Whitehall amateurs should take lessons in business practice

Tara Majumdar
NON-executive directors (NED) are not a new phenomenon in the private sector. These men and women have been discussing the performance of directors, participating in committees, and setting the strategic direction of businesses for years. But Whitehall has come late to the party. NEDs have only sat on the boards of government departments since 2010. And they have much to say about critical failures at the heart of central government.

In research interviews published today, government NEDs warn about appalling staff management. A culture of continuously-rotating officials around Whitehall departments is diluting experience and expertise. Speaking anonymously, one emphasised there was a tendency to “recruit lots of bright people” and to assume “they can do anything because they’re bright.” But as the work of government becomes increasingly technical and skilled, this is an archaic approach to attracting talent.

Non-executives want a system of employment that makes it possible to reward individuals for good performance and recruit external expertise. They complain about an arbitrary salary cap put in place by the coalition, which requires officials to be paid less than the Prime Minister. This means that it is increasingly difficult for Whitehall to retain talent.

One NED suggested that inflexible systems of reward “will drive people to the private sector.” Departments like the Treasury reportedly have higher staff turnovers than McDonalds. There is also frustration that better members of staff could not be appropriately rewarded because salaries are “too low” and “benefits too high.”

Further, good government, like good business, needs someone to be accountable for performance. Ministers are analogous to chairmen, so they need the formal power to appoint permanent secretaries who can act like chief executives. That way they can drive change, and hold senior officials to account for the delivery of policy and the management of departments. As one minister put it, “often neither ministers nor civil servants are actually accountable for the programmes they are delivering.”

Above all, Whitehall is missing the drive from ministers, and the Prime Minister, to effectively see change enacted. The problem, according to one minister, is that “making a department run properly is a long-term achievement. There’s no political upside.” Ministers are also not rewarded for good performance, and they move positions too often to be properly accountable. In his cogent critique of the management of the Ministry of Defence, Lord Levene argued that ministers must stay in post for longer.

At least the problem is clearly recognised. One minister recommended that “ministers should produce annual performance reports.” In future, the NEDs of government could help to assess the performance of ministers, just as they would in the private sector. But while this is common practice in business, it would be a revolution in politics.

Tara Majumdar is a researcher at the think tank Reform. Whitehall reform: the view from the inside is available at www.reform.co.uk #ReformWhitehall