Home page
> Management Advisory Committee > Organisational renewal > Next: The changing APS workforce
‹ Previous page

Last updated: 20 March 2003

Organisational renewal

MAC

The Management Advisory Committee (MAC) is a forum of Secretaries and Agency Heads established under the Public Service Act 1999 to advise the Australian Government on matters relating to the management of the Australian Public Service

Go to the MAC page

1. Introduction and overview

This report outlines the findings of a Management Advisory Committee (MAC) project on organisational renewal and the challenge of building ongoing capability within the Australian Public Service (APS) workforce. (Terms of reference for the project are at Appendix A.)

Key issues

MAC has reviewed the broad demographic shifts in the APS and their implications for organisational renewal, identifying two issues for particular consideration:

the implications of the ageing profile of the APS and the resignation and retirement patterns of mature-aged workers, including the impact of current superannuation arrangements
the career intentions and patterns of new graduate entrants and their implications for workforce planning.

Project methodology

The project involved:

an analysis of demographic trends drawn from the Australian Public Service Employment Database (APSED)
commissioned research on the issues identified above, involving surveys of current and former employees, agency heads and HR areas from eleven agencies
an analysis including an actuarial study of relevant features of the Commonwealth Superannuation Scheme (CSS) and the Public Sector Superannuation Scheme (PSS).

Report structure

This Introduction and Overview summarises the main findings and conclusions from the project.

Subsequent sections provide a detailed analysis of the changing APS workforce (Chapter 2) and reports on the research on mature-aged workers, graduates and comparisons of workplace attitudes by age and gender (Chapters 3, 4 and 5). The Appendixes provide background on the research objectives and methodology (Appendixes A and B), together with more detailed information on APS superannuation arrangements and their implications for organisational renewal (Appendix C).

Main findings and conclusions

APS agencies are operating within an environment characterised by devolved employment arrangements; contestability; increased demands for flexibility, responsiveness and performance improvement; and a greater emphasis on innovation and service delivery.

They have both the imperative and the flexibility to design and structure their workforce strategies to meet their particular business capability and renewal requirements.

The APS workforce has been undergoing significant change, including:

a major reduction in its size and function, though with some increase in staffing numbers over the last three years
an ageing profile-with an increasing proportion of mature-aged workers, particularly at senior management levels, and declining youth employment
increasing representation rates for women-with women now outnumbering men overall and, over the last decade, in graduate intakes, and with strong growth at senior management levels
recruitment patterns that have seen a greater reliance on graduates and more lateral engagement of older people above the base grade level
greater use of more flexible working patterns and employment relationships
more streamlined classification arrangements, with a decline in employment at the lower classification levels and a relative growth in middle management.

While a significant core of the APS workforce will continue to be long-term, full-time and employed on an ongoing basis, there will be much greater variation around that core including:

more movement in and out of the service and with more graduate recruits and young workers leaving within the first few years of entry
more lateral recruitment, including external engagements at middle and senior management levels
more people working part-time and other alternative working arrangements and a continued use of contingent forms of labour (e.g. through non-ongoing, contract and labour hire arrangements)
a greater influence of life stage and work/life balance considerations on career development and working patterns.

The profile of the APS workforce will continue to be an ageing one.

Given wider societal demographic trends, the APS will face increased competition for new entrants into the labour market and pressures on the retention of skilled employees.

These trends have a number of important implications for agencies and the APS as a whole.

Workforce planning

Agencies need to engage in more systematic workforce planning, including:

understanding their own workforce demographics and characteristics, noting the significant interagency variations on factors such as age
identifying their particular current and future capability requirements and implementing an integrated human resource management strategy to make sure they are met
implementing effective succession management to develop bench strength for key roles.

Agencies will need to ensure they understand the attraction, retention and separation factors and trends relevant to their particular organisation. Staff surveys can play an important role in this, including on the intentions and needs of mature-aged workers.

While workforce planning is receiving greater attention in many agencies, progress is patchy. The Australian National Audit Office has highlighted a lack of effective business/people planning at the strategic level and of integration between workforce planning and other people management initiatives¹.

Greater use could be made of APSED to provide benchmarking data for agencies to reference and compare their own profiles and trends.

Continued focus on organisational renewal at the Service-wide level would also be beneficial, particularly as the operating environment for the APS becomes more competitive. Such a focus can inform and support agencies in their understanding of emerging trends and issues, e.g. in relation to recruitment and mobility and canvass any challenges and opportunities for collaboration.

Looking to the future APS workforce requirements for superannuation arrangements, there is a need to retain valued mature-aged workers in the workforce and also for the benefits of all employees to be portable to and from other schemes. There is a case for changing APS superannuation, to provide stronger support for portability and, without reducing accrued benefits, to reduce incentives to retire early. The Government's policy is to reform superannuation for Commonwealth employees and to close the PSS to new members.

Mature-aged workers

The APS is increasingly reliant on mature-aged workers (45 and over), particularly in its senior positions. This varies, however, markedly between agencies.

A key feature of mature-aged employment is the relatively early departure through resignation or retirement of many of its older workers. Superannuation plays a key role in this.The APS is facing the likely departure of a significant proportion of its workforce (around 23%) over the next five years.

The demographic trends do not present a crisis, but do present a challenge that requires active management by APS agencies. Where this occurs, they can provide the potential for renewal and reinvigoration without excessive disruption or loss of corporate knowledge.

Agencies need to plan ahead and ensure growth of replacement talent and expertise and set in place strategies for appropriate skills and knowledge transfer.

With a continuing ageing of the workforce in prospect, agencies also need to ensure their management and work practices are geared to optimising the contribution of mature-aged workers and encouraging those who are making a valuable contribution to stay longer in the workforce.The research undertaken for this project highlights some key points in this regard.

Agencies have options available under current arrangements for influencing likely retirement patterns (including departure age) through remuneration packages to address.

The current and former mature-aged workers surveyed exhibited a strong preference for more flexible work options. A common perception is that current superannuation provisions act as a barrier to such options, including working part-time, phased retirement and/or moving to a reduced salary. As demonstrated in Appendix C, this is not the case; there is provision for benefits to be accrued on a pro rata basis and for the superannuation salary used for calculating the eventual benefit to be the equivalent full-time salary at retirement. Awareness raising directed at both agencies and employees is required to make this clear.

Providing access to more flexible working arrangements, such as part-time work and phased retirement, would assist in the retention of mature-aged workers. Consideration could also be given to more creative ways to using their skills (e.g. mentoring, skills transfer, and different roles with the opportunity, where desired and appropriate, to phase out managerial responsibilities).

More active management of leave is also required to encourage employees to use their entitlements to recreation and long-service leave as part of a broader management approach for employees to maintain a healthy work/life balance and level of enthusiasm. Senior staff need to lead by example and could be encouraged to take sabbaticals and other development opportunities so as to maintain their drive and expertise.

There appears to be a relatively high incidence of retrenchment for mature-aged workers, notably for the SES and including employees in their late 50s and 60s.

Voluntary redundancy has a role in facilitating structural and functional change and some skewing in its uptake to older workers can be expected. However, careful management is required to avoid creating expectations of receiving a redundancy payment to depart, particularly in the light of the abolition of a compulsory retirement age. In addition, redundancy arrangements should not be used as an alternative to rigorous performance management.

Re-engagement of former APS employees on different arrangements (e.g. non-ongoing or contract) has become common, providing valuable flexibility for the organisations concerned and extending the individuals' workforce participation. Such re-engagement should occur only in genuine circumstances and agencies should not engage in contrived arrangements to provide for the continued employment of employees.

Depending on the type of work involved, making best use of former employees will call for tailored management approaches to keep them up-to-date and project ready (e.g. through the establishment of an alumni type network).

Superannuation

The major superannuation schemes for the APS, the PSS and the CSS, provide retirement benefits from age 55. Their basic design therefore supports early retirement.

Both schemes have other design features that may influence some older scheme members to leave employment before retirement age, although, in relation to PSS members, an analysis found that the impact is small.

For the CSS, however, some members have been able to receive a better benefit by resigning before retirement and deferring their entitlements than if they had remained in employment until age 55 or later (the '54/11 issue'). This is an unintended consequence 4 of the original design features of the CSS, which sought to provide an equitable benefit for people who ceased membership before reaching their minimum retirement age. The 54/11 benefit has become attractive for some older members for a number of reasons, particularly because of the high CSS Fund crediting rates in recent years (in market conditions not contemplated by the original benefit design) and is possibly more noticeable at present because the age and salary profiles of CSS members mean they tend to occupy more senior positions. The '54/11 issue' is also more likely to affect men, given women represent only a third of CSS members and are less likely to be faced with such an incentive, due to their broken or late commencing career patterns and lower representation rates of the past.

Despite the past experience, however:

the incentive to resign before age 55 does not exist for all CSS members and where it does exist, some CSS members may choose not to resign because of personal circumstances
as the CSS has been closed to new members since 1990, the number of CSS members overall (and consequently the number who may have an incentive to resign before retirement) as a proportion of APS employees is rapidly decreasing
notwithstanding that this issue will cease to exist within the next ten years or so, the current new investment climate of lower interest rates, compared to the experience in recent years, could be expected to have some effect on the number of CSS members who would materially benefit from this incentive.

Although on an APS-wide basis the number of employees who would be attracted to early retirement is small, for some individual agencies the effect may be significant. In any case, the age structure of the APS suggests that, irrespective of superannuation arrangements, agencies need to encourage those older workers who are making a valuable contribution to stay longer in the workforce and to initiate that action well before targeted staff reach age 55.

Overall, the research indicates that the 54/11 issue is manageable-but that it and the implications of wider APS retirement patterns need to be managed actively by agencies. For example, in addressing the specific incentive that some CSS members have to resign before age 55, one particular option available to employers is for employers and employees, on a case by case basis, to use the flexibility offered by Australian Workplace Agreements (AWAs) to specify a 'superannuation salary' higher than the person's salary, without increasing take home pay.

This is an option to be used in a targeted way to facilitate valuable continuing service. It is not expected that there would be an increase in overall CSS scheme costs if superannuation salary increases to such employees are limited to raising the pension to the level of the deferred benefit pension. Managers should be careful, however, not to allow general expectations of entitlements to develop, and should be mindful that widespread use for employees aged 54, or for other employees, could affect agencies' superannuation contribution rates.

More generally, employers should look to developing more flexible employment options (as mentioned above) to manage the incidence of employees retiring from age 55 when their superannuation benefits become available. Again, AWAs may provide a suitable way to offer phased retirement (through shorter hours and reduced level work) that, under both the PSS and the CSS, allows superannuation benefits to continue to accrue. To some extent, pressure for early retirement will be alleviated as the age at which superannuation lump sum benefits can be accessed increases to age 60. However, superannuation pensions are not subject to this age restriction and, for PSS and CSS members, this change will not have any effect other than for those members who choose to take a lump sum benefit (instead of a pension).

Appendix C provides more detailed information on the provisions of the PSS and the CSS.

Graduates

The recruitment of graduates (through graduate programs and lateral engagements above base grade levels) is an increasingly important element in agencies' renewal and capability strategies.

The research conducted for this project focused on graduate intakes through formal programs, though it is recognised that many more graduates are recruited through lateral engagement.

Agency heads are generally satisfied with their graduate recruitment, although experiencing some difficulties in certain specialist areas (e.g. economists and accountants). They find agency-based recruitment effective and do not wish to return to centralised arrangements.

The project was, in part, aimed at testing the hypothesis that the APS is facing a move from a predominantly career service to a labour market increasingly interested in APS employment of five to ten years within a broader career. There is evidence of some decline in retention rates for more recent cohorts of graduates and increasing separation rates for young people generally. While retention patterns will be influenced by the overall state of the labour market, it is likely that the APS is experiencing something of a structural shift downwards in its retention rates for graduates, reflecting different career attitudes of more recent generations of new entrants to the labour force. As the labour market tightens over coming decades, the APS can expect additional pressure on retention.

However, it needs to be noted that the recent decline in retention rates is from a cohort with relatively high retention rates, and its impact on career patterns can be overstated.

Graduate recruitment can be expected to generate a continuing core of employees with long-term careers, albeit with a greater focus on skills development. Just over 60% of the 1996 graduate intake, for example, remain in the APS. In addition, while many were uncertain about their career intentions, the bulk of recent graduates surveyed did not come into the APS with an intention to stay only for a short period of time.

The research suggests scope for agencies to improve or at least maintain their retention rates concentrating on the workplace factors important to graduates: favourable employment conditions, job security, and interesting work. Training provided is also an important attraction factor.

Employment conditions are considered to be a particularly important factor attracting and encouraging graduates, and particularly female graduates, to stay in the APS.

Given the high proportion of female graduates (consistently outnumbering males since the early 1990s), this is clearly an issue for agencies to focus on. Retention rates vary between agencies and, while a range of factors is at play, further examination and evaluation of the different agency programs in place and their outcomes could assist in the development of better practice approaches.

The greater openness to mobility of graduates is consistent with research undertaken on the attitudes of Generation X employees that shows, by comparison, a more mobile group than their more senior colleagues and a greater tendency to view their careers as a series of stepping stones in which they augment their skills². This characteristic implies agencies should consider job challenges and design, as well as considering mobility as a managed strategy, perhaps in collaboration with other agencies. The APS should take advantage of its capacity to provide a broad range of employment and skill development opportunities.

The APS-wide dimensions of graduate recruitment and retention also need to be taken into account, including the capacity for offering a wide range of different jobs and opportunities for skills development. While the focus of graduate recruitment is at the agency level, there are wider attraction and retention benefits in reinforcing an appreciation of joining the APS and the opportunities that it provides. The role played by some agencies as a training ground of particular expertise in demand across the Service should also be recognised.

Agencies need to address these considerations in relation to the range of graduate entrants-those entering through formal graduate programs and the increasing number entering through lateral engagement. Their structured learning and development programs will need to recognise the changing nature of engagement patterns.

Attraction and retention

Looking more generally, the APS and individual agencies will face increased pressure to present themselves as a credible employer-of-choice. Attraction and retention strategies need to be aligned to meet changing demographics and capability requirements.

Attraction and retention strategies need to be based on an understanding of what motivates people to work and stay in the APS and particular agencies. They should build on the positive drawcard factors identified in the research-perceptions of job security, interesting work, good working relationships and, for younger employees, the prospects for training and career development.

Agencies and the APS more widely will need to market their organisations as an employer-of-choice, recognising generational differences in perspectives, attitudes and behaviours and possible views about the public sector and, where relevant, working in Canberra. This will involve a holistic approach incorporating recruitment, management, job design and learning and development. Key dimensions suggested by research into intergenerational differences include: a strong commitment to individuals' goal setting and career/skill development; a capacity to balance work and life; engendering a feeling of contribution and being trusted with some control over their work; and clear objectives, job expectations and performance feedback.

As the labour market tightens into the future, there will be increased pressure on attracting the skills required and maintaining competitive remuneration packages which support effective recruitment at the base grade and lateral levels.

Employment conditions and the capacity for work/life balance will be an important element of such packages, and may offer APS agencies a competitive edge. Attention also needs to be given to reward and recognition strategies involving non-financial rewards (including both formal agency-wide schemes and more direct and informal acknowledgement of achievement within work groups)³.

The possibility of declining retention and the need for a continuous process of organisational renewal will mean that agencies may need to boost their graduate intakes, or at least not cut graduate recruitment programs to the extent that has happened at particular times in the past. For some agencies, depending on the nature of their business and skill requirements, it will also mean a greater reliance on lateral recruitment of people with graduate qualifications.

In considering their approaches to retention, agencies should consider the level of turnover appropriate to their organisation and the right balance between turnover and continuity. Some degree of turnover will be positive from a renewal point of view. To what degree will be affected by the nature of the agency's business and the extent to which 'home grown' specialised skills are required or whether they can be easily bought in.

There may be value for some agencies in considering their classification structures to ensure they provide alternative pathways for attracting young people into the Service (e.g. traineeship arrangements) so as to expand their potential recruitment pool.

Interchange approaches with the private sector could also assist renewal, widening the pool of skills and perspectives available.

Flexible working patterns

Increased flexibility in working patterns and arrangements will be an important part of the response to the demographic changes, recognising the life stage dynamics influencing workforce participation.

The APS has been a leader in providing family friendly work practices (e.g. part-time work, flexible working hours, home based work, purchased leave) and needs to continue in this role through flexible conditions and supportive management approaches as part of its attraction and retention strategy.

APS-wide and agency employment conditions cater for women making different workforce participation choices: for women who are more 'adaptive' in their choices (e.g. access to part-time and casual work, the capacity to move in and out of the workforce) and those who are more 'work centred' (e.g. paid maternity leave and carers' leave). These conditions have been important in lifting women's representation rates and encouraging retention given the professional nature of APS work and the significant investment made in the development of employees. Ensuring the continued growth of women's representation rates at senior levels will be critical.

Elder care responsibilities will be an increasing issue for many employees. A number of agencies have introduced initiatives to assist employees in this regard (e.g. Centrelink's Elder Care Referral assistance program). Consideration could be given to providing greater flexibility in the taking of long-service leave for this and other caring purposes.

Agreement making

The Public Service Act 1999 (in tandem with the Workplace Relations Act 1996) has provided a more flexible employment framework within which agencies can structure their workforce strategies. Agencies should make full use of the flexibility now available, in particular through the strategic use of agreement making (through certified agreements and Australian Workplace Agreements to tailor workforce strategies for capability development and meeting particular attraction and retention issues.). AWAs in particular offer significant potential for tailoring remuneration and conditions packages to meet the needs and circumstances of the agency and individual employees (e.g. superannuation, flexible working arrangements and variable career patterns). They also allow for an enhanced focus on performance management.

As noted above, the strategic positioning of remuneration packages will become even more important as labour market conditions become more competitive. Pressures on wages policy and resourcing arrangements can be expected to build.

Management and leadership

Approaches to management and leadership at both the agency and the APS level will need to reflect changing workforce dimensions and organisational requirements. In particular, agencies need to ensure that:

sufficient 'bench strength' is available to replace key people in middle and senior management and specialist positions likely to leave in the near future
graduates are provided with the development opportunities and experience to form a strong pool of future leaders, recognising that their progression may be quicker and therefore their breadth of experience more limited than in the past
employees recruited into the APS at middle and senior management levels receive the development required, particularly in relation to the APS context and approach (e.g. the APS Values and their practical translation within agencies)
the necessary approaches and skills exist for managing a more varied workforce (e.g. working different hours arrangements and under different employment arrangements)
their employment framework and conditions support greater flexibility in staff profile and working arrangements and employee acceptance of that flexibility
more flexible approaches are taken to resource management (e.g. project teams, taskforces)
managers understand the different attitudes, expectations and life stage concerns of different groups of employees and what that means for working practices, management styles and approaches and occupational health and safety.

Effective systems of performance management will need to form an integral part of workforce planning and succession management. Such systems will be vital for the identification and development of talent and potential, as well as the active management of underperformance. The survey results indicated room for improvement in the quality of performance feedback processes and recognition of effort.

Learning and development

Learning and development strategies will also require adjustment to ensure changing capability needs are met. Specific issues highlighted by the research conducted as part of this project were the need for:

effective graduate development programs (including mentoring arrangements)
programs to support accelerated skills development and a systematic exposure to different work experiences given the likelihood of a faster progression through the ranks
activities to assist those coming in through lateral recruitment to orient them to key elements of the APS values, ethos and processes
innovative approaches to learning and development attuned to the greater numbers of employees on part-time and other alternative arrangements and to the geographic spread of the APS workforce
a focus on continuous learning and development for older workers to ensure their skills remain current and to enable their participation in the APS for longer periods
strategic use of selected mature-aged workers in coaching and mentoring roles
employees to be provided with development in the areas of stress and time management, maintaining work/life/health balance and career planning.

Knowledge management

Finding ways to efficiently capture knowledge has become an imperative, given the increasing emphasis on 'knowledge work' in the public sector, and the risk posed to corporate memory through loss of employees.

Effective knowledge management becomes even more critical for organisations with significant numbers of key people about to depart. Although a number of the agencies surveyed had knowledge management strategies in place, both current and former employees were uncertain as to whether their knowledge had been, or was being, effectively transferred.

A range of strategies may be appropriate (e.g. phased retirement with a focus on skills and knowledge transfer, mentoring and coaching, engagement of key people post departure). A number of agency heads interviewed stressed the importance of knowledge management more generally for their organisations and pointed to recent initiatives on this front (both systems and more people centred). A common response was the use of rotation and movement within their organisation, to ensure greater flexibility and breadth of knowledge and skills.

Sustained capability through organisational renewal

The changing profile of the APS in the context of wider demographic changes poses a number of challenges for the management of the APS and individual agencies to ensure a continual building of the organisational capability required to deliver their outcomes for the government of the day.

Organisational renewal is about a dynamic process of capacity building to ensure that organisations are equipped to succeed in a sustained way within a changing operating environment.

All agencies need to focus on the organisational renewal process ensuring that it is grounded in a thorough understanding of the changing operating environment and emerging demographics and on a systematic approach to workforce planning.

1 Australian National Audit Office (ANAO) 2002, Managing People for Business Outcomes, June 2002. particular superannuation issues (see section below) and more flexible and targeted working patterns.

2 See Zemke R, Raines C & Filipczak B 2000, Generations at Work: Managing the Clash of Veterans, Boomer, Xers and Nexters in Your Workplace, AMACOM, New York; Tulgan B & Martin CA 2001, Managing Generation Y: Global Citizens Born in the Late Seventies and Early Eighties, Rainmaker Thinking Inc; Ruch W 2000, 'How to Keep Gen X Employees from Becoming X-Employees', Training and Development, April 2000.

3 See Performance Management in the Australian Public Service. Management Advisory Committee. September 2001.