IPMA-HR Research Project “Transformation in Public Sector Human Resources” Survey Results

The Outsourcing and Insourcing Advisory Firm

IPMA-HR Research Project“Transformation in Public Sector Human Resources”

Survey ResultsApril, 2006

CONFIDENTIAL 2©2005, EquaTerra, Inc.

Transformation in Human Resources

> Today, Public Sector organizations face numerous challenges in attracting and retaining a quality workforce that can support and carry out their goals and mission.

> As the impact of the aging workforce increases, Public Sector organizations must focus on preventing the loss of important knowledge while developing new leaders and skilled professionals.

> Public Sector organizations are often less equipped to compete for talent with the private sector.

> The nature of Public Sector organizations and the political environments in which they operate can restrain the use of new tools such as outsourcing or shared services models to improve and transform HR service delivery and operations.

> Human Resources Information Technology (IT) is clearly a challenge as Public Sector organizations struggle with legacy systems and aging IT infrastructures.

> In the HR area, Directors and Managers struggle to gain the support of the organization’s executive leadership and to establish HR as a strategic partner.

> Within organizations, efforts to transform and improve other areas may take precedent over HR – yet another signal that executive leadership does not recognize the value of HR improvements or see the alignment with overall organizational goals.

> Cost remains a constant issue for HR operations in the Public Sector and HR professionals must balance conflicting agendas when pushed to improve and advance service levels while cutting costs and reducing budgets.


Key Findings

> Against this backdrop, the International Public Management Association of Human Resources (IPMA-HR) partnered with EquaTerra Public Sector (EQPS) to explore the challenges surrounding Human Resources transformation.

> The research survey and analysis resulted in several interesting points about HR transformation in the Public Sector, including:

- HR Professionals recognize the connection between improved and upgraded Information Technology (IT) and HR transformation.

- Management support is a key factor in pursuing HR transformation.

- HR Professionals recognize the importance of HR being perceived as a strategic asset to an organization.

- HR Professionals understand the value in Workforce and Succession planning but clearly desire assistance in this area.

- Outsourcing is not the norm and is not readily recognized as a key tool for HR transformation and improvement.

> This presentation features the results of the research survey and additional information on these and other key findings.


Respondent Demographics

> Total Survey Response: 224- Overall Response Rate of 11.3% - Sent to 1,989 senior level HR professionals.

> Survey conducted over 13 days.- March 8-20, 2006

> Most of respondents were local municipalities or cities serving <499,999 constituents.

> Survey targeted senior level HR professionals and worked well – 64% of respondents identified themselves as the HR/Personnel Director for the organization.



Responding Organizations

4% 9%

20%

55%

1%

1%

1%

5%

0%

0%

4%

Federal

State

County

Local Municipality / City

Town / Township / Village

University / College

School District

Special District

Not-for-Profit

Private Sector

Other

N=218


Breakdown of Respondents

What is your title?

Executive4%

Director of Human Resources

64%

Deputy or Assistant Director of Human

Resources8%

Manager of Human Resources

22%

Elected or appointed official

2%

N=216



Size of Responding Organizations by Constituents Receiving Service

7%

30%

14%

27%

7%

6%9%

Under 10,000 individuals

10,000-49,999

50,000-99,999

100,000-499,999

500,000-999,999

1,000,000-3 M

3 M+ individuals

N=214


Chain of Command

Who does your position report to?

Department director (other than HR)

9%

City Manager or Deputy City Manager

52%

Elected or appointed official18%Other

7%

Human Resources Director

14%

N=218

Other responses included Chief Financial Officer, Chief Operating Officer, the Organization’s Executive Director and Civil Service Commission.


Tenure

N=218

7.3%

26.1%27.5%

18.8%20.2%

0

10

20

30

40

50

60

# o

f re

spo

nd

ents

Less than 1year

2-5 years 6-10 years 11-20 years 20 years+

Tenure with Organization

N=218


Influence on Decisions

Within your organization's HR department, define your level of influence in the decision-making process:

Primary decision maker61%

Advisor to the primary decision

maker23%

Part of decision making team

16%

No influence on decisions

0%

N=218


What areas does your decision making role include?

> Of 214 respondents:> 92.5% of respondents have influence on strategy.> 88.3% on operations.> 73.4% on sourcing for service needs such as contracting with an external entity.> 58.9% on sourcing for operations purposes such as purchasing supplies or

equipment. > 59.8% on administration of labor contracts and negotiations.> 43.9% on Information Technology (IT).

> While majority of respondents have influence over strategy, later results indicate most organizations do not have a strategic plan for the HR department/area.

> While a large number of respondents indicate influence over sourcing decisions, the nature of public sector decision making and the related internal processes may limit this influence.

> Less that half of the respondents have influence over IT decisions, despite the recognized importance of IT in improvement and transformation.


HR Environment

> Size of HR Department or Area:

> Of 217 Respondents:

> 89.4% have 1-49 HR employees.

> 5.1% have 50-99 employees.

> 5.5% have 100-499 employees.

> 0% have 500+ employees.> Response consistent with the size of organizations.

> How would you best describe your HR environment?

- 39.7% Merit-based Civil Service System

- 35.5% At-Will Employment

- 5.6% Merit-based Civil Service System without formal protections

- 19.2% Other – Responses included: some combination of Civil Service & At-Will Employment, Civil Service for Safety Forces only and some unionization.

(N=214)


Unions & Labor Agreements

> Interesting responses in that 39% of respondents have no employees covered by Union agreements while for 24%, more than 76% of the organization’s employees are covered by agreements.

Percentage of organization's workforce covered

by Union agreements

39%

8%11%

18%

24%

0%

1-25%

26-50%

51-75%

Over 76%

N=217


Organization Size: Employees Served

Employees served by organization's HR dept. including FTEs?

0

10

20

30

40

50

60

70

80

90

0-99

em

ploye

es

100-

499

empl

oyee

s

500-

999

empl

oyee

s.

1,00

0-4,

999

5,00

0-9,

999

10,0

00-4

9,99

9

50,0

00-9

9,99

9

100,

000+

em

ploy

ees

# o

f re

sp

on

de

nts

N=217


Current HR Operating Environment

Organization's current HR operating environment

0% 16%

53%

5%

5%

21%

Fully outsourced services Some outsourced services Fully shared services

Some shared services Distributed services Blended services

N=214


Current Outsourcing & Shared Services

HR Function Areas Currently Outsourced

0 2 4 6 8 10 12 14 16 18 20

Retirement Plan Mgmt

Workers Comp

Benefits

Payroll

Training / Employee Dev

Job Candidate Testing

Information Technology (IT)

Union Contract Negotiation

Compensation Administration

Workforce Planning

Recruitment

Orientation

Other

Respondents

N=34

N=34


Current Outsourcing

> For Outsourcing, other responses included:- Cobra/SFA

- Insurance

- Employee Assistance Programs

- Executive Searches

- Risk Management

- Background Searches


Current Shared Services

HR Functions currently under a Shared Services Model

0 10 20 30 40 50 60 70 80 90 100

Benefits

Recruitment

Workers Comp

Training / Employee Dev

Compensation Administration

Payroll

Orientation

Retirement Plan Mgmt

Job Candidate Testing

Workforce Planning

Information Technology (IT)

Union Contract Negotiation

Other

Respondents

N=122

N=122


Current Shared Services

> For Shared Services, other responses included:- Employee Assistance Programs

- Health & Safety

- Risk Management

- Employee Relations

- Wellness Programs


Information Technology in HR

> How would you characterize your use of Information Technology (IT) in HR?

- 26.7% Limited Use of IT in HR - 42.7% Moderated Use of IT in HR- 30.7% Comprehensive Integration of IT in HR- N=150

> For overall satisfaction in IT, on average respondents ranked systems and applications that support HR operations low (3.19 mean score).

> The low rank of systems and applications is consistent with other results indicating the need for upgrades and improvements in HR IT.


Satisfaction in HR IT

Overall Satisfaction with Information Technology

0

10

20

30

40

50

60

70

1 (Low/bad) 2 3 4 5 (High/good)

Staff Processes SystemsN=156


Leadership’s Perception of HR

> When asked to rank on a scale from 1 (low/bad) to 5 (high/good), respondents ranked leadership’s satisfaction with HR service delivery as high:

- 59.8% ranked satisfaction at a 4.

- 14.8% ranked satisfaction at a 5.


Quality in HR

> When asked about quality within the HR department or area, on a scale of 1 (low/bad) to 5 (high/good), respondents ranked:

- People (HR Staff): Mean rank of 4.38

- Processes: Mean rank of 3.76

- Success in performing as a strategic asset to the organization as a whole: Mean rank of 3.65

> Other survey results indicate that management support is a key component of pursuing transformation in HR.

> Perception of HR as not being a strategic asset can serve as a barrier to HR transformation.

> While respondents recognize this challenge, survey results also indicate that most respondents did not have a strategic plan for the HR department or area.


Strategic Planning in HR

> When asked if they have an existing strategic plan,- 55.1% of respondents do not have a strategic plan for HR.- 44.9% do have a strategic plan for HR.- N=187.

> For those organizations that do have a strategic plan for HR,- 72.8% have a multi-year strategic plan.- 27.2% do not have a multi-year plan.- N=81.

> When asked if they have a multi-year budget,- 78.5% do not have a multi-year budget.- 21.5% do have a multi-year budget.- N=177.

> Despite identifying the challenge of being perceived as a strategic asset to the organization, the majority of respondents do not have an existing strategic plan for HR.

> For those organizations that do have a strategic plan, this plan appears to be comprehensive and covers a longer time frame.


HR Priorities

> When asked to rank the top three priorities in HR, respondents ranked:

- Top three: Manage benefit costs (i.e. workers compensation, pension, health care)

Align HR and workforce with organization’s objectives

Workforce/Succession Planning

- Bottom three: Emulate advances in the private sector

Reduce overall HR budget

Reduce administrative costs/improve back office processes

- When asked to identify any other priorities, responses were varied and included improving safety, improving morale and implementing performance measurement.

> Respondents recognize the importance of workforce/succession planning, a point confirmed throughout the survey.

> Despite reductions in cost being identified as an indicator of success, cost reductions were not identified as a priority.


HR Alignment with Organization

0

10

20

30

40

50

60

70

80

1 (notaligned)

2 3 4 5 (closelyaligned)

Alignment of HR Priorities with Organization

N=181


HR Alignment with Organization

> 76.3% of respondents ranked at a 4 or 5 (closely aligned) when asked about HR priorities alignment with organization leadership priorities

> Respondents view HR’s priorities as being aligned with leadership’s priorities, but does leadership share this perception?

> Later in the survey, responses indicate that management support is a key enabler for HR transformation and at the same time a key barrier to HR transformation.

> Likewise, earlier in the survey, respondents offered moderate rankings for HR’s success at being a strategic asset to the organization.


Recent Efforts to Improvement HR

> Other responses included: Created process team focused on HR issues, Streamlined Hiring, Additional Training for Staff and Strategic Planning.

> In addition to Process Improvements, most respondents have undertaken efforts to improve or upgrade HR IT systems, further confirming the importance of IT In HR transformation and improvement.

Efforts Undertaken to Improve HR

6.7%

7.9%

8.4%

8.4%

9.6%

11.2%

15.7%

19.7%

29.8%

32.6%

51.1%

77.5%

45.5%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Outsourced HR transactions

Other

Reduced size of staff

Centralized service delivery

Decentralized service delivery

Moved to a shared services

New HR Leadership

Replicate advances in private sector

Contracted with third-party admin

Hired additional staff

Reorganized Dept

Improved HRIT

Process Improvements

N=178


Measuring Success

> How does your organization measure success in improvements in HR service delivery?

- 74.4% Respondents said higher customer satisfaction

- 40.9% Cost Reductions- 39.8% Higher Retention- 19.2% Other responses

including: Greater efficiency Greater accountability Speed of service Meeting strategic goals Employee complaints/comments No measurement at this time N=178

> Customer satisfaction identified as an important measure of success.> At the same time, when asked about internal customer satisfaction surveys,

- 63.2% do not conduct a survey.- 36.8% are conducting surveys.- Of those that are, 46.8%

conduct surveys only as needed and 30.4% conduct surveys annually. (N=209)

> How are organizations measuring customer satisfaction?>What other measures are being utilized?> Is measuring success a challenge? A priority?


Organization & Brand Identity

> Does your organization have a “brand identity” as an employer in the marketplace:> 46.7% said NO> 34.6% said YES> 18.7% said ‘Don’t Know’

(N=182)

> For those respondents that said YES, when asked about the primary elements of their brand identity the top three responses were:

- 32.8% Pride & Values of working in the public sector

- 21.9% Great Place to work- 10.9% Job Security- Other Responses included: Progressive

Community, Family-Friendly, City/Location of Choice, Reputation for high quality services

> For those respondents that said NO or ‘Don’t Know’ regarding brand identity, when asked about the primary purpose of establishing a brand identity:

- 60.5% said a brand identity could help with recruitment

- 18.4% Retain Talent- 10.5% Workforce Succession Planning- Other Responses included: Don’t

know/understand brand identify, no purpose for a city, improve team/morale, enhance image, enhance customer service


Brand Identity Continued

How would you rank your organization's interest in establishing a brand identity?

0

5

10

15

20

25

30

35

40

45

50

1 (No interest) 2 3 (Some interest) 4 5 (Issue is underconsideration now)N=114

> Responses indicate confusion around brand identity and its purpose for a public sector organization and as an employer.

> 40.4% of respondents said their organization had low to no interest in establishing brand identity as an employer in the marketplace.


Mandate to Transform

> 75.8% of respondents said they are under no mandate to transform their HR operations.

> 24.2% are under some mandate to transform.

> N=182

> Of those respondents that are under some mandate to transform, they identified the following parties as those that gave the mandate:

> 22.7% Elected official

> 20.5% City Council or County Commission

> 6.8% Legislature

> 50% Other Sources

> Other responses included: HR/Personnel Staff, City Manager, Organization Executive Director, New/Current City Administration, Chief Administration Office and Internal Audit.


HR Transformation

9%13%

14%15%

19%

22%23%

28%30%

33%38%

39%41%

47%

0 10 20 30 40 50 60 70 80

Respondents

BenefitsRecruitmentOrientation

Training / Employee DevHR IT

PayrollJob Candidate TestingComp Administration

Retirement Plan MgmtWorkers Comp

Workforce PlanningUnion Contract Negotiation

None as of nowOther

What HR functional areas have already been transformed?

N=160


HR Transformation

> Benefits, Recruitment and Employee Orientation identified as the top three HR function areas already transformed.

> Most organizations have not already transformed Workforce Planning, a point that is consistent with later survey questions where respondents identify Workforce Planning as an area where help is needed.


HR Transformation

> Respondents identified the following activities as being important to improving HR effectiveness and efficiency to date:> Ranked in order of importance:

- Process Improvements.- Implementation of new IT.- Cut Costs.- Shared Services.- Outsource Services.- N=165

> In both cases, respondents recognize the importance of process improvement and new IT in improving HR service delivery.> Shared Services consistently ranked as being of greater importance than Outsourcing.

> Respondents identified the following activities as being important to improving HR effectiveness and efficiency in the next two years:> Ranked in order of importance:

- Process Improvements.- Implementation of new IT.- Cut Costs.- Shared Services.- Outsource Services.- Union/Labor Support.- N=168

> Throughout the survey, respondents more readily identify shared services as a tool. > Respondents also indicated that organization’s are already engaging in process improvements and the implementation of new IT to improve HR.


Value of HR Transformation

3

19

38

63

43

0

10

20

30

40

50

60

70

1 (notimportant/valuable)

2 3 4 5 (extremelyimportant/valuable)

How important is HR transformation to your future plans?

N=166


Value of Transformation

> The majority of respondents see value in HR transformation for their organization’s future plans.

> At the same time, when asked why transformation isn’t important to their organization, respondents cited management’s perception of HR not being a strategic partner (48.2%).

> Management’s support of transformation and recognition of transformation as having value is identified as a key enabler for transformation and a common barrier.


Timeline for Transformation

> Transformation planned in the next year- Most likely HR areas to be transformed in the next 12

months: Recruitment, Orientation, Employee Development & Training and HR IT

> Transformation planned in next 12-24 months- Workforce Planning, Compensation Administration and

Employee Development & Training

> Transformation planned in 24+ months- Workforce Planning, HR IT and Compensation

Administration


Changes needed to consider Transformation

47.6%

31.5%

23.4%

16.9%

16.1%

16.1%

15.3%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Lower cost options

New Management

Turnkey solutions

Nothing

Vendors more knowledgeable in PS

Lower risk options

Union Support/Collaboration

What could make your organization reconsider HR transformation?

N=124


Why is HR Transformation not considered important?

> Other responses included lack of time and management/community resistance.

48.2%

42.0%

29.5%

15.2%

13.4%

12.5%

10.7%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

HR not viewed as a strategic partner

Too Expensive

Executive Apathy

Not needed

Seen as vendor hype

Other

Union opposition

Why is HR transformation not important?

N=112


Value in Transformation

> When asked why organizations don’t consider HR Transformation important, most common response was HR not being viewed as a strategic partner. As mentioned earlier, the majority of respondents indicated their HR department or area does not have a strategic plan despite respondents influence over strategy.

> Management support and executive apathy, in addition to the organization’s culture, play an important role in transformation, a theme apparent throughout the survey.

> Cost appears to be a primary driver in decisions about pursuing transformation.

> If organizations had better information about transformation solutions and costs, would they be more likely to pursue transformation and improvements in HR?


Barriers to HR Transformation

> Other responses included lack of time, lack of staff, resistance to change and other priorities taking precedent.

10%

12%

19%

20%

21%

32%

32%

69%

0% 10% 20% 30% 40% 50% 60% 70%

Lack of funds

Lack of management support

Poor IT systems

Lack of skills / capabilities

Other

Apathy

Union Opposition

Not needed

Major Barriers to Transformation

N=165


Barriers to Transformation

> Lack of funds, lack of management support and poor IT systems identified as most common barriers to HR transformation – all common themes throughout the survey.

> When respondents were asked why transformation was not important to their organization, 42.2% indicated that transformation is too expensive.

> Cost is clearly a major issue in pursuing HR transformation.


Key Enablers for Transformation

> Other responses included new leadership, motivated staff and mandate to transform.

8%

8%

15%

19%

25%

34%

55%

68%

0% 10% 20% 30% 40% 50% 60% 70%

Strong management support

Strong internal skills

Appropriate funding levels

Highly integrated IT systems

Shared services

Other

Outsourcing

Union support

Key Enablers to HR Transformation

N=157


Key Enablers to Transformation

> Consistent with responses to questions concerning barriers to HR transformation, management support and appropriate funding are identified as key enablers.

> Strong internal skill sets and capacities are also recognized as being important for HR transformation.

> Respondents did not readily recognize Outsourcing as a potential tool for HR transformation.


HR Areas Needing the Most Improvement

> Other responses included performance measurement, centralizing HR, health & wellness programs and leadership development.

4%9%

12%17%

20%23%

26%30%30%

39%43%43%

48%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Workforce PlanningIT

Training / Employee DevComp AdminRecruitment

BenefitsJob Candidate Testing

PayrollOrientation

Retirement Plan MgmtWorkers Comp

Union Contract NegotiationOther

What HR areas need the most transformation & improvement?

N=169


HR Areas Needing the Most Improvement

> Top three responses: Workforce Planning, IT and Training. Respondents also indicated these areas were priorities to transform within the next year.

> Respondents also ranked Workforce Planning high as an overall HR priority.


Dangers of Unsuccessful Transformation

> When asked about the likely outcomes if HR Transformation goals are not met, respondents indicated:

- Inability to deliver core HR services (56.1%) or core organizational services (46.5%),

- Out of control costs (29.9%),

- Inability to recruit new staff (28.7%),

- Reductions to budget (15.9%),

- And Other responses (12.1%) including loss of department credibility, less efficient/less quality services, duplication of efforts and low employee morale. (N=157)

> Results reiterate respondents’ perception that transformation is important especially in service delivery.


Conclusion

> Clearly, the HR professionals we surveyed face a daunting task in managing Public Sector’s most critical resource - its’ people - with limited funds, limited influence on important decisions such as IT and limited support from organization management.

> HR leaders have influence on sourcing decisions but do not readily recognize outsourcing as a valuable tool for transformation.

> Cost is an important issue in transformation and HR professionals face the challenge of working towards improvements and advances while attempting to cut costs.

> Improvements and upgrades in IT are critical to the success of HR transformation.

> Survey responses lead to additional questions about measuring performance and success in HR operations, service delivery and transformation. Is measuring success important? Do most HR departments view performance measurement as a challenge?

> HR professionals recognize the importance of Workforce and Succession Planning but also recognize they need assistance in these areas.

> The results present an interesting paradox in the HR Dept’s struggle to be viewed as a strategic asset while not having a strategic plan. Does management’s perception also play a role in hindering HR strategic planning?

The Outsourcing and Insourcing Advisory Firm

“Transformation in Human Resources”IPMA-HR Research Study

For additional information on this research, please contact:Elizabeth Newman, Advisor

[email protected]

Documents

IPMA-HR Research Project “Transformation in Public Sector Human Resources” Survey Results