Long regarded as a bed of nails or a resting place for executives who failed in the marketplace, the public sector is now being reinvigorated by an influx of commercial talent. With everyone from bankers and publishers to accountants and strategy consultants switching sides, Stephen Cook examines the rewards, risks and pitfalls of taking up public office.

by Stephen Cook
Last Updated: 31 Aug 2010

With his highly developed instinct for going for the jugular, Michael Howard lost no time in focusing on public services when he took over as leader of the Conservative Party. We're all paying more in taxes and national insurance, he said, but where are the improvements? Where are the promised reforms and efficiencies? Undoubtedly, Howard and his team will be turning up the volume on this theme in the build-up to the next election.

There's also little doubt that the Government feels vulnerable over public services and knows that it's in a race against time. Tony Blair and Gordon Brown have assigned an extra £125 billion to hospitals and schools between now and 2006, and could pay a high political price if people don't begin to notice real improvements before they go to the polls.

A small but revealing example of the Government's anxiety came last summer, with an outburst by deputy prime minister John Prescott over the proposal to appoint a new chief executive of Bradford council at a salary of £200,000 - a cool £20,000 more than the prime minister. In fact, the pay was £175,000 with the rest in perks and the PM's perks would take a day to add up, but the underlying message was clear: we need better people and the results they can bring, but we're desperate to keep the costs down.

If the results are to come, it's clear that what is needed above all is better management. But the signs are that this is still in perilously short supply in the public sector, which is often less attractive to talented managers than the private sector for a range of reasons, among them lower pay and a widespread perception that working in the public sector is a bed of nails.

That belief doesn't stem entirely from easy prejudices about the public sector being full of time-servers, jobsworths and unreconstructed bureaucrats.

Heather Rabbatts, who was chief executive of Lambeth Borough Council in south London before moving to become head of education at Channel 4, says: 'If you look at what happens to people in the public sector who put their head above the parapet and try to get things done, it's very extreme. If the slightest thing goes wrong, they're told they are "crap" and they have the Daily Mail camping on their doorstep.'

There was also a high level of scrutiny and bureaucracy at Lambeth, and Rabbatts couldn't spend more than £10,000 without approval from politicians. 'If people were liberated from that kind of thing and trusted to get on and make decisions, then you'd get good decisions. I'm rung up and asked to go back into the public sector, but I never would.'

Other senior figures in the sector admit its shortcomings, and recently published research by the Chartered Management Institute concluded that public-sector reform was under threat from poor leadership. The institute's report, 'Leading Change in the Public Sector', was based mainly on interviews with middle and junior managers, who rated their leaders poorly, talked of a 'culture of blame' and complained that what was most lacking was 'clarity of vision'. Leadership development was crucial, concluded the report, and barriers to innovation and creativity - including excessive focus on targets and procedures - needed to be dismantled.

There's no shortage of initiatives to improve public-sector leadership and management, ranging from the Audit Commission's comprehensive performance assessments of local authorities to the NHS's Managing for Excellence programme, described by NHS boss Nigel Crisp in MT last January. The question is, how soon will they make a difference?

'Things are changing, but the key question is whether they're changing fast enough for another election victory,' says Hamish Davidson, chairman of Veredus Executive Resourcing, which has helped find important new recruits for the public sector. 'The Government doesn't think it's changing fast enough. There's a great worry about whether all this money will really produce better services and how much of it will be lost in inflation, salaries and inefficiency.

'It would also be wrong to underestimate the scale of the task the Government has, because the public sector contains an inordinately complex range of services. If they were privatised, they would be changed immediately - you would not have 32 London boroughs, for example, all performing a similar set of activities. And in many cases you're asking organisations to improve efficiency and service delivery in situations where they are the monopoly supplier and can't use market forces. How do you persuade people operating in an environment where their customers don't have a choice to behave as if they did have a choice?'

He says 'permeability' has increased between public and private sectors, partly because of privatisations over the years, but inter-sector movement of managers does not happen as much as in the US, and there is still a tendency for each breed to stay in its own silo. 'Parts of the public sector haven't been as cute as they could have been in looking after any new blood they bring in. There is a tendency for the antibodies to rally round to repel the invader - they need to invest more in retaining such people through briefing, mentoring and supporting them.'

A key institution in the drive to improve public-sector management is the Audit Commission, headed by former banker James Strachan. He says the public sector has some remarkable excellence, as well as 'some remarkable lack of excellence', and that parts of the NHS and some local councils are better managed than the private sector. 'So it's too simplistic to say the public sector is worse,' he adds.

But he is impatient with the theme of the complexity of the public sector management task and, like the Chartered Management Institute report, argues that what matters is clarity. 'The comment you always get is: "Ah, you don't realise, in the private sector it's just profits - here it's so complex." And it's true: you are managing against complex backdrops. But I have no sympathy with the notion of the management of ambiguity - it gets the task so badly wrong. The job should be to inject clarity - not necessarily simplicity, but clarity - into that ambiguity.

'The public sector is very bad at injecting that quality of clarity. It prefers to give itself room for manoeuvre and to maximise its options. There's not enough nailing of your colours to the mast, doing it in public and accepting that sometimes you might not succeed.'

He believes that the biggest lesson the private sector can teach the public sector is that managing any organisation is best done with a simple four-point plan, starting with a clear definition of your goals expressed in no more than five simple sentences. The second point is to ask yourself if you have the right team, and if not, move immediately to change people - if you don't do it fast, you'll regret it.

'The third point is delegate, delegate, delegate, and the fourth is praise success to high heaven. There is an all-important need to devolve decision-making and responsibility, while avoiding an overnight pendulum swing from command and control to telling people to do it all themselves. In the private sector - even in the lean, mean and hungry Merrill Lynch, where I used to be - a huge amount of time is spent praising and celebrating, and that contrasts strongly with the voluntary and public sector, where no-one bothers to say thank you.'

Strachan also wants to see a greater willingness to take risks in the public sector. 'Naked risk is for the mad and the speculative, but a calculated risk can be a route to success in the public sector as in the private sector, and I stress the word calculated. There's no reason you can't have a marked reduction in risk-aversion without any risk to the taxpayer. It's important to change the culture, to alter the gross imbalance between reward for success and and punishment for failure, which prevents people in the public sector putting their head above the parapet.'

In a sense, this is an argument for less management. But Strachan wants more management in the public sector, provided it is the sort that concentrates on strategy rather than nit-picking supervision of processes. The sector has mostly failed to differentiate between management and bureaucracy, and as a result has been 'both under-managed and destructively over-bureaucratised'.

Targets can help to raise standards, he believes, but it can be better to spend the time trying to improve things rather than ticking boxes, and to create an overall management framework that fosters this approach.

So instead of straining to answer all ambulance calls within eight minutes, you train staff on defibrillators and respond to cardiac cases in four minutes, thus bringing down the fatality rate quickly.

More clarity, more calculated risk-taking, fewer but smarter targets: the prescription sounds fine, but it's doubtful whether the patient will swallow the pill rather than surreptitiously spit it out into a handkerchief.

The reason for that doubt is illustrated by an anecdote in the Yes Minister tradition that Strachan tells about the time he addressed a group of senior civil servants on the need for more acceptance of risk in the way government departments are run. 'They were rather quiet about it. Then one of them said: "Mmm, yes, I think I could get my team to buy in to all that. But I do have one question. Could we use a word other than risk?"'


Trevor Campbell Davis, CEO of the Oxford Radcliffe Hospitals NHS Trust, is just the kind of innovative and enterprising manager the public sector is trying to attract. He spent his early career at publisher McGraw Hill. Jokes about hospitals having more managers than beds are nonsense, he says. The NHS, virtually run by doctors until 15 years ago, has been 'qualitatively and quantitatively under-managed' over the years. Top NHS management, in his view, is now as good as in any other industry, though middle management needs to improve. The most important difference between the public and private sectors, he says, is the multiplicity of stakeholders in the former. 'We have many masters in the NHS, starting with national and local politicians who think they have a legitimate locus in how the service is run. Other local stakeholders are the patients and their families, representatives of interest groups, voluntary agencies, local councils - and the list goes on. All have right of access to the thinking process, and a serious amount of management time has to be applied to their concerns.' Then there's the question of risk. 'In the private sector, there's a culture of taking acceptable risks, and the public sector has little experience of it,' he says. 'But if the NHS is to succeed as a devolved organisation, we need to allow some organisational risk, to let in the spirit of "give it a go", the acceptance of some measure of failure as well as success.' He thinks the drive to raise standards in the public sector has brought an unhelpful proliferation of rules and targets over the years, but that Whitehall and the Government has scaled this back recently. 'What we need is fewer targets and more statements about the general direction of travel, and for progress to be expressed in words rather than numbers.'


Anna Klonowski was a management consultant with KPMG before going into local government and becoming finance director at the London Borough of Hackney. 'Everyone expects you to say that the private sector is brilliant and the public sector is rubbish,' she says. 'Personally, I think good managers will succeed in the private or public sector, and there are good and less good managers in both.' But she admits that some factors put good managers off working in the public sector. 'Reputation and lower salaries are the biggest problem. If the reputation is not good, then why would people put their future and their career into the sector?' However, she thinks that the graduate recruitment scheme that she's working on in partnership with Islington Council and the Metropolitan Police to bring talented young people into the public sector might help. There's also the complexity of local government, including politics, the risk-averse culture, and the multiplicity of tasks and services. 'No private company would produce both social services and rubbish collection,' she says. 'The public sector is expected to be excellent at everything, but the reality is you can't because our role is partly about rationing scarce resources.' Klonowski is now on a short career break.

Would she go back to the private sector? 'I haven't ruled it out. It would be for the challenges and disciplines of the bottom line and of project management, which local government is sometimes not aware of. What I enjoyed as a management consultant was the diversity and multiplicity of individuals and organisational cultures, but I missed being part of seeing things through and making a difference. Bringing financial stability to Hackney means being able to make a difference in important areas, such as what's happening round the streets and to people's housing.'


JAMES STRACHAN managing director Chairman of the Audit Commission

of Merrill Lynch

SIGURD REINTON a director of chairman of the London Ambulance

McKinsey & Co Service

DENISE KINGSMILL partner at deputy chair of the Competition

solicitor Denton Hall and Commission

director of MFI

STEPHEN CARTER managing chief executive of communications

director of NTL watchdog Ofcom

ALAN BISHOP UK chairman chief executive of the Central

of Saatchi & Saatchi Office of Information

PETER ROGERS finance director chief executive, Westminster

of West Midland Buses City Council

PETER GERSHON COO of BAE Systems head of Whitehall's procurement arm,

the Office of Government Commerce

MORAG McDONALD finance director director of commercial development,

of AOL UK Guide Dogs for the Blind

GWENDA SLIPPINGS head of information resources manager at

information at Clifford Chance the Inland Revenue

STEPHEN BURD commercial managing director of Blackpool

director of Arriva Transport

SARAH SALVANATHAN director of departmental finance director,

finance operations, London Borough of Ealing


STEVE BRADBURY finance director finance director of the

of J Sainsbury not-for-profit Richmond Housing


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