House of Commons - Environment, Transport and Regional Affairs

Select Committee on Environment, Transport and Regional Affairs Sixth Report

THE ENVIRONMENT AGENCY

MANAGEMENT STRUCTURES AND THE PAY SYSTEM

48. The Agency has adopted a 'matrix management' system whereby staff are accountable both to managers in the regional and HQ policy divisions and to those within their own particular specialism. Thus, for example, a waste inspector in the Thames region could trace his or her line of responsibility both up through the Thames region and central overall policy division (i.e. the 'operational' line) and up through the Thames region and central waste regulation division (i.e. the 'professional' line).

49. The Agency's Director of Operations told us that this system brought "very significant benefits" to the Agency. Matrix management, he said, had enabled the Agency "to organise and run a business with 10,000 people in it". In particular, the system had brought consistency; made it possible to manage with the 120+ pieces of legislation which govern the work of the Agency and the large number of ring-fenced income streams by which it is funded; and ensured that the experience of 'front-line' regulators could be taken into account when formulating policy at head office.[102]

50. However, the evidence we have received suggests that the matrix management system as it is operated in the Agency is not enabling effective management, but is cumbersome and ineffective.[103] In order to cope with the demands of such a system, the Agency has had to insert into the staff structures which it inherited from its predecessor bodies additional tiers of general managers.[104] We were told that, typically, a field officer would have a team leader, who in turn would have a "functional manager" and a "general manager"; these latter would report to operational management and regional management respectively.[105] The result is a complex structure within which lines of decision-making and accountability are unclear.[106]

51. Witnesses were very critical of the Agency's matrix management system. They suggested that its failure to work effectively was hampering the Agency in the performance of its duties and resulting in costly and frustrating delays in getting decisions from the Agency on contentious issues.[107] The reason for such delays appears to be that the insertion of layers of general managers above the Agency's field staff results in a situation where staff at lower levels have the expertise to make such decisions, but lack the authority or the confidence to do so; whereas those at higher levels have the authority, but, as generalist managers rather than experienced field staff, do not have the necessary expertise. As a consequence, contentious issues have to be passed through several levels of management before a decision can be taken.[108] We question whether these extra layers of management are a good use of the Agency's resources. The test of whether a manager's job should exist is, in our opinion, this: is this post necessary for staff in the field to do their job properly? It appears that many of the Agency's middle-managers are there not to support staff in the field, but to support the particular management structure which the Agency has chosen to operate.

52. The problem is exacerbated by the fact that Agency management do not seem to encourage their field inspectors to take decisions based on their own judgement. We were told that many queries from industry, even relatively minor ones, were being referred to the legal department or team leaders, resulting in unacceptable delays for answers to simple requests.[109] The current system of performance-related pay in particular, we were told, discourages individuals from taking responsibility for making decisions, as "staff become more concerned about getting their line manager's approval (to get a good assessment) than concentrating on effective delivery of environmental protection and enhancement."[110] We return to the subject of pay below.[111]

53. We also heard evidence that the particular management structure which the Agency wished to operate was being forced on the Agency's functions, rather than appropriate structures being designed for each of the Agency's many and varied sections.[112] The most obvious example of this is the Agency's decision to split the functions of, on the one hand, issuing water discharge consents and waste licences, and, on the other, monitoring compliance with those consents and licenses, which had previously been carried out by the same teams. This decision came in for a great deal of criticism both from industry, which suggested that it compromises the ability of Agency staff to take a holistic view of a particular site or process, and from the unions, who suggested that it both reduces effectiveness and leaves staff feeling that their job is undervalued.[113] We are pleased to note that, following protests from industry, this particular structure has not been introduced into the Agency's Process Industry Regulation/Radioactive Substances Regulation function.[114]

54. The Agency's Director of Operations claimed that the matrix management system had brought consistency;[115] but it appears that that consistency is being bought at the price of the flexibility, based on experience and sound judgement, which we believe is essential if the Agency is to carry out the wide variety of tasks which it is charged with undertaking. This is another example of where the Agency is approaching the task of the integration of its functions in the wrong way.[116] Integration is not a matter of harmonised management structures, but rather of ensuring that all the Agency's functions, however they are managed, operate with the same core aims.

Treatment of technical specialists

55. We express above our concerns about the particular issue of the pay and grading of inspectors in the Agency's Process Industry and Radioactive Substances Regulation functions.[117] This issue is important in itself, but it is also illustrative of a broader concern, which is that of the Agency's treatment of its technical specialists. The Institution of Professionals, Managers and Specialists wrote in evidence to us, "Having realised that the field Inspector job is of higher quality, complexity and content than many of the nontechnical but managerial posts, management's response has been to try to devalue the Inspector job ... this is in part motivated by pay differentials particularly by Area (general) Managers who resent receiving less money than the highly qualified technical specialists they manage."[118] In oral evidence, Elizabeth Jenkins of IPMS, referring to Agency inspectors, said, "There is now no professional career structure for them. They more or less have to go to general management if they want to progress ... We think that [Agency management] have completely failed to address the issues surrounding the employment and career development needs of these people."[119] The GMB union wrote, "the 1997 'Next Steps' restructuring and reorganisation ... reduced the number of grades and as a result suppressed opportunities for promotional progression ... Staff view this as management manipulation to lower job value and hence grade worth. Staff continue to leave the Agency because of limited job scope and lack of career progression opportunities."[120]

56. Further evidence for the Agency's failure to value its technical specialists comes in figures which show, firstly, a diminution in the number of front-line field staff (from 220 in the former HMIP to approximately 180 now[121]), and, secondly, Agency guidelines which suggest that managers should spend most or all their time on office tasks.[122] As IPMS put it, "such advice is clearly at odds with the Agency's role not only in regulating complex major industries with expensive environmental controls, but also in developing policy and practice in areas such as advising on new legislation."[123]

57. Management posts which require substantial amounts of office work to be undertaken are clearly not attractive to highly experienced technical specialists, who value the time they are able to spend 'in the field', doing the job for which they have been trained. The result is that the Agency loses its experienced field staff to posts in industry which can offer more in the way of hands-on work and respect for technical ability. Furthermore, if the low pay and lack of career structure continues, and the Agency as a result loses its experienced staff, it gives itself a serious problem with training as well. Whilst clearly no substitute for a full and rigorous programme of official training, time spent with senior, experienced colleagues in 'on the job' training is a very useful part of a new member of staff's learning process. The Agency cannot afford to lose the benefits of the experience of senior field staff when training new recruits, any more than it can afford to lose their experience in regulating major industry.

The pay system

58. The Agency's performance-related pay system was criticised on a number of counts, particularly by the GMB, the union representing a number of staff within the Agency. We were told that the pay system:

was unfair;

leads to low morale;

discourages flexibility;

leads to a 'fear' culture;

lacks transparency;

and directly inhibits the effectiveness of the Agency.[124]

59. Although we have not regarded it as appropriate for us to look in detail at each of these allegations, it is clear to us in the context of the other criticisms which have been made of the Agency that its performance-related pay system is contributing to some of the operational problems which it is experiencing. In particular, it is apparent that the system is having the opposite effect on Agency effectiveness and quality of work from that which was intended. A number of witnesses referred to a 'tick-box' or 'check-list' approach to regulation on the part of Agency inspectors.[125] As we have already discussed, in the waste regulation function at least, this problem appears to be in part due to a lack of competent, properly trained inspectors.[126] However, evidence suggests that Agency staff operate in a framework of performancerelated incentives which attach more importance to quantity rather than quality of work done.[127]

60. It was also suggested to us that, in order to ensure that the performance markings awarded (box 1 exceptional, box 2 good, box 3 adequate and box 4 poor) fit the required distribution profile (10% box 1, 60% box 2, 25% box 3, 5% box 4), staff in groups where all were performing well were having to take turns to receive low scores. This is not only unfair and leads to low staff morale, but also, as alluded to earlier, results in a 'fear culture' where staff spend their working time concentrating on ensuring they retain line management approval and avoid giving any excuse for the award of a low box marking. As a consequence, much spontaneity and innovation are suppressed.[128]

61. The purpose of performance-related pay should be to encourage improved performance by individual members of staff and hence to improve the effectiveness of the organisation for which they work. The performance-related pay system which operates in the Environment Agency does not appear to be achieving these aims. The Agency must ensure that its pay system does not rely on crude 'tick-box' performance indicators such as the number of sites visited, but on the quality of the work carried out. It must also ensure that its pay system is designed and operated in such a way as to encourage good performance by its staff, including, where appropriate, innovative ideas and the taking of responsibility.

Recommendations

62. We recommend that the Board of the Agency look closely at its management structure, particularly the matrix management system, with a view to making recommendations as to how:

'matrix management' can be made to work effectively without inserting layers of general managers between staff on the ground and those who can take decisions;

management structures can be put in place appropriate to each function, without imposing the same structure on all aspects of the Agency's work irrespective of the appropriateness of that structure to the work which is being carried out;

specialists can be given a proper career structure which ensures that the Agency can recruit and retain experienced inspectors across all its regulatory functions.

63. We further recommend that the Agency's pay system be urgently reviewed, with a view to ensuring that it encourages staff motivation and morale and thus Agency effectiveness.

102 Q652, Q654 Back

103 See, for example, ev pp.128, 129 (EA58); Q110; Q552; see also further references below. Back

104 Ev p.112 (EA54); QQ72-73, 83 Back

105 QQ88-89 Back

106 Ev p.19 (EA08), pp.123, 130 (EA58); Q118 Back

107 Ev pp.123, 125 (EA58); Q109 Back

108 Ev p.112 (EA54); Q108; Q112 Back

109 Ev p.112 (EA54); see also ev p.30 (EA16); p.108 (EA53); pp.111, 112, 113 (EA54) Back

110 Ev p.95 (EA47) Back

111 See paras 58 to 61, 63 Back

112 Ev pp.79-80 (EA37); p.127 (EA58) Back

113 QQ91-92; QQ121-124. See also ev p.80 (EA37); p.108 (EA53); p.123 (EA58) Back