House of Commons - Communities and Local Government's Departmental Annual Report 2008 - Communities and Local Government Committee

Communities and Local Government's Departmental Annual Report 2008 - Communities and Local Government Committee Contents

2 Strengthening capacity

3. During the period covered by our Report of last year the Department underwent its first "capability review", conducted by the Prime Minister's Delivery Unit with assistance from the Audit Commission and the National Audit Office (NAO). The review aimed to measure capacity to deliver and to identify necessary improvements. Significant weaknesses were identified in setting out implementation plans and establishing a strategic lead across Whitehall and among strategic partners charged with practical delivery on the ground. The NAO, in a memorandum to us, subsequently outlined the key challenges facing CLG as: developing a clear view of what works across the full range of its responsibilities; more strategic management of staff; improved analytical capacity within the Department; and plugging skills gaps in project and programme management. These conclusions were in line with concerns we had raised in our reports on the Department's Annual Report in both 2005 and 2006. We concluded last year that "The Department needs urgently to tackle persistent concerns about its ability to deliver across the range of policies for which it is responsible and its ability to influence its strategic partners."

4. Since then, the Department has maintained a focus on strengthening its capacity. The Annual Report sets out a number of actions which it has taken in pursuit of the aim of addressing the concerns raised both by us and by the Capability Review, including:

Lead and enthuse partners in creating successful communities and services

leading work across and on behalf of government to implement the new local government performance framework;
establishing cross-government governance arrangements to ensure a joint approach to delivering the two PSAs set in the 2007 Comprehensive Spending Review (CSR07)—20 and 21—on which it leads;
"working in partnership across most of our key achievements and programmes, as set out in this report".

Base policy making and delivery consistently on evidence

increasing the number of economist posts in the Department;
putting all of the Department's senior staff through analytical training;
setting up three Expert Panels of academics, consultants and practitioners to provide additional analytical resource and challenge;
running a series of whole Department events and awareness sessions, including an 'Analysis for All' day;
running a 'Working with Ministers' programme that emphasises the importance of the evidence base for policy making.

Sharpen delivery focus and ensure strong performance management systems and skills

streamlining and strengthening corporate governance structures to ensure clear accountability for delivery;
focusing on ensuring effective performance management both for the two cross-government CSR PSAs on which it leads and for its wider set of DSO indicators.

Manage people effectively and ensure possession of critical skills

implementing a programme to improve human resource (HR) capability, processes and the approach to people management;
filling key leadership roles with specialist staff and appointing HR business partners to work closely with line managers;
holding workshops for staff on coaching, mentoring, performance management and programme management;
holding workshops across all grades to understand issues around 'speak up and challenge' and bullying and harassment.[2]

5. Since our last Report, the Department has been subject, first, to a Cabinet Office 'stocktake', conducted in January 2008, of progress in addressing the five key areas for improvement identified by the original review; and, later, to a full review of progress which resulted in a report published in December.[3] The NAO told us

[The] stocktake found that the Department had made progress across all areas for action and that the Department is using the actions identified as a driver for ongoing change and improvement. It found that the Department is moving in the right direction, but there is still some way to go and sustained efforts are required to achieve the desired change.[4]

The NAO summarised progress as measured by the 'stocktake' as follows:[5]

Key areas for improvement Progress so far

'Build the knowledge, confidence and skills to lead and enthuse partners in creating successful communities and services' Work on the local government agenda has been a very visible success.
The Department now needs to deliver on the promises made, learn from this success, spread good practice to other areas of policy and delivery, and achieve more consistency across the Department in dealings with stakeholders.

'Fill critical skills gaps and manage people differently so that they can deliver the Government's priorities' The Department has attracted talented people and undertaken work on identification of skills gaps.
Changes in the HR function have led to better support for managers in carrying out performance management as a core part of their job.
The HR function must now support the Department in filling the skills gaps it has identified, in particular, those in delivery expertise and Programme and Project Management.

'Make policy making and delivery more powerful by starting consistently from the evidence' The Department has used the Capability Review process to its advantage to galvanise support and drive through a critical agenda.
Significant progress has been made so far in raising awareness of the importance of analysis and evidence-based policy making and tackling capacity through increasing numbers and rolling out training.
It is essential that the momentum is sustained and best practice is shared and embedded across the Department and with delivery partners.

'Sharpen our delivery focus and ensure we have strong performance management systems and skills'[6] Following some early difficulties there are now clearer signs of improvement in strengthening delivery, for example through the early work of the Delivery Sub-Committee.
Department is beginning to engage in peer review activities.
Creation of a delivery team and its early success which should now be built on.
Focus must now be to ensure that these new processes are working in practice, that they are the right processes.
In addition to process, it is essential for the Department to create a culture where challenge is welcomed and valued.
This workstream should be fully supported with the right resources—people, skills, senior level time and engagement.

6. A similar message of "some progress, but still further to go" emerged from the Cabinet Office's most recent assessment. The report of that review summarised progress as follows:

Since the Capability Review of 2006 there has been a positive direction of travel for CLG. The Department has strengthened its strategic capability and made progress on improving the systems and processes that support delivery. It has also had notable successes, including the introduction of Local Area Agreements (LAAs). However, there is still further to go in order to meet the challenges ahead. CLG has more to do to build a strong culture of openness and constructive challenge (both internally and with stakeholders), to clearly articulate its priorities in a coherent strategy and business plan, and to embed change throughout the organisation.[7]

7. The report went on to summarise progress in the areas of leadership, strategy and delivery examined by the review as follows:

Leadership

Set direction: Well placed
Ignite passion, pace and drive: Development area
Take responsibility for leading delivery and change: Development area
Build capability: Development area
Significant progress has been made on defining a vision for CLG and building the capability of the Board and Senior Civil Service within the Department. The Board now needs to reach out and build capability throughout the entire organisation. In order to achieve this, the Board will need to work more corporately across the Department and create a culture of openness in which challenge is valued.

Strategy

Focus on outcomes Well placed
Base choices on evidence Development area
Build common purpose: Well placed
CLG has clear strategic objectives and has strengthened its strategic capability through improvements to the use of evidence and analysis in policy making. The successful and high-profile negotiation of LAAs has demonstrated CLG's ability to engage effectively with stakeholders. But there remains more to do in order to make this success a consistent stakeholder experience. CLG needs to continue to embed these improvements and build on the clear articulation of its priorities in order to create an overarching strategy that joins up the Department for staff and stakeholders.

Delivery

Plan, resource and prioritise: Development area
Develop clear roles, responsibilities and delivery models: Development area
Manage performance: Development area
The Department has made progress on improving the processes, governance and management information that support delivery. It has taken steps to build capability in the delivery chain through investment in the Government Office network and the creation of the new Homes and Communities Agency and Tenant Services Authority. CLG now needs to ensure that these improvements are embedded and complemented with a business planning process that allows better matching of resources to priorities across the Department. Work is also needed to ensure that CLG's delivery model is consistently understood by staff, stakeholders and partners.

8. We commend the Department for the progress which it has made towards addressing the areas for development identified in the 2006 Capability Review, and for the successes it has achieved in the last year which demonstrate that progress being translated into real advances on the ground. Two achievements in particular, noted by the Department in its own response to the most recent Capability Review,[8] merit a mention here, as they are the most obvious manifestations of progress in the two crucial areas which we highlighted last year and in previous years: influencing partners, and delivery.

9. The successful negotiation of local area agreements shows CLG working together with its partners across both central and local government in the influencing, brokering and negotiation role which the Secretary of State correctly identified early in her term as crucial to the Department's success.[9] Last year, we reported the view of the NAO, which said that the Department "does not have a reputation amongst its partners for having enough strategic influence to solve problems within Whitehall that are creating obstacles to local success."[10] The most recent Capability Review now finds that "the process of negotiating the LAAs and setting the new performance framework for local government, a key Government objective, has been lauded by stakeholders and delivery partners as exceeding expectations, and as an example of CLG leading across Government."[11]

10. In terms of delivery, the Department's most notable success has been the creation four months ahead of schedule of the Homes and Communities Agency and the Tenant Services Authority. The importance of the HCA in particular in addressing the long-term issue of housing supply, especially in the current economic climate, can hardly be overstated: it was thus vital that it be up and running as soon as possible, to avoid any drift before the new structures took effect. Led by the Chief Executive-designate of the HCA, Sir Bob Kerslake, whose early determination to establish the new agency as quickly as possible was no doubt the chief driver of progress, the Department has delivered a fully functioning Agency even earlier than had originally been planned.

11. Nevertheless, the results of the most recent Capability Review suggest that there is still some way to go before CLG can be said to be performing with full effectiveness. The conclusions of that Review suggest that the Department has so far taken only the first steps towards making the progress needed. We are pleased to see that, unlike last year, no aspects of its work are now identified as "urgent development areas". However, CLG achieved "well-placed" ratings in only three of the ten areas assessed by the Review, and in none of the areas under the heading "Delivery". The steps which the Department has taken to strengthen its leadership and strategic capability are welcome. However, notwithstanding the successes which we note above, these advances are yet fully to feed through into the delivery of policy.

12. As the Review suggests, concerns persist not only on delivery, but also in policy development. 'Making policy making and delivery more powerful by starting consistently from the evidence' was identified as one of the 'key areas' for action following the 2006 Capability Review: despite the advances noted in the most recent Review, 'Base choices on evidence' remains a 'development area'. We discuss in more detail below some examples of areas of policy which show clear signs of having fallen victim to the consequences not only of the Department's weaknesses in its ability to influence its strategic partners, but also of failing to base policy consistently on the evidence available.

13. Last year, we recommended that "The Department must continue to expand its analytical capability and to ensure that its staff possess the full range of skills its arms-length delivery chains require", concluding

The Department's stakeholders remain to be convinced that [those skills] are sufficiently embedded in its staff and culture. We share their doubts.[12]

Notwithstanding the advances noted in the Department's Annual Report and in the Capability Review, we have yet to see consistent and sustained evidence that the Department possesses the full range of skills required for the effective formulation and delivery of the policies for which it is responsible. We look forward to seeing further progress in the Department's 2009 Report.

Bullying, harassment and discrimination

14. One particular issue affecting the Department's capacity to deliver which we have pursued during our inquiries into recent Departmental Annual Reports is that of the small but persistent and significant incidence of bullying, harassment and discrimination within the former ODPM and its successor, CLG. The 2008 Departmental Annual Report is keen to stress CLG's commitment to "the creation of a positive working environment where colleagues treat each other with dignity and respect and feel safe to speak up and challenge."[13] It states that staff surveys over the year show gradual improvements in the number of staff who feel able to speak up and challenge the Department, with 30 per cent. in the first quartile to 34 per cent. in the third quartile. In our first oral evidence session, the Permanent Secretary told us about steps that CLG was taking to tackle the perception of bullying, harassment and discrimination:

What I think we were seeking to deal with was a climate within the organisation—not universally but more than you would want—of a rather robust management style on occasions and one that did not really draw out from people their opinions and their views and treat them with respect. We have put a lot of time and effort into creating the right climate, so what we do as senior people, how we behave; a lot of investment in coaching and also providing some opportunities for staff who feel they are being badly treated to talk off-line.[14]

He went on to admit that the Department, while working very hard over the last couple of years to improve the climate, still had "further to go in terms of our overall development of the organisation".[15]

15. The latest Capability Review shows that management culture is an ongoing issue for the Department. It found that

Staff and stakeholders observe barriers to effective feedback and challenge in the Department, particularly at Board level. Only 27 per cent of respondents to the staff survey feel that open discussion is encouraged and that it is safe to raise difficult issues in CLG. This impacts on the Department's ability to identify and respond to problems and opportunities, and it hinders Department-wide involvement, which may be leading to pressure on staff. CLG needs to ensure that the culture it creates, internally and with stakeholders, is one that staff feel is open and where feedback is valued. At the same time, it needs to strengthen channels of systematic feedback and external comparison.[16]

16. CLG's response to the Review reiterates its senior management's continued commitment to addressing the issue: "[We] are targeting our organisation's hard-to-tackle issues of 'speak up and challenge', tackling poor performance and managing change, and are setting ourselves goals for improvement on all three."[17] Nevertheless, we remain concerned about the persistence of poor management culture in CLG. Last year, we recommended "that CLG review the effectiveness and value for money of its actions over the past two years with a view to refocusing its efforts."[18] Since then, the Department has continued to take steps to try to address the issue. However, neither the Department's formal response to our Report nor its response to the Capability Review suggest that senior management is thinking seriously about whether the steps which it is taking are actually working, as we recommended. Rather, the approach seems to be to carry on and hope for improvements in the future: "we would expect it to take longer before significant changes in the proportions actually experiencing bullying or harassment are recorded […] We will continue consulting with groups of employees about their perceptions of these issues […] we will continue to monitor progress through staff surveys […]"[19]

17. Poor management culture in CLG is not just a problem for those who work there, as the Capability Review recognizes. Tackling that culture is an integral part of improving the Department's effectiveness and its ability to deliver. We do not doubt Departmental senior management's commitment to dealing with the problem. We continue to doubt, however, whether it is doing so in the most effective way. We reiterate our recommendation that CLG review the effectiveness and value for money of the actions which it has taken so far to combat poor management culture. It should do so with a view to ensuring that its efforts are directed towards steps which will lead to demonstrable improvements in the Department's ability, as the Capability Review recommended, "to identify and respond to problems and opportunities".

2 Communities and Local Government, Community, opportunity, prosperity: Annual Report 2008, May 2008, Cm 7394, paras 2.37-44. Back

3 Cabinet Office, Communities and Local Government: Progress and next steps, December 2008 (Civil Service Capability Reviews) (hereafter "Capability Review"), p.5. http://www.civilservice.gov.uk/documents/capability/pdf/clg-progress.pdf Back

4 National Audit Office, Performance of the Department for Communities and Local Government 2007-08: a review by the National Audit Office, October 2008 (hereafter "NAO"), para 2.1. Back

5 NAO, p.41. Back

6 The Department brought together its action on 'Strengthen understanding of what works and why in delivery, apply that knowledge consistently, and see projects through to success' and 'Manage implementation more systematically, so that risks are addressed, obstacles are overcome and there is real accountability for delivery'. Back

7 Capability Review, p.5. Back

8 Capability Review, p.11. Back

9 HC (2007-08) 170, para 1. Back

10 HC (2007-08) 170, para 6. Back

11 Capability Review, p.8. Back

12 HC (2007-08) 170, para 9. Back

13 Cm 7394, para 10.20. Back