Building workforce capability

In his speech on APS reform on 3 September 2009, the Prime Minister, the Hon. Kevin Rudd MP, signalled the need to attract ‘the best people from outside the public service, and to make the most of the great talent inside the service’.¹ He emphasised that the APS must

‘provide flexible and agile responses to changing realities and government priorities’ and that ‘a specific priority for the government will be a renewed and major investment in education and development of employees, in order to build strategic leadership across the APS’.

To meet the government’s aspirations the APS will need to address the most frequently cited workforce challenges nominated by agencies in this year’s agency survey, namely:

• increasing the capacity to manage organisational change or changes to functions and workloads
• improving the ability to attract and retain appropriately skilled employees
• developing capable leaders, managing succession, and knowledge management. building workforce capability

This chapter examines each of these challenges and the measures in place to address them.

Capacity to manage organisational change

The most frequently cited workforce challenge agencies nominated is increasing the capacity to manage the organisational change occurring across the APS. This includes addressing new and emerging capability gaps associated with changing environments, growth, or changing business needs. In particular, agencies have highlighted that altering functions and workloads without adequate resources produces significant challenges. Organisational change can also be driven by changes in the operating environment, or the needs of specific stakeholder groups. In this context, for example, one agency referred to concerns over its ability to deal with the increase in the evolution of its work due to increased complexity and sophistication in client practices.

Only a small number of agencies foresee potential risks to service provision, a loss of public confidence, or agency reputation, recent events have accentuated the need for agencies to be agile and responsive. The global financial crisis, the swine flu pandemic, and the Victorian bushfires highlight how rapidly events can have an impact on Australia. Agencies need systems and processes in place to be able to respond effectively to such events.

Such challenges may be manageable in the short-term; however, longer-term strategies need to be implemented to ensure capability is not eroded. Agencies’ organisational capability requirements and priorities need to be established so workforce risks can be identified and addressed. Some agencies noted the importance of this in their survey responses and have established mechanisms to ensure their workforce planning efforts focus on key organisational capabilities.

Responding to this challenge involves development of robust workforce plans, systems and processes to ensure agencies can anticipate and respond to events that will affect their workforces. This requires ‘a continuous process of shaping the workforce to ensure it is capable of delivering organisational objectives now and in the future’.²

Agencies’ progress with workforce planning

Workforce planning is a combination of analysis and strategic choices that can help move agencies from a reactive approach to a long-term strategic approach to managing their workforce. A mature approach to workforce planning generally involves development of a plan to document the outcomes of the process and provide a reference point for future assessments of progress. It can also serve the valuable role of providing a means of communication across the entire agency. This can take two to five years to develop.³

While workforce planning can take many forms, better practice usually includes workforce risk identification, assessment of the agency’s demand for employees, assessment of the supply of people with the competencies needed, development of strategies designed to address skills gaps, and alignment of workforce strategies with operational and strategic business plans.

For example, during the 2008–09 DIAC workforce planning process, analysts in each business area were asked to provide forecasts of required employee levels for their areas, including for critical jobs, roles and streams they had identified. Analysts also completed a risk assessment of local workforce issues. Business areas’ workforce plans informed development of a department-wide workforce plan, which described common issues and outlined mitigation strategies to address risks. DIAC reported that this process was time consuming, particularly for those analysts working in larger divisions or state and territory office business areas.

A different, but complementary, approach adopted by Centrelink recognised that in an environment of shrinking resources and increased expectations of service agility, resources and workloads must be managed strategically. In response, Centrelink is undertaking an ‘employee skill tagging project’ to improve its capability to identify its employees’ skills and experience, so work can be directed to employees with the relevant skills.

The agency survey component of the State of the Service report asked agencies about their progress in workforce planning since 2002–03. Over this period an increasing number of agencies have reported implementing policies, strategies and/or frameworks that aim to ensure they have the skills and capabilities needed for the next one to five years. This year has seen a decline in the number of agencies making this claim—from 79% in 2007–08 to 68% in 2008–09; however, the fall this year may be due to inclusion of the additional response category, ‘being developed’, that was nominated by a further 24% of agencies. The trend is shown in Figure 3.1.

Identifying workforce risks is an important step in workforce planning. The sole recommendation directed to agencies in the Australian National Audit Office (ANAO) audit of workforce planning in 2004–05 was that ‘agencies identify workforce risks specific to their agency with clear reference to a consideration of organisational capability’.⁴ Such an assessment of the risks should drive the policies and strategies agencies adopt and direct resources to areas that would benefit most. The agency survey asked two questions about risk identification: whether agencies have identified their workforce risks; and where the agency had an agency-wide documented workforce plan, whether the identification of workforce risks helped the agency meet its business priorities. The results are presented in Tables 3.1 and 3.2.

Table 3.1 shows that 68% of agencies currently have in place policies, strategies and/or frameworks that aim to ensure they have the skills and capabilities needed for the next one to five years, and have identified their workforce risks. Around a third of agencies have an agency-wide documented workforce plan (32%), an additional 38% of agencies report that a plan is being developed, and the remaining 31% of agencies do not have a workforce plan and/or are not developing one.

Table 3.1: Workforce planning in APS agencies

From survey of 95 agencies	Number	Percentage
Source: Agency survey
Agencies that currently have in place policies, strategies and/or frameworks that aim to ensure they have the skills and capabilities needed for the next 1-5 years.	65	68%
Agencies that have identified their workforce risks.	65	68%
Agencies that have an agency-wide documented workforce plan	30	32%
Agencies developing an agency-wide documented workforce plan	36	38%
Agencies not developing an agency-wide documented workforce plan	29	31%

Table 3.2 includes the number of agencies with a workforce plan, and the extent to which important elements of a workforce plan are included and assist agencies in meeting their business priorities.

Table 3.2. Workforce plans assist agencies in meeting business priorities

Of the 30 agencies that have a workforce plan:	Number	Percentage
Source: Agency survey
Agencies whose workforce plan helps meet business priorities.	30	100%
Agencies whose workforce plan assists in meeting business priorities by:- identifying the workforce risks	25	83%
assessing the demand for employees	20	67%
assessing the supply of employees	21	70%
outlining strategies to address the skill gaps	23	77%
aligning workforce strategies with operational and strategic business plans	19	63%

All 30 agencies with an agency-wide documented workforce plan indicated that it had helped them meet their business priorities. Of these, 25 agencies reported their plan helps meet business priorities by identifying workforce risks. Of the agencies with a workforce plan between 19 to 23 agencies report that an assessment of the demand and supply of employees, outlining strategies to address skill gaps, and aligning these with operational and strategic business plans assists them to meet their business priorities.

Given the lengthy timeframes ANAO observed were needed to produce an effective process, it is important that agencies recognise the considerable lead times. It is encouraging, however, that the 30 agencies with an agency-wide documented workforce plan employ more than half the APS employees (53%). Results from the agency survey show that the early adopters of workforce planning have made progress and are deriving business benefits.

APS-wide workforce planning

As well as individual agencies progressing workforce planning, initiatives are underway to enhance APS-wide workforce planning for information and communications technology (ICT) employees. The Gershon Review into ICT⁵ released in October 2008 found that while most agencies see ICT as fundamental to their business, there was a lack of strategic planning for ICT workforce capability at the agency and whole of government levels. The report recommended development and maintenance of a whole of government strategic ICT workforce plan to help agencies better manage their ICT workforce.

A cross-agency project team from the Commission and the Department of Finance and Deregulation (Finance), through the Australian Government Information Management Office (AGIMO), was established to develop the plan which is due to be completed early in 2010. It will include strategies designed to address identified gaps in capacity and to improve recruitment, retention and engagement of ICT employees. The plan will also indicate the expected processes to be followed to facilitate future whole of government ICT workforce planning.

Improving the ability to attract and retain appropriately skilled employees

The second most frequently cited workforce challenge identified by a large number of agencies was their ability to attract and retain appropriately skilled employees, especially in specialist areas or those of particular need within an agency. In 2009, the Prime Minister and public service leaders reiterated the importance of recruitment and retention in building workforce capability. In his ‘John Paterson Oration’, the Prime Minister stressed how crucially important it is that ‘the APS does more to attract, train and retain the very best people’. The Prime Minister further commented:

The APS must have its proper share of the nation’s most talented people, because ... the challenges facing government are as tough, intellectually demanding and important for our nation’s future, as the challenges facing any of our businesses or non-profit organisations. It is the view of the Government and the heads of the APS that only by hiring and promoting the best people can we solve the great challenges of our time.⁶

This section considers agency responses to the agency survey relating to recruitment, retention and skills shortages.

Recruitment

During 2008–09, across all agencies, the APS engaged 12,963 ongoing employees—nearly 9% of its workforce. Engagements refer to employees joining the APS. A further 14,903 employees were promoted.⁷ If these movements are not well managed, this can represent a significant cost to organisations in terms of management time spent in filling positions, lost productivity when positions are vacant, and decreased productivity until new employees reach full capacity.⁸

Measurement of recruitment performance can help agencies identify strengths and weaknesses in their recruitment processes and minimise associated costs. Agencies reported a broad range of approaches they are taking to measure their recruitment performance, both quantitative and qualitative.

Quantitative approaches reported by agencies included regular reporting of statistics, such as the time-to-fill data, rates of retention and turnover and, less commonly, the cost of recruitment activities. Some agencies used the recruitment metrics recommended by the Commission’s publication, Recruitment: Do You Measure Up? Some collect statistics on advertising effectiveness, such as the numbers of applications received and interviews conducted. Reviews against recruitment decisions, while not large in number, are also a useful metric to monitor.

Qualitative approaches reported by agencies included use of feedback from selection advisory committees, new recruits and employee surveys. Feedback from line areas and management on the appropriateness of the selection outcome is also a common approach. A number of agencies also review the probation and/or performance management system to further assess the quality of new recruits.

Although some agencies reported using a mix of quantitative and qualitative approaches for this task, consideration of the responses across all agencies suggests agencies tend to favour either a qualitative or a quantitative approach. It is generally beneficial to use a mix of both approaches to identify strengths and weaknesses in order to improve recruitment performance.

The most common measure nominated, by over half the agencies, was data on days to finalise the position.⁹ Data was provided on this measure by 57 agencies; the average time to finalise the offer of employment was 61 days but results indicate a wide range of 21 to 142 days. Information on how the APS performance compares with other jurisdictions is limited. However, the UK National Audit Office’s report, Recruiting Civil Servants Efficiently, found that it could typically take an average of 16 weeks to recruit a new employee and that significant cost savings could be achieved if processes were improved.¹⁰

The Commission is revising the guidance to agencies on recruitment and employment matters (see ‘New recruitment guidance’ below). The following case studies outline useful initiatives in improving recruitment performance and reducing recruitment timeframes.

Retention

Analysis of employee data for 2008–09 shows that 10,460 separations occurred from an average ongoing employee level over 2008–09 of 148,942 (or 7% of employees).

The employee survey revealed that almost one in five employees (21%) intend to leave their agency in the next two years, a slightly lower figure than that recorded when this data was previously collected in 2006–07 (24%). Just over half of these employees, or 11% overall, were intending to depart to pursue a job in another APS agency and hence remain with the APS. The 10% of employees intending to leave the APS reported an intention to retire (5%), pursue a job outside the APS (3%), or some ‘other’ unspecified activity (2%). These proportions are fairly consistent with the previous survey results.

The APS also has an increasing age profile. The State of the Service Report 1998–99 recorded that the median age of ongoing APS employees had risen from 31 years in 1979 to 40 years in 1999.11 At June 2009, the median age of ongoing employees had reached 42 years. The median age of the APS has risen 11 years in a period of 20 years. Because of its ageing workforce, the APS is increasingly focusing on the implications of the high percentage of APS employees who are (or will become) eligible to retire. In the next five years 45% of SES and 30% of EL employees will be eligible to retire. This potentially represents a significant loss of corporate knowledge and talent, although one impact of the global financial crisis may be to delay public servants’ retirement plans because of its effect on superannuation. The latter may present unique retention and engagement challenges—for more junior employees as career advancement opportunities may become limited for certain categories of job and position levels, and for employees who continue to work although having a preference for retirement.

Retention strategies

Agencies outlined a range of retention strategies in response to the agency survey. Professional development was a common response including activities such as graduate programs, management and leadership training, through to studies assistance, and participation in the Australia and New Zealand School of Government (ANZSOG). Other common strategies were inclusion of flexible work practices and family-friendly provisions in agreements, with one division of an agency reporting that approximately 40% of employees are part-time. A number of agencies also attempt to create a positive workplace culture focusing on employee wellbeing programs encompassing health initiatives or social events. Some agencies are expanding internal mobility opportunities to enable employees to access a greater variety of challenging and interesting work.

A small number of agencies reported implementing retention allowances in order to retain people with skills sets that are difficult to obtain and that are critical to their functions. These can take the form of general retention allowances in employee agreements, project allowances for highly sought after technical skills, or provisions for employees in remote locations (generally after three years’ remote service). Defence, for example, implements a scheme of payments to some or all employees within a specific employment category deemed to be of strategic significance to building Defence capability. Importantly, this initiative is only a short-term arrangement and combines with other remedies intended to allow alternative longer-term solutions to be developed.

Agencies also use performance management systems and associated performance bonuses as retention mechanisms.

Retention issues and superannuation

One of the key issues affecting retention of older employees is their superannuation membership. Traditionally, ongoing employees have been members of defined benefit superannuation schemes which offered attractive pension options available from age 55 years. For long-serving members this pension will act as an incentive to either retire or seek alternative employment. This is a challenge for agencies looking to retain skilled employees, particularly those who are members of the CSS.

Since closure of the Public Sector Superannuation Scheme (PSS) in 2005 the proportion of employees covered by the Public Sector Superannuation accumulation plan (PSSap) has been increasing, with approximately 30% of APS contributors now in PSSap. However, due to different rates of recruitment and employee turnover, this proportion varies across the APS. At 30 June 2009, it varied from approximately 16% to 48% for larger agencies.¹² As the percentage of employees in PSSap grows some of the traditional incentives for employees are receding. Agencies will need to be aware of this transition in order to make appropriate adjustments to their retention strategies.

Skills shortages

The agency survey collects information from agencies on the types of skills they find difficult to recruit or retain, as well as the impact the skills shortages have had on the agency’s capability. However, it does not collect the numbers involved in reports of shortages. This is important as large agency workforce shortages may involve significant numbers of employees while small agencies may report just a few. For any organisation wishing to understand the workforce trends most affecting its industry, the observed shortages of employees within their own organisation, and the extent of those shortages industry-wide, is an important piece of information. Furthermore, the shortages can relate to quality as well as quantity, with the result that the shortage may be minor or numerically small but key positions may be difficult to fill. As a result, any future data collection relating to shortages should include consideration of the number of employees and the calibre or classification level required, as well as an assessment of the impact on organisational capability.

With this caveat, the results for the last three years are presented in Figure 3.2. It shows the percentage of agencies indicating that a shortage in a particular profession is having a moderate or severe impact on agency capability in 2008–09 along with comparative statistics for the previous two years. The shortage of ICT professionals—nominated by 34% of agencies—remains the most pressing challenge across all agencies, followed closely by high-level policy/research skills (29%), and accounting and financial management skills (25% and 23% respectively).

Compared to previous years, the numbers of agencies nominating shortages of ICT, accounting, financial management, human resource, legal and communications/marketing professionals has substantially declined; smaller declines were observed in project management and statistical skills. However, the shortage of high-level policy/research skills continues to grow, as does contract management skills, and economists. The level of shortage of scientists remains the same as last year.

The categories of professionals that display lower levels of shortages, however, are very important to the agencies that rely on these professionals. When the results are analysed only for those agencies that employ scientists, economists, and statisticians, for example, the results show a moderate to severe impact of the shortage in 32%, 38% and 28% of those agencies respectively (rather than the considerably lower figures shown in Figure 3.2).

Hence, across these professional categories around a quarter to one-third of agencies employing such people are reporting moderate to severe impacts of the skills shortage on their capability.

Strategies agencies adopted to address skills gaps

Most agencies responded to skills gaps by adjusting their recruitment strategies and processes such as:

• developing a greater focus on key relationships with stakeholders such as universities
• using specialist recruitment firms (although this is seen as an expensive option)
• varying their advertising approaches as well as revising the branding and marketing of their agency
• placing greater emphasis on graduate programs, cadetships, and student placements.

Other common responses included training in areas where skills gaps existed and specific training for specialist skills and, in conjunction with this, a greater focus on career planning and succession management.

Some agencies focused on internal practices, such as work-life balance and flexible working arrangements. As noted earlier, a small number of agencies turned to bonuses, primarily aimed at retaining ICT or other key employees, specific allowances for certain skills sets, or professional development allowances. Less common practices were use of contractors and transfers or secondments of employees between APS agencies. One agency reported beginning secondments with the private sector.

A few agencies are developing innovative solutions, such as redesigning positions, pursuing flexibility in job design, teams taking responsibility for producing relevant skills sets, job profiling, and procedural documentation of tasks for facilitating more efficient succession management.

The current period of slower economic growth provides agencies with an opportunity to address these skills gaps, and to develop strategies to retain such employees when the economy recovers. It would therefore benefit agencies to include addressing skills gaps in their workforce planning efforts, including monitoring turnover rates in shortage areas.

APS-wide recruitment initiatives

Given the importance of recruitment across the APS, the Commission is producing new recruitment guidance and continuing to enhance the APSjobs website.¹³ Finance, in association with the Commission, has distributed new guidelines on recruitment advertising; and the Commission is conducting an evaluation of recruitment advertising. These initiatives are outlined below.

New recruitment guidance

In June 2009, the Commission conducted a recruitment survey of APS agencies to consider what additional assistance it could provide to agencies in relation to recruitment. Responses indicated that:

• there are business imperatives for streamlining recruitment (for example, ensuring that good candidates do not drop out because of the lengthy process), which have generated a range of agency initiatives (such as, electronic lodgement of applications)
• almost half of the agencies were not satisfied with the length of recruitment times; other work pressures were seen as one impediment to faster processes; another was additional requirements such as security clearance processes
• agencies had mixed views on how ‘merit’ should be defined and how it affects the recruitment process
• just over half of agencies considered that promotion appeals (applicable to promotions up to APS 6) should be abolished, though the alternative view was that it provides employees with confidence in the process
• agencies would like greater flexibility in the way selection of recruits occurs.

As a result, the Commission has started a comprehensive review of its website information and hard copy publications that advise agencies on recruitment and employment matters. It is expected that the review will be completed by the end of 2009. This is expected to make agencies more aware of the flexibilities available, which should help them reduce recruitment times. Merit was also reviewed and the Commission has enhanced its Better, Faster: Streamlining Recruitment in the APS guidance, which dispels myths, identifies best practice and outlines compliance requirements.¹⁴

APSjobs

The online gazette, APSjobs, has continued to support agencies’ recruitment efforts. Employment opportunities advertised in APSjobs in 2008–09 totalled 12,729; a 24% decrease from the 16,684 advertised in 2007–08.

An existing component of APSjobs, the ‘Campaigns’ page, is used for agency-specific and APS-wide recruitment initiatives, such as graduate programs, large bulk recruitment rounds or campaigns for specialist skills needed in the APS. An example of the latter is the ‘Finance Jobs’ recruitment campaign that provides a streamlined and coordinated approach to recruiting finance and accounting professionals. The campaign is run on a rolling basis and provides agencies with a pool of pre-assessed applicants between the APS 3 and EL 2 classifications for consideration. Feedback from 24 of the 29 agencies using ‘Finance Jobs’ is very positive. The campaign has reduced recruitment costs and provided an efficient streamlined recruitment process for both agencies and candidates.

With over 95,500 registered users of APSjobs, the site is proving an effective recruitment tool. The APSjobs team continues to help users through the APSjobs helpline and support network.

Evaluating recruitment advertising

The Department of Finance and Deregulation, in association with the Commission, has developed new guidelines on recruitment advertising. The Guidelines on Recruitment Advertising,¹⁵ which applies to recruitment advertising undertaken by agencies subject to the Financial Management and Accountability Act 1997, came into effect on 1 July 2009. The aim is to reduce recruitment advertising costs in the print media, which represents the most expensive element of recruitment advertising. The intention is to control expenditure, not reduce competitiveness.

The Commission’s evaluation of recruitment advertising is closely monitoring the impact, if any, the guidelines have on the efficiency and effectiveness of agencies’ recruitment advertising. To evaluate the effectiveness of an advertising source the study will collect data on the number of applications received from a random sample of advertisements, the number of resulting interviews, the resulting job offers, and the number of recruits. Study results will help agencies direct their recruitment advertising to those locations where it will be the most effective and help them optimise the return on investment from recruitment advertising expenditures.

Developing capable leaders, managing succession, and knowledge management

The third most frequently cited challenge APS agencies identified was development of future leaders, as well as leadership and management skills. While this relates mainly to the SES some agencies noted the underdeveloped leadership capability of middle managers and the lack of depth and length of experience among EL 1 employees. Some agencies reported not having a cohort to fill senior leadership roles that will become vacant due to the ageing of SES employees, difficulty in developing the necessary leadership skills, or being unable to retain employees with critical skills or with high potential for succession.

Changes to the APS operating environment will require APS leaders to be more responsive, professional and skilled at coordinating and pursuing whole of government ways of working and approaches to problem solving.¹⁶ The role of the leadership group in driving change and fostering a high-performing workforce is increasingly important.

While agencies report that development of the next generation of leaders is proving problematic, most also recognise that they need to encourage employees to gain a diversity of experience in order to prepare them for leadership roles. The diversity of experience necessary may not be achieved unless actively encouraged by the senior leadership group of each agency. To support succession management activities in the APS, the Australian Public Service Commissioner meets with Portfolio Secretaries and selected major agency heads to gather information and views on future leadership potential for agency head positions and any developing issues in this area. This occurs annually with the Commissioner providing a detailed report on conclusions to the Secretary of the Department of the Prime Minister and Cabinet (PM&C).

As one employer with ‘thousands of opportunities’ the APS has the potential to identify talent early and create opportunities for individuals or teams in order to broaden their experience and skills sets. ‘Transformational thinking’, a term used by the Secretary of PM&C, can be facilitated by having a more mobile and interchangeable workforce, by drawing particular expertise from other jurisdictions and/or sectors, and by adopting innovative approaches to active talent management. This goal needs to be accompanied by well-considered programs within each agency.

This section reports on talent and succession management, knowledge management and learning and development.

Talent management

Responses collected through the agency survey reveal that few agencies have an active talent management strategy. The number of agencies with active talent management strategies in place has remained relatively unchanged from 6% in 2007–08 to 8% in 2008–09. The number of agencies with talent management strategies under development has increased slightly, with 36% reporting they are devising strategies, compared with 29% the previous year.

When asked a qualitative question about the key benefits agencies have gained through active talent management, the small number of agencies that responded noted the benefits in being able to focus on succession planning activities, managing high potential employees, or that they were not yet able to evaluate or realise the benefits of their talent management approaches.

A substantial proportion of agencies (41%) reported facing some type of barrier or impediment to managing talent. The most frequently cited barriers (particularly for small agencies) were the inability to provide career and mobility opportunities and not having a framework or strategy in place to develop and manage talent.

Succession management

A key APS-wide challenge is succession management, which focuses on building organisational capacity by developing an internal field from which future leadership or critical skills positions can be filled. Building a cohort of high-quality leaders is of strategic importance for the APS. Since 2007–08, the proportion of agencies that have put in place, or are developing, plans designed to manage succession for critical roles and leadership positions has notably increased. Thirty-six per cent of agencies now have succession plans in place, an increase of 10% since last year. While this result represents a positive step towards succession management, 45% of agencies are yet to finalise and implement succession plans, and just under 20% have no plans in place. This affects the capacity of the APS to ensure workforce sustainability into the future.

Of the agencies with a succession plan in place, the most targeted area is for EL employees (67%). The SES and positions undertaking critical roles are also reported as common areas targeted by agency succession plans (64% and 58% respectively). Of the critical roles targeted agencies most commonly cite finance, ICT, and senior management or leadership positions.

Evaluation enables agencies to ensure that strategies they implement are appropriately targeted, are relevant and meaningful, and that participant and leader commitment and engagement is high. Although the number of agencies with systems in place to monitor and evaluate their succession planning processes is increasing (35% this year compared to 21% in 2007–08), more than half of agencies (53%) that undertake succession planning have not implemented an evaluation system.

Knowledge management

A number of agencies reported risks associated with an ageing workforce, loss of key employees and the subsequent loss of corporate knowledge. Accordingly, agencies must focus, not only on identifying and developing future leadership pools and succession strategies, but also on ensuring that agencies’ corporate knowledge management systems are in place. One large agency noted its key risk to be the successful transfer of the extensive corporate knowledge held by an ageing workforce.

Agencies will need to closely monitor age profiles and consider the adequacy of their corporate knowledge management systems and the practices they employ in transferring corporate knowledge within their organisation in order to ensure their ongoing viability. Some agencies report developing technical training programs and procedural guides for all roles, and reviewing career paths for specific groups of employees, in order to retain existing employees and to address potential skills gaps created as a result of employee retirements.

Learning and development

Learning and development activities are essential to building workforce capability, particularly leadership skills, responding to skills gaps, managing succession plans, and ensuring retirements do not lead to skills gaps.

Learning and development is a significant investment for agencies. Importantly, almost all agencies (92%) can estimate their investment in formal off-the-job learning and development, such as classroom-based workshops, programs, conferences and seminars. Table 3.3 shows agencies’ estimates of expenditure on formal off-the-job learning and development as a percentage of departmental operating expenses by agency size, for both 2004–05 and 2008–09.

Table 3.3: Relevant agencies' estimated expenditure on formal off-the-job learning and development as a percentage of departmental operating expenses, by agency size, 2004-05 and 2008-09

	Small		Medium		Large		All agencies
Expenditure as % of operating expenses	2004-05 (%)	2008-09 (%)	2004-05 (%)	2008-09 (%)	2004-05 (%)	2008-09 (%)	2004-05 (%)	2008-09 (%)
Source: Agency survey
Less than 1%	44	55	28	54	28	26	34	48
1.00 to 1.99%	36	28	56	35	39	37	43	32
2.00 to 2.99%	12	10	11	12	6	21	10	13
3.00% or more	8	7	6	0	28	16	13	7

The data collected shows an overall trend for less learning and development expenditures across the APS with the highest category of ‘3% or more’ falling from 13% of all agencies in 2004–05 to 7% in 2008–09 and the lowest category ‘less than 1%’ rising from 34% in 2004–05 to 48% of all agencies in 2008–09. A large proportion of small, and particularly, medium agencies have reduced expenditure on this function to less than 1% of operating expenses. This is consistent with agency responses provided in 2008–09 in relation to measures they would use to accommodate the increased efficiency dividend. The trend for large agencies is that fewer agencies are spending 3% or more of their operating expenses and more are spending 2% to 3%.

Again in 2008–09 agencies were asked to identify their top learning and development priorities; the five areas most commonly reported are listed, ranked in order, in Table 3.4. Consistent with last year, the areas nominated for the SES and EL classifications continued to be leadership development, people management, business and interpersonal skills. Priorities for the APS classifications remained strongly focused on technical skills relevant to specific jobs.

Table 3.4: Agencies’ learning and development priorities for employees, 2008-09(a)

Rank	APS 1-4	APS 5-6	EL	SES
(a) Agencies were asked to identify, by classification, the top five learning and development priorities for their agency in 2008-09. The results in Table 3.4 are the five areas most commonly reported by agencies. Source: Agency survey
1	Technical, relevant to specific jobs	Technical, relevant to specific jobs	Leadership	Leadership
2	Corporate skills	Interpersonal skills	People management	People management
3	Interpersonal skills	People management	Business skills	Other public administration
4	Self-management	Corporate skills	Interpersonal skills	Corporate skills
5	Agency specific IT systems	Self-management skills	Technical, relevant to specific jobs	Interpersonal skills

Last year’s State of the Service report noted that it was encouraging that agencies are placing a priority on interpersonal skills as a foundation for developing modern public servants who are increasingly required to have the ability to listen to the views of others, take them into account, resolve conflict when needed and negotiate effectively. Those results are reinforced again this year.

Key chapter findings

The experience of the past year demonstrates the importance of building agility and adaptability into each agency’s approach to strengthening workforce capability. This challenge is not only about predicting an organisation’s direction; it also involves preparing a workforce able to respond to events, and implementing the appropriate systems and processes to underpin an enabled workforce—irrespective of what the future produces. In this way, agencies can shape the future they envisage and deliver the programs or services for which they are responsible. However, they must also be prepared to respond to unforeseen events and be able to reanalyse, and redirect, their workforce in accommodating such events.

Across the APS, the key challenges agencies identified are increasing the capacity to manage organisational change or changes to functions and workloads; improving the ability to attract and retain appropriately skilled employees; and developing capable leaders and succession and knowledge management.

These are not new challenges and many agencies have improved or are implementing strategies to address them. However, only 32% of agencies had a documented and agency- wide workforce plan in place this year. Persistent skills shortages and the capability gaps they create need to be addressed. APS-wide data is not available with which to assess the extent of the shortages; however, multi-faceted, specially targeted and/or innovative responses are needed to address these long-standing issues.

Recruitment processes can be further improved with some initiatives underway to improve on this performance. Retention initiatives will need to be innovative due to the fiscal constraints within which agencies operate; they will also have to include APS-wide initiatives, not only to help retain employees but also to develop the leadership skills needed, to avoid competition between agencies, and to make best use of specialist skills.

Few agencies have active talent management strategies, and only a little over one-third of APS agencies have succession plans. Agencies’ expenditures on formal off-the-job learning and development has fallen with many small and medium agencies now spending less than 1% of operating expenses on this activity.

The APS needs to pay more attention to talent and succession management to address workforce capability issues. In light of the potential retirement profile of the APS workforce, agencies need to closely monitor the age profile within their agency and consider the adequacy of their corporate knowledge strategies. Corporate knowledge management is a significant issue for agencies with the ageing of the workforce but may not be broadly recognised or acted upon. Agencies, more than ever before, need systems and processes that enhance their capacity to manage organisational change, efficient and effective recruitment processes, and a management team focused on talent, succession and knowledge management.

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