The development of large and complex sites and the intensive asset management of our investment properties is only possible with a team of skilled, experienced, innovative and dedicated professionals. There is no better demonstration of this than the extent to which value gains are driven by active management of the Group’s assets.
Whilst the Harworth team has grown during the year, with the introduction of a regional operating structure, it remains relatively small. Long-term, sustainable performance must be underpinned by the development and retention of our people, together with the recruitment of individuals who buy into the Harworth culture, to support our growth ambitions. We can only achieve that if we: promote a strong and positive culture; engage meaningfully with our employees; take steps to improve diversity, in its widest sense and at all levels of the business; create an environment in which our employees can develop their skills and experience; and reward them appropriately for their hard work and contribution.
We believe we have a strong and positive working culture at Harworth, but we feel that it needs to be defined better so that we can preserve and promote it as we continue to grow and embed our regional operating structure. An exercise, led by our Head of HR and Organisation Development, to formalise Harworth’s core values, with the ultimate objective of defining them and our culture, is well underway and will be completed during this year. Once completed, we will use it as a framework for recruitment, decision-making and behavioural training across every aspect of the business.
The Board and executive team recognise the importance and benefits of engaging meaningfully with employees and considering how both strategic and operational decisions will impact the workforce. The Board is also mindful of the need to comply with 2018 Code in this regard.
Engagement by the Board
Encouraging higher levels of employee engagement is a priority and measures have been introduced to achieve that objective. Recognising that effective engagement requires multiple forums and means, the following initiatives are in place:
- our first Employee AGM will be held at the end of April 2019, with the intention that this be repeated annually;
- we have established a People Steering Group (“PSG”) with whom our Non-Executive Directors meet quarterly by rotation (see further below);
- regular site visits by our Non-Executive Directors are hosted by our project teams;
- we are encouraging wider employee participation in presentations at Board meetings;
- at some Board dinners the Board will be joined by members of the wider senior management team; and
- when Board meetings are held at our head office, the Board now breaks for an extended lunch with groups of employees.
One of the most important aspects of our employee engagement strategy is our PSG, which we established in the first half of 2018. It meets quarterly and comprises twelve employees, selected by our Head of HR and Organisation Development, from different teams across the business, seeking an appropriate mix, based on (amongst other things) length of service, experience and diversity.
The purpose of the PSG is twofold. From an operational perspective, it takes a lead in identifying and developing a “people agenda” and in proposing and implementing initiatives to drive that agenda. The group is also a forum for engagement between the Board and employees. PSG meetings are scheduled to take place immediately after Board meetings. This means two or three of our Non-Executive Directors can attend part of the PSG meeting where the views and concerns of employees are identified and discussed. Those views and concerns are fed back to the wider Board at the next Board meeting.
Ahead of its coming into force, the Board considered at length how best to satisfy the Group’s obligations on workforce engagement under Provision 5 of the 2018 Code. Having regard to the nature and scale of Harworth’s business the Board considers that the combination of measures listed above will facilitate effective engagement with employees. In particular, it views the engagement with the PSG as being akin to there being a designated “workforce” Non-Executive Director on the Board. Indeed, rather than there being a single designation, all Non-Executive Directors undertake that role at some point during the year. The Board will review the ongoing effectiveness of all engagement measures annually.
Whilst engagement with the workforce is important, it would be of limited value if the Board does not then consider the interests of employees when making its decisions, particularly those of a strategic nature or having widespread operational implications. The Our Partners section of this Report on pages 56 and 63 explains how the Board has taken steps to formalise the way in which stakeholder interests, including those of employees, form part of the Board’s discussions and decision-making process. By way of example, the Board was mindful, and took account of the fact, that the move to a regional operating structure would present both challenges and opportunities for the workforce.
Engagement by the executive team
Engagement with employees at an operational level is equally important, particularly as we grow and embed our new regional structure which, without effective communication between teams, carries the risk of a “silo effect”. The executive team, with support from the wider senior management team, continues to work hard to ensure effective engagement is maintained. We have a framework of active engagement which includes:
- an annual staff survey, now in its fourth year and covering a range of themes including communication, development, morale, motivation and, this year, the impact of our regionalisation programme. Once again there was a high completion rate, with 94% of employees responding (positively in most respects) to the survey, reflecting the fact that the survey is considered a meaningful exercise with feedback driving tangible initiatives;
- an internal Harworth newsletter published quarterly, which comprises operational updates from the Chief Executive and all our regional and central teams, alongside news items of a non-operational nature;
- quarterly Staff Communication Breakfast Briefings which are hosted by our regional and central teams on a rolling basis so that regular operational updates can be given and thought leadership and case studies can be shared;
- an annual staff conference, the theme for which was creative thinking in 2018;
- employee “roadshows” following the preliminary and interim results; and
- CEO breakfasts giving every employee (in small groups) an opportunity to share their thoughts and questions on a range of topics with our Chief Executive.
Diversity and equal opportunities
The challenge we face
We recognise the benefit of a diverse (in its widest sense) workforce comprising individuals with different backgrounds, experience, perspectives and ideas. Like much of the real estate and construction sectors, we face a significant challenge to achieve that but we are fully committed to meeting it.
We are working hard to address that challenge but recognise that, with a small team and relatively low staff turnover (itself a positive), this will take time. To do so effectively we must first be transparent about the size of the challenge and the progress we are making along the way.
The analysis over the following pages demonstrates the gender imbalance across the Harworth team, particularly amongst the Board and senior management team. We are also mindful that there are still no individuals from an ethnic minority background working at Harworth. For transparency, whilst Harworth is not obliged to publish gender pay gap statistics, we have decided to undertake gender pay gap analysis. We reported on it voluntarily in the 2017 Annual Report and have done so again in this report.
Steps we have taken in 2018
Since publication of the 2017 Annual Report, we have applied more structure to our efforts in promoting and monitoring diversity. At a Board level, the Nomination Committee takes the lead on promoting and assessing the achievement of diversity across the business, in alignment with the 2018 Code. The Nomination Committee’s annual timetable includes a review of diversity, particularly on the Board and at a senior management level, and the effectiveness of measures to improve it. Diversity is also an active and important consideration in the Committee’s succession plans, reflected in the most recent appointments to the Board (see further below). The Nomination Committee reports and provides recommendations to the Board annually.
In September, the Board approved the adoption of a new Diversity and Equal Opportunities policy which addresses diversity more explicitly, gives it the prominence it merits, and reflects the proactivity with which the Board is looking to address the diversity challenge.
Whilst appointments will always be based on merit, Harworth is committed to giving women and people from ethnic minorities every opportunity to apply for, and be appointed to, the new and replacement roles for which we recruit and, as such, our desire to encourage diversity is a prominent consideration when we are recruiting at all levels of the business. We have implemented a policy by which candidate long-lists prepared by recruitment consultants will be rejected if they do not contain a diverse list of candidates.
These measures complement some other initiatives which were already (and remain) in place and are designed to ensure that opportunities for recruitment, development and promotion are available to everyone, regardless of circumstances or background:
- we have enhanced maternity, paternity and adoption pay policies; and
- eight of our employees (12%) work part-time, whether that be a reduced number of days or reduced hours every day, including two members of our senior management team, and employees can work flexibly.
The appointments of Ruth Cooke and Angela Bromfield to the Board represent positive progress on diversity. At an operational level, despite the work we undertook with our recruitment consultants to identify a diverse list of candidates, our most senior external appointments during 2018 were males. This means that all the members of our executive team continue to be male. The senior management team comprises three females and eleven males. That said, there has been more gender diversity across the candidates we have recruited for new roles in our regional structure. Overall, we have recruited for 11 new roles since publication of the 2017 Annual Report and 6 replacement roles. The gender balance of our recruitment is shown below:
|Recruitment into new roles||5||6|
|Recruitment into replacement roles||3||3|
There were seven promotions during the year. Out of a workforce which was split 71% male : 29% female, five were promotions of male employees and two, including one to the senior management team, were of female employees.
It is important to stress that, whilst the Group’s desire to improve diversity will be a consideration in decisions on recruitment and promotion, selections continue to be made based on merit and ability.
The results of our latest gender pay gap analysis (which reflects the position at April 2018) appear below, alongside the results from 2017. Overall, this analysis reflects some modest improvements in our gender pay gap statistics. Our mean and median gender pay gap has reduced. Our mean bonus pay gap remains broadly unchanged and our median bonus pay gap has increased slightly. This is attributable to our recruitment of females into more junior roles during the period, which reduces the median bonus figure for females across the business. We do not consider this to be a negative development, as these individuals should represent our future leaders. Positive movements in the lower and lower middle quartile analysis reflect the recruitment of females into junior and middle management roles in the regions. A positive shift in the upper middle quartile analysis is attributable to the promotion of our Head of HR and Organisation Development to the senior management team during the period.
|The composition of Harworth’s workforce (by gender)1|
|Board||Investment Committee2||Management Board3||All Employees|
Note – figures in brackets reflect 2017 position.
1. At the date of this Report
2. Investment Committee of 8 has replaced Executive Committee of 6
3. Management Board is a newly formed committee and so has no like for like comparator from 2017
Gender pay gap statistics
Proportion of men and women in each quartile band
|Lower||Lower middle||Upper middle||Upper|
We believe that our gender pay gap is more a function of historic trends across the property and construction sectors than reflective of a “Harworth” approach. These figures reflect the fact that, historically, men have held the vast majority of the most senior jobs in the property and construction sectors and, as such, our gender imbalance is particularly stark at the executive team level. Whilst we recognise this balance will take time to address this is something we are committed to achieve.
Whilst Harworth has a long way to go in improving diversity across its business, we have long been committed (since Harworth’s formation in 2012) to creating a working environment that is free from discrimination, harassment and victimisation, where everyone feels valued and respected. This includes:
- promoting equality and fairness for all in our employment;
- making reasonable adjustments for disabled employees and giving full and fair consideration to disabled applicants for roles in our business; and
- providing equal opportunities for continuing professional development (“CPD”) and promotion within our business to any disabled employees,
which one would expect from all responsible businesses.
The Nomination Committee leads on succession planning and development for the Board and executive team.
In the second half of 2018 our Head of HR and Organisation Development undertook a detailed review of succession and development plans for each role in the business (outside of the executive team). The output from that review was analysed first by the executive team and then presented to, and scrutinised by, the Board. A similar exercise will be undertaken each year for the recently expanded executive team.
All our employees have undertaken an externally facilitated “Insights” personality profile exercise, which helps us to understand the dynamics of our teams and informs our recruitment of new employees and our plans for CPD of existing team members. It also assists in optimising the way members of our executive and senior management teams engage with each other.
During 2018 work was undertaken by our Head of HR and Organisation Development to improve the structure of our appraisal process. It now follows a more rigorous and consistent process and timetable which ensures that performance is managed and development needs are identified early.
Many of our employees regularly attend external training courses, often to satisfy ongoing CPD requirements for their professional qualifications. This is often complemented by workshops and webinars hosted internally, typically with input from our professional advisers. Six of our employees continue to work towards professional qualifications. We support all employees in the pursuit and renewal of professional qualifications: both financially, and by encouraging CPD and the transfer of knowledge from senior to junior employees.
External coaching continues to be available to our executive and senior management teams and we encourage them all to use this resource from time to time.
Recognition and reward
We offer a comprehensive employee benefits package for all employees, which includes a pension scheme with above-market employer contributions, private medical insurance, life insurance and income protection. The employer pension contributions and insurance cover for employees is consistent across the whole business.
Bonuses for those employees who are contractually entitled are awarded, in part, for performance against Group Financial Targets, which are aligned with the Group’s strategy for long-term, sustainable growth and applied consistently across the Group. In 2018, these targets were based on NNNAV gains, sales volume, acquisitions and profit excluding value gains. The balance of all bonuses are awarded for performance against personal objectives.
Following a review of our Remuneration Policy we are proposing to adopt a Restricted Share Plan (“RSP”) in place of the two long-term incentive schemes we currently operate. Our ability to cascade the RSP, the operation of which will be simple and transparent, is one of the key reasons we are advocating this change. Further details on our proposals for an RSP, and an explanation of the rationale for it, appear at pages 100 to 102 of this report.
We also operate an established Save-As-You-Earn (“SAYE”) scheme, which gives employees an opportunity (annually) to save up to £500 a month over 3 years and then purchase shares in the Company at a discount of 20% to the market price of the shares at the outset of the scheme. To date, approximately half of our employees have chosen to participate in the scheme and we expect more to do so this year. Alongside the SAYE, we are proposing the introduction of a Share Incentive Plan (“SIP”). If this is approved by shareholders at the AGM it will afford a mechanism by which the Company can encourage share ownership amongst employees by awarding shares to employees, or encouraging them to purchase shares, both in a tax efficient manner. Together, our existing SAYE and a SIP are tangible ways in which we can encourage share ownership amongst our workforce and our employees can share in, as well as contribute to, the Group’s success.
Whilst offering an appropriate remuneration package for our employees will always be of high priority, recognition is equally important. We, therefore, emphasise celebrating successes, such as at our staff conference, quarterly breakfast briefings and employee roadshows and in our newsletter.
Employee numbers and costs
The average number of persons, including Executive Directors, employed by the Group and our staff costs for the period under review are set out in Note 6 to the Financial Statements.