Professional Documents
Culture Documents
December 2010
BOOSTING HR
PERFORMANCE IN
THE PUBLIC SECTOR
CONTENTS
CONTENTS
Introduction
Overview
12
23
Building HR effectiveness
26
Conclusions
41
References
43
INTRODUCTION
OVERVIEW
CASE STUDY
Cambridgeshire County Council is one of the local authorities
that has been taking a lead on the place-based agenda.
Stephen Moir, Corporate Director for Strategy and
Democracy at Cambridgeshire County Council, said the
people function is taking the lead in providing co-ordination
and support for the whole Total Place programme across the
county.
Moir believes there is a real need for technical HR expertise
and input on issues such as front-line supervision and
management, as well as with terms and conditions of
employment, appraisal and performance management.
Under the Making Cambridgeshire Count initiative, the
county council is working with all the key local public
agencies, including the five district councils, the police,
the fire authority and the primary care trust, on eight
pilot projects.
This includes the Places Project, which is focusing on
how services to high-demand families in two particular
locations can be improved through improved coordination and collaboration between the police, fire,
health and social services.
We are testing what were going to do differently and using
NEXT GENERATION HR
Where HR is grounded in the business and delivering
the fundamentals well, it is able to engage in higher
value-adding organisation development (OD) and talentrelated activities that speak to the critical challenges
faced by that organisation. Where HR is taking this on
to the next step by offering either insight or challenge
to leaders as a matter of course, they are helping to
educate a class of business leaders who are also able to
see business as an applied HR discipline.
Source: Time for change Towards a next generation for HR
QUALITY, INNOVATION,
PRODUCTIVITY AND
PREVENTION
There are 12 QIPP workstreams:
s Safe care
s Right care
s Long-term conditions
s Urgent care
s End of life care
s Back office efficiency and optimal management
s Procurement
s Clinical support
s Productive care incorporating:
o the Productive Ward
o the Productive Mental Health Ward
o the Productive Community Service
o and Productive Operating Theatre
s Medicines use and procurement
s Primary care contracting and primary case commissioning
s Technology and digital vision
Alice Williams, Senior Associate, NHS Institute for Innovation
and Improvement, who helps support the roll out of the
Productive care stream, said it is about delivering evidencebased approaches to improve quality and efficiency that are
underpinned by lean principles. It involves front-line staff
being empowered to take ownership of improvements
in their operating theatres and community teams using
measurement skills and improvement cycles to look at how
processes can be changed to minimise wasted or duplicated
activity. The productive ward series relies on leadership being
devolved and shared decision-making within clinical teams
to help improve patient care on a day-to-day basis. One
example of how this approach made a tangible difference is
a reduction in the time clinical staff on wards spend handing
over between shifts from one-and-a-half hours to just 25
minutes. The Productive ward initiative has also resulted in
some ward staff reducing the time they spend travelling
between wards or to drug or stock stores by 10% after
reviewing the location of wards and stock facilities. Williams
said that because productive ward empowers and involves
staff it helps improve morale and job satisfaction and reduce
absence levels. Implementing the productive care streams
has delivered sustained improvements in direct patient
facing time, staff satisfaction and reduced levels of agency
staffing.
Croft said that NHS North West London is working with the
NHS Institute for Innovation and Improvement on just this issue.
We are exploring how we can deliver this sort of golden
triangle; being able to deliver quality, productivity and staff
engagement at the same time. The QIPP agenda is a major
opportunity for people management professionals. If HR
people are just focusing on their recruitment processes,
their disciplinary and grievance cases and their sickness
absence figures, they will miss the HR opportunity of
QIPP, which is about leadership, culture change, employee
engagement, training and development around tools and
techniques and team development.
Croft strongly believes that where HR leaders engage in this
wider organisational development agenda they will also
reduce things such as absence, stress and conflict, providing
both HR and managers at all levels with more time to focus
on adding value.
It is not just the NHS where lean working is being introduced.
Parts of central government have also been rolling out lean
working since 2008, including the Department for Work and
Pensions (DWP), HM Revenue & Customs (HMRC) and the
Ministry of Defence (MoD).
Martyn Craske, Lean Programme Manager for the DWP, said
lean was being implemented across the DWP following initial
pilots in 2007, which had provided evidence on the efficiencies
and improvements to customer service that could be made.
One of the challenges is to embed lean so that it becomes
self-sustaining in different parts of the DWP, such as Job
Centre Plus and the Pensions, Disability and Carers service
without the need of a central lean programme to drive it.
Craske believes that HR has a critical role to play in this by
helping to ensure that leaders and managers are equipped
with the key leadership and management skills needed to
embed and sustain Lean and also to design HR policies that
complement and support lean ways of working. For example,
in performance management, reward and recognition and
training, development and talent management.
He said that while lean has realised very significant
efficiencies already, its full potential could only be realised
where this was supported effectively by senior, middle and
front-line managers with the necessary capability.
10
One of the issues for us was the basic skill set of our frontline managers that perhaps we had taken for granted. Some
managers were not able to hold the morning meetings and
talk to their teams using the information boards, which is
part of the continuous improvement process.
Craske said some front and middle managers also struggled
with things such as sharing ideas, listening and encouraging
other people to come up with the answers.
Senior leaders also need to embrace lean principles through
how they manage to help create a culture in which lean can
flourish.
Where managers particularly middle managers truly
get Lean, great things can happen.
Pat Davies, Senior Change Business Partner for Jobcentre Plus
and a lean champion for HR, said the civil service as a whole
is now looking to integrate lean working into management
development programmes across government so it becomes
part and parcel of how we do business.
CASE STUDY
Since 2007 Jobcentre Plus has undertaken a journey towards
establishing itself as a lean organisation. Lean is both a set
of behaviours and a set of techniques and by using this way
of working, lean reduces waste, engages staff and improves
efficiency. Jobcentre Plus decided that it would embark on
its lean journey by engaging its people through creating lean
capability and the introduction of development centres. The
cumulative impact of this ensures that everyone in Jobcentre
Plus adopts lean ways of working and that national processes
have the lean tools and techniques applied to them to
eliminate waste and enhance the customer experience.
Additionally, a network of lean champions from all parts of
Jobcentre Plus has been set up to share good lean practice
and resolve common issues.
Development centres
A network of national lean development centres has
been established across Jobcentre Plus, each focusing on
a specified customer journey, to provide lean expertise
and operational input into improving the design of
existing processes and supporting the design of new ones.
Development centres are operationally managed to ensure
front-line engagement and are supported by a management
board that is chaired by a senior operational manager. Tim
added: The ideas and concerns which are the drivers for
the development centres come from staff from all levels and
usually as a result of their information centre meetings.
11
CASE STUDY
The Royal Bournemouth and Christchurch Hospitals
NHS Foundation Trust has put staff involvement and
engagement at the heart of its approach to change
management as it looks to improve service delivery and
value for money.
The trust, which employs more than 4,500 staff working
on two sites in Bournemouth and Christchurch, is on
a drive to improve efficiency and productivity against a
backdrop of trying to make 30 million of operational
savings over the next three years.
One of the drivers of change has been the trusts chief
executive Tony Spotswood, who is also the national lead
on the NHSs quality, improvement, productivity and
performance (QIPP) programme on back-office efficiency
and optimal management.
The trusts HR director, Karen Allman, said a wide-ranging
transformation programme under the heading Protecting
our future is looking at all areas of service delivery to try to
identify process improvements. This has included a focus
on service line reporting a way of analysing operational
processes across an organisation to identify possible
efficiencies in the delivery of clinical services.
12
Rate of change
The rate of change can be continuous for example,
increasing motivation, engagement in the workforce or
addressing the ongoing need to become more efficient and
effective. Or the rate of change can be intermittent a project
that addresses a current major problem or opportunity such as
solving a quality issue or introducing a new product line.
Scope of change
The scope of change can be organisation-wide or business
unit or team change that is radical and transformational
involving new knowledge or technologies and processes. This
might include at organisational level, a major restructuring
and reshaping that dismantles an organisations structure and
culture, for example from the traditional topdown, hierarchical
structure to a collaborative structure with self-directing teams.
Alternatively, the scope can be about increments or adaptations
to existing knowledge, processes and technologies at
organisation-wide, business unit or team level.
In many cases there will be overlaps between these different
types of change. In one of the case studies for the CIPDs
change management tool, the HR manager at AkzoNobel
commented:
What weve noticed is that a radical change is followed
by a period of continuous change that builds on the
radical. We are currently looking at ways to make
incremental, continuous change for the organisation.
For example, every time someone leaves we ask if its
necessary to fill the role. Can work be done differently?
Can someone be developed into the role?
13
CASE STUDY
Jobcentre Plus (JCP) has created the role of HR change
business partner to ensure that the people management
aspects of all cross-organisation projects are fully considered.
Pat Davies, Senior HR Change Business Partner for
Jobcentre Plus, said her role ensures that issues such as
workforce planning, employee relations, learning and
development and TUPE are fully considered when change
is being implemented.
She ensures that HR milestones are factored into project
management plans and that the people management
issues are included in the risk register.
One project she is working on is helping to support the
development of JCPs personal advisers to enable them to
provide a more personalised service for customers who
find it more difficult to get back to work. The project
is closely aligned with the Governments wider welfare
reform agenda.
It is about treating everyone as an individual. Really
listening to people and finding out what are the individual
14
CASE STUDY
Essex County Council is a large employer: in addition to
its 10,000 employees, the HR function provides support
to schools employing a further 30,000. The council wants
to be at the leading edge of HR practice, anticipating
and supporting broader organisation change. To meet
a perceived capability gap in the local authority sector,
they have recruited HR talent from outside, including
the financial services sector, as well as developing their
in-house talent, to build internal consultancy skills and
support OD and change management activity.
Faced with the need to make major financial savings,
the council has embarked on a radical process of service
transformation. This means a new target operating
model and the authority becoming almost purely a
commissioning, rather than delivery, organisation. The HR
function was asked to lead the transformation process
for the whole organisation, giving a powerful signal to
the organisation that people matter. This was within a
shrinking envelope as posts were taken out of the HR
function: Essex now has a ratio of slightly more than one
HR person to every 100 employees .
The new operating model has meant that service clients in
the area of employment and inclusion are now customers
of a trading company that operates in practice as a
separate commercial entity. Some 750 council employees
have been shifted across into the company. The trade
unions were impressed by the way in which this major
TUPE transfer was handled. Converting library services
into a trading company is currently under discussion.
Essex is working collaboratively with other public sector
providers and voluntary services to deliver service reform.
This involves working with a number of agencies to put
15
CASE STUDY
In 2009, Kingston Borough Council (KBC) embarked on
a four-year plan, One Council, One Kingston. Some 14
million of savings are required, to be achieved by doing
less but better. The aim is to plan, conceive and deliver
services as a single council, in combination with partners.
The approach has been designed to deliver our vision
and make peoples experience of our services as easy and
positive as possible by acting as one council. Essentially
this means looking at service delivery from the customers
perspective and eliminating unnecessary duplication
adopting one way of doing things, and doing things once.
Projects within the One Council programme include:
s Customer first looking at all staff who have
customer contact with the aim of minimising
unnecessary staff contacts, dealing with queries
straight away and exploiting use of the Internet, for
example for paying and booking online. A separate
project will increase investment in ICT and reduce
staff over the period of the programme.
s Community hubs bringing together local clusters
of services that could be provided by the council,
health, voluntary organisations and other partners.
s Commissioning aims at right sourcing rather
than outsourcing, and getting best value from
procurement.
s Organisational dynamic recognises that getting
structures right is not enough. Human Resources
Manager Marie Gadsden says the key is making the
organisation culture work, getting the right people
in place and getting the right behaviours. Staff
workshops have identified the characteristics of a
gold medal winning OD function, to be achieved
by 2012.
16
17
CASE STUDY
Karen Allman, HR Director at the Royal Bournemouth and
Christchurch Hospitals NHS Foundation Trust, said that
traditionally the relationship with the unions has been a
positive one, with the trusts quarterly partnership forum
working well. This is supported by a monthly sub-group
meeting that is used to review and change policies.
She cited the recent example of the introduction of electronic
rostering for nursing staff. The Royal College of Nursing
representatives have helped support the change and sent
out guidance making it clear that some people might have
to compromise on some of their traditional informally agreed
working patterns.
The only example of a recent dispute was over plans by
the trust to retain its flexible working allowance, which
was a payment for people working anti-social hours. The
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19
CASE STUDY
Grimsby Institute of Further and Higher Education has
reduced employee absence levels through a twin-track
approach of investing in the people management capability
of managers and also by taking a fairly prescriptive approach
to managing absence.
Since 2001 the institute has developed and implemented a
health and well-being strategy. The strategy is underpinned
by extensive communication with staff to ensure they have
clear expectations of what approach the institute adopts
which is a caring one, balanced with the business need for
people to be at work.
Peter Barnard, registrar at the institute between 2001 and
September 2010, said the college invests in the management
capability of its managers to ensure they can motivate,
develop and support their people; however, it also has a clear
HR policy framework that supports attendance.
Its our job as HR to equip managers through systems,
training, information, advice, and support so they do
the job they are actually paid to do, which is to manage
people. However, people working here also know that
we will actively manage absence. For example, we dont
pay people who go off sick while we are disciplining
them. This starts with the investigatory interview stage
and covers all subsequent stages, including if someone
goes off sick after receiving a penalty.
20
CASE STUDY
HM Revenue & Customs (HMRC) was formed in 2005,
following the merger of Inland Revenue and HM Customs
and Excise Departments. As part of a strategy to improve
its efficiency by 5% year on year to 2011, it has made
significant reductions in staff numbers and currently employs
the equivalent of 68,000 full-time people.
Employee engagement surveys have shown a continuing
need to motivate and engage HMRC staff. At the end of
2009, the department began developing an employee
engagement strategy and recognised the need to include
colleague segmentation to support the communication
and embedding of a wider customer-centred business
strategy. Focus groups and one-to-one interviews were
held with staff at different levels and almost 6,000 people,
in all grades and from a range of locations across the
UK, completed an online survey. Drawing on the survey
findings the results were used to establish what staff
attitudes and motivations really were and provide a deep
level of insight into the drivers of colleague engagement.
It emerged that initial assumptions that employee
engagement levels might be adequately reflected, by
aggregated scores on motivation or desire to stay in the
organisation, were incorrect. Measuring engagement by
peoples alignment with organisational objectives, or their
willingness to go the extra mile, failed to do justice to the
range of factors that influenced their behaviour. What was
needed was to look beyond the results for the workforce
as a whole and focus on the attitudes and motivation of
individual employees.
The research was undertaken jointly by the HR department
and behavioural, evidence and insight team in the individual
customer directorate with experience of working on the
HMRC customer segmentation. It demonstrated that
employees identified, not so much with HMRC, but with
their team or work group. Many were committed public
servants, enjoyed their work and took pride in what they did,
but others were angry and frustrated by the way their work
was organised.
There are many approaches to segmentation, but by basing
the segmentation on the core dimensions of passion
21
22
23
24
25
BUILDING HR EFFECTIVENESS
26
And for the HR function itself the top two challenges facing
those respondents in the public sector over the next 12
months are managing change and cultural transformation
and restructuring the organisation. Interestingly, these dont
feature in the top two challenges for HR functions in the
private services sector which appear to be primarily focused
on employee engagement and improving performance
management and reward.
The challenge for HR to deliver these agendas for their public
services organisations needs to be set against the backdrop
of the pressures facing the HR functions themselves. Over
the last 12 months, 40% of respondents from public sector
services report their HR function has decreased in size and
some 56% expect their HR functions to decrease in size over
the next 12 months.
To add to the picture, the HR Outlook survey highlighted
some 79% of public sector services HR respondents agree
or strongly agree with the statement, HR to be perceived
negatively in times of cost reductions and redundancies. This
is the strongest level of agreement with this statement seen
across the sectors surveyed.
Structures
The main route to achieve the goal of a strategic, value-adding,
business-aligned and efficient HR function has for many
organisations, we believe, been through structural change.
The CIPDs HR Outlook survey shows cost reduction is
the top priority for all sectors when restructuring their HR
function (according to respondents whose organisations
had done so in the last two years), with the desire for HR to
be a strategic contributor falling to second place. Looking
at the public sector, the position is even stronger: the cost
reduction driver is more marked (some 47% reporting
this versus 39% in overall sample). The need to fit wider
organisational change models (31%) and the need for HR to
be a strategic contributor (32%) are the other top priorities
when restructuring.
The challenges involved in HR transformation are highlighted
by the anonymous case study opposite.
But HR transformation is not easy and what you see often is
that it is difficult to embed in an organisation where there is a
lot of resistance to change (which can include HR resistance),
CASE STUDY
In 2008 the chief executive of a large public sector
organisation set out a vision for his organisation. He felt
that although they were meeting standard definitions of
success, the focus there had been on targets and had led
to robotic ways of working and not necessarily delivering
what was best for the public.
The drivers of this vision were three-fold:
s to encourage an approach where front line officials
could actively use their own judgement
s this would in turn increase the confidence and
satisfaction of the public accessing their services
s it would also support the organisation in its drive for
efficiency and cost-cutting by using resources in the
most savvy way.
27
All HR professionals
(n=2,266)
42
22
Large organisation
(n=1,571)
30
Medium organisation
(n=536)
Small organisation
(n=113)
11
35
15
64
47
111
4 2
14
2 3
15
25
The three-legged model (referred to as the Ulrich model) including business partners, specialists and shared services
A single HR team with generalists, specialists and administration together
A corporate HR strategy team with operational teams providing all HR services, aligned to business units
A corporate HR strategy team with operational teams providing all HR services, aligned by location
A set of specialist services provided centrally, with business unit HR teams providing the rest of HR services
A small central HR function with largely outsourced HR activity
Other
Shared services
Administrative tasks form the core of shared services activities, often in conjunction with a call centre and intranet.
These tasks, previously performed locally by divisions or business units, are re-engineered, streamlined and centralised
so that the various business units pool resources and share in the service delivery solution. This has the potential
advantage of offering cost benefits through the economies of scale that such a model provides.
Centres of expertise
Centres of expertise with deep technical capability in such areas as resourcing, employee relations, reward and
training give professional support to business partners, often developing detailed policy for corporate HR and acting
as a reference point for shared services agents dealing with complex issues raised by clients.
28
CASE STUDY
The MoD has moved to a shared service HR model over
recent years. Against the expectations of some who
thought they were being way too ambitious and despite
teething problems, they have succeeded despite the
scale of the shift. The MoD sees its shared service centre
as a seedbed for specialist HR, in that it aims to resolve
even quite complex issues, rather than passing them on
to a source of more specialist help. In the process, the
MoD has done a lot of work to strip out arcane and
contradictory HR processes to support an expert backoffice function. Their instinct is to develop shared services
further and consideration is being given to extend shared
services to include functions such as finance, not just
HR, and possibly provide back-office services to other
government departments.
To develop HR capability, the MoD is working closely with
the CIPD and adopting a CPD-based programme aligned
with the HR Profession Map. This will allow people to
achieve accreditation through external validation. The
MoD is heavily committed to a model of professional HR,
where people can show proof of their professionalism. HR
careers are shifting: the MoD will use the CIPD HR Map
to help people better identify their own development
needs and plan their careers, which may include moving
between different government departments. More
29
CASE STUDY
A new programme of HR collaboration at the civil service
has meant the function is ahead of the game now that
government departments are faced with potentially huge
budget cuts.
30
Philosophical reasons
Organisations that have a history of outsourcing other non-core
activities (for example, finance, IT) may simply decide that HR is
next in line for outsourcing. Similarly, sometimes an organisation
may decide to outsource all non-core (support) services in one
go, bundling HR, IT, finance, and so on, together.
Reducing cost
One important strand of HR transformation is the
development of OD capabilities among civil service staff.
Departments are unlikely to be able to afford to buy in
outside OD consultants as they have in the past. One option
might be to develop a shared service capability focused on
OD as an expert domain across Whitehall.
Reducing risk
Organisations may decide to outsource in order to reduce risk,
for example employment law.
Outsourcing
The potential drivers (and pitfalls) of outsourcing are wider
than just cost reduction. CIPD research back in 2004 identified,
for example, that the UK Government was clearly imposing
outsourcing of many functions as a means of delivering cost
savings (for example as a result of the Gershon review and
its focus on best value). Such wider drivers are likely to have
knock-on implications on any drivers for HR-specific outsourcing.
31
Improved metrics
CASE STUDY
Overview
With effect from 1 October, 2010 Cleveland Police
Authority entered into an outsourcing partnership with
Steria UK, covering its communications centre, criminal
justice and also back-office functions (including finance,
procurement, HR, payroll, learning and development).
The partnership has been agreed for an initial period of
ten years and will release some 50 million savings in this
time, with a guarantee of no compulsory redundancies
during that time for the 514 people that have been TUPE
transferred from the police authority to Steria UK. It was
also agreed that the partnership was to have no impact on
front-line police officers.
This is one of the first outsourcing arrangements of its kind
within the police service.
Background
Some two years ago Cleveland Police Authority decided to
consider outsourcing a number of its operations. Initially the
main area under consideration was ICT (information and
communication technologies), in anticipation of a possible
move to integrate ICT nationally within the police service.
As tenders were received from different bidders, a number
of them proposed widening the scope of the operations
to be outsourced and it was finally agreed that the scope
32
Staff engagement/buy-in
There have been mixed emotions from staff due to be
transferred, although it has been generally positive.
Cleveland Police had entered an outsourcing arrangement
about five years earlier involving the TUPE transfer of some
50 staff. Their experience was broadly positive.
HRs role
HR has played a key part in the outsourcing planning and
implementation in terms of their role in communication
and engagement of all stakeholders, not least the union
negotiations.
Workforce planning
Expected benefits
Outsourcing of HR
33
Key learnings
It is early days for this arrangement (it went live 1 October
2010, the day after my visit!) so as yet some of the practical
issues/challenges might not have surfaced, but what seem
to be key points in agreeing the deal and ensuring it is a
success include:
s To ensure a seamless service, the choice of
outsourcing provider is key. And this, for Cleveland
CASE STUDY
Overview
Somerset County Council entered into a partnership
agreement with IBM, Somerset and Avon Police Authority,
South West One and Taunton Deane Borough Council
in 2007. The four organisations formed a joint venture
company called South West One, 80% of which is owned
by IBM. The partnership covers an initial period of ten
years with a guarantee of no compulsory redundancies
during that time for the 660 people including 146 from
the HR department that have been seconded from
Somerset County Council to the joint venture company.
This is the first time a local authority has entered into a
partnership with a private sector company and a different
type of public service organisation.
Background
More than three years ago, a team comprising the chief
executive and HR director of Somerset County Council
34
Implementation
Crouch decided that those who were corporately
strategic would remain within the organisation, and those
who delivered strategy would join the company. Only four
out of 150 remained with Somerset CC. The decision was
based on the existing structure, which saw each HR group
manager act as advisers, for the directorate they were
representing and managers of their own teams. If they
did not move, new managers would have to be found. As
Croach says:
I dont think I ever did direct their work in a
management way, but I liaise with them and I still
make sure that what they do is in line with what they
should do so I still give them parameters in which
to work. But that is from a client basis rather than a
management basis, but to all intents and purposes, it
is pretty well the same thing.
Staff engagement/buy-in
One of the advantages of the secondment model is that
staff have remained loyal to the organisation. However,
staff are showing more loyalty towards the new company
the longer the contract goes on. As Croach states, there
is a psychological problem with our secondees in that
they are unsure who they work for because with the
secondment model they are still employees of the council
yet work for a separate organisation.
Expected benefits
The main driver for outsourcing was to improve quality
through service transformation under which staff would
be transferred from back-office functions to front-office
transformation roles. However, this has not happened
because other public sector bodies in the county or region
did not join the venture company, as IBM expected.
Actual benefits
However, moving to a shared service platform has
enhanced service delivery in important ways:
s There are procurement savings of 160 million over
ten years across all functions. The shared service
operations allows transactions to be made far more
effectively, including far better MIS than we would
have ever had before; and not just within HR, but
across service areas.
s It is interesting to note the degree to which the IT
department has improved: The IT department is much
better than it used to be.
HRs role
The only noticeable difference between the former and
current system is that HR is now working to a shared
service model, which involves working to the different
terms and conditions and grading schemes that exist
within each of the public service organisations (see public
policy recommendations section).
Outsourcing of HR
HR services (including learning and development and
health and safety) are one of the back-office functions
that have been outsourced into the joint venture
company. Both the administrative and more strategic
aspects of HR (including business partners) have been
outsourced. In fact, there only remains four people out of
the original team of 150.
(continued)
35
Despite this, Crouch says that his role has remained largely
unchanged:
As an HR director (HRD), you probably only spend
5 or 10% actually managing the service in terms of
employee management. Most HRDs are technical
specialists in their own right who serve as HR advisers
to the CEO and the board and with most of their
other time spent in enhancing the HR offering.
If anything, he believes that his responsibilities have
increased, not so much in the monitoring of the contract
as one might expect, but in directing the work of
seconded employees, due largely to the huge change
agenda impacting on local government and the need for
the client HR function to be appropriately responsive.
Crouchs role is to work with the senior client function
heads within the council, and specifically to support
performance monitoring among the functions, which he
says is a tougher role in many respects.
A commissioning role is tougher in terms of
monitoring contracts than it is to actually monitor the
employees who deliver the work.
In an effort to avoid excessive performance management,
Somerset CC inserted a clause into the contract
that penalised IBM if labour turnover went above a
certain level. As it turns out, labour turnover has been
at historically low levels due to the recession. IBMs
management style has been relatively hands-off. Their
objective is to transfer knowledge, not to overmanage
staff. The HR team is made up of the same managers;
the only difference is that there is now an IBM director of
operations, who has made a helpful contribution. So the
HR service that Richard is getting is very similar to the one
he got three years ago.
Political context
Somerset CC needs to make 1,500 losses over the next
two years as part of an expected budget cut of 2540%
over the next three years. Some 1,000 staff have already
expressed an interest in the voluntary redundancy
programme that the council is currently rolling out, with
200 employees already exited.
36
Key learnings
s Leadership is not as strong under the chosen
consultancy partnership model as the direct
management model. Other drawbacks include a slow
decision-making process and impatience with the
speed at which change is implemented.
s The partnership has been constrained by the
secondment arrangement and the terms of the
contract. Crouch would prefer a TUPE model that
focused on cost rather than quality if he had his time
again. However, his biggest recommendation is to
outsource rather than adopt a partnership.
s Dont put in place guarantees about employment.
Due to IBMs contractual obligation to guarantee
employment, the headcount can only decrease by
7% in any one year due to natural wastage. There is
therefore no scope to make savings from wage costs
under the current terms of the contract.
s He would also centralise operations in a shared service
arrangement. He would still have the good managers
acting as business links to the directorates they
represent. However, they would not have their own
offices and administrative teams.
Alternatives to outsourcing
One criticism of HR outsourcing is that it can be like picking
up spaghetti, for example, if complex processes already
exist, inefficiencies may simply be transferred out of the
organisation and result in poorer service standards overall.
Where HR is contracted to a private sector provider, the TUPE
regulations will apply and personnel costs will be transferred,
so limiting the level of efficiencies that can be achieved.
Outsourcing arrangements are often long term (five- to
ten-year contracts are not unusual) and it is important to
Potential options
Offshoring
Outsourcing
Web-enabled HR system
Interim management
Outsourcing
Job redesign
Change reward/performance structures for
managers
Internal advice lines for managers
Outsourcing
Shared services
Greater investment in HR
37
Shared services
86% of internal shared services projects meet cost
savings goals, compared with 67% of outsourcing
projects [HR Magazine, July 2004, p80]
One of the more common alternatives to the outsourcing
model is shared services. Some local authorities are interested
in developing their own shared services and then seeking a
commercial return from sharing them with other (adjacent)
partners. However:
s There is widespread uncertainty about political direction,
including the relationship with outsourcing, and
understandable reluctance to be a frontrunner.
s Some local authorities are still looking to implement the
Ulrich model and feel that considering further radical
transformation of HR may be premature.
s HR directors have not necessarily got support from their
senior management for developing the HR function.
s Some local authorities are looking to identify a
commercial strategic partner to help them get started.
Other concerns are more fundamental. There is a question
about the business case for shared services across
local authority boundaries, whether applying to HR or
more widely. As a matter of principle, why should it be
significantly cheaper to deliver services from a single centre
if employment policies and conditions continue to diverge
between authorities? Sutton and Merton Councils have dealt
with this by transferring staff to Sutton, so that they are on
common terms and conditions, but other authorities have
been unwilling to face up to the legal and employee relations
issues involved. Some elected members may also be unwilling
to support sharing services between authorities, on the
grounds that this will weaken local accountability. However,
the Sutton and Merton shared service has demonstrated
that considerable savings can be achieved (500,000 to date
through integration of structures, delayering management,
joint procurement to achieve economies of scale and
business process re-engineering) while at the same time
achieving improved customer satisfaction measured
through improved performance indicators and customer
satisfaction.
Dean Shoesmith, Joint Head of Human Resources at the
boroughs of Sutton and Merton and also President of
the Public Sector People Managers Association, believes
38
CASE STUDY
Following the departure of the head of HR at Merton Council
in 2007, the chief executive of Merton Council, Ged Curran,
conducted an options review of how best to provide the HR
service going forward. The service had been highlighted in a
comprehensive assessment report by the Audit Commission
as in need of improvement. The assessment included
discussions with various internal and external stakeholders,
including the CEO of Sutton Council, with whom Curran
enjoyed a constructive relationship and who was interested
in exploring opportunities for strategic partnerships. Curran
was impressed by Suttons HR function, which continued
to receive high inspection ratings by the Audit Commission.
The two chief executives therefore decided to approach
Suttons head of HR, Dean Shoesmith, to ask whether he
would trial providing Merton with HR support while retaining
responsibility for Sutton. The two chief executives saw this as a
strategic opportunity that would help pave the way for further
partnerships to develop.
A year later, Shoesmith was permanently appointed to both
councils as head of HR and charged with responsibility for
looking to the various models of shared service delivery
that were set out by the 4ps consultancy. These included a
secondment programme, which would have seen Sutton staff
seconded to Merton Council. This was rejected due to the
complications that would be caused by TUPE, as under case
law a long-term secondment has the potential to be deemed a
TUPE transfer, rather than a secondment.
Insourcing was considered but rejected because there was no
existing shared HR services function within local government
that could do the job effectively. The outsourcing model was
also considered, but rejected because of concerns that there
would be a lack of flexibility over how services were delivered
and that the drive to make profit might also compromise
service delivery.
The decision was taken to go down the shared service path for
a number of reasons:
s It allows for further business process engineering
improvements.
s It is more responsive to deal with problems if they arise.
s It offers considerable savings.
s It offers more scope for further savings through joint
procurement.
Implementation
Shoesmith has adapted the Ulrich model by integrating a
fourth leg, which sees the learning, development and diversity
teams integrated to make savings in procurement in particular.
Customer satisfaction has increased and more ambitious
targets have been set and met due to the maintenance of
the HR business partner arrangement. Shoesmith cites lower
absence levels, a greater focus on strategic priorities and a
higher degree of innovation due to the sharing of knowledge
and ideas between departments as key benefits of the new
arrangement. Shoesmith also argues that the arrangements
allow him to use the strengths of each department. Mertons
CRB check system was well developed and Suttons HR
team knowledgeable therefore the combining of those
employees into an integrated team synthesised the best of
both. Shoesmith believes the timeframe for CRB checking
could be cut by five to six weeks during the course of 2011.
Costs have also been cut as staff resources have been shared
between the two departments. HR headcount has been
reduced by 16%, which has mainly come from managerial
delayering and avoiding duplication. Shoesmith said the move
to shared HR services has delivered 500,000 in savings to
date. He also estimates that further savings of 800,000 will
be made from 2010 against total shared budgets it will
produce a total of 28% budget savings.
A legal collaboration agreement and service level agreement
ensures that Sutton provides an equal HR service to both
councils. If Merton becomes unhappy with the service, it
will go to Mertons director of corporate services in the first
instance; and if that fails, escalation procedures allow for
matters to be raised with Mertons chief executive. The last
resort is the dispute resolutions procedure, with Local
(continued)
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40
CONCLUSIONS
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42
REFERENCES
43
Issued: December 2010 Reference: 5420 Chartered Institute of Personnel and Development 2010
The PPMA serves and represents the professional interests of members working across the
HR/OD professions within the Public Sector. The Association influences and contributes to
the development of public policy and legislation in this respect, constantly advocating the
need for higher standards of people management and development to further enhance
the delivery of public services.