HR managers are habitually in a difficult position, caught between the conflicting needs of organizations to cut costs while retaining employees' energy and commitment. Caught between two stools, they often fall down the gap.
Overcoming this institutional handicap depends on five factors:
- dividing more HR work up into short-term projects with definite end-dates;
- being flexible; - working with employees wherever they are based, instead of expecting employees to come to them;
- adopting a facilitative approach, providing employees with the information and tools they require to take their own decisions, rather than taking those decisions for them;
- replacing gut instinct with hard data when it comes to pinpointing and resolving employee issues.
HR consultants are an accepted part of the HR function, providing specialist expertise on HR techniques and regulatory compliance. However, while know-how may be an important factor when it comes to selecting an HR consulting firm, success during the course of the project is dependent on a firm's ability to get things done, the extent to which it can work in joint client-consulting teams and achieving the right balance between doing things on the client's behalf and allowing the client to remain in control of the work.
Moving 250 far-flung oil industry staff from one employer to another without spilling a drop of oil or losing a single employee benefit is hard enough. Making the change in six weeks demands creativity too. Excellent communications and fast-track processes for legal compliance helped to safeguard the future of the UK's oldest and largest North Sea oilfield, as well as the futures of all its workers.
Founded in 1954, Apache Corporation is based in Houston, Texas and employs more than 2,350 people around the world. The company is known for its ability to acquire oil production assets from other producers and improve their efficiency, profitability and life expectancy. Apache is also active in oil exploration and the opening up of new fields. The company produces some 430,000 boe (barrels of oil equivalent) per day and has a market capitalization of more than US $13 billion.
Apache completed the US $630 million acquisition of the Forties oilfield from BP in April 2003. The Forties field is the largest oil discovery ever made in the British sector of the North Sea, and on its transfer from BP immediately became Apache's largest asset worldwide.
The Forties field was discovered in 1970 and began production in 1975. After 28 years of continuous production, delivering around 2.5 billion barrels of oil (around 15 per cent of the UK's total historic offshore production), Forties still ranks in the top 10 fields for liquid hydrocarbon production and reserves. The field has estimated reserves of 147.6 million barrels of oil equivalent and anticipated 2003 net production of 45,000 barrels of oil per day. (A barrel is about 35 imperial gallons or 42 US gallons.)
The North Sea is an extremely harsh environment in which to locate a complex industrial process. For Apache, coming to the North Sea presented technical problems very different from those the company was used to solving in the more benign waters of the Gulf of Mexico. Technologies and operating procedures have been specifically developed for the North Sea oil industry over more than a quarter of a century. But the technical context was not the only challenge for the new market entrant. Apache also had to absorb, comply with and master the complex employment landscape within which its new asset was set.
An opportunity with added responsibilities
Apache acquired the Forties field at a time when the major players in the North Sea oil industry were looking to redistribute their assets. From the point of view of an incomer, the North Sea has a mature and sophisticated infrastructure, including a highly skilled workforce. Apache saw clear opportunities for cost reduction, and ways that the company's expertise could be exploited to wring further enduring value from Forties without compromising on the safety or compensation of the people involved.
Forties is also surrounded by known fallow fields, indicating potential expansion opportunities for Apache. Assessing the profile of known, probable and possible oil reserves within the field allowed the company to make the immediate deal, while the wider context enabled Apache to plan Forties as a base for long-term expansion in the North Sea.
Forties immediately became Apache's single most valuable field, and attracted the management and investment attention that accompanies such status. The change of commercial ownership would mark the arrival of a new generation of energy management, focused on revitalizing a key European industry.
The asset Apache bought from BP included a total of 350 people continuously offshore and an infrastructure that was up to 28 years old. The age of the equipment created reliability and maintenance issues, which Apache experts could immediately measure in business terms. The team estimated the company could add 7,000 bopd (barrels of oil per day) to the field's production simply by improving the reliability of rig equipment. Apache estimated that work scheduled for rig maintenance was blocking a further 8,000 bopd.
While the Apache team could rapidly turn its attention to production improvements using the expertise developed by the company throughout its global operations, the company knew that employment issues would present novel challenges. Following a rapid competitive tendering process, Mercer was engaged to provide actuarial, administration, investment and legal services together with advice on communications, employment law, healthcare, HR operations, employee performance and reward. The Forties deal had been announced in January; Mercer were engaged in February; more than 250 staff were to be transferred to Apache by the start of April. Speed and accuracy would be paramount in making the transition work, especially given the complex nature of the staff's existing employment rights, which had to be protected.
Creativity was important too. Apache needed to replicate the big-company benefits its new staff were entitled to, but without an existing profile in the market.
The Apache/Mercer team set these objectives for the project:
Ensure a smooth and trouble-free transfer of staff by the beginning of April.
Agree a three-month Transition Service Agreement with BP to allow time to establish payroll and benefit continuation arrangements.
Develop a compensation and benefits arrangement for the newly created company that would meet the new business obligations and objectives.
Communicate with staff throughout to maintain morale and productivity.
The UK's Transfer of Undertakings (Protection of Employment) legislation, universally dubbed TUPE, provides a legally binding guarantee that employees' contractual terms and conditions remain intact when they move to a new employer during a change in ownership. TUPE is based on the European Community Acquired Rights Directive and requires new employers to respect employment terms including salary, hours, overtime allowances, redundancy packages, holiday entitlements and union recognition. TUPE applies for mergers and acquisitions, and also for outsourcing deals that involve the movement of staff between employers. The regulations do not just apply during the period of transition and a following honeymoon, but for the full duration of employment. Employees can sue employers for unfair dismissal if TUPE is not complied with at any time.
However, TUPE does not cover non-contractual elements such as pensions and benefits. Apache agreed with BP that staff moving to Apache would receive pay and benefits ‘broadly comparable' to those at their previous employer. In particular, Apache undertook to continue to provide a defined benefit pension plan for current employees. However, despite this commitment to provide similar compensation and benefits, the company needed to contain or reduce employment costs per unit of production to be more efficient. In order to respond to the six-week timeline for implementation, the team's solution needed to be as clear as possible and involve minimal bureaucracy.
Shared vision, shared visibility
One of the early tasks on the project was to share understanding of the relevant UK laws and precedents around TUPE, Data Protection and employment law issues as well as the general human resource climate in the UK. These areas were all new to Apache's management, but the team absorbed them rapidly and looked for creative solutions that would match the company's strong commitment to getting things done quickly. A steering committee communicated regularly between the United States and the UK using conference calls.
The shape of the project and its management style were dictated by the strict time frame. The team focused on the ‘end game' defined by the project's objectives, and worked backwards from the deadline to define the necessary tasks. Mercer's Peter Wallum calls this kind of project ‘do-by-close': the project is defined by tasks that must be completed by the closing date.
A dedicated Apache Web site was set up to support collaborative work across the continents and around the clock. All project papers were filed and available to the client and consultants working on the assignment, giving shared visibility of the authoritative status of every factor in the project. The team also maintained an ongoing log of tasks, issues and risks associated with the project. Budgets were agreed for the streams of work and were monitored on a weekly basis.
Mercer drew together experts in retirement benefits, healthcare, share schemes, employment law and employee communications to ensure that all areas of the project were covered. The firm's collective experience in mergers and acquisitions was also tapped by the team using Mercer's knowledge management systems. Mercer's actuary for Apache, Nigel Roth, says:
We have 13,500 consultants worldwide, and an M&A network within the business, so we've got someone ready to respond and deliver in every geography. We nominated individuals from different parts of the business with the right range of skills to meet Apache's needs. We worked well together as a team and had highly complementary strengths.
Each of the different work streams presented its own set of challenges. On the benefits side, it was agreed that Apache would establish a new Defined Benefit (DB) pension plan offering broadly comparable benefits to the scheme previously provided by BP. Employees of the Forties field were to be given access to this new Apache DB pension plan, and the ability to transfer past benefit rights if they requested. Mercer recommended changes to the way contributions were made to the scheme in order to produce savings on Apache's National Insurance bill, but at no detriment to staff. A new Defined Contribution (DC) pension scheme was also set up for new employees and any existing Forties employees who opted to transfer into it.
The new pension programme had to be approved by the Inland Revenue and in place by July 2003. By that time, employees needed to be informed about the pensions options available to them. It was important to communicate the scheme's details and the available options face-to-face to ensure all employees understood their rights. Presentations were given in a number of workplaces, including the oil rigs themselves. Mercer used financial advisers from its sister company, Marsh, who, uniquely in the industry, had the required flying licences. Tim Wagstaff of Marsh explains: ‘This means we are licensed to visit rigs. Anyone doing so needs to have practised for possible emergencies - by escaping underwater from a helicopter and so on.'
The team also produced personalized benefit statements (along with other communication literature) to help employees make informed decisions. Wallum says: ‘You can't do this sort of thing with a video. We had real people walking around and talking to people. We provided the background materials and provided the Marsh people to do the advising, on the rigs and at home. We used every technique we could to contact people.'
Keeping the show on the road
A critical aspect of the project was helping to maintain employee motivation and productivity during this period of major change. Throughout the assignment the team's communications specialists adopted the ‘Apache style' when preparing for briefing groups and supporting question and answer sessions. The Apache style is plain-speaking and direct, reflecting the need for speed and accuracy in its sphere of business in its avoidance of ambiguity or vagueness.
The distributed nature of the workforce presented particular problems for the communications exercise. Staff were mostly at rigs or on shore leave: there was no question of gathering everyone in a hotel for a half-day's session or drawing up a schedule of one-to-one meetings. The team visited individuals and used a range of channels to communicate, including e-mail.
The biggest hurdle to installing the new pension arrangements was the transfer of Apache staff records from BP. The team found and appointed a payroll bureau to handle the complexity of pay arrangements in the North Sea oil industry. Additional complications included replicating BP-specific calculations, and especially dealing with situations where employees had been members of several successive schemes as a result of previous corporate acquisitions within the BP group.
Apache also needed to replicate the previous DB pension arrangements as far as possible. These involved complex investment strategies that would be costly to model. Mercer used a consulting solution covering risk assessment, objective setting and investment strategy through an approach called Mercer 360. This approach enables smaller pension schemes to implement an appropriate investment strategy at an affordable cost. The team was also able to use this structure to design the new DC arrangement.
The team also had to ensure that the new pension arrangements were formally approved by the Inland Revenue before the launch date in July. The legal team shifted the approval process on to a fast track by submitting a simplified draft of the arrangement ahead of the final version. This allowed the team to prepare a final submission that it knew would gain rapid approval.
The team then had to train the new pension fund trustees. The appointed trustees were mostly from the United States and had little experience of UK pensions and benefits. The training programme was designed for fast consumption, and tailored to the exact requirements of Apache's new schemes for the Forties business.
The Apache/Mercer team created risk benefit arrangements for employees working in the North Sea that mirrored, as far as possible, those offered by their previous employer. These benefits included private medical insurance, disability cover and life assurance. Some of the benefits in the new ranges had previously only been available to big benefit purchasers - companies with larger populations of staff. The Apache/Mercer team managed to negotiate discounts similar to those made available to larger companies, ensuring that staff didn't miss out on big-company benefits with the change in ownership.
Under their previous arrangements, employees in the Forties business had benefited from a Save As You Earn (SAYE) share option plan and a Share Incentive Plan (SIP), where the company matched the purchase of shares by individuals. The transition team replicated the SIP in all its features, and added extra beneficial features that could be introduced in a US share scheme but could not be applied to UK shares. A tax-qualified discretionary share option plan was implemented by Apache to replace the SAYE scheme. Early Inland Revenue approval was sought and obtained for both of these plans, meaning that the re-engineered share benefit packages were fully implemented on time.
Wrapping up the new pensions and benefits arrangements called for the creation of a new staff handbook and contracts of employment for every member of staff. The Forties business had previously had two staff handbooks, and like many such products they were not always easy to navigate or update. The team replaced these handbooks with a single, simplified handbook that covered all the relevant details, met the legal requirements of TUPE and fitted with Apache's approach to staff management. The team also worked with Apache's solicitors to develop new contracts of employment for staff in time for the transition date.
A smooth transition
Mergers and acquisitions are famously unpredictable in their achievement of the business goals designed for them. Sometimes macro-level faults cause such deals to come unstuck. In these cases, one or more external factors in the companies' environment turn out to have been incorrectly analysed, or to have changed in their relevance or impact by the time the deal is completed. Other mergers and acquisitions are derailed not by inappropriate or unsustainable visions, but by failures of execution. In particular, deals can often fail because key staff members melt away during the transition. How people are treated during the process of change, and the care applied to their future security and opportunities, are significant determinants in the retention of staff and hence the overall success of mergers and acquisitions.
Jeff Bender, Vice President of HR, Apache Corporation says: ‘We've experienced negligible turnover since we've taken over the field operations from BP. Our production has already improved significantly, with more expected over the ensuing months. A significant cultural change process is in place and we've already seen the results of this throughout the organisation.'
The team's commitment to regular and consistent communication with all the affected staff made the change process a transparent and inclusive one. The level of senior management attention given to pensions and benefits issues gave a strong message that the new owners were committed to the personal obligations they had undertaken in acquiring the Forties business. Apache was in fact able to sustain productivity throughout the period of the transition project. The company had managed to replicate an inherited pay and benefits regime without the significant costs normally borne by a new, ‘outsider' company entering an unfamiliar market.
Despite having no existing management infrastructure in the UK, Apache was able to show staff how quickly the company could get up to speed and take firm control of the issues it was facing. The deal was completed on time, a successful Transition Services Agreement was made and implemented, stakeholders were communicated with throughout and new services such as payroll and pensions administration were created and launched without major hitches.
Mercer's contribution to the successful transition took its lead from the entrepreneurial way the consultancy was awarded the contract. Peter Wallum explains how his firm became involved with Apache:
I read about the deal in the Financial Times at the weekend, and I knew they'd need help. So I talked to some people in our Houston office and they found out the Apache management was coming to see three potential consultancy providers the next week. We were allowed to do a quick presentation on the Tuesday morning, with the understanding they'd want a fully costed proposal by Thursday night. We were about to send it out when all the power went off in the city - a total blackout. I rang Jeff Bender on my mobile phone and he said that if we could get it to him in the morning, he'd read it. I sent him a hard copy on Friday morning by courier along with - rather cheekily - an engagement letter to sign. Which he did, on Monday. And we started on Tuesday. It really helped us that Nigel Roth went to Houston to visit Apache's top management the following Friday to outline many of the benefits, issues and challenges already identified and to present effective solutions.
Wallum did not doubt that his team were exactly right for Apache's needs, a conviction which drove his actions. But this style of thinking also matched Apache's own approach to business remarkably well. Both organizations could be said in this case to be operating out of opportunism. ‘Opportunism' is commonly used in a pejorative sense, but it is a term that is due for rehabilitation in business. Apache's success lies in seeing opportunities where others see problems, and acting upon those insights. Similarly, Mercer's success in helping mergers and acquisitions lies in their ability to recognize situations in which they can make a crucial difference for their clients, and communicating their value directly with the prospective client. Summing up his team's activities in winning the engagement and delivering its goals, Wallum says simply, ‘We really wanted to do it.'
This project also demonstrates that the ‘soft' values of employee rights can receive the same attention as the harder issues of commercial takeovers without being lost in a flurry of technical tasks - providing the right kind of specialist attention is committed to the transition. The North Sea is a dangerous environment, and the personal risks taken by those who work there are to some extent balanced by the long-term security represented by their benefits packages. Protecting employee rights in this industry therefore has a moral weight that is hard to ignore, but which should not go unaddressed in other business sectors. A sense of urgency is demonstrably not incompatible with attention to employee needs, aspirations and sensitivities.
How the commitment of a group of highly valuable knowledge workers was revitalized through a simple process of exploration and change.
Evotec OAI is a drug discovery company, performing technical research and development services for pharmaceutical and biotechnology companies. The business is knowledge-intensive: the company's highly qualified scientists create novel compounds and design new drugs in the very earliest stages of the pharmaceutical development process.
Evotec OAI was formed in December 2000 by the merger of Germany's Evotec and the UK's Oxford Asymmetry International. The merged company's ability to offer integrated services across the entire drug discovery process makes it a partner of choice for many of the world's major pharmaceutical and biotechnology companies. Evotec OAI's applied expertise in chemistry, biology and compound screening enable it to accelerate its clients' product development processes. Using Evotec OAI also allows client companies to manage risk by outsourcing this complex and knowledge-intensive process. The result is a reduction in both the time and cost of bringing new drugs to market.
Throughout the industry, relevant scientific knowledge and skills are at a premium. As previous generations of ‘blockbuster' drugs lose their patent protection, pharmaceuticals companies must replace them with new products. At the same time disease profiles continue to evolve, leading to searches for new treatments and new markets. Competition and consolidation within the pharmaceuticals industry is intense, and companies such as Evotec OAI who are at the leading edge of the innovation process must work hard to keep their people. The greatest problem with businesses based on human capital is that human capital's habit of leaving the building every evening - and sometimes not returning. But the same competitive pressures mean that few companies can solve their retention problems simply by throwing money at the problem.
Staff turnover among Evotec OAI's knowledge workers had reached 25 per cent, an expensive and potentially business-threatening level. The high level of churn was not only draining the company of valuable expertise, but challenging the continuity of its projects. Replacing staff is a costly and time-consuming process, and even the best-qualified and motivated new staff cannot reach their full productivity potential on day one. Evotec OAI urgently needed to know why staff were leaving, and what the company could do to turn the tide. Evotec OAI asked Penna to help management understand the company's staff retention issues, reduce recruitment costs and build a more engaged organization: one whose people are committed to the company for the long term, and who feel that their needs are well met by the company.
People as vectors of knowledge
As an organization that depends on intellectual capital and research for its competitive advantage, Evotec OAI is wholly reliant on the knowledge of its people and their ability to apply that knowledge. The competition for scientists who have the mix of talents needed to succeed in this field is intense. The best people combine high intellectual abilities with deep knowledge, attention to detail, and the ability to work with others. While the mainstream media often depicts this area of activity as a somewhat mechanical business of manipulating data on screens, taking its keynote from advances in imaging and the development of the human genome project, the reality of drug discovery work combines data processing, individual insight and collaborative teamwork. Knowledge cannot exist in a vacuum, and only has value when people can use it to solve real problems. The delivery channel for knowledge, in other words, will always be people: human beings with all their quirks, passions and needs.
In the years immediately following the merger of the two predecessor companies, the business grew strongly. The company was growing by 30 per cent every year. However, the staff turnover rate of 25 per cent meant that the company was continually short of people. With a workforce of specialized scientists, 40 per cent of whom have PhDs, finding people of the right calibre is a challenge. Such people are not easy to attract and are expensive to replace.
HR Director Martyn Melvin had tried a number of traditional methods of finding out why staff turnover had increased and remained stubbornly high. For example, he improved the exit interview process in order to learn more about the motivations of those leaving the company and to retrieve as many leavers as possible. Melvin felt that these kinds of actions addressed symptoms rather than underlying problems. His work with Penna was aimed at moving away from firefighting towards an employment environment better designed to satisfy and motivate the company's people.
The Evotec OAI/Penna team's first task was to design and deliver a set of employee diagnostics that would reveal the reasons why staff were not completely engaged with the company. The research would also help the team understand the factors that had most impact on engagement levels, so that the company could begin to influence how strongly staff identified with the company. The team would then develop a strategy to increase employee engagement and thereby strengthen retention. Finally the team would implement its strategy and measure the results.
Asking the right questions
The team worked with a tight budget and decided on a simple and collaborative approach to the project. Focused, light-touch and personalized projects work well in human resources situations, where any suggestion of unnecessary spending - especially on external consultants - can be read as compounding whatever criticisms staff may already have of management's priorities.
The team first ran a series of focus groups to identify the organization's key issues. The first focus group involved members of the senior team, so that they could understand and commit to the process, and further sessions were run throughout the business. Themes that emerged from the focus groups included the lack of clear career paths, inconsistent management style, the pressured work environment and the high local cost of living.
The themes from these focus groups then helped shape the design of a questionnaire for all employees. The questionnaire was implemented as a form on a Web page, so that it could be efficiently delivered to and completed by every member of staff. The process was confidential as well as easy to use, with completion of the questionnaire taking no more than 15 minutes. The online questionnaire was hosted externally by Penna's partner PeopleMetrics, so no systems had to be installed at Evotec OAI.
Penna's Alasdair McKenzie says: ‘We used the focus groups to understand the working experience at Evotec OAI, and then used that understanding to design the questionnaire. It's better than using an off-the-shelf questionnaire because it's unique to the organization while drawing on best practice from elsewhere.'
The response rate for the questionnaire was 88 per cent, which compares extremely well to the average 40 per cent response rate expected for surveys of this kind. The team tested the validity of the questionnaire results using statistical analysis methods. McKenzie stresses the importance of validating the questions before developing a strategy based on the answers: ‘Knowing that we'd asked the right questions gave us confidence in the actions we were going to take based on the results.'
Some of the questions required a specific answer and a value judgement. These questions asked respondents to agree or disagree with a statement using scores ranging from 5 (‘strongly agree') to 1 (‘strongly disagree'). But the questionnaire also included open questions. The team was particularly keen to identify and explore the factors that led to increased job satisfaction, people's desire to stay with the company, and the levels of employee advocacy. Would they, for example, recommend Evotec OAI as a place to work to friends? As well as being a good indicator of employee engagement, such attitudes can actively help with recruitment. Therefore qualitative data on questions such as ‘What do you like about working here?' were captured and provided helpful and constructive feedback. The questionnaire also included a blank space for staff to add their own observations about life at Evotec OAI.
Analysis of the questionnaire returns revealed the real issues within the organization, and indicated which factors were affecting individuals' engagement. With this knowledge gained, the team could now identify the ‘levers' the company could use to improve employee attitudes in general and staff loyalty in particular.
The research took less than two months to complete, including data capture and analysis. The results showed that a small number of key areas held a disproportionate sway over employees' sense of engagement. This discovery allowed the company to direct its attention and resources to those areas, rather than constructing an unfocused programme of change.
There were three key areas of concern affecting Evotec OAI's fragile retention situation. The team called the first issue ‘role fulfilment'. This meant the extent to which employees could stretch within their defined roles and thereby feel the achievement of working to their full potential. Melvin and McKenzie make the point that knowledge workers enter their professions largely for the rewards of intellectual achievement, and that when opportunities to fulfil themselves professionally go stale, they can rapidly lose their attachment to the company. McKenzie believes this is a two-way street: ‘Knowledge workers have high expectations, but when you engage them correctly their productivity is enormous.'
The second area of concern that emerged from the research was the somewhat directionless nature of the company's career development processes. The existing appraisal process focused on assessing past performance, and setting appropriate rewards. This regular opportunity to review the individual's progress and aspirations needed to become more forward-looking, and focus on where the employee wanted to go rather than where he or she had been. Melvin says: ‘We weren't asking those questions, we were just making appraisal judgements. Now we also ask about career aspirations, and what [people] are doing to develop their own career.'
The final area affecting employee engagement was the visibility, or perceived lack of it, among the company's leadership. Employees felt that they did not have enough contact with senior management and were not confident that direction was being set for the company as a whole. Any perception that an organization lacks attention to the rudder quickly combines with other frustrations to fuel a sense of detachment in employees. This is one area where no news is definitely not good news.
Presenting the evidence the team had collected to the company's leadership was a challenge in itself. ‘A certain amount of heart-searching and budgeting went on,' says Melvin. ‘But you can't ignore data like this. You may think you know what your people are thinking but these figures make it real. You can track the responses on a graph: this is what they are telling you. It's not simply about making people happy. It's about making the business perform better.'
Figure 4.1: Summary of the team's findings
Small changes for large effects
The data gleaned from the research pointed to a number of areas where Evotec OAI's management could make beneficial changes. According to Martyn Melvin, the business needed to effect a number of small changes that would target key concerns: ‘It hasn't been one big change, but a lot of small changes. We've taken action on a broad range of issues, all of which were brought to us by the employees.'
The company wanted to demonstrate clearly that it had listened to its people's opinions and taken appropriate actions, even where there was no complete solution within the company's control. This was particularly true in the case of the cost of living in the local area. Melvin says: ‘We couldn't do anything about the local cost of living, though we recognized it as an issue. But what we could do was help with the make-up of the benefits package. We can make employees feel more valued, and treat them as adults with choices.'
Benefits packages were redesigned to provide a choice from the benefits that employees said they valued most. So, for example, employees can now choose to swap earned extra holiday entitlement for pay if they wish. The ability to craft their own compensation packages gives people a degree of control over their lifestyle choices which they can otherwise feel are frustrated by general economic conditions. ‘More money' is rarely the answer to any problem, though it is unsurprisingly the first answer most of us produce to most challenges that we face in business and in private life. By tackling this expectation with employees, and finding a workable solution, Evotec OAI's management could show the link between the business's commercial parameters and the compensation of its people. The company does not have the option of raising its prices to customers in order to increase wages; nor can it easily relocate to a cheaper location (and expect its employees to follow). Management and employees need to appreciate each other's perspectives, and design reward systems that address both commercial realities and individual aspirations. Often, as at Evotec OAI, the key to satisfying both parties lies not in raised costs but additional flexibility and personal choice.
The company also set about revitalizing its training, development and career support activities. The intellectual and professional development of staff is close to the hearts of Evotec OAI's scientists. For many professional staff, the opportunity to explore new areas of research or go deeper into their existing specialisms has no price. For such people, their own development cannot be replaced by other incentives such as money or improved working conditions. Without a sense of forward intellectual development, many such professionals feel that they are going backwards. The urge to stay at the leading edge of developments in the sciences sustains researchers throughout their careers, and Evotec OAI realized it needed to support that motivation much more explicitly. The company now also looks for opportunities to broaden the experience of its people as well as advance them in their existing specialisms.
The company also decided to strengthen the bonds among its people, so that they would identify more strongly with each other and forge a greater sense of common purpose. Supporting relationships among staff is also a means of extending the company's training effort and spreading knowledge throughout the organization. Actions taken included the extension of the induction period to a whole year. Weaker departments were partnered with better performing ones for guidance and benchmarking. The company did not neglect the informal networks that do so much to power the creativity and motivation of companies, especially companies dedicated to innovation. A new restaurant was built so that staff could enjoy meals with each other on site, and strengthen their personal networks in a relaxed setting.
In order to improve the visibility of management, the existing quarterly directors' communication exercise was redesigned to include more ‘face time'. The changes resulting from the project were in fact communicated at a quarterly meeting, so that staff could see that the senior leadership were completely supportive of the project's recommendations. On the broader issue of management visibility as the business develops, Melvin and McKenzie acknowledge that management skills do not always arise naturally or predictably in scientific research environments. According to Melvin: ‘Exposure to responsibility for anything other than their own work doesn't tend to happen until their mid to late 20s'. The company now actively looks to source managers from among those staff who show an aptitude for juggling several activities at once. They may not be the best scientists in their groups, but they have the ability to take an overview and pursue several strands of activity at once. There is an explicit recognition within the company that it needs a mix of skills to succeed, and a renewed commitment to supporting excellence across all the disciplines required for commercial performance. Those whose fulfilment derives from technical development are encouraged to pursue their goals, while those whose finest talents lie in other directions are supported. By selecting and developing managers from within its own ranks, Evotec OAI will help to ensure the credibility and accountability of its leadership as the company goes forward.
Other ‘small changes' were introduced to support the company's internal communications and bolster a sense of belonging to a unified and directed organization. A company magazine was started, and the intranet began to be used for more cross-site activities between the UK and German offices, particularly for arranging job swaps.
From project to toolset
This project began as a means of discovering why Evotec OAI's retention rate was poor and creating a set of actions to correct the situation. The result, however, has been a much deeper impact on the business. The project has given the company a means of exploring issues as they arise in the future, and intervening in order to change course. Melvin gives the sense of an organization newly empowered with additional skills to drive the business forward: ‘It's never finished! We're currently looking at doing another phase of research. We're always trying to move in the right direction, and always looking for the next set of coordinates. Now that we know the levers we need to pay attention to them, so that we have a satisfied and productive workforce.'
Evotec OAI also now has a hard measure of its current level of employee engagement and can track this measure regularly as the firm progresses. The organization now regards this kind of self-examination as a regular attribute of its business methods, and a behaviour that feeds directly into the improvement of the working environment, career prospects and company harmony.
The staff turnover rate halved following the implementation of the project's recommended actions. The company now does far less recruiting, leading to a significant reduction in HR costs. The reduction in churn also means that the company retains more knowledge for a longer time, giving it a competitive advantage over firms with higher staff turnover rates. Productivity and morale have also increased. Martyn Melvin estimates that the company saved several hundreds of thousands of pounds in the period following the changes. The UK project was subsequently repeated at the German office with similar results.
Professional environments are notoriously difficult to staff and motivate. Monetary incentives often have little real priority among knowledge workers, though they may focus on money issues as an acceptable proxy for other concerns. The relationship between the work they do and its external commercial value is not always clear to researchers, and arguably their freedom from immediate commercial pressures is a factor in their ability to experiment and explore. But the absence of this lever, which tends to apply by default in most businesses, creates unique problems. A knowledge-intensive company such as Evotec OAI cannot assume that its people share a set of obvious drivers that can be appealed to or manipulated. As has been said of many professional environments, managing scientific researchers is ‘like herding cats'.
This project demonstrates that returning to first principles by asking people what they feel is wrong with their environment can reveal the actual drivers that pertain within a particular company. Discussing the results frankly and relating them to commercial realities can then allow creative solutions to come forward. It is striking that all the ‘little changes' actioned by Evotec OAI share the trait of addressing the employees as ‘big people'. Flexible benefits packages give the message that individuals are recognized as adults with choices, but so does flexibility over the professional development paths they take. Scientists are used to structure in their work: structure is at the heart of the scientific method. The commercial world delivers little in the way of reliable, persistent structure and companies cannot pretend that this is not so. By supporting their people's own sense of personal responsibility, direction and development, companies like Evotec OAI show that this apparent conundrum can be, if not solved, managed with excellence.
Penna has shown with this project how a low-budget consulting exercise can produce deep and lasting benefits for an organization. Many employees are cynical about HR projects, expecting them either to be sinister exercises in covert criticism or blatant propaganda campaigns. The human scale of Penna's work at Evotec OAI and the team's faithful concentration on the opinions and aspirations of the employees created workable solutions that benefited everyone in the company.
It is doubtful whether the kind of information gathering and analysis performed at Evotec OAI would have been successful if it had been conceived and undertaken solely by the management team. There is often a sense, especially within organizations that have recently undergone major changes, that management ought to understand how everyone is feeling without having to ask. The direction and endorsement of an external partner can help management break the ice that quickly forms around employee dissatisfaction, and give everyone involved the necessary permission to share his or her views.
Helping members of the armed services make the transition to the wider world of work required a sensitively tailored package of information and counselling services.
The issue of what to do with those who are no longer needed to fight for their country has been around as long as warfare itself. The treatment of those laying down their weapons and returning to more peaceful activities has varied over the centuries from total indifference to support from the very top. An early initiative that combines a certain randomness with high-level support is commemorated in a common pub name throughout England. After the Battle of Warburg in 1760, John Manners, the Commander-in-Chief of the British Army, generously set up each of his disabled non-commissioned officers with a public house. The new landlords called their establishments The Marquis of Granby in honour of their patron, who died in 1770 leaving massive debts. For many years, Manners's gesture remained the highpoint of military resettlement services.
Resettling military people in ‘civvy street' took on a more official aspect during World War I. The scale of the national call-up meant that the many hundreds of thousands of men returning from the hostilities could not be naturally absorbed into the civilian community. As the number of people in uniform changed during the 20th century and the range of service roles multiplied, resettlement became an ever more complex issue. At the same time public perceptions of the community's duties to its service people changed. The development of the modern welfare state after World War II and the convergence of education and employment policy-making towards the end of the century both helped to create a climate in which the transition from service to civilian life became an opportunity for support.
Today, more than 24,000 personnel leave the UK Armed Forces annually and make the transition to civilian life, of whom around 17,000 are eligible for some form of resettlement assistance. These leavers are of widely different ages and have a diverse range of qualifications and aspirations. They are also dispersed throughout Britain and overseas. Each person approaching his or her date of leaving has different personal circumstances and ambitions, but adjusting from the military environment to the civilian world is an issue common to all. This change in life stage is certainly a challenge, but also a chance to take stock and focus on the opportunities and possibilities that lie ahead. Leaving the services need not be seen as the end of the line, but as a point of change within a larger career.
In October 1998 resettlement services for the UK Armed Forces were taken over by the Career Transition Partnership (CTP), a partnering arrangement between the MoD's Directorate of Resettlement and Right Management Consultants. The initial five-year contract was subsequently renewed for an additional two years to September 2005. CTP has merged the best of commercial HR consulting with a military context, creating a unique bridge between two very different worlds. The new organization is clearly working to set leavers on the right path. A leading air engineering mechanic from the Royal Navy says: ‘All the people were extremely helpful. They pointed me in the right direction and supported me every step of the way.'
Creating the partnership
Three objectives were defined in the initial contract for CTP. The first objective of the new organization was to set up a resettlement service for all ranks and all services, with the capacity to handle an estimated 17,000 eligible service leavers every year. The service would have to be in place by October 1998; the contract was agreed in July, giving the team a very short time in which to design and staff the organization.
The second objective targeted CTP's impact on the population of service leavers. The aim was to increase the take-up of resettlement services from the existing 40 per cent of service leavers to 50 per cent, or up to 8,500 individuals per year. The third objective was to place 75 per cent of service leavers within jobs within six months of their leaving date.
The team proposed delivering flexible, personalized career change and job-finding support through 120 civilian staff based at nine specialized centres. These Regional Resettlement Centres (RRCs) were already in place at military bases across the UK. The Directorate of Resettlement, representing the MoD half of the partnership, was to form resettlement policy for all three services.
Initial access to resettlement was also to be managed separately by each service through their respective education departments. Unit resettlement staff would provide information and administrative services to leavers, while Service Resettlement Advisors provided more comprehensive briefing and advice. Those eligible for resettlement help would then be directed to the nearest CTP Resettlement Centre to start their programme.
The package available to eligible service leavers through the RRCs begins with individual career counselling. Each person is assigned a career consultant as his or her key point of contact for advice, guidance and support throughout resettlement and for up to two years after discharge from the services. Leavers can then attend a Career Transition Workshop (CTW). This is an interactive three-day workshop, during which service leavers are helped by a training consultant to identify, evaluate and market the skills, attributes and experience they have gained in the services. Leavers explore how they can break their experience and expertise down into meaningful elements that may be repackaged into compelling offers for employers. One RAF Junior Technician advises other leavers: ‘Whatever else you intend doing for your resettlement make sure you do a Career Transition Workshop.'
The RRCs offer other workshops and seminars on topics such as self-employment, CV writing, interview techniques and personal networking. There are also financial advice briefings given by reputable financial organizations and housing briefings delivered by the Joint Service Housing Advice Organization.
Further practical assistance includes trial attachments with civilian employers that enable service leavers to spend time with a potential employer while being paid by the MoD. These attachments give service leavers work experience while enabling employers to assess their ability and fit without obligation or cost. Leavers also enjoy administrative support and research facilities including careers libraries, PCs with Internet access, telephones and career guidance software packages.
The RCCs share access to a Resettlement Training Centre based at Aldershot where leavers can join a broad range of training courses. Current courses include computer maintenance, roadside vehicle repairs, security systems and aerial installation, facilities management, project management and IT skills. There is even a workshop on becoming a management consultant. Courses are regularly adjusted to meet the needs of employers and many lead to the award of civilian qualifications.
Finally, the CTP works with a sub-contractor called the Regular Forces Employment Association (RFEA) to place leavers in jobs. More than 25,000 vacancies are generated annually by the RFEA through 29 branches across the UK. Candidates are matched with vacancies using a central database networked to the RCCs.
This story, from an air engineering officer in the Royal Navy is typical of many:
I was very quickly introduced to the CTP by the Royal Navy resettlement office in Portsmouth. This proved to be the turning point in making my departure from the Royal Navy a successful one. Eight months since leaving the Royal Navy my business partner and I have established an organizational development and management training company, with a growing list of clients from small-to medium-sized enterprises to large blue chip organizations. I am convinced that many of the mistakes that I could have made I did not, due to the advice and guidance of the CTP.
The CTP service was the first example of a military resettlement service being provided by a partnership of private and public organizations anywhere in the world. The biggest challenge facing CTP at the outset was the need quickly to integrate a civilian organization into a military environment. The key issues were communications, confidentiality and culture.
For example, since the RRCs are based within MoD facilities they initially lacked the communications technology that is standard in the private sector. CTP quickly installed a wide area network (WAN) and enhanced telephone systems to enable better communication. In addition, specific steps were taken to understand the culture and traditions of the services. The delivery teams designed for CTP integrated individuals from both civilian and military backgrounds. Right's Tim Cairns had himself served in the armed forces, so was well placed to appreciate the differences between team members:
There was a natural caution borne of not quite knowing how other people work. It's a fear of the unknown. People have perceptions that quite often are wrong. They get their perceptions from the media, which is not quite the truth, because they are selective or exaggerated. In my experience, what helped was that the civilian side tried very hard to understand how the military operates. Many of our staff are ex-military and over time civilians with no military background have learned a lot about the military ethos - the impressive aspects as well as the frustrating ones.
In order to meet the key objective of increasing the number of individuals taking up resettlement services, the CTP team decided to track and keep in touch with individuals as they were assigned to different areas within their service. This is a significant departure from previous practice, which ensures continuity of planning in the runup to leaving.
To provide international support an RRC was opened in Germany and local support provided to ex-Ghurkhas in Nepal. Additionally, workshops and career consultancy have been delivered at military establishments (such as RAF Lossiemouth in Scotland and RNAS Culdrose in Cornwall) where service leavers find it difficult to travel to other venues. Online support has also been continually improved and updated.
The issue of confidentiality arises from the high proportion of personal information divulged in the CTP process. For example, some leavers have medical histories that should not be divulged to potential employers, though employers may need to know about any implications for the individual's ability to perform or keep a particular job. Since leavers' files contain a mixture of private and public information, access to records has to be through an authorized individual.
From the cultural point of view, life in the armed services is highly structured. While collaborative and creative techniques have begun to cross over into the armed forces from general management practice, it is fair to say that the trade in approaches has historically been in the other direction. The 20th century's big corporations were initially modelled after military organizations, with specialization, hierarchical structures and a reliance on orders. Today's business organizations target innovation, quality and flexibility as well as efficiency, creating a need for more motivational management, empowerment and openness. These approaches are irrelevant and indeed dangerous in the battlefield, so service personnel are valued for their ability to perform as ordered, use their initiative when appropriate, and persevere in the face of adversity. The ethic of loyalty to the team is also highly prized in the military environment. These qualities have a high value in the civilian world, but must be exercised in a less structured environment.
Workers in the business world need to accept rapid and radical changes to their goals, and must be able to tolerate high levels of ambiguity. CTP is often the first place in which service people experience these aspects of the outside world. According to one army leaver: ‘[CTP] made me realize I've got to start thinking for myself'. Meanwhile a flavour of the traditional military attitude comes over in this excerpt from the Royal Marines' robust advice on how to work with a CTP consultant: ‘His experience is in commerce and industry and therein lies his strength - use it. He is well paid for his services so make sure he is working for you. Know his name, telephone and fax number and his e-mail address.'
Right's Cairns says: ‘[Attendees] don't know what to expect from the workshops but they come out positive about it. It's facilitative rather than chalk and talk, which is different to what they're used to. They are very adaptable people, though sometimes institutionalized - but they're aware of that.'
Performance of the new unit
Nine RRCs were opened within the target time of three months. The centres were able to help current leavers, plus a backlog of leavers who had postponed registering with the existing resettlement services in anticipation of the launch of CTP. A tenth centre was subsequently opened in Germany to support service leavers based there. CTP consultants also delivered face-to-face advice to people on active duty in Gibraltar, Cyprus, Brunei, Nepal, Kosovo and many other overseas locations.
Over the initial five-year contract period, CTP provided personal career transition services to over 50,000 people of all ranks leaving the UK armed forces. This throughput equates to more than 70 per cent of those leaving, and 15,000 more people than set out in the project's initial objectives. More than 3,000 Career Transition Workshops were delivered in the UK and Germany, and more than 30,000 job vacancies were generated every year by the RFEA.
As a result of the advice they received from CTP, service leavers are now better prepared than ever to face the civilian world. Recent surveys of leavers assessed by the MoD indicate that between 93 per cent and 96 per cent of service leavers gained employment within six months of leaving the military, over 20 per cent more than targeted in the initial objectives.
CTP staff act impartially, aiming to give the right guidance to each individual. Sometimes the result is a recommendation that an individual remain in the services. Leavers can be advised that they will ultimately be better placed for a civilian career by staying in the armed forces and gaining more experience and qualifications. For example, during 2002-03, 30 per cent of the 900 people who reengaged with the services during the resettlement process did so directly as a result of CTP advice and information. Retaining these people represents a win-win situation: the individuals have their career prospects enhanced, while the MoD saves hundreds of thousands of pounds in recruitment and training costs.
The CTP philosophy is empowerment, so that individuals treat the resettlement process as a preparation for life, not just a means of getting a first job. CTP enables service leavers to invest in their future through a proactive approach to their own career development, to make their own decisions and to act on them. For many leavers, personal ownership of this kind is a new experience and one that provides a steady foundation for their onward progress. The advice leavers receive is impartial and the interest of the individual is paramount at all times. This attitude has helped individuals to find the most suitable long-term career, rather than just a short-term job that may not last and lead to later unemployment and lack of direction.
Tim Cairns himself went through the transition process before CTP existed. Of his own experience, he says:
There was a lot of help available, but you had to seek it out for yourself. And there was a lack of ongoing support - no centre and no assigned career consultant. CTP gives leavers a named person, assigned to them in a one-to-one meeting at the end of their Career Transition Workshop, and that relationship persists for up to two years after they have left.
The work of the CTP has also improved the reputation of the armed forces as an employer, both to future recruits and to civilian employers. Those who have been well supported during their transition to civilian life are more likely to recommend the services to friends and relatives. Employers are also more likely to gain benefits faster from employing service leavers who have had the benefit of CTP. For example, Ray McMahon, Service Support Manager for railway company GNER Scotland says:
We have been delighted with the calibre of staff that have joined GNER from the armed forces. The transition of staff joining GNER has been remarkably smooth. We are a customer service industry led business and the staff we have recruited have all shown that their training in the forces has been invaluable when dealing with people and providing customer service. Our relationship with the CTP is going from strength to strength and we are pleased to provide employment opportunities for those leaving the forces and entering back into the civilian world.
Right's contribution to the resettlement service centres around its ability to tailor HR consulting for the military environment. The company took best practice from commercial outplacement and career guidance services and adapted it to the special circumstances of those leaving the armed forces. It was able to respect and preserve the best qualities of the CTP's clients while introducing them to the realities of the wider world of work.