Final Report: Moving towards the ‘Big Society’ – Human Resource Challenges for the Third Sector
Background
Over the last decade, research into and governmental reports on the third sector, in itself an ill-defined and diverse sector, have highlighted the apparent shortage of qualified long-term employees. Often cited are particular shortages in managerial skills and IT skills. Also acknowledged are the challenges for this sector in providing adequate training to their human resources, often due to the nature of their funding structure. These findings apply predominantly to the Charity Sector, but other organisational forms, such as community interest companies and social enterprises face similar challenges.
With the government’s drive towards more community and citizen engagement, and a clear policy to develop cooperatives and social enterprise models of community activity, these challenges are likely to gain further prominence. In addition, the clear indications of less financial resources available across all business sectors will exacerbate the challenges surrounding human resources and their development in this sector.
The goal of this research was to look more closely at the Social Enterprise part of the Third Sector, as it is often neglected in regards to research on human resource management issues; especially since this is a sector that is particularly pertinent to the government’s idea of the ‘Big Society’. The research aimed to develop a better understanding of the challenges that social enterprises face and anticipate in light of the cuts in public spending (and thus a reduction in their income from government grants and contracts) whilst hearing rhetoric of growth in this sector. The objectives are to:
- Identify up to ten social enterprises differing in size
- Explore their perceived and anticipated challenges in regards to human resource development and requirements
- Synthesise similarities across the different organisations
- Provide recommendations of how such challenges may be addressed and what further research is required.
Whilst the research aims to synthesise some commonalities, the research team did not aim for representative findings, but the aim was to develop a better understanding of the current status quo to encourage further research and the identification of potential ways to the challenges faced.
Work Programme
The Work Programme set out for this piece of research was divided in to four stages. Stage 1 aimed at synthesising the existing literature on Human Resource Management within the Third Sector, focusing specifically on the experiences and research published surrounding Social Enterprises. This stage also aimed to identify up to 10 Social Enterprises in order to collect primary data on their experiences on managing Human Resources.
Stage 2 comprised the data collection phase and early parts of the iterative analysis process. It was anticipated that during this stage, data would be analysed and data collection refined based on emerging findings.
Stage 3 aimed at completing the analysis of the data and drafting the report, relating the findings to both the literature on Human Resource Management in the Third Sector and, if possible, to broader ideas relating to good practice in Human Resource Management.
The final phase aimed, time and resource permitting, to develop the findings into publishable work and potentially briefing papers for targeted audiences/stakeholders with an interest in this area.
Research Findings
This section of the report will outline the findings of the research. It will outline the methods used to approach the different work streams and subsequently present the findings. Finally, a short reflection on the research process and topic will be presented.
Methodology
The research consisted of two approaches – namely a focused synthesis of existing literature within this field and the gathering of qualitative data from individuals working within the Third Sector.
Literature Review
In order to gain an insight into the literature published a thorough review was conducted searching both academic publications and the grey literature (e.g. governmental reports, trade press, interest group publications). Databases, such as Web of Knowledge and Emerald were used to locate relevant academic publication. In order to locate grey literature, relevant websites, such as the National Council for Voluntary Organisations, were consulted, as well as general searches using Google. An initial search combining key words such as social enterprise, human resources, human resource development, human resource management was undertaken with limited success. In order to capture a wider range of literature, search terms such as Third Sector, Non-profit, Not-for-Profit, Charities were included.
Interviews
Considering the scope and resources available for the study, it was decided to undertake a qualitative study to investigate the experiences of Social Entrepreneurs of managing their Human Resources and the challenges that they face. An invitation letter was sent to contacts within the Social Enterprise Sector outlining the project and asking for volunteers to participate in the study. Participants were asked to contribute no more than one hour of their time for an interview – either by phone or in person. The letter was disseminated through the Social Enterprise Foundation and the local Council for Voluntary Organisations. A follow-up email was sent as well as individual approaches to 15 organisations were made from a list of suitable organisations on the Social Enterprise Foundation membership list. Other contacts within the sector were asked to suggest possible interviewees. An interview schedule was designed based on the emerging findings from the literature review and the researchers own experiences in the sector. Interview questions gathered some basic information about the organisations/person that was being interviewed, inquired about current Human Resource Management Practices, the perceived challenges surrounding Human Resources, the way organisations plan for Human Resources, and what ought to change in order to address some of the challenges they see as impacting on the sector. Interviews were conducted both by phone and face-to-face. Notes were taken and interviews were recorded where possible.
Results
Literature Review
Initial searches discovered very few publications that focus specifically on Human Resource Management issues within the arena of Social Enterprises. By widening the search, it became apparent that much of the research is subsumed within a body of research surrounding the Third Sector more generally, but focusing predominantly on charities and non-profit organisations. The review had to take into account this body of literature in order to provide any meaningful insights. The lack of sufficiently focused literature reiterates the existing challenge to define the sector and treat individual organisational forms as distinct. The third sector is still an accumulative construct that includes a range of organisational forms. This review, due to resource constraints, did not include research that looks at the definitional aspects of the Third Sector. What was also apparent, much of the research remains to be small scale. Furthermore, it is acknowledged that there is a growing body of research pertaining to the Third Sector in North America – however, the definition of what constitutes this sector, as well as the context in which this sector operates are very different, so a priority has been given to work that was judged relevant to the UK context.
One of the major themes within this (combined) body of literature is the funding dependency. This has received much attention as it is considered as having a major impact on third sector organisations’ human resource management practices (Nyssens, Adam, & Johnson, 2006). Cunningham (2010) indicates that within the current purchaser-provider model, purchasers have a critical influence on contractor organisations’ operational practices and employment outcomes by embedding certain conditions and policy interests in the contracts. Furthermore, the contract culture has led to the undermining of staff conditions and more rigorous scrutiny of employee performance (Cunningham, 2001). Third sector organizations are encouraged to introduce best practice in their approach to undertake staff training. However, they do not seem to gain support from the funding bodies to do so (Cunningham, 2001).
A dilemma emerges when balancing funding objectives (e.g. a short-term or medium-term) and organisational development issues (e.g. long-term goals). In the short-term, the concern is to satisfy funding regimes and procurement regulations. This may shape the structure and the human resource deployment of organisations in order to deliver the agreed contracts. In the long-term, on the other hand, organisations expect the development of their own competence and human capital in order to continue their goals and justify their legitimacy. However, funding objectives and organizational long-term goals are not necessarily mutually reinforcing. Sometimes, organizations have to serve the particular funding projects in exchange for their long-term sustainability. Exacerbated by the unpredictable nature of the funding, this has raised the complexity in human resource planning and development in the sector (Royce, 2007).
Whilst there is literature addressing the issues of social entrepreneurial ventures as a means of decreasing funding dependency from the public sector and enhance third sector organizations’ sustainability (Cunningham, 2008a, 2008b), one of the main challenges that confronts third sector organizations, including social enterprises, is an evidentiary knowledge and skill shortage (Royce, 2007; Venter & Sung, 2010).
This leads to the second major aspect discussed within the literature, namely the acquisition and recruitment of appropriate skills to the sector. Looking at the Human Resource Management capabilities of the sector, Borzaga & Solari (2004) warn that a lack of Human Resource Management skills in the social enterprise sector has reduced their ability to select and appoint suitable key members of staff. The consequence is that unsuitable appointments are the likely result further weakening the organisations’ ability to recruit needed skills and expertise. Ventor and Sung (2010) review the recent literature in relation to skills and workforce development in the third sector and report that there is a significant skills and workforce gap across the third sector. They summarise the gaps by providing the main areas of shortage, namely strategic management, management skills, legal knowledge, IT and ICT applicability, marketing and promotion, team working and team building, and fundraising.
In order to obtain needed skills, it has been suggested that the third sector pays more attention to identifying and attracting potential population groups and effectively manage volunteers (Venter & Sung, 2010). However, Nickson et al. (2007) investigated social care in Scotland and suggest that attracting application is not a major problem. The difficulty is finding appropriate employees. Clark (2007) confirms this view, having undertaking a survey in England.
Workforce source in the third sector includes paid staff and volunteers. A high proportion of the workforce comes from part-time workers, women, and temporary workers (Almond & Kendall, 2000). Whilst the voluntary workforce is pivotal, they also present a diverse group in their backgrounds and commitment to the organisations. Ventor and Sung (2010) report that some of the workforce is highly skilled or qualified, managing this workforce to the best for the organizations is a growing issue.
In terms of paid staff, uncompetitive pay is a challenge for the sector to recruit suitable staff (Maher, 2009; Nickson, Warhurst, Dutton, & Hurrell, 2007). Furthermore, third sector organisations have to compete with the private and public sector for their Human Resources (Nickson et al., 2007). Not only does the third sector differ in the availability of competitive pay levels, but low job security and unclear career pathways are also considered possible reasons for the difficulties in gaining the appropriate skill set for the sector. According to Ventor and Sung (2010), the third sector traditionally has never been considered as an appropriate career path. Therefore, it is difficult to attract young or experienced professionals to devote their career to the third sector. However, Maher (2009) investigates employee career development and concludes that organisations are still responsible for employees’ career development. He reports that a higher position is still seen as the goal that individuals are seeking to achieve within the non-profit sector.
This may link to Human Resource Management debates surrounding organisational commitment. Stereotypically, the workforce in the Third Sector is believed to be more committed to the organisations, due to choosing the work based on the social purpose of the organisation and not the financial rewards associated with work. Recent research (e.g. Alatrista & Arrowsmith, 2004; Almond & Kendall, 2000; Cunningham, 2001; Goulet & Frank, 2002) has shown that this holds true to some extent in that nonprofit employees are more committed to their job and willing to spend unpaid time to carry out their work compared to for-profit employees. The reasons that are being cited are the personal value and motivation delivered through working in the third sector. Whilst this is a positive sign, Leat (1995) reports that staff recruited from the private sectors for their managerial skills and knowledge see this as a conscious career move, but demonstrate less commitment to the organisations. Other research confirms that non-profit employees are more driven by the personal characteristics, values and social motives often resulting in more motivation outside of traditional financial rewards; for instance by responding positively to intrinsic and non-monetary rewards (Ridder & McCandless, 2008). Dolnicar & Randle (2007a) investigate volunteers’ motives in Austria and conclude that volunteers are driven by different motives such as altruism, personal satisfaction, gain working experience, etc.
This may suggest that whilst these skills are needed within the third sector, recruiting solely on the basis of skills and experiences may compromise other aspects related to organisational performance.
Attention is also given to Human Resource Development within the sector. The literature suggests that skill and workforce development in the third sector is mainly focused on paid-staff (Venter & Sung, 2010). However, skills and workforce development in the third sectors is generally under developed for any staffing group. The findings from the literature in relation to staff training in third sector organisations have consistently showed that financial instability and an ability to identify skill gaps are the problems in third sector organisations (Parry, Kelliher, Mills, & Tyson, 2005; Venter & Sung, 2010). In general, training in third sector organisations can be classified according to the level of position within the organisation, i.e. managers and frontline staff. Evidence seems to suggest that senior managers are more likely to receive training compared to frontline staff (Clark, McHugh, & Kay, 2011). Clark et al (2009) and Machin & Paine (2008) report that training schemes are in place in most third sector organisations, but insufficient time and funding are cited as the reasons that cause a lack of support for individuals to undertake training. Whilst this is not unexpected, some recent research has suggested that volunteers are the main assets and resources in the third sector, if they are provided with appropriate training and support (Alexander, 2010; Evans & Clarke, 2009; Handy, Mook, & Quarter, 2007). If this holds true, the lack of opportunity for volunteers to gain additional skills will only reinforce the continuing lack of appropriate skill sets in the sector.