Memorandum from Ernst & Young
1. Ernst & Young welcomes the opportunity
to make a written submission to the Public Administration Select
Committee. Ernst & Young is one of the world's largest professional
services firms, with over 135,000 people serving our clients in
more than 140 countries. In the UK we have over 9,000 staff in
20 locations providing nationwide coverage to our client base.
Ernst & Young is a global leader in assurance, tax, transaction
and advisory services and aim to have a positive impact on business
and markets as well as on society as a whole. The UK Government
is one of our most important clients and we have valued relationships
with many departments and agencies.
SUMMARYA successful
integration is one in which both the individual and the organisation
are transformed for the better and are able to leverage each other's
strengths to achieve mutually beneficial goals. Diane Downey,
Assimilating New Leaders, 2001
2. Over the last year, Ernst & Young have
interviewed a range of Permanent Secretaries, career civil servants
and external recruits about their experiences of recruiting into
the Senior Civil Service, particularly from the private sector.
Our observations are based upon these interviews, desk-top research
and our own experience of working with government organisations
and their leaders over many years.
3. Our overall conclusion is that, despite the
cost and risk of failure, there remain compelling business reasons
for bringing in external talent who can inject new skills, ways
of working and broaden networks. The challenge for the Civil Service
is how and when to recruit more systematically as part of a wider
resourcing strategy that allows for successful integration both
for the individual and the organisation.
— There is a risk of setting up new recruits
to fail. Expectations have not always been clear on arrival. Some
new recruits have arrived without clarity over their priorities,
how long they have to make an impact and without open feedback
in the early months. This becomes an ongoing problem where external
recruits lose confidence and can either become blockers or leave
disenchanted with the organisation.
— An over-reliance on external recruitment
can be costly and risky. The Corporate Leadership Council in the
US reported that between 40-60% of external hires into major corporations
will be unsuccessful and leave their job within 18 months—which
does not even allow time to settle in and begin to make a lasting
impact. For the Civil Service, recruitment costs are typically
£40k per head in addition to the opportunity cost for those
involved in the process.
— Organisational fit matters. Of our interviewees,
those working in agencies had found the transfer from private
sector to public sector easier than those who had moved into Whitehall
departments. This was due to agencies having clear performance
goals, generally being more arms length from political decision-making
and having more autonomy. It is also possible to succeed in Whitehall
but seems to be more dependent on former experiences and skills.
There are examples of former local authority senior leaders and
those from professional service firms moving successfully into
Whitehall roles and there is a clear sense of them having benefited
from their experience of complex, bureaucratic and political organisations.
— It is critical to match the right people
to the right jobs and culture. While important, too much weight
has been given to technical skills. The Civil Service should select
people on their technical skills, organisational fit and personal
qualities—particularly adaptability and an ability to listen
and learn. A lack of confidence within the Civil Service has led
it, at times, to be in awe of external recruits with impressive
looking CVs and job titles and to be insufficiently critical and
challenging in referencing and in its assessment of fit and wider
capabilities.
— Improvements need to be made to the HR
processes. There are good examples to be found but, too often,
sourcing has lacked rigour and induction has been poor both on
basic orientation and on "how things get done".
4. At the end of this response we summarise
our main recommendations but first we turn to the specific questions
you raise in the consultation.
QUESTION 1
Is the current level of external recruitment to
the Senior Civil Service justified? Does it achieve the objectives
set out for it (eg filling skills shortages in the Civil Service,
ventilation with new ideas and ways of working)?
5. External recruitment is still a necessity
for the Civil Service but there is currently too much tactical
recruitment for individual roles concentrated at senior levels.
Despite the desire to bring in new ideas and ways of working there
is more evidence of filling skill shortages largely in corporate
service functions. External recruitment tends to be concentrated
in certain professions such as medical, IT, finance, audit, and
procurement. In contrast 60% of all internal SCS are in policy
delivery, operational delivery or legal professions (see chart
below from Cabinet Office, SCS database 2008).
SCS PROFESSION OF POST BY INTERNAL/EXTERNAL
(% OF TOTAL IN PROFESSION)
6. We agree with Sir David Normington's recommendation
that there should be an overarching workforce strategy which should:
— Have clear plans for each of the professions.
The corporate service functions have worked with departments to
raise capability including bringing in external recruits but the
Civil Service would also benefit from plans and a clearer strategy
for resourcing policy and operational delivery—the core
roles for SCS. The plans need to be explicit on the current state,
the organisational skills required and the likely sourcing balance
between internal and external over the next five years.
— Identify from which sectors and for which
roles external recruitment is likely to provide the best fit.
For example, with the growth in partnering with a broader range
of service providers, private sector experience could assist greatly
in filling commissioning and commercial roles. We have seen how
private sector hires can bring both the right skills and experience,
and the right culture and mindset to these areas. (Also, see our
observations on recruitment from the private sector in response
to question 8 below)
— Focus on recruitment at Deputy Director
level. External recruitment directly into board level posts from
outside the sector is unusual in the private sector and is more
likely to increase the risk of failure. Yet, the Civil Service
continues to fill over a third of Director and Director General
posts from the private sector. It would be less risky and less
expensive if external recruitment is encouraged more at Deputy
Director level. The chart below shows the growth in the proportion
of external recruits filling the most senior roles.
The proportion of Director Generals who are external has increased from 25% in 2003 to 42% in 2007
Source: Cabinet Office, 2008, The SCS database
QUESTION 2
How effective are the existing arrangements for
making and overseeing outside appointments to the Senior Civil
Service?
7. Sourcing and selection are critical in making
successful appointments into the Civil Service. In interviewing
over 20 existing or ex-senior civil servants, we found that:
— Sourcing needs to be more rigorous: new
recruits into the Civil Service were generally ready to move and
found their roles in a number of ways. There are examples of former
non-executive directors of government departments filling permanent
executive positions; others were approached to apply through open
competition by government board members; and others were approached
by search firms. There were few examples of candidates simply
responding to an advertisement.
— Selection needs to pay more attention
to fit: most found the recruitment process straightforward although
heavily reliant on formal interviews. If anything, some said the
process was less rigorous and had fewer stages than those for
senior positions outside the public sector where there is more
emphasis on ensuring the right fit for both the organisation and
the individual and potentially many meetings with senior colleagues.
8. Our recommendations are to build on existing
good practice and to be more systematic particularly in sourcing.
This is particularly important as there is a concern that the
suitable pool of external talent is drying up. The Civil Service
should therefore consider:
— Increasing expectations on board members
to network and identify potential talent.
— Retain information within departments
and professions on potential recruits similar to the approach
taken by professional search firms. Private sector organizations
that hire many senior professionals often find that having search
capabilities in-house is more cost-effective than relying on external
firms.
— Improve knowledge of where the search
firms differentiate from one another. There is the opportunity
to do this through the new Cabinet Office framework agreement
which is currently being tendered.
— How to provide opportunities for potential
recruits, particularly those not from the public sector, to be
involved in government work either as NEDS or in an advisory capacity.
9. We also have recommendations on selection
practice. Most important is the criteria used for making appointments.
There continue to be benefits in using the Professional Skills
for Government framework to ensure that there is an objective
standard for testing skills and leadership capabilities but our
interviews revealed a consensus that it was necessary to look
beyond this. The most successful external recruits are likely
to be those who combined:
— A high level of technical skill or sector
knowledge.
— Strong leadership and team-building skills.
— An understanding of the environment they
are entering with its unique political governance and rhythm.
— Personal qualities including adaptability,
an ability to focus over the long term and balancing an appreciation
of public sector values and skills with different ways of working.
10. It should be the responsibility of the selection
panel to get to the heart of this with their candidates and to
ensure that the processes, including referencing, fully test motivations
alongside skills and experience.
11. Our comments on overseeing appointments
are limited to the observation that, from the point of the view
of the candidates, the process becomes less transparent, more
delayed and uncertain at the end of the process where approvals
are sought for the proposed appointment. This contrasts starkly
to best practice where this would be treated as a critical step
in the process, when the candidate needs to be courted and brought
on board.
QUESTION 3
What steps should be taken to ensure outside recruits,
once appointed, are able to operate effectively within government?
12. Our research provides helpful insight across
all steps in the on-boarding and integration process.
Induction and on-boarding
13. Successful on-boarding arrangements are
essential for learning, building effective relationships and meeting
performance expectations. Induction is at best patchy for new
recruits. The on-boarding arrangements also matter for internal
candidates promoted into senior roles but those from the private
sector need much more systematic support.
14. Those we interviewed had been appointed
before the introduction of the SCS base camp—which is a
concept we very much welcome—and there are likely to have
been other changes within departments too. Nonetheless, we have
identified two key shortcomings:
— a failure to provide basic induction
for SCS recruits who are often locked outside the traditional
departmental induction processes as it is thought unnecessary
or unsuitable for them; and
— the lack of regular contact with their
line manager again contrasts with the experience of other recruits
below SCS level. This can leave the new recruit feeling isolated
without established peer networks and lacking ongoing feedback.
15. In order to overcome these problems, we
observed that the better examples of induction have included:
— A 100-day transition plan agreed with
the recruit before they arrive.
— Clarity and co-ordination over the responsibilities
of the line manager, HR, the mentor, Head of Profession and personal
assistant.
— Participation in departments' own induction
procedures so that the new arrival can get to grips with the basics
such as office systems and a wider cultural absorption than that
provided by purely SCS events.
— Clarity over terms and conditions which
are very different between public and private sector—we
heard comments from some who said that had they fully understood
what they were signing up to then they would not have joined.
— Mentoring. This was universally seen
as very important for new recruits. Those we interviewed who were
mentored highly valued this to ensure they did not trip up on
arrival and learned more quickly how to get things done and make
a difference.
16. There are also some wider requirements around
role expectations and creating the conditions for new ways of
working.
Clarifying expectations
17. For new recruits to stand a chance of success,
the recruiting department needs to:
— Agree role, objectives and 2 to 3 key
priorities.
— Set expectations on ways of working.
In particular, being clear about the balance being sought between
bringing in new technical skills and bringing in new ways of working
and broader cultural change.
— Recognise that it will typically take
at least 18 months to make a demonstrable difference to the organisation
and possibly three years to embed this and leave a sustainable
legacy.
— Provide honest and ongoing feedback rather
than leaving the new recruit to judge themselves on impact both
in terms of delivery and organisational fit.
— Finally, the individual and the Civil
Service should be clear about career expectations. Is the individual
being recruited for a specific skill set and/or set of circumstances
such as a turnaround or one-off activity or is the new recruit
interested in and likely to bring more general leadership skills?
More than one interviewee commented on how difficult it was to
find another role in government or to make a clean exit.
Creating the conditions for new ways of working
18. As well as bringing in skills, a new recruit
particularly from the private sector is often asked to bring new
ways of working while, at the same time, adapting and fitting
into the existing structures and systems. If a new recruit is
truly to operate effectively and to change the status quo, they
will require:
— Their appointment to be part of a wider
change programme embracing organisational structures, systems
and culture.
— HR and Commercial to demonstrate a willingness
to create agile processes which bring in, reward and incentivise
high performance.
— Strong teams. No individual can succeed
by themselves. We were struck by how many interviewees saw as
essential the ability to identify and appoint quickly an able
deputy, often a civil servant, whom they knew and trusted to help
them get things done.
— Senior sponsorship. While we have commented
on the challenge of regular contact between the new recruit and
their board member, it was nonetheless very powerful for the new
recruit to know they had permission visible to all to make changes
and challenge the status quo. While this needed to be accompanied
by an understanding of how far one could push without alienating
oneself, senior sponsorship is critical in traditionally hierarchical
organisations like the Civil Service.
QUESTION 4
Should there be ministerial involvement in appointing
outsiders? If so, what mechanisms would need to be in place to
safeguard against inappropriate political influence in the recruitment
process?
19. The Code carefully sets out ministerial
involvement and appears to strike the right balance between involving
ministers while ensuring the Civil Service takes the decisions
on most appointments.
20. One observation we would make is that any
sense of ministerial involvement in external hires could make
them more vulnerable than internal civil servants to the arrival
of a new administration who may view the external hire as too
closely associated with the outgoing administration unlike internal
civil servants who will normally have experienced working for
other administrations and will be more used to the impartiality
of working in the Civil Service.
QUESTION 5
One issue of significant concern is that of pay
differentials between those appointed from outside and existing
civil servants. Is the practice of paying higher salaries to some
external recruits justified?
21. Evidence provided to the Senior Salary Review
Body in December 2008 showed that in 2007-08, the median starting
salary of external recruits was between 15% and 54% greater than
the median salary of internal promotees to the same payband.
22. There is a case for paying higher salaries
to some external recruits for the following reasons:
— There should be a risk premium for external
recruits given that the chances and consequences of failure are
significant at between 40-60%—although taking action on
other points raised here could reduce that risk.
— Existing civil servants entering the
Senior Civil Service are likely to benefit from reserved rights
on pension such as a final salary pension retirement age of 60.
New recruits will be working to a career average pension age of
65. It is reasonable to increase base pay to compensate for this
shortfall.
— In many cases the Civil Service is paying
for a skills shortage or to inject new ways of working and must
expect to pay a premium where it does not have these skills internally.
23. Circumstances where the Civil Service needs
to ensure that it does not pay over the odds include:
— ensuring that candidates understand that
the total reward package will look different to that in the private
sector by computing more explicitly the cash benefit of the total
reward package and ensuring that this is not undersold;
— attracting candidates who are motivated
by more than remuneration; and
— putting people on permanent contracts
when using fixed term contracts and paying performance premia
will achieve better return on investment.
What evidence is there to demonstrate the difference
made by senior outside appointees to the performance of their
departments?
24. There is evidence that external recruits
have had a positive impact in the following circumstances:
— where there is a clear and explicit strategy
or reason for recruiting into particular roles. The approach in
the Finance Function is the most obvious example where the Head
of Profession worked with departments to bring in financially
qualified Finance Directors either from elsewhere in the public
sector or in the private sector. Whilst there are cases where
some individuals have not been entirely successful, overall it
seems clear that the external hires have made a strategic difference
to finance professionalism and service in government;
— where there is a clear requirement for
new skills or sector experience that can be found better from
other sectors such as in commercial or commissioning roles, then
these have proved their worth; and
— where the personal fit is right. Even
where there is a skills requirement, it is important that the
person has the right personal qualities and is adaptable to working
within the Civil Service. However good the strategy and planning
might be, round pegs in round holes are critical.
QUESTION 7
What are the implications of making external appointments
for the culture of the Civil Service, including effects on the
morale of civil servants and on shared values such as the public
service ethos?
25. It is possible to overstate the impact of
external appointments on shared values such as the public service
ethos. It is true that most of those whom we interviewed who joined
the Senior Civil Service from outside were more motivated by the
specific role than by the notion of working in the public sector
generally. Typical comments were "The initial attraction
was the status and role. It equated to working as FD in a large
FTSE 100 company", "I saw the attraction of a big job"
and "I could see the potential for the initial role leading
to other opportunities".
26. It is also true that our reading of the
SCS Staff Survey in 2006 suggests that external recruits have
less affinity with their department or the Civil Service than
those who have worked a long time in the organization (see below):
27. Both of these may suggest that new recruits
do not feel they belong to the Civil Service or more broadly the
public sector. Whilst this does not mean that Civil Service values
are eroded, we consider that it reinforces the importance only
to bring in external talent where it is genuinely able to add
value above and beyond what an internal candidate could provide.
QUESTION 8
Is there the right mix of external appointees
in terms of where they came from? Should there, for instance,
be greater or fewer appointments from the private sector?
28. It is more important to get the right person
for the right role than to be concerned about overall numbers.
Within the context of the Civil Service, too often search firms
are told that someone is needed from the private sector without
being clear why. There should be much more consideration given
both to the skills required and the organization's requirement.
For example, is transformational change required and is this more
likely to be achieved from a private sector recruit? Is there
a need for a particular sector experience or roles where there
are internal skill shortages? Examples of where private sector
recruits are likely to bring in skills and add higher value include:
— Commercial and commissioning services.
Government is looking to a much broader range of service providers
and to bring new commissioning models into the public sector such
as in the NHS and Offender Management. Private sector recruits
can bring considerable knowledge of the supplier market, an understanding
of risk sharing and the skills required for strategic partnering
and contracting.
— Corporate services. Private sector recruits
are more likely to have an impact if the government department
is looking for transformational change. One DG F&C arrived
to find that the job for the first two years was getting the basics
right before it was possible to move into influencing and shaping
spending decisions. More positively, the DG HR Head of Profession
has looked to recruit specific skills to match the requirements
of the various departments at the time. Those departments going
through transformational change have benefited from the organizational
development experience of private sector recruits while others
have looked for HR generalists who have operated in large scale
organizations.
— Delivering culture change. In one department,
the Permanent Secretary told us that he had deliberately brought
in two external DGs to shake up the department one of whom went
on to replace him as Permanent Secretary.
— Policy delivery. Most of those we interviewed
from the private sector were full of admiration for the policy
delivery skills of existing civil servants and thought that the
internal pipeline was strong for senior policy roles. We believe
there is a case for strengthening the role of the Civil Service
Policy Delivery Head of Profession and being more explicit and
systematic where the balance should be between internal and external
recruitment. While those we interviewed are right to value the
traditional skills of policy civil servants in getting things
done in Whitehall, there are potentially more roles that could
be opened up as external recruits bring strategy development,
sector and stakeholder knowledge, delivery experience, and marketing
and others skills to the benefit of the organization.
QUESTION 9
How could the effects of making outside appointments
be most effectively monitored?
29. The absence of a clear workforce strategy
has made it difficult to monitor outside appointments. Implementation
of Sir David Normington's recommendation will make it possible
for Cabinet Office and Heads of Profession to set standards and
expectations both for internal and external recruits. The capability
reviews provide good supporting evidence of the impact of functions
which have recruited externally too.
QUESTION 10
What can be learnt from the experience of the
devolved governments or other countries when it comes to making
external appointments to the senior ranks of the Civil Service?
30. While we have not yet carried out an international
study, we found the 2003 Canadian Centre for Management Development
report on Making Transitions Work: Integrating External Executives
into the Federal Public Service a useful piece of research
which raised very similar issues to those we identified in the
UK from our own work.
ERNST & YOUNG
OVERALL RECOMMENDATIONS
31. We have recommendations both for those looking
to join the Senior Civil Service from outside and for changes
the Civil Service should look to make itself. We recognise that
many of these actions are ones that the Civil Service is committed
to making and we particularly support Sir David Normington's conclusion
that a workforce strategy should be developed for the SCS.
TIPS FOR
SUCCESS FOR
THE NEW
RECRUIT WHO
SHOULD:
— Before committing to join, meet other
Board colleagues, negotiate your key deliverables and be clear
about the terms and conditions including restrictions on future
work.
— Have a good number two. Some of our interviewees
had identified an internal Director or Deputy Director who knew
the Civil Service and how to operate within the department and
across Whitehall.
— Push for honest feedback. Encourage those
you work with to give constructive feedback to help fit in. This
does not come naturally to many SCS but is key to success.
— Get a mentor. All those we asked who
had a mentor found it invaluable both to access networks and to
learn about the unwritten rules of the Civil Service.
— Don't try to run before you can walk.
Being action-oriented is good but external recruits should not
succumb to organisational or self-generated pressure to do too
much too soon. Early credibility will come through strong technical
advice and the right behaviours. Hard and sustainable delivery
can follow later.
THE CIVIL
SERVICE SHOULD:
— Develop a workforce strategy which fits
round pegs into round holes. The strategy will need to:
— Segment the professions, including policy
and operations, identify the balance between external and internal
resourcing and between levels. Increasing recruitment now at Deputy
Director level will help increase the talent pool for more senior
roles over the next five years.
— Be flexible enough to accommodate the
range of roles and cultures in departments and agencies.
— Be clear where in the marketplace the
right skills are to be found whether from the private sector or
elsewhere in the public sector.
— Get the basics right. Invest in improving
HR systems and processes such as search, induction, development
and deployment.
— Ensure there are clear expectations between
the new recruit and the Civil Service on priorities, timescales,
and career opportunities.
32. We would be very happy to discuss these
points further with the Committee if that would be helpful, and
we look forward to seeing the outcome of your work.
April 2009
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