House of Commons - Public Administration Committee

Outsiders and Insiders: External Appointments to the Senior Civil Service - Public Administration Committee Contents

Memorandum from the Civil Service Capability Group, Cabinet Office

Following our conversation yesterday, I am now able to attach a short summary of key data on the SCS which you will wish to share with members of the Committee.

Also attached are two letters from David Bell to Gus O'Donnell. David is happy for these to be shared with the Committee. Please note that the letter dated 17 September 2007 was a personal note which, amongst other things, contained David's views about the appointment of "outsiders" to the SCS. We have therefore redacted the sections which would not be pertinent to the inquiry as well as named individuals.

May 2009

ANNEX—Summary of key data on SCS

EXTERNAL SCS

As at 30 September 2008 the size of the SCS is 4,220 members.

EXTERNAL PROFILE

— The proportion of SCS that joined from outside the Civil Service has stabilised at 23%. This comes after a year on year increase between 2003 and 2006.

— For those in post at 1 April 2008, the median length of time in the SCS for externals was 3 years compared to 5.3 years for internals.

— The median age of external SCS is 50 years compared to 49 years for internals.

— The median salary of external SCS is higher than those of internals for all paybands. Overall the median salary for externals is £89,800 compared to £74,500 for internals.

— Around a third of externals are in medical, information technology or finance posts. The proportion of internal SCS in these professions is only 7%.

Table 1: SCS by Source, April 2003 to April 2008 (percentages)

Headcount Source	2003	2004	2005	2006	2007	2008
External	18	20	21	23	23	23
Internal	82	80	79	77	77	77
Total	100	100	100	100	100	100

Source: SCS Database. Cabinet Office

INFLOWS

— In the year to 1 April 2008 there were 533 new SCS entrants; 157 (29%) of these were external entrants, a decrease of 9 percentage points on the previous year.

— Of those 157 external new entrants, 127 were recruited though open competition, the other 30 include secondments and short-term staff.

— Since 2004, about 200 SCS new entrants each year have been recruited through open competition (187 in year to April 2008). This includes those recruited from within the Civil Service and external recruits.

Table 2: SCS entrants by source

2004	2005	2006	2007	2008

Number %	Number %	Number %	Number %	Number %

Internal entrants 337    64
309    65
404    70
326    62
376    71

External entrants 191    36
169    35
172    30
196    38
157    29

Total 528    100
478    100
576    100
522    100
533    100

Source: SCS Database, Cabinet Office

OUTFLOWS

— In the year to April 2008 there were 358 leavers from the SCS, the lowest figure since 2004. Just under a third (31%) of these leavers were recruited to the SCS from outside the Civil Service, the same as in 2007.

— Turnover rates for external SCS have been consistently higher than internals over the last four years. For 2007-08 the turnover rate for externals was 11.8% compared to 7.8% for internals.

— Of external SCS who left during the year ending 1 April 2008, 51% resigned. For internal SCS who left during the same period, the most common leaving reason was retirement (33%).

Table 3: SCS Leavers by Source, 2005 to 2008 (percentages)

Headcount Source	2005	2006	2007	2008
External leavers	31	28	31	31
Internal leavers	69	72	69	69
Total	100	100	100	100

Source:SCS Database. Cabinet Office

Chart 1: SCS Turnover rates by Source

DIVERSITY

There are targets on addressing under-representation in the SCS.

OVERALL SCS DIVERSITY

The targets to be achieved by 2013, with a stretch target to achieve them by 2011, are;

— 39% women in the SCS—33.2% (1401) as at 30 September 2008. Up from 32.6% (1374) in April 2008.

Chart 2: How the representation of Women in the SCS compares to leaders in other sectors[4]

DIVERSITY BY SOURCE AND STOCK

— 32.1% of external SCS are women, compared to 33.5% of internals SCS (Sep 2008).

— 25.4% of external SCS in Top Management Posts are women, compared to 26.7% of internal SCS in TMPs (Sep 2008).

Appendix 1—Letter from David Bell to Sir Gus O'Donnell, dated 17 September 2007

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BEING A PERMANENT SECRETARY

I began by reflecting a bit on my experience as a Permanent Secretary, with half an eye on my two year anniversary in post. To repeat what I have said previously to you; this has proved to be a fantastically interesting job in which I think that I have both learned a great deal and, I hope, contributed likewise from my experience in coming from "outside". I will say a little more below about what that might mean for me personally going forward.

I suppose that I am particularly pleased that I have made such a smooth transition into the role. However, the reality is that not all of the outsiders we appoint to DG posts and below find it quite so easy, despite our rhetoric of wanting such people to join us, it is particularly interesting for me in this Department as I have recruited outsiders who have "landed" in quite different ways. What do I conclude from this and are there lessons to learn if we are to continue to seek to encourage outsiders to apply for senior positions?

BRINGING IN OUTSIDERS; LESSONS LEARNED?

I think that there are two key points for me.

Firstly, an understanding of how politics and politicians work is really important in terms of previous experience, particularly for those coming into senior positions and who will have early and on-going regular exposure to Ministers. This is pertinent for those coming in from the wider public sector as it is for those from the private sector. I am forming the hypothesis that those who cope best are those who have significant experience of senior politicians eg in local government. For those who have no such previous experience we need to think much more carefully about induction or even opportunities for short term attachments for those who might be considering career shifts.

Secondly, our selection processes do need to be reviewed as a matter of urgency so that we can test better the adaptability and likely resilience of those that we might want to bring in from the outside. I worry that the Civil Service Commissioners are so anxious about political interference in appointments that they prevent us from making more intelligent use of Ministers.

This is a conversation that Leigh Lewis and I began with the Commissioners during their away day which we attended on 11 September. I was pleasantly surprised to hear how open they were to thinking about new ways of undertaking selection, not just in terms of how Ministers might make a contribution but in terms of approaches that go beyond out rather formulaic and rather truncated processes. Many other organisations would spend a lot more time than we do assessing whether the `fit' was right and it strikes me that we should explore whether that could help us, recognising the time and cost that might be involved.

DEFINING "OUTSIDERS" AND ASKING ABOUT THE VALUE THEY ADD

But who are the "outsiders"? I believe that we need to be cultivating those from outside the Top 200, but inside the wider NDPB world, who might well be serious candidates for Permanent Secretary posts in due course. I am particularly thinking of those who are now working in national bodies, having had experience of the "front line'. In my "world", I would like to include people like:

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These colleagues would be very serious candidates for Permanent Secretary posts in a number of departments (including DCSF) and I do think that we need to be cultivating them now so that they are ready and eligible for posts in the future. I suspect that there are others too across Whitehall who might be in a similar position. Are we identifying and developing them?

Even if we have a broad definition of "outsiders", we need to ask what value they add, something that I alluded to at CSSB earlier in the week. When we had my end-of-year review discussion, I commented on how I had become an increasing admirer of the "traditional" civil service skills. Certainly, the younger generation in DCSF and others that I have met across Whitehall are very clued up about delivery and are not the traditional "policy wonks". I am optimistic that such colleagues will comfortably compete for Director General posts and beyond in the future.

This leads me to the position of asking myself what the added value is of bringing in outsiders, beyond the obvious one of giving us a different mix of backgrounds. I think that this is a particularly pertinent question if we are paying over the odds for such people. To put it bluntly, do we really get £20k/30k/40k (or more!) value out of such people even when we are recruiting so-called "scarce" skills? I think that it would be worthwhile doing a pretty hard headed review of such appointments to ask ourselves whether they have delivered what have expected.

I would observe that when it comes to the crunch (as you will have seen very vividly over the past couple of months), the politicians seem to really like, and want close to them, those who have some of the traditional skills of operating the machinery of government, providing wise counsel and advice, fixing things and making them happen and negotiating across Whitehall and beyond. And that is despite the rather lazy rhetoric that we have seen in recent years implying that outsiders must be better.

Any success that I have had in working with Ministers has not, in my view, been attributable to the supposed "street cred" that I have brought as someone from the education system. Rather, it has been based on a lot of experience of working at a very senior level with politicians and understanding their rhythms and motivations, ie very much the "kit bag" of the traditional senior civil servant.

I would though make an important point about "the deal". It has been put to me that we say one thing about what we expect from outsiders in terms of challenging existing ways of doing things, utilising their external experience etc. but then when they get here, we expect something else and show ourselves to be quite resistant to challenge and change. What I have said in the previous paragraph might even be used as the case for the prosecution as what we really value, when push comes to shove, are the insider skills.

Now my response is that any outsider coming into a new organisation has to learn about the culture, see how things work, build alliances and the like if they are to succeed. Equally, they need to understand how "the machine" works if things are to get done. None of this is unique to the Civil Service and effective leaders should know how to adapt. However, I would acknowledge that there is a danger in bringing people, whose orientation is towards delivery, into an environment in which the focus is slightly different. Again, this reinforces the point about good selection processes, a clear understanding of what we want and a frank discussion with potential candidates about what they might be giving up as well as what they would gain by coming into the mainstream Civil Service.

There is also an argument that we should be clearer about what kinds of skills are required for particular posts. I am pretty certain that many of our NDPB's across Whitehall benefit from people coming in from the outside but this is not the same as saying that such people will necessarily make a straightforward and smooth transition to the "mainstream" Civil Service. Also, it is not inconceivable that there are many people we need with technical skills, often gained in the private sector, that might not suit them for regular interactions with Ministers (although I find myself immediately hesitating in the suggestion that you can be a member of the SCS and not be very good with Ministers, particularly if we know that from the outset).

SUCCESSION

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CONCLUSIONS... OF A TENTATIVE SORT

So, where does this leave me on all of this? A little confused, is the honest answer. Here I am as an "outsider" lauding the traditional skills of the civil service and indeed being very anxious to acquire them more deeply as part of my skill set. An outsider it seems who has some scepticism about how much value outsiders actually add, given what we often have to pay for them. And yet... it cannot be right or healthy that we sit here complacently assuming that all is well with us and that the people we have from within are sufficient to meet the changing demands in our country and beyond. We know that policy cannot be developed in isolation from understanding and driving delivery and we need people who are used to making things happen outside the world in which we inhabit. And surely too there has been real value in bringing people in from outside who have added significant value to our work and genuinely enhanced both our capacity and diversity?

I also wonder what it means for our younger generation of mainstream civil servants, particularly fast streamers and those whom we think are destined for greater things. We are unbelievably lucky in the Civil Service in attracting Britain's brightest and best (some of whom are so scarily bright and talented that I stand in awe of them; it reminds me of being a teacher and occasionally teaching youngsters who, even at the age of 10, were manifestly brighter than me!). so, when we talk of "getting out to get on", what do we really mean by this in terms of the skills and experiences required? What is the `rounded' civil servant of the future going to look like?

And how does what I have said here play into the very tricky pay issue that we have touched upon at CSSB? You know that I am fairly relaxed about paying what we need to pay, particularly to attract good people to run NDPBs but I am very concerned about the longer term impact on our ability to attract the best people to mainstream posts. And even if we said that the insiders are best suited for `our' posts and thus we can afford to depress pay rates, then we are back to the problem of the younger generation seeing what is happening and going elsewhere (except, as I have found, there is an inherent value in the fascinating and excitement of being a Perm Sec!)

The best I can say is that all of the is requires a bit more thought and could repay some further analysis and discussion, perhaps via a Top 200 group chaired by a Permanent Secretary. The timing is good because we now have a wider group of people at Director General level who represent a wide variety of backgrounds, some of whom we have paid a "premium" to appoint. It would be worth assessing how they have made the transition, how they compare with the insiders, what value we have got from them, what the likelihood is that they will succeed and so on. All of this I am sure would help you in planning for the future.

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Appendix 2—Letter from David Bell to Sir Gus O'Donnell, dated 16 April 2008

"OUTSIDERS" AND THE SCS

You will recall that I wrote to you about the above subject in September (my letter of 17 September 2007). You then suggested that I draw together a small group of interested colleagues to discuss this matter further and come back to you with any thoughts that we might have for the future. In the meantime, Sir David Normington has undertaken a commission to look at SCS issues more generally so I have copied this letter to him for information.

At the outset, I am very grateful to Gill Rider, Clare Chapman (Workforce Director General in the Department of Health), Lesley Longstone (Young Public Appointments Ltd, a recruitment company that specialises in public sector appointments) for joining the ad-hoc group and contributing so imaginatively and creatively to our discussions. Our deliberations were wide-ranging but I have tried to keep our conclusions fairly short and group them under a number of headings.

THE RATIONALE BEHIND APPOINTING "OUTSIDERS" TO SCS

Perhaps counter-intuitively given the recent practice of the Civil Service, we came to a fairly firm conclusion that appointing "outsiders" to the very senior posts in the SCS is always a risk. Clare Chapman was very powerful on this point, drawing upon her Tesco and PepsiCola experience in the UK, USA and Europe. If you start from this premise, it suggests that we need to grow our own talent more systematically and be very deliberate when we do appoint externally. There is evidence from the private sector that if no mitigating action is taken, circa 50% of external hires made at Director level are not successful (ie they either leave or become "blockers").

There is no reason why the public sector should be different. Data suggests that between 2003-07 circa 30% of SCS Pay Band 1 executives who were recruited from outside the DH and DfES/DCSF have now left their departments. Further analysis is needed to get underneath this number and more work is required to know how many "blockers" we have in addition to the leavers. Early evidence however appears to reinforce the hypothesis that senior external hires can be risky.

Not surprisingly though, our group continued to see value in making outside appointments in certain circumstances. What is key is that mitigating action is taken to reduce the chances of failure. This is commons practice in the best of the private sector but it is not yet mainstreamed in the Civil Service. Given the risk of a circa 50% failure rate, external recruits should be:

— Strategic hires: ie bringing new expert skill and experience.

— Future talent: ie should be hired for a career rather than a job (the test of this is whether you can make at least two suitable roles versus one job that is suitable).

— Fit Civil Service values: ie it is particularly important that they have a corporate versus selfish approach to leadership. Lack of corporacy can quickly become a fatal flaw.

— Are "worth it": ie there is usually a circa 10% premium on bringing someone in from outside. This is usually a small price to pay, but value for money is a useful test.

— Given a formal "bridging" versus induction programme: ie between 3-12 months to learn the service from end to end (usually Ministers through to the frontline) is critical. Clare Chapman managed to complete two months of her three month programme and the payback in terms of a "fast start" on learning the service and the people was noticeable.

There are obviously other actions which can be taken but these give a flavour of the types of mitigating action we are pointing to.

SEGMENTATION

Not all external hires are the same and the group felt that the Civil Service had not done a careful enough segmentation of external recruits into different career trajectories which would help to set better expectations, induction and support. We identified three broad categories of recruits from outside:

— Developmental recruits/postings: Typically these would be recruited from within the immediate sector—for example, health or children's services or criminal justice—where the objective of the posting would be to broaden the experience of the individual, strengthen capacity when they returned to their "home" organisation and build knowledge of policy and influencing issues whilst in the central department.

— Specialist recruits: these would be individuals recruited for a specific skill set (likel to be sector or profession related). If these are single job versus career appointments then they are more likely to be fixed term appointments with a clear expectation about exit at the appropriate point. Arguably, a financial premium may be more appropriate in such circumstances.

— Career recruits: These may be people who bring more general leadership and management skills, addressing capability or capacity gaps in central departments. These are the recruits that should be capable of making the transition to other SCS posts and beyond and who, with appropriate support and encouragement, should be expected to make further transition.

The three categories above are not mutually exclusive. For example, recruits in the first two categories may demonstrate an aptitude for, and be interested in, further generic opportunities. However such a segmentation may be helpful to permanent secretaries when thinking about the potential to recruit externally. It is also worth noting that, unanimously, Heads of Profession who sit on Corporate Functions Board believe that the pool of external specialists now able or willing to join the SCS has been exhausted, for the moment anyway. Each Head of Profession stressed that the long-term answer is to "grow our own" and recruit externally only when we need new skills or practices, rather than relying on external recruits for leadership. Clearly, this is something that David Normington may wish to examine in more detail.

THE PRE-APPOINTMENT PROCESS

Our group spent quite a bit of time thinking about appropriate preparation in advance of coming in, for those we appoint from outside. There was absolutely no doubt that exposure to government, politics and politicians was very important. In our view, some of the best translations in to the Civil Service were done by those who understood the "rhythms" of government and politicians.

Our current procedures (rules, even?) made it very difficult to "woo" potential candidates, significantly in advance of any particular selection process although Gill, John and Clare argued that this is common practice elsewhere. Indeed the suggestion was made that more use could be made of acting up or interim appointments to ensure that proper time, care and consideration was given to attracting the right candidate. This is partly behavioural, since `wooing' requires the candidate to feel cared for as a person rather than processed as a candidate. It is also partly procedural however, since our appointments process is robust but can be inflexible when there is a need to move quickly on decisions or package issues.

The group concluded that it would be worth, via the permanent secretaries' network and beyond (eg into the LGA and CBI) asking for suggestions of hose who might, at some stage, be the sort of people we would be interested in attracting into central government. Then it might be that we could organise one or two events for such people and give them the opportunity to understand more about the way central government works and the opportunities that might be available. This was an initiative that Gill's team could lead from the Cabinet Office.

INDUCTION

Strong indication and bridging where necessary is clearly important for those coming from outside and there was a recognition that this was rather haphazard and patchy. Our group thought that a piece of work could be done involving one or two external recruits, and Gill's colleagues, to outline the key elements of such an induction. This could then be circulated to permanent secretaries as well as new arrivals so that both parties knew what was on offer.

PAY

We did some analysis of the pay patterns, ably assisted by the data that Gill provided and that some work Lesley and Clare have done on the DfES/DCSF and DH. As you will know for the Service as a whole, the facts are straightforward in relation to the "premium" we are paying for external recruits. This was confirmed when looking in more detail at entry to Pay Band 1 in DfES/DCSF and DH where an external "premium" of around 10% was being paid.

Overall, we felt that selection panels needed to be much more critical when considering rates of pay, perhaps using the segmentation approach above. We also felt that payment should, except in the most exceptional circumstances, be for a career in the SCS rather than a specific job.

It is fair to say that we did not come up with any startlingly new insights as a result of our work. However, I think that we did identify some areas that might be worthy of further work including:

— Agreeing a better rationale for the appointment of senior staff from outside the SCS, drawing upon the work the group has done on segmentation, and circulating this as a note of advice to permanent secretaries and the Civil Service Commissioners (who we know are concerned about our practice in this area, particularly in relation to pay).

— Identifying and cultivating those from a variety of backgrounds who we might think could make the transition into the SCS at some point in the future and putting on some events for them.

— Asking a couple of recently appointed "outsiders" to prepare short case studies of their experience, focusing particularly on the requirements for the most effective induction.

— Analysing further career trajectories and performance patterns of those brought in from outside, majoring particularly on the evidence of a tailing off in performance (as assessed via box markings) in the second and subsequent years in post.

Clearly, it will be for you to decide what, if any, of this work should be taken forward and by what means. Whatever happens though, I think that I can safely say that those of us involved in the ad-hoc group have found it extremely interesting. At the very least, it will help us as individuals to think more carefully about our hiring decisions in the future.

1 Directors and above. Back

2 As a percentage of those with a known ethnicity/disability status only. Back

3 As a percentage of those with a known ethnicity/disability status only. Back

4 Sources: Sex and Power: who runs Britain 2008, EOC eg GMC, Law Society; The Female FTSE Index; and House of Commons weekly information bulletin July 2008. Back

5 As a percentage of those with a known ethnicity/disability status only. Back

6 As a percentage of those with a known ethnicity/disability status only. Back

7 As a percentage of those with a known ethnicity/disability status only. Back

8 As a percentage of those with a known ethnicity/disability status only. Back

9 Asterisks in this memorandum denote that part of the document has not been reported, at the request of the Cabinet Office Capability Group and with the agreement of the Committee. Back