PRIORITIES AND EXPECTATIONS FOR The Future Forecast.

Transcription

1 PRIORITIES AND EXPECTATIONS FOR The Future Forecast. December 2014

2 CONTENTS Foreword 3 Ann Francke, Chief Executive, CMI Executive summary 4 Survey findings 5 Organisational optimism 6 Staff morale and job security 6 Economic expectations 7 Top management priorities 8 Managers resolutions 9 Budgets 9 The right people? 10 Political policies 11 Conclusion & recommendations 12 METHODOLOGY This paper is the latest in CMI s Future Forecast series. This year, we surveyed a total of 1,253 CMI members across the UK during late October and early November 2014, spanning a wide range of economic sectors and managerial levels, from junior managers to CEOs. ACKNOWLEDGEMENTS This paper was written by Lysbeth Plas and Patrick Woodman at CMI. Our thanks go to all the CMI members who gave their time to share their views with us through the survey. Comparisons are made throughout between this year s data and the Future Forecast report of Previous years are referenced where relevant. 2

3 FOREWORD ANN FRANCKE By most economic indicators there was much to be upbeat about in This report adds to a positive picture of the UK economy, with more managers reporting growth over the last year and optimism about their organisations prospects remaining steady and strong. But when asked about the economy as a whole, managers optimism is more muted. There are still major causes for caution. UK public finances remain under pressure. In recent weeks we ve been told that warning lights are flashing on the dashboard of the global economy. Doubts persist about the health of the European economy. Growth has slowed in the US and in Asia. There s rising tension with Russia, while Ukraine and parts of the Middle East face ongoing conflict. That could be taking its toll, prompting UK managers to reassess our national prospects. But political uncertainty isn t just an overseas phenomenon. At home, a General Election is only months away. Are the major parties focusing on the issues that British managers want them to? This report suggests they re missing the mark. There s a real need for policy makers to refocus on productivity. Among other things that means moving on from a debate that s been dominated by immigration and looking more closely at other thorny issues. The findings show that managers want more fairness and transparency when it comes to issues like business taxes and management pay. They want a focus on improving young people s prospects and developing the talent of the next generation. And they re looking for support in raising skills levels across the workforce. These priorities aren t only areas for government to act. They need sustained effort from employers and professional bodies have a role to play too. We re looking forward to working with a fantastic group of employers and government to develop a new trailblazer apprenticeship for management. And we re pushing hard to help raise standards of management and leadership across the board, giving more managers opportunities to progress to Chartered Manager. The forecast for 2015 remains mixed. It s far from a cloudless sky. But with a real focus on the essentials of good management and leadership on a sense of purpose, on inspiring people, and on developing potential there ll be plenty of cause for optimism and sustained success in 2015 and beyond. Ann Francke CMgr CCMI Chief Executive, CMI 3

4 EXECUTIVE SUMMARY Organisational prospects More organisations report growth in the last 12 months than in any of the last five years. 46% of managers say their organisation grew in 2014, compared to 41% last year. Managers are as positive about their organisation s prospects for the year ahead as they were 12 months ago, with 63% saying they re optimistic. Private sector managers are the most optimistic: 73% see a rosy future ahead, compared to just under half (49%) of those in the public sector. Economic prospects However, looking at the prospects for the economy as a whole, managers are slightly less upbeat than last year: just over half (51%) are optimistic compared to 55% at the end of Management priorities The top management priorities for 2015 remain controlling costs and managing performance. But people development has now made it into the top three as well, replacing increasing turnover. Similarly, training and development makes it into the top three areas of spending where managers expect budgets to increase. On the whole, expectations for investment remain modest, reflecting the continued focus on controlling costs. Spending on IT shows the biggest increase. Managers say it s increasingly tough for organisations to recruit the talent they need: 72% report problems in 2014, compared to 66% in This is particularly true of management and leadership skills, where almost three-quarters (75%) report recruitment problems. Despite these issues, most managers report that developing the next generation of managers and leaders is relatively low down their organisation s agenda: less than a third () consider it a priority. Individual priorities Managers top management resolutions for 2015 are to devote more time to their own professional development (53%), find ways of becoming more productive () and support the development of their team s skills (). Policy priorities Looking ahead to next year s General Election, work experience for every young person emerges as the joint-top policy that managers would back most strongly, with a net support score of 79%. A new apprenticeship for managers is also strongly backed, as are incentives to encourage employer investment in management development. The other, equally popular policy shows managers want a focus on business ethics and integrity, with support for closing loopholes used by businesses to avoid tax on UK activities scoring 79% net support. 4

5 SURVEY FINDINGS Organisational performance over the past year The positive trend brought on by the end of the recession continued into % of managers report moderate or rapid growth, compared to 41% last year. Equally, slightly fewer report a decline this year: 19% compared to 22% in The five-year trend shows just how far the economy has come. Five years ago the number of managers who reported decline was almost as high as the number reporting growth; in 2011, declining organisations even overtook those that did well. The current situation shows growth going in the right direction, suggesting many organisations are back on track when it comes to their performance. Figure 1 Organisational growth and decline Growth Decline 19 Growth has been strongest in the private sector, as reported by 55% of managers, followed by 54% in the charity sector. The public sector is unsurprisingly in a time of austerity still much lower, reporting 32% growth. Another sign of overall restored organisational performance is a continued fall in redundancy levels: 56% of managers report no redundancies in their organisation, compared to 53% the year before. What s more, the number of managers expecting their organisation s headcount to increase is now the same as those who expect it to decrease (both 34%). Last year, managers mostly expected headcounts to decrease. 5

6 Organisational optimism Managers optimism about their organisation s prospects for the next year has stabilised at 63%. Figure 2 Organisational optimism about the year ahead, (%) Pessimistic Optimistic Looking at the five-year trend, individual managers optimism and confidence in their organisation s prospects have increased significantly in line with an economy emerging from a severe recession, but has plateaued this year Again, there are significant differences between the sectors. Although public sector managers optimism about their organisation has increased from 44% to 49%, they still lag behind the other two sectors: 73% of the private sector and 69% of the charity sector are positive about their organisation s prospects for the year ahead Equally, the number of pessimistic managers in the public sector is also much higher. 34% are downbeat about next year s prospects for their organisation, compared to only 15% and 14% in the charity and private sectors respectively. Figure 3 Organisational optimism by sector While organisational optimism is unchanged, there are higher expectations of pay increases in 2015, after a long period of pay restraint. The majority of managers (53%) expect a pay rise in the new year, with 26% expecting an increase of more than 2% Staff morale and job security Staff morale is up slightly from 42% in 2013 to 44% this year. However, the number of managers who are pessimistic about morale in their organisation has also grown: from 36% in 2013 to 38% this year. Public sector managers are by far the most concerned. say they are pessimistic, compared to 24% in the public and 35% in the charity sector. 26 Private sector Public sector Charity sector 27 When it comes to job security, managers feel slightly more secure than last year (66% in 2013 compared to 69% this year). Again, it s managers in the public sector who are the least confident, with saying they feel insecure compared to 27% in both the private and the charity sectors. 6

7 Economic expectations Last year, expectations for the economy were high after emerging from the crisis. This year, expectations have been cut slightly: the IMF amended the projections for world GDP growth for 2015 from 4% to 3.85% 1. In November 2014 the Office for National Statistics confirmed a slight slowdown in the pace of UK growth at 0.7% for July-September Although Britain s recovery remains on track, growth is heavily reliant on the consumer sector, raising questions about efforts to rebalance the economy with more exports and greater business investment, as confirmed by this year s Autumn Statement in December This is likely to have an impact on managers outlook. Looking at the prospects for the UK economy as a whole, 51% of managers are optimistic about the year ahead. That s down 4 percentage points from last year s level but it remains double the level recorded the year before. Public sector managers are once again the least positive (45%) about the economy s prospects, but only slightly less so than the charity sector (47%). The private sector is more bullish: 56% of managers foresee a promising future. Figure 4 Economic optimism about the year ahead, (%) Pessimistic Optimistic World Economic Outlook, October Office for National Statistics, Second Estimate of GDP, Q3 2014, November

8 Top management priorities Managers top priorities for 2015 are controlling costs (72%) and managing performance (71%) as was the case last year. However, developing people has made it into the overall top three (56%), overtaking increasing turnover (), which suggests a stronger focus on people as the key route to success. Becoming more environmentally sustainable is still the lowest priority for organisations: only 19% of organisations see this as a top priority. The focus on people becomes even clearer when looking at the different sectors. Controlling costs, managing performance and increasing turnover have traditionally been top priorities for all sectors. Last year, they also included developing strategic partnerships and restructuring. This year however, the latter are replaced by improving employee engagement and developing people, which is in line with the recommendations made by the Commission on the Future of Management and Leadership in the summer of The same report, however, also recommends a strong focus on an organisation s social purpose, something that is reported as a priority by only 23% of managers. Controlling costs Managing performance Developing people Increasing turnover Improving employee engagement Developing strategic partnerships Developing new products and services Restructuring Supporting the next generation of managers and leaders Rebuilding trust in management Focusing on organisational ethics Developing a clear social purpose Expanding in international markets Exploiting the rise of social media Exploiting online business channels Becoming more environmentally sustainable Figure 5 Organisational priorities for 2015 (%) Public sector 8 Controlling costs Private sector 68% Managing performance Charity 72% Managing performance & Controlling costs 75% Managing performance 66% Controlling costs & Increasing turnover Developing people 57% Developing people 55% Developing people 56% Improving employee engagement 3 Management 2020 Leadership to unlock long-term growth, The Commission on the Future of Management and Leadership, July

9 Managers resolutions Managers individual management resolutions for 2015 are a mix of focus on their own and on their team s development. Managers number one personal resolution is to devote more time to their own professional development (53%), with many planning to take new courses or qualifications (44%). Second most commonly, managers want to find ways of becoming more productive () and achieve a better work-life balance (47%), with a prime route to achieving that being to reduce time wasted by unnecessary meetings and s (45%). The third most common resolution is to support the development of their team s skills (). Substantial numbers resolve to improve communication with their team or intend to become a mentor or coach. Budgets With controlling costs still the main organisational priority, it is not surprising that most managers do not expect to see major budget increases in The expected increases are only marginally higher than last year. However, they re nevertheless a sign of optimism. The top three areas of expected investment have changed as well. Investment in IT is the area where increases are most widely planned, followed by business development and sales. But this year s results also reflect the sharper focus on developing people: training and development is now part of the top three, overtaking marketing. The market for management consultancy looks set to remain challenging. It emerges as the area with the highest expectations of budget cuts, with 24% of managers expecting their consultancy spend to fall. Figure 6 The number of managers who expect budgets to increase, IT Business development/ Sales Training and development Marketing Management and leadership development Recruitment Employee pay Product research and development Plant and machinery Corporate social responsibility commitments Management consultancy 9

10 The right people? Managers have growing doubts about the talent and skills available to their organisation: 39% say they don t have the right people in place to achieve their organisation s objectives, up from 35% last year. Figure 7 Does your organisation have the right people to achieve its goals? Yes No They also report increasing difficulty in recruiting the talent they need: 72% say it s quite or very difficult, compared to 66% last year. Finding the right management and leadership skills specifically proves particularly tricky, with 75% saying it s hard to find people with the right skill set. In light of these recruitment issues, it s striking that supporting the next generation of managers and leaders ranks comparatively low on the agenda for many organisations: as indicated in Figure 5, less than a third () of managers say it s an organisational priority. Previous research has shown that the UK needs as many as 1 million new managers by , but while supporting the next generation remains low on employers agendas, recruitment difficulties can only continue Figure 8 Recruiting management and leadership per sector Private Public 39 Charity/not-for-profit Easy Difficult 4 Management 2020 Leadership to unlock long-term growth, The Commission on the Future of Management and Leadership, July

11 Political policies With the UK General Election fast approaching in 2015, we asked managers what they would like to see in political parties manifestos. Ensuring that every young person has work experience before leaving education received the strongest backing, with a net support score 4 of 79%. Developing a new, employer-led management apprenticeship would also get managers votes (72%), as would incentives to increase employer investment in management development. Similarly, making management modules compulsory in higher education for all degree courses makes the top ten set of policies. So too does making foreign language compulsory up to the age of 16, reflecting an awareness of the importance of international trade to the UK s economic success. Ranked joint-top with 79% net support is a policy of closing loopholes used by businesses to avoid tax on UK activities. The announcement in the Autumn Statement of a levy on profits moved abroad is therefore likely to be welcomed. Other strongly-backed policy areas include: Reforming procurement rules: removing the barriers that prevent SMEs from winning business from government scores highly, as does a requirement to provide evidence of professional management in order to win government contracts Reforming pay: a national minimum wage increase scores highly (net support 59%), while a majority of those polled also support measures requiring companies to publish the ratios between top executive pay and the salaries of a company s lowest earners. At a time when immigration has dominated much of popular political debate, management opinion is highly divided on the question of limiting the movement of labour across the EU. While 37% would support such a move, 33% oppose it. Opinion is similarly divided on relaxing visa rules for skilled migrants and students (36% in favour, against) but taking students out of net migration figures gets backing from, with only 16% opposing. Other divisive policies include encouraging organisations to set targets for gender and ethnic representation (net support of 2%), while the balance of opinion is currently against legal quotas for women in boardrooms, with 36% opposing and 32% supporting (net score -4%). Figure 9 Net levels of managers support for political policies Closing loopholes used by businesses to avoid tax on UK activities Ensuring every young person has work experience before leaving education Developing a new, employer-led management apprenticeship Removing barriers that prevent SMEs participating in government procurement Incentivising employers to invest in management development e.g. through tax credits Increasing the National Minimum Wage Requiring evidence of professional management in order to win government contracts Making management and leadership modules mandatory for all degree courses Requiring companies to publish the ratios between top executive pay and lowest pay levels Making foreign language learning compulsory until the age of 16 Reducing the cost of employing people, e.g. reducing NI contributions On this question, managers were asked to indicate whether they opposed, supported or were indifferent to a range of statements. The net score is calculated by subtracting the Oppose score from the Support score. 11

12 CONCLUSION & RECOMMENDATIONS This year s Future Forecast survey offers a nuanced picture of managers expectations of Most remain optimistic about their organisation s prospects, despite a wobble in confidence about the wider economic outlook. There s been an important shift in management priorities: managing costs and performance are still at the top of the agenda, but developing people has become more important as employers grapple with the challenges of gearing up for growth. The reactions to potential policies also emphasise that, for these managers at least, growth through people is the only option. UK productivity lags behind many of our competitors, and skills are a critical component of that gap especially management and leadership capability. Closing that gap needs action from employers and policy makers together, but this survey suggests the main political parties manifestos run the risk of missing the mark when it comes to supporting growth. Of course, government policy is no substitute for employer action, although there are areas where incentives such as Growth Vouchers or National Insurance reductions for employing young people can clearly help encourage employers to take the right path. Ultimately, managers and leaders have to take responsibility for meeting the challenges they face. Our recommendations for managers flow from the findings of this survey, but they re also shaped by the recommendations of the Management 2020 report from the Commission on the Future of Management and Leadership. The Commission found that great management and leadership in the 21st century boils down to three critical factors purpose, people and potential. Purpose: a sense of social purpose and mission is critical to any well-run organisation. That includes the commitments that a business makes about how it does business, not just how it makes money. It s in that light that we see managers putting fairness in businesses tax arrangements near the top of their priority list, plus strong support for more transparency about executive pay. Recommendation: be more transparent and live up to stakeholder expectations about tax and management pay. People: developing and leading people is a clear theme in this year s results, with people moving up the management agenda, signs of increasing investment, and a personal commitment to development from managers both for themselves and their teams. CMI wants to see more employers make use of Chartered Manager in 2015, tapping into its power to raise standards and embed managers commitments to professionalism. Recommendation: prioritise people development and raise management standards. Potential: developing the talent of the next generation is a must. Without it, the recruitment difficulties reported by managers will only worsen over time. There is a clear challenge to managers to back up their enthusiasm for work experience by actually offering placements something previous research has suggested remains too rare. Innovation in higher education is key, with a focus on practical skills and providing management modules to more students. And with strong support from managers, CMI is looking forward to working with employers and government to develop a trailblazer apprenticeship in Recommendation: tap into the talent of the next generation and develop their potential. Giving an organisation a sense of purpose, inspiring its people and making the most of their potential are at the heart of great management and leadership. The ability of managers and leaders to meet these challenges will go a long way to determining whether the optimists are proved right over the coming year. 12

13 Chartered Management Institute (CMI) CMI is the only chartered professional body in the UK dedicated to promoting the highest standards in management and leadership excellence. With a member community of over 100,000, CMI has been providing forward-thinking advice and support for more than 60 years. We continue to give managers and leaders, and the organisations they work in, the tools they need to improve their performance and make an impact. We are a UK awarding body for management and leadership qualifications, and the only body that awards Chartered Manager, the hallmark of any professional manager. Through in-depth research and policy surveys CMI maintains its position as the premier authority of key management and leadership issues. Website: and use #futureforecast LinkedIn: Chartered Management Institute Network Facebook: Copyright Chartered Management Institute First published December 2014 Chartered Management Institute 2 Savoy Court, Strand, London, WC2R 0EZ Registered charity number Incorporated by Royal Charter All rights reserved. Except for the quotation of short passages for the purposes of criticism and review, no part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission of the publisher. British Library Cataloguing in Publication Data A CIP catalogue record for this report is available from the British Library /14