ITEM NO 5.

Report No 30/2007 NHS Tayside Delivery Unit Committee 23 May 2007

DRAFT HR KEY PERFORMANCE INDICATORS

1. PURPOSE OF REPORT To advise the Delivery Unit Committee of the on-going development of draft performance indicators for the HR function. These indicators will underpin the Service Level Agreement to be established between the Delivery Unit and HR Function, and form the basis of an evaluation process in relation to service delivery to the Delivery Unit function. 2. RECOMMENDATIONS The Delivery Unit Committee is asked to note the: 3. the development of draft HR functional performance indicators. the consultation process being undertaken in relation to these draft performance indicators with Executive managers, Service managers and other stakeholders.

EXECUTIVE SUMMARY 3.1: Background Following on from the creation of the Delivery Unit, discussions have been on-going around the most appropriate Human Resources [HR] function arrangements to underpin and compliment the new Delivery Unit structure. This is set against a context of the HR function itself having previously realigned its services and already operating as a single directorate to promote single-system working. To help assist integration, it has been decided that HR establish a Service Level Agreement with the Delivery Unit, enabling HR performance to be monitored against a range of agreed key indicators. This approach offers a means through which the Delivery Unit Executive Team and Committee, and other key stakeholders, can be reassured with regard to service delivery. In addition, development of such indicators offers the HR function an opportunity to strengthen relationships with service managers through a common language for communicating HR strategy, inputs and results. This is seen as an important step in a transformation model that moves from an examination of HR infrastructure [improving efficiency and effectiveness] through HR capability [development of HR talent] to HR solutions [focussed on critical business challenges and delivery of strategic solutions] as part of a wider HR strategy being developed by the Director of Strategic HR and Workforce Development. 3.2: Proposed Performance Indicators In developing a range of performance indicators within NHS Tayside, considerable thought has been give to what would act as the most appropriate set of measures. Best practice approaches - e.g. such as recommended by PricewaterhouseCooopers LLP/Saratoga Institute (2005) - focus on simplicity of reporting and on tangible outcomes which enhance understanding of functional performance.

Cognisance also has to be given to the range of data sources available from current systems. Care requires to be taken to ensure generation of data does not become an industry in itself. To assist in this area, action was taken in the second half of 2006/07 to put in place a number of data sources through bespoke in-house systems, and, more recently, through the implementation of the IT-based recruitment system. Following existing models established by, for example, the Royal Bank of Scotland Group, it has been a deliberate choice to therefore start with performance measures that offer insight into delivery of strategy and monitor progress against key areas. The indicators proposed therefore focussed on: HR delivery effectiveness measuring overall process effectiveness through cycle times and outcomes HR efficiency functional operating costs, response times, etc

and cover areas of : Productivity & Efficiency Staffing Learning & Development Functional Performance

reported against a simple Green-Amber-Red traffic light system of performance outcomes interpretation. A copy of the draft performance indicators is attached to this paper for reference. 3.2.1 Wider Organisational Measures Some of the performance indicators e.g. total numbers of grievances raised are intended to compliment existing reports developed for Staff Governance Committee and elsewhere, and are included to also offer the Delivery Unit Committee and Executive Team a means of temperature checks on wider organisational issues. Likewise, it is important to recognise that performance against some areas e.g. compliance with appeals policy commitments on timescales - can be highly dependant on factors outwith the HR function, but which again highlight wider organisational issues for example, the availability of management panel members to consider grievance appeals. Retrospective analysis of performance in these areas may subsequently promote debate around the potential blocks to effective performance and aid development of strategies to address these. 3.2.2 On-Going Assessment of Indicators In establishing a range of performance indicators, care needs to be taken however not to simply assume that the indicators offered are the right model or best fit. Leading edge organisations with a tradition of human capital measurement use a range of both traditional HR metrics (e.g. employee turnover rate) as well as measurement of bottom-line contributions of investments in, for example leadership development and knowledge sharing as other measures of business impact. In line with an ethos of continuing improvement, throughout 2007/08 there will therefore be an ongoing assessment of the indicators themselves to determine whether there is a requirement to revise, redirect or re-affirm the indicators to ensure they appropriately measure the HR functions ability to deliver the right things at right time to right quality. 3.3: Benchmarking against NHS & Other Sectors The approach adopted by many other HR measurement best practice employers is that while the organisation should be focussed on getting the baseline basics right, such as absence rates, training costs per employee and turnover rates for example, these should also be measured against relevant industry benchmarks to give a sense of comparator performance. Work is therefore already underway to identify both best in class and World class performers and learn what for them promotes effective delivery. 2

Work in identifying best practice comparitors is being taken forward through a variety of means. NHS Partners, a pan-UK NHS reference group, are being used to identify best in class NHS organisations, while contacts are being explored via a range of potential providers (e.g. PricewaterhouseCooopers LLP/Saratoga Institute) to identify World class practice. As comparitors are identified, these will be fed into performance reporting to enable comparator analysis. 3.4: HR Functional Capacity / Restructuring In the context of ever-demanding people management agenda there has been an on-going debate over existing NHS Tayside HR capacity. A consequence of implementation of HR performance indicators will therefore be to promote a mature debate over the extent to which existing HR resources are deployed to meet key value-add requirements, and the degree to which, if deemed appropriate, certain administrative, routine advisory and other current responsibilities could be better discharged in another form. Work has already been undertaken to compare the existing NHS Tayside HR function resources with that elsewhere. Within NHS Tayside, the percentage of HR staff-to-total staff is currently 0.7% (excluding Learning & Development staff) 1, or a ratio of 1: 142 2. A HR staff-to-total staff benchmarking exercise across the NHS UK-wide undertaken by NHS Partners [2007], including NHS Tayside, highlights that the NHS median ratio is 1:75 3. Other by-sector studies undertaken indicate that a public sector HR staff-to-total staff average percentage is 1.18%, with a cross-sectoral average of 1.3% 4 While this potentially raises issues around whether NHS Tayside has in place sufficient HR resources to meet Delivery Unit and other service user requirements, the function itself must first demonstrate that all steps are being taken to fully utilise its existing capacity. As part of this process, a HR structural review is being undertaken, with diagnostic work taken forward by the Chief Executive, Director of Strategic HR and Workforce Development, and Associate Director of HR to identify non-added value activity and consider existing functional configuration and delivery to further drive consistency, efficiency and effectiveness. This follows on from work undertaken by an independent body commissioned to identify user views of the service. Proposals arising from this review will be subject to a future paper to Staff Governance Committee, following consultation with Delivery Unit Committee and other appropriate stakeholders. 4. MEASURES FOR IMPROVEMENT As detailed within the draft performance indicators, with reporting cycles indicated. 5. FINANCIAL IMPLICATIONS None 6. RISK ASSESSMENT As stated above, once established it would be prudent that the performance indicators are reviewed for example after six months, and periodically thereafter- to ensure continuing relevance.

Inclusive of Training & Development the figure increases to 0.8% Using a base of 79.3 wte HR staff against 11,226.49 wte total staff 3 NHS Partners results: Lower Quartile = 1:56, Median = 1:75, Upper Quartile = 1:95 4 For example: Mercer Consulting (2005) HR staff-to-Total staff figures indicate: Manufacturing 0.95%; Finance/Insurance 1.49%; Pharmaceutical 1.61%; Other Service 1.29%; Public Sector 1.18%; Energy 1.25%; Overall Average 1.3% calculated by dividing the average HR wte (excluding training staff) by numbers of wte employees and multiplying by 100.
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IMPLICATIONS FOR HEALTH Effective HR functional performance will help ensure effective implementation of Delivery Unit work plans, which in turn will improve the health of the local population of Tayside.

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TIMETABLE FOR IMPLEMENTATION AND LEAD OFFICER Alan Boyter, Director of Strategic HR and Workforce Development, is NHS Tayside lead officer for HR. Consultation around the draft performance indicators is already underway, with a view to implementing the standards in July 2007.

9.

CONSULTATION, INFORMING, INVOLVING & CONSULTING WITH PUBLIC & STAFF Consultation on the draft performance indicators is being taken forward through the Delivery Unit Senior Management Team, and appropriate Board / Delivery Unit Committee structures, led by George Doherty, Associate Director of Human Resources.

George Doherty Associate Director of HR 4 May 2007