Leading corporate functions: Where next for civil service reform?

Event report

Sir Bob Kerslake described the ‘federal’ model of the UK government and long-standing attempts to bring together transactional services. The ‘glacial pace of change’ on shared services has now accelerated, he said, with moves forward on sharing, market testing and outsourcing these services.

He discussed the prospect of moving the debate beyond shared services and considering functions more widely. He outlined the agreement in the Civil Service One Year On report on a new model of functional leadership that moves beyond a federal structure.

• The functions that the civil service is reviewing for this new model are:
• communications
• finance
• HR
• internal audit
• IT
• legal
• procurement
• property.

He argued that the purpose of the new model is not only to achieve greater efficiency, but also to provide:

• resilience to longer-term austerity measures
• better standards across government functions
• greater opportunities for professional development.

He argued that change in functional leadership could lead to a more unified civil service generally.

Lessons from other organisations show that there are certain things that need to be got right:

1. Change should be planned and organised over a number of years.
2. We shouldn’t assume that there is a one-size-fits-all model for all different functions.
3. We have to ensure that the accounting officer role of permanent secretaries is not compromised.
4. We have to reach the right combination of a top-down leadership and bottom-up feedback.

He said that the importance of strong leaders of functions is not just about efficiency. They drive big change through as an insurgent, challenging force. The federal model couldn’t have achieved the changes in digital that this kind of leadership has produced.

Sir John Elvidge drew on his experience as permanent secretary of the Scottish Executive, describing how government in Scotland moved away from a federal model. Scotland had an easier starting position than Whitehall as it had shared services in the Scotland Office since the 1960s. However these pre-existing single shared-service structures still didn’t insulate from the two divisive forces inherent in the departmental model:

• Pull: powerful figures appropriate resources to their own purposes
• Push: staff naturally attach their loyalties to somewhere below the corporate level.

He set out how the Scottish changes relied upon “commonality of purpose”, the idea that government is a single organisation with a recognisable set of common objectives. At least at the level of language and formal conception, departments were removed. This signalled the primacy of shared purpose, which then drove changes to behaviour and reversed divisive forces of departmentalism. With shared purpose, you could have a discussion about the value the organisation wanted from shared services and work out common measures, he said.

On politics, he said that the divisive departmental forces were exacerbated by eight years of coalition government, in which separate political territory was staked out around each department. The political leadership was important in driving change through their unusual commitment to the idea of the unity of purpose.

His key insight from the Scottish experience for Whitehall was that if you stop at shared services you will not deliver all the benefits of a reformed leadership model.

Laura Walker shared insights that drew on her experience of a range of private sector organisations:

First, she said, context is important, and the nature of the business model is related to the value-drivers and cost-drivers that might lead you to join up activities. For example for the John Lewis Partnership – which comprises allied business units (Waitrose and John Lewis) that are themselves very federal (individual stores), joining up activities across the whole business is only done if it leads to competitive advantage from, for example, shared branding or identity; or if it leads to very significant cost-savings.

Second, she said, making the shift is not about just putting structures in place, but requires paying attention to formal and informal drivers of behaviour. Starting from a very federal structure and building up to a new sense of common purpose relating to the John Lewis Partnership as a whole, meant addressing both. The biggest thing that makes a difference is leadership behaviour, particularly what leaders actually pay attention to (rather than just their formal obligations).

Third, she said, from a functional perspective, there is no one-size-fits-all model, but the natural centre of gravity of a particular function should be used to determine the most appropriate model.

Finally, these changes do take time. Shifts can happen gradually, and there’s no need to address all functions at the same time.

Paul Martin reflected on his time as in local government and as Regional Director of the Government Office for the South East. He argued that efficiency is fundamentally about desired outcomes, and that functional and support services are a means to achieving these. So functions shouldn’t be reorganised until you’re clear on the outcomes they should support.

He then described the reform of Wandsworth council from a federal model with seven self-contained departments to a more unified structure, supported by centralised (and outsourced) support services. This had been less easy for some support services like finance and policy he said. But, local government had reached the point that the case had to be made for the continuity of any service or function, and the default position is reform or abolition.

He outlined a number of points specifically on functions:

• functions should be a servant of policy and its desired outcomes – not their master
• specialist advice must be proximate to policy makers and very sensitive to their needs there is no reason all support services should be ‘lumped together’ and seen as one group
• markets should be used to commission support services as efficiently as possible but must use commissioners who are able to monitor contracts and encourage innovation.

Questions from the floor covered a number of areas including:

• Why, given past failure, progress on shared services will actually be made this time.
• How permanent secretaries resistant to change can be dealt with.
• How cross-party consensus on change can be built in the run-up to the election.
• Whether there is a role for mandating that certain functions are brought into a shared service community.
• How the outcomes of a corporate function could be measured in terms of its impact on the rest of the organisation instead of its own cost-saving.
• How the different nodes of power at the centre can overcome historical barriers to functioning as a single corporate centre.
• The implications of changing functional leadership on the success of cross-cutting measures, particularly in the context of austerity.
• Lessons from other sectors on how to achieve behavioural change within leadership.
• Whether the new functional leadership model would extend to ALBs.
• How to communicate change.