Cost saving tops public sector agenda as leaders plan cuts

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• Significant cost cutting planned for 2012
• Redundancies and recruitment freezes high on agenda
• Public sector leaders concerned for workforce morale

Public sector workers will face increased pressure this year as cost cutting measures continue to bite, according to new research from global management consultancy Hay Group.

The report reveals that the majority of public organisations plan to make significant cost savings this year through pay reductions, redundancies and recruitment freezes.

As a result, senior leaders express concern over the impact of cuts on workforce morale and engagement.

Hay Group’s report, Dealing with the deficit, is based on research among 175 organisations across the public sector.

An Austerity Agenda

As government spending cuts continue to reduce budgets, and with recent data from the Institute for Fiscal Studies revealing that just 12 per cent1 of austerity measures have yet been implemented, driving cost savings remains the key priority for public sector organisations during 2012.

Almost two thirds of leaders (62 per cent) are seeking to reduce their pay bill this year. The same number are preparing to make redundancies.

Around two fifths intend to implement a recruitment freeze (41 per cent) and achieve savings through office and facilities closures (39 per cent) over the next 12 months.

Peter Smith, a director at Hay Group, comments: “The public sector has had to bear the brunt of the government’s austerity programme. As our research demonstrates, the sector is still firmly in cost-cutting mode.”

Under Pressure

Almost three quarters of senior managers (74 per cent) believe their stretched workforces will suffer due to additional workload brought about by cuts.

Close to half of public sector leaders (46 per cent) already identify a conflict between the needs of their organisation and the reality faced by their employees.

More than two fifths (41 per cent) believe that the amount of pressure on employees is already unsustainable. The same number report that employees are currently holding back discretionary effort and delivering only what is expected of them.

As a result, almost half of senior managers (48 per cent) are reluctant to continue to ask more from their employees. Almost a third (31 per cent) admit to feeling guilty doing so.

The majority (53 per cent) are concerned that they may lose their best staff as a result of increased pressure.

Peter Smith comments: “Public sector leaders are understandably concerned about asking more from workforces who have already felt the impact of cost-cutting measures, and rightly recognise the threat to employee engagement.

“Leaders must create a climate that will engage and motivate those around them, and ensure that their objectives are clearly communicated throughout the organisation.

“They must also realise the importance of middle managers as a crucial link between senior management and frontline workers. Middle leaders have a critical role to play in communicating priorities down and concerns up through the organisation, and in continuing to ensure the quality of service delivery.”

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