Better services.Fewer resources.Succeeding in anage of austerity.

Reducing thebudget deficit isthe most urgentissue facingBritain...tacklinga deficit of thisscale requiresurgent action.”

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The Spending Review FrameworkHM Treasury, June 2010

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Are youup for thechallenge?You’ll needresilience,stamina andfortitude.But it’sall abouttransformation,not austerity.”

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2010 has been an extraordinary year forpublic service. Over the course of thisparliament, the chief executives of manyorganisations will face unprecedentedchallenges and find themselves making moredifficult decisions about their organisationsthan ever before.

Nationally and locally, our public serviceswill change shape. Sectors will need tocollaborate to a much higher degree onefficient and effective local and nationalpublic service delivery and we will seeincreased competition for major servicecontracts. More power has already beendevolved to local authorities and localcommunities; individuals and frontlineprofessionals will start to take more controlof service provision and quality. The scaleof change ahead is as daunting as thetimescales involved – but there areundoubtedly opportunities to be seized.

The requirement to deliver cuts on the scalerequired by the Coalition Government willhave a severe impact on the size and shapeof public sector organisations themselves,with over 300,000 anticipated job losses.

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Introduction

However, the degree to which the cuts willaffect local people and local public servicesadversely will depend on each sector, andorganisation’s approach to achieving change.There will, of course, be a difficult balancefor chief executives to strike and leaders knowthat, in this context, the only solution is tothink radically differently about how theywill do business moving forward.

Over the summer of 2010 we spoke toaround 70 leaders from across the public andnot for profit sectors to explore the impactof far-reaching spending cuts on theirorganisations. We included a range of localauthorities, central government departmentsand non-departmental public bodies aswell as health bodies, fire and rescue services,police services and national charities.While we covered broad ground, our reviewpredominantly considers the situation ofservice delivery bodies at a national andlocal level. The challenges will inevitably varyfrom sector to sector, and across devolvedadministrations, but there are challengescommon to all.

Our conversations explored the impact ofcurrent demands on leadership skills, lookedat the new skills that are required withinorganisations to deliver urgent change,and to ensure high performing, lower costservices longer-term; we talked about howorganisations were approaching the needto effect service reorganisation, and thesupport chief executives in particular felt theyneeded. Overall, to what extent did leadersfeel confident about having the capacityand capability in place to cope with whathas been asked of them?

Our discussions broadlycovered the following areas:

Context We asked respondents to tell usabout the impact of the new governmentand of the spending cuts on their organisation– what impacts were they anticipating?

Challenges We asked respondents aboutthe main challenges to their sector andorganisation as a result of the new budgetaryconstraints.

We asked about the likely impacts to servicedelivery, and ability to meet customer expectations.

Services We asked how organisationswere planning to support and maintainservice delivery while implementing cuts.

People A key area of focus was the shape –and in some cases the longevity – oforganisations. We asked how anticipatedchange was likely to affect their people, howthey were approaching talent management inthe current climate and how organisationswere planning to reduce management numbers.

Tools Finally, we asked participants what tipsand advice they would offer to peers in theirsector, or in another, to meet the challengesahead. What tools, or sources of advice andguidance did they consider to be available –and what, if anything, was missing?

We hope that this short review, which toucheson many of the talent-related challenges nowfacing leaders, actively encourages debate acrosssectors and helps to inspire leaders to sharethe ideas and practices which will ultimatelylead to success.

Mark TurnerSenior Partner

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Juliet TaylorSenior Consultant

Since the second World War,we have never seen morethan two years of successivespending cuts. Even thedeepest cuts in the lateseventies lasted no more thantwo years, making this thelongest sustained periodof cut backs in 60 years.”

“ The policies of a new Government focusedon delivering sweeping public service reforms,combined with its response to the toughesteconomic conditions the UK has seen for over50 years, have triggered the start of changeon an unprecedented scale. In signalling itsintention to get to grips with a huge structuraldeficit, the Government has demanded thatthe leaders of our public services work togetherto achieve £83 billion savings by 2014/15.For many, the demand for immediate savingswithin their own organisation has fast becomea reality.

Nobody in the sector is new to change, ofcourse. The process of modernising ourpublic services to meet the complex needsof increasingly diverse, growing and ageingpopulation has been underway for over adecade. The last five years of this at least haveseen an additional, concerted drive towardsthe achievement of substantial efficiencysavings, with the development of a valuefor money culture and greater emphasis ontransparency around public spending.This has been particularly marked in localgovernment, although Whitehall hasalso been working to drive forward therecommendations of both the Gershonand Lyons reviews since 2004, stripping outsome considerable cost in the process.

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An unprecedented time for public service

The changes needed from 2010, whileurgent, are not for delivery over a short,sharp period; nor are they changes to beimplemented in another, later year. For many,working relentlessly to achieve savings onthe required scale up to 2014/15 will meanfinding ways of meeting complex andchanging needs, delivering more with lessresource.

Many of our respondents had beenmodelling for scenarios involving substantialcuts ahead of the General Election; in thissense, there were perhaps few surprises.But some chief executives we spoke tononetheless admitted to feeling initiallyoverwhelmed by the requirement to makesome of the toughest decisions of theircareers about budget allocation, and tocarry responsibility for the inevitable impactof these on staff and services. Of concernto almost everyone we spoke to wassimply the timescales in which significantcut backs need to be secured – in onechief executive’s words: “with just onemore year, we would be able to do thisso much more comfortably, and withmuch less negative impact on our customers”.

Many leaders have, however, also identifiedthe unrivalled opportunity, now well withintheir grasp, to finally achieve real servicetransformation for good. Indeed, everyone wespoke to agreed that cuts alone would notwork if we are to sustain essential publicservices of appropriate choice and quality.The old days of salami-slicing are over.Wholesale transformation, while daunting,is now the only way forward.

For many, this is the first time the countryhas had a genuine opportunity to jointhe public sector together at a local leveland localism presents some interestingconsiderations for the future. The challengeis now to think innovatively about what“radical, reforming” government means.What are the choices in terms of reducingpublic expenditure and balancing prioritiesto minimise impact on public services?

The bar will, of course, remain high in termsof customer expectations after a sustainedperiod of increased funding and growth.Change will therefore be delivered in thecontext of a society that has developed astrong sense of entitlement and right toaccess broad, responsive services tailoredto their individual needs. Given the additionaldimension of increased demand for particularservices – particularly welfare provisions– as austerity measures bite, there will also bea formidable task ahead in both managingand meeting the expectations of the taxpayer.

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In devolving budgets and power to localdelivery bodies, the Coalition chose to endthe system of public service agreements(PSAs), which it considered relied too muchon top-down performance management.In drafting their business plans followingthe Spending Review, Departments havebeen reflecting on their roles andresponsibilities. They now face decisionsabout how they are configured, in order towork with an expanded local delivery landscape.

For Central Departments, stringentDepartmental Expenditure Limits (DELs)were arrived at by applying rigorous criteriato proposed activities. All activitiesconsidered non-essential to meetGovernment priorities were abandoned infavour of those which can be targeted tothose most in need, or which provideeconomic value. Real emphasis has beenplaced on the extent to which Governmentneeds to fund programmes, and whetherthey could instead be provided moreeffectively by a non-state provider, inpartnership or by citizens – again, at lowercost.

But the new political administration hasalso introduced a contrasting way of workingto the previous government – at least inits early days – with a comparatively hands-onapproach to decision-making withindepartments. In addition to the challengessome of our Whitehall clients have facedthis year in seeking Ministerial approval forkey recruitment projects, respondents alsotalked to us about the uncertainty they havefaced regarding the role of their organisations,unresolved for some time.

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Where the achievement of aGovernment objective dependson more than one department,it will be important that thosedepartments work closely todeliver it in the most cost-effectivemanner. In some cases thismay involve additional spendingby one department torealise savings in another...”Savings expectations for local authorities andthe Latest Spending Review September 2010

For Central Departments, 2010 has atthe same time been a year of decisivechange and one of great uncertainty.On the administrative spending of CentralDepartments alone, the Spending Reviewdelivered decisive action to cut coststo the tune of 34% across departmentsand arms length bodies, with the aimof saving £5.9bn a year by 2014/15.Only the Departments of Health andInternational Development remainprotected from cuts on this massivescale – for unprotected departments,difficult choices remain for 2011 onwards,and a significant number of publicbodies are already at an advanced stageof closure.

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The Whitehall perspective

Arms length bodies which were reassuredof a future in May found themselves beingabolished in October. At the same time,urgent restructuring has taken place in theCabinet Office to manage redeploymenton a grand scale.

Unlike local authorities, Central Governmenthas not been subject to such stringentcost-cutting across the piece in recent years.While the National Audit Office has demandedrigour in accounting, and has continuedwith the production of cross-cutting value formoney studies, a largely centralised system,coupled with rigorous ComprehensivePerformance Assessment (and latterly CAA)placed much greater scrutiny on councilspending. So while there is an appetite to“share the pain” of cuts between Whitehalldepartments, the requirement to generatesavings on this scale has perhaps been more ofa shock to the system for Central Government.

In addition, while respondents were generallypositive about achieving cuts, culturally theCivil Service is less geared up to meet thislevel of change at comparatively short notice.The sheer scale and reach of its nationalorganisations, combined with the interdepen-dencies between them, will present significantchallenges in untangling how money is spent.While it has put in place measures to savemoney through increased regionalisation andthe shared service agenda, it has nonethelessreceived increasing budgets in recent yearsand has used them to build substantialcapacity.

On a practical level, Central Departmentshave in the past relied on the skills ofmanagement consultants to plan and deliverchange – however, as a direct result of thebudget, spending on these contracts hasinevitably decreased, leaving less specialistcapacity to plan, project-manage and delivertransformation.

Delivering change will also require strongFinance and Human Resources capabilitywithin departments. But there is perhapsa bigger question about the skills that will beneeded to drive the necessary change acrossWhitehall. Most respondents we talked tofrom this sector pointed out the need forincreased strategic and commercial capabilitywithin core departments – yet the recruitmentfreeze throughout most of 2010 has madeit difficult to bring in the right skills. Instead,many senior teams were characterised by ahigh proportion of roles filled on an ‘acting up’basis. In some cases, the view was that,while high-quality, staff in these posts werenot yet ready to perform at that level.

Finally, real pressure to drive down “inflated”public sector salaries has been an issue inWhitehall this year. The extent to which thisfactor undermines Government’s ability toimport vital skills moving forward will beknown only once departments are again freeto advertise key leadership positions externally.

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1. The size of departments, combinedwith a culture unused to change on thisscale, and demanding timescales,have presented a formidable challenge interms of planning and communication.

2. Rationalising what is left, after restructuringdepartments and public bodies whichhave already been through substantialchange and therefore employ staffon different terms and conditions.

3. Limited options to seek specialistexternal support around planning anddelivery of large-scale change programmes.

4. Heavily unionised environments addto the already formidable task of engagementand can make urgent change harder toimplement.

5. Change impacts on morale, performanceand behaviour, destabilising workforcesand potentially stifling productivity.

Top 10 challfor Whiteh

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6. The recruitment freeze has prohibited,in all but exceptional cases, the ability ofDepartments to bring in precisely the skillsthey need to deliver change.

7. Increased Ministerial involvement inthe day to day business of Departments,by the new Government, means that seniorofficials have also needed a period of‘cultural’ adjustment. Business was veryslow to pass through Ministers’ privateoffices after the Election, resulting intemporary stasis.

8. The impact of wide scale change willbe significant given limited central capacity,especially around redeployment.

9. There is significant pressure to drivedown pay at a time of high demand and lowmorale. This may also present practicalchallenges in attracting to Government theskills required to deliver new ways ofworking, particularly from the private sector.

10. There is limited outplacement of valuefor staff leaving their roles. Culturally, thisis likely to be particularly hard felt in aService renowned for looking after its people.

engesall

Fire and Rescue and police services faceddifferent challenges, but had already beenworking to strip out cost from manageriallayers and to look at innovative ways towork with the community on prevention.Their challenges related principally to payand conditions. Nonetheless, respondentsfrom local delivery bodies recognised thatthere were very difficult decisions aheadabout the way services are delivered withdrastically reduced allocations.

Local authorities provide around 800 servicesto households and businesses at a cost of£120bn a year. While the local deliverylandscape will expand under a decentralisinggovernment, participants were in agreementthat it would not be possible to achievecutbacks without impacting on local publicservices. The practical implications ofdelivering cuts of this type within councilsare indeed very significant – the localgovernment services of recent years willchange substantially to release efficiencieson this scale, at a time when the recessionhas already had a significant impact onlocal authority finances, due to a sharp fallin investment income.

The pay bill for mainstream council workforces(excluding police, teachers and fire staff butincluding chief executives and chief officers)was £24.8bn in 2008-09. Although there hasbeen some controversy around the pay ofsenior officers, the local authority workforceis relatively bottom-heavy, with a larger groupof lower-skilled workers, as well as diverseprofessional and specialist groups.

Since joining local governmentin 1987 there have only beentwo years where budgetshaven’t been cut. We’ve hadCCT, Best Value and CPA.As a result, local governmentis in a stronger place tothink its way through the cuts.”

The Spending Review framework, set outin June 2010 said: “The Governmentwill ensure that the Spending Review processconsiders the needs of local governmentholistically, and takes account of theopportunities for frontline bodies to worktogether across traditional boundaries.”

Savings on the required scale clearly couldnot be achieved without significant publicservice reforms, offering local delivery bodiesmore control over decisions made aboutlocal public spending. The Spending Reviewtherefore provided a settlement for localauthorities which radically increased freedomto manage local budgets, for local people.

Overall, the chief executives we spoke tofelt that councils – and other local publicservices such as police and fire and rescue –were in a stronger position to respond to theausterity measures than most centraldepartments. Council chief executives felt thatlocal authorities had benefited from severalyears of having to implement cost reductionmeasures (although not necessarily making‘cost cuts’ as such).

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The local government perspective

In early 2010, there were 1,744,700 staff inmainstream local government jobs and around60% were earning under £18,000 a year.Chief executives and chief officers accountfor only 2.58% of the overall pay bill. Withinthis sector, respondents therefore agreed thatmiddle management would be reviewedfor efficiencies – otherwise, the only wayforward was significant service reconfiguration.

Some authorities had already taken steps tolook at the proportion of their staff workingwith customers, and to review those serviceswhich could be better provided centrally,with a leaner staff. Moving forward, morelocal service providers will be looking to pulltogether the ‘back office’ functions of HR,finance, IT and customer services across thelocal authority, fire and rescue and police.But how change is delivered will depend toa large extent on specifics – the proportionof revenue coming from government fundingin that area; how advanced the authorityis in terms of the efficiencies it has alreadyachieved; unique demographic pressures,and the spending plans of neighbouringauthorities and delivery partners.

With an ageing population, there will besignificant pressures around the cost of socialcare, where local authorities have beenspending £14.4bn a year. The cost of childprotection also continues to rise. Mostauthorities have initially been stripping outcost from discretionary spending areas;statutory services will not be exempt, however,and it will be difficult to reduce spendingon statutory services without adjusting servicelevels.

In areas such as adult care, driven bydemography and longevity, and childprotection (connected to a much wider rangeof needs) the inability to control demandfor services will make planning a particularlychallenging exercise. Closer to the frontline, council chief executives know they willneed to balance the need to cut spendingwith enough flexibility to cope with increaseddemand, particularly around welfare andhealth.

Longer-term, localism will be key, offeringan opportunity to maintain valuable servicesthat are not statutory, and to work withlocal partners, both voluntary and privatesector. Respondents did, however, broadlyagree that a better understanding of ourneighbourhoods was needed. All of thelocal service provider chief executives wetalked to mentioned the move towardssharing and pooling local budgets to stimulatemore investment in prevention and earlyintervention, and to increase transparencyaround spending levels and priorities ona local and community footing.

But despite the Government’s commitmentto ensuring that expenditure will befocused on protecting the quality of keyfront line staff, some respondents didquestion the potential to change systemsto the degree that was necessary withoutimpacting on the frontline at all.

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10 top challlocal servic

You need to be able to sharethese ideas for change at aregional or county level anda forum to facilitate this moreeffectively would help.Participants should invest thetime, be honest and sharethe scares.”

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1. Respondents talked about thechallenge of lifting service users out of adefault mindset that ‘the state will help’.

2. For many, the question now is:“what will we not now do?”

3. The requirement to manageunpredictable demand for high-riskservices such as adult social careor child protection at a time whenbudgets are particularly tight.

4. Challenging timescales in which complex,multi-stranded and potentially radicalservice transformation needs to happen.

5. Heavily unionised environment:the threat of militancy and strike actionover redundancies and changes topay and conditions. The need for detailednegotiations makes change harder toimplement at speed.

6. Local bodies will be forced to findpractical ways of working through socialenablement and co-production,tackling the dependency culture andencouraging service users to ‘self-serve’.

7. Understanding how best to tap intonew structures such as GP commissioning,for more efficient future working.

8. There is a big task to do inminimising the impact of job lossesin terms of service quality.

9. Leaders will need to balance organisationalchange with the broader political agenda,locally and nationally, as one respondent said:“a hard circle to square.”

10. Change impacts on morale,performance and behaviour, creating anunstable workforce and stifling productivity.

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• Increased sharing between authorities– e.g. joint service provision and initiatives;shared Chief Executives; shared backoffice services to become more customercentric as well as cost effective.

• Service reconfiguration andremodelling, including commissioningand re-commissioning of majorservices such as adult social care(“a sensitive issue”), and increased useof private and voluntary sectors.

• Greater targeting of resources to preventservice needs arising in the first place.

• Early cuts to non-statutory areas such aslibraries and economic development.

• Increased focus on customer contact todetermine the shape of the organisation– “getting more on line and reducingthe need for face to face customer contactcentres where possible”.

• Wider transformation activity – e.g, changingthe shape and culture of the organisation.

• Streamlining management structures –“we’re reviewing job descriptions ata senior level to become more generic andtransferable”.

• “Smarter people, smarter working”– e.g. initiatives focusing on flexible workingto achieve savings on office space.

• Maximising income (e.g. effectivedebt collection) and placing more emphasison asset management and developinginvestment portfolios.

• Efficient use of resources – e.g.reviewing staff Terms and Conditions;smarter procurement.

• Developing a stronger culture of‘intelligent budgeting’ internally, to deliverimmediate and longer-term cashableefficiencies – e.g. staff use of taxis, mobilephones, use of venues, newspapersand periodicals, ICT efficiencies.

How local authorities are cutting cost

enges fore providers

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1. Having the right leadership in placeat this time is critical: know whatyou need to do as a leader, and whatskills you need in your team

2. Deal decisively with the difficult issues:restructuring is already an inevitability

3. Knowing your destination iskey to delivering change successfully

And not just at the top. Almost allrespondents, across sectors, talked aboutneeding good people in the top threetiers who are able to facilitate large scalechange moving forward. But the secret lies,they say, in increasing the flexibility of theworkforce and, again across different sectors,chief executives talked to us about reviewingand “structure-proofing” job descriptionsfor future continuity and flexibility.

But the evidence suggests that leadershiprequirements are changing again andorganisations must act now to plug any gaps.In a climate of public sector recession,leaders will need to show greater confidenceand in most cases higher levels of personalresilience. In the words of one respondent:“now is the time to get on the front foot byhiring the best change leaders you can find”.

The chief executives of changing organisationswill be subject to intense scrutiny, particularlyat a time when emotions can run high.But there is also a real opportunity for middlemanagers to step up. Most respondentstalked about the importance of driving changeas a team: “and you need a team who’reall in it for the opportunity this moment offers”.Collective leadership will be vital, bothwithin organisations and outside them.

Discussions also suggest greater demandfor skills traditionally associated with theprivate sector, such as commercial acumen,as public service looks to the private sectorto leverage efficiencies through outsourcingand partnerships. Transformational HR & OD;commercial and procurement; large-scaletransactional and operational leadership,and finance will all be essential.

One respondent told us the single piece ofadvice they would pass on to colleagues inthe sector would be: “learn from the privatesector. If you can, spend your way out oftrouble by hiring for success. It’s an investmentyou won’t regret.” But this is, respondentssaid, a challenging time in terms of attractingindividuals with the right skills and qualitiesto key leadership roles in public service.Changes in pension arrangements and pressureto reduce senior salaries means that recruitmentis more reliant on non-remunerative aspectsof a role.

The three key messages from this review

“Hard times make careers.”

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Leadership is critical

Other organisations have been subject toa recruitment freeze, making it hard to addto the current workforce at all – in thesesituations, leaders have made internal movesto fill the gaps as best they can, and are“making do”.

Although both central and local serviceproviders can offer some outstanding talent,the risk is that there are not currently enoughcapable leaders with the right experienceor ability to deal with change on this scale.The situation therefore sets a new expectationfor public sector leaders, despite moremanagers than ever ‘acting up’ into key rolesand teams decreasing, the bar remainshigh in terms of developing capacity andcapability. Succession planning for the futurewill be key and, for many respondents, thequestion to ask is: “what will we need after2014/15 and how do we make sure we areidentifying and growing that talent now?”

Finance and HR

Finance and HR functions are likely to bestrengthened considerably in order to manageand monitor change. Respondents fromacross different sectors talked about the needto rely on finance and commercial, and HRand OD teams, moving forward. A goodHR Director is a powerful asset and their teamwill be a critical catalyst in effecting culturalchange as well as reshaping the workforce.In the words of one Whitehall respondent:“HR is currently our only growth industry”.

The value of interim managers

Although some organisations covered in thisreview were subject to the arbitrary CentralGovernment recruitment freeze at the timeof speaking, and others (particularly inlocal government) had temporarily frozenrecruitment in order to review currentresources, most said they were still usinginterim managers. Indeed, interim managerswere viewed as a very appropriate means offilling specific skills gaps at a time when theorganisation was uncertain about, or simplynot ready to make, a permanent commitment.Other respondents had relied on interimmanagers to deal with sudden peaks inservice, service blockages, or to ‘kick start’the process of transformation.

Interim managers are being seen as capable,credible senior players with a major role toplay in delivering large scale change, andsupporting teams that have been stretchedby staff change elsewhere in the organisation.Particularly in the area of HR, they haveincreasingly been seen by chief executivesas a strong ‘back up’ solution to in-houseteams overwhelmed by the scale oftransformation or with limited specialist orstrategic capability. They will occupy criticalpositions until the final staff structure isagreed and there is a strong case to recruitpermanently.

Changes in both the private and publicsectors over the last two years mean that theinterim management talent pool has grownconsiderably and now offers an even richermix of skills and experience from whichorganisations can draw in taking forwardtheir individual service and organisationalchange programmes.

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Visionary and clear-sighted– excite people about what the future holds

Programme management– stay on top of a complex change agenda

Political acumen– read the agenda locally and nationally

Commercial awareness– run the organisation as a business

Strategic and big picture in approach– clear future view of the organisation

Decisive– comfortable with a lot of accountability

Positive and confident communicator– sell the opportunities

Stands their ground– strong sense of core mission and values

Highly collaborative– identify and understand different interests

Strong negotiator– seek solutions with an increasingrange of partners

Unrelenting– high level of personal resilience

The new leadership qualities

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Management de-layering isan inevitability. Our messageis simple: we are going tobe employing fewer people.”

Deal decisively with the difficult issues

Respondents have used a range ofapproaches and schemes to reduce sizequickly – these have included deletingvacant posts immediately, as well asinstigating voluntary redundancies andoffering early retirement. All said they weredoing everything they could to avoidcompulsory redundancies but had chosento be “straight with staff” from thebeginning, unable to make any promisesaround job security. No organisationswe spoke to were preparing to cut salaries,although some had surveyed staff aboutother options such as working part-time ordecreasing hours where this was feasible.

Radical service redesign, and the need toreorganise the workforce around this, isbringing with it significant opportunity toimprove the quality of the workforce.One organisation we spoke to had reviewedthe qualities they wanted for the futureorganisation and were selecting middle andsenior management candidates on newcriteria, including attendance, performanceand attitude: “in this approach, not onlyhave we been able to reduce the size of ourmanagement teams, but we have also beenable to enhance our ‘gene pool’ and raisethe bar moving forward”.

Overall, respondents thought the key tomaximising any restructure at the current timewas to create a “high-value, but stable”culture which would remain unchanged byfurther structural alterations. This, they felt,would create a more resilient senior team,able to flex as services continued to change,and as the organisation continued to respond.

“We agreed that we would only fight thebattle once: get the bad news out of the way,up front”, said one respondent. But theview was unanimous: dealing decisively withthe difficult issues will continue to be essential.While organisations accept that they cannotstay the same, and significant job losses areexpected across the public sector, the taskof reorganisation presents a challenge to thechief executive.

For leaders, the success of their organisationis down to the people in it: the challengeis to excite and inspire staff in order to retainfocus and productivity, while also handlingclear messages about downsizing andpotential redundancy. Although some publicservice professionals (such as police officers)are protected by law from redundancy, formost public service organisations restructuringwill be an inescapable requirement; formany, the task of scaling back managementoverheads has already begun.

Where asked, respondents agreed thatthe way restructuring is handled can makeor break an organisation. Emphasis shouldbe given to fair treatment of those whoare leaving their posts, whether throughredeployment, retraining or outplacementsupport. The budgets available for this,however, varied between organisations.

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• Accuracy.There is no room for error when jobsare at risk and people’s future, as well asthe reputation of the organisation,depends on it. Leaders need a solid basison which to make decisions; if they havethe option to do so, they should considerinvesting in the help of a specialist provider.

• Communication.The importance of continuous openand transparent communication about howdecisions are going to be made, to thepeople affected, to Trade Unions and tokey stakeholders, cannot be under-estimated.In the words of one respondent:“talk about the issues early; keep talking;work on a ‘no secrets; no surprises’ basis”.

• Future-focused competencies.It is critical to evaluate people againstthe competencies, behaviours, skills andabilities that are going to be importantto the future of the organisation, ratherthan what has gone before.

• Supportive.Leaders should remind the organisationof the developmental benefits of change –whatever the outcome for staff personally.

The rules of successful reorganisation

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A number of respondents are concernedthat they will lose some of the talent theyparticularly want to keep, but nonethelesssaid they expected a few senior staff to“vote with their feet” at times like this.These leaders had acted decisively to put inplace restructuring programmes focused onsecuring skills for the future, to reduce theperiod over which senior staff would beuncertain about their futures. In their view,the sooner the revised senior structure wasin the place, the sooner they would beable to use the new team to drive changeand set the tone for the organisationmoving forward.

While there was little clarity over the detailedbudgets available to support restructuringprogrammes, most respondents said theywere considering partnering with specialistproviders, if not working with them already,who would help ensure the right decisionswere made and minimise any risks in“getting it wrong”.

The threat of being legally challenged overredundancy decisions was keenly felt by somerespondents, and leaders overall were keen totake the steps necessary to maximise theirchances of defending the outcome, as well asbuilding the right workforce for future needs.

While our conversations suggest that manyorganisations are seeking to promote staffinternally where talent is ready, it is likely thatthere will be some gaps requiring skills fromoutside the organisation. Where possible,these appointments should go to externalcompetition, although the budgets to do thisremain limited.

In the view of some respondents, therequirement to promote staff internally atthis sensitive time was a positive signalto their teams, helping to retain motivation.For some senior staff, not deemed quiteready to take on responsibilities at the moresenior level permanently, coaching andmentoring was being offered as a practicaloption. However, at the time of our research,budgets for this were not universally available.

In many cases, respondents were still seeingthe situation as a “temporary fix”, ratherthan a longer-term investment. They wereunable to identify coaching support as animmediate priority. They did, however,recognise the requirement to have the rightskills in place longer-term, and for themthis was “something to think about in 2011”.

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The chief executives we talked to remainedlargely positive. They talked about being“courageous in approach”; they havetackled the big issues early and are doingtheir best to keep their workforces stable.In the case of those organisations beingabolished (mainly national non departmentalpublic bodies) it has inevitably been verydifficult to maintain the motivation andinterest of staff, as well as a strategic view.

Particularly when morale is low,performance needs to be watched closely.Respondents were clear on this: “do nottolerate falling standards”. One of the morecommon concerns, respondents told us,was the very real prospect of increasedsickness absence in workforces where themood was low because of uncertainties overjob security. In some cases, participantshad been working to incentivise attendance.

There is, of course, an external aspectto this: as services become leaner, there isscope for them to become more imaginativeand innovative, and quality of serviceshould remain at the heart of everything.

In the words of one chief executive:“make the narrative about the future, notabout austerity”. For many, change hasbeen seen as an opportunity to stripback their organisations to focus on whatcustomers really want and need.

All respondents agreed that change wasnot possible without a clear sense of whattheir organisation will look like in 2014/15.Planning is therefore absolutely crucialand this is the area where respondents havefelt the most challenged this year – witha demanding new national government,changes in local administration for anumber of councils, and very little timefor anyone to produce meaningful plans.This task appears, in a number of cases,to have exposed shortfalls in managementinformation which chief executiveshave been particularly keen to address.

But change, they said, quite simply cannothappen without “the rigours and disciplinesof serious project planning”. Transformationalchange requires substantial programmemanagement skills and leaders advisedcolleagues to “be clear about your priorities”;“keep your nerve and focus on what youcan control”. With strong programmemanagement capability, they would “managethe risks closely”, remaining “mindful ofany unintended consequences of your actions”.

Vision is critical:know your destination

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However, in the words of one respondent:“we need to separate the link in the public’smind between reducing numbers andreducing quality levels. To date, ourorganisation has succeeded in improvingquality while reducing some services”.

Our big engagementprogramme with staff isunderway. There will inevitablybe disputes with the unionsand our HR teams will bechallenged. But the Membersare on board and realiseit needs to be done.”

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Respondents pointed out the critical importanceof achieving buy-in to the vision of the futureorganisation and, in particular, making sure thatthe politicians are on-side: “you need to havereal political support for what you’re doing.Be equally straight with Ministers and electedMembers. They need to be on board too.”

Constant communication overall was seen asbeing of paramount importance during timesof significant change - “ensure it’s ‘done with’and not ‘done to’” – respondents stressed

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the importance of being upfront with staffand giving clear and early messages toemployees. They also emphasised theimportance of union support: “keep as closeas you can to representative bodies andwork hard to achieve compromise withinrealistic parameters”. While change canbe very complex to deliver in public sectororganisations, partly because of the large,diverse workforces involved, respondentspointed out the importance of takingminority views into account, while not lettingthem stop progress: “address the issuesand broker what you can...then move on”.

Don’t forget your valuedcustomers. Shrinking to theextent that you can no longerprovide the same qualityof service to them is a mistakeyou’ll regret later on.”

Finally, respondents warned colleaguesof the danger of compromising theirorganisation’s beliefs and values in tryingto simplify change: “if you stop believing,you will fail”, they said. They advisedcolleagues to “be crystal clear in termsof your objectives” and to “inspire peopleabout what you are here to do”.But while they considered that it is morepowerful to set the vision by focusingon outcomes, in an era of politicalchange, they warned against ignoringpolicy objectives.

In the words of one of respondent:“hard times make careers”. But despite the‘hard times’, all of the leaders we spoke towere unequivocal about the opportunitiesthat are there to be seized. They talkedpositively about the future and did not stopto dwell on the idea – and reality – of austerity.Critical to them is finding the flexibility andinnovation they need to deliver the task,inspiring and engaging others to workalongside them in doing so, and buildingthe capacity and capability requiredto deliver truly transformational change.

There is no doubt that shared values andcommitment to providing the servicescommunities really want at a local level willprovide the conditions in which localismcan thrive. But leaders centrally, too, arekeen to work together and know thatholding their nerve will be essential.They are already dealing decisively withthe big issues that affect their organisations,and their staff. The most successful amongthem are able to articulate a powerfulvision of the future – a vision with whicheveryone is on board.

We havebeen able toget to thereal issues. All theunder-the-table debatesare nowfirmly onthe table...”

“

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Conclusion

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• They have a very strong senseof what their organisation will looklike when change is complete,and this will retain their focus.

• They have a grip on the dataand are constantly challenging it,knowing they need the full pictureto measure savings accurately.

• They will create entrepreneurswithin their own organisations,who think differently, are ‘can do’and motivate others.

• They are currently positioningchange within their organisations assomething that will make a difference tothe quality and relevance of services.

• They will ensure a longer term visionand strategy is in place – and willfrequently review progress against it.

• They are planning properly and, inmany cases, buying interim managers orconsultants to oversee this for them.

• They will be rationing prioritiesand keeping a sharp eye on them.

• They are rethinking what it meansto be part of that organisationand considering how to build theirnew workforce around it.

• They are unlikely to allow minority viewswithin the organisation to stall change,although they will listen to all views.

• They started to engage others in theirthinking straightaway and are in touchwith their partners (central government)and communities (local government).

• They are making sure now that theyhave the best they can get in termsof finance, HR & OD and transformationalchange skills.

• They will be constantly reviewingthe balance between achieving short-termpriorities and longer term objectives.

• They know that success, now andin the future, will be down to the qualityof their people.

How respondents will see the changes through

Mark Turner, Senior PartnerMark has over 20 years’ experience as aheadhunter, specialising in finding Chairs,Chief Executives and Directors for a widerange of organisations across local andnational public sector organisations,and advising on talent-related aspectsof transformational change. He leadsGatenbySanderson’s Board Practice andis a frequent advisor on good governanceacross the public sector. This is thefifth in a series of reviews which Markand Juliet have undertaken on issuesof interest to public sector leaders.

Juliet Taylor, Senior ConsultantA former postgraduate research scholar,Juliet worked in higher education, theVoluntary Sector and the Civil Servicebefore joining the recruitment industry in2003. She leads recruitment on manyof our senior Central Government andVoluntary Sector assignments. With strongresearch and analysis credentials, sheactively contributes to the company’sthought leadership activities and has nowdelivered five reviews focusing onissues affecting public service.

About the authors

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We would like to thank the following fortheir particular input during this review:

Lord Victor Adebowale, Chief Executive, Turning PointDerrick Anderson, Chief Executive, London Borough of LambethAdrian Belton, Chief Executive, The Food Environment Research AgencyRhona Bradley, Chief Executive, Addiction Dependency SolutionsProfessor Michael Brown, Liverpool John Moores UniversityCatherine Brown, Chief Executive, Animal HealthBill Butler, Chief Executive, Security Industry AuthorityTim Byles, Chief Executive, Partnerships for SchoolsDavid Cowans, Chief Executive, Places for People GroupKevin Crompton, Chief Executive, London Borough of HaringeyGareth Daniel, Chief Executive, London Borough of BrentBarbara Frost, Chief Executive, WaterAidSimon Gillespie, Chief Executive, MS SocietyProfessor Neil Gorman, Vice-Chancellor, Nottingham Trent UniversityMike Hagen, Deputy Chief Fire Officer, Merseyside Fire & RescueMark Harris, Chief Executive, National Lottery CommissionIan Hayton, Chief Fire Officer, Cleveland Fire and Rescue ServiceBernard Herdan, Chief Executive, National Fraud AuthorityDavid Hunter, Chief Executive, Bassetlaw District CouncilHelen Jagger, Chief Executive, Berneslai Homes Neil Kinghan, Interim Director General, Equality and Human Rights CommissionRob Leak, Chief Executive, London Borough of EnfieldPeter Lewis, Chief Executive, Crown Prosecution ServiceAngela McNab, Chief Executive, NHS LutonCraig Mackey, Chief Constable, Cumbria PoliceAndy Marles, Chief Fire Officer, South Wales Fire and RescueTerry Moran, Chief Executive, Pensions, Disability and Carers ServicesAndrew Morley, Chief Executive, the London Criminal Justice PartnershipMalcolm Morley, Chief Executive, Harlow District CouncilShan Nicholas, Interim Chief Executive, Child Poverty Action Group Geoffrey Parker, Chief Executive, Charnwood Borough CouncilJackie Potter, Chief Executive, Manchester City South PartnershipSusan Scott-Parker, Chief Executive, Employers’ Forum on DisabilityGlenys Stacey, Chief Executive, Standards for EnglandCaroline Tapster, Chief Executive, Hertfordshire County CouncilKatrine Sporle, Chief Executive, The Planning Inspectorate

Acknowledgements

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