Future Forecast: Expectations for 2013

Ben Musgrave & Patrick Woodman

Future Forecast: Expectations for 2013December 2012

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Copyright Chartered Management Institute ©First published 2012

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British Library Cataloguing in Publication DataA CIP catalogue record for this report is available from the British LibraryISBN 0-85946-453-9

2012 was another difficult economic year for the UK. But could management confidence be – at long last – on the up?

The answer, according to the results of this year’s Future Forecast survey of CMI members, is a cautious ‘yes’. Examining managers’ experiences over the last 12 months and their expectations of the year ahead, the findings reflect the difficult year that many organisations have experienced, with widespread redundancies and restructuring. Many managers still have a tight focus on controlling costs and the mantra of delivering ‘more for less’ still resonates with most managers.

Many of these trends are set to continue – not least because the UK’s economic prospects remain relatively gloomy, with official forecasts predicting weak growth at best. Yet the survey also shows that a growing number are optimistic about their organisation’s prospects for the year ahead. Many are focused on improving employee engagement and developing their people’s skills to get the best from their teams, a strategy which is surely right and is to be applauded.

The challenge will be converting this welcome sign of management optimism into tangible results. Engaging the talents and motivation of all staff in pursuit of that goal will be a huge advantage.

Twenty thousand CMI members were invited to complete an online survey during November 2012. A total of 595 responses were received from across the UK, drawn from industry sectors across the economy and from managers at a range of levels of seniority up to directors and chief executives.

For consistency of analysis, the commentary in this report refers primarily to the Future Forecast report of one year ago. Some reference is also made to relevant data from CMI’s Economic Outlook series of reports, the most recent of which was published in October 2012.

Methodology

Introduction

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Executive Summary • Fifty-three per cent of managers feel optimistic about their organisation’s prospects

for next year, up from 43 per cent a year ago.

• Managers’ top priorities for the year ahead include controlling costs, managing performance, developing strategic partnerships, developing their people and improving employee engagement.

• Managers have substantial concerns over their organisations’ people capabilities. Some 43 per cent do not believe their organisation has the right people to fulfil business objectives in 2013. The most common problem is a shortage of key skills which along with poor morale, general lack of manpower and poor leadership, are substantial concerns. These factors are up considerably from last year, by 19, 15, 14 and 13 percentage points respectively.

• Managers’ priorities for their own professional development include strategic decision making, negotiating and influencing, change management and coaching and mentoring.

• Feelings of job insecurity have reduced, with 33 per cent of managers feeling insecure compared to 39 per cent a year ago. Public sector managers remain most pessimistic about their continued employment. Confidence in the jobs market remains low, with only 47 per cent of all managers believing that they could find comparable employment within three months should they be made redundant.

• Fifty-nine per cent of those surveyed experienced redundancies in their organisations over the last twelve months – including 96 per cent of those working in the public sector.

• Looking at the prospects for the economy as a whole, 25 per cent report that they are optimistic about the year ahead – up 17 percentage points since last year.

• The restructuring of the public finances, technological change and the price of energy are the top external factors expected to have a damaging impact on organisations in 2013.

• Skills and employment policy are seen as priorities for government action. Integrating management and leadership development into the education system, ensuring that interns receive the minimum wage, and tax incentives for investment in management and leadership development are the most widely supported employment law and labour market policy initiatives among survey respondents.

• Family-oriented policies such as extending the right to request flexible working and reforming parental leave are also popular, although more so among women managers than their male counterparts.

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Asked about the performance of their organisation over the past 12 months, 33 per cent reported growth, slightly more than those reporting decline (27 per cent), with 41 per cent describing their organisation as stable. Comparison with the figures from last year’s Future Forecast survey1 suggests a small improvement, as the number of those reporting decline has decreased by five percentage points and the numbers reporting growth has increased by 3 percentage points.

Within the private sector specifically, 39 per cent of respondents report growth, up from 36 per cent in the previous two years. Meanwhile, fewer report decline: 22 per cent, compared to 29 per cent last year. The not-for-profit sector showed considerable change on last year, rising from 27 to 38 per cent reporting growth. In the public sector, only 19 per cent report growth (compared to 17 per cent in the last two years), an unsurprising difference.

The majority of managers (60 per cent) reported that the performance of their organisation was in line with targets (an increase by five percentage points from 2011), while just over a quarter (27 per cent) reported that their organisation’s performance was worse than had been forecast (a decrease by 4 percentage points). This compares with just 14 per cent of organisations that exceeded their targets.

The survey asked managers for their verdict on the best managed organisation in the UK over the last year. As was the case in 2011, John Lewis was voted the winner, with managers impressed that they “kept to [their] mission and values while making minor adjustments to [the] changing environment”, with staff who “seem to care about performance of the business”. John Lewis was closely followed by Virgin Group which, came across as being an “open and honest” company, winning admiration from some for fighting the government’s decision on the West Coast Mainline franchise and winning a review. One respondent viewed Virgin’s courage as an example to other companies: “We need brave leaders, now more than ever, to revitalise the corporate world and the economy”.

The success of the London Olympics and Paralympics was also reflected in the voting, with numerous managers citing the Games as a whole, or the Olympic Delivery Authority and LOCOG specifically. Meanwhile, in the battle between the supermarket chains, Sainsbury’s leapfrogged Tesco.

Table 1 (above) and Figure 1 (below) Best managed companies 2012

Star performers in 2012

Survey FindingsPerformance

in 2012

1 Pearson, G. & Woodman, P., (2011) Future Forecast: Expectations for 2012, Chartered Management Institute

Best managed company 2011

John Lewis Partnership

Tesco

Sainsbury’s

Marks and Spencer (joint fourth)

Ryanair (joint fourth)

Best managed company 2012

John Lewis Partnership

Virgin Group

London 2012 Games (joint third)

Sainsbury’s (joint third)

Tesco

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The survey asked managers how optimistic they are about their prospects both for their organisation and for the economy as a whole during the next year. As with last year, the results to these two questions tell very different stories. Just over half – 53 per cent – feel optimistic about their organisation’s prospects, up by ten percentage points, while only 25 per cent feel the same way about the economy as a whole (albeit up from eight per cent).

Figure 2 Levels of optimism for organisational and economic prospects in 2013

Public sector managers are much more pessimistic about their prospects for next year, while optimism in the private and not-for-profit sectors is stronger (62 and 54 per cent). Organisational optimism amongst public sector managers is however 13 percentage points higher than in 2011 so this is at least a move in the right direction.

In spite of this increased confidence, it is clear that managers are still operating in a tough external environment and could face numerous potential threats in the coming year. We asked which of these topical threats managers felt would have a negative impact on their organisations’ performance.

Figure 3 Agreement that factors will have a negative impact on organisational performance

Prospects for 2013

External threats to performance

0%

10%

20%

30%

40%

50%

60%

Pessimistic

25

48

21

28

53

25

Neither Optimistic

The economy

Your organisation

0%

10%

20%

30%

40%

50%

60%

70%

80%

Restructuringof UK public

finances

58

Energyprices

54

Instability ofthe euro

3633

Socialunrest

33

Trade unionactivism

26

Technologicalchange

22

Capacity ofUK transportinfrastructure

Competitionfrom emerging

economies

19

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As with last year’s findings, the restructuring of UK’s public finances are causing concern for managers across all sectors. This is particularly apparent for those in the public sector – 78 per cent of whom agree that this will have a negative impact on their organisation’s performance. It is also the top concern for not-for-profit sector managers (62 per cent) and the second biggest concern for private sector managers (47 per cent).

As shown in Table 2 below, the cost of energy is the primary concern for private sector respondents (51 per cent agreement). Forty per cent of this group expect the instability of the euro to have a negative impact on performance, although this number falls to 30 per cent and 22 per cent in the not-for-profit and public sectors respectively. Bigger issues for the public sector include the impact of social unrest (49 per cent), technological change (46 per cent) and trade union activism (41 per cent).

Table 2 Top factors expected to have a negative impact on organisational performance by sector

As at the start of 2012, there are two major priorities for managers going into 2013: controlling costs and managing performance. Developing strategic partnerships, ‘developing our people’ and improving employee engagement are all up in this year’s survey (by 4, 5 and 7 percentage points respectively, compared to last year).

Figure 4 Factors seen as a high priority in the next 12 months

Organisational priorities

0%

10%

20%

30%

40%

50%

60%

70%

80%

Controllingcosts

78

Managingperformance

75

Increasingturnover

49 48 48

Developingstrategic

partnerships

Developingour people

47

Improvingemployee

engagement

39

Developingnew productsand services

Restructuring Rebuildingtrust in

management

37

28

Expanding ininternational

markets

24

Exploitingonline business

channels

19

Exploitingthe rise of

social media

18

Becoming moreenvironmentally

sustainable

16

Private sector

Energy prices

Restructuring of UK public finances

Instability of the euro

Technological change

Competition from emerging economies

Public sector


Energy prices

Social unrest


Trade union activism

Not-for-profit sector


Energy prices

Social unrest

Instability of the euro


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Unsurprisingly, the priorities are different for managers in different sectors (see Table 3). The need to develop strategic partnerships is greater for those in the public and not-for-profit sectors (57 and 50 per cent respectively) than for those in the private sector (42 per cent), reflecting moves towards new models of public service delivery. Restructuring is again the third highest priority for public sector managers, described as a high priority by 58 per cent.

Table 3 Top organisational priorities by sector

As shown in Table 4, controlling costs and managing performance are the top priorities for organisations of all sizes. However, small organisations (1-50 employees) have a greater focus on managing performance, increasing turnover and on developing strategic partnerships. Medium and large organisations, appear to be more focused on improving employee engagement and developing their people. Only 40 per cent of managers in small organisations describe improving employee engagement as a high priority, compared to 52 per cent across medium and large organisations.

Table 4 Top organisational priorities by size

Having looked at the organisational challenges and priorities for next year, we also asked managers whether they believe they have the right people in place to meet their objectives in 2013.

Overall, 47 per cent of respondents answered yes to this question, three per cent fewer than last year. However, 43 per cent of managers believe that their organisation does not have the right people in place. The view of private sector respondents is more optimistic, where a small majority – 55 per cent – do believe they have the right people in place (see Figure 5).

Fulfilling business objectives in 2013

Private sector

Managing performance

Controlling costs

Increasing turnover

Developing our people

Improving employee engagement

Public sector

Controlling costs


Restructuring

Developing strategic partnerships



Controlling costs





1-50 employees

Controlling costs


Increasing turnover



51-250 employees


Controlling costs



Increasing turnover

251-1000 employees

Controlling costs




Increasing turnover

1000+ employees

Controlling costs


Restructuring



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Figure 5 Managers’ views on whether their organisation has the right people to fulfil business objectives in 2013, by sector

To help explain these findings, the survey asked what issues managers faced as a result of not having the right people. Shortages of key skills are reported by 79 per cent of all managers: worryingly, this is up by 19 percentage points on last year. The number of managers reporting poor morale and poor leadership also went up substantially (by 15 and 13 percentage points respectively). As Table 5 shows, there are once again substantial differences between the sectors.

Table 5 Issues faced by those who feel they do not have the right people

Sixty-eight per cent of respondents report feeling secure or very secure in their jobs, compared to 62 per cent last year. The overall number of managers feeling insecure has dropped six points to 33 per cent but remains higher among public sector respondents, at 44 per cent.

Managers’ confidence in the jobs market has increased but remains low. Only 47 per cent believe that they could find comparable employment within three months if they were to lose their job. As with the findings from last year, public sector managers – the group who feel least secure in their jobs – feel least confident about finding new work, with only 38 per cent believing that they could get comparable work within three months. This is however up from 29 per cent points last year.

Managers from the public and not-for-profit sectors are most likely to look for a new job in 2013, with 46 and 42 per cent of managers in these sectors indicating that they will seek new employment. This compares to 33 per cent in the private sector. In all sectors, these numbers are slightly lower than last year.

Job security, job market confidence

and morale

Overall Private Public Not-for-profit Issue % % % %

Shortages of key skills 79 82 79 63

Poor morale 65 61 76 56

Poor leadership 63 63 59 70

Not enough manpower 54 51 62 44

Lack of ability to innovate 49 47 48 67

Lack of experience 44 49 38 52

Personality clashes 39 46 29 56

Lost people through redundancy 38 29 49 30

Too many people 10 11 9 11

4541

3357

5535Private sector


Public sector

Yes

No

Positive %Negative %

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Our survey also asked for the first time how optimistic managers are about the prospects for staff morale in their organisation in 2013. Overall, 46 per cent are optimistic, compared to 31 per cent who are pessimistic. Again, public sector managers are the least positive group: only 30 per cent optimistic with 49 per cent pessimistic. This compares to optimism of 54 per cent in the private sector and 52 per cent in the not-for-profit sector (with pessimism at 21 and 25 per cent respectively).

Fifty-nine percent of all respondents report that their organisation has made redundancies in 2012 but there were enormous differences between sectors. An enormous 96 per cent of public sector respondents had experienced redundancies in their organisation in the last year. Across the board, the experience of redundancy was higher than expected at the start of the year – a noticeable difference compared to the previous year’s data, which showed that expectations noted in this survey in December 2010 were largely borne out over the following year.

As Table 6 also shows, some 80 percent of public sector managers predict further redundancies in 2013 as austerity continues to bite. On a more positive note,more managers are not expecting redundancies in 2013 than are expecting them (49 per cent versus 45 per cent).

Table 6 Expectation vs experience of redundancy in 2012, expectations for 2013

In terms of hiring expectations, 33 percent of private sector managers are expecting an increase in their organisation’s headcount, compared to 28 per cent within the not-for-profit sector and only 8 per cent among public sector respondents. In comparison to 2011, the private sector has seen a slight increase by two percentage points whilst the not-for-profit sector percentage remains static and the public sector figure is down by 8 percentage points.

As in 2011, the top priority area for managers looking to strengthen their skills is strategic decision making, highlighted by 47 per cent of managers across all sectors. Negotiating and influencing skills are the second most common area where managers want to improve their abilities, especially for private sector managers.

Redundancies and headcount

Priorities for professional

development

Sector

Public

Private

Not-for-profit

Managers expecting

redundancies in 20122 %

69

18

38

Managers whose organisations made

redundancies in 2012 %

96

41

47

Managers expecting redundancies in 2013

%

80

26

44

2 Pearson, G. & Woodman, P., (2011) Future Forecast: Expectations for 2012, Chartered Management Institute

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Figure 6 Professional development priorities for 2013

Change management is more of a priority for managers in the public and not-for-profit sectors reflecting the higher levels of restructuring and redundancies that have taken place (43 per cent and 33 per cent). Project management skills are also a more common focus for public sector managers (39 per cent).

When examining development needs according to management level, strategic decision making is highlighted by all managers from junior roles through to directors. As Table 7 shows, coaching and mentoring skills become more of a priority from middle management levels upwards while team leadership and negotiating and influencing are more of a requirement for junior managers.

Directors also gave more varied responses than other managers, with performance management, negotiating and influencing, and change management ranked jointly as the 4th highest priorities.

Table 7 Priorities for professional development by managerial level

Director/Partner

Strategic decision making

Coaching and mentoring

Financial management

Performance management/ Negotiating and influencing / Change management

Developing others/ Political astuteness

Senior Manager/Principal


Negotiating and influencing

Financial management


Political astuteness

Middle Manager/ Consultant


Change Management/ Project Management



Performance management

Junior Manager/ Advisor


Project Management

Team Leadership


Performance management/ Change management

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Strategicdecisionmaking

44

Coachingand

mentoring

35

Negotiatingand

influencing

34 33

Projectmanagement

32 32

Performancemanagement

Changemanagement

30

Developingothers

Financialmanagement

Politicalastuteness

2825

Communication

23

Teamleadership

22

11

Development method %

On the job learning 51

Continuous Professional Development (CPD) programme 50

Training and short courses 47

Self directed learning 45

Coaching/ mentoring 29

Chartered Manager 20

Professional qualification 20

Voluntary opportunity 14

Academic/ business school 13

Secondment/ job rotation/shadowing 10

The most popular approaches for managers developing their own skills in the coming year are set to be on-the-job learning, CPD programmes, training and short courses and self directed learning. Chartered Manager also features highly on the list, identified by just under one in five. This reinforces the positive findings from CMI’s recent Professionalising Management about the experiences of those managers who have attained Chartered status and the impact they have on their organisations’ performance.3

Table 8 Managers’ approaches to personal skills development

This year’s survey also looked at the likely approaches for managers to developing their teams in the coming year. The table is topped by in-house training, while on-the-job learning and coaching and mentoring put a particular onus on managers to examine how they can directly support development and learning among their team members.

Table 9 Managers’ approaches to team development

Approaches to development

Team development

3 Professionalising Management: the impact of Chartered Manager, Chartered Management Institute (2012)

Development method %

IIn house training 72

On the job learning 68

Coaching/ mentoring 63

Continuous Professional Development (CPD) programme 47

Self directed learning (e.g. e-learning) 43

Secondment/ job rotation/shadowing 24

Professional qualification 23

Voluntary opportunity 16

Academic/ business school 14

Chartered Manager 4

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With economic growth still high on the political agenda, this year’s survey assessed CMI members’ support for a range of policy options relating to employment law and economic policy.

Despite the pressures on businesses to manage their costs, as with 2011, the survey results again show there is strong support for the National Minimum Wage for all workers, including interns who are currently often unpaid, and maintaining its level for young people. With the Government due to take forward its Modern Workplaces agenda for workplace reform, it is notable that 65 per cent back reform of parental leave to enable more equal sharing of the leave entitlement between both parents. A similar number, (66 per cent) back the extension of flexible working rights.

Among a number of questions related to skills policy, there was strong support for integrating management and leadership development into education and skills systems at all levels from schools to higher education (87 per cent), as recommended in the Heseltine Review4. It suggests a recognition from practising managers that management and leadership skills can be nurtured from an early age. There is widespread support from CMI members for tax incentives to encourage business investment in management and leadership development and increased employer ownership of skills funding, as noted a year ago and also in CMI’s Economic Outlook series. With extensive political and media focus on the question of women’s under-representation in senior management roles, it was notable that a majority reject quotas for women on company boards). This is in line with CMI’s preferred route of ensuring that women are able to enter the boardroom on merit through good management and leadership that utilises talent effectively.

Figure 7 Support for potential policy measures

Public policy in the year ahead

62A moratorium on new regulationsaffecting small businesses

6526Reforming parental leave to enablemore sharing between parents

876Integration of management and leadership development into education and skill system, at all levels from schools to higher education

758Increased employer ownership of skills funding

6628

Local Enterprise Partnerships taking a lead on localinitiatives to improve leadership and management 7211

Extending the right torequest flexible working

3840Tax incentives for employee share ownershipin exchange for reduced employment rights

819Tax incentives for investment in managementand leadership development

58

57Mandatory quotas for the numberof women on company board 34

35Requirements for companies to report on gender diversity at senior management levels

81 13Reducing the minimum wagefor young people

Support

Oppose

Positive %Negative %

81Ensuring interns receivethe minimum wage

6520

6520

9

Offering National Insurance holidays for businesses taking on additional employees

16

Offering National Insurance holidaysfor businesses taking on young people

4 No stone unturned in pursuit of growth (2012), Department for Business, Innovation and Skills. www.bis.gov.uk/heseltine-review

http://www.bis.gov.uk/heseltine-review

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Conclusion: another challenging year ahead

For the last two years, our survey has told a story of insufficient skills, poor leadership and a lack of manpower negatively affecting organisational performance. This year’s results have much in common with those findings.

Many of the challenges facing the UK economy remain: weak consumer demand, prolonged economic uncertainty and weak performance in the Eurozone, and – as confirmed in the Chancellor’s Autumn Statement at the start of December 2012 – a fiscal picture that is worse than anticipated a year ago. There is no doubting the seriousness or scale of the factors shaping the environment in which managers are operating.

Yet it is not an unremittingly bleak picture. The economy emerged from its double dip recession and while a triple dip is still feared, most predictions are for very modest growth next year. Some 39 per cent of private sector managers report that their companies did achieve growth in the last year and a majority performed in line with their targets. Managers’ optimism in this survey is up ten percentage points compared to a year ago, with more than half of those surveyed now expressing a positive outlook. This is not a picture of an economy in freefall.

The conclusion for managers has to be that lean times still lie ahead for many, if not most, parts of the economy. There will continue to be a premium on the skills needed to deliver organisational priorities in this tough climate. Cutting costs and managing change will again be important themes this year. The importance of negotiating and influencing skills might be a result of the growing need to build strategic partnerships – or of the need to protect scarce internal budgets.

There is also an important role for managers in getting the most from their people. Improving employee engagement is a priority for many in the year ahead. Raising performance levels might mean developing team members’ skills, and many managers are interested in developing their own coaching and mentoring skills which will help in this regard. It also implies a focus on better performance management.

The challenge will be to reconcile these priorities, ensuring that the pressure on employees to perform – including on those in management roles – does not simply lead to a resurgence in command and control, authoritarian management styles. Empowering staff, giving them a real voice in business decisions and finding ways to innovate despite limited resources may seem like a more difficult prospect. For those that can rise to the challenge, the rewards will be far greater.

•

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Future Forecast: Expectations for 2013