Memorandum from Hamish Davidson, Chairman,
Davidson & Partners
INTRODUCTION
Submissions for other witnesses appear comprehensive
and in many respects deliver some consistent themes. Rather than
repeat them, I shall merely comment on or add some additional
thoughts and perspectives, as well as raise some issues that do
not appear to have surfaced as yet and which may be of interest
to the Committee.
Culture within the public sector generally is
"never take a pay cut, and never take a cut in status"
Christopher Johnson (Mercer) alludes to this in his
submission when he talks of it being easier to attract talent
from the private sector than from other roles in the public sector—intrinsic
value of the work and quality of experience to be gained—whereas
candidates from other parts of the public sector already enjoyed
intrinsically valuable work.
Within the private sector, it is my experience that
candidates will be much more flexible about an "apparent"
drop in status as regards literal job title in order to take on
a wider role with more responsibility—or a more focused
delivery role. They are also more open to being flexible on the
make up of the compensation package, which might involve a lower
base salary.
Within the public sector, I have found that other
than a potential move to the "Not for Profit" or "Third"
sector, candidates are almost always unwilling to take a drop
in status/title—and most definitely are unwilling to take
a drop in salary. The exceptions to this behaviour are, in my
experience, rare and exceptional.
This "culture" has had a series of
knock-on effects, as I will note below.
The roots of recent salary inflation at Chief
Executive (CX) level in local government
There are a number of causes:
(1) The role of a Local Authority CX has become
much more complex
The net impact of central government policies
over the last 20 years means that the role of a Local Government
CX (and with a few notable exceptions, I am primarily thinking
of unitary, city, metropolitan and counties—rather than
districts) has become a larger one and much more demanding in
recent years. Rather than presiding over a "steady-state"
machine with little in the way of change and a large, top-heavy
bureaucracy—the role of today's CX is much more complex,
involving ensuring delivery of services through third parties
as much as through directly employed staff, via a slimmed down
top team and has become much more community and outward facing,
and now has very much a shared "leadership" role alongside
the elected political Leader of the Council. Actually, the modern
role of a CX of a unitary, Met or City authority is probably the
broadest in all of public sector. These are tough jobs. The talent
required to be successful in this new model CX role is now much
greater than was the case in years past, and inevitably then,
the pool of such candidates of such calibre is small. Candidates
of this calibre are in great demand—and this has contributed
to their ability to command higher salaries.
(2) Much of central government now "rates
highly" the best of local government CX's
When I first began recruiting within the public sector,
local authority CX's were, with very rare exceptions, not rated
very highly—to such an extent that when conducting a search
for a senior civil service appointment, I would generally have
been laughed out of court if I had suggested headhunting within
the local government community.
Over the last 10 and particularly over the last
five years, with the focus on "delivery" local government
is today considered one of the few parts of the public sector
that actually "gets" delivery, and from where talent
that understands how to achieve such in a complex context can
be readily sourced. Today, when undertaking a search for a senior
civil service or agency role, local government is one of the first
areas typically to be considered. The best of local authority
CX's now find themselves to be a highly sought after commodity,
able to command much higher salaries.
(3) The unintended impact of CPA
The Audit Commission alluded to this issue in
its report. A perhaps inevitable impact of the CPA regime was
the almost desperate need of local authorities to move out of
the danger zone of one or no stars—and if at all possible
hit four stars. Fair enough. However, what I noticed over the
next few years was an emerging trend for elected members, when
appointing a new CX, to increasingly veer towards appointing a
serving CX who had already made their mistakes elsewhere, would
therefore know what to do different, and thus hit the ground running
with the barest minimum of learning curve.
It is the impact of this trend that the Committee
will want to take note of. Increasingly, there emerged a reluctance
to make an internal appointment as CX and to opt for the external.
Now, had the internal candidate been appointed, then the salary
could typically be set at the lower end of the range. However,
given the increasing trend to appoint "externally",
and given my point about the prevailing culture within the public
sector of never taking a pay cut, the inevitable consequence is
ever increasing salary inflation.
(4) A general reluctance to appoint candidates
from outside of local government
I note with interest that this was a point David
Clark of Solace chose not to comment upon in his evidence to the
Committee.
My own personal philosophy regarding talent,
remains the same as when I last gave evidence to this Committee
back in 2003. Specifically:
— diverse teams tend to make more informed
decisions;
— the best of talent from any one sector
is as good as the best of talent in any other sector; and
— talent comes in all shapes, sizes, guises,
genders, accents, nationalities, sectors, etc.
However, for whatever the reason (and perhaps
this is another unintended consequence of the CPA regime), local
government has continued to be very wary of appointing CX's from
outside of the local government family—and very rarely does
so, despite more candidates from other sectors (including private)
increasingly being drawn to vacancies when they occur, particularly
given the more attractive remuneration levels. So whilst one might
have thought that increased supply of candidates would take the
pressure off the trend of rising salaries, in fact, that potential
supply has either tended to be ignored or the specifications for
the roles written in such a fashion as to exclude candidates from
outside of the sector.
(5) A general reluctance by head-hunters to
challenge restricted personal specifications
(6) An increasing tendency "not"
to respond to open adverts
In Europe (but not the US), the UK (and most
especially England) is quite unusual with regard to the common
practice and extent to which recruitment consultancies/head-hunters
are used to recruit to local authority CX roles.
There are a number of reasons for the UK situation:
— the thinning and reduction of HR capacity
leaving organisations less able or confident to undertake occasional,
top level recruitment;
— the increased complexity of the role
of CX in local authorities, leaving many less confident about
their ability to "grow their own talent";
— the increased complexity of the role
of CX in local authorities has also meant that the candidate pool
of candidates perceived able to do the job from within the local
government community has declined;
— an increased trend to bring some "independent
assessment" element to the recruitment process;
— even where there may be potential internal
candidates, a growing trend to "test the market";
— the increased turnover and "mortality"
rate of CX's, meaning that local authorities, faced with fishing
more frequently in a smaller pool (bearing in mind the general
reluctance to "open up" the person specifications to
candidates from outside of the local government community) have
had little choice but to employ external consultancies (head-hunters)
to identify, approach and encourage potential candidates to move
jobs; and
— the desire in some cases to address issues
of "diversity" and under-representation, and thus the
need to target specific individuals or categories of individuals.
All of the above reasons have served to increase
the tendency to use external consultancy assistance (head-hunters)
in senior level recruitment. This is a trend that is increasing,
steadily.
However, in recent years, the principle reason
for the increased use of head-hunters has been a shift in candidate
behaviour. 10-20 years ago, candidates typically:
— will not have been overly concerned about
confidentiality regarding their potentially applying for another
role;
— will not have worried too much re the
knock-on impact of applying for an external role on their relationship
with their Leader, and indeed, likely to have informed their Leader
of their action at the outset; and
— will not have worried too much re the
knock-on impact of applying for an external role on the organisation
as a whole.
Today, by comparison, we see very different behaviours:
Today, the "trend", particularly amongst the strongest
and highest profile candidates is for them to be:
— very concerned indeed about confidentiality;
— unlikely to wish to "rock the boat"
with the Leader unless absolutely necessary, and therefore not
tell their Leader that they have applied for another role until
they have been short-listed for final panel interview;
— be very concerned about "leaks"
regarding their application, and word getting back to their organisation
and potentially "de-stabilising" it;
— extremely concerned and at times, almost
paranoid about seeking promises and guarantees that confidentiality
will be maintained and that references will not be taken up until
very late in the process:
[It is worth pointing
out, here, that public sector is very different from private sector
in this regard. Formal current employer references still tend
to be taken up prior to panel interview in the public sector,
whereas this will almost never happen in the private sector—references
only being taken up if the decision has been taken to offer the
person the role, and that offer being conditional upon satisfactory
references
It is also worth noting
that the extent of informal "referencing" (or "checking
up on") of candidates for searches conducted for private
sector clients tends to be much more extensive than is typically
undertaken within the public sector].
— much less willing to "put their
hat in the ring" and formally apply for a role where they
perceive or think that there may be many other strong candidates
applying, and thus the recruitment begins to feel more like a
lottery; and
— very nervous about the emotional and
physical distraction that preparing an application and going through
a full scale interview and assessment process involves unless
they think there is a very strong chance they will get the role.
The net consequence of all of the above is that
candidates are increasingly:
— sitting on their hands and waiting to
be approached and persuaded to apply for senior public sector
roles;
— very unwilling to respond directly to
job ads;
— assuming that if they are not so approached,
then it is highly likely that the employer is not interested in
them; and
— unwilling to apply for roles unless they
are reassured that their application is likely to be very favourably
received, that the effort they will have to put into preparing
the application and going through a recruitment process with all
the attendant emotional and physical distraction will be worth
it and that they are likely to be a "strong contender"
to be appointed.
Overall, then, the local government recruitment
market (and indeed, at a slightly slower but still inexorable
rate, the rest of the senior level public sector recruitment market)
is moving towards a more "private sector" model of recruiting,
where although, because of the "open and fair competition"
tenet, roles are still advertised, the working assumption amongst
increasing numbers of employers is that the strongest candidates
are likely to be generated through headhunting.
And all this increased having to "tease
candidates out of their existing roles" has meant that the
balance of power in negotiations has shifted from the employer
and more towards the candidate when it comes to talking about
remuneration. Thus we have the final key element that has contributed
to perceived salary inflation for senior posts within local government.
Polly Toynbee saying "role of head-hunters
ought to be looked at in the course of this investigation"[7]
The point that Polly completely missed (and
indeed, was incorrect in her evidence) is that, unlike in the
private sector, where typically a head-hunter's fee will be based
a percentage of their eventual remuneration (their pay), that
does not apply in the public sector. For the most part
and with few exceptions, in the public sector recruitment consultants
charge a flat fee, agreed in advance with the client—with
the implication that (and here I am specifically contradicting
Polly), that there is absolutely no incentive (through gaining
a higher fee based on a percentage of the final agreed remuneration)
for head-hunters to "up the ante" on salaries.
Movement of senior execs between public and private
sectors, and vice versa
Lots of people in public sector talk about believing
they could do a job in private sector but few do in practice;
equally, they keep finding reasons why private sector people would
find it hard to do public sector jobs.
"The majority of highly paid senior public
sector jobs are not affected by a particular scarcity of suitable
candidates"[8]
... Taxpayers Alliance
Candidly, though many of the contributions from the
Taxpayers Alliance were interesting and relevant, this particular
statement is "utter rubbish".
"More focus on growing talent from within
and growing successors ..." per Chris Johnson
Spot on. This is a massive area of lost opportunity.
The extent to which public sector, despite the literal explosion
of "leadership development bodies" fails miserably to
invest effectively in growing its own talent (especially amongst
women and BME communities) is staggering. In this area, the private
sector (most particularly within global multinationals) is far
ahead of the public sector.
To confirm, the supply of suitable candidates
for senior roles is hampered and impacted by:
(1) Overly narrow specifications in the person
specification. (2) Those drafting the specifications and making
appointments tending to be "pale, male and stale"(and
this includes too many of the head hunter advisors).
(3) A tendency to not take perceived risks ("out
of the box" candidates—often those from private sector
or minority communities and women who may have had what are seen
as "unconventional" career tracks) in making appointment
and thus appoint "safe" (typically, white, male and
more conventional career track) candidates.
(4) "Byzantine" appointments processes
that "effectively" un-nerve and often end up discriminating
against candidates from outside of the public sector, for whom
these processes resemble some archaic, process-driven ritual.
July 2009
7 Q 30 Back
8
EXP 05 Back
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