Examination of Witnesses (140-159)
MR PETER
BOREHAM, MR
DAVID EVANS,
MR CHRISTOPHER
JOHNSON AND
MR HAMISH
DAVIDSON
21 MAY 2009
Q140 Chairman: If we had a standard
disclosure arrangement, one of the things that we could disclose
is that ratio of how it changes over time.
Mr Boreham: I think the ratio
is fundamentally unhelpful. Polly Toynbee referred to the situation
of outsourcing cleaning and catering staff. As soon as my organisation
outsources its cleaning and catering staff to Chris's organisation,
then my ratio gets better and his gets worse.
Q141 Mr Prentice: I remember the
exchange very well. She said that in the public sector 28% of
all people are professionals, in the private sector it is something
like 8 or 9% because the public sector has been outsourcing all
the low-paid jobs to the private sector. I remember that exchange.
Mr Boreham: It does immediately
distort the ratio.
Mr Johnson: I do not think it
is just because the public sector has been outsourcing some types
of work. I think the nature of the role of the public sector means
that it needs more professionals proportionally than most private
sector organisations do to finish the work.
Q142 Julie Morgan: I wanted to ask
about your experience with the public sector organisations you
have worked with. You come in and you are paid your thousands
and you give your advice.
Mr Boreham: I am sorry; our companies
are paid thousands.
Q143 Julie Morgan: I mean your companies,
yes. What is your general experience? Is your advice accepted,
and do you measure what the results are afterwards?
Mr Johnson: I will start. Certainly
in the case of the firms I have worked with over the years, providing
advice is a mixture of providing objective, dispassionate advice
on the one hand and working through with the client to help the
client get to a decision that takes into account the advice that
we give. Yes, we are very interested in the effect of that advice,
so over the years I have looked at organisations and watched them
to see whether they seem to be making progress as a consequence
of advice they have taken from firms I have worked with or other
firms. It varies from consultancy firm to consultancy firm, but
most consultancy firms do some sort of review with the client
after the work has been done to take stock of whether the advice
was the advice which was required and whether it had the impact
that was desired.
Q144 Julie Morgan: So you do review
it?
Mr Johnson: Yes.
Q145 Julie Morgan: What are the results
generally?
Mr Boreham: Do clients always
take our advice? No, and, indeed they should not. It would be
an unfortunate situation if we were making decisions for organisations,
and I am quite uncomfortable when an organisation wants me to
tell them what to do, because it implies that they have not engaged
with the task that they are looking for help with. So most of
the time, yes, they take our advice, but they do change it, they
do ignore it. Sometimes, actually, afterwards, we work out they
were quite right to ignore our advice.
Q146 Chairman: You still get the
fee, do you not?
Mr Boreham: Absolutely.
Q147 Julie Morgan: What about political
involvement in setting pay, for example? What do you think of
politicians setting the pay for the chief executives?
Mr Boreham: I think it is very
difficult for politicians to set pay, because the politician will
immediately look at how this will play when it is disclosed in
the newspaper, and that will weigh very heavily on his or her
mind, quite understandably, whereas the remuneration committee
chairman of an independent organisation will be focused on the
needs of that organisation in particular. I think it is difficult
for all of you to set pay levels for an external organisation.
At the risk of making myself very unpopular, political decisions
were taken some time ago to hold down the pay of MPs and to reward
in a less transparent way, and I think that is probably something
that everyone now regrets. That is an example of a political decision
taken to keep the headline level down. The same thing could easily
happen if we were trying to have political decisions for pay,
for example, of a local authority chief executive.
Mr Davidson: That last point is
very prevalent here. I think that there has not been a local authority
chief executive appointment, one that I was involved in, where
politicians were not involved in setting the pay. The unique thing
about a chief executive appointment is that for every other appointment
in the authority the chief executive is the client, whereas for
the chief executive appointment the politicians are the client,
and they are, in my experience, very sensitised to the remuneration
issues. Indeed, I think that is vital, because they will, in the
end, have to defend this when it becomes public, because there
will be an open salary on there. My practical experience has been
that I have often given advice in terms of what I think, and sometimes
that advice has been accepted and sometimes not. I explain the
implications of not doing so and we move forward, but I have never
had a problem with politicians having some involvement. More generally,
taking the discussion away from pay for a moment, my practical
experience over the years, moving right across public services,
has been that often the clients do not take advice and particularly
advice that has been geared towards opening up the specifications
to make them less onerous. The last time I gave evidence to your
committee, I made the point about: diverse teams making more informed
decisions; the best of talent in any one sector being as good
as the best of talent in any other sector; and talent coming in
all shapes and sizes, guises, sectors, nationalities, whatever
it may be. I make that point relentlessly to clients in public
services. Sadly, they tend to pay lip service to this and then
proceed to narrow down the specification dramatically, thereby
narrowing the potential pool of candidates, and thereby, I am
afraid, back to inflation in remuneration.
Q148 Julie Morgan: I think you talked
earlier about the pale, male and stale appointments and a sort
of world that is a bit pale, male and stale. I know the appointments
you have made have not all been pale, male and stale because I
think you have been responsible for some appointments where women
have come in and black and minority ethnic candidates, but it
does seem as if it is all from a small grouping of known people.
I suppose that is my criticism really of the idea of head-hunting.
You are complaining about a narrow specification, but head-hunting
implies that you go to those that are known, and I think that
is really something that does go down quite badly sometimes with
the public and people know about how it is done?
Mr Johnson: As a client in that
situation, because I have been a client, I have actually been
a client to Hamish, my experience is that the client is often
pressing—almost the opposite of what Hamish is saying—the
recruiter to think more broadly. I can think of a number of instances
where we were looking to make sure that we had tapped into potential
candidates that were from minority groups and what media could
we use to do that and how could we get the recruiter to focus
on those parts of the market place. So I do not think it is the
case that everybody takes an easy option, recruiting in their
own image or recruiting from the people they know. I think there
is a serious effort on both the client and the recruiter's side,
in my experience, to widen the net and to make sure that we, as
we then were, are picking up from a much more diverse group of
candidates. I felt quite heartened actually by my own personal
experience in that respect.
Mr Davidson: Chris was an enlightened
client, frankly, although I have to beg to disagree to some extent
here. First of all, I will accept, you will be delighted I say
this, I guess, that head-hunters are often part of the problem,
not part of the solution. They are part of the problem in that
they themselves tend often not to challenge the client sufficiently,
they tend often to take the lazy way out, because if, in fact,
it turns out that we only have to look at a very small pool, it
is less work. They often are themselves made up of male, stale
and pale, they often are made up of people who work in that unique
sector, so they are minded to think about only that sector as
well. So I would be quite critical of many of my colleagues in
this environment. However, I am also aware that sometimes, for
statistical purposes (and the Cabinet Office were very assiduous
at one point in collecting statistics in terms of analysing a
break-down of shortlists and such like), yes, there is a pressure
to deliver candidates who are not of the norm, but I come back
to my point that often those people do not get appointed and they
have a bad experience and, as a result of that, they decide, "I
am not going to apply for these jobs again." This is what
happens. So there is a real conundrum here in terms of delivering
that diversity of candidates linked back to this point of inherent
conservatism of the appointment process.
Mr Boreham: Can I make a specific
point on diversity, which is to do with the recruitment of non-executive
roles into public bodies, for example. Non-executive roles in
the public sector are actually paid extremely low compared to
the private sector; so a discount from private sector to public
sector exists at executive level, but at non-executive level it
is much larger. This actually causes quite a serious diversity
issue, because typically you can only get people of the necessary
experience if they have retired on a nice fat pension, so you
tend to end up with people in their sixties or their seventies.
They are not just male, pale and stale but they are certainly
pale, because the reality is that there are not enough black and
minority ethnic people in their sixties and seventies with deep
business experience and credibility. If you want to get more black
and minority ethnic non-executive directors into the public service,
you have to recruit people who have got a day job, and the reality
is that if they have got a day job, £290 a day is not going
to do it. It also raises the question of diversity of outlook:
because if all your non-executive directors are portfolio non-executives
or people who have retired, you are not getting the perspective
of people who are in work at the moment, who are raising families
and who are more representative of the population of the UK as
a whole.
Mr Davidson: I agree. There is
a real dilemma there—with regard to the issue of how we
tackle that, particularly the under-representation of youth for
example. In the latter case, the typical excuse will be "We
cannot hire them as non-executives because they have not had enough
life experience and experience generally." How are they ever
going to get it? I do not understand why more quangos in particular
but all these public bodies too—have not set up shadow boards
to draw in the talent to give them practical experience to grow.
It tends not to be done. I have made that plea several times.
Coming back to your point here in terms of these appointments,
to explain the conservatism point here whether it is non-executive
or full-time jobs, often the panels will make the logical hire—not
the inspired hire. The inspired hire is that person who is a bit
different who does not fit the norm and is outwith the people
we know about.
Q149 Paul Flynn: The evidence we
heard this morning has reinforced the view that essentially your
role is parasitic. You have virtually said so. If you disagree
with that, where is the proof that your intervention and the vast
fees paid to you has resulted in the improvement of the efficiency
of the organisations?
Mr Davidson: You ask a direct
question and I would be prepared to point directly to examples
of organisations I have been involved with over the years.
Q150 Paul Flynn: You just said that
often times they do not take your advice and Mr Boreham has said
sometimes they are right not to take your advice.
Mr Davidson: I think that is fair.
Q151 Paul Flynn: On balance, where
is the advantage in employing you and where is the proof of it?
Mr Davidson: My perspective may
be somewhat different. The kind of client base I have had have
tended to be the doomed, the dying or the failing type of organisations
or the seriously aspirational that do not want boring candidates.
They need seriously change focused candidates and those individuals
do have to be sought after, particularly where we are trying to
recruit for organisations with very poor reputations.
Chairman: You are not talking about the
Speaker's Office, are you?
Q152 Paul Flynn: You were responsible
for the advising of the Chair, Chief Executive and the 14 Commissioners
of the Commission for Equalities and Human Rights.
Mr Davidson: A fascinating exercise.
Q153 Paul Flynn: One of the pinnacles
of your career perhaps?
Mr Davidson: No, I think the Chair
of the Electoral Commission would be the pinnacle.
Q154 Paul Flynn: The Chair was appointed
at £160,000 a year, the Deputy Chair and the Commissioners
get a daily allowance of £600 and £400 respectively,
so not a lot of equality there. Three senior personnel resigned
from the Commission within a week in March: the Chief Executive,
the Group Director of Strategy, and one of its Commissioners.
Sir Bernard Massie, another Commissioner, also sent a letter,
a written warning, to his colleagues expressing concern at the
Commissioner's performance. Do you think your advice and the cost
of it were justified by the chaos that resulted from those appointments?
Mr Davidson: You are assuming
that I gave advice that the particular individuals should be appointed
which is not necessarily the case.
Q155 Paul Flynn: There is no need
to reveal your involvement. How much was your organisation paid
for this and what is your assessment of the result?
Mr Davidson: My understanding
is that there is no criticism of the Chief Executive who has resigned,
Nicola Brewer. She is a very highly regarded and talented individual.
My understanding of the Commissioners who resigned is that it
is more to do apparently with the criticism of the Chair and with
regard to the Chair appointment. I did not make that appointment.
Q156 Paul Flynn: This is the parasitic
nature of it. You go in, you give advice, and if it goes wrong
it is nothing at all to do with you but if it goes right I presume
you claim the credit. I have not seen any evidence from you yet
of why you are necessary. We have seen this enormous explosion
in the use of consultants. Where has been the resulting improvement
in the efficiency of the bodies that employ the consultants? Is
everything more wonderful now in organisations where consultants
are used? Are they more efficient and more profitable than before?
Where is the evidence?
Mr Davidson: If you want to look
at specifics, I would, in local authority terms, point to places
like Coventry, Birmingham, the Audit Commission and Camden. For
those organisations I could give you evidence. In terms of when
an organisation begins to fail, there are very many complicated
reasons why that will occur. It may indeed be to do with the relationships
between the chair and full-time appointments, just as it is sometimes
between politicians and full-time appointments as well. I stand
by the point that if we are deemed to have failed we will not
be asked back. What is interesting there is that in the main we
got asked back. Nonetheless, I take the challenge; it is a fair
point to raise.
Q157 Paul Flynn: You corrected one
of my colleagues here who said that you are paid thousands and
you said no you were not paid thousands, your organisations were
paid thousands. You are not doing this work from the goodness
of your heart or are volunteers in some way. In the interests
of transparency, would you like to tell us what you are paid?
Mr Boreham: I have a copy of my
P60, if you would like to see it.
Mr Davidson: I indicated that
in the public sector what happens is the fees tend to be a flat
rate for recruitment whereas in the private sector it is a percentage,
therefore there is no salary inflation in that sense. To answer
your question directly, in my last full year I got paid £190,000
so just below the Prime Minister in that particular case.
Q158 Paul Flynn: We know Mr Boreham
is paid £126,000.
Mr Johnson: I used to work for
a different management consultancy from the one I work with now.
My base pay then was £170,000 and my whole earnings were
about double that. Then I worked in the Cabinet Office where my
base pay was £135,000 and my whole cash earnings were £150,000.
Now I am with Mercer and they pay broadly in line with what is
transparent.
Mr Evans: I am feeling considerably
underpaid.
Q159 Paul Flynn: You are not going
to tell us by how much you are underpaid. You do not have to.
Mr Evans: I am paid less than
an MP.
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