DR 336: Letter to the Chairman of the Committee from Sir Peter Ricketts KCMG, Permanent Under Secretary of State

 

 

I am writing to update you on the latest FCO management issues. This letter covers the first quarter of this year: January to March 2009.

 

capability Review

 

The latest Capability Review (March 2009) was positive about progress made in modernising the FCO. It significantly raised our overall scores and concluded:

 

"The FCO engaged seriously with the findings of the 2007 Capability Review. The Department has demonstrated enthusiasm and commitment to change and improvement. The Department has made considerable progress in key areas, including a better definition of its role and purpose, more strategic HR, and improved business planning and change management. Much of this is work in progress, and FCO needs to continue to think radically about its place in a changing world. Considerable improvements in leadership, along with plans that will improve strategy and delivery, give confidence that genuine change has begun and that improvements will continue."

 

The full report was sent to the Committee on 31 March 2009. 

 

Staff Survey

 

We received the results of our latest staff survey in January (we do these annually). I attach the full report.[1] The big picture is encouraging: most of our staff think our organisation is good and getting better.

We got our best ever return rate (71% of all staff) and high scores in many areas. Most of our staff:

· understand how their own work contributes to FCO/post objectives (92%) and how their own directorate/post contributes  (81%)

· feel they are doing something worthwhile (88%)

· are proud to work for us (84%)

· are able to use their skills and abilities in their current role (80%)

· feel safe and secure at work (80%)

· feel part of a team (79%)

· have good line managers: most staff (78%) say their managers consult them,  praise good performance (76%), set clear objectives (73%), etc.

· say they are treated with fairness and respect (75%)

· know they are responsible for developing their own skills (86%)

· think they get good training (69%)

· say the FCO/post keeps them well informed (69%)

· can strike the right work/life balance (68%)

And there were significantly improved scores in several areas, including leadership (70% say their senior managers show integrity, up 7% on last year, and 64% have confidence in their senior managers, up 11%); change (68% of staff understand why the FCO is changing, up 7% on last year); and diversity (73% now say the FCO/Post is actively committed to it, up 7%).

There were also areas where we need to improve. 17% of staff said they had experienced some kind of discrimination, bullying and harassment in the last year. I have reiterated to all staff our zero tolerance policy and made clear that I hold our Heads of Mission and Directors responsible for implementing it. We are also following up with Posts and Directorates where the survey suggested a significant level of unacceptable behaviour.

 

I take these figures, and this issue, very seriously. I think that part of the reason this score is higher than last year is that our diversity training has actively encouraged staff to speak out against unacceptable behaviour. And we know that some staff whose poor performance is being professionally tackled by their line managers are wrongly accusing their managers of bullying. But bullying, discrimination and harassment, is clearly still taking place and I am determind to stamp it out.

Our culture

 

I mentioned the Cultural Audit in the last update. This covered a much smaller sample of staff than our staff survey, but its findings have helped us to debate and define the type of culture we want to see in the organisation and how we can go about achieving this. 

 

While retaining those aspects of our existing culture of which we are proud, including a strong commitment to excellence and public service, we want the FCO to become a more flexible, creative and innovative organisation.  We've set out the kind of behaviour that we want from all our staff in the attached leaflet (The FCO way)[2] which we are circulating to all our posts and directorates.

 

I and my colleagues on the FCO Board have made a commitment to try to model this behaviour ourselves. I have asked all our managers and leaders to do likewise. And we have made clear that we will recognise and reward all our staff who demonstrate it themselves. 

 

Human Resources

 

Improving service to our own staff in our HR function was one aspect highlighted by both the cultural audit and the recent staff survey.  We are taking steps to address the problems identified.  This work is focussing on customer service training and improving our online HR offering for staff.

 

We have also restructured the HR team and appointed a new Assistant Director for Talent and Performance Management. This appointment is part of a drive to create a more strategic HR function, able to respond to the needs of the organisation, and provide a flexible and professional service to all our staff.

 

Corporate Services

 

Last December we launched the Corporate Services Programme (CSP). The goal is to provide better service for our staff and better value for the FCO and the UK taxpayer. 

 

The CSP aims to modernise the FCO's corporate services policies, processes and tools to improve the way in which we support our people (by introducing new HR tools); run our buildings (by adopting new ways of managing our properties such as Facilities Management); and manage our money (by implementing better banking and procurement practices). For example, since December five overseas posts in Europe have switched over to a new facilities management contract for the UK and North West Europe. Two more go live on 1 May and the remaining seven by July. 

 

The CSP has also focused on cutting out unnecessary bureaucracy through our "10,000 days" project. So far over 9,000 days of management time have been saved by simplifying processes and abolishing unnecessary management returns. So we are increasing our target, and hope to pass 15,000 days by the end of the next quarter.   

 

Looking ahead we remain on track to open a Corporate Services Centre in Central Milton Keynes in July - for the first time we will bring corporate service support and delivery into a modern, open-plan building. With the tough economic climate in mind, the Board have also asked the CSP team to come up with proposals to save significant money from the next financial year onwards. 

 

Business Planning/Departmental Strategic Objectives (DSO) and Public Service Agreement (PSA) Monitoring

 

DSO and Geographic Business Plans for 2009-10 have been agreed.  Country Business Plans which cascade from these are being finalised by our overseas posts.  For 2009-10 we have introduced a Balanced Scorecard, fully integrated into the Country Business Plans, for posts to complete at mid-year and end-year reviews. The scorecards will give Directors and the Board an overview of the network's all-round performance as well as being a useful management tool for posts.   

 

Final assessments of progress made in 2008-09 against our DSOs and the PSA on which the FCO leads (Conflict Reduction) will appear in our 2009 Departmental Report.  The Board will hold its internal review of 2008-09 DSO and Geographic plans in June. 

 

Top Risks Register

 

When updated in March, the Top Risks Register included five operational risks (physical security, resources, internal financial controls, IT systems, UKvisas) and nine strategic risks (terrorist attack, Iran, Afghanistan, Iraq, Pakistan, Middle East, Zimbabwe, economic crisis, Overseas Territories and Sudan). The Board also discusses individual risks in depth at its monthly meetings, the most recent of which focused on the Horn of Africa (January) and Information Management (February).

We continue to raise awareness of risk management throughout the organisation.

Five Star Finance

We have implemented a new cash flow management scheme, a key HMT requirement for the FCO, which is now classified as a large department.

 

In their provisional report Financial Management in the FCO the National Audit Office (NAO) confirmed that we have firmly reached 3.5 stars. Whilst they recognise that there is still room for improvement, they did praise the substantial improvements made within the last 12 months within the FCO. NAO commented that there is "a strong financial management culture in place at the top of the Foreign & Commonwealth Office".

 

Eight new accountancy trainees (recruited through the Government Finance Profession Scheme) are now assigned to FCO departments and will undertake a series of placements in the FCO finance community during their training.    We have also recruited an additional seven Government Finance Professional trainees who will be joining us in September 2009.  The aim is for the FCO to 'grow its own' accountants who will be equipped to occupy senior management positions in the future.

 

The internal Fast Stream Finance option entry scheme (aimed at up-skilling the existing finance community) was recently launched. This will bring an additional 20 officers into mainstream finance, supporting them during their studies as part of the 'grow our own' agenda.

 

A 'Finance in the FCO' course aimed at the generalist level was successfully started in January.  New financial/procurement compliance seminars to help staff understand the 'Procure to Pay' process and shift of control to accruals-based budgets and targets ran from January to March in the UK and overseas, equipping around 500 staff across the network to better comply. Requisitioning training was delivered successfully in the UK over the last six months and is now being rolled out regionally. A 'Budgeting, Monitoring and Forecasting' course was piloted in February and regional rollout is underway as part of a strategy to increase regional availability of finance training. Additionally, a tailored, modular finance course for Board members and senior management is being scoped and due to be piloted in May. A further review of all finance training requirements is planned for May.

 

We are implementing Hyperion and Oracle Business Intelligence Enterprise Edition (OBIEE) to provide our people with the best in planning, budgeting and Management Information tools. We will use Hyperion/OBIEE as our single, standard, end-to-end planning and budgeting solution. Hyperion is due to be rolled out in the UK in July.

Estates

 

The Committee will be aware from their visit last year of existing plans by the Cayman Islands Government to provide new purpose-built office accommodation for the Governor's Office. The original plan for staff to remain in their current location until completion of new offices changed as the building's new owners are developing the building as retail space. Consequently, the Governor's Office moved to interim accommodation at the end of March. New accommodation is currently under construction and due for completion in Spring/Summer 2011. The project is funded by the Cayman Island Government.

 

Staff moved into our new Embassy building in Harare at the end of March. The new offices provide a modern working facility for staff from the FCO and other partners across government, and we have added staff amenties, in a secure two hectare compound.

 

This is a complete transformation from the Embassy's previous offices which were in two rented floors at the top of an eight storey building in central Harare.  We had no control over other tenants and their visitors, little control over the basement car park, no stand-off from the pavement and were right next to a petrol station - all factors making the Embassy a highly vulnerable target.  On top of that the economic decline of Zimbabwe prevented the landlord from adequately maintaining the building which resulted in frequent power cuts, people trapped in lifts, and lack of running water.  The new Embassy has its own borehole, water treatment plant, sewage treatment works and full standby power making it independent of public utilities if need be. It integrates DFID staff with the rest of the Embassy, which will assist co-ordination of British support to the new unity government and the British community. The opening of the new Embassy is a powerful signal of the UK's commitment to stand by the people of Zimbabwe and help them rebuild a democratic and prosperous country.

 

The difficult local conditions, continuing political upheaval and economic collapse in Zimbabwe, and a range of other factors pushed up the final cost of the Embassy from our initial estimate of £17.5m million to a final total cost of £27m. We are conducting a full review to ensure that we have received value for money from our strategic construction partner, Mace, and to establish whether those on the FCO side running the project took all possible steps to keep costs down. We are also looking at how to improve the governance and budgeting of future estates projects to ensure spend is tightly controlled and the taxpayer gets the best value for money.

 

Further to the FCO's response to the committee's recommendations on the FCO's; 2007-08 Departmental Report with regard to Islamabad and Karachi, I attach the final copy of the lessons learned action plan.[3]

 

I also enclose our quarterly report for properties sold[4] in the third quarter of financial year 2008-09. No properties were purchased. None of the properties sold were the Residence of a Head of Mission.

 

FCO Services

 

It is now a year since FCO Services made the transition to a full Trading Fund and I am pleased to report that the organisation has performed strongly in its first year.

 

FCO Services' change programme, intended to enable the business to operate effectively in a more competitive environment, has borne fruit and we are confident that the business has progressed well against its targets, delivering substantial benefits to the FCO.

 

Chris Moxey, FCO Services' Chief Executive, will report progress against FCO Services' Ministerial targets through their 2008/09 Annual Report and Accounts which will be laid before Parliament in July.

 

When Chris Moxey appeared before the Committee last July, I understand that some concern was expressed about FCO Services' ability to expand into wider markets under current economic conditions. I am encouraged by the past year's trading performance. Their commercial strategy is showing significantly more rapid than expected revenue growth generated from wider markets during 2008/09, with a current forecast wider market turnover for FY 08/09 of around £23.5m (2007/08 £12.5m).

 

In the light of FCO Services' strong performance in FY 08/09, new targets have been agreed for the FY 09/10, as follows:

 

· An in-year surplus before interest and tax of at least £2.9 million.

· A Return on Capital Employed of at least 3.5%.

· Wider Market revenue growth of 10% over 2008-2009 performance.

· Contribution to the FCO's Comprehensive Spending Review (CSR) efficiency commitments by delivering £6m of cumulative cash savings over the two years 2008/09 and 2009/10.

· A utilisation rate for revenue earning staff of at least 75%.

· A customer satisfaction rating of at least 85% satisfied or very satisfied.

These targets were announced to both Houses in a Written Ministerial Statement on 30 March 2009. They are challenging. But we recognise that our interest in FCO Services goes far beyond simply the achievement of low prices and high revenue. I am pleased that the Committee has asked us to take steps to ensure that the pressure on FCO Services to meet financial targets does not compromise the quality of the work it undertakes. We will: the FCO has an ownership interest as an investor and stakeholder, and as a customer we need FCO Services to focus on value for money, guaranteed supply and quality of delivery.

 

Third Generation Firecrest (F3G)

 

We have begun the main overseas rollout of our new IT system, F3G, following the completion of deployment at four pilot posts. Four more posts received F3G by the end of March, and we will be increasing the rate of overseas deployment significantly over the next quarter. We expect global rollout to be complete in the first part of 2010.

 

Some posts have encountered technical difficulties, which we are working to resolve. But overall the feedback from posts has been largely positive: staff are benefiting from a faster and more stable system, mobile working, and the ability for locally-engaged and UK-based staff to work more closely together.

 

Consular

 

The current consular credit card payment system, which allows consular customers to pay for all consular services by credit card, either through local banks or using a centrally negotiated contract with Barclaycard has now been rolled out to a total of 49 posts with a further 14 posts having completed training and due to go 'live' to customers shortly. Six further posts are earmarked for training in May.

 

Integration of the FCO and Identity Passport Services (IPS) Passport Operations

 

You will recall that we have agreed in principle to merge the overseas (FCO) and UK (IPS) passport services by 2011. Work continues on the integration plan. I and my Home Office opposite number, David Normington, signed a Memorandum of Understanding on 29 April, which represents a strong commitment by the two Departments to the project.

 

UK Border Agency (UKBA)

 

On 1 April the UKBA became a full executive agency of the Home Office. This followed a successful year as a shadow Agency during which time it brought together the work of the former Border and Immigration Agency, customs detection and UKvisas.

 

The FCO and UKBA share a strong commitment to working together to deliver an effective immigration policy for the UK. This commitment is enshrined in the Agency's three-year Business Plan published last month. In the introductory foreword the Home Secretary and Foreign Secretary have committed themselves to working together "to facilitate legitimate trade and travel, so that the UK remains flexible to changing economic conditions and continues to thrive as a global hub".

 

Service Level Agreement (SLA) with Partners Across Government

 

The provision of a worldwide platform for HMG remains a high priority for the FCO. Almost all our Whitehall Partners have now signed up to the new SLA which governs the terms under which we provide support and services to them and their staff based in FCO posts. Negotiations continue with the Met Police and some others to secure signature. We have recently conducted a review of our charging mechanisms and implemented a number of initiatives to simplify and streamline the existing processes and guidelines. We will continue to look to make it attractive for other government departments to base their overseas operations on the FCO platform: together we are stronger, safer and better able to deliver for the UK taxpayer.

 

 

 

 

11 May 2009

 

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[1] Not published.

[2] Not published.

[3] Not published.

[4] Not published.