Meaningful and productive employment. Bridging the employment experience gap RISK PENSIONS INVESTMENT INSURANCE

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1 Meaningful and productive employment Bridging the employment experience gap RISK PENSIONS INVESTMENT INSURANCE

2 What does meaningful and productive employment look like? Businesses in the UK continue to face significant changes and challenges that are likely to increase in both number and complexity in Productivity is one of the most important of these. Despite the ONS reporting a slight rise over the first three quarters of 2018, this is now slowing. Recently, the method of calculating productivity - as a measure of GDP per hour worked - was brought in line with how it is calculated by the other G7 economies. This shows that the productivity gap - how far the UK lags behind the US, Germany and France - is not as wide as previously thought. However, based on a GDP per worker measurement, there remains a significant productivity gap when the UK is compared with all G7 nations, except for Japan. It is the combined understanding and agreement between the employer and employee of what creates productive value and how that value is shared that provides the foundation for meaningful and productive employment. True productive value can only be created in a collaborative, engaging work culture and environment where employees can flourish by doing meaningful work. This means it is meaningful to the employee in that it allows them to use their full range of skills and abilities, make decisions about the best way of delivering what s required of them and can clearly link their contribution to organisational objectives. This work also has to be meaningful to the employer in terms of it being work that needs doing and that it can only be done by employees effectively and efficiently rather than via third parties or technology. Our research over the last year has been led by wellbeing, but also allowed us to gain a better understanding of the employment experience currently offered by UK employers and how this is received by employees. How effective are current employment models? How do organisations typically respond to employment issues they identify? What steps do organisations take to align their business needs and priorities with those of their people? Our research identified the ageing workforce as the number one challenge for employers today and therefore is of particular relevance to meaningful and productive employment. We will focus on this and other demographic, gender and diversity challenges in our future publications. 2 Meaningful and productive employment * statistics as per latest Office for National Statistics reports

3 Over the course of 2018 we extensively researched current UK employment through four distinct, but related studies. We separated our research into two well defined areas: Overall workplace wellbeing Focussing on wide, holistic indicators and the drivers behind employment experience. Financial wellbeing Focussing on the provision of pension and wider financial wellbeing in the workplace. In order to gain a broad, robust and representative view of the employee and employer perspective, we polled two groups of 3,000 employees for two separate surveys as well as two groups of 200 employers for two further surveys (employing a total number of people in the region of 500,000) The results revealed a significant and widening gap in the employment experience when compared for both groups. It also identified ways of bridging that gap. Bridging the employment experience gap 3

4 Employment challenges 1 Understanding employees 3 The skills and reward conundrum As well as being workers, employees should have a legitimate interest in organisational success, as both stakeholders and customers. They have unique views, experiences and aspirations based on their personal values and beliefs, as well as what is going on in their lives both inside and outside of work. This means that a one size fits all approach to managing employees is becoming much less relevant in a changing and more personalised employment landscape where work/life balance is more of a blend. It seems wrong to know more about customers than those working in the business. We are in an extremely tight labour market, with an increased focus on highly skilled roles and recruiting for the skills and capabilities required for future roles. This is reigniting the war for talent. This is shifting the balance of power from the employer to the employee. Organisations will need to think more creatively on how they recognise and reward their top achievers across the board through pay and bonusing. 2 Productivity 4 The perception gap over the importance of wellbeing Our Why BWell survey revealed that a third of the UK s employees claim to be coasting. This means they are going through the motions at work and probably doing just enough to get by. In some cases this is a conscious choice, but for others it is because their organisation has created barriers that affect their productivity. Given the UK s productivity challenges, this level of coasting is a worry but also an improvement opportunity. How holistic is the concept of wellbeing and why do most employees feel there is a discrepancy between the importance employers say they place on it and the impact of relevant strategies and programmes to improve it? 4 Meaningful and productive employment

5 5 Poor financial health can have a negative impact on mental health and employee performance, creating both a challenge and appetite for employer support through financial wellbeing initiatives. 6 Employees are very aware of the state of their financial health but many are struggling to cope Short-term financial concerns such as day-to-day living costs are a higher priority than building a pension A one size fits all approach to managing employees is becoming much less relevant in a changing and more personalised employment landscape Saving for the future and long term financial planning feel of less relevance and importance than day-to-day needs when you are struggling to make ends meet. Financial wellbeing strategies should include provision for supporting the wider financial concerns of employees. 7 Only one in five organisations report very high levels of employee wellbeing Many organisations are having to review and rethink their wellbeing strategy and programmes because these are not having the intended impact, or delivering real benefit. Bridging the employment experience gap 5

6 The employment experience gap The employment experience gap is defined as the difference between an employer s views on the effectiveness of the employment proposition they offer and how this is experienced in reality by employees. The employment experience gap has a major influence on productivity in terms of understanding and improving both the emotional, physical and logistical drivers of both wellbeing and performance. Effective people strategies align both the purpose and objectives of your business with those of your employees. An organisation s people is its greatest competitive advantage, so failure to fully understand employees concerns and requirements limits the chance of having a successful business. Our research over the past year brings this to light. Strategically, employers and employees are mostly aligned on the key objectives for developing a wellbeing strategy, which are to keep employees fit and healthy and to improve productivity and happiness. But only one in three employers has a wellbeing strategy in place, compared to just one in five employees who think that this is the case. Your wellbeing strategy is focussed on keeping employees fit and healthy 58 % 53 % Your wellbeing strategy is focussed on improving productivity 53 % 40 % Your wellbeing strategy is focussed on improving productivity 47 % 31 % Employer experience Employee experience 6 Meaningful and productive employment

7 However, the employment experience gap increased significantly when we asked about the impact, effectiveness and benefits experienced from wellbeing strategies and programmes. Also, from a financial wellbeing perspective, employees felt much less satisfied about how fairly the value and success generated by the business are shared with the workforce. The success generated by your organisation is shared fairly 70 % 15 % The level of wellbeing in your organisation is high 61 % 19 % In addition, these results support what we have seen from other studies, which is that the pay gap between the lowest and highest paid employees is in fact widening. Mandatory gender pay reporting has already started to create momentum for establishing greater transparency around pay and this will only expand further to shine a spotlight on some uncomfortable pay differentials in the coming years. In short, a significant proportion of employees do not share their organisation s views on the impact and effectiveness of wellbeing strategies and programmes. The pay gap between management and nonmanagement staff is reasonable WE ALSO ASKED EMPLOYEES HOW THEY ARE COPING AT WORK: 68 % 27 % There is genuine openness and transparency about remuneration 68 % 32 % COASTING 46 % 32 % ABOVE AVERAGE Your organisation will be more successful in five years time than it is now 77 % 43 % Your wellbeing strategy is very effective/delivering real value 42 % 16 % 9 % FLOURISHING 7 % STRUGGLING 6 % NONE OF THE ABOVE Employer experience Employee experience Bridging the employment experience gap 7

8 Having identified that around a third of respondents describe themselves as coasting at work, we decided to compare their satisfaction in a number of other employee related factors, compared against those who claim they are flourishing: % OF THOSE WHO FLOURISH / COAST WHERE THEY: Have meaningful work 89 % 46 % Have a job that makes best use of their skills and abilities 83 % 39 % Have interest shown in them as a person 87 % 41 % These results show that coasters are not happy to be employed in work that doesn t get the best out of them and with very limited opportunities to develop their skills and careers. Despite this, the majority are not planning to move on any time soon. These people have become stuck. Organisations should be honest in their assessment of possible coasters in their employment. Do they coast through choice or because of the type of work they do and organisational restrictions over how they do it? Feel supported in personal and professional development 32 % 81 % Feel they can develop their future careers at their current organisation 29 % 74 % Feel their organisation will be more successful than now in five years time 29 % 68 % Feel secure in their job 62 % 91 % See themselves still working there in twelve months time 60 % 90 % Flourishing Coasting 8 Meaningful and productive employment

9 Bridging the gap How do organisations bridge the employment experience gap? Using a bridge analogy is a good one from two perspectives. Firstly it is important to identify how big the gap is and why it exists, otherwise it could get bigger or there is a risk of creating one that doesn t currently exist. The second is in deciding the type of bridge required depending on attributes like size, complexity, geographic reach, business objectives, future evolution etc. Some will require a steel based super structure, while for others a wood beam bridge will suffice. The key is relevance and where employers and employees come together to create a new era of meaningful and productive employment, by focusing on: 1. Having a clear sense of purpose, objectives and strategy about what they stand for as both an organisation and an employer and what ultimately defines and drives decision making. This can then be supported by clear, innovative, exciting, engaging and aligned business and people plans that ensure future success and sustainability. inside and outside of work. HR metrics and analytics are vital to understanding their employment journey, their motivation for being at work, their experience of you as an employer and how to get the best out of them. 2. Understanding how value is generated compared to the costs of doing business and determining how to enhance those value drivers. An important element of this is understanding and defining what meaningful work is, how this allows employees to generate value and share in the success that this creates. 3. Developing a deeper understanding of employees as stakeholders, customers and people and not just workers. They have lives, skills, knowledge, experiences, challenges and responsibilities both 4. Clearly identifying the links and overlaps between different programmes and activities underpinning people strategy, policies and planning. For example, inherent links between employee engagement, health and wellbeing reinforce the need for activities to focus on these collectively and not in isolation of each other. Bridging the employment experience gap 9

10 5. Separating the vital few from the useful many by setting the expectation and performance at the right levels. Trying to be excellent at everything is a potential recipe for failure and gets in the way of actually being very good. Prioritisation is important in focusing time, money and resources on improvements that generate benefit and value for employees, customers and business. 6. Creating an open, honest and engaging organisational and leadership culture and behaviours that encourage collaborative working at all levels of your organisation. 7. Ensuring communication is genuinely two-way, open, honest and transparent. The focus needs to be on having adult-to-adult rather than parent-tochild communication that engages and involves employees and allows them to input and share and not just provide them with information. 8. Regularly measuring, reporting and communicating progress, impact, effectiveness and performance against defined objectives using KPIs that allow everybody to understand the benefits, return on investment and employment experience. This partly explains the current experience gap because good things do happen, but employees simply might not know about it. 9. Benchmarking experience and performance internally to identify areas of good practice and externally within sector and against aspirational employers in other sectors. This helps to determine where to set the bar for expectation, experience and performance. 10. Starting talent planning for the future now because the economic, business, technological and employment worlds are changing rapidly. What do the optimum operating models of the future need to look like? Where will technology replace jobs and where will it enhance jobs? What are the skills required to be successful in the future? Will skills gaps be addressed through internal development or external recruitment and where will the investment for this come from? What will your future reward model look like? Successful business is built on healthy relationships and the effective management and alignment of expectation against reality. 10 Meaningful and productive employment

11 Organisations will need to decide on the type of structure required in order to bridge their employment experience gap. The key is relevance and where employers and employees come together to create a new era of meaningful and productive employment. Bridging the employment experience gap 11

12 The Barnett Waddingham approach To us, innovation means having an approach to consulting that moves seamlessly with our clients changing requirements in a market that s constantly evolving. Innovation underpins our attitude to performance. Simon Sinek says everyone has a WHY; a purpose, cause or belief that inspires you. We firmly believe this too we ve based our WHY around the philosophy of Eudaimonia: a state of happiness which translates as human flourishing ; reflecting work as a successful, symbiotic relationship between employer and employee as opposed to one of paternal ownership. We have boldly structured our business to reflect the pursuit of happiness and wellbeing for employees and employers alike. To deliver this, we identified six pillars of wellbeing that impact how an employee performs in their role: My Job, Financial Security, Health, Protection, Support and Work/Life Balance. Our ACDC methodology locks best thinking into our day-to-day consultancy, allowing us to understand and anticipate clients needs, and ensure our solutions continually meet them. Our approach gets to the heart of clients issues in four key steps: A C D C ANALYSE CONSULT DELIVER CHECK 12 Meaningful and productive employment

13 1. Analyse Identifying the actual issues a company might face, rather than jumping to conclusions. We analyse and benchmark relevant client data against an analysis of employee responses from our innovative wellbeing analytics tool, BWell; gauging employee wellbeing across the six pillars. BWell is presented in both a digestible report and an interactive online dashboard. 2. Consult Consulting on both the design of a holistic wellbeing strategy and objective recommendations to solve the issues identified. 3. Deliver Engaging with the workforce and implementing the actions agreed with the client by building simple, effective solutions where our independence allows us to combine the market s most appropriate products for each client. 4. Check Monitoring the impact of our recommendations against the client s objectives and benchmarking our performance - demonstrating a return on investment. Regular monitoring also serves as prompts to adapt the strategy where certain solutions are no longer fit for purpose, ensuring the clients needs are continuously met. Within this framework, our focus on people analytics and consulting on strategy prior to recommending solutions is what sets us apart. BWell is our workplace wellbeing analytics tool. We use data gathered by way of an employee survey, employee workshops or through other metrics. Cohort analysis Our intention is that our pension analysis tool, GEM, will become the ultimate corporate dashboard focusing on the holistic wealth & health issues impacting a workforce. We extended this tool recently to meet the demands of the market under pension freedoms. We can now examine the diversity of cohorts closest to retirement age, and analyse which new solutions offer them suitable pathways to retirement. These sorts of innovations are possible because we re not here to sell products. Our independence allows us to build simple and effective solutions; combining the right products from the market to get the best results for each client. Find out more: barnett-waddingham.co.uk/gem Bridging the employment experience gap 13

14 Please contact your Barnett Waddingham consultant if you would like to discuss any of the above topics in more detail. Alternatively contact us via the following: Barnett Waddingham LLP is a body corporate with members to whom we refer as partners. A list of members can be inspected at the registered office. Barnett Waddingham LLP (OC307678), BW SIPP LLP (OC322417), and Barnett Waddingham Actuaries and Consultants Limited ( ) are registered in England and Wales with their registered office at 2 London Wall Place, London, EC2Y 5AU. Barnett Waddingham LLP is authorised and regulated by the Financial Conduct Authority and is licensed by the Institute and Faculty of Actuaries for a range of investment business activities. BW SIPP LLP is authorised and regulated by the Financial Conduct Authority. Barnett Waddingham Actuaries and Consultants Limited is licensed by the Institute and Faculty of Actuaries in respect of a range of investment business activities.