As the public sector takes the necessary steps to meet budget cut demands, is there a danger that organisations will overlook the importance of effective talent management with potentially disastrous long term effects?

Public sector management consultancy Hay Group surveyed 131 public sector leaders ranging from board and executive level to middle management and came up with the grim conclusion that in the rush to make short term savings many organisations are neglecting to keep a long term view on investment in skills and people.

The study – Mind the talent gap: dealing with the deficit (http://www.haygroup.com/uk/downloads/details.aspx?ID=30462) – identifies three main areas that demand attention:

•    Talent Management: Most organisations have not renewed their talent management strategy or thought strategically about the capabilities their workforce will need to deliver future strategy
•    Leadership capability. A new type of leader will be needed with a different outlook and with capabilities such as resilience, commercial acumen and collaboration skills
•    Engagement, enablement and productivity. Few organisations have yet launched effective strategies to address this challenge.

“The report raises concerns over whether public sector leaders can steer their organisations through unprecedented reform, and whether leaders are being developed for the sector’s future needs,” says Jody Goldsworthy, associate director at Hay Group. “Many organisations are overlooking the leadership and workforce development strategies crucial to success in a changed landscape. These need to be reviewed as a matter of urgency.”

The study concludes that almost three quarters of respondents (73%) have not renewed their talent management strategy or thought systematically about identification and retention of people they don’t want to lose. The knock-on effect of this is that over half now lack confidence that that they will have the right people in place once the current age of austerity comes to a close at a time when 70% of respondents argue that the current cutbacks frenzy doesn’t leave a window to source new talent or skills.

The report warns: “Across the whole public sector, the picture gets worse the further into the future we look. When asked whether their organisation has clearly defined the talent, skills and capabilities they will need to operate in five years’ time, some 86% of local government and 75% of central government respondents say they have not.”

The picture gets even bleaker once it focuses onto the frontline – the middle management teams who actually deliver public services. Some 72% of them complain that the current cuts are being pushed through too quickly and only 69% say they are motivated to ‘go the extra mile’ and put any discretionary effort in. In contrast, some 83% of senior management people claim they will put extra effort in.

The report points out that this mindset has potentially damaging consequences: “It is these middle managers who will actually lead their teams to deliver the organisation’s new strategy, so it is vital that they are on board with any change strategy and are motivated to take on broader, more challenging roles.”

It adds: “ The public sector is characterised by many middle leaders with a strong sense of moral purpose about service delivery and sense of responsibility for their jurisdiction over public funds. Organisations would do well to actively tap into this to address and maintain engagement.”

Alongside engagement sits employee enablement. Hay Group argues that productivity has been shown to increase by 4.5 times as much if both engagement and enablement are addressed. To enable employees they need to have:

•    a job that is doable and challenging; a supportive environment to work in
•    the right resources to do the job well
•    sufficient training
•    mechanisms to collaborate where necessary
•    good performance management systems
•    the right work structures in place

Sounds reasonable enough, yes? But there’s widespread concern among the Hay Group survey group that the current climate means it’s increasingly difficult to meet these criteria. Almost half of central government (47%) say cost cutting is forcing their organisation to cut the level of training to managers/leaders while more than half of middle managers across the whole public sector agreed that change prevented them giving employees the appropriate autonomy to do their job effectively or from providing all of the necessary resources for employees to do their jobs.

Clearly this has a knock-on effect on productivity and indeed the Hay Group survey found that 26% of all public sector respondents cited the current changes as preventing them focusing on productivity improvements. This is particularly bad in central government where 41% of respondents voice this concern.

That said, there are clearly some ‘finger in the air’ assumptions being made – ranging from 6% to 20% – when those surveyed were asked what level of improvement could be expected if they had everything they think they need to do their jobs.

Addressing these issues is the responsibility of senior management and a new type of leadership rank within organisations. Post-austerity public sector leaders will need a number of key qualities, including:

•    resilience
•    the ability to set a compelling vision and bring others along
•    partnership and collaboration with other sectors and partners
•    more commercialism and entrepreneurial drive
•    innovation, risk taking, looking for new opportunities
•    communication, influencing and negotiating
•    commissioning skills.

The cuts are a fact of life; how those cuts are managed, communicated and delivered is what will determine the ultimate impact on morale. Hay Group estimates that once cuts exceed 5%, but remain below 20%, the amount of damage they inflict on morale is roughly the same regardless of size. That might on first reading seem like a good thing, but it means that three rounds of cuts of 5% could inflict three times as much damage to morale as one 15% round.

With the first round of cuts now in place, it’s time for public sector organisations to consider the inevitable next wave. The findings suggest that as a drip feed of bad news has a worse impact on morale then one bad announcement, it’s typically better to face up to the worst and take the pain in one go. With that in mind it’s essential to invest in repeated communication from the highest ranks.

The public sector can learn from the private sector in this respect. Hay Group notes that in August 2009, at the height of the private sector recession, only 46% of frontline staff had trust and confidence in their leaders. The public sector can avoid this situation, but it’s going to require some fresh thinking on the part of management and a willingness to engage when there is little information to hand.

The report states: “The level of communication required in the current period of public sector change is unprecedented. It is undoubtedly far more than leaders would initially believe is necessary or comfortable. If people understand the rationale for change, they will co-operate and find new ways of working. The challenge here is that senior leaders will not always have clear information or direction to provide. Talk anyway, even if it is to explain what you don’t know. The alternative is rumour and speculation.”

Overall the conclusion of the Hay Group study is simple: action is needed now to avoid future problems. Goldsworthy concludes: "To operate in a new way, it is critical that organisations identify the new structures, roles and behaviours they will need at leadership level and across the workforce. As the landscape shifts around them, public sector organisations realise this, but are yet to take steps to address it. Only with the right capabilities in place will the sector meet the challenge of maintaining and improving services against a backdrop of fundamental change.”