Promoting High Performance Working - GOV.UK

1 Promoting high Performance Working Ian Stone Paul Braidford Maxine Houston Fergus Bolger POLICY RESEARCH GROUP, UNIVERSITY OF DURHAM OCTOBER 2012 Acknowledgments The authors would like to thank Ben Davies and Briony Gunstone and the staff of IFF Research Ltd for support in designing the questionnaire and sample frame and undertaking the telephone survey, and Gordon Allinson of PRG who undertook several in-depth interviews. We also gratefully acknowledge the time given by business owners and managers who took part in both the telephone survey and the in-depth interviews. Finally, helpful comments were received on draft versions of this study from the steering group, and other BIS and UK Commission for Employment and Skills personnel. Contents 1 Executive Summary .. 1 2 Introduction .. 5 Background.

2 5 Behavioural economics .. 8 Objectives .. 9 9 3 Telephone survey 12 Telephone survey results .. 13 Profile of respondents .. 13 Adoption of practices by size of 13 Adoption of practices by sector .. 15 Other influences on adoption 16 Qualifications of workforce by level of 17 Deficiencies in workforce skills by level of adoption .. 18 Training by level of 18 Strategic direction of business by level of 19 HPWP 21 Reasons for non-adoption .. 22 Processes of 23 4 Interview findings .. 26 Use of practices as a system .. 26 Management 28 Terminology .. 29 Less systematic use of 29 Bundles of practices .. 31 Moving towards systematic 31 Business 32 Size of business .. 32 Internal segmentation .. 33 Human Resources 34 Characteristics associated with HPWP 35 Business characteristics 37 5 Drivers of adoption.

3 38 Champions .. 38 Founding principles .. 40 External requirements: clients, regulation and quality systems .. 43 Strategic direction of business .. 44 Competitive 45 Takeover .. 46 Crisis/turning 47 Technological Use as a change management 51 Awareness of HPWPs .. 52 Drivers of HPW - 52 6 Implementation .. 54 Speed of adoption .. 54 Adopters: internal factors .. 55 Internal factors as constraint or facilitator a case study .. 56 Adopters: external factors/facilitators .. 58 Networks .. 59 Trade 59 Consultants and mentors .. 60 Public sector support .. 61 Benchmarking and learning from other 61 External facilitators conclusions .. 62 Adopters: 63 63 Management and 65 Lack of resources .. 66 Segmented applicability .. 66 Non-adopters.

4 68 Implementation conclusions .. 70 7 Evaluation and impact .. 72 Evaluation of HPWPs .. 72 Impact .. 74 Discretionary 74 Recruitment and retention .. 75 Winning new 76 Bottom line impact .. 76 Evaluation and impact - conclusions .. 77 8 Typology of 78 Targeting of policy options .. 79 9 Conclusions and policy perspectives .. 81 Issues affecting 81 Rationale for government 82 Policy 82 The MINDSPACE framework .. 83 Overarching 86 Targeting .. 86 87 Specific policy options .. 87 Mandatory policies .. 87 Promotional and awareness-raising activity .. 88 Developing partnerships and networks .. 89 Dissemination through trade 90 Linking HPW to existing 90 Linking HPW to innovation policy .. 91 Measuring 92 Appendix 1 Telephone Questionnaire.

5 93 Appendix 2 Interview Questionnaire - adopters .. 113 Appendix 3 Interview Questionnaire 122 Appendix 4 Technical 126 Appendix 5 Bibliography .. 130 Tables Table Sample by sector and number of 13 Table HPWPs adopted by number of 14 Table Mean number of HPWPs adopted by 15 Table Mean number of HPWPs adopted by 15 Table HPWPs adopted by 16 Table Proportion of respondents by percentage of staff qualified to at least level 17 Table Proportion of respondents by percentage of staff qualified to at least level 17 Table Proportion of respondents by percentage of staff qualified to at least degree or equivalent 18 Table Proportion of respondents by type of developmental support in the past twelve 19 Table Proportion of respondents by customisation of 19 Table Proportion of respondents by type of 20 Table Proportion of respondents by development of new products.

6 Services and 20 Table Proportion of respondents by quality of 20 Table Proportion of respondents by Product Market Strategy Composite 20 Table Proportion of respondents by Product Market Strategy Composite Measure and skill 21 Table Number of HPWPs and operation of HPWP 22 1 Executive Summary Business growth through higher productivity and enhanced competitiveness is of critical importance to the UK s economic recovery and future prosperity in general. There is a considerable body of evidence showing that wider adoption of high Performance Work Practices (HPWPs) would improve firm Performance and contribute to growth. This evidence shows that whilst adopting more practices is in itself beneficial, the greatest impacts stem from of the use of high Performance Work Systems (HPWS) which involve a coherent bundle of such practices.

7 HPW is defined by the UK Commission for Employment and Skills as a general approach to managing organisations that aims to stimulate more effective employee involvement and commitment in order to achieve high levels of Performance . [They are] designed to enhance the discretionary effort employees put into their work, and to fully utilise .. the skills that they possess (Belt and Giles, 2009). A system comprised of a coherent bundle of high Performance work practices creates a synergetic effect whereby the impacts of the system exceed those resulting directly from the individual practices being used. The presence of a HPWS is associated with increased profits, sales and profitability; employees report higher job satisfaction, motivation, involvement and commitment and greater opportunities for innovation and creativity, alongside lower staff turnover.

8 This research project, jointly commissioned byBIS and the UK Commission, examines the drivers, facilitators and barriers to the adoption of HPWS and assesses how higher levels of adoption might be promoted amongst English SMEs. The findings are based on a telephone survey of 500 SMEs from across England, and follow-up in-depth interviews with 40 of the respondents to that survey. The research concludes that there is a rationale for policy development which is worthy of careful consideration. There are a number of policy options, most of which, if properly designed, would be relatively low cost and capable of having positive impacts on SME Performance . Issues affecting adoption Currently, both awareness of HPWPs and their adoption are low in the English SME sector. Most English SMEs are unfamiliar with the ideas and practice behind HPW, rather than simply being ignorant of the term.

9 They are not aware of the potential benefits that employing HPWPs can bring to the business. The evidence shows clear information failures and an associated sub-optimal level of demand. 1 Where HPWPs are used, this typically reflects the incidental adoption of relevant practices rather any deliberate adoption a HPWS per se. The adoption of HPWPs is associated with firm size; larger SMEs are much more likely to utilise these practices than smaller ones. Businesses with strategic growth ambitions and a quality-led business plan are more likely than others to adopt a coherent high Performance system. Training and support in this area is available and effective for the minority which access it. The adoption of HPWPs and their deepening into a coherent system often requires a trigger, in many cases simply of becoming aware of the practices in the first place.

10 This research shows that whilst few English businesses use a HPWS involving a complete bundle of HPWPs, a high proportion employ at least some of the practices involved in such a system. The research shows that key influences on adoption are the size of the business, the degree of autonomy in operations and business positioning with respect to entrepreneurialism, risk and growth ambitions. There is a widespread desire among businesses to be a good employer , in order to motivate the workforce to perform well, impress customers, and gain the respect of their peer group. HPWSs are generally regarded as being consistent with notions of what constitutes a good employer . Rationale for government intervention There is a clear market failure associated with a lack of awareness of HPWS amongst the majority of English SMEs.