Reward is playing a key role in helping City and Guilds to operate on a more commercial and competitive footing, says Tom Washington
The rollcall of City and Guilds’ graduates include famous names such as Jamie Oliver and Alan Titchmarsh, but necessary changes to its business strategy have meant much pruning in order to build a recipe for success.
Before Chris Coyne, group head of reward, joined the vocational qualifications awarding body in August 2008, City and Guilds had no specific reward function. But under the guidance of chief executive Chris Jones, appointed in 2008, it has began using reward to steer it onto a more commercial path.
Although the past year has been successful, with the body achieving a record turnover of £115 million, the future looks more challenging. Traditionally, City and Guilds performs well during a recession because rising unemployment brings more investment in vocational skills training.
When a higher education establishment offering a vocational qualification enrols a student, it gets money from the government. That money is then paid to the body providing the qualification, like City and Guilds.
Funding set to tighten
But with much of City and Guilds’ revenue coming from this source, the changing political landscape means the funding pursestrings are set to tighten in the coming months. Changes to the structure of the qualifications and credit framework involving the way they are awarded, mean City and Guilds has to be on its toes.
“We have had to change the way we work,” says Coyne. “Just because we have a long history and we are a royal institute and a charity, that is no guarantee we will be around for ever. The new CEO has created a cultural change for the business.
“The shift is to start recognising we operate in a competitive and commercial environment, so we are bringing more skills on board that you would typically find in a plc environment and, equally, investing heavily in developing people’s skills within the organisation, notably our sales force.”
Reward is playing a significant part in this change. For example, the City and Guilds sales team previously had no sales incentive programme, which was not conducive for an organisation wanting to drive its business forward. Consequently, Coyne was involved in designing a sales incentive scheme, which is now going through a six-month pilot, due to end in April 2010.
“Anyone working in a sales environment would expect to have an incentive programme, but we had some long-serving sales staff who did not know what to expect,” he says. “We are rewarding people for the number of new education centres they bring on board, so counting the commodities they sell rather than the revenue they bring in. It is recognition that those people on the front line are key to all our growth plans, and need to be incentivised and rewarded.”
But City and Guilds has been cautious to ensure the scheme does not change an environment that Coyne describes as extremely collaborative, regardless of grade. “I think there is a danger with a sales incentive plan that you could override some of those values,” he says. “We have seen it drive behaviours: some right ones, some wrong ones. We need to make sure that when people are aiming for one target, it is not at the cost of something else they should be doing.”
The move towards a more commercial setup was influenced by the need to move away from a public-sector feel, both internally and externally. “For me, it is about the performance culture,” says Coyne. “That is not to say the public sector is not high-performance, but there is a degree of inertia that, without the commercial agenda, you might slip into.”
Final salary pension
City and Guilds’ reward shake-up began the moment Coyne stepped through the door. The first project on his to-do list was the small matter of closing the organisation’s final salary pension scheme, in which annual contributions were forecast to cost a huge 30% of payroll. The move was necessary to help reduce a resource-draining deficit and share some of the risk with employees.
City and Guilds had been operating a final salary scheme for staff aged over 40, and a money purchase scheme for those below this age. To replace these arrangements, it introduced a hybrid scheme that combined a career average revalued earnings (Care) plan with a money purchase element. This gave employees the security of a defined benefit promise and the opportunity to boost their pension at retirement by contributing to the money purchase part.
As a result, the body’s payroll costs were reduced from 30% to 9.5%, but conveying a positive message to staff was not easy. “The biggest challenge was communicating the change and coping with some quite understandable upset at the start,” says Coyne.
But City and Guilds shared its business case openly with staff, and followed this up with face-to-face meetings all over the country, individual statements sent out to staff explaining what it meant, an online pensions modelling tool and a telephone helpline. Despite tough early negotiations with trade unions, the results speak for themselves.
“The amazing thing for me was we had around 55% take-up before the changes and we increased that to 71% afterwards, so we got more people into retirement savings, which I think is fantastic,” says Coyne. Although the organisation’s annual staff survey showed an overall engagement level of 69% before the changes, this rose to 72% after the pension changes. “We had 860 respondents and only one asked for the final salary scheme back,” says Coyne.
Mr Potato Head
With a four-person reward team now in place, City and Guilds’ benefits proposition is taking shape. But before Coyne joined the organisation, the most recognisable face in reward was Mr Potato Head.
The children’s toy character features prominently in City and Guilds’ benefits communications, depicted in various situations and guises, dressed up to reflect different perks. For example, a pair of cartoon spectacles is added to illustrate eyecare vouchers, a smaller version of him demonstrates childcare vouchers, and showing him lifting weights promotes gym membership.
But the incoming reward manager was not totally convinced by the character. “Mr Potato Head existed before I joined and, to be honest, I looked at it and said I did not like it,” says Coyne. “I thought it was a bit wacky, but I was persuaded by our marketing people that it was part of brand building and it needed time. I have grown to see the power of it. A staff survey showed 80%-plus recognised him to be linked to our benefits.”
But underpinning the jovial branding is a serious shift towards the idea of total reward and explaining to staff the good value of their reward package. City and Guilds uses its annual survey to monitor all area of satisfaction and engagement, and this year 76% of employees said they understood the value of their total reward package. “That is a step forward in making people think outside the box of base salary,” says Coyne.
This total reward message fits with City and Guilds’ overall HR strategy of developing its employer brand. To further improve this, the organisation plans to send out paper total reward statements next year, despite already having online versions in place.
“There is something about [the statement] landing on someone’s doorstep,” says Coyne. “I believe you can get very powerful messages across. They can also be shared with partners, who are often a big influence. We can customise them and I want to build into them not only information on salary and benefits, but also [statements such as] ‘in your position, did you know about the learning and development opportunities available to you?’ You can build up that whole proposition more with a hard-copy statement.”
Coyne’s long-term plan for benefits is to build in more flexibility. Currently, staff can flex income protection cover up or down by 20% from a starting level of 55%, and can also choose to buy or sell five days’ annual leave.
“I think the days of an employer saying to someone ‘I am hiring you and you could be 17 or 65 but I know exactly what is best for you and it is our benefits package’ are over.”
City and Guilds has used reward to refocus its efforts on continuing to deliver its core purpose. “Everyone has woken up and realised we have to be commercial and compete, but without losing that sense of purpose and valuing the learner,” says Coyne. “Every day I can see more and more that reward, in its broadest sense, underpins the direction we are going in.”
Career profile: Chris Coyne
Before joining City and Guilds in August 2008, the organisation’s group head of reward, Chris Coyne, spent six years at global property firm DTZ as UK reward manager.
Before that, he was an HR business analyst at US IT services company Perot Systems for two years.
However, Coyne spent most of his early career with the Royal Navy. In his 12 years as a commissioned officer, he worked in both personnel administration and logistics on projects that included training and development, and payroll information systems.
Before Coyne joined City and Guilds, reward did not exist as a separate function within the organisation, but was instead handled by the HR team. Coyne says this posed a challenge, but one that has proved immensely satisfying. This includes a task he cites as one of his fondest achievements – building his own reward team.
“I was given a blank canvas [at City and Guilds],” he says. “I had the chance to put together a reward philosophy, then build a strategy from it and begin to start delivering it. For me, being able to see the three so tangibly come together I found very rewarding as you can see the impact of what you do coming to life.”
City and Guilds at a glance
Founded in 1878, City and Guilds is a charity and operates under royal charter.
It is a not-for-profit vocational awarding body, offering more than 500 qualifications across all industry sectors, through 8,500 colleges and training providers in 81 countries. Two million people a year start City and Guilds qualifications, in subjects ranging from agriculture to engineering, hairdressing to motor vehicle maintenance, IT and tourism.
City and Guilds has two forms of income: through organisations that offer its qualifications, such as schools, colleges, training organisations and the armed forces, and employers. The latter is a growing element of its business, often acting to accredit employers’ in-house training. Its customers include McDonald’s, Honda, Shell, Tesco and B&Q.
This year, City and Guilds achieved record revenue of £115 million, up from £100 million the previous year.
Famous names who have gained its qualifications include Jamie Oliver, Alan Titchmarsh and Karen Millen. City and Guilds employs 1,000 staff in the UK, of which 60% are female and 40% male. Its average length of service is five and a half years.
Case study: Dental insurance adds bite
Ruth Anderson, a paralegal at City and Guilds, joined the organisation two years ago, having previously worked in the hotel industry while trying to kick-start her legal career.
Anderson works within the in-house legal team of eight people, assisting lawyers with day-to-day procedures, researching issues and keeping the team up to date with any changes in legislation.
“The benefits package at City and Guilds is one of the best I have seen, because it offers such a wide range of benefits you can actually use,” she says.
Her favourite perk is dental insurance. “It is really hard to find an NHS dentist normally. It takes so much time and you can never find a local one,” she says.
“With this benefit, I am able to spread payment for any treatment and it is right next to work.”
Anderson also values City and Guilds’ subsidised staff canteen, for which employees are issued with an electronic card that is topped up straight from their salary.
“I budget on a monthly basis and this benefit means I do not have to stop and think about what I am having for lunch and how much it will cost,” she says.
Benefits at City and Guilds:
- Pension: Career average re-valued earnings (Care) plan for all with 1/85th accrual and 3% employer contribution. Optional money purchase top up with employer contribution up to 8%; employer offers 2% for every 1% from the member
- Private medical insurance for employees, with wider cover offered at corporate rates
- Group income protection for all at 55% of salary, which staff can flex up or down to 75% or 35%
- Death-in-service of four-times salary
- 25 days’ holiday, rising by one day every two years to a total of 30 days. Staff can buy or sell up to five days a year
- Subsidised staff restaurant
- Three days’ paid leave a year to take part in corporate social responsibility projects†
- Dental insurance
- Critical illness insurance
- Travel insurance
- Retail vouchers
- Childcare vouchers
- Cycle-to-work scheme
- Charitable donation scheme
- Employee assistance programme
- Discounted gym membership Family-friendly policies
- 39 weeks’ fully-paid maternity leave
- Three weeks’ paternity leave
- Flexible working where possible