13th July, 2009
Between March 18th and May 26th, the IPA carried out a survey to dig deeper and find out what was happening in UK workplaces, and how managers and employees were reacting to the recession. We found that in spite of the threat of redundancy, and decreasing job security, levels of engageent were holding up.
Anecdotally, it would seem that this recession is different in certain key respects to previous recessions; many more employers are aware of the value of their workforce and are trying to find ways to reduce expenditure without reducing the headcount. Employees are also acting in ways that differ from previous recessions; so far we have seen less industrial action than might have been expected, and a preparedness to alter terms and condition to maintain employment. But why are managers and employees reacting in this way, and what effect is it having on how they feel about their work, their wellbeing and performance?
The IPA’s experience of supporting workforces through change has led us to believe that a recession need not necessarily mean worse employee relations or lower levels of engagement. How managers communicate with, involve and consult with their workforce can have a big impact on employees’ feelings of security and wellbeing, and their ability to continue working for the success of their organisation.
To find out what was going on inside the workplace, we conducted two online surveys; one for people with management responsibilities, and one for those without. The survey was conducted in house, and over 100 organisations responded. Many of these organisations were IPA members and clients. We then collated and analysed the responses, which form the basis of the analysis published here.
Redundancy
Our survey supports forecasts by employers’ organisations and trade unions that predict that job losses are likely to continue throughout 2009. We found that 1 in 3 managers expect to make redundancies in the next 6 months. Full time workers will bear the brunt of the redundancies; 46 per cent of managers expect to cut full time workers, 27 part time workers, and 20 per cent temporary and agency workers. This reflects other labour market statistics that show a substantial decline in full-time positions, over and above part-time positions which are increasing.
Redundancies can have a big impact not only on those who are leaving, but also those who stay behind. Managers who do not handle redundancies well risk declining performance and productivity, and consequently further redundancies. Access to clear information alongside employee consultation are not just a legal requirement in many redundancy situations, they are also an effective means of maintaining trust between employers and employees in difficult circumstances.
However, of those who are aware of redundancies at their workplace, just under half of employees have been informed and consulted about redundancies that have, or are about to take place. This is in contrast to the responses we received from managers, 88 per cent of whom report that they have consulted, or are planning to consult, their workforce about redundancies. This discrepancy may reflect the fact that managers are planning to consult their staff, but have not yet done so. But it may also reveal a certain ambiguity about the term ‘consultation’.
Most managers and employees expect consultation to take place using an existing employee forum or union representatives.
Reducing expenditure
Over the last 12 months there have been a number of high profile examples of organisations developing creative and varied ways of cutting expenditure, often as a means of retaining staff and avoiding redundancies. Flexibility on the part of employees has enabled employers to alter terms, conditions and hours to cut costs.
Our survey shows that these practices are not just confined to one or two organisations. 88 per cent of managers in our survey are reducing, or planning on reducing expenditure, with most employing two methods or more.
Terminating temporary contracts or agency workers was the most common way of reducing expenditure, suggesting that employers are trying to keep hold of the permanent staff who they have invested in at the expense of temporary staff. The second most common expenditure reduction is in training, learning and development budgets for staff. While this may be understandable, it does risk damaging staff engagement in the medium term, and the ability of the organisations to be in a position to capitalise in the upturn, or prepare staff for new roles in a restructured organisation.
Just over 1 in 10 are planning to reduce or cancel budgets for staff surveys, employee forums, or engagement programmes. Reducing or cancelling staff bonus and incentive schemes, asking staff to take zero pay rises or pay cuts, and cutting hours through short time working, flexible working or sabbaticals were also approaches being used by managers.
Effects on the Workforce
Almost 2 out of 3 employees report noticing some
changes among their colleagues as a result of the downturn. Decreased
morale is the most common change; 1/3 of respondents reported lower
morale in their workplaces. 14 per cent have observed worse
industrial/employee relations and the same number have noticed lower
productivity.
A lower level of morale is perhaps unsurprising, but it
may hint at other problems below the surface. Levels of morale often
correlate with levels of wellbeing, suggesting that the recession may
be having deeper, and more long lasting impact on employees.
There are some variations in managers’ perceptions of
the impact on the workforce. Although they recognise the decline in
morale (38 per cent) none of them reported a decline in productivity.
1/3 of managers and employees claim they have not
noticed any change as yet. And 68 per cent of managers have not noticed
any impact on levels of engagement. This evidence that engagement is
holding up echoes other research, such as that by the Sunday Times Best
Companies to Work For list. Given the prominence of perceptions of
fairness and transparency in fostering engagement, companies that are
able to communicate clearly and demonstrate their commitment to
managing the impact of the recession on the workforce fairly and
equitably, stand a good chance of maintaining engagement.
Security
Although engagement appears to be relatively
unaffected, job security has been damaged by the recession. Our survey
shows that 1 in 3 employees felt insecure or very insecure about their
long term job security. Just under half of all employees claimed to
feel secure.
The percentage of employees feeling insecure is similar
to the number who said that their organisation has made, or were about
to make redundancies in the next 6 months, suggesting that employees’
fears may well be an accurate response to the threat of redundancy.
Communication
The impact of the recession on the workforce,
particularly as it relates to employees’ sense of security, is likely
to be influenced by the way in which leaders communicate and build
trust among employees in the organisation’s strategic response.
With that in mind, the survey asked employees how well
they understood the impact of the recession on their organisation.
Employees’ understanding of the business – its strategy and how their
role relates to the overall goals of the business – are vital to
maintaining engagement. Even during a downturn, an understanding of the
changing environment and the organisations’ response are likely to
support engagement.
The survey also asked managers how well they thought
employees understood the impact of the recession on their organisation.
The results showed that 65 per cent of employees think that they
understand the impact of the downturn well, and 19 per cent think they
understand it very well.
Managers appear to be somewhat less optimistic – 54 per
cent thought their employees understood the impact of the recession on
their business well, and 14 per cent very well.
A good understanding of the business’ environment is
likely to reflect a certain level of communication on the part of the
leadership, and the involvement of the employees in the business
strategy. A separate question reinforced this, showing that
organisations are putting considerable effort into their
communications. 86 per cent of managers have used one or more direct
and indirect methods of communication.
26 per cent of managers have communicated with staff
indirectly, through consultation with workplace or union reps; 19 per
cent have informed employees through specially convened meetings; 20
per cent have sent out newsletters/email briefings or put information
on the internet; and 22 per cent have used line managers to brief
teams. It is worth noting, however, that employees present a slightly
different picture; 19 per cent report that they have received no
information on this matter, which roughly equals the number of
employees who say they do not understand, or do not know, the impact of
the recession on their business.
Conclusion
Redundancy is still likely to be the main story of the
workplace for the next 6 months, but our survey has shown that there
are other concerns facing employers and employees that will be
increasingly important to recognise as Britain moves out of recession.
Morale, employee relations and productivity have been
damaged somewhat by the recession although most employers believe that
overall engagement has remained unchanged.
Employees’ job security, unsurprisingly, has decreased,
but these survey results to indicate that the relationship between job
security and employee engagement is not straightforward.
Employers are feeling the effects of the recession and
are trying to cut expenditure where they can. Although full time staff
might be retaining jobs, they are likely to be facing reduced benefits
and learning and development opportunities. Although employers might
still be committed to improving employee engagement, budgets in this
area are being cut too, and managers will be forced to do more with
less.
Managers are communicating with employees, and in a
variety of ways, which is having a positive impact on employees’
understanding of the impact of the recession on their organisation.
Those organisations that are communicating well are more likely to be
able to take their workforces with them through the difficult period
ahead, and gain the flexibility and engagement that will enable the
organisation to prepare for the upturn.
Hannah Jameson
IPA research manager
You can download the full report here.
