PPMA Joint Southern & South East Region and London Region Meeting June 2013

www.pwc.co.uk

PwC

Introduction and overview

• PwC are working with the PPMA to develop thinking about the ‘future of the public sector workforce’

• The purpose of this work is to equip HR professional across the councils sector to facilitate the discussion with their leadership teams about the future size and shape of their own organisations – giving HR a ‘place at the table’

• This session will given an overview so far of our thinking both about the future of the workforce and the future of the HR function

2

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The future of the public sector workforce

Slide 3

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Part 1. The future of the public sector workforce

Global context

Public Sector UK view

Workforce overview

Demand side issues

Supply side issues

The new world of public sector workforce

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Global outlook remains very mixed, with BRICs relatively strong but continuing storms in Europe

Source: PwC main scenario for 2012

Russia

Germany

UK

US

Brazil

India

Spain

Key

Canada

Mexico

South Africa

Australia

Japan

Italy

Greece

Ireland

France

2.1

2.3

3.6

2.3

-2.0

0.3

-0.6

0.0

0.4

-1.7

2.5

5.0

-6.9

3.1

8.0

2.2

3.9

x.x = GDP growth in 2012

China

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-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Apr May Jun Jul Aug Sep Oct Nov Dec January Feb March

The 2012 growth outlook for the Eurozone has deteriorated sharply since last summer

Consensus economic forecasts for Eurozone GDP growth in 2012

1999-2010 average Eurozone growth: 1.5%

Source: Consensus forecasts

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New strategic playground

for growth & development across sectors

EC IC

Organisation Territory

Internal

control

External

control

Arena for efficient

processes & effective services

Strategic

implementation

Public sector leaders need to balance their internal and external focus...

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...by creating the agile public body

A strategic leader, focused on and accountable for outcomes, not processes, and which sees collaboration, accessibility and transparency as core capabilities built through

...reducing the complexity of organisations

...enhancing customer intelligence

...developing new business models

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Where necessary, prepare to deal with failure where it becomes inevitable in a managed way

Strategic

Financial

Operational

Funding available to manage risk

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Public sector workforce statistics

• 5.7 million people work in the public sector across the UK

• In September 2012 around 19.4% of people in employment worked in the public sector: - 2.7 million central government - 2.6 million local government - 478,000 in public corporations.

• Top three industries in September 2012: - National Health Service –

employing 1.6 million people - Education – employing 1.5 million

people - Public Administration – employing

1.1 million people

(Office of National Statistics Part of Public Sector Employment, Regional

Analysis of Public Sector Employment, Released: 06 March 2013) 10

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Cross service demand side issues

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Service demand and supply issues

• Political pressure to deliver better services ‘locally’ with local public resources

• Pressure to deliver ‘more for less’ ever decreasing funding and increasing efficiency target

• UK ‘protectionist’ attitude towards public services

• Increasing use of technology – 24/7 client access and support

• Aging population – pressure on adult health and social care

• Troubled families – income divide

• Intergenerational worklessness

• Migrant population – net migration figures

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Workforce challenges - macro • Aging workforce – segmentation?

• ‘Millennials’ – different attitudes

• Increasing cost of workforce

• Decreased ‘mobility’

• Engaging the workforce in the solution

• Physical and cultural barriers across public services (T&C’s culture)

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Specific workforce challenges

LG & Education Health

Central Gov ‘Blue light’

Significant reorganisation

Long lead time to

develop skills

Cost of workforce

Funding cuts affecting pay and promotions causing

increased resignations and making it harder to attract

candidates

Reduction in management

positions increasing spans of control to

reduce cost

Increase in partnerships

to save money

New operating models

Lack of transparency

between input and outcomes

Movement of services from

central to local delivery

Combining of back office functions to

save on cost – centralised HRSS

New structure – PCC replacing

police authorities

Amalgamating police fleets and centralising

contracts leading to larger areas covered and

more generalist roles

Modernisation – implementation of

new systems resulting in

changes to roles

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Integration of community

service delivery

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Delivery models: the public-private continuum

Public sector control Hybrids Private sector control

Executive Agency

Trading Fund

NDPB

Public Corporation

Joint Venture

PPP

Privatisation

Mutual JV

BPO

GovCo

Permanently employed?

Outsourced?

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Cross service ‘supply’ side considerations

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Service delivery

Own

Buy Share

PwC

Own

• Retention of rare skills

• Workforce cost • Motivation and

engagement

Share

• Performance culture – shared goals

• Multidisciplinary teams – T&Cs

Buy

• Performance measurement

• Different organisations aims?

• Motivation of workforce

Cross service ‘supply’ side workforce considerations

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The future of the public service workforce

We need to work across existing and emerging boundaries creating evidence based strategy and prioritised workforce interventions focused around:

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Future Workforce

Strategy

Productivity

Flexibility

Agility Collaboration

Efficiency

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The changing role of the HR function

Slide 19

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Market trends - HR call to action

• HR functions have changed significantly over the past decade however there are still serious questions about HR’s ability to drive the change needed to deliver growth.

• To become a true strategic business partner, means understanding the company’s business, industry and strategy. HR needs to be actively involved in investment and business decisions and looking to financial measures to gauge results. A strategic HR function should act as a consultant to the company on all people issues, providing insights that can help business leaders make the rights decisions and helping to craft the right business strategy including those around new market entry.

• If HR is not focused on the strategic business issues that have a direct impact on overall value then their future may be bleak. With CFOs taking a much wider role around growth and business transformation, HR leaders need to become more strategic or face becoming purely functional

(Source: PwC 14th Annual Global CEO Survey ‘Growth re-imagined. The race for talent is back on)

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Market trends - HR call to action

“HR needs to be actively involved in investment and business decisions and looking to financial measures to gauge results. A strategic HR function should act as a consultant to the company on all people issues, providing insights that can help business leaders make the right decisions and helping to craft the right business strategy including those around new market entry.”

• What needs to be in place to enable this to happen?

• If these things are not in place, what can be done to counteract this?

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Market trends - CEO business and people challenges

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90% of CEOs

expect their key operations to grow in BRICs.

66% of CEOs

say that a lack of the right skills is their biggest talent challenge.

66% of CEOs

fear talent shortages will constrain their company’s growth.

83% of CEOs

intend to make “some” or a “major” change to their strategies for managing people.

(Source: PwC 14th Annual Global CEO Survey 2011 ‘Growth re-imagined. The race for talent is back on)

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Business related pressures causing HR functions to transform

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From the CEO

• Focus on ‘core competencies’

• Companies retrench to focus on core activities

• Creates pressure on HR to ‘prove its worth’

From the CFO

• Pressure for cost reduction

• Benchmarking against sector high performers

• Requirement to demonstrate the ROI for HR activities’

From line manager

• Support for them to have the autonomy to manage their teams

• Tools to improve the performance of their teams

• Less labour intensive interaction with HR

From employees

• Improving service to employees

• Modern employees act as ‘volunteers’ and demand high standards of service from HR

• Employees have a new one-to-one relationship with companies

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HR related pressures causing HR functions to transform

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From the HR Community

• Better, clearer, simpler governance

• Wanting better integration E2E – stop the silos

• Getting technology enablers to function in the right way

• Better recognition for the ‘stretch’

From the HR Market Place

• Focus on integrated transformation

• 2nd generation outsourcing & 3rd generation cloud based services

• Making multi-functional shared services work

• HR Software as a Service

From the HR Leadership

• Focus on aligning business objectives and HR priorities

• Delivering measurable HR Value

• Achieving greater influence at the top table

• Doing more with less – being leaner

From Internal HR

• Greater focus on benchmarking against the market and competitors

• How to work around current technology constraints without creating a culture of ‘patches’

• Ensuring effective governance and control of HR related work

• Building better capability to manage supplier relationships directly

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The people challenges in transformational change

The present economic climate is demanding major workforce reform

• How do we define our people strategy?

• If we get it wrong, we will not be able to deliver our future business strategy

• How do we strategically plan our workforce requirements and deliver them?

• If we get it wrong, we could end up with the wrong workforce to deliver our strategy

• How do we reduce the cost of the workforce and improve flexibility and productivity?

• If we get it wrong, we could run out of money/not meet budget

• How do we identify the talent in the organisation and retain them?

• If we get it wrong, we could lose the talent to take our business forward

• How do we develop the right structure and roles to enable new cost effective operating models?

• If we get it wrong, we could end up with a model that fails to work in practice

• How do we have an HR function fit to drive workforce reform whilst reducing its cost?

• If we get it wrong, we may never deliver our financial and people requirements

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In summary, the case for stepping up the pace of HR change is increasing

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Common challenges potentially impacting how HR will be delivered in the future...

Cost reduction

Consolidation

Regulation & Risk

Globalisation

In addition, HR is facing ‘internal’ pressures...

HR

Cu

sto

me

rs

Global

Differentiated

Fragmented

HR

Ro

les

Strategic Focus (BPs)

Aligned to strategy (CoE)

Effective delivery (SSC, Local HR)

HR

En

ab

lers

Technology

Global Standards

Measured value

In addition, to the demands made by the business, there are strategic priorities for HR

Talent • New employee preferences &

requirements • Branding & sourcing of talent • Attraction & retention of global &

diverse talent

Culture • Increased need to manage risk and

embed ethics in corporate culture • Increased focus on organising and

incentivise around the customer • Cross cultural integration challenges

Change • Significant HR support to manage

organisational change • Increased complexity in business

processes and structures • Need to expand service delivery

models into new countries and segments

• The credit crunch has put cost reduction and efficiency at the top of senior executives agendas

• Increasing regulation in some sectors

•Significant increase in cross-border M&A

• The continuation of globalisation – for example, internationally mobile employee base and off-shoring

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Evaluating our own drivers

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From the HR Community

• ’

From leadership

From the HR Leadership

From manager and employees

In two groups evaluate the key drivers in the public sector

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HR Priorities - Business themes that trigger change in People and/or HR priorities

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Enables Shapes

Enables Shapes

Business Strategy defines the direction, positioning, scope, objectives and competitive differentiation

People Strategy defines the leadership, talent, culture and operating model requirements to align to the Business Strategy

HR Priorities articulates the strategic direction and imperatives of the HR organisation and builds out the capabilities required to align to the People Strategy

Critical workforce capabilities – viewing productivity

and skills development as an integral part of

transformation programs.

Managing change in turbulent times –guiding

organisations through change and transformation and

build organisational capability.

Talent management in the increasingly global

environment– establishing holistic, integrated,

technology-enabled, new talent supply chains.

Improving organisational effectiveness – striving for

high performance in operating models, culture,

leadership, adaptability and sustainability.

Learning and collaboration – considering social media

environments and new ways of working, blended

learning and learning as a business.

Measurement – focusing on data-driven, value

outcomes in building competencies, process

effectiveness, productivity and organisational

performance

Business Strategy

People Strategy

HR Priorities

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HR Priorities - Different business strategies will drive differing HR responses

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Alternative business strategy changes require an accompanying realignment of People strategy & HR priorities.

Survive Restructure & Refocus Expand

Focused primarily on short-term actions to manage costs, cash flow and

revenues to ensure survival.

Rationalise vendor contracts

Labour cost reduction

Consider lower cost labour locations

Operational efficiency improvements

Optimise processes and functions

Protect employer brand

Using rapidly changing environment as context to restructure - strengthen leadership and critical talent, review

operating model and culture to optimise agility and innovation

Rigorous workforce planning

Critical skills and role development

Talent retention

Engagement and alignment

Payroll and rewards optimisation

Performance management

Take advantage of market disruptions to acquire capabilities,

market share, and new talent

Leadership capability review and enhancement

Talent acquisition

Post merger activities

Workforce segmentation

Governance and organisation architectures

HR priority interventions

Business Strategy

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These drivers are fundamentally changing the people operating model

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Lin

kin

g e

mp

loym

en

t bra

nd

with

ove

rall b

ran

d s

trate

gy

Business Strategy

People Management Strategy

Human Resource Strategy

Role of manager

Culture

(behaviour)

Retain

&

Engag

e

Build &

Grow

Talent

Perform

&

Reward

Attra

ct

Optimise (Incl. measurement and benchmarking)

“L

ine

of

sig

ht”

Lin

kin

g s

tra

teg

y to

activity

Change Levers HR

Structure & Capability

HR

Operating Model &

Technology Platform

Role of HR

In defining the People and HR

Strategies it is important to

recognise that they need to be

effectively aligned with the wider

business strategy.

It is also essential to understand the

importance of integrating other

component elements which make

up the broader system and which

underpins business change.

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Managing

the HR

function

Aligning

people

to strategy

Managing

financial risks

Creating and

measuring

shareholder

value

• Payroll

management

• Benefits admin

Personnel

administration

• Job grading

• Salary admin

• Manpower

planning

• Compliance

(tax, labour

law, etc)

• International

assignments

• Pensions

HR management

• Personal

Performance

Management

• Training and

Development

• Reward

• HR Function

effectiveness

HR performance

• Governance

• Leadership

alignment

• Leadership

development

and talent

management

• New core

capabilities

• Employee

engagement

• Performance

management

Organisational

effectiveness

• Transformation

al change

• People

elements of

process or

systems

change

• M&A due

diligence &

integration

Managing change

• eHR

• Outsourcing

• HR Function

design

HR efficiency

Financial and accounting impact of people, people-related costs and HR interventions

Basic

Personnel

Services

Control and

Compliance

Specialised

Expertise

Strategic

Business

Partner

Change

Specialist

Administrator

Enforcer

Expert

Business Partner

Change Agent

Slide 31

And the type of HR function

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There is no single generic solution

“There is no one single organisational solution for HR (…). Each organisation will need to find a way that best fits with its unique situation”

Transforming HR, Creating value through people – Reddington, Williamson, Withers

However…..

• Today's HR models all encompass four common elements, however the shape and focus of these vary from organisation to organisation

E-HR

Portal

Employee Self Services (ESS)

Manager Self Services (MSS)

Specialist HR

HR Leaders

i.e. Centres of Expertise

Business HR

i.e. HR Business Partners

Transactional HR

i.e. Shared Services /

Outsource

1 2

3 4

Admin Expert / Functional Expert

Change Agent/ Strategic Partner

Strategic Partner/ Leader

Employee Champion / Employee Advocate &

Human Capital Developer

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Function capability

Slide 33

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People & Capability - HR needs to addresses capability and behaviour

HR has recognised that sustained functional performance requires an approach that addresses capability and behaviour. HR capability will focus on less traditional HR skills, such as:

• Trend spotter

• Talent assessor

• Business leader and consultant

• Strategy developer

Building business capability and support:

• Creating clear line manager accountability

• Providing the right tools, development and support

• Reinforcing the people management role

By focusing on capability HR can realise more value from historic investments in technology and process

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People & Capability – Building capability in the HR function

Personal Attributes

Required for excellent performance across all levels and functions

E.g. Results orientation, Commitment, Continuous Learning, Honest & Integrity

Leadership & Management Competencies

Success factors that differentiate performance across career levels and bands

E.g. Strategic thinking, Resource management, Networking, teamwork, Goal setting

HR Core Competencies

Success factors that are shared across all HR roles

E.g. Insights & Influence, Operational excellence, Stewardship

HR Role Specific Competencies

Success factors that distinguish sub-functional/role specific competencies

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• There are levels of competencies required to function within HR

• As organisations look to transform they also need to consider how key HR competencies need to adjust

• It should also be aligned to the attributes and the leadership competencies of the entire organisation

HR Business Partner

Centre of Expertise

HR Operations Local/ Generalist HR

Business Management

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People & Capability – Building capability in the HR function

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Strategic Orientation

Functional Alignment

Leadership

Transactional

Business Partner

Centre of Expertise

Local/ Generalist HR

HR Operations

HR is recognising that sustained functional performance requires a different approach that fully addresses HR and business capability and behaviour. New roles in the HR function equally dictate new capability (skills, knowledge and experience) requirements. Some roles will focus on strategy alignment, others will focus on operational excellence.

Business Management

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People & Capability – Building capability in the HR function

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HR Business Partner

• Aligned to business shape • Enhance business performance • Act as a change agent and strategic partner to the business

Centres of Expertise

HR Operations

Local HR/ Generalist

Business Management

Typical Role attributes Changes in capability required

• Provision of best-in-class strategy, policy and process •Lead specialist interventions & provide deep specialist advice to the HR community

• Delivers scaled operational services to the business and HR • Works with external vendors and supplier s • Quality and customer experience

• Provision of ‘near-to-customer’ tactical HR support, for example succession planning and performance management support

• Promotes a commercially-run and compliant function • Governance and reporting • Financial and strategic planning • Risk and compliance

• Increases in business acumen and strategic influence

• Increases in deep technical specialism and increased awareness of best in class approaches to their specialism • Strategy development, program design

• Increases in customer awareness and service management • Service & performance focus

• Org design, development & HR effectiveness • Relationship management • Project & Product management

• Sometimes an entirely new capability in HR • Increase focus on planning & performance

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Building our own ‘From ... To’ model

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Strategic input

Data interrogation

and utilisation

Impact

Managing

Planning

New mindset Barriers and solutions

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Building our own ‘From ... To’ model – potential responses

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Strategic input

• Taking strategies, plans, solutions and helping to implement them effectively

Data interrogation

and utilisation

Impact

Managing

Planning

Current mindset New mindset

• Producing statistics and reports on time and accurately

• Credibility though meeting delivery expectations consistently

• Ensuring that individual, team and funtional objectives are delivered to required parameter

•Ensuring that planning is done effectively, in line with operational and business cycles

• Shaping solutions at inception to ensure they are more relevant, can be landed and are sustainable

•Analysing data to identify trends, issues and remedial solutions. •Identifying gaps in data captures and working with internal partners to fill gaps

•Building, developing and maintaining relationships through accessibility and demonstration of expertise on a day to day basis

• Continual review of how functional services are delivered with respect to meeting ongoing organisational requirements

• Identifying key emerging issues through organisational and environmental scanning and adapting planning to take account of these

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Summary and close

Slide 40

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Closing remarks

• Our external and internal factors are influencing the size, shape and composition of our workforce

• We need to change and adapt to meet these changes and deliver effective services of the future

• The HR function has a key role to play ..... but our ‘mindset’ need to change to give us a place at the table

41

Thanks

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