), while almost a quarter (24%) of non-executive directorships are held by women (Exhibit 35).

The proportion of female executive and non-executive directors is equal in SMEs and other firms employing fewer than 1,000 people. In these firms, more than one in seven (15%) of both executive directors and non-executive directors are women.

There remains a great deal more to do to raise these numbers and fully harness the potential contribution of women to the boardroom. It is important for businesses to achieve further demonstrable progress in the coming months – both to gain the benefits of a larger role being played by women in decision making but also to avoid the risks of a regulatory straitjacket of rules being imposed from Brussels.

A great benefit of female executive directors is as role models for talented female employees at more junior levels, demonstrating the routes by which women move up through management into executive positions within the business and supporting a ‘pipeline’ of future talent. The issue cannot be solved by legislative quotas, as the experience of Norway demonstrates: despite a law requiring that 40% of directors on boards are women, still only 2% of CEOs are female.31 Norwegian experience shows that quotas are blunt instruments that do not necessarily have a great impact in practice on the proportion of women holding executive positions.

0 20 40 60 80 100

1,000+

250-999

1-249 (SME)85 15

85 15

79 21

Exhibit 34 Gender of boardroom directors,by company size (%)

Male Female

Exhibit 35 Gender of executive and non-executive directors, by company size (%) Executive Non-executive

1,000+ Male 82 76

Female 18 24

250-999 Male 85 85

Female 15 15

1-249 (SME) Male 85 85

Female 15 15


Many boards have multiple female directorsIncreasing the number of female boardroom directors is not about tokenism. Part of the value of greater female presence – and other moves to increase boardroom diversity – is to challenge ‘group think’. This means ensuring that women do not run the risk of being a lone voice. Monitoring the proportion of companies that have more than one female director on their board is therefore a useful measure of progress.

Looking at the results of our survey in terms of individual organisations, nearly a third (30%) of SMEs already have two or more female directors on their boards (Exhibit 36). As the size of the board is typically smaller in SMEs than in larger firms, this figure demonstrates that many smaller businesses – which have often found it more difficult to increase diversity in the boardroom – have made real progress.

The progress in larger firms is also encouraging, though here too more needs to be done. Nearly two thirds (63%) of companies with more than 1,000 employees have multiple female directors.

Steps are being taken to grow the number of future female leadersThe major step to improving female participation rates in the boardroom for the longer term is to ensure a continuing supply of capable candidates by addressing pipeline issues.

The survey asked respondents about the initiatives they are taking now or considering introducing within the next 12 months to improve gender diversity among the next generation of business leaders. The results show a variety of steps are being taken to help diversify corporate boards in the future (Exhibit 37).

Almost seven in ten firms (69%) are taking – or are currently considering taking – action to address the gender diversity of their boardroom.

Nearly half (49%) of firms said they are using or considering mentoring schemes to help bring on future female leaders. A quarter (24%) already have networking schemes in place to aid gender diversity, while a further one in eight (13%) are considering implementing a scheme of this type. On the recruitment side, a quarter (26%) report using or considering targeted advertising or headhunting to encourage female applicants for vacancies, while close to a third (31%) use or are considering positive action in the recruitment process for potential future business leaders.

Focusing on board level appointments, nearly a fifth of respondents are operating or considering introducing positive action on shortlisting female candidates for non-executive positions (19%) and for executive director roles (18%).

While the results show action and/or plans for initiatives are widespread, these types of good practice to develop future female leaders need to be spread further to help bring about major shifts in boardroom gender diversity.

Exhibit 36 Boards with multiple female directors,by company size (%)

0

1,000+

250-999

1-249 (SME)

0 10 20 30 40 50 60 70

1,000+

250-999

1-249 (SME)30

34

63


Exhibit 37 Steps to improve future boardroom gender balance (%)

In operation Considering

Positive action on shortlisting for exec directors

Positive action on shortlisting for non-execs

0 10 20 30 40 50

Positive action on shortlisting for exec directors

Positive action on shortlisting for non-execs

Targeted ads/headhunting

Positive action in recruitment process

Networking

Mentoring36 13

24 13

17 14

15 11

9

9 9

10

“Almost seven in ten firms (69%) are taking – or are currently considering taking – action to address the gender diversity of their boardroom”


1 Navigating choppy waters, CBI/Harvey Nash, June 2011

2 Preliminary estimate of Q3 GDP, ONS, November 2011

3 Economic forecast, CBI, November 2011

4 Global competitiveness report, World Economic Forum, 2011-12

5 Economic outlook, IMF, September 2011

6 Economic forecast, CBI, November 2011

7 Mapping the route to growth, CBI, June 2011

8 Leaner and fitter: boosting productivity in public services, CBI, March 2010

9 Thinking positive: the 21st century employment relationship, CBI, July 2011

10 Labour Market Statistics, ONS, September 2011

11 Mapping the route to growth, CBI June 2011

12 Action for jobs: how to get the UK working, CBI October 2011

13 Work patterns in the recession, June 2009 and Easing up? CBI/Harvey Nash, November 2009

14 Picking up the pace, CBI/Harvey Nash, May 2010 and Gearing up for growth, October 2010


16 Business population estimates for the UK and the regions 2011, BIS/ONS, 2 October 2011

17 Labour Market Statistics, ONS, October 2011

18 Future champions, CBI, October 2011


20 Graduate recruitment survey 2011, Association of Graduate Recruiters, June 2011

21 Working towards your future: making the most of your time in higher education, CBI/NUS, 2011

22 Jobs for the future, CBI/Siemens, 2009



25 Enhancing management quality: the potential for productivity growth after the recession, R Homkes, CentrePiece, winter 2010/11, Centre for Economic Performance

26 Future champions, CBI, October 2011

27 In Navigating choppy waters, 65% of respondents said that the removal of the DRA had increased uncertainty in workforce/succession planning (June 2011)

28 Room at the top, CBI, December 2010

29 Women on boards, Lord Davies of Abersoch, February 2011

30 Women on boards: six-month monitoring report, Cranfield University, October 2011

31 Increasing diversity on public and private boards – part 2, Government Equalities Office, 2009

References

November 2011

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For further information on this survey contact:

Matthew Percival Policy adviser

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