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Introduction
Banking crisis - incentives and performance management during a recession
While employers adopt ever more creative measures to avoid redundancies and hold on to their best employees, there is a rising and justifiable tidal wave of public anger about the payment of bonuses to failed bankers in general, as well as the much discussed award of a grotesque pension to a certain Scottish banker.
However, the Standard reports that far from being chastened bankers are enjoying a bonanza of bailouts from Britain’s top companies – and demanding higher fees than ever before. Last month a joint CIPD/KPMG survey entitled Labour Market Outlook revealed 50% of employers surveyed were freezing recruitment, 40% terminating temporary or agency contracts, 19% increasing flexible working, 17% cutting bonuses, 15% introducing short-term working, with only 7% opting for wage cuts. This month a report by KPMG and the Recruitment and Employment Confederation (REC) showed a record fall in UK job vacancies in February. Mike Stevens, head of Business Services at KPMG , said:
“This latest survey reveals a gloomy picture of the UK labour market. The terrible news from the equity markets and the broader economic front has led to a steep fall in the demand for permanent and temporary jobs across most sectors of the economy and the worst is probably yet to come.”
If the global economy is ever to be repaired and rebuilt it is imperative we answer not just the simple question “How could this have happened” but more importantly “How do we stop it happening again?”
Put at its most simple an economic catastrophe has been caused by a comparatively small group of people (we are yet to be told quite how many) who were unable to manage risk effectively. For most of us risk management is part of our daily lives, seen as the most basic requirement of any manager’s job description and implying a high level of responsibility and accountability. Why, therefore, was this group of individuals exempt from such an elementary requirement? It is too easy to blame it entirely on greed, the bonus culture and even the unfortunate non executive director when it is clear that massive failures in training and performance management have occurred. Writing in the Sunday Times on 1st March Phillip Delves Broughton (a Harvard MBA holder himself) has laid the blame squarely at the door of the Harvard Business School MBA, describing the qualification as “Harvard’s masters of the apocalypse”.
Mathematical skills possessed by bankers have conferred on them an almost mythical status similar to that enjoyed by witchdoctors in primitive societies. Is it really the case that so little is understood of their rarified talents that lesser mortals do not feel able to measure their performance on any basis other than short-term profitability? Exceptional mathematical skills neuro-psychologists tell us are often accompanied by a level of autism with personality characteristics that can include a degree of detachment, recklessness and obsessive and addictive behaviour. These so called gifted personalities may not be natural team players and can make it difficult for their colleagues openly to challenge their apparent achievements without inviting ridicule. Such was the fate of whistleblower Paul Moore, head of group regulatory risk at HBOS in 2002-05 who, as reported in the Guardian, alleged he had been repeatedly threatened after claiming internally that the bank was "going too fast", "had a cultural indisposition to challenge" and "was a serious risk to financial stability and consumer protection". If we are to face the future with any degree of confidence the new global economy will need to establish strong regulatory authorities that are truly independent and incorruptible. This is only likely to happen if the world is given a lead in the country where all this started - the USA.
Education
Failure of selection process for secondary education and the postcode lottery
March is probably the busiest month of the year for secondary schools’ senior management teams as they carry out the selection process for the next academic year. Last year almost one in five children was not given a first choice of school. This year it is likely schools will be faced with a far greater number of applicants as cash-strapped parents take their children out of private schools and compete for places in the hard-pressed state sector.
A report on school admissions published by the London School of Economics is fiercely critical of the process. It describes it as “too complex” for many parents to understand and recommends that it be carried out by an independent body. A research team headed by Prof. Anne West carried out the study funded by the education charity Research and Information on State Education. It examined more than 3,000 secondary school admission forms. Criticism was strongest for the faith and academy schools that control their own admissions. Researchers concluded that some schools were operating a form of backdoor selection by asking for personal information about parents’ marital status, occupation, educational background and even children’s hobbies.
Such practices clearly favour middle-class and better educated families. This applies here in Kent which has grammar schools and where parents are required to make a personal statement of their case to the chosen school’s authorities when exercising their right of appeal. Responding for the Church of England, chief education officer the Rev. Janina Ainsworth said: “Church attendance is the only measure our schools use when allocating places on the basis of faith and you cannot get a much simpler way of assessing whether someone has a faith commitment or not”.
Brighton and Hove, one of 25 local authorities with over-subscribed schools, has taken up the government’s suggestion and allocated places through a lottery system. An account of identical twins in Hertfordshire who were allocated schools 18 miles apart graphically illustrates the absurdity of a random selection process. Ed Balls’ initial enthusiasm for the scheme has obviously cooled and he has now set up an enquiry into the part lotteries play in the admissions system. The Times has conducted its own research into the problems faced by applicants this year and found that as expected, they are worse in London. Richmond upon Thames heads its telephone poll of 43 authorities with only 62% of children getting into their first choice school. Meanwhile Sir Cyril Taylor (former advisor to 10 secretaries of state on the academies) recommends that head teachers publish staff turnover figures and pupil exclusion to assist parents in selecting a secondary school. “There are more important things to consider than exam results. If a school has a high staff turnover this is often an indication that all is not well”, Sir Cyril explained.
Graduates – gloomy outlook
The future for graduates has never seemed as uncertain, with lower pay and fewer opportunities. For the first time in its 22 year history, the Association of Graduate Recruiters’ (AGR) survey found that average starting salaries will stay the same as last year at £25,000 p.a. The banking and financial services sectors, which provide 13.3% of vacancies, are cutting wages by up to 8%, while some City firms are offering law trainees up to £10,000 to delay the start of their training contracts. Law firms invest very heavily in trainees, an investment which is only realised once they qualify as solicitors and start to produce fees. Potential trainees in firms such as Norton Rose and Herbert Smith are being invited to go away and do something useful for a year “provided of course it is not yoga”.
In such a hostile employment climate it is not surprising that this year’s applications for undergraduate courses at UK universities are up by 8% on last year with a record 465,000. It remains to be seen whether it is sensible to put off the evil day to start working, with the rising cost of student debt. The AGR is urging graduates not automatically to consider returning to university or taking a year out as the first alternative when the job search gets tough, unless they believe it will add to their employability. Most employers said taking temporary paid work was preferable. The AGR also welcomed John Denham’s proposal for a national internship scheme for students. The scheme would provide skills training and experience for three months’ work but participants would receive only slightly more than they would from grants and loans. Commenting on the scheme, Mr Denham told the Daily Telegraph: “At the end, they will be more employable, and some of them will get jobs. These are the children of the baby-boomers. They will be a very big group. What do we do with them? We can't just leave people to fend for themselves.”
As part of the programme to kick start the construction industry the Department for Children, Schools and Families’ plan will accelerate school building projects by £919m in the next year. Universities will receive £8bn for teaching and research, 4% more than last year. Research in science and technology is the priority, at the expense of social sciences, the arts and humanities. One such victim is the London School of Economics which had its overall grant for research and teaching reduced by 0.8% and research funding by 13%. This is unfortunate timing when viewed against the current economic crisis.
Apprenticeships – employers know little
The government’s Apprenticeships, Skills, Children and Learning Bill was published last month, with a fanfare of publicity spearheaded by Sir Alan Sugar. However, research conducted by CIPD revealed employers have only a limited knowledge of how apprenticeships work, with only 7% being aware of the National Apprenticeship Service which matches apprentices with employers.
Stress management – 2nd hospital trust told to improve practice
It is alarming to note that the Health and Safety Executive has ordered another hospital trust to improve its stress management practices. In 2003, following allegations of bullying and harassment, the West Dorset General Hospital NHS Trust was served with an improvement notice. This time it is the turn of United Lincolnshire Hospitals who have received an improvement notice for failing to follow HSE guidance on managing stress. This is only the second time the HSE has taken such draconian action over failures to manage stress. Commenting for CIPD Ben Wilmott, the senior public policy adviser, said: “The case showed that the HSE was fully prepared to act where employers were failing to meet their stress management obligation under health and safety law.”
Stress management and the mental health of the workforce will be discussed at our next monthly Breakfast Forum on Friday 13 March. The discussion will be led by LJ Conradie, Consultant Clinical Psychologist and Managing Director of Canterbury-based firm Psicon. The forums are free and intended to be relatively informal and conversational. To find out more or to attend, contact anne@employment-relations.co.uk or call 01303 840001. A full English breakfast will be provided.
