UK: Crossing the private-public.

UK: Crossing the private-public. - The lines between public and private sectors are blurring as talented individuals move more freely between the two. The mutual suspicion, however, will take time to fade.

by David Smith.
Last Updated: 31 Aug 2010

The lines between public and private sectors are blurring as talented individuals move more freely between the two. The mutual suspicion, however, will take time to fade.

On one side is the public sector, with its tradition of service and protocol, responding to the often unpredictable mood shifts of politicians, but with the almost certain prospect of a 'gong', preferably a knighthood, at the end of it. On the other is the private sector, red-blooded and fiercely competitive, reacting to the even more unpredictable needs of markets and business partners and with nothing certain at the end of it, except that those who do not succeed are certain to be condemned as failures.

The public-private divide is part of the British economic and political landscape. From the days when trade was something that was not discussed in polite society, to the more recent phenomenon, which still existed when today's top businessmen were starting their careers, when the pick of the crop of graduates headed straight for the Treasury or the Foreign Office, it has appeared that never the twain would meet.

Unlike, say, America, where talented individuals have glided effortlessly between private and public sectors, including positions within the cabinet - President Clinton's Treasury secretary, Robert Rubin, was recruited from Goldman Sachs - the lines in Britain appear to have been much more rigidly drawn.

Or at least they were. Suddenly, moves between the public and private sector - in both directions - are becoming more frequent. Senior civil servants, particularly from departments such as Trade and Industry and the Treasury, can consider themselves unfortunate if they are not offered a top private sector posting. Thus, in recent years Sir Peter Middleton, former permanent secretary to the Treasury, was recruited to run BZW, the then investment banking arm of Barclays, while his former colleague, Sir Geoffrey Littler, who was a deputy permanent secretary, took on a similar role at NatWest.

Sir Brian Quinn, who ended a long career at the Bank of England as head of banking supervision, now has a top job at Nomura, the biggest Japanese investment bank. Sir Peter Gregson, permanent secretary at both the Department of Energy and the Department of Trade and Industry, is now a director of Scottish Power. Sir Terry (now Lord) Burns, was already a non-executive director of Queen's Park Rangers in the latter days of his period as Treasury permanent secretary. Now that he is stepping down, still in his mid-fifties, he can expect a string of private sector offers. His former political boss, Kenneth Clarke, has proved to be the most successful of the latest wave of Tory ministers to seek to transfer their skills to commerce. He is chairman of UniChem, deputy chairman-designate of British American Tobacco, a director of Foreign & Colonial Investment Trust and an adviser to Daiwa Europe. Lord Simon, now busily ensconced at the DTI, is the most famous recent example of a move in the opposite direction.

Sir John Whitehead spent 37 years with the diplomatic service, ending that career six years ago as British ambassador to Japan. He is now a senior adviser to Deutsche Morgan Grenfell and on the board of Cadbury-Schweppes and British Plasterboard. 'I consider myself very lucky,' he says. 'I suppose in retrospect that it was as ambassador to Japan I came most in touch with people in the private sector. We had been suggesting to British business that Japan was difficult but not impossible and that they should go and look at it for themselves.'

Whitehead had no plans to get into business when he retired as ambassador - 'I had thought of trying to run a university,' he says. But he was approached to take up his current private sector positions and has no regrets. He is aware, however, of the differences between the two roles. 'Things operate on a much shorter timescale in the private sector,' he says. 'There is, and I don't mean this in a disparaging way, much less considered follow-through.

We are, after all, in it to make money.' Even within the businesses with which he is involved, Whitehead sees different cultures at work. 'Cadbury's is much more structured than the other two, but that's fine,' he says.

'You try to contribute in the best way you can.' Having been initially of interest to the private sector as a Japan specialist, he is gratified to have found that his roles go well beyond that. British Plasterboard, for example, has yet to develop significant business interests in Asia.

Perhaps the ultimate example of a public-private crossover expert is Sir Peter (now Lord) Levene. Levene, who is among those tipped to become the next Lord Mayor of London, was chairman and managing director of United Scientific Holdings before becoming an adviser to ministers in first the Thatcher and then the Major administrations. He brought his business experience to bear on efficiency and effectiveness across Whitehall, most notably in defence procurement, and is also the former head of Canary Wharf and the Docklands Light Railway. He was given a peerage by the outgoing Tory government last year.

Increasingly, however, a new type of crossover is emerging. Eyebrows were raised when the new chairman of the Post Office was announced earlier this year. Neville Bain had been group chief executive of Coats Viyella, departing last year amid suggestions of disagreements with Sir David Alliance, the chairman. His career, while distinguished, had not involved a prominent public sector role.

A New Zealander who graduated from Otago University and trained as an accountant, Bain was formerly managing director of Cadbury worldwide, 1986-9, and became deputy group chief executive and finance director at Cadbury-Schweppes. As well as his Post Office role, he is also chairman of Hogg Robinson, chairman of SHL Group, and a non-executive director of Safeway, Scottish & Newcastle and Gartmore Scotland Investment Trust.

'I think there is more similarity between the private and public sectors than people would think from the outside,' he says. 'We are talking in terms of the Post Office about a business with the normal processes, the strategic planning, and so on. What takes you aback is the size of the business.

We have sales of £7 billion and are a national business, with some international parts. I don't think, however, size per se is the issue but being non-executive chairman I have to be aware of the really big issues. What is important in my role is that I'm not surprised by anything.'

Did he have any qualms about taking on what some would regard as a poisoned chalice? After all, even the Tory government balked, not only at outright privatisation, but at giving the Post Office the commercial freedom it sought. 'I tried to think very carefully about what was involved in the role,' he says. 'It's something I wanted to do. It is bringing the business skills you have and putting them into the public sector. In a way it is giving something back to the community. It is not a money issue for me.

It gives me a rounded interest. This is a way you can have influence, but you have to be robust enough to cope with what will come back at you.'

His mission, however, is to extract genuine commercial freedom for the Post Office from the Government. 'The Post Office does not have any true commercial freedom,' he says. 'Everything we do is subject to the agreement of the DTI and every time we spend money it is subject to the approval of the Treasury. If you want to grow the business it is very, very difficult.

This business is capable of becoming a world leader. The Royal Mail is a great platform and we should build on it.' The Post Office's powerful unions. particularly the Communication Workers Union, headed by left-winger Derek Hodgson are, he says, less of a problem. 'The unions are not that much of an issue, as long as we are communicating properly with them.

There will be differences of emphasis between management and unions but there aren't huge differences of strategy.'

So is it the Government he is frustrated with? 'I was not unaware there would be challenges,' he says. 'Occasionally I get irritated by the red tape within departments but I can't say I am hugely frustrated within the job. It's different. I'm learning and they're learning.' Every month Bain does a value-check to see what he is getting out of his various jobs, and what they are getting out of him. 'I'm putting a lot more into this job than they and I originally anticipated, probably three-and-a-half days a week rather than the two that was intended, but I'm having a great time and I'm getting a lot out of it.'

Bain may getting a lot out of it, but why should any sane businessman, with the prospect of the much richer rewards available in the private sector, take on a public sector role? Apart from salary, the 'stakeholders' in a public sector business are different, and far harder to please. How can you operate when, as for Bain, the future of your business appears to depend on the outcome of a cabinet battle between Gordon Brown, the chancellor, and Margaret Beckett, president of the board of trade? Are these the kind of jobs which should carry the health warning: 'Only masochists should apply'?

To a certain extent, perhaps. But the appeal of public sector roles cannot be explained in terms of normal measures of reward, or even the legendary gong - most very successful businessmen can now expect one of those anyway. Instead, the appeal seems to tap into a rather old motivation, something which appeared to have become obsolete in the 1980s, the tradition of public service.

Stephen Bampfylde, of the head-hunting firm, Saxon Bampfylde International, which has become a specialist in filling such big public sector jobs as the Post Office chairmanship, most of the utility regulators and the director-general of Fair Trading, says that the task of selling a public sector role differs from that involved in private sector positions. 'You have to sit down with people and explain to them why it is a good idea,' he says. The money, of course, is always an issue. But these are attractive jobs because of their significance in the country as a whole. 'They also appeal to people who want to give something back to society,' adds Bampfylde. 'We look for a high degree of intellect and also, and this is important, a degree of subtlety. The kind of approach needed to be successful in the government world, the degree of patience, can be different to that in the private sector.' Many businessmen, like civil servants, see a move across the public-private divide as something to be contemplated at the end of their main career. But, according to Bampfylde, this is often not what the client wants. 'We often find ourselves talking to people who say, "yes, I'm interested, come back to me in 10 years time", when the reason for approaching them has been because they are in their prime,' he says.

Having got over these hurdles, the final one for any businessman contemplating taking on a big public sector job is to be prepared for the glare of the spotlight. 'We look for people who are willing to have brickbats thrown at them,' says Bampfylde. 'We do talk to people quietly and privately about whether they are prepared to live with that. It is possible to be a successful businessman and remain a private person but you can't bring that off in the government arena.'

Even where businessmen have not been taken on full-time by the public sector, they are being introduced to the public sector in an unprecedented way. The Labour government has co-opted businessmen in a manner that has the Conservatives shaking their heads in a mixture of astonishment and envy. 'When John Major was prime minister, the idea of bringing businessmen into policy-making was anathema,' says one former cabinet minister. 'Now they are everywhere - and it is working.'

The Task Force Revolution, a recent report for the Industry Forum by the Cranfield Partnership Research Unit, describes the 75 new task forces established by the Labour Government in its first year alone, and chronicles the role of businessmen in these groups.

'The business community has representatives on most of the major task forces and has the chair and a majority of members on those directly concerned with industry issues,' the report says. 'In total there are in excess of 350 business people on task forces, including 90 alone on the Department of Trade and Industry's competitiveness working parties. A wide variety of individuals are involved from a range of different sectors, although the majority are from the FTSE-100 top companies; mostly they hold senior management positions. The major business organisations are represented, with the Confederation of British Industry participating in most of the business-led task forces. The Trades Union Congress and some individual trade unions are also represented, although generally only on those groups considering work-related issues.'

This goes beyond the tripartism of the 1960s and 1970s. Martin Taylor, chief executive of Barclays Bank and head of Gordon Brown's tax and benefit task force, has been at the heart of policy and the design of the Treasury's tax credit and National Insurance reforms, despite a notional involvement of two days a month. Prudential's chief executive, Sir Peter Davis, is overseeing the Government's welfare-to-work programme including the New Deal for the unemployed.

Arguably more interesting, however, is the involvement of the businessmen below this very senior level. Allowing managers to participate in task forces is not just pro bono work for companies. Their businesses gain a greater insight into how government works. Civil servants, meanwhile, are also being urged to consider periods in the private sector. A report commissioned by the previous Government recommended that civil servants be allowed to take up non-executive directorships where there is no conflict of interest, and be prepared to move in and out of the public sector.

It was warmly welcomed by the then deputy prime minister, Michael Heseltine, and remains official policy.

The divisions between public and private sectors are being broken down, although, as with any change of this type, it is taking time. At the end of it, Britain should get better government and, one hopes, better business.

RAIL CHIEF KNOWS WHAT HE'S UP AGAINST

John O'Brien is responsible for overseeing one of the most-criticised areas of Tory privatisation. He is in the public spotlight as rail franchising director, and came to the Office of Passenger Rail Franchising from Granada, having started his career with Arthur Andersen.

O'Brien joined Granada in 1981. He rose to become chairman of one of the company's then five divisions, the commercial and overseas rental division, and a member of the management board. After leaving Granada he helped oversee the relaunch of the Spastics Society as Scope, before joining the Office of Passenger Rail Franchising as chief operating officer. He became rail franchising director in August 1996.

'Working in the public sector there are a different group of constituents you have to bear in mind,' he says. 'You have to have a group of people around you who have all the bases covered, and this probably means having a slightly different mix of people than you would get in the private sector.'

He is gradually getting used to the higher profile. 'Everybody has a story to tell about their last rotten journey. I can take an overview of things but that is of no use to the person who was stuck on platform six all morning. The public role is quite different to that you would generally find in the private sector. Most business people have a choice whether they want to be in the headlines, usually if they are trying to achieve a particular goal. In this job you don't have that choice.'

But he has no doubt that, in bringing business skills to his present role, he is serving a necessary function. 'When I joined this organisation we had people who were expert in railways, expert in government and expert in a whole lot of other things, except for commerce. I brought to the party a knowledge of how businessmen think. I also knew that what businessmen wanted from us was clarity and certainty.

It does not always come easily to the public sector, but my view was that if we were going to say no (to something), we should say no as quickly as possible. Better that than uncertainty.' The knowledge learned on one side of the fence, in other words, can be invaluable on the other. 'There's nothing quite like seeing how the other side sees things,' he says. 'If I were ever to move back to the private sector, knowing how things work in the public sector, in government, I would be in a far better position.'.

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