Managers optimistic but keep purse strings tight, study finds

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Written by Seun Robert-Edomi on 12 December 2013 in News
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63 per cent are optimistic about their organisation's prospects for the next year

Workers associating news of a more buoyant economy with long-awaited pay rises, team size increases and job moves could be disappointed in 2014, according to a new report from CMI (Chartered Management Institute).

While the UK's managers are generally optimistic about economic prospects for the year ahead, the research conducted with more than 750 UK managers warns that controlling costs is set to be bosses' number one priority in 2014, with budgets for outgoings like employee pay and headcounts forecast to hold steady, or face cuts.

Managers are much more positive about how their organisation will fare in 2014 than they were this time in 2012; 63 per cent are optimistic about their organisation's prospects for the next year, a 10 per cent increase on last year and 20 per cent up on the year before. However, the annual 'Future Forecast' research indicates this optimism won't give rise to a wholesale increase in investment in the coming year. As in 2013, controlling costs continues to be the highest priority business challenge for more than three quarters of managers when looking ahead to the new year (77 per cent).  

When asked about different spending priorities, managers indicated that just three out of 11 budget areas were more likely to see investment increase compared to last year - 47 per cent intend to increase investment in business development and sales, 42 per centin IT and 41 per cent in marketing. Investment in training and development remains at 42 per cent, showing no growth from 2012. With little additional growth in business investment, 67 per cent of organisations will also hold employee pay steady or cut it and 66 per cent will freeze or reduce headcount. 

Ann Francke, Chief Executive of CMI, said: "With growth to date largely driven by consumer spending, hopes for a sustainable recovery depend on business investment following suit. Today's research suggests this isn't on the cards. Yes, business confidence has had a much-needed boost, but managers remain cautious about finances. 

"This raises a question about how strong economic optimism really is, and if organisations are not investing in developing their teams to build that growth, such optimism could be short-lived. The challenge for employers in 2014 will be how to reward and retain staff when pay rises and bolstering teams through recruitment aren't options." 

Despite 2013 being a more successful year for many organisations compared to the year before - 41 per cent reported growth compared with 32 per cent in last year's report - the  findings suggest the upturn is yet to produce happier, more secure employees, and may not do so in the immediate future. Managers are more pessimistic than this time last year about staff morale in their organisation in the coming year (up five per cent from 2012 to 36 per cent) and feel less secure in their own jobs than they did 12 months ago - 35 per cent feel insecure, up four per cent. 

Francke added: "After years of pay freezes and redundancies, many workers will be hoping to see the economic upswing improve their pay packets, but this is unlikely to be the case.  Instead, employers need to look at other ways to invest in their staff.  Motivation is about more than money - development opportunities and sought-after benefits like flexible working are much prized."

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