theHRDIRECTOR

THE ONLY INDEPENDENT HR STRATEGIC PUBLICATION IN THE UK MARCH 08 ISSUE 45

theHRDIRECTOR INTERVIEW: Andrew Newall – Group HR director, United Biscuits

FORUM: PLANNING FOR THE FUTURE Thinking the unthinkable ETHICS IN THE WORKPLACE A necessity not a ‘nice to have’ CORPORATE MANSLAUGHTER ACT Avoiding the cost of complacency GLOBAL PAYROLL Bringing consistency out of complexity

CASE STUDIES THIS MONTH Andrew McCallum – Head of Corporate Reputation, Centrica Alex Redgrave – Vice President, Head of Consulting, HOK Professor Richard Scase Arco Getty Images PLEASE NOTE: Henley Management College WE DO NOT SABMiller ACCEPT ANY PAID FOR OR SPONSORED EDITORIAL

Pictured: Andrew Newall - Group HR director, United Biscuits

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The Thomson trademark and Star Design are trademarks of Thomson Finance S.A. used herein under licence. www.thehrdirector.com CONTENTS

theHRDIRECTOR CONTENTS MARCH 08 ISSUE 45

EDITOR’S WELCOME 5

theHRDIRECTOR INTERVIEW 8 This month we talk to Andrew Newall – Group HR director at United Biscuits.

FORUM: PLANNING FOR THE FUTURE 12 PAST PERFORMANCE IS NO GUARANTEE OF FUTURE SUCCESS 14 p14 We find out how companies need to plan for the future in a way that takes into consideration our changing world. predicting future trends CASE STUDY SABMILLER 18 “and staying ahead of INTERVIEW PROFESSOR RICHARD SCASE 20 the game is key THE IMPACT OF TECHNOLOGICAL DEVELOPMENTS 22 In an increasingly virtual world, how will the UK workforce develop over the next 20 years? Kai Peters, chief executive, Ashridge Business School, examines the workforce of the future, what its needs will be and the implications for businesses. ” INTERVIEW ALEX REDGRAVE – VICE PRESIDENT, HEAD OF CONSULTING, HOK 26 CASE STUDY HENLEY MANAGEMENT COLLEGE 28

ETHICS IN THE WORKPLACE 30 “Business ethics – isn’t that an oxymoron?” Simon Webley, research director at the Institute of Business Ethics, begs to differ. INTERVIEW ANDREW MCCALLUM – HEAD OF CORPORATE REPUTATION, CENTRICA 34

p30 ETHICS AUDITS 36 Peter Binns, principal consultant at organisational development company, Bath Consultancy Group, looks at the five levels of corporate ethical engagement, and what this means for HR. doing business ethically CASE STUDY ARCO 38 “has a significant positive impact on financial CORPORATE MANSLAUGHTER ACT 40 performance Chris Green, partner at law firm Weightmans, reviews the Act and its implications for organisations. HOW TO MANAGE A FATAL ACCIDENT INVESTIGATION 44 Kevin Elliott, partner at Eversheds LLP law firm and a specialist in work-related fatalities, highlights some of the key issues that an organisation’s management should be aware of, ” in the event of a workplace death.

GLOBAL PAYROLL 48 We take a look at the challenges and rewards of implementing a common approach to global payroll systems. CASE STUDY GETTY IMAGES 52

p48 attention to detail is “important when REGULARS establishing multinational payroll IN BRIEF 6 Scanning the HR scene. WEB LINK 6 Previews of the latest web features. ” EVENTS CALENDAR 54 Key dates for your diary.

theHRDIRECTOR – MARCH 08 3 Promise. Realised.

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FUJ288_Tailor_297x210.indd 1 12/12/07 16:50:13 www.thehrdirector.com EDITOR’S WELCOME

EDITOR’S WELCOME CONTACTS Welcome to theHRDIRECTOR – the only magazine dedicated to HR directors. EDITORIAL Editor Heather Parsons the future noun [S] - “a period of time that is to come” [email protected] When you talk about the future, what do you mean? Are you referring to Editorial Assistant Lea Watson [email protected] t: 01454 292 061 the near future or the distant future? And how would you define either of those terms anyway? Does the near future mean tomorrow, the day after, ADVERTISING SALES ABC APPROVED next week, next month or even next year? And does the distant future Account Manager Lee Francis [email protected] t: 01454 292 063 relate to some or even all of those very same timeframes? Sales Executive Evan Hay We have a wonderful language with endless nuances of meaning with [email protected] t: 01454 292 064 which we can communicate and express ourselves, yet when you pare ADMINISTRATION & SUBSCRIPTIONS everything away, the sense of what we say relates very much to who we are Administrator Colette Walker [email protected] t: 01454 292 060 – and even how old we are. When you are a very young child, the near Subscriptions Co-ordinator Rebecca Dodd future means in the next few minutes and the distant future probably [email protected] t: 01454 292 067 extends only as far as tomorrow. For teenagers and young adults, like my DESIGN children, these timeframes expand a little further, but the thought of Senior Designer Emily Jarvis reaching even the age of 40 let alone 60 or 80 is in the really distant future MANAGEMENT – so far away that it is virtually unimaginable! Managing Director Peter Banks But it is this capacity to imagine the unimaginable that will give businesses www.thehrdirector.com the edge over those that can only see as far as the next three or five years. t: 01454 292 060 f: 01454 294 787 Our world is changing at such a pace, and technology is bringing us so EDITORIALPANEL many tools and opportunities that would have been inconceivable even ten Lucy Adams or twenty years ago, that being able to keep up, let alone be ahead of the Group HR Director curve, is a constant challenge. Carolyn Dyer Human Resources Consultant Can you imagine going to work in a virtual world, choosing the outfit people will see you wear online, but never leaving your front door? Would you be Anthony Hesketh Senior Lecturer & Deputy Director prepared to use memory implants to help you remember the latest legislation? of the Centre for Performance-Led HR These are the type of ‘way out’ ideas outlined on P.22 by Kai Peters, CEO of

Richard Higginson Ashridge Business School, which may excite you or strike fear into your heart! Reward Manager Whilst I may suffer from the occasional ‘senior moment’, the thought of Makbool Javaid having a memory chip implanted is not one that I would warm to at present, Partner but change is part of life and these types of technological advancements are Sudhanshu (Sudden) Palsule something that we may all have to adapt to in the coming years. Managing Director More immediate change is afoot here at theHRDIRECTOR, as this is my last Linda Thompson European Director of Operations issue as editor. I have very much enjoyed the last four years and am proud that the magazine now enjoys such respect amongst you, our readers. Andrea Winfield International HR Business As we all look to the future, I hope we will be able to echo Robert Browning’s & Strategic Projects Manager words: “The best is yet to be”. SUBSCRIPTIONS If you would like to subscribe please call us ONLY on 01454 292 067 or e-mail us at £125 [email protected] for further details. PA CONTRIBUTIONS We welcome ideas for features. Please send ideas, including a short synopsis if possible, to our Editor. Editorial guidelines are available on request. In the Heather Parsons absence of an agreement, the copyright of all contributions, regardless of Editor format, belongs to theHRDIRECTOR Ltd©. We do not accept advertorials or sponsorship for features. PRODUCED BY em5 design & advertising ltd. www.em5.co.uk • [email protected] • 01454 299 010

The publishers accept no responsibility in respect of advertisements appearing in the magazine, and the opinions expressed in editorial material Printed on environmentally friendly paper. or otherwise do not necessarily represent the views of the publishers. The publishers accept no responsibility for actions taken on the basis of any 9lives 55 is certified as FSC mixed sources product of information contained within this magazine. The publishers cannot accept 55% recycled fibre from both pre- and post-consumer liability for any loss arising from the late appearance or non-publication of sources, together with 45% virgin ECF fibre. any advertisement for any reason whatsoever. ISSN 1754 0224.

theHRDIRECTOR – MARCH 08 5 INBRIEF & WEBLINK www.thehrdirector.com

INBRIEF WEBLINK HM REVENUE & CUSTOMS (HMRC) HAS ANNOUNCED THAT IT WILL BEGIN THE PROCESS OF WORKING WITH INTERESTED CONNECTING YOU TO YOUR ONLINE RESOURCE PARTIES ON THE DEVELOPMENT OF A TAXPAYERS' CHARTER, WHICH WILL SET OUT BOTH TAXPAYER RIGHTS AND RESPONSIBILITIES IN A SINGLE ACCESSIBLE DOCUMENT. In THESE addition, three consultation documents have also been FEATURES ARE published. The first is on payment, repayment and debt. NOW AVAILABLE The second contains proposals on compliance checks and TO ALL READERS for a new framework for HMRC to check that taxpayer’s ONLINE payments and repayments are correct. The third puts forward proposals for extending the new statutory framework for the Finance Act 2007 and for charging civil penalties on all other taxes, levies and duties that HMRC is responsible for, with the exception of Tax Credits. FFI: www.hmrc.co.uk

WE TAKE A LOOK AT THE EXTRA A NEW “ENTREPRENEURS’ RELIEF” HAS BEEN ANNOUNCED FEATURES & CASE STUDIES AVAILABLE ONLINE THIS MONTH. BY THE GOVERNMENT AND WILL OFFER A 10% CAPITAL GAINS TAX (CGT) RATE ON LIFETIME GAINS OF UP TO £1M. PAYROLL The Impact Partnership is a joint venture that aims to bring The measure will help people who own a stake of at least regeneration to Rochdale. In order to cope with the extra 1,300 jobs that the five per cent in a trading business and are also an programme will bring, a new payroll system will be introduced. We look at the employee, company director or other officer of that challenges and benefits of bringing together 13 different payrolls. company. The relief will help an estimated 80,000 business owners and investors in the next tax year, 90% of whom CORPORATE MANSLAUGHTER ACT The Corporate Manslaughter Act is are forecast to pay CGT at the 10% rate only. The move due to come into effect on 6 April 2008 and will affect businesses of all sizes. will reduce the Government’s expected additional tax take Ed Conybeare, specialist in regulatory issues, Shulmans Solicitors, explains from the CGT reforms by £200m to £700m a year. A the ramifications of the Act, offers guidance on how HR directors can take single 18% rate of capital gains tax will take effect on 6 steps to prevent liability, and discusses the importance of ensuring employees April 2008. are aware of, and compliant with, the Act. FFI: www.hmrc.co.uk PLANNING FOR THE FUTURE In order to retain a competitive edge in the modern marketplace, organisations must be able to take a broad view of the NEW LIMITS FOR PAYMENTS AND AWARDS MADE TO way the world could change if they are to make long-term decisions for the WORKERS IN CERTAIN EMPLOYMENT RIGHTS CASES HAVE good of their company. Peter Cheese, global managing partner, Human BEEN RAISED FROM £60,600 TO £63,000 UNDER THE Performance Practice, Accenture, draws on a recent global survey to reveal ANNUAL INDEX-LINKED FORMULA, AS FROM FEBRUARY the key areas of concern for leaders and comments on how planning for the 2008. The increased limits will affect statutory redundancy future is essential for every business strategy. payments, the basic and compensatory awards for unfair dismissal, the limit on guarantee payment made when ETHICS IN THE WORKPLACE How can an organisation ensure that its employees are not provided with work, and the minimum employees adhere to ethical principles in their communications? We find out basic award for unfair dismissal in health and safety. how Waterford Technologies and Twin Valley Homes implement and enforce FFI: www.berr.gov.uk ethical communication policies, whilst adhering to the privacy laws, and show how employees can be trained to behave in the appropriate manner.

THE DEADLINE FOR RESEARCH AND DEVELOPMENT TAX Subscribe today and receive personal access to members’ benefits. RELIEF CLAIMS IS 31 MARCH 2008. This is for any period Call us on 01454 292 067, or apply online at between 31 March 2002 and 31 March 2006 as changes www.thehrdirector.com/subscribe.html to the regulations means that organisations now only have two years to make a claim. FFI: www.hmrc.gov.uk BUSINESS NEWS • FEATURES • CASE STUDIES EXPERT COMMENT • EVENT INFORMATION • ARCHIVES BACK ISSUES • SUPPLIER DIRECTORY www.thehrdirector.com

6 theHRDIRECTOR – MARCH 08 Client approval...

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theHRDIRECTOR INTERVIEW

THIS MONTH WE TALK TO ANDREW NEWALL, GROUP HR DIRECTOR AT UNITED BISCUITS.

WHAT ROLE DOES HR PLAY WITHIN UNITED BISCUITS’ OVERALL BUSINESS addition to the office-based locations, to gain feedback from an HR point STRATEGY? We are very proud of our heritage and iconic brands, and of view regarding the areas we should be targeting. As a result, the key culturally there is a huge affinity between the people working in each of areas I want to focus on are: our locations and these brands. The role of HR is to find and develop 1. Reward - how can we simplify reward, make sure our packages are talent that can build on the best of the past and have relevance to the relevant and motivate our people to support our drive for improvement? future growth of the brands and the business. 2. Organisational development – we need to look for improvements to HR also plays a role in ensuring United Biscuits (UB) is well regarded how we run the business. as an employer. In the same way that an investor looks at the capability 3. Capability – if we want to continue the drive for improved performance, of a company before investing, any potential employee will be looking we need to attract new blood and ideas to our workforce. at the capability for personal growth before they invest their time and 4. Trade unions – how can we build a strategy that is more about career in UB. HR has to take leadership of the employer brand to reflect partnership and building together? the fact that UB is a great place to work with the benefits that come from having market leading positions and strong brands. 5. Business in the community – this means not only supporting local charities but, since we are the key employer in some areas, taking a WHAT ARE YOUR KEY HR THEMES WITHIN UNITED BISCUITS FOR 2008? Our more proactive and responsible role e.g. in schools, improving skills business is about continual improvement, being efficient and using all our set amongst our employees, apprenticeship schemes etc. assets effectively. I’ve been in post for four months and, during this time, 6. Having a hard look at how we, as HR, do business – how we can I have visited our factories both here in the UK and on the continent, in improve our effectiveness?

8 theHRDIRECTOR – MARCH 08 www.thehrdirector.com theHRDIRECTOR INTERVIEW - ANDREW NEWALL

THE COMPANY SEEMS TO HAVE A VERY STRONG GROWTH STRATEGY, WITH so people understand why they need to change the way they do things, A STREAM OF ACQUISITIONS AND SALES TO ACHIEVE THESE TARGETS. HOW in order to reduce waste, energy consumption, costs etc. We are looking DO YOU COPE WITH THE PEOPLE CHALLENGES THAT THIS BRINGS? In at energy consumption now and obviously you don’t achieve those goals addition to our own growth, the whole sector is undergoing some overnight but have to build incrementally. fundamental change at the moment, driven by commodity pricing, new The best way to achieve goals is to get people actively involved. Lean health initiatives etc. All of this means change at the micro level – if we manufacturing techniques are all about employee involvement and introduce a new recipe for healthier biscuits, for example, this can impact engagement, so the role of leaders is to provide the right culture and roles right through the supply chain. environment in which people are encouraged to have ideas and put them In my experience there are only two levers by which you explain the into place themselves. In other industry cultures leaders often insist on what necessity for change: firstly, that the world is changing and we need to is happening and initiatives are brought in from the top down, but we are change with it; secondly, that the world can, and will be, a better place if we trying to create leaders who not only recognise that everyone has a change. Both of these drivers for change go hand-in-hand and, if you explain contribution to make but then also know how to get the best out of them. them clearly, I believe that people will be inspired and buy into the ‘dream’. The bedrock is all about values and behaviour, and the vision of where you Certainly, as I go round the business I meet many people who demonstrate want to take the organisation, and three of our company values - we all a high resilience to the challenges that constant change seems to bring. have personal responsibility; improving efficiency is a way of life; and execute Living with change is not only becoming expected but it helps define who excellently – fit clearly into this drive for greater sustainability and efficiency. we are; it is seen as not something to be feared but something to look forward to in many ways because of how we manage the change process. WHAT PRIORITY DOES THE COMPANY GIVE TO HEALTH AND WELLBEING, AND HOW IS THIS IMPLEMENTED IN PRACTICE? UB was one of the first major food CAN YOU GIVE ONE EXAMPLE OF HOW THINGS HAVE BEEN CHANGING IN manufacturers to launch a campaign aimed at communicating the importance PRACTICE? Manufacturing in Western Europe and North America is shrinking of fitness and wellbeing to its employees and to show how this can be as it is being moved to the east, so as a company we must improve our achieved in work. In 2004/2005, UB’s Europe-wide internal communications efficiency to operate cost-effectively within this new arena. However, that programme challenged staff to walk 10,000 steps a day, in accordance with doesn’t always mean outsourcing to drive down costs - we have made a Department of Health guidance on minimal fitness standards. All 12,000 of strategic decision that we would like to keep the manufacturing knowledge UB’s staff across Europe received free pedometers to monitor their progress. and process in-house and, therefore, we are repatriating products that were This activity was supported by a six-month rolling poster campaign, which manufactured by a third party: for example, all Jaffa Cakes are now made provided employees with information on particular food issues such as obesity, in Manchester and Mini Rolls are manufactured in Aintree. This shows our balanced diet, sodium, carbohydrate, sugar and calories in versus calories out. commitment to the workforces in those factories and reflects the fact that We have an Occupational Health Service which is responsible for pre- they have risen to the challenges and are doing an excellent job. employment medicals, health screening for existing employees, consultations for ill staff and awareness campaigns for specific health topics. WHAT DO YOU THINK IS THE KEY TO ENSURING CONSISTENT EMPLOYEE In addition, over the years, individual sites have run ad hoc campaigns, ENGAGEMENT AMIDST THIS ATMOSPHERE OF CONSTANT CHANGE? Treat for example weight reduction (Teesside), and breast awareness and people as adults, be courteous, treat them with dignity and recognise that smoking cessation (Tollcross and Carlisle). they may surprise you at times by bringing out things you would never consider. Be honest and truthful and, above all, tell it like it is. We use a AND WHAT ABOUT CONSUMER HEALTH? As our knowledge of the impact variety of communication channels to do this and ensure that our messages certain ingredients can have on health improves, we have revised the are consistent and reinforced regularly. Explaining why change is expected recipes of existing and new products. We have committed to an extensive and encouraging people to take control where possible of their own destiny health and nutrition programme which has made significant progress so is the best way I know to build confidence and support for any change. far, as shown by the following examples: • To date UB has achieved 22% sodium reduction across its biscuits and YOUR COMPANY HAS JUST ANNOUNCED A NEW STRATEGY FOR REDUCING cakes portfolio. IMPACT ON THE ENVIRONMENT AND ACHIEVING SUSTAINABILITY. AS GROUP • UB has achieved an average of 45% saturated fat reduction on its UK HR DIRECTOR, WHAT ROLE DO YOU PLAY IN ACHIEVING THOSE GOALS? All snacks portfolio since 2005, including Hula Hoops and Skips which have companies have a moral duty to recognise the impact they have on the had saturated fat reduced by 80%. environment. We spend so little time on this earth and have one opportunity of leaving a positive legacy. Sustainability is not just good THERE HAS BEEN MUCH TALK ABOUT AN ECONOMIC DOWNTURN IN THE business: it’s a clear demonstration of leadership. HR has a role in finding COMING MONTHS; WHAT EFFECT DO YOU THINK THIS WILL HAVE ON YOUR and creating leaders people want to follow. Some of the targets we have INDUSTRY? I think it is difficult to predict what will happen to the world set are for 2015 and even further into the future, so whilst some employees economy this year. As a business we are continuing to expand into won’t be with us then they still need to understand why those goals are international markets and seeing growth across the world. Whilst the important to us, and them, now. Good leaders will put things in context driver in terms of profitability is very much the UK at the moment where >

theHRDIRECTOR – MARCH 08 9 theHRDIRECTOR INTERVIEW - ANDREW NEWALL www.thehrdirector.com

> we are gaining marketshare, we certainly see future growth in places such as India, China and Eastern Europe. In Europe we will focus on building brands that are relevant to people and continually look for efficiency in our operations. The last time we went through a downturn like this, back in 1991, evidence shows that UB’s turnover actually improved. Whilst you can never say that history will definitely repeat itself in that way, our brands have been around a very long time and I believe that they will be resilient to economic pressures in the future.

HOW DOES UNITED BISCUITS MEASURE THE IMPACT OF HR STRATEGY ON THE BOTTOM LINE? As it currently stands there are no KPIs. Amongst many other things my priority will be to work with the business and the HR Executive to align and improve the service we provide. I have confidence that with a blend of new blood and existing talent, we have what it takes to create a great HR function.

HOW DO YOU MEASURE THE ROI OF YOUR OWN ROLE? The elements of my role in which I will measure ROI include the development of my top team to help me create and steer a great HR function. I need to embed values in the team and the business that differentiate us and add to our success. It is also important for me to develop a vision that people believe in, to motivate and engage people to support the business’ plans for growth.

WHERE DO YOU THINK HR AS A PROFESSION IS HEADING GLOBALLY? HR as a profession is increasingly demonstrating homogenity, in theory and in practice. Good HR practitioners can operate across borders. We are seeing growing numbers of companies in many geographical regions successfully using the same HR models, for example, a structure FIVE QUICK QUESTIONS with experts, business partners and service delivery people. There is a risk, however, that there are not enough generalists as HR practitioners WHAT IS YOUR FAVOURITE BUSINESS BOOK? “Shackleton's Way: become specialists in their chosen areas. Whilst you do need people Leadership Lessons from the Great Antarctic Explorer” by Alexandra with depth and expertise in certain functions, as your career progresses Shackleton, Margot Morrell and Stephanie Capparell. as an HR professional you are expected to be relatively knowledgeable WHAT IS YOUR FAVOURITE NON-BUSINESS BOOK? I don’t read many, in all areas, and it is this breadth of disciplines that is missing in many but my favourite would be “Lord of the Rings” by J. R. R. Tolkien. HR professionals today. I think we will also see continued outsourcing of the service delivery aspects of the function. To add value to the HOW DO YOU LIKE TO RELAX? I have got three sons and the youngest, in particular, tends to keep me very busy. I also enjoy football, hill business, HR needs to understand fully the challenges businesses face, climbing or playing keyboards or guitar. I live just outside Glasgow so to lead change and inspire at all levels. a couple of years ago I did the Caledonian Challenge, which is a 55 mile People don’t automatically have business acumen, it is something walk within 24 hours...and it rained for about 18 of them! that needs to be developed. To be a true HR leader you have to understand the drivers of the business, so it is vital that we have people WHAT REALLY WINDS YOU UP? People not fulfilling their promises. If who see themselves first and foremost as leaders or managers within someone says they will do something, I expect them to do so and leave the business, and only secondly as HR specialists. them to get on with it. If they have a problem I am happy for them to come to me, but otherwise I expect them to deliver.

IF YOU WEREN’T A HR DIRECTOR WHAT WOULD YOU BE? If I had the cash For further information: I would probably be touring the world! I like seeing different cultures and meeting different people.

www.unitedbiscuits.com

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PLANNING FOR THE FUTURE “THE BAD NEWS IS TIME FLIES. THE GOOD NEWS IS YOU'RE THE PILOT.” MICHAEL ALTHSULER

Indeed, it is true that time never stands still, and organisations can never rest on their laurels but constantly have to be thinking ahead, just as pilots have to plan their routes, flight check their equipment and ensure they are ready for any eventuality. However, there is no doubt that planning for the future is now a very complex task. Organisations do not operate in isolation, and the ever-increasing pace of change in the 21st century has an exponential effect on every business. Politics, economics, ethics, science and technology are just some of the areas that shape our economy and our lives in general, and leaders must be able to take a broad view of the way the world could change if they are to be able to make strategic, long-term decisions for the good of their company. But how are they to know which issues and forces will shape this 21st century and the impact these will they have on their organisation? Where can they gain insight and expertise to help them to make these decisions, and how can they find time to step back from the pressures of their day-to-day roles in order to have the perspective needed to weigh up the differing priorities? In our forum this month we take a look at how leaders can ‘think the unthinkable’, ‘imagine the unimaginable’ and use a variety of tools to enable them to plan for the future, as they seek to become effective strategic leaders in our complex world. We talk to a number of experts who highlight the issues they think will have the greatest effect on businesses in the coming years, and examine the challenges brought by the growth of technology and the development of virtual worlds. In addition, we find out how one company – SABMiller – took the brave and confident step of providing a programme for their senior executives to consider these very issues, without any expectation of seeing an immediate ROI, in the knowledge that their investment would reap the benefits far into the very future they were considering. There is no doubt that in this century businesses will need leaders who demonstrate acumen, wisdom, flexibility and clear- thinking in addition to their own particular business skills. For those organisations that have such leaders, planning for the future will be a challenging and exciting time; for those that don’t, the future may well prove more difficult.

theHRDIRECTOR – MARCH 08 13 FORUM: PLANNING FOR THE FUTURE www.thehrdirector.com

GREAT EXPECTATIONS OR HARD TIMES? DINOSAURS ROAMED THE EARTH FOR MANY MILLIONS OF YEARS YET ARE NOW EXTINCT; WHAT FINER EXAMPLE COULD THERE BE THAT PAST PERFORMANCE IS NO GUARANTEE OF FUTURE SUCCESS. ORGANISATIONS THAT RESIST THE POSSIBILITY OF CHANGE WHEN PLANNING FOR THE FUTURE COULD EASILY FIND THEY HAVE NO FUTURE AT ALL.

One of the more difficult aspects of planning is deciding when the “If you are in the nuclear or power generating industry you future begins and for how long it will last. There was a time, not too are looking 15 or 20 years into the future because you have long ago, when companies could take several months developing always done that; whereas if you are in advertising you couldn’t three, five or even 10 year action plans, confident that, barring a small do that because things are changing so quickly. tweak here and there, those plans would prove effective for their intended duration. “can we be absolutely sure that our planning is robust?”

Such halcyon days, if such they were, are no longer with us. “The question is: should any industry trust planning approaches so deeply rooted in such practices? This is where Today’s world is fast-moving and volatile; recent events, such many go wrong because, in effect, you have to ask yourself 'Is as the difficulties experienced by Northern Rock and the global our planning – which may have been developed more than 50 stock market crash that sent share prices reeling in January, years ago, in some cases – suited for the future; can we be serve to underline that fact – and lead many people to absolutely sure that our planning is robust?’. This is not so conclude that the future is already with us. important in functional specific events, such as the sub-prime Joseph Lampel is professor of strategy at the Cass Business market, but it is in terms of fundamental realities.” School and believes most companies’ planning approach is Lampel explains that many companies have gone wrong simply rooted in their industry provisions, whether it is capital because they have realised too late, that industry changes mean goods, advertising, high technology or consumer appliances. the same planning approaches used historically, are no longer of “They do it because it has always been done that way,” says any use. However, the companies that ‘saw the light’ from a much Lampel. “So their planning approach is rooted very much in experience, earlier stage have actually gone on to become positive examples expectations and, above all, systems which are specific to their industry. for the benefits of change.

14 theHRDIRECTOR – MARCH 08 www.thehrdirector.com FORUM: PLANNING FOR THE FUTURE

“Shell began to recognise in the early 1970s that it TOMORROW’S PEOPLE was moving into a new reality and revamped its planning approach. An even more interesting example is General THERE IS ANOTHER GROUP OF PEOPLE FOR WHOM Electric which completely changed its planning strategy PLANNING FOR THE FUTURE IS EQUALLY IMPORTANT AND, at that time.” POTENTIALLY, MORE DIFFICULT. THEY ARE THE EMPLOYEES- Both organisations had recognised that whilst the DESIGNATE; THE YOUNG PEOPLE STILL STUDYING AND NOT 1950s and 1960s had been relatively stable in terms of YET PART OF THE WORKFORCE. THE VERY PEOPLE, IN FACT, demand forecasting, they were now facing a new reality THAT MIGHT PROVE TO BE THE SALVATION OF COMPANIES and they had to change to meet it. SOME YEARS FROM NOW. Whilst there are any number of industry-specific issues to be addressed, some – such as communication Andy Airey is chief executive at the Inspiring – apply to all in equal measure. And here there is an Futures Foundation, an independent, not- issue of common practice versus best practice. for-profit organisation whose role is to help “Unfortunately, common practice within large young people plan for their futures. organisations is very much a 'from top downwards' view; “We work with young people from 14 bringing the clarion message rather like Moses bringing years and upwards who are most likely to the tablets from the mountain,” states Lampel. “It is pass through higher education into a career,” common practice because it is usually based on sensitive says Airey. “We are trying to foster and develop in these young information held by a small number of managers at the people a view of career development. top. The downside is that people feel they are being told “In our discussions with them, we try and give them a what will happen and what they have to do; they are flavour of the workplace issues we think are facing graduates given no sense of involvement. now, and the likely trends they will discover as they move “Best practice seeks to canvass their views at an early through education and into the workplace. stage and weave that into the message. A lot of “We are finding clearly there are certain sectors – IT, the managers either do not do this or do not do it very well.” built environment, and the broader engineering field, for What are the thoughts of those working as service example – where there is a key shortage of graduates wanting providers to other businesses? to work in these areas.” Spring Group is a human capital management Employers often complain that young workers enter company and Aidan Anglin is the Managing Director of employment without sufficient work-related skills. Research IT Recruitment Services. He says the biggest flaw recently conducted by the Foundation found the reality is that they see within organisations is the failure to young people are themselves demanding more help in this area. focus on delivering their business strategy by If businesses are planning for the future, those plans ought to putting the right people and effective recruitment include the skills they will need and how better to ensure their planning processes in place. availability than by engaging with their future workforce at the "A lot of organizations tend to focus on what earliest opportunity. After all, educating young people about they need to do to meet their staff numbers, but what they need to succeed in their chosen profession benefits very rarely take a strategic view in terms of looking both the individual and the organisation. at their budget, the anticipated company growth, and the “There is less understanding in the school environment people and skills they need to meet those company targets. about graduate careers than there used to be,” reveals Airey. "HR plays a strategic role in matching recruitment “As a result of all the other pressures under which schools are plans with the business plans and budget delivery. And now operating, such as league tables, career guidance has gone that means challenging the leaders. We encourage down the agenda.” organisations to involve us in all aspects of their business All of which suggests that, when planning for the future, plan, so that we can understand operationally what the organisations might like to consider creating a higher profile and HR teams need in order to deliver from a people a greater level of understanding within the schools and colleges perspective." Spring says they are also very good at that are producing their future workforce and potential CEOs. focusing on niche skills which can be difficult to find. Aidan adds: "It can sometimes take up to six months to find someone in the right location. So in the meantime, the question to ask is has the organisation looked at a contingency plan to put a temporary person in place?

“often attrition is completely overlooked For further information: in staff planning”

"Further, we find that very often attrition is completely overlooked in staff planning. It is too late and rather www.inspiringfutures.org.uk unproductive to leave it until someone leaves before >

theHRDIRECTOR – MARCH 08 15 FORUM: PLANNING FOR THE FUTURE www.thehrdirector.com

> figuring out how to manage attrition. For example, if a company philosophy to hire and develop the highest potential performers, has a new managing director, that could well result in a higher and then identify and coach great managers to retain and attrition than expected. However, having a change management motivate these performers as they form the foundation of programme in place could prevent that from happening. sustainable business growth. The research that supports these "Businesses also need to ensure they have the right career philosophies is ongoing so we are always breaking new ground profiles in place to develop their employees. And, last but not to then build upon.” least, having established their demand plans, they must ensure they have an operational team in place to deliver those plans. “adapt to frequently changing marketplaces” Otherwise the whole process would be a futile exercise." Thinking outside the box or ‘blue sky’ thinking may be the Gallup are always looking a long way into the future; ten answer to some, or indeed, many companies’ prayers. years, in fact. But they are very conscious of the need to Eugene Burke, director of science and innovation at adapt to frequently changing marketplaces. assessment product providers SHL, certainly believes that “We pair our long-term plan with agile performance such abilities make for good leaders in an uncertain management and decision-making to allow for adaptation,” climate. Predicting future trends and staying ahead of says Templeton. “Our client teams of consultants are the game is key, he says. empowered to adjust and adapt as needed to guide our “The ability to innovate is where inductive reasoning clients when market conditions change. These adaptations will, I think, play a pretty critical role,” opines Burke. are communicated in real time to our practice teams in order Good planning is, after all, a way of solving problems which to modify our long-term plan accordingly.” have not yet arisen. And it follows that there must be gaps in our Such flexibility and adaptability is also championed by the information where the future is concerned. And that, according Chartered Institute of Personnel and Development (CIPD). to Burke, is where inductive reasoning can be so useful. Angela Baron, an organisational and resourcing “There are two ways of solving a problem; one is the advisor at the Institute, knows that businesses are practical approach of analysing it, which is OK if you have a operating in a fast-paced, fast changing world of procedure or plan of methodology in place; the other is where work and that means they have to be forward looking you don’t have all the information and you have to work in terms of how they use people in the future. things out from first principles, taking a fresh view of things. “It is about planning flexible resources packages; That’s where inductive reasoning comes in,” says Burke. it is about not just coping with today but planning He believes there is increasing uncertainty about what for all sorts of eventualities and changes that may we do in the world of work and more and more companies take place in the future,” says Baron. are looking for ways to move up the value chain. He “In HR terms it is mostly about change readiness; it is believes that the ability to adapt, to pick up different about making sure you are not dealing with static processes in pieces of information and then make use of it in a way the recruitment and development of people and their skills. that makes sense, is going to become increasingly We must make people more ready for change; they need to important. accept that change is the norm and not the exception. Some companies find themselves thinking more “It does look as though we are entering a much more about others than themselves. One such client-centric turbulent economic climate. That means businesses will have company is Gallup and the majority of its thinking, to be even more agile and flexible to respond to more planning and focus is on its clients. challenging economic climes than perhaps we have been used “Gallup's consulting work is focused on leveraging to in the past. We have to accept that the ways we have done human capital to improve engagement and productivity,” business previously will not necessarily hold true for the says managing director, Annette Templeton. “As our client foreseeable future.” base increases its global presence, Gallup is focused on thought leadership, research, and change management “creating the climate and conditions where people solutions that can be applied globally, as well as at a local can grow and develop” level within countries and cultures. There are common elements that motivate and engage people around the Baron asserts that this needs a continual re-assessment world, but also unique elements that require regional expertise. of policies and practices, ensuring we are not just preserving The future for our clients – and us – is centred on Gallup driving a status quo but actually creating the climate and conditions impact with a growing force of experts in multiple countries, where people can grow and develop; where they can cultures and languages.” achieve their potential and create the capacity businesses Its consulting work is based on philosophies that are need if they are to take advantage of opportunities as and 'outside the box' and so their leaders are constantly pushed when they present. to demonstrate the effectiveness in applying them to drive “If you look across the economy you will find many pro- the bottom line in client companies. active organisations that are looking very seriously at those “We are the only firm who has cracked the code empirically issues and trying to develop the processes they need. to show how an engaged workforce leads to an engaged Elsewhere you look and you find complacency. And where you customer base,” states Templeton. “We use a strengths-based find complacency you often find failure as well,” says Baron.

16 theHRDIRECTOR – MARCH 08 www.thehrdirector.com FORUM: PLANNING FOR THE FUTURE

It is fair to say that with the benefit of hindsight, lots of writers will look back and reveal why companies have failed. Often that will be down to their inability to adapt and change, says Baron, who concludes by adding: “It is no longer a valid assumption that companies who have built upon a successful past will enjoy a successful future, because the future now looks very different.”

GREAT DEA

For further information:

www.cass.city.ac.uk

www.cipd.co.uk

www.gallup.com

www.shl.com www.midlandhr.com/greatidea

www.spring.com

theHRDIRECTOR – MARCH 08 17 FORUM: PLANNING FOR THE FUTURE SABMILLER CASE STUDY www.thehrdirector.com

CASE STUDY LEADING WITH A LONGER TERM VIEW

SABMILLER IS ONE OF THE WORLD’S LEADING BREWERS WITH BREWING INTERESTS OR MAJOR DISTRIBUTION AGREEMENTS IN OVER 60 COUNTRIES SPREAD ACROSS SIX CONTINENTS. DEVELOPING A LEADERSHIP PROGRAMME THAT HAS NO IMMEDIATE PROOF OF ROI MAY SEEM LIKE A LEAP OF FAITH, BUT FOR THIS COMPANY, IT IS ONE THAT WILL PAY DIVIDENDS FOR MANY YEARS TO COME.

The company’s range of international premium beers includes SABMiller as a company has a very inquisitive character, brands such as Peroni Nastro Azzurro, Pilsner Urquell, Miller and rigorous thinking is employed at every stage of decision- Genuine Draft, and Castle Lager, which are supplied to markets making. This was to be reflected in the programme, with the in developed European economies, North America and South aim of informing, challenging and provoking relevant debate Africa in addition to fast growing developing markets such as amongst these very senior leaders. in Latin America, Africa, China and India. Clark felt that in the same way that nano technology had In Europe the company operates in eight predominantly not been on the company’s radar two or three years ago, central and eastern European countries with around 12,000 but was now very much on its agenda, there was a need for employees, and has a very strong focus on talent and the company to look at what the future could bring and to performance. start thinking about the longer term strategic issues – the It wasn’t a specific external trigger that led the company big, big picture. to take the decision to develop an innovative leadership programme, but instead it was something that European MD, THE PROGRAMME Alan Clark, personally felt was needed within the company. The company was clear about the range of topics it wanted Richard Waters, SABMiller's European HR development to include in the programme - climate change, water manager, looks after Europe’s top 200 leadership resources, alternative energy technologies and stem cell group, and is the person to whom Alan outlined his research amongst others - but it needed a partner that would vision: “Alan wanted to lift up people’s eyes from the fully understand its requirements to facilitate the day-to-day and the short-term, so that they could programme. These were not short-term ROI, but instead a consider and debate the wider issues.” programme that would pay back over the very long-term. The programme was intended for the very senior SABMiller took the decision to work with Saïd Business executives in the business, including the country MDs School because it responded proactively to the company’s and the European Functional Directors. Waters outline and, as a fully integrated school within the continues: “Alan didn’t want them to have a personal university, had a wide range of experts on which it development experience or to be on a course that was all could draw to help shape the programme. As Ron about strategic planning and how to do business. It wasn’t Emerson, co-programme director for the leadership even to be about our company, or our geography. Instead, he programme together with Tracey Camilleri, both of wanted our leaders to focus on the very strategic issues that whom are Associate Fellows at Saïd Business School, we will be facing within the next five – 10 years, such as explains: “From our perspective it was a very exciting climate change, stem cell research, demographics and the challenge: the initial approach from Alan Clark and ageing population, the rise of China and India, and how Richard Waters was quite innovative and even risky - they democracy is changing and moving on globally.” wanted their senior people to think about the issues that

18 theHRDIRECTOR – MARCH 08 www.thehrdirector.com FORUM: PLANNING FOR THE FUTURE SABMILLER CASE STUDY

might shape the 21st century in a way that most other companies then maybe they need to be considering issues in a broader, longer- hadn’t done before. Alan's other stipulation was that it should be term way too, instead of merely always looking for immediate ROI. about 'real science' and not dumbed down for a lay audience.” For example, one client who is doing a leadership programme has The prestigious location and the world-class faculty of Oxford asked us to start to bring in elements of the SABMiller type of also created the right atmosphere for the participants to move programme to kick-start debate in a new way.” physically and mentally out of their everyday environment and connect effectively with the intellectual issues they were being “the programme will pay dividends for asked to consider and debate. the participants and SABMiller far into the future”

“participants were encouraged to It is, of course, not often that people have the opportunity to make the connections in their own way and time” take time out of their normal roles to engage in debate in such a way. But as Waters explains, the effects of the programme will Eighteen senior executives took part in the week-long pay dividends for the participants and SABMiller far into the programme, which duplicated an Oxford tutorial style of small future: “People felt it was an honour and a privilege to be groups of people debating issues in predominantly 90-minute involved in such an intellectually demanding programme. It sessions. The first 40 minutes gave an overview of the topic and also provided access to other links with Oxford, including the rest of the session was devoted to discussion both with the a think-tank which has now presented to our executives, faculty member and the other participants. and access to new networks of expertise. The topics that made up the programme were deliberately “We can’t and wouldn’t want to be trying to measure intended to be unconnected, so the participants were encouraged the ROI since the benefits won’t be seen this year or next, to make the connections in their own way and time. but perhaps in two to four years’ time when these senior The business school drew not only from its own expertise but executives are sitting round a table discussing an issue, they also brought in experts from the University faculties and specialist will be able to contribute in a different way. The first laboratories. This enabled SABMiller’s leaders to do practical session, as with any programme, was in part a pilot, but the experiments, with often very interesting results. For example, resulting feedback from the participants has been so participants took part in an experiment where by taking a cheek positive that SABMiller is planning to run the programme swab they could analyse their own mitochondrial DNA and uncover again twice this year – widening it to invite other their maternal ancestry. Such practical activities helped to underline experienced executives, including other board directors.” the messages from the programme – for instance this session related The positive benefits for the business school and university directly to the topics of demographics, the ageing population and faculties that had involvement with the programme have been provided a foundation for later discussions on stem cell research. The numerous, with a number of academics expressing their enjoyment academics put a great deal of time and effort into providing the at engaging in debate about their subject with extremely intelligent programme, some even working until midnight to process the DNA lay people in a totally different way. As Emerson explains: “As a so that feedback could be given to the delegates the next day. business school we found it very interesting to work more closely There was also a visit to Culham Science Centre where two with the university. There is often a view that academics, particularly leading experts facilitated discussions on fusion technology and also senior ones, don’t want to get engaged in business, but not one a variety of alternative energy sources. Here the group considered member of the faculties we approached said no. What’s more, all of which options might have long-term sustainability and which may be them are very keen to engage in the next roll-outs of the programme useful stop-gaps on the road to real alternatives to fossil fuels, as the for SABMiller.“ major source of energy generation. The group also took part in a session lead by professor Sir Richard Gardner, the chairman of the Royal Society’s working group on stem cell research and therapeutic cloning. The executives looked at the current science involved in these areas and how this might evolve. Later on that day Professor Julian Savulescu, director of Uehiro Centre for Practical Business Ethics, Department of Philosophy, responded to this by leading a discussion on the practical implications of this type of research. This led to a very vigorous discussion regarding how people form their views and the consistency of those views regarding these elements. For further information: The faculty members were also able to provide a very challenging view of their topic area, relate it to business, and also respond to demanding questions from the group.

FUTURE DEVELOPMENTS & BENEFITS www.sabmiller.com The programme has definitely sparked some competitive thinking amongst other companies that are involved with the business school. Emerson explains: “Some of our clients have taken note that if a major global company like SABMiller is thinking this way, www.sbs.oxford.edu

theHRDIRECTOR – MARCH 08 19 FORUM: PLANNING FOR THE FUTURE PROF. RICHARD SCASE INTERVIEW www.thehrdirector.com

INTERVIEW LOOKING AHEAD WE TALK TO PROFESSOR RICHARD SCASE, AUTHOR OF “GLOBAL REMIX: THE FIGHT FOR COMPETITIVE ADVANTAGE”, ABOUT THE FACTORS HE SEES AS HAVING THE MOST IMPACT ON ORGANISATIONS IN THE 21ST CENTURY.

IN YOUR OPINION, WHICH GLOBAL ISSUES WILL MOST SHAPE young talent in the 21st century ‘thinks differently’ and has THE 21ST CENTURY? Most governments around the world - very different work expectations. The huge attraction of social with the possible exception of the United States - accept that network websites, where this generation interacts often in climate change, the demand for energy and the rising cost of global teams, is testimony to the appeal that independent commodities will have major impacts. But the challenges do collaboration has for young people. And yet the HR not stop at these. departments in the majority of organisations have not grasped The world’s population is expected to almost double by this fundamental point. Or if they have, HR personnel have 2050 and this will have major consequences for economic, been unable to convince their corporate bosses of the need to political and social stability. This could lead to catastrophe in the respond proactively if they are to capture the best young talent poorest parts of the world where global warming will also lead in what is fast becoming a global war. to water and food shortages. This will encourage greater DO YOU THINK ORGANISATIONS ARE PREPARED TO UTILIZE THE international migration and a huge increase in the number of OPPORTUNITIES AND TO MINIMIZE THE RISKS? The majority of economic migrants. This will force governments in the richer companies will argue they are fully prepared to take advantage countries to impose tighter border controls and a cultural retreat of new technologies. But they would say that wouldn’t they? from the attractions of globalization. I believe that the shift to The reality is quite different from this rhetoric. As soon as senior national isolationism will be greatest in the United States. and middle managers realise the implementation of these The 21st century will witness the growing dominance of technologies could seriously challenge their own working India and China in both global economic and political affairs. practices and particularly how they will manage their staff, they China will dictate currency rates and global economic growth in back away. The outcome is the under-utilization of the full much the same way as the Unites States has done over the past potential of these technologies, as witnessed in the reluctance 80 years. The high price of oil and declining reserves will force of adopting Web 2.0 methodologies in many companies. Western national governments to introduce draconian renewal and energy sustainable policies. This will act as a spur for JUST AS POLITICAL PARTNERSHIPS EVOLVE AND CHANGE innovation and the re-design of corporate operational processes. BETWEEN COUNTRIES, DO YOU BELIEVE THAT IN FUTURE COMPANIES WILL START TO WORK MORE IN PARTNERSHIP WITH WHAT IMPACT WILL THESE HAVE ON BUSINESS ORGANISATIONS? EACH OTHER ACROSS THE GLOBE? Global partnering will Companies will be no longer be able to rely upon cheap energy continue to grow in line with the growth in world trade. This will and commodity prices to under-write their business activities as be at both ends of the supply chain; from the sourcing of they have been able to do in the past. This will compel them products and services through to their sale as customer- to take up the potential of information technologies to specified requirements. The demand for companies to be agile introduce more flexible working practices. Businesses will and innovative will compel them to continually re-invent their encourage greater flexible, remote and home working. In any product and service portfolios as well as to review continually case the new generation of employees - generation ‘I’ as in I- their position in established and new markets. The BRIC POD - will insist on flexible working and personal autonomy economies, and particularly India and China, will require in how they achieve their targets. Western companies to develop business partnerships with local WHICH PARTICULAR ASPECTS OF TECHNOLOGICAL CHANGE companies. This will be in order to gain access to these markets WILL AFFECT ORGANISATIONS MOST? Undoubtedly, the Web because of local regulations and also as a result of the need to 2.0 technologies that allow for remote, flexible and understand local cultures and business practices. Business collaborative working will have a major impact. There will be partnerships are always high risk since it is almost impossible to the abolition of top-down ‘command and follow’ structures, obtain ‘complete information’ on the proposed partner. Due replaced by self-managed systems. It is the transfer of diligence will often fail to pick up any ‘dubious’ practices to say Facebook to the workplace. nothing of the company’s culture. As is well-known, it is the lack of cultural fit between partners that leads to the break-up HOW CAN ORGANISATIONS ADAPT THEIR STRATEGIES TO of partnerships rather synergies in strategic intent. INCORPORATE THESE DEVELOPMENTS? There needs to be a significant change in the culture of boardrooms of the major For further information: corporations in the world. There has to be recognition that www.richardscase.com

20 theHRDIRECTOR – MARCH 08 A lasting commitment

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The Pensions Trust – the natural choice for your financial security. FORUM: PLANNING FOR THE FUTURE TECHNOLOGY www.thehrdirector.com

MODIFIED HR MANAGEMENT: THE GENIE IS OUT OF THE BOTTLE IN AN INCREASINGLY VIRTUAL WORLD, HOW WILL THE UK WORKFORCE DEVELOP OVER THE NEXT 20 YEARS? KAI PETERS, CHIEF EXECUTIVE, ASHRIDGE BUSINESS SCHOOL, EXAMINES THE WORKFORCE OF THE FUTURE, WHAT ITS NEEDS WILL BE AND THE IMPLICATIONS FOR BUSINESSES.

There have always been two fundamental aspects to human resource yet many organisations continue to believe that their digital intellectual management. The first side, which I term as compliance, has to do with property can be protected and monetised using ever more complicated legislation and regulation: Transfer of Undertakings Protection of encryption technology or onerous threats and penalties. For all intents and Employment, (TUPE), reorganisation, performance improvement, pension purposes, music is in the public domain. Increasingly, news is as well. One conditions, and health and safety. These issues consume tremendous of the first changes Murdoch implemented after purchasing the Wall Street amounts of time and lead to endless column inches in the HR media. While Journal was to abandon the subscription model for the online version and all are clearly very important, they are mainly matters of good housekeeping make it free. With the introduction of the BBC’s iPlayer and increasing within an organisation as it stands today, rather than strategic or exciting. digital storage space and bandwidth, video is soon to follow. On the other side are the strategic issues affecting organisations now This trend has two implications for business. First, business models and into the future. Knowledge and creativity are the backbone of an must change, taking into account that one can no longer sell information increasing number of sectors ranging from banking through to media to individuals, but that one now sells individuals to advertisers. Second, and extend to all of the professional service areas. There is, therefore, a the ubiquity of digital information means that innovations can be need to look broadly at the nature of the workforce 20 years into the immediately copied as information flows through the economy. future. Who are they? Where will they work? And lastly and literally, how will technology change these individuals? “a new balance that we need to acknowledge An old chestnut says that making predictions is very difficult, especially rather than try to abolish” when it comes to predicting the future. There are nevertheless concrete indicators presently available which provide insights into what is to come. This same generation also has a different view on the long-running For one, the workforce of the short-term future is already here. The debate about a work-life balance. In a global, digital era, communication younger end of the millennial generation, those between the ages of 10 is not compartmentalised into work and play and networking is not and 20, take things for granted that question many of the basic tenets of compartmentalised into social and professional. Both flow seamlessly into economic life. The trigger for these changes is the digital era. With few each other. For the better part of a year, I tried to use LinkedIn as a exceptions, this generation believes that digital information should be free, professional network and Facebook as a social space. My rearguard action

22 theHRDIRECTOR – MARCH 08 www.thehrdirector.com FORUM: PLANNING FOR THE FUTURE TECHNOLOGY

has failed miserably and the two have now overlapped, leaving TECHNOLOGICAL DISADVANTAGE? me to manage both around the clock, doing both work and idle chit chat at work and at home. Most organisations, however, ATTRACTING, RECRUITING AND RETAINING DIGITALLY cannot cope with this blend. Rules and regulations abound and QUALIFIED STAFF HAS BECOME A PROBLEM THAT ONLY headlines proclaim that the cost to the economy of employees LOOKS SET TO INCREASE IN THE FUTURE. THIS IS A occupied with Facebook at work runs into billions of pounds per SENTIMENT BACKED UP BY A RECENT SURVEY BY CHINWAG annum. There are not too many headlines about the value added JOBS, SO, HOW CAN ORGANISATIONS COPE WITH THE to the economy by people sitting at their computers or using their DEARTH OF THE TECHNOLOGICAL EMPLOYEE? Blackberries all day and night. This is simply a new balance that we need to acknowledge rather than try to abolish. The “Digital Skills Survey 07” shows that 97% of respondents Adding to the complexity of the home at work/work at home found it either difficult or impossible to attract suitably qualified debate is the increasing presence of virtual worlds. Two of which, digital staff for their businesses in 2007, with 76% reporting “World of Warcraft” (WoW) and “Second Life” are well known. problems persuading staff to stay once employed. Chinwag Jobs The former is quite clearly a multi-user online game. The latter canvassed employers, recruitment consultants and HR professionals combines elements of gaming with social spaces which are and found that the number of staff working in digital positions already being used by corporations to conduct meetings and by (such as online marketing and web design) increased during 2007, universities to provide courses. Recent estimates suggest that on although the amount of suitably qualified people did not. the gaming side, 150,000 people are already making their living The dearth of such candidates is hindering growth in 2008. virtually. They collect either gold coins in WoW or Linden Dollars Over half of respondents reported that the digital skills shortage in Second Life. These are sold on e-Bay for real Dollars, Euros and had impeded the growth of their business in 2007, with 85% of Pounds, allowing other players who purchase these currencies to companies expressing concern that the shortage would continue upgrade their avatars. Turning up at a virtual disco without the to have a negative impact on their organisation’s growth this right fancy frock on is simply not done in Second Life. Having a year. The research showed a climate ripe for 'wage inflation', as paladin in WoW without a decent sword is also frowned upon supply and demand forces will determine the cost of digitally and it is quicker to spend the money, if you have it, than to collect competent employees. the gold coins on your own. With skills in short supply, companies are finding themselves While we may consider these worlds an anomaly, we need becoming more reliant on freelance and temporary contracts to to realise that it will be perfectly normal in future versions of ensure that they get the right calibre of staff and over three- virtual worlds to get up in the morning, switch on the computer, quarters of the organisations surveyed used contractual workers decide what one’s avatar should wear while one wears only in 2007. pyjamas oneself and embark on the workday virtually. We are Sam Michel, managing director, Chinwag Jobs, comments: used to answering e-mails now and find that normal. Working "These results show the pain of recruiting in 2007 gets worse in virtually in more advanced environments will also be perfectly 2008. It's now actively affecting the growth normal. It would be terrific to conduct virtual meetings with prospects of a sector that is booming despite distant colleagues in an environment which is not as agonising concerns about the wider economy. Employers as a teleconference or as annoying as a bad videoconference. must work harder to attract and retain quality staff, without resorting to the temptation of “nine virtual universes are being built to unsustainable wage levels. coincide with the opening of the Beijing Olympics” "The digital sector desperately needs to improve career development opportunities As a harbinger of things to come, one can do worse than to and widen its net, with industry-wide initiatives to support look at an enormous project that is presently taking place in Beijing internships and training programmes, and to encourage people called the Beijing Cyber Recreation Project. Nine virtual universes with traditional skills to make the jump to digital." are presently being built to coincide with the opening of the Beijing In a world where globalisation is aided by technological Olympics. They will allow 150 million people to simultaneously advances, it seems that the only way forward is for companies work, shop and play in a virtual world. In physical terms, a 100 to focus on the attraction and development of people that will square kilometre site is being built to house the servers and suppliers power digital progression. including banks, logistics companies and virtual advertising companies. MindArk of Sweden is masterminding the project in collaboration with the municipality of Beijing and Cisco and IBM. The immediate goal is to disintermediate supply chains to allow consumers to source products directly from China with consumers For further information: paying less and producers charging more than they presently can. What happens after that is anyone’s guess. Even more far-fetched from today’s perspective will be what develops in human-machine interaction. We are already putting www.jobs.chinwag.com computer chips in millions of our pets to track them. Daniel Erasmus, director of the Amsterdam-based Digital Thinking >

theHRDIRECTOR – MARCH 08 23 FORUM: PLANNING FOR THE FUTURE TECHNOLOGY www.thehrdirector.com

> Network, estimates that, on the people front, 20,000 individuals It is already time to experiment with Second Life and similar sites to already have electronic hearing aids wired into their brains and see whether there are opportunities to better coordinate a globally that ocular implants are only a few years away. In 1998, Kevin dispersed workforce. Additionally, it is already time to investigate Warwick, currently a professor of Cybernetics at the University of whether there are products or services which could be sold virtually. Reading, had already had radio-frequency identification From an HR perspective, designing frameworks which harness the chips implanted in his arm. The chip, the size of a grain of 24/7 on-line and off-line capabilities of the workforce is much more rice, allowed him to open doors, switch on lights and store useful than spending time on trying to ban what can’t be banned. identification records. For those who are interested, the chip For the future, it will be necessary to give some real thought as can be seen at London’s Science Museum. to how to manage modified human resources both from the By 2000, a night club in Barcelona called the Baja Beach dystopian and utopian perspectives. Both sides are readily imaginable Club, used implants to track membership, also allowing and it is up to civil society to create an acceptable balance. The Six members to run up a bar tab in their arms. More recently, a Million Dollar Man, the character from the 1970s’ television show of similar concept was patented by the VeriChip Corporation the same name, will not cost six million dollars to build in the future and approved by the US Food and Drug Administration in but will instead be cheap as chips. 2004 to store individualised health-care records. Presently, The genies are out of the bottle. Alas, now back to that VeriChip is working on infant management systems “Hugs” complicated performance improvement plan! and “Halo” for the young and “Roam Alert” systems to help prevent older people from wandering off. So far, these chips need to be near a scanning device to be read. Work is, however, underway on GPS-enabled chips although there are still problems with power sources and antennae. In 2006, the State of Wisconsin, presciently (or perceptively?) sought to ban RFID chips implanted without the permission of the intended recipient as it does not take an extensive leap of faith to imagine the level of surveillance such technologies could allow.

“implanted memory chips”

If one combines the capabilities of RFID chips with the hard- wiring capabilities of the audible and ocular implants, one readily arrives at implanted memory chips. Scientists estimate that these technologies will become available around 2020. Such chips will allow within-body storage of databases: policemen with built-in photo databases of wanted criminals which automatically make matches: or stellar ‘A’ Level results for secondary school kids who have no problem with remembering the order of the Wives of Henry VIII. From a business perspective, knowledge will be something that can, in large part, be embedded. So get ready to be loaded up with the entire compelling text of the Companies Act 2015, or the 24 volume technical manual for the major construction or technology project of the future. If you cannot wait that long, or remain a bit squeamish about chip implants, you can always pop a few memory enhancement pills which are presently in third-phase human testing and likely to come to market in the next two or three years. All of these trends are real: not figments of the imagination. Thinking them through rationally, today, will give organisations an For further information: opportunity to consider how their competitive environments will www.facebook.com develop and where opportunities lie. These human-computer www.linkedin.com interface developments will almost certainly outpace our abilities www.secondlife.com to grasp the consequences if we do not start now. www.worldofwarcraft.com First, the use of existent technology changes the relationship between public lives and private lives. Corporate regulations will neither remove nor control these changes. Second, the value of all Kai Peters but very high value information will continue to approach zero. For Chief Executive anyone in media-related environments, thinking up new business www.ashridge.org.uk models will be critical. Third, digital universes are rapidly approaching.

24 theHRDIRECTOR – MARCH 08 EPTHINTUITIVEINSPIREDINDEPTHINTUITIVEINSPIREDINDEPTHINT HINTUITIVEINSPIREDINDEPTHINTUITIVEINSPIREDINDEPTHINTUIT EDINDEPTHINTUITIVEINSPIREDINDEPTHINTUITIVEINSPIREDINDEP VEINSPIREDINDEPTHINTUITIVEINSPIREDINDEPTHINTUITIVEINSPIR INDEPTHINTUITIVEINSPIREDINDEPTHINTUITIVEINSPIREDINDEPTH EPTHINTUITIVEINSPIREDINDEPTHINTUITIVEINSPIREDINDEPTHINT IREDINDEPTHINTUITIVEINSPIREDINDEPTHINTUITIVEINSPIREDIND DEPTHINTUITIVEINSPIREDINDEPTHINTUITIVEINSPIREDINDEPTHIN NSPIREDINDEPTHINTUITIVEINSPIREDINDEPTHINTUITIVEINSPIRED TUITIVEINSPIREDINDEPTHINTUITIVEINSPIREDINDEPTHINTUITIVEIN

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A personal approach to HR recruitment. FORUM: PLANNING FOR THE FUTURE HOK INTERVIEW www.thehrdirector.com

INTERVIEW THE FUTURE DESIGN OF THE WORKPLACE

WE TALK TO ALEX REDGRAVE, VICE PRESIDENT AND HEAD OF CONSULTING AT THE GLOBAL ARCHITECTURAL FIRM HOK, ABOUT WHAT HE SEES AS THE MAJOR ISSUES AFFECTING THE WORKING ENVIRONMENTS IN THE 21ST CENTURY.

CAN YOU EXPLAIN A LITTLE ABOUT YOUR ROLE? Since joining likely impacts that will be brought about by addressing the HOK in 1999, I have led the company’s consulting team, which environmental impact of our offices. specialises in the strategic design of workplaces. We exist to Offices were originally conceived as factories for work, advise clients on the future of work. We question how where a nine-to-five culture dictated a rush hour of commuters. companies’ estates and workplace practices can support their In the future offices will become more like homes, incorporating businesses. The consulting team works on a diverse range of design elements from hotels, retail and leisure. Employees will projects, from developing an accommodation strategy for the not have fixed desks and will have the room to take cat naps House of Commons’ 12 properties and 3,600 staff, to creating at work. We will come and go in the office as it suits us, a masterplan for the regeneration of Oxford Street and planning breaking the cycle of rush-hour and lessening the impact on an open workplace for 400 lawyers at RPC’s London office. our transport infrastructure. And a flexible workforce is a happy workforce. As our stress levels decrease, so will the cost of stress IN YOUR OPINION, WHICH ISSUES AND FORCES WILL MOST to our economy, currently estimated at £3.8bn a year. SHAPE THIS 21ST CENTURY? While it is hard to list all the issues Management styles will change to accommodate remote and forces most likely to shape the 21st century business workers and UK plc will be forced to invest in its IT infrastructures environment, the office designers at HOK are focusing on the to support home working. following four major trends and their impact on our working Businesses will actively promote changes to their working environments: practices, and HR professionals will be forced to educate staff, 1. Health and the wellbeing of employees, and the facilitating a change in their attitudes. increasing responsibility companies must take for this 2. Work /life balance and employees’ changing desires HOW DO YOU WORK WITH YOUR CLIENTS TO HELP THEM TO and expectations from employers ‘IMAGINE THE UNIMAGINABLE’ AND RELATE THIS TO THE 3. The sustainability of businesses and the impact of POTENTIAL LONG-TERM EFFECT ON THEIR OWN COMPANY? We work closely with our clients to write their briefs and also companies’ environmental credentials on recruitment use workshops to help facilitate the development of their 4. The development of technology and its ability to ideas, rather than imposing our views of office design on their transform our working lives. businesses. IS THERE ONE PRESSING WORLD ISSUE THAT YOU THINK HAS In addition, HOK encourages its clients to look for inspiration BEEN OVERLOOKED, OR AT LEAST NOT GIVEN THE PRIORITY IT from all building sectors, not just traditional office design. By DESERVES SO FAR? We cannot underestimate the importance looking to the health, education, leisure or hotel industries, we of climate change and the impact that the inefficient use of can imagine a different working environment by drawing on our office space has on the environment. There is currently their experiences. For example, we can ask how teachers 370m sq metres of office space in the UK. At a conservative encourage learning through the layout of their classrooms, or estimate 20% of this space is underused at any one time, as how hoteliers make their guests feel at home through the design employees adopt an increasingly flexible attitude to work. of the reception desk. This equates to 74m sq metres of space that is built, heated, For the same reason, we encourage all our clients to meet lit and serviced, and yet not used. not just with office planners, but with workplace psychologists By affecting a small change in our working practices we and ergonomists to look beyond the scope of traditional office can dramatically reduce the impact UK offices have on the planning and consider the impact of design on their companies. environment and in the process, save the businesses community HOW CAN THIS THEN BE TRANSFERRED INTO STRATEGY money. EFFECTIVELY? To transform this vision into a strategy, HOK WHAT IMPACT WILL THIS ISSUE HAVE ON BUSINESS models its clients’ future workplace needs against their existing ORGANISATIONS? By changing the way we work, we can real estate. In this way, HOK can compare the values of reduce both the amount of office space businesses require and implementing new ideas and new workplace models against the the carbon footprint of our buildings. Yet this is just one of the cost of taking no action at all, and develop a strategy accordingly.

26 theHRDIRECTOR – MARCH 08 www.thehrdirector.com FORUM: PLANNING FOR THE FUTURE HOK INTERVIEW

DO YOU BELIEVE THAT THE ROI FOR THIS TYPE OF VISIONARY THINKING CAN ACTUALLY BE MEASURED? The simple answer is both yes and no! While we can measure staff satisfaction levels, staff retention, sickness levels and companies’ profitability levels, there remains a challenge in linking these changes to the redesign of the working environment. While we can measure real estate savings and environmental efficiencies, we cannot measure the changes to employees’ creativity and innovation levels that will occur with the introduction of new working methods. However, this should not stop all of us seeking to make a difference. One of my clients, a telecoms company, has recently developed a cutting-edge state-of-the-art video conferencing product so good you actually feel like you are sharing the same room with people on the line. As a result the division has banned internal company travel for meetings and is now calculating considerable cost savings in terms of hours saved and travel expenses spared. For this company at least, the visionary thinking is measurable. At RPC a transformation of their office space has helped drive recruitment. Whereas before a trainee lawyer would sit conditions of 5,000 staff. Each of these companies is looking with one partner, in RPC’s new open-plan offices, they now at flexible working so there is no doubt that the business have the opportunity to listen to and learn from senior lawyers community is waking up to the future. across the business. This new open and communicative learning environment has created a clear ROI. WHAT ARE THE KEY FUTURE ISSUES YOU ARE CONSIDERING WITHIN HOK AT THE MOMENT? We are looking at issues IS THERE A CREATIVE SIDE TO THINKING IN THIS WAY, OR DO which could potentially shape the future of how we work. YOU FIND THAT IT IS MORE LINKED WITH IN-DEPTH DEBATE ON For example; how we can quantify the impact of workforce SERIOUS ISSUES? A creative approach to change is needed. and workplace development on the environment? How we However this should always be backed up by quantifiable can facilitate change in office workers’ mindsets and ensure research and data. In order to create a new working developments in working practices are welcomed and environment, we have to imagine a space which doesn’t yet adopted at every level of the company? exist. This requires a creative mind. However, to monitor how We are looking at how we can learn from different industries offices and businesses work we must provide in-depth analysis and sectors, and how we can bring other disciplines together of our working practices. e.g. HR, facilities managers and workplace psychologists, to ensure the design of our working environments is not the sole FROM YOUR EXPERIENCE OF WORKING WITH MULTINATIONAL domain of workspace planners. ORGANISATIONS, HOW WELL DO YOU THINK THEY ARE PLANNING FOR THE FUTURE IN THIS WAY? While many HOW ARE THESE AFFECTING YOUR ORGANISATIONAL STRATEGY multinational organisations are able to think about their BOTH FOR THE COMING YEAR AND IN THE LONGER-TERM? businesses’ working practices, many are still stuck in a These issues have already had a dramatic impact on HOK’s mindset which only looks to the bottom line. Instead of organisational strategy. In addition to setting up a sustainability thinking about their business environment in the widest team to look at HOK’s carbon footprint and office design, possible sense, and considering issues such as the best way we are working towards a collaborative approach across all to attract and retain staff, some companies find it difficult to our departments. consider the wider implications of issues such as health and the environment, and retain outdated working practices. However, it is not all doom and gloom. Many forward thinking companies are already looking to the future and planning accordingly and, while these are primarily less mature technology companies, it will not be long before the wider business community looks to the future of its workforce. I am For further information: currently working on three projects addressing the working www.hok.com

theHRDIRECTOR – MARCH 08 27 FORUM: PLANNING FOR THE FUTURE HENLEY MANAGEMENT COLLEGE CASE STUDY www.thehrdirector.com

adopt a completely new set of behaviour, to challenge and change the way in which they and their organisations create wealth and wellbeing, and to engage in a much more complex debate about the impact their way of doing things has on the world as a whole. Initially Henley developed two new programmes, “Our World CASE STUDY Working” and “Leading for Sustainability”, to address these issues. “Sustainability goes much farther than CSR in terms of shaping the way in which an organisation undertakes its PLANNING activities. A sustainable business is one where the organisation has both the means to sustain its own activity (the ability to FOR AN UNCERTAIN ensure its long-term survival) while at the same time ensuring FUTURE – it has a long-term future not compromising or degrading the resources of the planet as a whole. It is this second obligation SUSTAINABLE that demands new approaches to leadership, decision making and resource allocation,” says Richard Kemp, Henley’s director of BUSINESS Programme Development.

“many organisations now stand at a crossroads”

“Traditionally, organisations have been content only to engage in sustainable practice when these ‘come free’ – i.e. when the cost savings SINCE ITS INCEPTION IN THE SECOND WORLD WAR, HENLEY of a change make it easy to justify that change to staff, shareholders MANAGEMENT COLLEGE HAS ALWAYS WORKED TO HELP and stakeholders alike. However, many organisations now stand at a COMPANIES PLAN FOR AN UNCERTAIN FUTURE. THE COLLEGE crossroads when sustainability-driven changes may come at a cost to ACTS AS AN EXTERNAL BAROMETER FOR BUSINESSES – profit. Shareholders, in particular, may require more stringent proof LOOKING WORLDWIDE AT ISSUES COMPANIES WILL NEED TO that the changes made were indeed right and necessary for the present CONSIDER IF THEY ARE TO BE SUCCESSFUL – AND HELPS THEM and future worth of the business as a whole. It is this area that Henley TURN THESE CONCERNS INTO PRACTICAL ACTIONS. is exploring successfully with managers and leaders in companies such as Costain, IBM and SMEs who find themselves on the frontiers of As one of the world’s oldest and most well-respected business wealth creation in the future,” comments Richard. schools, the college prides itself on giving managers and leaders Sean McLean of IBM South Africa recently attended the first Our worldwide, the tools to generate wealth and prosperity through World Working programme: “What makes Our World Working is the sustainable business models. Its business has always been to help process of experiential learning, as opposed to academic learning. Had such individuals to make the right choices for themselves, their this course just been designed for us simply to acquire and process companies and the communities in which they do business. information relating to the challenges and opportunities of investing in developing economies, and the effect of globalisation, the impact THE CHALLENGE: would not have been as significant. Instead, it was a valuable journey, Creating a sustainable business model for the 21st century and I believe that without exception, each of us had our epiphany, 2006’s report by the World Bank’s former chief economist Sir Nicholas leaving us richer for it, and better equipped to make the correct Stern, which showed global warming could shrink the global decisions on how our actions, as business people, will impact, economy by up to 20%, was a wake-up call for global businesses of negatively and positively, the lives of many in the emerging world.” the real and imminent threat posed by climate change. This was the As an organisation the college, which is a charity, is practising first time an eminent economist, rather than an ecological group, had what it preaches. Fair trade coffee is now available throughout studied the threats posed by climate change from a business Henley, bio diesel is used to fuel vehicles and garden machinery, and viewpoint and reported back to business in a language it understood. the college, which is the second largest provider of MBAs in the This, added to the twin towers tragedy of 2001, which highlighted world, is replacing hard copy course handouts with memory sticks. the increasing effect of politics on business, and the emergence of For the future Henley is exploring the opportunities presented by new convergent technology, meant the business world of the 21st century technology for delivering virtual learning globally – a move which would be completely new uncharted territory compared to the 20th will bring, among other benefits, reduced carbon emissions through century. To compete successfully and safely business would need to reduced travelling. look outside its traditional concerns and, instead, embrace a world where customers were expecting businesses to take responsibility for their actions and to act transparently.

THE SOLUTION For further information: Henley realised that executives would need to be taken on a completely different learning journey to meet these new challenges. This would involve educating business practitioners and leaders to www.henleymc.ac.uk

28 theHRDIRECTOR – MARCH 08 It’s not rocket science Get your staff to do their homework- and reap the rewards.

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To find out more information or discuss how Zubka’s Internal Referral System can benefit your company, contact LAUNCHING THIS MONTH! Tim Dennis, Sales and Business Development Director, on [email protected] or +44 1628 661123. ETHICS IN THE WORKPLACE www.thehrdirector.com

WHY DOING BUSINESS ETHICALLY CAN HELP YOUR COMPANY “BUSINESS ETHICS – ISN’T THAT AN OXYMORON?” THIS IS A QUESTION THE INSTITUTE OF BUSINESS ETHICS IS OFTEN ASKED. MANY PEOPLE BELIEVE THAT BUSINESSES, BY THEIR VERY NATURE, CANNOT BE CONSIDERED AS ETHICAL. SIMON WEBLEY, RESEARCH DIRECTOR AT THE INSTITUTE OF BUSINESS ETHICS, BEGS TO DIFFER.

Public perception of business behaviour is consistently poor, fuelled as it WHY IS BUSINESS ETHICS IMPORTANT? is by high profile reports of unethical and illegal conduct. Compared with The IBE believes that businesses, and all organisations, should ‘do the 2006, the general public’s confidence that UK business is behaving right thing’ because it is the right thing to do. However, there is research ethically dropped four points to 54% in 2007 (from a survey by Ipsos- demonstrating the benefits that businesses with stronger programmes MORI for the IBE). From the overdraft penalty charging by banks, to for ethics and corporate responsibility enjoy, including reduced risk, additives in food, rigging of phone-in competitions and dangerous toys better financial performance, improved staff and customer loyalty. reflecting poor supply chain management, companies are under constant Why should HR professionals take an interest in establishing a strong scrutiny by the media and the general public. With this they are culture of ethics in their organisations? becoming more and more sensitised to ethical issues. Evidence suggests that the companies with ethics policies and codes are more effective in engaging with their employees, provide a beneficial SO WHAT IS BUSINESS ETHICS? working environment and have a culture that enables unethical The Institute defines business ethics as the application of ethical values, behaviour to be identified and dealt with early. As staff prefer working such as fairness, honesty, openness and integrity, to business behaviour. for such organisations, there are recruitment and retention benefits. In short it is about how an organisation does its business. Does it treat Consequently, companies would have fewer costs associated with labour its employees with dignity and respect? Does it treat its customers fairly? turnover, union disputes and employment litigation. Does it pay its suppliers on time? Is it open to dialogue with its local IBE research has suggested that, over time, doing business ethically communities? Does it acknowledge its responsibilities to wider society? has a significant positive impact on financial performance. In 2003, Does it practise good governance? companies with a code of ethics in place financially outperformed those Business ethics applies to all aspects of business conduct, from without over a five year period. boardroom strategies, sales techniques and accounting practices to In addition, in 2007 the IBE found that companies which trained their stakeholder relations and issues of product responsibility. Business ethics staff on ethical standards or corporate responsibility commitments were concerns discretionary decisions that organisations, and the individuals found to outperform those that had a code of ethics but provided no who work for them, make in the day-to-day situations they face. training about it. Establishing high standards of business based on ethical principles requires organisations to put in place ethics or corporate responsibility HOW DOES A CODE OF ETHICS BENEFIT A COMPANY? programmes – policies, codes, training and support etc – and actively When a company states its ethical values and provides a code of ethics to nurture an ethical culture. guide staff in their day-to-day working, an explicit message is sent

30 theHRDIRECTOR – MARCH 08 www.thehrdirector.com ETHICS IN THE WORKPLACE

throughout the organisation: how the company does business is ETHICAL POLICY as important as results. Frank Chapman, chief executive of BG Group, says in his introduction to their current Principles into THE FALL OUT OVER ENRON AND THE RECENT Practice: “Every employee is required to comply with the Business CONVICTION OF CONRAD BLACK OVER HIS STEWARDSHIP Principles and will have my support and that of BG Group OF HOLLINGER HAVE HIGHLIGHTED THE IMPORTANCE OF management, if adherence to the Business Principles impacts EMPLOYERS HAVING CLEAR POLICIES AND PROCEDURES achievement of other near-term performance goals.” DEALING WITH BUSINESS ETHICS, IF THEY ARE TO AVOID But is having a code of ethics a sufficient indication that a POTENTIAL CRIMINAL AND CIVIL PROCEEDINGS. company actually behaves in an ethical fashion? After all, Enron had a code of business ethics! The number of companies with There are many business practices which are widespread and codes of ethics has steadily increased. An estimated 85% of the commonly accepted in some countries (e.g. payments to inter- FTSE 100 and 65% of the 350 have some form of explicit ethical mediaries) but are either unprofessional, unethical or unlawful. policy. Despite having such policies in place, companies are still Except in the most obvious cases, a failure to communicate to receiving reputation hits arising from unethical behaviour within employees the business standards expected of them will make it their organisations. What might be the reasons for this gap? difficult for employers to take action against employees if they conduct business in an inappropriate way. There are a number of

TRAINING ‘grey areas’ where clear line drawing is necessary. To name but Companies are finding that just having a code of business ethics a few: is not enough. In order to have a positive affect on the corporate • doing business with family or friends (without prior disclosure) culture, ethical values need to be embedded deep within the • acceptance of gifts or entertainment organisation’s DNA. To make an ethics programme effective in • paying intermediaries for securing business (where this is the actually influencing behaviour and decision making, not only norm in a particular sector or country) must guidance be offered, but a regular training and awareness • reporting potential conflicts of interest expenses charged to raising programme about its content and application is required. the business non-documented transactions etc. Training, as part of a wider ethics programme, can help employees to understand the company’s policies and to ‘live’ Accurate and contemporaneous record keeping and them at work. Training managers at all levels can help to documented processes are the key to ensure that there are encourage an ethical culture. When staff do the right thing even sufficient ‘checks and balances’ in place. For employers, this will act in the absence of rules and regulations, because it is ‘the right as a deterrent for potential inappropriate business behaviour and thing to do’, that difference becomes apparent. provide a transparent record for auditing and investigating Yet from 1998 to 2004, IBE surveys on how codes of ethics are processes. It will also provide protection for employees, in case they used showed that less than half of companies with explicit ethics get caught up in someone else’s inappropriate business conduct. policies said they provided any training, in spite of increased media Employers are advised to introduce ‘whistle blowing’ policies reporting on irresponsible corporate behaviour. However, to enable employees to report suspicious business conduct. responses to the most recent survey, “Use of Codes of Ethics in Whistleblowers have protection against adverse treatment or Business 2007: survey and analysis of trends”, to be published dismissal under the Public Interest Disclosure Act 1998 (PIDA) and this month, show that ethics training is now being seen as far more can report the matter outside if their employer does not address important than it was three years ago. Seventy-one per cent of their concerns. This overrides any confidentiality restrictions in their respondents say that they offer members of their staff training on employment contracts. But their protection to go external is only the meaning and use of the code, as opposed to 48% in 2003. maintained if they have first gone through their employer’s internal procedures. Even if, having gone through internal procedures, the So what positive effects can a responsible company hope to see? employee is not satisfied with his employer’s response, it has at Managing an ethical organisation requires courage in the face least forewarned the employer about the potential exposure of its of an economic downturn. But those who invest in training and business practices, rather than first reading about it in the press. encouraging staff to behave in line with the company’s stated ethical values, can hope to see the benefits.

• Attract and retain quality staff As mentioned above, it is easier for employers with a reputation for a strong ethical culture to attract and retain the highest quality staff. Ethics training is likely to result in increased staff confidence in the integrity of their employer as well as increased motivation levels and consequent performance outcomes. According to the Fraser Younson CIPD‘s August 2007 Labour Market Outlook, many potential Partner, employees consider a company‘s ethical reputation as an Head of Employment Group increasingly important component of the ‘employer of choice’ www.blplaw.com brand when considering which jobs to accept. An international survey conducted by Ipsos-MORI for Manpower in 2005 revealed >

theHRDIRECTOR – MARCH 08 31 ETHICS IN THE WORKPLACE www.thehrdirector.com

> that 28% of jobseekers rated “acts ethically” as an important factor partnership with those responsible for ethical performance within of what makes a great employer, above investment in training (22%) their organisation, HR can help to integrate ethics into processes such and being a well-known company or brand (14%). as the employer brand, recruitment, induction, appraisal, retention, motivation, reward, diversity, coaching and training. • Competitive advantage through trust In an increasingly globalised world, there can sometimes be little “HR professionals have a key role to play” to differentiate between companies offering similar products or services for similar prices. For the customer, the ability to trust a HR also has an important role to play in monitoring how company becomes increasingly important. Customers are now ethical values are embedded. Staff surveys, appraisals and exit more sensitised to ethical issues such as supply chain management interviews can all provide valuable information on whether the (the impact on Nike and Gap over child labour issues are still being company’s ethical values are embedded, as well as providing ways felt). Their loss of trust in a brand may never be recovered. When to evaluate how the ethics programme is working and whether staff are trained to offer a consistent quality of service and product the company is living up to its values in practice. as part of an embedded culture of fairness, the reputation of Management appraisals can ask for commitments to the the company as one that can be trusted, can be significantly company’s ethics and look for examples of how the employee and enhanced. The IBE research for “Does Business Ethics Pay?” their departments have supported the company’s ethical found that companies with codes of ethics are consistently commitment. In a similar way to other performance measures, these recorded as being more admired by their peer group in the can demonstrate how employees who have contributed to the Most Admired Companies list published by Management company’s ethical performance can be included in decisions Today, than those with no code. This suggests that where regarding bonuses or promotions. there is an embedded policy of doing business ethically, it More research is needed to understand exactly why and in becomes part of a company’s culture with a consequent what ways business ethics pays, but it is certainly clear that HR improvement on overall reputation. professionals have a key role to play in ensuring that a business ethics policy succeeds. • Protect reputation Enhancing reputation is one thing, but it could all be lost in IBE Research referred to in this article one bad news story. PR disasters, once they hit, can have a “Use of Codes of Ethics in Business: 2007 survey and analysis of trends” lasting negative effect on a company. British Airways, by Simon Webley (2008), Institute of Business Ethics Cadbury’s, BP and BAE Systems are just some of the UK “Does Business Ethics Pay? Revisited – the value of ethics training” companies who have suffered reputation crises in the past by Kaodi Ugoji and Nicole Dando, (2007), Institute of Business Ethics twelve months; and they continue to feel the effects. Having “Does Business Ethics Pay? Ethics and financial performance” an established reputation for high business standards will help a by Simon Webley and Elise More, (2003), Institute of Business Ethics company weather such crises and minimise the negative impact on trust and stakeholder relationships.

• Increased investment IBE research mentioned above found that companies with codes have a much more stable price/earnings ratio over a five-year period than those that do not have a code. This implies that they tend to manage their financial assets in a more efficient way. These results compliment those of a recent study by investment bank Goldman Sachs (GS Sustain), which found that companies that are considered leaders in environmental, social and governance policies are also leading in stock performance - by an average of 25%. A company with an ethical reputation gives investors confidence that the business is well-managed.

THE ROLE OF THE HR PROFESSIONAL HR professionals have a central role in supporting a workplace culture where ‘doing the right thing’ is encouraged. Human For further information: resources departments are the main point of contact for all staff www.cipd.co.uk within an organisation and as such have unique access to staff www.ipsos-mori.com throughout their career, from induction training to exit interviews. HR is also responsible for key systems and processes which can underpin effective delivery of messages the organisation wishes to Simon Webley convey about ethics. Through HR, ethics can be given credibility and Research Director aligned with how businesses run. With their expertise in change www.ibe.org.uk management and internal communications, and by working in

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theHRDIRECTOR – MARCH 08 33 ETHICS IN THE WORKPLACE CENTRICA INTERVIEW www.thehrdirector.com

INTERVIEW PROVIDING ENERGY ETHICALLY CENTRICA IS A FTSE 100 ENERGY BUSINESS WITH APPROXIMATELY 33,000 EMPLOYEES IN THE UK, NORTH AMERICA AND WESTERN EUROPE. WE TALK TO ANDREW MCCALLUM, HEAD OF CORPORATE REPUTATION, ABOUT THE COMPANY’S APPROACH TO CORPORATE ETHICS.

HOW WOULD YOU DEFINE THE ROLE OF ETHICS WITHIN DO YOU UNDERTAKE AN ETHICS AUDIT? Not a formal audit. We CENTRICA? The role of ethics is to define a framework within did audit the situation before starting the revision of our principles which our people can operate, to state our principles and provide so we could understand awareness levels and communication guidance in decision making when tough challenges arise. processes and how well they were working. The ‘Speak up’ process provides rich information and is reported quarterly to the HOW IS THIS SHOWN IN PRACTICE? Last year we revised our board audit committee – they oversee both the process of dealing business principles with assistance from the Institute of with issues that are raised, and also monitor the outcomes. Business Ethics and they are now as follows: 1. Demonstrating integrity in corporate conduct HOW DO YOU ENSURE CONSISTENCY OF ETHICAL BEHAVIOUR 2. Ensuring openness and transparency WITHIN A GLOBAL BUSINESS? In certain operating environments 3. Respecting human rights there will be different challenges and sometimes there won’t 4. Enhancing customer experiences and business partnerships be a right and wrong answer. We use the guiding principles to 5. Valuing our people help us make the decisions. For example in Nigeria we have 6. Focusing on health, safety and security taken a very tough stance against facilitation payments, which 7. Protecting the environment might mean we have to walk away from certain deals. We also 8. Investing in communities. fully support those who make decisions based on our principles, even if it means they have to turn down business It had been about three years since we last communicated opportunities because they are unhappy with the premise on them to staff, and since then our business has gone from a UK which the deals are being made. business, to one operating in developing countries and areas of the world where ethics are not as well-observed as they are here. DO YOU FEEL THAT HAVING CLEAR ETHICAL PRINCIPLES IS A We employed a number of communication tools to get BENEFIT OR A HINDRANCE TO SUCCESS IN THE MARKETPLACE? It the message across to all employees, suppliers and other is definitely a benefit. It is vital for us in every way, from stakeholders including a booklet listing our eight principles; a attracting the right people to work in our company and guidance document “Building a better business” which choosing the right suppliers, to acting in a way our customers explains how to uphold our business principles on a daily basis; expect as a responsible company. a board game for use within team meetings; the company WHAT GOALS DOES CENTRICA HAVE REGARDING DEVELOPING intranet; internal magazines and face-to-face meetings. THIS ASPECT OF ITS BUSINESS? I’d like to achieve about 80% – WHICH AREAS OF CORPORATE ETHICS FALL UNDER THE REMIT 90% awareness of the principles by mid-2008. When we have OF THE HR DIRECTOR WITHIN CENTRICA? The HR director, finished the communications and e-learning processes, we will along with others on the executive committee, is responsible run a survey to gauge response and awareness levels. Then it for making sure that the company ethics are maintained. She needs to become a core part of business – included in induction, is one of the leads in our whistle blowing ‘Speak up’ initiative. ongoing training, frontline training of apprentices etc. This is a facility which gives employees the chance to voice We also aim to get across the principles to suppliers and their concerns anonymously, by avenues such as the telephone business partners in this first quarter – last year we had a and e-mail. roundtable workshop on our corporate responsibility principles for 20 – 30 key suppliers. Now we want to engage them on our HOW DO YOU GET EMPLOYEES TO BUY INTO LEVELS OF ethics principles before cascading these principles down our BEHAVIOUR AND WAYS OF ETHICAL THINKING? By being very supply chain, nationally and internationally. What is not going to clear about what the principles are and how they apply to go away is the scrutiny of supply chains by NGOs etc. Greater everyone, collectively as a group. We have had strong feedback collaboration between companies and some guiding principles from our people that we need to be very clear with external that govern all organisations working within a sector are needed, audiences about our position on certain issues. This goes back to to make things clearer for everyone in the future. our eight principles, such as protecting the environment, investing in communities, a focus on health and safety and protecting people’s rights. As we continue to grow internationally the focus For further information: on that will continue to grow. www.centrica.com

34 theHRDIRECTOR – MARCH 08 www.thehrdirector.com ADVERTISEMENT

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theHRDIRECTOR – MARCH 08 35 ETHICS IN THE WORKPLACE www.thehrdirector.com

CORPORATE ETHICS STRATEGIES: WHERE ARE YOU AND WHERE DO YOU GO FROM HERE?

PETER BINNS, PRINCIPAL CONSULTANT AT ORGANISATIONAL DEVELOPMENT COMPANY, BATH CONSULTANCY GROUP, LOOKS AT THE INTRINSIC PART THAT CORPORATE ETHICS PLAYS IN TODAY’S BUSINESSES, AND WHAT THIS MEANS FOR HR.

Corporate ethics has risen spectacularly as a key issue for companies and 3. Business Integration. At this level ethics is ‘integrated into company for HR directors in recent years. It’s not just the high-profile scandals – systems and processes’. This is where audits, measures and targets Enron, World Com, Shell in the Niger delta – that have focused attention, play a role. Ethics becomes ‘just the way we do business around here’. but also the positive side of an ethical approach too. The company’s ethics become part of its ‘lived brand’. Whether it takes the form of Corporate Social Responsibility, 4. Strategic Driver. Here ethics becomes an integral ‘part of strategic Sustainable Business, Corporate Ethics or the Triple Bottom Line the thinking and planning’ at board level and below. Ethics becomes an message is clear: profitability alone is no longer good enough. Society ‘enabler’ and the company’s ethics is seen as a business asset which grants corporations the privilege and protection to thrive and prosper and increases profitability rather than as an overhead cost. in return expects them, at the very least, not to damage the personal, 5. Industry Advocate/Leader (and beyond.) At this level the company social and environmental matrix within which they are embedded. uses its ethical leadership to ‘influence both the sector as a whole or Some of this shift is driven internally – by the vision, values and other external stakeholders’. commitments of the CEO, the board and other champions. There are also an increasing number of external drivers, among them the 2006 So what has all this got to do directly with HR? At level two, Companies Act, which introduced a requirement for all public companies ‘Compliance’, the requirements as far as complying with relevant legislation to report on social and environmental matters. for people management are fairly obvious and we won’t discuss them Our experience has indicated that there are five levels of corporate further. Equally, it is unusual for HR to be involved at level five, ‘Industry ethical engagement: Advocate/Leader’. We shall therefore leave this too, and concentrate on 1. Denial/Refusal. This has been the traditional corporate stance, voiced levels three and four. most clearly by Milton Friedman in 1970; for him and for most corporates at the time, “the business of business is business” and ETHICS AND BUSINESS INTEGRATION companies’ sole purpose is therefore just to make profits for shareholders. One key area for level three is recruitment and retention. Experience Ethics is simply excluded. with our own clients and other research reveals that ethical concerns are 2. Compliance. Here the company’s ethics are ‘externally driven’ by playing an increasing role in the ‘war for talent.’ The brightest and the legislation or other factors. Compliance is seen as an overhead ‘cost’, best young professionals – particularly post Enron – generally want to but sometimes considered more positively as a necessary ‘hygiene’ factor. work in a company they can be proud of (or at least not feel ashamed

36 theHRDIRECTOR – MARCH 08 www.thehrdirector.com ETHICS IN THE WORKPLACE

of.) This is confirmed by recent research by The Work Foundation must contribute as a full member of the top team in developing in the UK. The study of over 1,000 workers found that around corporate strategy. It is just too slow, too clunky and too one in 10 are 'ethical enthusiasts' who hold strong views on haphazard first of all to agree a business strategy and only then corporate social responsibility which directly influence their choice to shoe-horn the people strategy around it. The HR director of employer. The study also found that companies without a good needs to be able to contribute fully to all parts of the discussion record on corporate ethics are more likely to lose staff in the 12 and ensure, along with the other directors, that there is a months following appointment. These figures probably understate concurrent design for both the functional and the people- the situation for managerial staff. architecture sides of it. Commenting on the research, Stephen Bevan, deputy director of The connection between ethics, HR strategy and research at The Work Foundation, explained: "Most employers only business/corporate strategy has recurred a number of times find out about their employees' concerns after they have resigned, with our clients, and the trend seems to be increasing. One and in most cases they assume that money is the issue. In fact only project we were privileged to be involved with was the merger around 10% of employees leave because they are unhappy with of Unifruco and Outspan to create Capespan, the largest South their pay packet.” African supplier of fresh fruit. The strategy that emerged from It is not just a matter of making the company ethics-friendly, this included workforce, social and environmental concerns. A but also making its recruitment practices such that ethics-friendly Foundation was set up to support land transformation, people are selected. In summing up the in-depth research carried empower people and create more sustainable horticultural out on 11 outstanding ‘good-to-great’ US companies, and with processes. The company is clear that this goes beyond particular reference to the recruitment processes of Nucor and traditional philanthropy: “Capespan doesn't relegate [these Pitney-Bowes, Jim Collins concluded that “the good-to-great projects] to a corporate social responsibility shelf - it pulses in our companies placed greater weight on character attributes than on veins and we're proud of our roots.” specific educational background, practical skills, specialised knowledge, or work experience". Although no one set of values WHERE ARE YOU AND WHERE DO YOU GO FROM HERE? or ethics emerged as the single preferred set for all the companies, So what does all this mean for HR directors charged with determining having these values – whatever they were – and including them how the company should work with corporate ethics? We conclude in selecting the right people really was a critical success factor. with a couple of action points: • Begin with where you are, not where you would like to be. Be “how do you get people to hold themselves honest about whether you are a level one, two, three, four or five and others to account?” company. Better to be a level one or two company doing sensible things to lift the level, than a level four or five company resting on Another key level three concern for HR professionals is regarding your laurels. Better also to hold the tension between where you learning and development programmes. ‘Ethics proofing’ these are and where our poor wounded planet urgently demands we programmes is important but not always easy to achieve. It is one should be, than to be a busted flush going nowhere. It is also thing to get people to talk the talk, but how do you get them to walk worth noting that individuals within the organisation will equally the talk? How do you get behaviour in alignment with the explicit be on the five stage journey which can be unrelated to where the values that have been articulated at the top? How do you get people organisation resides, which can cause confusion. – especially managers – to hold themselves and others to account? • Secondly, do whatever you can to fulfill the requirements of the Big picture ethics has to be translated into the small change of actions level you are at. Experience shows that getting people involved, and behaviour on the ground, and in many cases a standard off-site however reluctantly, grudgingly and in compliance mode, is a development programme will not, on its own, achieve this. Most of key to engagement in the issues, and with it to jump-off to the us also need a mirror to be held up to us to help us see when we are next highest level. getting it right and when we are getting it wrong in our day-to-day actions, not just once or twice off-site. For teams that spend time working together and in meetings, experience with our clients indicates that one way of doing this is to get the team to agree a small set of negative (‘red card’) and positive (‘green card’) behaviour types. Protocols and processes for then holding each other to account can range from quick o reviews at the end of team meetings, to 360 feedback, to regular For further information: appraisals. Coaching and Action Learning have also proved very www.capespan.com effective in providing on and off-the-job based support. www.theworkfoundation.com

ETHICS AS STRATEGY DRIVER Readers familiar with the work of Dave Ulrich will be aware of his advocacy of the role of HR as strategic business partner, and our own Peter Binns work with clients such as Nokia, BBC and several government Principal Consultant departments has also included this as a major theme. This is based www.bathconsultancygroup.com on the understanding that the HR director needs to be included and

theHRDIRECTOR – MARCH 08 37 ETHICS IN THE WORKPLACE ARCO CASE STUDY www.thehrdirector.com

dignity afforded to Arco staff is extended to all employees manufacturing Arco products. Excellence in reputation and hard work are also highly prized core values amongst Arco people.” All Arco suppliers have to sign up to the requirements of its policy document “The Ethical Guide for Vendors”. Prior to CASE STUDY business contracts being agreed, Arco own-brand suppliers are subjected to an initial ethical and quality audit based on the requirements of the policy document. Once they become MANAGING established suppliers, regular ethical and quality auditing is carried out to ensure conformity and constant improvement. Audit results ETHICAL TRADING are monitored strictly and form a fundamental part of Arco’s THE ARCO WAY Vendor Performance Measurement procedures.

THE MOVE TO JOIN ETI “Striving for ongoing improvement in line with best industry practice was the prime motivator in becoming a member of ETI,” explains Bateson. “One of the unique features of the ETI is its tripartite membership, which brings together 44 companies, 17 NGOs and four major trade union organisations. Membership of ETI will help us sharpen our focus on developing our procedures and practices in the HULL-BASED FAMILY BUSINESS ARCO IS A LEADING UK SUPPLIER area of ethical trading. We will be further developing our auditing OF PERSONAL PROTECTIVE EQUIPMENT, WORKPLACE SAFETY practices this year and hope to work with fellow ETI members on a PRODUCTS AND WORK WEAR. SINCE ITS FOUNDATION IN 1884, number of specific project groups and initiatives going forward.” FAIRNESS, INTEGRITY AND HONESTY HAVE BEEN INTRINSIC TO As a result of joining the initiative, Arco has updated its “Ethical THE ETHOS OF THE COMPANY, WHICH HAS SEEN A GROWTH IN Guide for Vendors” to incorporate the nine principles of the ETI base BUSINESS FROM AROUND £1M OF ANNUAL SALES IN THE 1960S code, which are: TO A TURNOVER IN EXCESS OF £201M IN 2007. • Employment is freely chosen • Freedom of association and the right to collective bargaining Through its team of specialists, its Big Red Book product catalogue are respected and a rapidly expanding 35-strong branch network, Arco offers a • Working conditions are safe and hygienic range of branded and own-brand products that include safety • Child labour shall not be used clothing and career wear, footwear and workplace hygiene products. • Living wages are paid As part of its continual investment in people, Thomas Martin • Working hours are not excessive and Jo Martin - the fourth generation of the Martin family to run • No discrimination is practised the company - have recently seen Arco become the first B2B • Regular employment is provided company of its kind to become a member of the Ethical Trading • No harsh or inhumane treatment is allowed. Initiative (ETI). This is a unique organisation that brings global companies, trade union organisations and NGOs together to work Dan Rees, director of ETI concludes: “According to recent out the solutions to ethical trade and then implement them. research1, eight in 10 consumers want retailers to do more to help people in developing countries improve their standard of living MAKING WORK A BETTER PLACE and provide reasonable conditions for those involved in making Sandra Bateson, Arco’s HR director, explains: “Arco’s core purpose our products. In our experience, individual companies working in is to make work a better place for people – not only for our staff, isolation to audit their supplier worksites can only achieve limited but for our vendors and our customers; and our investment improvements to workers’ conditions. A ‘joined-up’ approach is in people extends to the many communities in which our the only way we are going to be able to achieve widespread, people work.” lasting change to working conditions and wages.” In addition to donating almost a thousand hours of employee time to local charitable concerns last year, Arco Notes: raised £10,000 for Macmillan, supported 200 charities 1 Research conducted by the Co-operative Bank. nationally, and was one of only 127 companies to donate one per cent of pre-tax profits to charitable organisations through the Business in the Community’s Per cent Club.

CORE VALUES For further information: “Five hundred of Arco’s staff have been with the company for over 10 years; more than 60 of those for over 25 years, which is testament to the fact that Arco is a great place to work,” says Bateson. “Our www.arco.co.uk ethical policy plays a critical part in ensuring that the respect and www.ethicaltrade.org

38 theHRDIRECTOR – MARCH 08 XLEROKSSHRIWWJSV

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www.hrcircles.com CORPORATE MANSLAUGHTER ACT www.thehrdirector.com

CORPORATE MANSLAUGHTER AND THE IMPLICATIONS FOR HR DIRECTORS HR PROFESSIONALS AND THEIR COMPANIES HAVE ONLY A FEW MONTHS LEFT TO INCORPORATE NEW HEALTH AND SAFETY LEGISLATION INTO THEIR SYSTEMS AND PROCEDURES BEFORE THE CORPORATE MANSLAUGHTER AND HOMICIDE ACT 2007 COMES INTO EFFECT ON 6 APRIL 2008. CHRIS GREEN, PARTNER AT LAW FIRM WEIGHTMANS, REVIEWS THE ACT AND ITS IMPLICATIONS FOR ORGANISATIONS.

EXECUTIVE SUMMARY A substantial part of the failure within the organisation must have The Act will mean that failure to review structures and policies now could been at a ‘senior level’ – i.e. the people who make significant decisions mean the implications for companies of a fatal incident will leave them about the organisation or substantial parts of it. For example, this liable to potential fines of up to 10% of their annual turnover. In includes those carrying out strategic functions such as central finance, addition, there will be a real threat of more offences of personal liability senior operational management roles or other managerial roles and for gross negligence manslaughter or other offences, which could even those with central responsibility for health and safety. Depending on lead to individuals facing fines or imprisonment in certain circumstances. the nature and scale of the organisation, other roles including regional managers in national organisations and managers of different THE ACT operational divisions such as HR managers, are also likely to be under The new Act is not retrospective and so will not apply to any incidents prior consideration. If management of safety and responsibility for complying to this date. The Act does not create any new duties and so companies lies with an HR department or manager, they will need to be competent who currently comply with existing safety obligations apparently have little to discharge that duty and ensure that the company’s procedures are in to worry about. fact implemented. Because the police will need to look at the role of individuals more THE OFFENCE closely in order to prosecute a company, they are likely to investigate Although the offence is concerned with corporate liability and does not such senior people more thoroughly and, in the process, may uncover alter the legal position of individuals, personal liability of directors, senior further evidence of individual gross negligence at senior levels. Under managers or other individuals remains possible for gross negligence the new Act, more prosecutions should be expected of individuals who manslaughter, and under s.37 of the Health & Safety at Work Act, for might not previously have been “controlling minds” of their companies any offence even if the injuries are not fatal. but who might be “senior managers”. The requirement for a gross breach means a breach far below what THE NEW TEST could have been reasonably expected. Juries are required to consider, a) The way in which an organisation’s activities are managed by its when assessing if there has been a gross breach: senior managers • the extent and seriousness of failures to comply with health and b) causes a death and, safety obligations, c) amounts to a gross breach of a duty of care to the deceased. • and the degree of danger this posed.

40 theHRDIRECTOR – MARCH 08 www.thehrdirector.com CORPORATE MANSLAUGHTER ACT

GUIDANCE OVERVIEW THE CORPORATE When deciding whether an organisation is guilty of Corporate MANSLAUGHTER AND CORPORATE Manslaughter, consideration may also be given to, amongst other HOMICIDE ACT – WHAT IT WILL MEAN things, relevant health and safety guidance (such as Approved Codes of Practice). The Health and Safety Commission (HSC) and FOR BUSINESS TRAVEL Institute of Directors (IOD) have now issued their guidance THE NEW ACT, DESIGNED TO MAKE ORGANISATIONS document on promoting health and safety at work. The guidance CULPABLE IF THEY ARE NEGLIGENT AND FAIL TO is aimed at company directors and specifically covers the Corporate DEMONSTRATE A DUTY OF CARE TO THE HEALTH, SAFETY Manslaughter and Homicide Act. The guidance is not obligatory AND WELLBEING OF EMPLOYEES, WILL MEAN A TRAVEL but by following the guidance, directors would normally be RISK MANAGEMENT PROGRAMME WILL BE ESSENTIAL TO considered to be doing enough to assist their organisation meet its PROTECT TRAVELLING EMPLOYEES AND THE BUSINESS legal obligations. In the event of a death, the CPS could point to REPUTATION. MATTHEW JUDGE, DIRECTOR, ANVIL GROUP, provisions in the guidance which had not been followed as ANSWERS SOME KEY QUESTIONS THAT HR DIRECTORS evidence that the company’s failings were gross. Whilst targeted AND LINE MANAGERS NEED TO ADDRESS: at directors, the guidance is useful for others in terms of identifying action to be taken to comply with the legislation. HR professionals Will it cause a change in travel policies? may wish to enquire what guidance and published information Companies need to look at the effectiveness of their health and exists to set out the standards required of them by law. safety systems, with regard to travel. Are they rigorously followed? The guidance states that the starting point is to follow three What are the health and safety attitudes, policies, systems or ‘essential principles’: accepted practices within the organisation? 1. Strong and active leadership from the top 2. Worker involvement How should businesses/corporations approach business travel 3. Assessment and review. when the Act becomes law? Businesses should be looking to implement a travel risk The guidance goes on to list a four point agenda in order to management programme that incorporates health and safety embed the essential principles. The four points are to ‘Plan’, policy, traveller training and awareness, traveller tracking and ‘Deliver’, ‘Monitor’ and ‘Review’ health and safety. Each point support. Businesses should also be aware of employee whereabouts recommends core action to be taken, as well as suggested good in case of an incident that might put the employee at risk. practice, with the aim of assisting directors in providing effective leadership of health and safety. What can businesses and corporations do to protect themselves from prosecution in the case of an employee dying overseas? CORE ACTIONS If they have not done so already, HR directors and senior managers In order for effective health and safety planning, the board is need to start enforcing strict travel policies incorporating corporate advised to be aware of the significant risks faced by the governance and health and safety associated issues. Organisations organisation and to agree a policy which sets out the board’s role should provide the same duty of care to its employees working and the role of individual board members. The health and safety abroad as it would if they were working in the UK. policy should be a ‘living’ document which evolves as required. The guidance suggests adequate resourcing, competent What parts of the business will be affected by the CPMS? advice, the use of risk assessments and employee involvement in The boardroom agenda should regularly include Corporate health and safety decisions which affect them. Manslaughter to ensure compliance with all health and safety In respect of monitoring health and safety, organisations must legislation relevant to the organisation. HR must ensure employees give appropriate weight to reporting, audit the effectiveness of conduct themselves responsibly and adhere to the company policy. management structures and risk controls and report the impact of new procedures etc. The reviewing guidance highlights the importance of reviewing the health and safety performance yearly, examining whether the health and safety policy is appropriate and that there has been effective reporting. If any action is needed to address the shortfalls then this should be decided and the action monitored.

PENALTY The penalty for a company convicted of Corporate Manslaughter is an unlimited fine. The Court may also impose a Publicity Order requiring the company to advertise its own conviction and Matthew Judge Director misdemeanours or a Remedial Order to put right any outstanding www.anvilgroup.com safety issues. The Sentencing Advisory Panel is currently consulting in respect of how to approach sentencing organisations convicted >

theHRDIRECTOR – MARCH 08 41 CORPORATE MANSLAUGHTER ACT www.thehrdirector.com

PROFESSIONAL SUICIDE? > of Corporate Manslaughter. The consultation document, dated 15 November 2007, asks those consulted for opinions regarding RECENT RESEARCH CARRIED OUT BY THE BRITISH SAFETY aggravating/mitigating factors and aims of sentencing. COUNCIL (BSC) IN DECEMBER 2007 FOUND THAT MANY The panel proposes, in respect of the level of a fine, to look at ORGANISATIONS ARE STILL NOT PREPARED FOR THE an organisation’s annual turnover. The panel considers that an CORPORATE MANSLAUGHTER ACT. offence under the Corporate Manslaughter Act should attract a much higher level of fine than an offence under the existing Although the Act received Royal Assent in 26 July 2007, the legislation which results in death due to the elements of serious research shows that many organisations still do not understand management failure. The panel’s provisional proposed starting point, the ramifications of not being properly prepared. The BSC for conviction on trial of a first time offender, is a fine of five per cent survey of 1250 organisations found that: of turnover (averaged over three years prior to the incident). It is • 46% of employers do not understand or are not aware proposed that the Court will then take into account aggravating and of the Corporate Manslaughter Act mitigating factors, arriving at a fine in the range of 2.5% to 10% of • 60% of employers do not have any senior executives the average annual turnover of the organisation. qualified in even the most basic health and safety practices The panel’s provisional view is that a Publicity Order should be • 42% employers said their business does not have a health imposed on every offender convicted of Corporate Manslaughter. and safety management system The consultation document also asks those consulted for their • 30% of workplaces do not have formal health and safety opinion on this course of action. This will have a real impact and inductions views are sought so as to co-ordinate an objection to such a • 28% of companies with 251-500 employees are unaware change being introduced from current levels of fines. of the Act INDIVIDUAL LIABILITY • 44% of companies in London are still not fully prepared Prosecutions have historically been unsuccessful for gross for the Act negligence manslaughter due to the “controlling mind” • A worrying 59% of organisations in the South West and requirement which has now been removed in the new offence. As West Midlands are not properly prepared for the Act. such an organisation’s liability will now be assessed on a much wider basis. However, the offence of gross negligence manslaughter in With more than one in seven employees still unclear about respect of individuals will still be available, and it is likely that with what they are legally required to do to make their workplace the availability of the more viable new offence, individuals may find safe and more than one in six employees feeling that employers themselves facing gross negligence manslaughter prosecutions at are not doing enough to improve health and safety in the the same time as the company facing a corporate manslaughter workplace, it seems that businesses are not taking the prosecution. An extensive investigation would have already been implications of the Act seriously. completed in respect of the Corporate Manslaughter offence with “The new legislation is a wake up call to the many thousands individuals’ behaviour being focused on. of employers who freely admit to not understanding or even There is also the potential for relevant individuals to be knowing about the new Act”, says Brian Nimick, charged with a s.37 offence if the health and safety failings of the CEO of the British Safety Council. “Our report company are found to be with the consent or connivance of the reveals that around a fifth of businesses of all individual or attributable to any neglect on their part. Such sizes have not heard of the Act, even though it proceedings may result in a fine or imprisonment. becomes law in just three months’ time. Staggeringly this includes 40% of civil service CONCLUSION and public sector organisations.” In light of this new legislation, it is important to evaluate the If businesses do not begin to familiarise health and safety performance yearly - examining whether the themselves with such a vital piece of legislation, then it will not just health and safety policy is appropriate and that there has been be a legal complication, it really could be a matter of life or death. effective reporting. If any action is needed to address any shortfalls then this should be decided and the action monitored.

For further information: www.hse.gov.uk/aboutus/hsc/ www.sentencing-guidelines.gov.uk/about/sap/index.html For further information:

Chris Green www.britishsafetycouncil.org Partner www.weightmans.com

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THE EFFECTIVE MANAGEMENT OF A FATAL ACCIDENT INVESTIGATION KEVIN ELLIOTT, PARTNER AT EVERSHEDS LLP LAW FIRM, SPECIALISES IN WORK-RELATED FATALITIES. HERE HE HIGHLIGHTS SOME OF THE KEY ISSUES THAT AN ORGANISATION’S MANAGEMENT SHOULD BE AWARE OF, IN THE EVENT OF A WORKPLACE FATALITY.

Organisations that have already experienced a work-related fatality will POWERS OF REGULATORS be aware of the huge number of different issues that will come to light This is a complicated area in respect of which legal advice should be in the aftermath of the incident. Those organisations that have not sought. In respect of documentary evidence, the police and the HSE both experienced a fatality need to have an understanding before any such have, or can be, granted powers to have documentation handed over to incident arises as to what those issues are likely to be. them. Note that those powers will not extend to being able to obtain documents that are legally privileged (primarily communications THE EXTERNAL INVESTIGATION BY REGULATORS between solicitor and client in contemplation of potential litigation). Manslaughter offences (corporate or individual) are investigated by the police Legal advice should be sought before documents are handed over. and prosecuted by the Crown Prosecution Service (CPS). Dependent on what Either the police or the HSE will want to interview individuals either type of activity is being carried out, health and safety offences are investigated as a witness or suspect. Where an individual is to be interviewed as a by the Health and Safety Executive (HSE) or the Local Authority (LA). Broadly witness they should be briefed in advance about the format of the speaking the HSE regulates activities in industrial or manufacturing sectors, interview and reassured that the interview is merely being undertaken to whereas LAs regulates activities in retail and office sectors. detail evidence. Consideration should be given as to whether or not a A protocol entitled “work related deaths - a protocol for liaison” colleague should sit in on the interview if the interviewee would like this. has been created by agreement between the Association of Chief Police If an individual is treated as a suspect they will be interviewed under Officers, the HSE, the British Transport Police and the Local Government caution and are entitled to legal representation at the interview. It is likely Association. The protocol sets out the need for a police officer to attend that they will need separate legal representation to that which the the scene of the death to determine if there is sufficient evidence to company is receiving because of the potential for a conflict of interest to justify a manslaughter investigation (corporate or individual). arise (see the section on conflicts below). Police will remain in control of the investigation (referred to as If a corporate body is suspected of having committed an offence and ‘having primacy’) until either they are satisfied there is insufficient is called to attend an interview under caution, then a representative will evidence for any manslaughter charges (in which case they will hand the need to be authorised to speak on the corporate body’s behalf. No case back to the HSE/LA to investigate) or if such evidence does exist the liability will attach to that individual simply by virtue of them attending matter will be referred to the CPS to prosecute for manslaughter. the interview.

44 theHRDIRECTOR – MARCH 08 www.thehrdirector.com CORPORATE MANSLAUGHTER ACT

INTERNAL INVESTIGATIONS A TARNISHED REPUTATION? There are many sound reasons why an internal investigation may be undertaken; though note that there is no legal requirement to NASAR FAROOQ, FROM ONLINE HEALTH & SAFETY do so. Best practice is that an investigation of at least some sort CONSULTANCY CRONER, TALKS ABOUT THE RISKS should be undertaken. TO CORPORATE REPUTATION FROM FORTHCOMING Any investigation should not be entered into in haste and must LEGISLATION. be planned carefully. Given the potential liabilities, it may well be that an instruction is given by a company’s external lawyers to With news of the Corporate Manslaughter and Corporate investigate so they can then advise on potential liabilities. If done Homicide Act regularly hitting the headlines, British businesses are correctly any report will be privileged i.e. it does not need to be undoubtedly aware of the impending legislation, and the fact that handed over to any regulator. it will make it much easier for large organisations with complex Careful thought should be given as to who should carry out management structures to be convicted of corporate manslaughter. any investigation. The investigation should not be carried out, What has not been so apparent, however, is the impact the for example, by anyone who in any way had a part to play in legislation will have on the reputation and success of any the incident - there needs to be totally objective evidence. The company found guilty of causing death due to their gross investigation should be carried out promptly and should include corporate health and safety failures. statements from those whose evidence will assist the The Publicity Order - Section 10 of the impending law - investigation. All relevant documents (e.g. training records; risk requires any company convicted of corporate manslaughter to assessments; method statements) should be collated and disclose their conviction in the public domain, as well as the details appended to the report. of the offence, the amount they were fined and the improvements they have been ordered to make to their health and safety culture.

CONFLICTS OF INTEREST This will inevitably damage a company’s reputation by This has been touched on above. In any regulatory investigation highlighting what could be perceived as its laissez-faire attitude into a work-related fatality, thought must always be given to the to health and safety and the welfare of its employees, visitors, possibility of conflicts of interest arising. Classically this may be contractors and clients. Negative publicity like this will ultimately a case where the company is under investigation as is the impact a business’s retention and recruitment rates, and its deceased’s line manager. The deceased’s line manager may ability to maintain and secure new business. attempt to infer that the company did not provide him with To prevent this worse case scenario, existing systems, policies adequate training to carry out his task, to add to his defence. and organisational arrangements should be reviewed so that Alternatively, where a number of individuals are under suspicion, responsibilities for health and safety are clear and everybody in they may blame each other as to who was responsible for the company understands them and implements them. training or supervising the deceased. In those circumstances Encouraging such communication at all levels in spoken, individuals may each need separate legal representation in written and visible pathways is fundamental to preventing and addition to the company’s own representation! Thought needs preparing for an unforseen accident. Indeed safety culture will be to be given as to how this will be funded (e.g. company; insurers; a key factor for juries to consider in deciding whether or not there union; legal aid). has been a gross breach in health and safety management. It should also be borne in mind that conflicts of interest can Ultimately if health and safety procedures and responsibilities arise between the company and its directors if both are are allocated and communicated clearly and regularly to all staff, investigated. Funding in that case may be provided if any liability a sense of ownership regarding the company’s overall health and insurance is in place for directors and officers. safety standards will be achieved and the chances of a work- related death or injury reduced. To achieve all these objectives,

PR AND COUNSELLING the commitment and leadership by senior management is Systems and procedures for dealing with the media is something absolutely essential. that can and should be managed proactively - the time to learn about dealing with the media is not after a fatality. Thought should be given to having one or more persons in the company trained in speaking to the media. There is also a need to deal extremely sensitively with the family of the deceased. Expressions of sorrow over the death of a colleague are decent, humane comments which do not amount to admissions of guilt. Putting up the shutters because of concerns over liability will usually be the wrong course of action. Dealing with a work-related fatality is a traumatic experience for all, but particularly for those who either witnessed the event or Nasar Farooq Technical Manager the immediate aftermath. Again this can be managed proactively www.croner.co.uk by having in place arrangements whereby professional counsellors can attend on site for group and individual consultations, as well as offering follow-up telephone hotlines. >

theHRDIRECTOR – MARCH 08 45 CORPORATE MANSLAUGHTER ACT www.thehrdirector.com

PREVENTATIVE ACTION > THE FIRST 24 HOURS The way in which the first 24 hours following a fatality is THE NEW CORPORATE MANSLAUGHTER LEGISLATION WILL handled can often shape, or at least influence the shape of, the PLACE RESPONSIBILITY FOR ANY DEATH CAUSED BY future external investigation by regulators. Some key points: CORPORATE NEGLIGENCE FIRMLY AT THE DOOR OF SENIOR • Solicitors must be notified and if necessary arranged to be in MANAGEMENT. MARY CLARKE, CEO, OF COGNISCO, PRO- attendance on site. The value of the advice and support on VIDERS OF CUSTOM BUILT ONLINE EMPLOYEE ASSESSMENT site of an experienced health and safety solicitor in the SOLUTIONS, LOOKS AT HOW COMPANIES CAN MINIMISE immediate aftermath can be considerable. THIS RISK. • Notification of insurers. This will probably be a requirement under a company’s Public or Employers Liability Policy, but As recent events such as the HMRC data breach have shown, insurers may also provide indemnity in respect of costs. mistakes made by employees can cost an organisation dearly and can do considerable damage to a company’s reputation. • Establish an internal investigation team. Once the new Corporate Manslaughter Act is implemented, the • Ensure employees are reminded of the need to avoid speculation, impact of these employee mistakes could be far more significant particularly in written form (including emails) whilst the internal and is an issue no business leader or HR director can ignore. investigation team is carrying out its investigation. It is, therefore, essential that an organisation ensures that all • Support should be provided as is necessary and appropriate to employees are well informed, competent and carrying out their the deceased’s family. roles correctly and that the organisation identifies where any • Counselling and other support should be arranged to those skills gaps exist, in order to minimise this risk. employees who either witnessed the accident or the It may come as a surprise to learn that in Cognisco’s recent aftermath of the accident. survey of 1,260,000 subjects in 35 countries, we found that 23% • A key single point of contact should be established to act as of workers do not understand at least one crucial area of their liaison with the regulators to deal with all requests (such as to job. The consequences of this could, of course, be catastrophic for interview individuals or obtain documents). any business. If almost a quarter of an organisation’s staff are not • The services of PR consultants should be utilised (either an performing their jobs correctly then the company, its customers internal department or an external consultant). All press and employees are potentially at risk. enquiries should be directed to a single point of contact and Employee understanding and competence in their job roles is all employees must be briefed not to speak to the press. a major issue for HR directors. The best way to minimise your • It is likely that a company will be obliged to notify the death exposure to these risks is to make sure that you fully understand pursuant to the Reporting of Injuries, Diseases and Dangerous your workforce and their capabilities. Do your workers really Occurrences Regulations (this may not always be the case, such understand their role within the company and are they competent as where the death involves contractors in certain situations, or to carry out the roles they perform? What is expected of them and for certain road traffic deaths). what are the consequences of the decisions they are making? Ultimately, what is the exposure to them and to the business if they INQUEST are not equipped or confident enough to make these decisions? Consideration needs to be given to the role of Coroner’s inquests Potential risk can be minimised by assessing employee in respect of work-related fatalities. All work-related deaths will performance regularly, identifying what employees understand be subject to an inquest before a Jury. The purpose of an inquest and what they misunderstand, identifying where training is is to establish certain details and for a verdict to be reached. It is needed and where skills gaps exist. Careful assessment of these not a forum to apportion guilt. The inquest needs to determine: factors will help to ensure that any HR strategy you implement is • who the deceased was; as effective as it possibly can be and allows you to identify any • how the deceased came by his death; problem areas before the worst should happen. • when the deceased came by his death; • where the deceased came by his death.

It is likely that employees will be called to give evidence at any inquest and appropriate support should be given as well as legal representation arranged for the company. If manslaughter charges are brought, the inquest will not normally be held until after the determination of these charges. If no manslaughter charges are brought then the inquest will usually take place before any health and safety charges.

Mary Clarke TIMELINES CEO The timescale from the date of the incident to any criminal www.cognisco.com proceedings should be measured not in weeks or months, but years. It is normal for there to be between two and five years from the date of the incident to the conclusion of all criminal

46 theHRDIRECTOR – MARCH 08 www.thehrdirector.com CORPORATE MANSLAUGHTER ACT

proceedings. This time delay can present a number of problems to a company, for example: will relevant employees still be employed when the prosecution comes round; will all documents still be to hand; could there be a change of ownership in the business; and how would the incident be dealt with as part of due diligence? A lot of these issues can be covered by a comprehensive internal investigation immediately after the accident.

CONCLUSIONS As morbid as it may seem, businesses can and should prepare for the possibility of a work-related fatality. That preparation can include: • Having 24/7 contact details for your solicitors • Media training for key individuals • Accident investigation training for those individuals likely to be involved in such an investigation • Putting in place counselling provisions for affected persons.

The forthcoming changes to the law of corporate manslaughter will inevitably lead to greater scrutiny of corporate bodies following a work related fatality. Be prepared!

Kevin Elliott Partner www.eversheds.com

theHRDIRECTOR – MARCH 08 47 GLOBAL PAYROLL www.thehrdirector.com

THE BENEFITS OF A GLOBAL PAYROLL

WHY THE ADVANTAGES OF SUCCESSFULLY INTRODUCING A PAYROLL SYSTEM WHICH STANDARDISES THE FUNCTION ACROSS MULTIPLE COUNTRIES, WILL ALWAYS OUTWEIGH ANY INITIAL STUMBLING BLOCKS.

Introducing a global system across any function of a business is a in Europe, a common approach to global payroll systems pays daunting task. Determining standard processes for employees to dividends for companies who achieve a standardisation of follow in every country can seem to work against recognising the approach and, alongside this, greater ease in meeting financial value of individual local practice and even cultural differences. compliance and auditing requirements. “Auditing and Introducing a global payroll system pushes this problem to the accreditation is important for all multinational payrolls,” he extreme. Local countries do have different ways of doing things says. “Even if you're considering introducing systems to but not just because individual payroll functions have decided countries where you have relatively few employees it's worth things should be done in this way. Instead, the differences are thinking about the cost of non-compliance or of the company enshrined in the legal and governmental systems for that country, holding HR and payroll data that is not accurate.” which means tax and deductions will be peculiar to that particular Indeed, the fact that a global system means increased accuracy for location and any mistakes made, through human or system error, businesses is itself an attractive proposition when compiling can have serious implications. While companies must ensure they global reports. “If you're an HR manager in Europe and you adhere strictly to local legal demands they cannot lose sight of the want to compare your results to the company in the USA it can fact that introducing a new payroll system that promises greater be a nightmare,” says Ian Sparrow, programme director at ADP. efficiency and then doesn't pay people correctly or on time, is one “But with a global system it is possible to do a basic of the biggest disincentives for employees. compensation and benefit comparison quite easily.” These kind of comparisons aren't simply useful on a “increased accuracy when compiling global reports” strategic level to compare performance around the world. With increasingly mobile employees, businesses need to be one step ahead Despite the risks, the rewards of a successful implementation are on payroll provision to ensure seconded staff do not carry out indisputable. According to Tim Palmer, EquaTerra's HR practice lead unfavourable comparisons with their local counterparts before HR and

48 theHRDIRECTOR – MARCH 08 www.thehrdirector.com GLOBAL PAYROLL

payroll have a chance to consider the situation: “People REMOTE EXPENSES will talk to co-workers and colleagues and discover what's possible pay wise in the country where they're working,” LOOKING AFTER THE PAYROLL OF EMPLOYEES SCATTERED says Lara Auvien, global compliance director at hy-phen. AROUND THE WORLD SEEMS A CHALLENGE, BUT IT IS “If you don't get it right inevitably people will not work NOW POSSIBLE TO PROCESS THE EXPENSES CLAIMS OF for you.” EMPLOYEES WHEREVER THEY MAY BE.

“the market is still reasonably young” An entirely web-based solution, WebExpenses, enables employees to log onto their system on the Internet anywhere in the world and According to Tim Palmer, the provision of payroll make expenses claims which can then be approved and processed systems with the potential to reach around the world only by their manager – who can also be anywhere in the world. started to be realised four years ago when SAP changed “Our user base is divided between finance its licensing agreement to facilitate cross-border usage of staff who want to invest more time in using the the application. As such the market is still reasonably system because it gives them more information young with a few solutions yet to make their presence and makes their life easier,” says Sanjay felt on the market in any significant way. It is an area Parekh, a director at WebExpenses, “and the awash with consultants and outsourcers, all keen to step other employees in the company. For them the in and provide employers with the information and system has to be easy and quick to use so they services they need to keep tabs on who gets paid what, can get on with their work.” how and where. Given the complications that can arise Going live in 2000, the application was picked up by textile from these questions their support is to be welcomed. marketing company Woolmark early on and rolled out across its Paul Downes, managing director of the human capital pan-European sales team, from Ireland to Turkey. “Data input is team at Resources Global Professionals, believes there is a very easy and its much faster than using Excel,” comments Johann basic question to be asked prior to any selection of Mittermayr, the sales manager for Europe. “My manager approves a global payroll system: “You need to ask what the expense reports within hours, no matter where in the world he is." client’s data environment is and in looking at that At the same time, Woolmark's Financial Controller for Europe you can see if that environment is suitable for reports the system meets their overall criteria: “With staff based in consolidation,” he says. “Of course you need to so many countries, reporting to managers based in different consider the external and legislative parts of countries who also travel extensively, and with all of the providing payroll, but there are also the internal administration done centrally in the UK, we needed a system that parts of the company to consider.” was simple, robust and reliable.” “You have to gather together the requirements for According to Parekh, while local jurisdictions can influence the the payroll service, what functions and nuances you want way expenses need to be recorded and processed, the solution has and then work out how to make that more efficient,” says not been designed to deliver all things to all locations: “Because of Ian Sparrow. “You don't want to just do what you did in the underlying complexity of this area you can decide to try and the past, you need to streamline the function and code everything,” he says, “but sometimes that level of coding is therefore gain benefits.” not feasible in terms of the investment we need to make. It is This approach of increasing efficiency first rather than better to code 95% of the requirement and manually change the introducing technology on top of inefficient systems, can other aspects you require.” be crucial to delivering the business case. According to It is interesting to note that even on specific functions such Sparrow, the financial return on investment for a global as expenses, there is the recognition that an amount of flexibility payroll solution is not necessarily a monetary saving, but is valuable for companies to ensure the system meets their instead the ability to drive greater value from running the requirements. Even in this area it is clear one size does not fit all. payroll function at a similar cost. Pulina Whitaker and Kevin Conway, employment law and benefits specialist and tax specialist respectively at King & Spalding, note that each country a business enters will have its own tax system requiring deductions to be made from pay. To make matters For further information: more complicated, some of these deductions need to be made without the employee's consent, while www.webexpenses.com others definitely do need their permission. “Statutory requirements are different between countries,” notes Whitaker. “Employers will run into trouble if they make deductions without the proper consents in place.” www.wool.com Conway adds that a good knowledge of the local tax system means organisations can adjust pay and rewards >

theHRDIRECTOR – MARCH 08 49 GLOBAL PAYROLL www.thehrdirector.com

> packages for individuals as they move around the globe, services at Ceridian. “The shared service model means it’s a ensuring they are always incentivised efficiently. “If you very quick implementation for clients in those have regular cross-border employees the process for countries. If you're outside the 47 we can bring up a dealing with their move should be built into your new country, which depending on size and complexity system,” he adds. will take between three and nine months.” In addition to local tax law, organisations also need A similar situation exists for solutions such as to be aware of compliance regulations governing their euHReka provided by ARINSO. This comes with payroll systems, some of which may have international preconfigured country specific settings which can be reach. Many systems comply to the recognised set up swiftly for users in their particular location. European standard of SAS70 type 1, although some Naturally, there may still be idiosyncrasies required by users countries may require their own specific accreditation for but these can be met during the implementation local use. There may also be strict rules governing the process: “You need to define the gap between the language used on any technology solution. local requirements and the service offered by ARINSO,” explains Ivan Mostien, head of global “increase investor confidence in a company's financial development of the euHReka solution. “In some reporting procedures” countries it may be that the payroll service is already outsourced to another provider so we need to work In 2002, after the accounting scandals involving Enron with them to get the details of the system right.” and WorldCom, the Sarbanes-Oxley Act (also known as “If a country is not covered by a preconfigured SOX) was passed in the US introducing new measures to solution,” says Jason Kiely, HR specialist at SAP consultancy increase investor confidence in a company's financial Bluefin Solutions, “it is usually the case that an reporting procedures. The act had clear implications for 'international' version can be deployed which again multinational organisations with a US Stock Market requires a little manual configuration to meet local listing. In 2005, Chevron UK decided to act on SOX rules and regulations. Fast emerging countries are while addressing their own need for a new payroll being targeted for preconfigured models as the solution: “We already knew our HR systems were demand grows. There's clearly a threshold that creaky and we were also in a real muddle with needs to be reached for suppliers to offer coverage payroll,” says Peter Brand, regional manager of for that area.” Chevron's HR shared services for Europe, West Africa, Another limiting factor on the roll-out of multinational Eurasia and the Middle East. “Sarbanes-Oxley put us payroll is the number of people in one country which may be under enormous pressure within the company to do affected. There seems general consent that less than fifty something, and the only solution was to rapidly people in a country will not pay dividends for the amount of replace the HR systems, and at the same time do financial outlay required to push the system into that something about payroll.” location. However, as the market diversifies and more flexible Chevron brought in EquaTerra to consult on their service offerings become available, even this lower limit may new solution and help see a smooth implementation. not apply in all instances: “If you are looking at global roll- The final deal was sealed with a 250 page contract – a out you really should include everyone to get the most from factor of EquaTerra's determination that the deal be your investment,” contends Jason Kiely. “It might be easier watertight and give Chevron exactly what it required to see the value and benefits with the large companies but from a compliance point of view. “We probably over the SME market is such that you should make an individual engineered the deal,” admits Peter Brand, “but we were new assessment in each case.” to the process and cautious which meant we opted to include just about everything.” “any agreement with a solution or service provider should be viewed as a long-term relationship” “attention to detail is important” There is no question that creating and deploying these Clearly, such attention to detail is important when kind of systems is expensive – both initially and ongoing – since establishing multinational payroll – whether using a service once deployed, the payroll systems must receive continuous provider or adopting an in house system. “One of the biggest updates to ensure they comply with local and international challenges is getting all the information you need to create legal requirements as well as the ongoing demands of the the system,” says Lara Auvien, “There are many questions to payroll function itself. Given that any agreement with a be asked – essentially you need to know every element of solution or service provider should be viewed as a long-term payroll you will ever have in order to pay anybody.” relationship, companies must work to get their requirements To make matters a little easier it is worth bearing in mind right first time: “You have to get the definition of services right that service and solution providers who are already working for your business,” says Tim Palmer. “Payroll professionals in specific countries will have established systems which will need to be included in this because they can better define deliver to that country's requirements. “We're operating in what is required. Without taking time over that you can 47 countries,” notes Len Elkington, VP of multinational experience complications further down the line when some

50 theHRDIRECTOR – MARCH 08 www.thehrdirector.com GLOBAL PAYROLL

aspect of the service is duplicated between you and the provider, or alternatively it doesn't turn up at all.”

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www.hyphen.com Call us today on 0118 951 9586 to discover how Softworks Workforce Solutions can www.kslaw.com benefit your organisation or e-mail: [email protected] www.softworks-workforce.co.uk www.resourcesglobal.com

theHRDIRECTOR – MARCH 08 51 GLOBAL PAYROLL GETTY IMAGES CASE STUDY www.thehrdirector.com

CASE STUDY PICTURE THE PERFECT MULTINATIONAL PAYROLL SOLUTION

GETTY IMAGES, A GLOBAL CREATOR AND DISTRIBUTOR OF VISUAL CONTENT, RECENTLY OPTED FOR A MULTINATIONAL PAYROLL SOLUTION FROM CERIDIAN, ONE OF THE LARGEST PROVIDERS OF HR SERVICES IN THE WORLD. INITIALLY, THE SERVICE COVERED EMPLOYEES IN ITALY AND JAPAN BUT HAS SINCE BEEN ROLLED OUT TO A FURTHER SEVEN LOCATIONS AROUND THE GLOBE BRINGING THE NUMBER OF EMPLOYEES SERVED TO OVER 200.

COMPANY BACKGROUND Of the few multinational providers around, the challenge was Getty Images was founded in 1995 by Mark Getty and Jonathan then to find one with the necessary expertise and strength-in-depth Klein with the business objective of turning what was a fragmented in all the countries in which Getty Images principally operated. The photographic library market into the thriving, modern industry we range of services had to match the requirements of local operations see meeting the needs of visual communicators today. and be flexible enough to adapt with the development of each It was the first company to license imagery via the Web, moving individual location. the entire industry online. In doing so Getty Images allowed its Marilyn Hull, payroll manager at Getty Images, explains: “We customers easy access to view and purchase images from their vast were looking for a provider who could meet our requirements in collection in a user-friendly way. a number of worldwide locations. Having previously relied on The company is credited with creating what is considered to be individual providers in each country, we were keen to centralise the world's finest imagery collection, making the widest choice the payroll function without losing any of the local legal or cultural available in the most accessible and usable way, 24 hours a day, 365 expertise.” days of the year. Their images, which range from contemporary creative imagery to news, sport, entertainment and archive material, THE SOLUTION are found in the full range of traditional and digital media worldwide. After thorough investigation, Ceridian, with its proven capability Headquartered in Seattle, USA, with 21 offices worldwide, a of successfully managing international payrolls in 42 countries, presence in over 100 countries and services in six languages, Getty proved the best match for Getty Images. Images is truly a global business. “The knowledge that Ceridian delivers expertise in each country saved us many hours of research looking for a new payroll THE CHALLENGE provider, checking references and negotiating contracts,” says Hull. The rapid rise of the business through organic growth and According to Len Elkington, vice president of Ceridian acquisition resulted in the use of disparate payroll systems to pay Multinational HR Services, based in London: “Our multi- employees in different countries around the world. Faced with a national payroll services are delivered through one standard lack of continuity and multi-contracts, the finance function decided contract with a single point of contact across all payrolls, to embark on a programme to centralise payroll by appointing a removing the need to liaise with multiple providers. Built into single multinational provider. This would not only allow the payroll the contract was the flexibility to accommodate the evolving department in Seattle, USA, to deliver a more consistent service, needs of Getty Images. Naturally, employee populations move but it would also save renegotiating multi-country contracts at around the world and a client does not want to have to go renewal time and provide a complete global picture on payroll data through costly contract revisions. This proved a particularly attractive through multi-country reporting. solution for Getty Images.”

52 theHRDIRECTOR – MARCH 08 www.thehrdirector.com GLOBAL PAYROLL GETTY IMAGES CASE STUDY

THE IMPLEMENTATION favoured a phased roll-out, adding countries to its payroll service The first country to be implemented was Italy in January 2007, on an on-demand basis. followed shortly after by Japan. During the course of the year Spain, Indeed, the company is typical of an international company Australia, New Zealand, Canada, Portugal, Thailand and, most recently, undergoing constant change. In such circumstances, payroll can Singapore were added. In fact, in each of the first five countries, there become a logistical and compliance nightmare, but with the new are two separate Getty Images’ operations – development and sales system in place, the company has just one single point of contact companies – which are treated as having separate payrolls. for ensuring consistency in its business evolution. The phased approach was successful with Ceridian delivering accurately and on time according to Hull: “Many conversions to “multinationals can concentrate on different providers can prove very ugly, which can deter companies building their own businesses” from contemplating the move. I have been there before with previous companies but this conversion worked very well after a lot of work “As companies expand rapidly on a multinational basis, they are and planning on both sides. Every implementation deadline was met faced with increased challenges to build efficient and compliant except for one country where the old provider proved obstructive in payroll procedures and systems. To meet those challenges providing all the necessary data, which was outside Ceridian’s control. internally can be difficult and costly. By outsourcing payroll, “The company and its representatives in each country were very multinationals can concentrate on building their own businesses helpful. Italy, in particular, has very complex rules and regulations at a critical time in their development,” says Elkington. and the Ceridian office there took care in not only answering our Getty Images recognised that Ceridian had the capability queries but explaining why pay rates moved month by month.” to evolve with the needs of its business. Within the existing contract the company could increase or decrease employee COMPLIANCE numbers and add new countries as required. This saves the When Getty Images made its decision to look for a multinational time-consuming process of finding a new payroll provider, provider, an important requirement was that the provider appointed acquiring references and entering into lengthy negotiations. would have the expertise, operating guidelines and internal standards to meet local laws and regulations. Avoiding compliance failures was CORE BUSINESS a crucial factor in the final decision. With 214 employees in nine different countries covered so far Tax and remuneration laws differ widely, not only between by one multinational payroll agreement, Getty Images can be countries but also sometimes within countries. Getty Images confident that its people are paid correctly and the business is recognised the volume of in-country legislation and internal policies fully compliant with local laws and regulations. The consistent with which it needed to be compliant, especially in Europe. process applied across these countries allows the company to consolidate its payroll information, understand true labour costs “consistency and control” and make strategic workforce decisions. It has the peace of mind that, via skilled professionals conversant with cultural issues, Additionally, companies listed in the USA, and with major legislation, taxes and statutory requirements, payroll and regulatory financing overseas, are bound by the Sarbanes-Oxley (SOX) Act filing will be processed in a timely and accurate manner, leaving the of 2002. Central to SOX are the controls on financial processes, company to concentrate on its core business. which encompass payroll and international operations. The selected provider needed to demonstrate that they could comply with the standards set out by SOX. As with many multinational companies, Getty Images has international assignees working in different countries. For these employees, payments are invariably more complex. The multinational payroll solution delivers consistency and control when applying the various policies and regulations applicable to these employees.

THE BENEFITS Already the business has realised some distinct benefits from outsourcing its multinational payroll, as Hull explains: “We have achieved three main goals. First of all, we now have a more global picture of our payroll worldwide with the receipt of standard multi- country reporting. Secondly, we have the peace of mind that the national rules and regulations are being met thanks to the payroll expertise residing in each country. Lastly, we have one single point For further information: of contact which underscores the one-stop service provision.”

FLEXIBILITY As highlighted previously, in the case of Getty Images, a flexible www.ceridian.co.uk approach to multinational payroll was required. The organisation www.gettyimages.com

theHRDIRECTOR – MARCH 08 53 EVENTS CALENDAR www.thehrdirector.com

EVENTS CALENDAR

MARCH

11 MARCH 2008, RADISSON SAS PORTMAN HOTEL Organised by 3RD ANNUAL CONGRESS: HR STRATEGY IN BUSINESS Strategic HR Network This one-day strategic conference will deliver topical issues in an interactive t: 020 7631 0031 environment through high-level presentations. It will provide the perfect framework to e: jburgess@strategic-hr- stimulate ideas in the roundtable sessions most relevant to you - where you can network.co.uk benchmark, share experiences and generate best practice strategies to use in the w: www.strategic-hr- workplace. network.co.uk

12 MARCH WORKSHOPS, 13 & 14 MAIN EVENT, HOTEL VAN ORANJE, Organised by BME Global AMSTERDAM HR DIRECTORS SUMMIT 2008 For further information on After five years of delivering niche HR Conferences, BME Global is proud to present this event please visit: the HR Directors Summit 2008, an event for top-level HR professionals to hear about www.bmeglobal.co.uk/ the latest thinking in Human Resources and Strategic Management. The Summit’s Summit.html format is a combination of workshops, keynote presentations, conference sessions, discussion tables, one-to-one business meetings and networking activities.

APRIL

10 APRIL 2008 WORKFORCE STRUCTURING IN EUROPE Organised by Eversheds This one-day course will provide you with the key knowledge and skills that are For further information on needed to successfully project manage multi-jurisdictional workforce restructuring this event please contact us projects in Europe. Based on a case study, experts will explain how to get the on 0845 497 1302 or email information you require at an early stage, the questions to ask of stakeholders and [email protected] how to identify steps for your project plan, anticipate potential problems and reduce risk.

22-23 APRIL 2008, PALM BEACH HILTON AIRPORT, WEST PALM BEACH, FL Organised by STRATEGIC TALENT MANAGEMENT Jacob Fleming Group As companies strive to differentiate themselves in an increasingly competitive global o: (216) 920-3048 market, one common success factor is often overlooked: talent management. I would c: (216) 509-0349 like to invite you to attend this five star event and become a pioneer in the ever- e: [email protected] evolving environment of talent management. w: www.jacobfleming.com

23-25 APRIL 2008, LONDON EMPLOYMENT LAW EUROPE Organised by JSB Europe plays a central role in the UK's economic success and is vital to UK businesses. t: 020 8371 7010 Understanding how employment law works in different European countries has e: [email protected] become one of the key challenges facing business for many HR professionals, in-house w: www.jsbonline.com/ lawyers and advisers who operate in more than one European jurisdiction. This quicklink/127/ comprehensive three-day event will enable you to understand local practice and procedure, as well as the cultural implications of employment law in Europe.

MAY

15 MAY 2008, LONDON SALES COMPENSATION TRAINING Organised by This workshop will provide an overview of the strategic context that needs to reflect Watson Wyatt the continuous evolution of sales strategy. The workshop will review different To find out more about this event, distribution models and their impact on sales roles and sales compensation plans. and secure your place, please visit www.watsonwyatt.com/ rewardacademy or call 020 7227 2139

JUNE

26-27 JUNE 2008, LONDON EXECUTIVE RECRUITMENT EXHIBITION AND Organised by CONFERENCE Genie Corporate Now in its third successful year and destined to be even bigger and better. Already Contact Saul Cooper recognised as the key executive recruitment event in the UK, the 2008 conference will t: 0845 025 3702 focus on the recruitment and retention of senior executives, giving top HR professionals e: [email protected] the opportunity to listen to the key note speakers and discuss current and future strategic w: www.erecuk.com issues.

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