Date: 07/01/2014 Duration: 00:11:06

In this podcast CIPD's Chief Economist Mark Beatson and Chief Executive Peter Cheese consider some factors that may have an impact on the world of work in 2014. An improved economic outlook will enable HR professionals to think more strategically.

Philippa Lamb: Hello and welcome to the first podcast of 2014. A new year is always a time for looking forward and in a moment the CIPD’s chief executive will give us his predictions on what HR and CIPD members can expect in the coming 12 months. First though here’s chief economist, Mark Beatson, on the outlook for UK Plc.

Mark Beatson: I think the economy’s in a much better place than it’s been for a number of years. 2013 finally saw that growth picked up. We've seen two or three quarters now when growth has probably exceeded expectations and we've also seen that business confidence has finally turned.

PL: How do you think we're going to see the economic picture change this year?

MB: Well in one respect I think it’s going to feel pretty much like the last few months in the sense that we're starting in a fairly confident position in terms of business confidence and also consumer confidence, and I think that there's plenty of steam in the economy for that to continue pretty much throughout the whole of 2014. So it’s going to be the first year when growth has felt like normal, the first year since 2007 when growth has been above 2%.

PL: So a year of productivity?

MB: Not necessarily. We're seeing employment still continue to increase and the OBR have shown that we've lost 7% to 10% of our productivity during the recession. Now the question is how do businesses get that back. I think we see a very important role here for investment and not just investment in machinery or even in IT. It’s also investment in people, in actually making the most of your existing workforce and, where you are investing in machinery and capital, also investing the time and effort into the training and the organisational changes required to make the most out of it.

PL: We've been hearing a bit of discussion about wage inflation finally creeping back. Is that a concern or a good thing?

MB: Well it depends on the context. If we start seeing wages going up because effectively the labour market is starting to slow down because we've got too many young people unemployed and distant from the labour market, then that's a problem. We're actually not seeing those indications yet. Hopefully what we’ll see is with productivity rises is that that will feed through into wage growth. But I think we have to recognise that the official forecast suggests that although wage growth will pick up in 2014, it won't be enough to actually keep pace with inflation and in particular it depends upon the measure of inflation that's used to compare with wage growth and if you look at the Retail Price Index as your measure of inflation…

PL: Which was the old way of measuring it.

MB: That's right, if you use that as your measure then earnings aren’t going to increase in real terms anywhere in the near future, partly because as unemployment falls we're expecting to see the Bank of England start to increase interest rates. That feeds through to mortgage payments and they in turn feed through in RPI inflation as against the official measure. So I think we're going to see the cost of living issues and the discussion of the cost of living continue to be on the agenda.

PL: So for HRs looking to find opportunities where they can add to the bottom line demonstrate their value, a year where they’re going to start to see that chance or are they still fire fighting?

MB: Well I think this ought to be the stage of the cycle when people are starting to think strategically about recruitment rather than opportunistically, and certainly the labour market ought to be tightening at some stage. That will mean it becomes a little more difficult sometimes to actually be able to find the right candidates and so that's one opportunity for HR to show its stuff. The second will be if actually the scope for pay increases is relatively modest, then how do you motivate employees and make good use of rewards, other forms of reward apart from pay? I think finally also it’s making the case for investment in people alongside the investment in the other things that business do, and reminding the board that you need to get the people side right, you need to get the organisation matters right, and not just simply purchasing new systems, new software, new IT etc. and that's another opportunity.

PL: Which brings us to chief executive Peter Cheese and his thoughts on what 2014 will look like for HR and what the CIPD will be working on this year.

Peter Cheese: So I think as we look ahead to 2014 there is no doubt that there is growing confidence in the economy and that is translating, I think, more and more into confidence in businesses and business leadership. I think what that will start to drive is more and more innovation. I think there's more pressure now with more confidence to say, okay so we can't stand still, we've got to change. And an agenda which historically over the last certainly four or five years has been very driven by cost cutting is a very different kind of agenda when you have to start to think about innovation and growth. It’s actually a lot harder and I think in that context this debate about have I got the right skills, the right capability, the right organisation, i.e. the big strategic agendas that face HR, I think are going to become clearer and clearer.

PL: So a real year of opportunity for HR to add value in a really tangible way?

PC: I believe so and I've said for a while now that I think that the agenda, the strategic agenda if you will for HR, has become a lot clearer and whether it’s talking about skills mismatches, whether it’s talking about culture, how it really changed culture and financial services and all these other industries and companies that we worry about. Or how do I build innovation and a learning organisation? These have become very clear imperatives over the last year or two and I think they’re absolutely going to accelerate in the coming year.

PL: CIPD members are going to be hoping, I think, for a better year this year aren’t they? There is this sense that finally, and at last, there's a little more optimism creeping in and they’re looking forward to a year where they can do more, achieve more for their organisations. In light of your analysis what would you suggest then as their top priorities, the questions they should be asking rather than perhaps the questions they frequently ask?

PC: First and foremost I think it’s the question that they should always be asking which is are we clear ourselves as HR professionals and what is the business trying to accomplish? What’s its strategy? What are its priorities? Where the value’s going to come from. And as I said in a context now which I think is so clearly shifting much more towards growth and innovation and opportunity versus how I survive and cut cost, that says that those imperatives for these sorts of things, which should be on HR’s agenda and they should be contributing to the business debate about, have never been clearer.

PL: Specifically what’s at the forefront of your mind then?

PC: I would start with these sorts of big debates about are we creating sustainable businesses for the future with the right kinds of corporate cultures, with the right engagement with our workforce and the communities which we serve. So the right sort of social enterprise which have moved very much from I think rhetoric to practicality. These are tough things to accomplish; you don’t change culture overnight. You don’t become a socially responsible enterprise overnight but they are enduring characteristics of successful businesses which I think are much, much better understood now since the beginning of the global financial crisis and thank heavens they are. And all the debates I sit in with business leaders and others are very much pointing to that. So that's great for HR; as I said, to step up into that space and say, “Right what does culture really mean? How do we really change it? What are the levers which we have at our disposal to help change culture?”, and then beyond that how would we know whether we are accomplishing that change which starts to speak to things like better measures and metrics.

PL: A lot of really exciting things coming through at the CIPD too, what are you going to be offering your members?

PC: Well we are working on a lot of different things. I mean first and foremost I'd say I think we're clearer on our priorities, we're clearer on the things that we're doing to accomplish and make a difference against those priorities, whether it’s building clearer membership propositions and more differentiation between different levels of membership, whether it’s being clearer on what the career profiles and opportunities are for people within HR, CPD continuous professional development, all the way through to the bigger strategic things which relate to the agenda I've described on helping to inform the profession.

So the research and the policy, everything from the megatrends, you know what’s really shaping our futures, through to the work we're doing on analytics and measures and better insight, working with the UK Commission and CIMA and others on the Valuing Your Talent programme or whether it’s down to what we're describing as the kind of science of human behaviour. What are those things that we need to better understand which really will, I think, shape a different understanding of accomplishing outcome of behavioural shift, behavioural change and motivation and engagement with a deeper understanding of the science that drives them? And we're researching all of those things so I think, as I said, it’s been clear on our priorities all the way from research and policy right the way through to individual execution and membership proposition.

PL: So quite a long list, an exciting list; what are the two that would be top for you, right at the forefront for you?

PC: If I look at 2014 and the big things we want to really try and land, one is this very challenging agenda and coming up with a framework for human capital measures and metrics which has broad consensus and buy in, not just from the HR community but from the finance and business community, and indeed regulators and others and investors, for example. That is a big project. It’s a really strategic project working with the UK Commission for Employment and Skills, Investors in People, Chartered Institute of Management Accountants, the Chartered Management Institute and others, and if we can land that during the course of the year having a more commonly accepted framework, that would be an incredible step forward.

But also to bring it back to very practical things for our membership I'm determined that we will really move forwards on these membership propositions, so much greater clarity for members at different levels about what membership means to them, about how we bring different services and capabilities to bear for people at different levels and at different points in their career, all the way from whether I'm a top HR director to whether I'm a student just starting out. So I would point to those two things, one, which is very strategic and will shape the future for the profession in many ways, and the other which is very practical and pragmatic and about making a difference for our members everywhere.

PL: So a busy and ambitious schedule ahead. Look out for the Valuing your Talent project soon. Also in the next few weeks there'll be a series of think pieces by leading academics on learning and development: Dr Paul Howard-Jones on Neuroscience and Learning; Professor Eugene Sadler-Smith on Ideas and Innovation; and Dr Adrian P. Banks on Cognition, Decision and Expertise.

Leadership is under the microscope too. We have new research looking at the fresh and original thinking that some organisations are applying to their leadership and management structures. We’ll have results from that project for you in the Spring and a round table discussion on leadership in the February podcast next month.

So plenty of food for thought. Keep an eye on the website for updates and Happy New Year