Instilling a high performance culture in the Civil Service by p4md

INSTILLING A HIGH-PERFORMANCE CULTURE IN THE CIVIL SERVICE Discussion paper This discussion paper explores what improvements could be made to current approaches to people management in the Civil Service in order to make it more effective. This document is intended to facilitate discussion on this topic and we welcome feedback.

July 2021

THE COMMISSION FOR SMART GOVERNMENT The Commission for Smart Government is an independent initiative to consider how to make public administration more effective. The Commission is a project of GovernUp, which is an independent, non-party research initiative that offers evidenced-based solutions for all political parties to adopt. The 12 workstreams are: Assessment

What have been the standout successes and failures of recent public administrations, and what can we learn from them?

Best Practice

What are the examples of best practice in the UK and around the world from which we can learn?

Talent & Competence

How do we equip civil servants with better skills, recruit and remunerate to attract the best and incentivise success, and share knowledge?

Project Management

How do we ensure government has the right skills and systems in place to commission and manage big projects successfully?

Finance

How do we ensure stronger financial management, strip out cost and drive efficiency?

Structures

How should we improve the current Whitehall structure, with its small yet overlapping centre and siloed departments, to make decision-making more effective and less bureaucratic? To what extent should we devolve more power and decision-making to local bodies, and how can this be achieved while maintaining a proper role for the UK Government? How can we make the system, including ministers and civil servants, as well as agencies, regulators and arms-length bodies, more accountable?

Devolution Accountability Technology

How can we deploy technology more effectively and rapidly to improve public services?

Data

How can we ensure that decisions are evidence-based and informed by data?

Ministers

How can we make ministers and advisers more effective in their jobs?

Appointments

How can we ensure that the appointments system attracts the best and aligns with the Government’s priorities?

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COMMISSIONERS Michael Bichard

Deborah Cadman Camilla Cavendish Suma Chakrabarti

Ian Cheshire Phaedra Chrousos Chris Deverell Jayne-Anne Gadhia Martin Gilbert Verity Harding Nick Herbert Margaret Hodge Husayn Kassai Daniel Korski Paul Marshall John Nash Mark Rowley Gisela Stuart Jacky Wright

Lord Bichard KCB is a crossbench peer in the House of Lords and chair of the National Audit Office. He was formerly Permanent Secretary at the Department for Education and the first Director of the Institute for Government. Deborah Cadman OBE is Chief Executive of Birmingham City Council, and previously of the West Midlands Combined Authority. Baroness Cavendish of Little Venice is a former Head of the Number 10 Policy Unit. Sir Suma Chakrabarti KCB was until recently the President of the European Bank for Reconstruction and Development. He was formerly Permanent Secretary at the Ministry of Justice and the Department for International Development. Sir Ian Cheshire was the Chairman of Barclays UK plc until 2021. He was formerly the Government Lead Non-Executive Director 2019-2020. Phaedra Chrousos is the Chief Strategy Officer for Libra Group and a former commissioner for the US Technology and Transformation Service. General Sir Chris Deverell KCB MBE is the former Commander of UK Joint Forces Command. Dame Jayne-Anne Gadhia DBE FRSE is a businesswoman and the founder and Executive Chair of the start-up Snoop. Martin Gilbert is the Chairman of Revolut and the co-founder and former CEO of Aberdeen Asset Management. Verity Harding is a Visiting Fellow at the Bennett Institute for Public Policy, Cambridge University, where she is on secondment from her role as Global Head of Policy and Partnerships at DeepMind. Lord Herbert of South Downs CBE PC (Chair) is a former Conservative minister. Rt Hon Dame Margaret Hodge DBE MP is a Labour Member of Parliament, a former minister, and the former Chair of the House of Commons Public Accounts Committee. Husayn Kassai is the co-founder and CEO of Onfido. Daniel Korski CBE is the co-founder and CEO of PUBLIC and a former Deputy Head of the Number 10 Policy Unit. Sir Paul Marshall is Chair and Chief Investment Officer of Marshall Wace LLP and a former Lead Non-Executive Director at the Department for Education. Lord Nash is a businessman and Government Lead Non-Executive Director. He is a former minister. Sir Mark Rowley QPM is a former Assistant Commissioner of the Metropolitan Police. Baroness Stuart of Edgbaston PC is Lead Non-Executive Director at the Cabinet Office and a former Labour MP and minister. Jacky Wright is the Chief Digital Officer for Microsoft US.

Contents Introduction........................................................................................................................6 Executive Summary...........................................................................................................7 Effective talent management at the leading edge, and an assessment of Civil Service capability ............................................................................................................ 13 A close relationship between strategy and talent management ............................ 14 Successful corporates and other governments ........................................................................... 14 How the Civil Service compares ................................................................................................... 15 Strong talent management capability ....................................................................... 17 Successful corporates and other governments ........................................................................... 17 How the Civil Service compares ................................................................................................... 19 Attracting the best possible talent ............................................................................ 21 Successful corporates and other governments ........................................................................... 21 How the Civil Service compares ................................................................................................... 22 Developing high performers, effective teams and great leaders ........................... 24 Successful corporates and other governments ........................................................................... 24 How the Civil Service compares ................................................................................................... 27 Goals, incentives and performance management ................................................... 34 Successful corporates and other governments ........................................................................... 34 How the Civil Service compares ................................................................................................... 39 How to reform people management: proposals for discussion ................................. 43 Objective One .............................................................................................................. 43 People at the heart of business planning ...................................................................................... 43 Transparent assessment of HR capability..................................................................................... 44 Objective Two.............................................................................................................. 44 A stronger role for the centre....................................................................................................... 45 Invest in modern data-powered HR practices ............................................................................ 45 Enhance HR capability in departments ......................................................................................... 45 Objective Three ........................................................................................................... 46 A single Public Service ..................................................................................................................... 46 Enhance recruiting power ............................................................................................................... 47 Achieve genuine porosity................................................................................................................ 47 The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

Decentralise to disrupt ................................................................................................................... 48 Redefine the qualities of leadership............................................................................................... 48 Strengthen numeracy and data literacy......................................................................................... 50 A major commitment to raise TQ ................................................................................................ 50 Objective Four ............................................................................................................. 51 Authors ............................................................................................................................ 53 References ....................................................................................................................... 53

Introduction The Government’s Declaration on Reform sets out a bold objective: “We will have the best people leading and working in government to deliver better outcomes for citizens”. The ability to have the right people, with the right skills, in the right roles, with the right incentives goes beyond effective recruitment and training. It is about having coherent mechanisms for planning and deploying people and capability, incentive and performance management structures and systems of authority and accountability that are all attuned to the overall needs of the organisation. Civil Service reform initiatives have come and gone for decades. Yet, on fundamentals, far too little has changed. Now we need an altogether different level of ambition and impetus. Organisations’ success rests on their people. So transforming how people are managed is critical to the success of the reform programme as a whole– from digitisation through to devolution. In this paper we have looked at how the most effective organisations in the corporate sector manage their people, as well as exploring approaches in other governments and the wider public sector in the UK. The larger tech companies feature prominently in this analysis. They have led much current innovation in talent management, which corporates around the world have then adopted. Google offers some of the most striking lessons. This global conglomerate of over 200,000 people owes much of its success to the systematic way in which it has deployed its scale and engineering-driven culture in extensive research-grade study of management and the rigorous application of its findings. We have examined what underpins the culture of excellence in Singapore’s public service, consistently ranked the best in the world. In the wider UK public sector, we have looked at how the police and military build their delivery cultures.

Executive Summary Reforming government ‘as a means of delivering the better Britain the public demands and deserves’1 will only work if it changes people; their skills and diversity, pay and incentives, accountability and performance management and ways of working. Much of the Government’s Declaration on Reform and 30 point plan of near term actions is about people. This paper assesses current performance in people management against the practices of other high-functioning large and complex organisations and identifies what lessons can be drawn from the comparison. A strategic approach to talent A close relationship between strategy and talent management is a hallmark of today’s most successful corporates – whether that’s a conglomerate such as India’s Tata Group, Netflix in Silicon Valley or BlackRock global asset management. Senior leaders invest considerable time and energy in the people agenda as a core element of the business planning cycle, boards are heavily involved in the appointment of senior roles and succession planning and management throughout the organisation is focused on talent as critical to successful delivery. Singapore’s Public Service, consistently rated the best in the world, invests in high quality administrative capacity as a core strategic objective for the government and has this year embarked on a wholesale transformation of the public service as a counterpart to its medium-term policy agenda. The Civil Service’s approach to talent management is un-strategic by comparison. Talent management still does not, for the most part, take place in the context of a clear business strategy – either at departmental or at cross-government level. The functions have provided a structured approach to the development of specialist skills, but there is still some way to go in effectively deploying capability against priorities. HR is not at the top table, nor is talent at the top of Permanent Secretaries’ to do lists. BlackRock’s CEO describes his organisation as “maniacal about high performance”; the same could not be said of the Civil Service. Strong HR capability Government has set out to professionalise HR. Yet the skills, systems and data underpinning people management in government still lag some way behind the corporate sector. There is no comprehensive workforce plan outlining the skills needed. The central HR function is underpowered in its ability to set and enforce coherent standards and systems across government. Preparations for EU exit and the Covid response showed the limits to government’s The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

ability to channel the right people into the right roles quickly. This lack of nimbleness contributes to the dependence on outside consultants, “It’s very difficult…to ‘plug and play’, because everyone’s on different systems.” The high churn of civil servants between roles is both a consequence and cause of weak talent management. Departments hardly attempt to shape careers. So individuals have to carve out their own career paths with few checks on mobility. The result is that departments cannot plan their workforces or control what staff go where. Some departments such as HM Treasury lose a quarter of their staff each year. Data on people and skills is poor; Civil Service leaders don’t know enough about their workforce to deploy it effectively, nor to understand the impact of current approaches to recruitment, incentives, performance management and how they could be improved. There is nothing like the sophisticated data capture and analysis that is becoming commonplace in large organisations elsewhere, which would allow government to not only match capability to need, but to assess and predict the impact of HR policies and initiatives more accurately. Attracting the best possible talent Successful organisations engage in energetic competition for talent, to recruit and retain the skills needed. The Civil Service’s approach is “remarkably passive2” in comparison. Recruitment practices are behind the curve in relation to the private sector and it is being outpaced by other parts of the public sector. There is no in-house headhunting (or ‘talent acquisition’) capability as in most large corporates. This limits ability to proactively source talent and recruit people with more diverse professional and lived experience. Long, complex recruitment processes put candidates off and place them at a disadvantage. Recruiters too often cannot recognise transferable skills: “they can’t always see how a public law barrister could be a brilliant policy professional.” 3 The Fast Stream recruits many outstanding graduates. But too few have science degrees, because recruitment does not place enough emphasis on numeracy and effective data management and analysis. Developing high performers, effective teams and great leaders Continuous learning is replacing traditional training models to constantly enhance employees’ skills, matching the rapid pace and complexity of technological change. Companies make their workforce highly capable and increase the diversity of their senior leadership by providing generous training . Singapore’s public service focuses on training and developing a high quality cadre of officials with skills matching the private sector. The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

The Civil Service’s approach to learning and development has been to focus resources on those considered to be high potential and on senior leaders. The Institute for Government (IFG) recently concluded that “the majority of the UK’s 430,000 civil servants have been left behind.” Government has tended to be short of specialist skills. There are key gaps in commercial, digital and project delivery expertise. The Functions need to make further progress. But they now provide a model for determining and developing the specialist skills required. There has been less progress in addressing the skills required in more mainstream roles, especially in the policy profession, which makes up 24,000 people, many of whom fill leadership roles in the centre of government. Data literacy is low and gets in the way of effective resource planning and project management, as well as good policymaking. In January, the Cabinet Office launched a new curriculum and virtual campus for government skills. It promised a renewed emphasis on technical and analytical skills and a greater effort to provide training opportunities for all officials. The single greatest skills challenge for the Civil Service is digital. But it is not yet clear the extent to which this will be prioritised in the new curriculum. The Civil Service needs to get better both at recruiting and cultivating specialist digital skills and, as a matter of urgency, developing all officials’ technical intelligence or ‘TQ’ – their ability to apply and maximise the use of current technology and adapt and capitalise on future innovations with speed. Leadership teams tend to lack operational delivery skills and experience of working directly with citizens. That hampers effective policymaking, service design and delivery severely. Government would gain so much by encouraging civil servants to spend time outside Whitehall to expand their skills, knowledge and networks. The Government has set out an intention to develop a pipeline of secondments into major organisations. Time spent in local government, a delivery agency, or an innovative social enterprise would also be valuable, but those who have done this have found the experience of going ‘against the grain’ difficult and a potential risk to future career prospects. Government’s approach to developing and promoting leaders has not put sufficient emphasis on management skills. Unless the government clearly signals different expectations for those filling leadership roles, with a greater premium on delivery experience, the dominance of the ‘mandarin’ profile will persist; just seven of the 22 permanent secretaries of central government departments have any significant experience outside Whitehall and operational experience is limited. The continued emphasis on career progression through policy roles in the central departments also inhibits the progression of people with a wider range of professional and social backgrounds; nearly three out of four senior civil servants are from privileged backgrounds.

Goals, incentives and performance management Translating a strategic vision into organisational goals and in turn into team and individual goals, is crucial in ensuring the most productive use of resources. Many companies now use goal management systems as the backbone of their organisational effectiveness – such as OKRs, or Objectives and Key Results, deployed by Google and now widely used in tech, large corporates and some public sector organisations. There is a strong link between goals and innovation. Really stretching goals require organisations to transform their capabilities to reach them. The discipline of focusing resources on the handful of things that really matter to an organisation supports collaboration and increases the chances of success. In the words of Larry Page, “you have to put more wood behind fewer arrows.” The Civil Service is too often weak at matching goals and resources. Objectives are often more wish lists than a clear plan of action. Impact is measured more through activity than outcomes. Current incentive structures block effective cross-government collaboration. There is a stated desire to innovate; yet departments tolerate far more risk in the status quo than when considering new approaches or providers. To support greater agility, promote collaboration and improve performance, most corporates are moving away from retrospective annual reviews, replacing them with more frequent checkins focused on providing support and coaching. The Civil Service’s ponderous, resource intensive, performance management system looks increasingly outdated. Proposals There are no quick fixes. Leaders must apply serious and sustained commitment to overhaul talent management from top to bottom so that it is truly excellent. The ambition should be to establish the Civil Service as the world leader in effective talent management in the public sector, with an approach as good as that deployed at the leading edge in the private sector. Here are our top recommendations. The full package is set out at the end of the report. -

Set and publish progress against key metrics for tracking progress on the people agenda, such as median time in role for senior civil servants, the percentage of Fast Stream recruits with a science degree and the percentage of senior civil servants with more than three years’ experience outside Whitehall.

Transparent assessment of HR as part of departmental capability reviews, resulting in a clear published scorecard, externally validated by NAO. Progress should form a core aspect of Permanent Secretaries’ performance appraisals.

Invest in a central People Data and Analytics team to oversee best in class workforce data collection and analysis. Provide insights into the impact of talent policies, support a test and learn approach to new policies and promote a data driven culture in HR.

Build the concept of a single Public Service, bringing together the Civil Service, local government, health, and others, across the four nations of the UK. Expand the Fast Stream across the new style Public Service, providing graduate recruits with the opportunity to develop varied policy and delivery experience.

Reduce the number of civil servants and increase their pay, raising talent density.

Establish a Crown headhunter – an in house capability to seek out and find a wider range of external talent in the private, public and third sectors and manage relationships with external headhunters so they are incentivised to open up talent pools from more diverse professional and social backgrounds. Abandon the use of ‘success profiles’ in recruitment – they put off external candidates and roll the pitch in favour of internal candidates.

Give Ministers the option to sit on or put a NED on the appointment panel in appointments at Director level and above.

Fund a Crown Fellows Scheme; a cadre of 1,000 talented people, recruited from inside and outside government, to be placed in local teams to power delivery of the core priorities and support innovation.

Set up Joint Local Action (JOLT) teams bringing together talent people from all sectors to carry out radical experiments in service design.

Replace the Permanent Secretary role with a Chief Executive as the senior Civil Service post in departments, with a clear focus on strategy, execution and organisational effectiveness.

The Cabinet Secretary should set an ambition to achieve at least 50 per cent of Permanent Secretary (or Chief Executive) roles with significant delivery experience during his tenure.

Introduce the SCS Standard – a package of core skills requirements for senior civil servants. Include numeracy and data management; financial management; project/programme/portfolio management; digital acumen and significant delivery experience outside Whitehall. Meeting the ‘SCS Standard’ should be a condition for promotion to the SCS. An ‘Advanced SCS Standard’ should set the bar for progression to Director General level.

Set up a world leading executive training programme for senior public servants and aspiring ministers, equivalent to leading business school offers in the private sector.

Radically overhaul performance management, abandoning annual reviews. Collect better data on impact and ensure that individuals are supported and incentivised to set and meet ambitious goals and to innovate.

Reorientate and expand the role of the Civil Service Commission to be an independent critical friend to the Government’s approach to talent management. Appoint a First Civil Service Commissioner with extensive leadership experience outside the Civil Service.

Effective talent management at the leading edge, and an assessment of Civil Service capability Different organisations will always choose to manage their people in a way that is consistent with their particular purposes and the wider context in which they operate. Public administration operates under conditions that require certain skills and ways of working to be successful – namely the political context and the inherent complexity of both the issues at hand and the cast of stakeholders involved. Moreover, there is no one ‘private sector standard’; a manufacturing company will have a different approach to a professional services partnership. However, despite this necessary variance in approach, there are certain characteristics of effective talent management that are common to most large and complex organisations and many examples of innovation that have wide application. So, in assessing current practice in government, we think it is valuable to look at high-performing organisations elsewhere, in both the public and private sector and consider what lessons can be drawn. The government’s people agenda spans capability, skills, pay, incentives, accountability and performance management. This section distils five key characteristics of effective talent management and assesses current government practice in these terms. 1. 2. 3. 4.

Strategy: Leaders put people and talent at the heart of strategy and planning. Strong HR capability: people, systems and data for effective talent management Attracting the best possible talent Developing high performers, effective teams and great leaders: attracting and retaining great talent. Training, career management and succession planning. 5. Effective systems of goals, incentives and performance management: Goals and accountabilities are clear, feedback systems drive improvements and incentives are aligned with organisational objectives.

A close relationship between strategy and talent management Successful corporates and other governments “There’s no business plan without a talent plan” – this is credited to Steve Schwarzman, CEO of The Blackstone Group. The inverse is also true: it’s hard – impossible, perhaps – to have great talent management in the absence of a clear business plan. A superior talent strategy, which is relentlessly focussed on supporting – and in some cases driving – the companies’ business strategies is a key component in the success of consistently high-performing organisations, whether that’s a conglomerate such as India’s Tata Group, Netflix in Silicon Valley or BlackRock global asset management4. Senior leaders invest considerable time and energy in talent management, as a core element of the business planning cycle and management throughout the organisation is focused on this as critical to successful delivery. Boards are heavily involved with the development and succession of senior people. “Having the right people in the right roles at the right time is the single most important thing we can do to ensure effective execution of our strategy,” one of our interviewees told us. The talent management function plays a pivotal role at the top table in the most successful organisations. In regulated sectors, the relationship between HR policies and company performance and compliance is particularly acute. Another of our interviewees, a People Director at a major retail bank, explained how accountability for remuneration and incentives together with responsibilities for succession, capability, culture and diversity, mean this role is central to decision making at the executive committee: “we’re talking about these issues at the ex-co all the time, not least because of their impact on our ultimate responsibilities around fair treatment of customers.”5 Some public service organisations too take a strategic view on talent. In the British Army, talent management is a central strategic function and in the wake of the Integrated Review of Security, Defence, Development and Foreign Policy, the Army is engaged in a major exercise to plan the optimum configuration of its workforce capability to support the delivery of this policy over the next decade. This includes detailed planning of specialist skills required, which will inform the profile of regiments, recruitment, training and career planning for individuals. In Singapore, investment in high-quality administrative capacity is a core strategic objective for the government. Singapore’s Civil Service consistently operates at the global frontier of administrative efficacy, receiving the top rating in the World Bank’s Government Effectiveness metric (the UK is at number 21). Singapore launched a Public Sector Transformation programme The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

at the start of 2021 as a counterpart to the Singapore Agenda, the government’s medium-term policy agenda. It amounts to a wholesale transformation of the public service, incorporating comprehensive digitisation programmes and the redesign of services around the citizen or business, alongside workforce transformation and implementation of more flexible, agile and collaborative working practices6.

How the Civil Service compares “The Civil Service presents itself as a people-centred organisation, but hasn’t followed through on that. The system talks a lot about people but doesn't have the guts to make the difficult decisions needed [to have a really effective talent strategy].” Former Permanent Secretary7 For an organisation in which its core organisational assets are its people, the UK Civil Service’s approach to talent management is un-strategic by comparison. This is a function of the government’s wider weakness in strategic planning capability, which the Commission has described in our baseline diagnosis What’s Wrong with Whitehall8. Our paper on resource management and planning concluded: “Strategy, or in plain English being clear about what the government, as a whole, really wants to achieve, has been the greatest weakness in the UK’s approach to financial management.”9 In 2014, Lord Browne, then the government’s lead non-executive director, conducted a comprehensive review of talent management in the Civil Service.10 This made a series of clear recommendations, including urging the government to “think strategically about talent.” The report stipulated that “good talent management can only happen when there is clarity about the future shape and needs of the organisation. Departmental boards should address this and the Civil Service as a whole must focus on its needs as an organisation.” Although there has been increased focus on professionalising HR since then, talent management still does not, for the most part, take place in the context of a clear business strategy – either at departmental or at cross-government level. Major policy reviews will not always take into account the available skills and capability to execute the changes, leaving departments with the challenge of retrofitting an extensive review of skills once the policy change has been adopted 11. In their most recent report, the Senior Salaries Review Body stressed the need for a more strategic approach from government, linking workforce policies and pay to departmental plans and noted “insufficient focus on outcomes and the achievement of best value.”12 The 14 cross-government functions (including project delivery, commercial, legal and finance), which are overseen by the Cabinet Office, have been successful in providing a means for the corporate centre to drive improvements in capability. However, whilst acknowledging that The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

progress has been made in providing a more structured approach to the development of specialist skills, including people standards, career frameworks, tailored training programmes and accreditation (on which, more later), in its 2020 review, the NAO said that functions are not yet fully involved in departmental business planning and could do more to combine knowledge and insight to tackle cross-government issues13. Functions’* role in providing the skills, methodologies and resources to implement policies successfully has a significant bearing on government’s capacity to deliver. Commenting on business planning in a major delivery department, a former senior leader told us: “Decisions on where to focus capability were often taken independently of strategic planning in the department. There was, for example, no departmental view on where we should focus our best commercial or project delivery people, in line with our priority projects.” This in part reflects the limitations in the way departments can deploy their people – with very few restrictions on the internal market for jobs, movements are primarily driven by the individual’s preference, rather than the needs of the organisation (on which, more later). The new Outcome Delivery Plans, which will replace Single Departmental Plans for this year, place a greater focus on deliverability and accountability. They require departments to consider capability more thoroughly – alongside affordability and risk – to ensure more realistic and deliverable plans. Capability is also a strong theme in the Treasury’s Public Value Framework. This is right, but departments and the centre must ensure that planning doesn’t stop at skills and capacity, but looks more deeply across the system to ensure alignment of incentives, management structures and ways of working. When it comes to translating policy intent into effective services for end users, the fundamental importance of having a really coherent approach to talent management aligned with strategic objectives is illustrated by the NAO’s recent good practice guide on improving operational delivery in Whitehall14. The guide says, “government needs people who can lead, manage and work in complex systems and good workforce planning to ensure that the right technical skills are in the right place.” It concludes that “much of government continues to lack these *

Government functions: Functions aim to develop and deploy specialist expertise across government. Typically, functions set cross-government strategies, set and assure standards, develop capability, give expert advice, drive continuous improvement, and develop and deliver commonly required services. The functions overlap with the Civil Service professions, which work to develop the capability of groups of people with particular skills, knowledge or expertise. Many functions have an associated professional grouping and one of the core activities expected of functions is to develop capability. Functions often have a central unit or organisation, for example to set standards and coordinate training across government, but much of the work of functions is carried out by staff working in departments (for example, in finance teams or as commercial practitioners). Source: National Audit Office analysis The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

capabilities” and warns against “misaligned incentives”, insufficiently collaborative ways of working and fractured lines of accountability. Worryingly, when it comes to effective management and improvement of services, the report says “staff need the skills, methods and time to spot, raise and fix problems. We found no evidence of this happening in nearly three-quarters of the organisations we assessed.” The Government’s central strategic challenges are all cross-cutting. Achieving real progress in reducing emissions, tackling inequality and regional economic disparities, improving productivity and increasing international investment will all require not only better horizontal coordination across departments, but also require much better cooperation between Whitehall and local government – as set out in the Commission’s paper Smart Devolution to Level Up15. This assessment therefore takes a close look at how people management in the Civil Service affects government’s horizontal interoperability and the ability to work collaboratively between central and local government.

Strong talent management capability Successful corporates and other governments The experience of managing organisations through the pandemic over the past 12 months, has served to elevate the position of People Directors. As one senior executive of a major corporate put it: “The Covid experience was a major proof point for the HR function. Not many CEOs would now doubt the need to have a really strong people capability.” Organisations with strong talent management take a corporate view of talent, with careful thought given to deployment of individuals as a core business asset. People are moved into roles to provide the resource required to deliver on current business plans, but also to enable them to develop their experience to fulfil future business needs and develop leadership potential. To be successful, this approach must take into account the needs and aspirations of individuals, otherwise the organisation risks losing talent to competitors. It also relies on the combination of sound data on the skills, capabilities and performance of employees plus significant managerial investment in the process of not just allocating people to roles, but identifying and nurturing future capability. In the British Army, an organisation with a relatively captive talent pool, career management is prioritised not only for workforce planning, but as a key part of the ‘offer’ to employees. In deploying talent, the needs of the Army come first, which can sometimes mean that individuals are moved into roles that they would not have chosen. The Army seeks to balance this with strong support for individuals to achieve their full potential. Formal career reviews will aim to The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

help individuals define their career aspirations and steer a path to accrue the skills, experience and knowledge to fulfil their potential. The close involvement of management and senior leaders in HR issues at both corporate and individual level is notable in both professional services firms and the Army. At Black Rock, an organisation described as “maniacal about high performance” by its chief executive, talent management policies and practices are guided by its global Human Capital Committee (HCC), composed of 35 senior leaders, only one of whom is from HR. The HCC has responsibility for talent planning and recruitment, including employer branding, ensuring a high performance culture, employee and managerial development, talent reviews and succession planning16. It takes a hands-on approach to ensuring that the firm’s four guiding principles shape day-to-day operations and behaviours and ensures end-to-end coherence of talent management across the company. As Donnell Green, BlackRock’s global head of talent management, puts it, “The HCC and BlackRock’s Global Executive Committee are not afraid to address head-on some of the stickier issues of culture change and culture formation, including breaking down silo behaviour and driving harder to create a stronger high-performance culture.” An increasingly common approach to ensure that talent management receives the senior strategic focus required is to expand the remit of the board’s compensation committee. These board level people committees cover succession planning for key executive roles, ensuring a strong pipeline of internal candidates, the oversight of developing workforce needs and how the organisation is responding, alongside cultural accountability for diversity and inclusion, sustainability and other core organisational values. Turning to the tools that augment HR capability, larger organisations are increasingly deploying sophisticated workforce analytics to enhance workforce planning, alongside dimensions of talent management. Once the preserve of digital leaders such as Google, the application of advanced analytics and large data sets to processes such as recruiting and retention is becoming much more mainstream, to deepen understanding of why people chose to join or to leave, what drives engagement and what improves career progression. In addition, many organisations are increasingly using data and analytics to predict and assess the impact of specific initiatives, to build a business case for HR practices and to calculate the return on investment of specific initiatives, such as an increase in pay flexibility, performance pay, or training allowance.

Google’s People Analytics department Google has spent years methodically building one of the most refined performancemanagement engines in the corporate world using analytics and the power of Big Data. This is used in solving fundamental business problems related to managing the employee life cycle, maximizing employee’s potential contribution, or improving Googlers’ wellness. As the head of the People Analytics department Prasad Setty puts it: “We need to be able to measure, to find out what does and doesn’t work at Google rather than just adopt best practices.” Over the last six years, Setty’s team has produced significant insights that have: • • • •

helped limit the number of interviews required (company analysis showed that more than four interviewers didn’t lead to higher quality hiring), revealed the optimal organizational size and shape of various departments, shown how to better manage maternity leave resulting in a fifty percent reduction in defections, created on-boarding agenda for an employee’s first four days of work that boosted productivity by up to 15 percent.

How the Civil Service compares “Civil Service leaders do not know enough about their workforce or how best to deploy it”– Institute for Government, Finding the right skills for the Civil Service The Civil Service’s talent management capability is weak compared to large private sector organisations. In most Whitehall departments, HR is not a major player in running the department, with the function more focused on payroll and managing transactional processes around recruitment, performance reviews or complaints, rather than taking a strong strategic lead in addressing long-term staffing needs, succession planning, skills and driving performance improvements17. HR directors are represented on only a minority of departmental boards and don’t always report directly to Permanent Secretaries. The Civil Service Workforce Plan 2016 – 2020 contained plenty of sensible cross government HR initiatives but was a long way from the corporate talent planning of the kind seen in larger private sector organisations (or indeed the Army). While all departments have now submitted workforce plans to the Cabinet Office, these vary in quality and the overall progress on improving The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

workforce planning in departments is slow18. The IFG’s report on Civil Service skills published earlier this year, concluded that there is still no comprehensive strategy (or strategic workforce plan) to outline the skills the Civil Service needs for the coming decades – and without this, priorities will be ad hoc and skills development will remain patchy across departments and functions.19 In part, this is a function of the absence of strategic business planning in government, but it also reflects the fact that the centre of government is under-resourced and lacks agency to manage a really successful talent management approach. The fragmentation of responsibility for talent is unhelpful. Civil servants are employed by individual departments, who are responsible for their own workforce planning, with permanent secretaries accountable for running their departments. The Cabinet Office has control over recruitment and performance management frameworks, pay and terms and conditions and responsibility for specialist skills development rests with the leaders of the Functions – also overseen by the Cabinet Office. The HR function has a small central team that works with departments to identify current and future capability requirements across government and to help meet urgent demand – including preparations for EU exit and the Covid response. However, these periods of stress on the system shone a light on the limits to government’s ability to channel the right people into the right roles quickly, showing the lack of interoperability between departments and the administrative challenge of moving people between departments to support resource gaps 20. Why does the government often need to turn to external consultants for support in policy development? The absence of a central mechanism for workforce planning, recruitment and speedy deployment of policy skills is a key factor here: “Consultants can quickly pull together capability to focus on a particular problem and help the government track a way forward at speed. The failing on the government’s part is often one of nimbleness rather than skills and expertise. It’s very difficult in Whitehall to ‘plug and play’ because everyone is on different systems.”21 The high churn of civil servants between roles (and across departments) is both a symptom of and a contributor to weak talent management – median tenure in role for senior civil servants (SCS) is just two years. There is generally little formal corporate input into career path management. Even in the Functions, a few of the professions and specific talent development schemes, it is limited. So the onus is on individuals to carve out their own career paths, and there are very limited restrictions on movements between roles. The result is that departments have reduced visibility on their future workforce and have limited means to control staff deployment – indeed some departments such as HM Treasury lose a quarter of their staff each year.

Talent-related data in the Civil Service is poor. The IFG’s recent report on Civil Service skills pointed out that consistent data on skills and levels of competence, is lacking and different data collection systems across departments mean that Civil Service leaders do not know enough about their workforce or how best to deploy it22. Even basic information, such as leave or sickness records, is often incomplete. And as recent events have demonstrated, the centre lacks clear records of officials’ interests outside government. Government lacks the sophisticated data capture and analysis that is becoming commonplace in large organisations elsewhere, which would allow government to not only match capability to need, but to more accurately assess and predict the impact of particular HR policies or initiatives.

Attracting the best possible talent Successful corporates and other governments Successful organisations compete energetically for talent, to recruit and retain the skills needed for the organisation to achieve its objectives. They invest in defining and developing an employee value proposition that extends beyond remuneration and employee benefits, to encompass corporate culture, working environment, training and career progression. The employer’s brand in the talent market is a crucial asset, with key attributes including culture and values, supportive management, autonomy and work/life balance23. Competition for talent has become more acute in the last decade as demand has converged on certain key skills including project management, financial planning, commercial and procurement – and especially around emergent digital skills such as UX design, cybersecurity and data science. A recent survey by the World Economic Forum showed that nearly eight in ten global CEOs are concerned about the availability of people with the right skills. Many larger private sector organisations have an internal headhunting function – generally known as ‘talent acquisition’– to underpin their ability to attract the best talent in a cost effective way. These internal headhunting teams will manage all aspects of the recruitment process for both external and internal candidates, including proactively identifying and approaching candidates. They also manage the use of external recruitment agencies, typically deployed for about 20 per cent of roles. The larger tech companies have led the way in developing ‘best in class’ talent acquisition capabilities, providing an account management service for internal business units, using market knowledge to inform role descriptions and compensation offers and managing an optimal candidate experience. These internal headhunting teams will track key metrics including time to hire and cost per hire, with individuals in this function receiving bonuses of up to 20 per cent of their base pay as an incentive.

Many of the most successful companies recruit according to a set of clear criteria which go beyond the requirements of the immediate role in play. At Google, for example, there are four key characteristics sought: superior problem-solving skills, leadership, cultural-fit (described as ‘Googliness’) and role-related knowledge. Leadership skills are desired even in low level roles; candidates with an ability to collaborate, work well in teams and navigate ambiguous situations will score highly for ‘Googliness’; whilst role-related knowledge comes second to “being a smart problem-solver and good at learning”. These criteria reflect Google’s view of what it takes to be successful in the company in the medium to long term: “There’s a lot of musical chairs with regards to people’s jobs at Google. So we want to hire smart generalists who can grow and move around the company over time.”24

How the Civil Service compares The Civil Service’s approach to attracting and retaining talent is “remarkably passive”25, according to a former permanent secretary we spoke to. There are some highlights: the Fast Stream brand has been very successful in attracting a talented and increasingly diverse cohort of graduates; last year the Fast Stream was the top employer in the Times top 100 graduate employers for the second year in a row. However, outside this scheme, the Civil Service’s efforts to compete in the market for high calibre candidates are not exactly on the front foot and the government is not maximising its potential to recruit the best possible talent. It was the consistent view of the headhunters we spoke to that not only were recruitment practices far behind best practice in the private sector, but the government was also being outpaced by the wider public sector. There is no internal headhunting (or ‘talent acquisition’) capability as in most large corporates. This is a constraint on the ability to hire the best candidates at lower to middle management levels where using a headhunter is not usually cost effective, increases reliance on external headhunters for senior and more specialist roles and certainly restricts the government’s ability to be an intelligent and exacting client of external search firms and ensure that it is maximising its potential to recruit high quality and more diverse candidates. Recruitment processes are long and complex and can be baffling to people not familiar with them. The Civil Service uses ‘success criteria’ which assess candidates according to no less than 36 separate ‘strengths’ and nine ‘behaviours’, alongside ‘experience’, technical qualifications and ‘ability’26. Not only is the process off-putting to external candidates, a number of the headhunters we spoke to that believed it gave an advantage to internal candidates “you need to be able to understand the rules of the game in order to jump the hurdles they ask of you”27. We heard that Civil Service recruiters were not good at recognising transferable skills in external candidates from non-traditional professional backgrounds, “they can’t always see how a public law barrister

could be a brilliant policy professional.”28 This has serious implications for securing the best talent, in terms of calibre and diversity. The government has made recruitment from more diverse groups a stated priority and introduced a range of policies to support it. However, we heard that recruitment practice often thwarts it. One headhunter told us: “You can have the best policy in the world, but it falls down in the implementation. Talent teams [in government] are being asked to deliver on things that are beyond their skill sets and networks – particularly in regard to diversity and also specialist skills, like digital.” The use of KPIs in contracts with external search firms to incentivise the development of new candidate pools is not common practice, as it would be elsewhere. Pay for civil servants is below not just the private sector, but also equivalent roles in the wider public sector. This discrepancy becomes more pronounced at more senior levels. Recent benchmarking found that at Director level, the Civil Service median salary was £103,500 – well below the national public sector at £162,500 and private sector at £218,60029. A permanent secretary earns 25 times less than the average FTSE 100 CEO. And when it comes to attracting the brightest and best graduates, as Policy Exchange pointed out in their recent report on government reform30, the average starting salary in the Fast Stream may be in line with average graduate salaries at £28,000, but is well below the top management consultancy, investment banking and law firms which have starting salaries of £50,000. As Policy Exchange argued, it is necessary to increase civil servants pay to be competitive in the market – and this may be most straightforwardly achieved by reducing the number of civil servants overall. When it comes to attracting high performers, the Civil Service’s employer brand is not always an asset either, with jobs in the Civil Service associated with stability and navigating ponderous bureaucratic systems – not with the opportunity to innovate and bring about high impact change on a large scale. Speaking of her secondment from Microsoft to spend two years as HMRC’s Chief Digital and Information Officer, Jacky Wright said that she hadn’t anticipated the scale and sophistication of the work: “What surprised me is, when we look at HMRC, it is as large as any FTSE company. Then there’s the nature of what we do, the breadth of what we do – everything from taxes to customs and trade – and the impact that we have in society.” Offering the ability to make an impact is a strong incentive and an underplayed asset in the government's approach to secure outside talent. Indeed, a clear sense of purpose at work is a primary motivating factor for people under 40 in choosing roles – alongside training and development opportunities. But aside from lack of awareness of this opportunity, we also heard from contenders for high level roles in government that they were put off by a lack of confidence that these roles would have sufficient mandate to implement change.

The government does not have a great track record in supporting external entrants to thrive once in post. Catherine Baxendale’s report in 2014 demonstrated barriers to success included lack of induction and support, a resistance to change and a lack of value on operational delivery31. Whilst the government has taken steps to address these problems, in our own research, we heard many testimonies from outside recruits that their impact had been hampered by unclear mandates and inadequate resources and they had struggled to navigate bureaucratic systems and hierarchies and found the political context very challenging, without adequate support from managers. If the Government is to make a success of its ambition, set out in the Declaration, of establishing new entry routes for professionals from outside the Civil Service, it must also address how to ensure these individuals are successful in their roles. Lacklustre efforts to attract external talent are related to the ‘war for talent’ inside the Civil Service. Much has been written about the Civil Service’s overheated internal talent market, which leads to what Michael Gove has described as “the whirligig of Civil Service transfers and promotions”32, so detrimental to the effectiveness of the organisation. Whilst measures to introduce more friction (such as reducing managed moves) and to incentivise people to stay in role (including the plans for pay progression) will help, this situation also reflects the poverty in proper workforce planning in the organisation and the lack of focus on outcomes. As covered later in this paper, better alignment between organisational objectives and personal incentives will also serve to place greater emphasis on demonstrating impact in a role.

Developing high performers, effective teams and great leaders Successful corporates and other governments At a time in which corporate loyalty is much depreciated and mobility rates are at an all-time high, development programmes are a key weapon in keeping good people, with training associated with higher retention rates.33 Developing internal talent pipelines is also an effective way to compete in a market in which many companies are adopting increasingly aggressive strategies for finding critical high-skilled people. Many companies have recognised that traditional training models which focus on set piece training at certain junctures (such as induction for new hires or at the adoption of new systems) need rethinking if organisations are to take advantage of the rapid pace and complexity of technological change. Shifting to a broad-based continuous-learning model, which repeatedly enhances employees' skills and makes training widely available, can also help companies to maximise the

full potential of their workforce and increase the diversity of senior leadership by eroding barriers to promotion such as education credentials. The advantage of a diverse workforce has become axiomatic, but the impact of ‘diversity and inclusion’ policies is often too superficial to unlock the full benefits of diversity. Simply recruiting and retaining more people from underrepresented groups does not automatically increase an organisation’s effectiveness. Research has shown that in organisations where the prototypical leader is a white man who earns respect by speaking assertively, challenging and high-value projects are often assigned to candidates in that mould, with women and people of colour assigned to more mundane projects, taking longer to reach promotion and/or leaving the organisation. “Over the years we’ve seen the emergence of a multibillion-dollar industry dedicated to advancing [diversity and inclusion]. Companies have adopted a slew of initiatives as a result: affinity groups, mentoring programs, work-family accommodation policies and unconscious-bias training... But the sad truth is that these efforts largely fail to produce meaningful, sustained change – and sometimes even backfire”.34 Successful strategies to harness diversity are hard to get right and require leadership from the top, close interrogation of an organisation’s practices for development and promotion (and good employee data helps enormously here), leading to systemic change. Addressing socioeconomic diversity is particularly challenging but some companies have found that bold moves have paid off. Google’s analysis of the factors associated with strong progression of its staff through the organisation found that a high grade point average was not correlated with career success and has deprioritised academic qualifications in recruitment criteria as a result and at the same time increased its ability to recruit from lower socioeconomic backgrounds. In large organisations in the private sector, the attributes of leadership place emphasis on setting and executing a clear strategy, delivery of transformation projects and creating the conditions for innovation – with the hard metrics of cost, customer numbers and profit providing evidence of success. When it comes to leadership training, an MBA – often funded by employers – is an increasingly ubiquitous qualification amongst the ambitious and upwardly mobile. And for those that reach the junior ranks of leadership positions, studying for executive MBA and other structured accredited learning programmes alongside the day job is encouraged and again generally sponsored by employers. 25 %t of FTSE 100 CEOs hold MBAs (and 20 % are Chartered Accountants). It would be rare to find a local government chief executive without extensive operational delivery, commercial or financial management experience. The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

AT&T’s Workforce 2020 strategy AT&T’s Workforce 2020 strategy, initiated to support the company’s transition from a hardware-centric to a software-centric network, involved a systematic audit of its 250,000 employees to catalogue their current skills and compare those with the skills it expected to need in future. The company identified 100,000 employees whose jobs were likely to disappear, and several areas in which it would face skills and competency shortages. The response was a multiyear $1 billion initiative to retrain its existing workforce. Since then, its employees have taken nearly 3 million online courses designed to help them acquire skills for new jobs in fields such as application development and cloud computing. The company also now hires far fewer contractors to meet its needs for technical skills.*

Singapore's culture of public service excellence In Singapore’s Civil Service, the emphasis is on training and developing a high quality cadre of officials, and giving them exposure to best practice outside government; to grow expertise of equal calibre to the private sector, rather than recruiting from outside the Civil Service. Civil Service pay is benchmarked to the private sector, with the top officials earning seven figure sums. Younger officials showing strong potential are routinely sent on full time MBA courses at INSEAD Business School where they study alongside high fliers from the corporate world. There is a large-scale ‘talent attachment programme’ in which civil servants are sent for 12 month ‘work and learn’ placements to private sector companies, with a particular focus on service transformation and delivery. The Core Competency framework is under review as part of the public sector Transformation Programme, drawing from best practice in leading private sector organisations. It will have an increased emphasis on innovation and continuous learning, implementing well, cross-public sector collaboration (known as ‘one Public Sector mindset’), and working effectively with citizens. All public officers already receive up to 100 hours of training per year. Core training programmes delivered by the Civil Service College include design thinking, data analytics, creating a culture of innovation, ‘future-craft’, organisation building and change management. A priority is to develop better integration between policy and operations and digital technology, with public servants at all levels from the front line to the top tier receiving tailored training to this end. “Good policy/ops-tech integration happens when the policy/ops communities and technologists know how technology can best be applied to achieve agencies' missions, and work together to achieve them*.”

How the Civil Service compares ““The top of the Civil Service still thinks that courtier skills and a quick wit are the most important things to have (indeed that they are pretty much sufficient) and are best learned through a combination of PPE plus private office.”– Former Permanent Secretary The Civil Service’s approach to learning and development has been to focus resources on providing formal learning programmes for those considered to have high potential and on senior leaders. The IFG’s assessment of skills in the Civil Service concluded that “the majority of the UK’s 430,000 civil servants have been left behind” and that training, development and learning are not a high enough priority and should be better aligned to the Civil Service's core priorities. The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

In January, the Cabinet Office launched a new curriculum and virtual campus for government skills, promising a renewed emphasis on technical and analytical skills and a greater effort to provide training opportunities for all officials. Creating an organisation-wide culture of continuous learning will require not just increased availability and quality of training, but also greater emphasis on both individuals and their managers to taking up training opportunities. The planned capability based pay progression will reward officials for developing their professional skills. IFG has recommended creating incentives for managers to ensure staff receive training. The government also needs to ensure that it is providing the right mix of training, focusing on building the right range of skills, both through formal training programmes and other development routes. The specialist skills gaps in government have been well rehearsed and are a familiar theme in reports from the National Audit Office and the Public Accounts Committee in investigating policy and operational failures, serious delays and overspends. The government has itself admitted key gaps in commercial, digital and project delivery expertise. The IFG has recently pointed to capability gaps in engineering, climate science, as well as project delivery, which are inhibiting the delivery of key programmes to reduce the UK’s emissions to net zero35. In addition, the Commission’s work has identified key requirements to strengthen capability in digital skills, financial planning and portfolio management. The Functions must do more to meet skills gaps. But they provide a model for determining and developing the specialist skills required in each domain – representing about a quarter of all civil servants in total. Where there has been less progress, is in determining the skills required in more widespread roles, especially in the policy profession, which makes up 24,000 people, many of whom fill leadership roles at the centre of government. Gaps have been highlighted over the last year, as the coronavirus response reinforced the need for civil servants with experience of working in and with local government and those with the ability to manage large and complex projects at speed and under pressure. The use of data in government came under particular scrutiny and the lack of capability in this area was a hindrance in establishing and then delivering the government's response: “Data literacy is still very low. Turning Covid data into something we could show ministers every day was a slog36.” The deficit in numeracy skills and underdeveloped use of data in working practices is a serious problem and a major constraint to effective resource planning and project management, as well as good policymaking. The IFG’s recent work on policymaking, which found that policy is often made on the basis of limited information, with little testing and options appraisal or evaluation, called for greater emphasis on numerical and statistical literacy in the recruitment and training of policy officials – alongside better use of digital tools37. There is no data on the educational The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

background of the Civil Service as a whole, but the last available annual report for the Fast Stream (in 2018) demonstrated that just 18 per cent of applications to join the Graduate Fast Stream, Analytical Schemes or Specialist Schemes had completed degrees in science subject areas in the previous year. Arguably the single greatest learning and development challenge for the Civil Service is digital and it is not yet clear the degree to which this will be prioritised in the new curriculum. Not only will the Civil Service need to get better at recruiting and cultivating specialist digital skills, it will also need a much broader-based programme of developing all officials’ ‘TQ’– their ability to both apply and maximise the use of current technology and adapt and capitalize on future innovations with speed. This was described by our Commissioner Jackie Wright during her two-year secondment from Microsoft to be Chief Information and Digital Officer at HMRC: “We need to do a better job of equipping our people and making sure that they understand how technology can be used to enable them to do what they need to do. The policy organisation is responsible for working with every other part of the organisation – including mine – to understand how policy gets implemented… what does it cost, how do we campaign, how do we work with our intermediaries, our agents, our software developers to implement that policy – and what are the inhibitors? Every stage of the implementation [of policy] requires a digital element. So, digital and IT becomes the axle by which things get done.38” The absence of frontline experience, working directly with citizens, amongst the majority of civil servants outside operational delivery roles is in marked contrast to many other parts of the public sector and another significant barrier to effective policymaking, service design and delivery. Government has yet to promote strongly enough civil servants spending time outside central government to expand their skills, knowledge and networks, alongside formal learning programmes. The 2016 to 2020 Civil Service Workforce Plan set out plans to increase talent flows between the Civil Service and the public and private sectors, but it has failed to get off the ground in a meaningful way. Reinvigorated efforts to increase interchange with the devolved administrations have recently been announced and the Declaration on Reform includes an intention to develop a ‘pipeline of secondments…into major organisations in the UK and internationally, including other governments’. But there are no schemes for local government or the wider public sector, nor the third sector. Plenty of civil servants do leave government under their own steam each year, although this is often a one-way track. Attrition rates from the Civil Service as a whole are lower than the average turnover for UK organisations (seven per cent overall, rising to 11 per cent in the SCS) 39. But the issue is that the Civil Service is not doing a good job of tracking and holding on to its The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

most talented people. Career development outside the Civil Service continues to be the most common reason for exits. However, amongst those SCS who undertook an exit interview in 2019/20, dissatisfaction with pay has increased40. In the course of writing this report, we spoke to a number of former Fast Streamers who now work for professional services firms, corporates and tech companies. Whilst they now often command much higher salaries, they told us that the major motivating factors for leaving were frustration with the inertia of the system and the ability to expand their experience and progress their careers more quickly. They spoke of the sharp contrast between working in the Civil Service and the highly effective organisations in which they now work; “I don’t feel like I’m wading through mud every day to get things done”. Will they return? Maybe, but not any time soon. We also spoke to civil servants from the policy profession who had opted to spend time out of Whitehall to take up roles in local and regional government. They were motivated by a desire to increase their experience of service delivery and had found their time at the local level to be extremely valuable. However, they told us that the experience of going ‘against the grain’ had been difficult and a potential risk to their future career prospects. Organising their own secondments had been a very painful process, with problems over access to training and performance management, as no formal arrangements existed to facilitate outward secondments. Securing their next role back in Whitehall had also been difficult, as they were disconnected from their networks and found that their experiences in local government were not valued by the centre. As one current secondee told us: “I had to fight my way through the process to do this and I’m likely to pay a price when I go back, as it’s still about who you know and who you’re in front of, and I’ll be missing opportunities.” Unless there is increased value placed on external experience, there is a risk that ambitious civil servants will not see secondments as beneficial to their careers, even if new pathways are created. The continued emphasis on career progression through policy roles in the central departments, not only acts to discourage civil servants from seeking experience outside Whitehall, but it also inhibits the government from being able to take full advantage of the talent available in the organisation and thus improving cognitive diversity. The Civil Service is committed to being the UK’s most inclusive employer, and has made good progress in increasing diversity, especially at the lower levels. But progress in the senior Civil Service has been slower. Two new accelerated development programmes for officials from ethnic minorities and those with a disability are designed to help build talent pipelines from these groups. But without better workforce data and analytics, it will be hard properly to understand and address the barriers to progression in a systematic way.

There is also more work to do to support progression of people with a wider range of professional and social backgrounds. New research by the Social Mobility Commission has revealed that nearly three out of four senior civil servants are from privileged backgrounds41. The report found that a ‘behavioural code’ exists that can be both alienating and intimidating for those from working class backgrounds. Success is more likely for those in policy posts, who live in London, and work in departments near the political centre of power like the Treasury. Those working in Ministers’ private offices, for example, tend to get promoted, often helped by senior colleagues with similar cultural and socio-economic backgrounds. Those left behind tend to be in operational roles where progress is slower. Recommendations include better collection and analysis of data to understand the impact of existing and planned talent management policies on the ability for people from low socioeconomic backgrounds to progress, and in particular to improve access to policy roles, especially high profile ‘accelerator roles’. Gus O’Donnell wanted to be the last Cabinet Secretary to have never run anything. But the current cadre of permanent secretaries shows that the ‘mandarin’ continues to be the dominant success profile. Just seven out of the 22 permanent secretaries of central government departments have any significant experience outside Whitehall in either the private sector, a delivery agency or local government and operational experience is limited. Management skills are undervalued. A former permanent secretary told us: “People are promoted because they are clever – and specifically because they sound clever in meetings – not because they are good at management.” Another said: “It’s not uncommon for people concerned to nurture their careers to avoid difficult postings which entail actually running something – because in those jobs success or otherwise is abundantly clear.” The government is currently reviewing its vision and strategy for the senior Civil Service in the 21st century SCS project, which aims to increase diversity and broaden geographical distribution of senior leaders, build skills and expertise, “create an agile, creative leadership community who are positioned to deliver for future generations”42 and ensure systems empower leaders to be effective. The current standards and expectations for leadership encompass a confusing array of different frameworks and emphasise behaviours over specific skills and experience. There is the Competency Framework, currently being phased out in favour of the Success Criteria (although still in use in some departments). Both specify behaviours and capabilities, in which skills are implicit rather than explicit (see box below). Alongside this, there is the Leadership Statement, which sets out the behaviours expected of senior leaders.

Success Profiles – CS Behaviours at Level 6, Director and DG level: Managing a Quality Service Work across government to ensure delivery of professional excellence and expertise to customers. Ensure the Department has an in-depth and evolving understanding of the broad range of customers’ requirements. Establish and negotiate service levels and deliverables with delivery partners at a broad strategic level. Promote delivering value for money, emphasising a good return on taxpayers’ money. Ensure all parts of the delivery chain fully understand the required outcomes for the customer. Ensure all colleagues and stakeholders involved in delivery are clear about the impacts of poor service and communication on the customer.

What is clear from the government’s approach to developing and promoting leaders to date, is that there is much less focus on modern management skills than in the private sector and indeed in local government and the major public sector delivery agencies. As a former permanent secretary told us: “The Civil Service has enthusiastically embraced ‘leadership’, but there is precious little talk about ‘management’.”43 Serious study of strategy, organisational management and digital transformation which are at the core of Master of Business Administration (MBA) and other executive programmes offered by the leading business schools, are given much less emphasis in Civil Service leadership training. The increasingly widespread focus on the leader as ‘coach’ in the private sector, has yet to have a significant impact on Civil Service leadership in practice. A former permanent secretary told us: “The permanent secretaries who understand that their role is to grow talent are few and far between.”44 Another core attribute of Civil Service leadership that has been under-emphasised in training to date, is political acumen. Senior civil servants operate in a context of ‘dual leadership’, exercising management authority over their organisation and staff, whilst leading alongside ministers, who have the final democratic authority. The environment in which they operate is imbued with politics – in the words of one permanent secretary interviewed for a recent study, “it’s in every breath we take”45 and senior civil servants must work with and alongside a very wide range of internal and external stakeholders – and may sometimes find themselves answering directly to the media and to parliamentary committees. Navigating this successfully requires an ability to read the politics, understand and analyse differing interests and to decide how to act with judgement and integrity – all of which must take place in a constitutional and ethical framework. Yet there is little structured learning to support the development of political astuteness; rather the onus is on ‘learning on the job’. The ‘Success Profiles’ which set out the behaviours expected The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

of civil servants at different levels of the organisation barely mention ministers and the political context, even at Director and Director General level. The professional standards and codes provide guidance as to the boundaries in the complex inter-relationships between ministers and civil servants, but civil servants are not systematically taught how to navigate those relationships in day to day working. The complexity involved in leading in the Civil Service was underscored in the report by the Public Services Leadership Taskforce in 2018, which pointed to the need for better horizontal collaboration between public sector leaders. The Taskforce identified some key challenges. Central to these was a feeling of isolation, with people at the top of organisations often feeling exposed, lacking support and advice in dealing with difficult situations. Leaders also reported needing more expertise; being accountable for organisations entailed overseeing a range of expert functions of which they may not have had relevant experience in the past. They also highlighted the strategic complexity of their roles, that they were trying to achieve strategic outcomes that they could only partly influence. The Taskforce concluded that networks between top leaders across services were under-developed. This was a constraint on public sector leaders’ effectiveness and as a result can limit their time in post and deter people from applying for leadership roles.46 The National Leadership Centre was set up in response and is now into its second year, providing a programme and network for senior public sector leaders and research to contribute to evidence on public sector leadership. This focus on cross-sector leadership is very welcome. Better coordination across Whitehall and between the centre and local government and delivery agencies, and between different state actors (alongside business and the third sector) at local level is essential if the Government is to make progress in tackling the inherently complex and cross-cutting challenges of the day. There is still some way to go to bring coherence to the various leadership training offers available to the Civil Service (and wider public sector). Public sector leadership training still lags far behind comparable offers for the private sector. There is no international executive Master of Public Administration (MPA) in the same league as the hundreds of MBAs available, offering not only an opportunity to study leadership and management in the public sector, drawing from case studies of what has been attempted by administrations around the world, but also to interact and exchange knowledge with international peers – a feature of MBAs that is so highly valued by participants.

Goals, incentives and performance management Successful corporates and other governments “I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the Earth.”– President John F Kennedy’s address to Congress in 1961 “If you want your car to get fifty miles per gallon, fine. You can retool your car a little bit. But if I tell you it has to run on a gallon of gas for five hundred miles, you have to start over”– Astro Teller, leader of the Google X team that developed Project Loon and self-driving cars So, once you have the right talent in the right places, aligned to your business strategy, how do you incentivise strong performance and innovation? Translating a strategic vision into organisational goals, and in turn into individual goals, is crucial in ensuring the most productive use of resources. There is abundant evidence that organisational productivity is enhanced by well-defined, challenging goals. As well as informing the allocation of resource against priorities, by linking individual objectives to the organisation’s broader mission, clear goals also have a big impact on engagement. A study by Deloitte found that the single greatest factor in employee engagement was “clearly defined goals that are written down and shared freely....Goals create alignment, clarity and job satisfaction.” This was borne out by internal research conducted by Goldman Sachs, which found that employees who work with their managers on setting specific goals are four times more likely to be engaged and over 50 per cent more productive47. However, goal setting has to be done carefully– done wrong and you can end up with conflicting priorities, unclear or arbitrarily shifting goals which leave people frustrated, cynical or demotivated. Many companies have goal management systems to link goals to a team’s broader mission; one of the most popular of these systems is OKRs, which stands for Objectives and Key Results. Conceived at Intel, most famously embraced by Google, and now widely used in tech, OKRs have also been adopted by companies as diverse as Disney, BMW, Exxon and AnheuserBusch, and in the public sector by the US Navy and some city level administrations in the US. The OKR system supports leaders at each level of an organisation to define a small number of high-level, qualitative and inspirational goals or ‘objectives’. Teams then identify three to five quantifiable outcomes or ‘key results’ which will be used to measure success in achieving these objectives. This approach keeps planning and progress-tracking focused on the impact the work is having, rather than micromanaging the specific work that teams are doing on a daily basis. The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

Because of this, it is an effective mechanism for aligning top-down strategy with bottom up, teamlevel commitments to intermediate goals in support of that strategy. Office of Management and Budget 2001-2005 In 2001 the Office of Management and Budget (OMB) launched a mission to ensure government programmes had clear goals and definitions of success. It set up a five-year programme to work with departments and agencies to ensure every programme had quantifiable outcome and efficiency goals. In the first year, OMB reviewed 20 per cent of the approximately 1250 programmes in the federal government. They determined that 50 per cent of the programmes reviewed could not articulate what outcome they were supposed to accomplish. Either the enabling legislation for the programme didn’t define a goal at all, or a very general goal; or success was defined in terms of inputs or outputs, not outcomes. By the end of the administration, the number of programmes with clear outcome goals had risen to 80 per cent. President GW Bush’s close adviser and later OMB Deputy Director Clay Johnson, who drove this agenda from 2003, argued that clarity on both outcome to be accomplished and a desired timeframe were essential: “You plan and fund and organize very differently, and you have very different political issues to deal with, if you are trying to teach all schoolchildren to read at grade level in 12 years, versus 4 or 20 years. You are merely “working at” getting something done if you have no outcome goal or if you have an outcome goal without a desired timeframe. You need both to make a strong case for the specific level of funding that should get you to the goal, to develop the appropriate workplan, and to use initial performance data to refine strategies and tactics.” There’s a strong link between goals and innovation. When Kennedy announced in 1961 the epoch-defining ambition of sending a man to the moon by the end of decade, he acknowledged the accelerated developments in technology that would be required to achieve it. A less ambitious goal could have relied on the use of existing knowledge and incremental improvements, but really stretching goals require organisations to transform their capabilities to achieve them. This is the basis of Larry Page’s philosophy of 10x thinking: a 10 per cent improvement means working existing systems better, whereas Page expects Google to create products and services that are 10 times better than the competition. Thousand per cent improvement requires rethinking problems and exploring what’s technically possible. Just as important to successful innovation, is the discipline of focusing resources on the handful of things that really matter to an organisation. Steve Jobs said: “You have to pick carefully...

Innovation is saying no to 1000 things”, an attitude echoed by Larry Page, “You have to put more wood behind fewer arrows.” Implicit here is the importance of alignment: ensuring that all necessary parts of an organisation are working in support of shared goals, with teams able to identify cross-dependencies and coordinate with each other – particularly in tech, where agility and collaboration are essential. Achieving effective alignment is really hard to do. Studies suggest that only seven per cent of employees “fully understand their company’s business strategies and what’s expected of them in order to help achieve common goals”48. In a recent poll of 400 global CEOs, lack of alignment was identified as the top obstacle in execution of strategy49. But when companies get this right, the impact is significant: companies with highly aligned employees are more than twice as likely to be top performers50. Google draws heavily on cross-functional connectivity to power innovation and advanced problem solving, and uses its transparent goal setting system to promote a kind of freewheeling collaboration, as described by Lazlo Bock, Google’s former head of People Operations: “People across the whole organisation can see what’s going on. Suddenly you have people who are designing a handset reaching out to another team doing software, because they saw an interesting thing you could do with the user interface.” In organisations that are highly focused on innovation, the use of aspirational goals also provides a licence to fail. Google divides its goals into two categories. Committed goals tied to the company’s metrics, including product releases, hiring and customers, are to be achieved in full in a set time frame. Aspirational goals are for bigger-picture, higher-risk, more daring initiatives, and here the expected rate of attainment is 60 to 70 per cent. To support greater engagement with goals, more organisations are adopting dedicated cloudbased goal management software. AOL brought in an OKR platform in 2016. The company’s global chief technology officer Bill Pence described the impact as radical transparency, real-time connection and a company that coordinated operations as a matter of course. How can performance management systems most effectively support organisations to achieve their goals? The trend in the business world is a move away from the traditional appraisal process, geared mainly towards assessing and holding people accountable for past performance, towards more regular conversations about performance and development, with an onus on team leaders coaching team members. This movement, which was precipitated by the tech companies Adobe, and then Dell, Microsoft and IBM, has been taken up by major professional services firms, and today two-thirds of large companies in the UK are in the process of changing their systems51.

The reasons for this change are firstly, a greater focus on developing employees in a tighter labour market; frequent informal check-ins with managers help managers do a better job of coaching and allow their teams to process and apply advice more effectively. Secondly, more rapid innovation and a need for agility means that future needs are continually changing. Projects are often short-term and change along the way, so goals and tasks can’t always be plotted out a year in advance with much accuracy. Thirdly, the traditional systems of forced ranking and focus on individual accountability don’t enhance teamwork and help track collaboration. At GE, which championed the forced ranking system in the 1980s, using it to shed its bottom 10 per cent of employees each year, individual rankings and annual reviews have been eliminated in line with a new business strategy focussed on innovation. Annual goals have been replaced with shorter-term “priorities”, and whilst managers still have end-of-year discussions with team members, the onus is on frequent “touchpoints” addressing two basic questions: What am I doing that I should keep doing? And what am I doing that I should change? Companies that have abandoned appraisals have found that they have had to rethink their HR systems more broadly, because many of HR processes and systems revolve around performance ratings where the influence of employment law has been to standardise practices, develop objective criteria to justify employment decisions and document all relevant facts. Without formal appraisal scores, companies have also had to rethink their approach to performance pay and identifying poor performers. Google’s upward feedback survey on managers 1. My manager gives me actionable feedback that helps me improve my performance. 2. My manager does not micromanage (i.e. get involved in details that should be handled at other levels. 3. My manager shows consideration for me as a person 4. My manager keeps the team focused on priority results/deliverables. 5. My manager regularly shares relevant information from his/her manager and senior leadership 6. My manager has had a meaningful discussion with me about career development in the last six months. 7. My manager communicates clear goals for our team 8. My manager has the technical expertise required to effectively manage me. 9. I would recommend my manager to other Googlers. Through these surveys, managers are able to sit down with their teams and address issues. Managers also have tangible data to talk with their HR Business Partners about how they can improve. The results? In two years, overall manager scores went up from 83 per cent to 88 per cent favourable, and their worst managers rose from 70 per cent to 77 per cent favourable. The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

Netflix has abandoned formal appraisals, alongside most standard management controls, (including KPIs, salary bands, or bonuses. The expenses policy is five words long: act in Netflix’s best interests). But this has not prevented the company from aggressively pursuing a policy of ‘talent density’, believing that the best predictor of the performance of a team is not the quality of the best people in the group, but rather of the worst. Managers are encouraged to apply the ‘Keeper Test’– would they fight hard to keep an employee who was given an offer by a competitor? Any employee showing sustained B-level performance is asked to leave, and given a generous settlement. There are no performance improvement plans – instead, the company relies on a culture of ‘radical candour’ and an intensive focus on feedback and management coaching to get the best out of their employees.52 Deloitte’s performance management overhaul In 2015, Deloitte embarked on an overhaul of its performance management system, to create a simplified design that was quicker, more agile, and more supportive of constant learning – underpinned by a new way of collecting reliable performance data.* Three key pieces of evidence supported the development of the new system. Firstly, Deloitte calculated that their existing performance management system was consuming two million hours a year. Secondly, a review of research in the science of ratings showed that assessing someone’s skills produces inconsistent data. Ratings actually show more about the perceptions of the person giving the assessment than about the performance of the person being assessed. For example, if a manager is evaluating a team member on strategic thinking, it turns out that how much strategic thinking the manager does, or how valuable she or he thinks strategic thinking is, or how tough a rater they are, significantly affects their assessment of the team member’s strategic thinking*. Thirdly, Deloitte conducted its own research on what characterised high performing teams and discovered that the best teams were strengths orientated – and felt called upon to do their best work every day, in teams with great clarity of purpose and expectations. Deloitte’s redesigned system is based on the premise that people rate other people’s skills inconsistently but they are highly consistent when rating their own feelings and intentions. The immediate team leader (and no one else) is asked not about the skills of each team member, but about their own future actions with respect to that person, in ‘performance snapshots’ at the end of every project or once a quarter:

Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus [measures overall performance and unique value to the organization on a five-point scale ]. 2. Given what I know of this person’s performance, I would always want him or her on my team [measures ability to work well with others on the same five-point scale]. 3. This person is at risk for low performance [identifies problems that might harm the customer or the team on a yes-or-no basis]. 4. This person is ready for promotion today [measures potential on a yes-or-no basis]. The data points from these performance snapshots are aggregated to produce information for leaders’ discussions of annual compensation, succession planning, development paths, or performance-pattern analysis. There are no cascading objectives, no 360-degree feedback, no annual reviews. Instead, team leaders must check in with each team member once a week to provide coaching on near-term work.

How the Civil Service compares Limitations in current business planning and performance management systems mean that government is not succeeding in setting goals for teams and individuals that make the most effective use of available resources and engage people in understanding how their efforts are contributing to core objectives. As noted earlier in the paper, this goes back to the lack of a clear overarching strategy in government, plus rigorous business planning in departments. There is often a mismatch between objectives at team level, and the resources available to achieve these objectives– and too often objectives will refer to a string of activities and outputs which do not amount to a plan to achieve measurable outcomes. Giving evidence to the Parliamentary Committee on Public Administration, Dave Penman, General Secretary of the FDA, said “when the Government allocates resources to departments as part of the spending round, there is a clear disconnect between what is expected from the Civil Service and the resources it is given”53. Professor Kakabadse agreed, suggesting that “Too many commitments are concurrently pursued […] The frustration and concern of civil servants attempting to meet the commitments made by the minister and the government is that they are unable to fulfil such a broad range of obligations”. John Manzoni, former Permanent Secretary in the Cabinet Office and Civil Service Chief Executive, has said that government is “doing 30 per cent too much to do it well” and that “We need to go back, we need to re-plan, we need to be realistic, we can’t do it all”54. The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

The absence of clear goals also contributes to a culture of “diffused accountability”, where decision-making structures are focused on achieving broad consensus, and operational decisions are often pushed up the hierarchy for sign-off. This is a notable contrast not only to the typical behaviour of business units implementing an agreed business plan in most high-functioning corporates, but also to more delivery-focused public sector organisations such as the police or the military, where there is greater clarity on operational decision-making authority (and accountability) at each level of the organisation. Achieving a better ‘culture of delivery’ in the Civil Service will depend on reducing top-down micro-management; having a transparent system of goals and objectives, focused on a tighter set of core priorities, will be instrumental in supporting this. Current incentive structures do not best support cross-government collaboration. A former permanent secretary with responsibility for a priority cross-cutting agenda told us that he had found it “extraordinarily hard” to get people to commit resources in support of this effort, despite its political importance, because people were primarily incentivised to support departmental hierarchies, and this cross-cutting initiative did not feature in their departmental objectives. And whilst No 10 could be called on to weigh in where necessary, he had no crosscutting authority (or associated programme budget) of his own, and had to rely on persuasion alone, “we were going against the grain every day. There is no deeply rooted cultural practice of cross-government collaboration.” This lack of alignment around key organisational goals has been a core theme of the Commission’s work. The recent Declaration on Government Reform has emphasised new Departmental Outcome Delivery Plans, to which performance management arrangements for Permanent Secretaries will be closely aligned. It is not yet clear how this will support and incentivise better cross-government working. The experience of the last five years, in responding to first EU Exit and then the pandemic, has shown that the Civil Service is able to adapt quickly and successfully to external pressures. There is an opportunity to convert this experience into a more systematic and structured capability to set and respond to stretch goals and provoke greater innovation as a result. The Declaration on Government Reform commits to championing innovation and encouraging “considered risk taking to find new ways to solve challenges.” Achieving this in the absence of urgent external and/or political pressure will require careful review of incentive structures. At present, there is far greater tolerance for the risks associated with the status quo – whether that is existing systems, contractors or procedures – than for the risks associated with adopting new approaches or providers. As Michael Gove said in his speech at Ditchley last year, “It is a cliche to say of Government that no-one ever lost their job for recommending the contract go to IBM.” The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

Establishing a clearer incentive to innovate must be a priority outcome of the government’s forthcoming review of performance management for the senior Civil Service. Addressing the current set of political priorities around net zero, levelling up and a re-framed international status for global Britain will certainly require more than incremental achievements, making radical new ways of working not just desirable but essential. The Declaration on Reform states that the system will be overhauled to provide a clear link from overall priorities to individual objectives, giving Ministers and senior officials responsibility for defined outcomes, and measurable targets for delivery. It also states that rewards and bonuses will be linked to meeting targets and demonstrating wider performance. The Civil Service has only just completed a review of performance management procedures for senior civil servants, launched in 2019. This brought into effect (in April this year), a modest set of updates, including the introduction of mandatory quarterly performance reviews, lifting the cap on the percentage of civil servants who can receive in year awards (up to £17,500) and the scrapping of the mandatory use of an objective-setting form. The new review should be much more ambitious and must ensure that the new system collects reliable evidence of performance and drives improvements. The current system, which consists of annual reviews, 360 degree reviews, and moderated performance ratings, consumes millions of hours of time each year and is increasingly out of step with the direction of performance management reforms in the private sector. The Civil Service has a track record of being significantly behind the curve in performance management, introducing guided distribution of rankings in 2013, eight years after GE, the company which most ardently championed this system, itself abandoned the practice, in line with much of the rest of the corporate world. Although an increased focus on outcomes is welcome, the review should consider carefully how best to use the performance process to drive improvements, as well as just increasing accountability. In the corporate world, many companies have chosen to divorce conversations around progress towards goals, from performance reviews – at Google, for example, OKRs amount to a third or less of performance ratings, with a greater emphasis on feedback from cross-functional teams. The reason is that if performance ratings are too closely tied to achievement of goals, then individuals are not incentivised to set really stretching targets, nor to innovate. Whilst this is particularly important in environments where employees stand to gain significant financial bonuses from strong performance ratings, it is also a really important consideration for the Civil Service. In government, the complexity of the operating environment means that outcomes are rarely in the control of one team, or even one department. To be confident of The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

achieving objectives in this context, individuals could be incentivised to reduce expectations and focus on outputs rather than outcomes – which would not serve the wider purpose of the organisation, which is to deliver for the citizen.

How to reform people management: proposals for discussion We have proposed a set of objectives to guide the reform of Civil Service talent management. Alongside each, we have identified some key initiatives instrumental to achieving change. There are no quick fixes, and a series of individual initiatives will not be sufficient. This requires a serious and sustained commitment from the very top of the organisation to implement a root and branch overhaul of talent management, and to continually test whether systems support the organisation’s overall objectives, and to strive for excellence. This must be at the heart of the reform effort and become an ongoing strategic priority. The ambition should be to establish the Civil Service as the world leader in effective talent management in the public sector – with an approach as good as that deployed at the leading edge in the private sector.

Objective One: a deeply strategic approach to talent that is driven by top leadership The people agenda must form an integral part of an enhanced strategy and business planning process. The Civil Service leadership must have a restless commitment to continually test whether the full suite of talent management practices underpins delivery of the government’s priorities – which ultimately comes down to promoting better outcomes for citizens. This goes to the top of the agenda, and leaders must take a hands on approach to ensuring success.

People at the heart of business planning In our paper on finance and planning, we recommended establishing an overarching ‘plan for government’. Talent management needs to become an integral part of business planning, at both whole-of-government and departmental level. This should be a dynamic process, with a capability to move talent against priorities mid-cycle. •

Revamp the purpose of the government’s central People Committee to focus on the establishment and propulsion of a high performance culture, with a remit to energetically tackle key strategic questions, including: o Making better use of goals and performance management to drive ambition and innovation.

o Breaking down departmentalism and centralism and promoting greater collaboration and interoperability across Whitehall, with local government and public sector, and other external partners. •

The People Committee should establish key metrics for tracking progress on the people agenda, such as median time in role for senior civil servants, the percentage of Fast Stream recruits with science degrees, and the percentage of senior civil servants with experience outside Whitehall. These metrics and progress against them should be published annually.

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Departmental boards to have oversight of people agenda. In our paper on departmental boards, we proposed that the role of non-executives in reviewing the performance of Permanent Secretaries and other senior executives and in recruitment should be formalised through the establishment of a Remco. The Remco should pay particular attention to the Permanent Secretary’s commitment and success in improving talent management in the department. Departmental boards should ensure that they have NEDs with the appropriate expertise to be able to fulfil this role.

Transparent assessment of HR capability Our finance and planning paper also called for rigorous assessment of departments’ financial planning and management capability, resulting in a clear published scorecard, externally validated by NAO. •

Departments’ talent management capability, and the degree to which the top leadership is engaged in driving progress, should be a core component of these capability reviews. Where talent management capability is assessed to be poor, and progress is unsatisfactory, the capability reviews should trigger intensive support to improve performance from the centre. Departments’ progress in improving talent management capability should form a core aspect of Permanent Secretary’s performance appraisals.

Objective Two: top quality and well-resourced HR capability HR directors must be creative and high calibre and equipped to take a more strategic role in business planning, deploying leading edge approaches and systems in managing people effectively. This will require rich and reliable HR data, and data analysis to provide insight into the value and impact of actual and planned HR practices. HR processes must be geared towards helping the best people to do their best work every day, promoting nimbleness, ambition, and innovation.

A stronger role for the centre The Cabinet Office needs to be able to assert greater coherence in people management, with a powerful remit to bring systems and practices up to date. •

Strengthen the centre’s ability to set government wide HR standards and shared systems – including a single Civil Service wide HR system. End the practice of departments being able to apply individual approaches to performance management or commission and run their own departmental HR systems.

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The central HR team should power a root and branch review of existing HR practices, taking account of (but not simply adopting) leading edge approaches elsewhere, and taking a rigorous data and research-based approach to evaluation.

Invest in modern data-powered HR practices Invest in a central People Data and Analytics team to oversee the establishment of best in class workforce data collection and analysis. Provide insights into the impact of talent policies, support a test and learn approach to the development of new approaches and promote a data driven culture in HR. This team should be high-calibre, staffed with data scientists and others with experience of applying rigorous data-driven analysis (for example in management consultancy settings). The focus of the team should be directed by the People Committee and its findings should be reported to that forum, to support decision-making.

Enhance HR capability in departments •

Revise the role of departmental people directors, to include a greater emphasis on talent planning, succession planning, use of contemporary talent management practices and tools, and the use of data in supporting all of the above.

Objective Three: government becomes a much more porous and diverse organisation, able to attract and develop high performers from a broader range of backgrounds Transforming public services and the way government works will require an influx of disruptors – people with different backgrounds and perspectives, who are able to challenge the status quo and help develop innovative new approaches. Recruitment must be more effective at sourcing high performers, with improved processes, a better employer brand and a more active approach in the market, bringing in people with a wider range of professional and lived experience. Training must catch up with the needs of the organisation (especially in digital, management and leadership), and career management must emphasise the value of experience in operational delivery, in local government and the wider public sector, and in the private and third sectors.

A single Public Service Successful delivery of challenging cross-cutting issues – whether that is levelling up or reaching net zero – requires much deeper, more creative and more systematic collaboration between the different layers and realms of the public sector, alongside much more interchange of ideas, data and people. Senior roles in government need a pipeline of talent with much more delivery experience, and more varied lived experience. In order to be incentivised to take up opportunities in new regional departmental bases and government hubs, officials need to feel that they have an opportunity to build a top flight career outside London. And to achieve greater diversity in the senior ranks, government needs to create more routes to the top. •

Build the concept of a single ‘Public Service’, bringing together the Civil Service, local government, health, and other delivery agencies, across the four nations of the UK, helping to ensure more cohesion across the different realms of government. Set up a Public Service Board, headed by the Cabinet Secretary, and including leaders from its different parts.

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Expand the Fast Stream across the wider public service, providing graduate recruits with the opportunity to develop varied policy and delivery experience. Provide public servicewide training opportunities and leadership schemes.

Enhance recruiting power Government needs to be better at seeking out great talent from outside the organisation, with a more diverse range of professional and lived experiences. This should extend beyond large corporates and the largest organisations in the third sector. To disrupt current ways of working and bring in genuine innovation, government will also need to bring in more people from creative digital ventures, social enterprises and charities. •

Establish a Crown headhunter – an in house capability to a) proactively source a wider range of external talent in private and public and third sectors, and b) manage relationships with external headhunters to ensure they are incentivised to open up talent pools from more diverse professional and social backgrounds. The Crown headhunter should be used to source candidates for Civil Service roles and for public appointments.

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Abandon the use of ‘success profiles’ in recruitment – the complexity of the framework puts off external candidates and rolls the pitch in the favour of internal candidates. A simpler set of key criteria would also provide the basis for a more objective, merit-based recruitment process.

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Give Ministers the option to put a NED on the appointment panel in appointments at Director level and above, to give them the ‘greater visibility’ they seek.

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Reduce the number of civil servants and increase pay, raising talent density.

Achieve genuine porosity Success in realising ambitions to open up the Civil Service and establishing large-scale interchange in and out of the government, will require streamlining and standardising processes for secondments, actively marketing these opportunities, and investing in ensuring the success of the programmes through providing induction, training and other management support to individuals. •

Actively promote interchange with public, private and third sectors. Streamline and standardise processes for outward secondments, resolving current issues around contracts, access to training, pensions etc which act as impediments. Use interchange as a tool to advance departments’ strategic priorities e.g. outward secondments to customerfacing innovators in the private sector for service delivery departments or inward secondments from local government into teams addressing place-based policies for skills development or carbon reduction.

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Centrally fund a Crown Fellows scheme: a cadre of 1,000 talented people, recruited from inside and outside government, to be placed in local teams to power delivery of the core priorities and support innovation.

Decentralise to disrupt Government’s plan to move 22,000 roles out of London by 2030 presents a golden opportunity to disrupt current ways of working, increase collaboration between central and local government, and refocus policy making and service delivery around the citizen, business or place. •

Set up Joint Local Action (JOLT) teams, bringing together talented people from all sectors to carry out radical experiments in service design, with a particular emphasis on understanding and improving citizens’ lived experience. These would be cross-organisational, place-based joint ventures, bringing together local government, the local presence of government departments, like DWP, arm’s length bodies, health, the policy and other local public services, depending on the issue being tackled. They would harness the insight and effectiveness of local business and the third sector. (Further detail is set out in the Commission’s policy paper on structures55)

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Create shared Crown Offices across the country, transforming the ambition of the decentralisation programme to create greater shared capacity in places, including shared commercial teams, digital platforms and other corporate resources.

Redefine the qualities of leadership Government’s leaders run large and complex organisations and need better management skills. This means redefining the qualities for senior leadership, setting out the core skills, capabilities and experience required. •

Replace the Permanent Secretary role with a Chief Executive as the senior Civil Service post in departments, with a clear focus on strategy, execution and organisational effectiveness – alongside policy at a strategic level.

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The Cabinet Secretary should set out an ambition to achieve at least 50 per cent of Permanent Secretary (or Chief Executive) roles with serious delivery experience during the course of his tenure.

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Introduce a package of core skills requirements for senior civil servants – the ‘SCS Standard’ – including numeracy and data management; financial management; project/programme/portfolio management; change management; digital acumen (on which more below), and significant operational delivery experience outside Whitehall. As a condition for promotion to the SCS, officials (and external applicants) must be able to show they can meet the ‘SCS Standard’ through a combination of accredited training and experience.

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Appointments to the SCS without meeting the ‘SCS standard’ should be by exception, and all existing SCS should meet the standard within 2 years. An ‘Advanced SCS Standard’ should set the bar for progression to Director General level.

Leadership training and career path management will need to be overhauled to support development of these leadership qualities. Training must address the deficit in management skills in the senior Civil Service before they reach the very top roles. •

Set up a world leading executive training programme for senior public servants and aspiring ministers, equivalent to leading business school offers in the private sector. Government should work with a leading academic institution to establish a global Executive Masters of Public Administration. An interdisciplinary, international platform for advanced leadership development, pooling the best research and faculty from around the world. It should teach leadership through hands-on problem solving on real-world cases, leveraging peer-to-peer learning, and it should be offered to political and administrative leaders alike from across international, national, regional and local government. There should be a particular focus on digital transformation, applying leading-edge thinking in digital disruption from the top business schools to a public sector context. Working with a business school would allow for some mixing with those on executive MBA courses on certain modules, which could help to break down the cultural barriers between the government and the private sector. A programme along these lines, targeted at a sufficiently senior level, would also help to encourage the interchange of talent and ideas between different parts of the public sector, whether Civil Service and Ministers or Whitehall and local government.

Strengthen numeracy and data literacy The Civil Service’s pervasive weakness in numeracy and data literacy must be addressed through recruitment at all levels, training, and changes to working practices; this must amount to a major cultural shift. •

Strengthen numeracy requirements for the Fast Stream and set out an ambition to recruit more science graduates across all dimensions of the scheme.

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Place greater emphasis on numerical and statistical literacy in training of all officials, including data management, quantitative analysis and modelling as part of testing and options appraisal, and earned value management in project execution.

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Set clear expectations for use and presentation of data in submissions, business cases, project reporting and other core management tools.

A major commitment to raise TQ Realising the promise of digital transformation will require a major commitment to raise the Technical Intelligence, or ‘TQ’ of the Civil Service. The complexity of transformation projects, and the pervasiveness of their impact, requires the full engagement of the whole senior leadership team, each one understanding their role in the transformation and feeling confident in execution. •

As part of the ‘SCS Standard’ new senior civil servants should be able to demonstrate a technology requirement, encompassing digital literacy, knowledge of digital business models and planning, technical project oversight, digital procurement, data management, and understanding of relevant new and emerging technologies, including AI, and how these be deployed ethically to improve efficiency and service delivery for the citizen.

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Create a set of digital requirements for roles overseeing large digital programmes. Create a pre-posting training offer – akin to language training in the FCDO – for those taking up the roles who do not have the necessary digital skills.

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Establish a comprehensive digital skilling agenda to create a pipeline of future digital skills, for example by funding Digital Government modules in engineering and politics degrees, as well as chairs of Digital Government at universities.

Objective Four: people and teams have clear goals and are incentivised to set and strive for ambitious outcomes and deploy innovative approaches There should be a greater emphasis on managers giving team members the resources and support they need to achieve goals, and on providing team members with coaching, feedback and training to perform more effectively. Better business planning towards defined goals should support clearer decision-making authority and accountability. Annual reviews are a poor means of driving future performance and have been largely abandoned in the private sector. •

Linked to the development of the ‘Plan for Government’, establish a discipline of setting clear and transparent goals for each team, which support the achievement of the government’s overarching priorities (but are not simply ‘cascaded’ down). As part of the business planning process, resources should be appropriately mapped to teams to achieve goals. Under this system, the vast majority of departmental business should be part of programmes of activity focussed on delivering core goals.

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Managers should be strongly focussed on providing support to team members to achieve goals and should receive training in coaching. Establish a Google-style survey for team members to rate managers in order to reinforce this culture shift.

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Use the forthcoming review of performance management to radically overhaul the current system, abandoning annual reviews. Start from the first principles of a) collecting better data on performance, b) recognising success and c) driving improved performance. The review must be informed by analysis of leading-edge practice elsewhere, behavioural insights and rigorous internal research and evaluation. Individual performance assessments should be linked to clear evidence of impact but linking KPIs for team goals too closely to personal performance management risks disincentivising ambition and innovation; a more sophisticated approach is required.

In addition, we propose reform to the Civil Service Commission, to provide increased impetus, scrutiny and support to the process of improving talent management across all four of the objectives outlined above. The Commission’s current role is exclusively concerned with regulating external recruitment to the Civil Service. This addresses one serious risk to talent management and a capable Civil Service, that otherwise people could be appointed because of personal connections with Ministers or senior civil servants. However, we agree with the Government that there are other risks: excessive barriers to external recruitment, poor training, a lack of parity of esteem for different disciplines. These need to be tackled under the leadership The Commission for Smart Government is powered by GovernUp, an initiative of The Project for Modern Democracy, a company limited by guarantee no. 8472163 and a registered charity in England and Wales no. 1154924. Privacy Notice.

of our proposed Office of Government Effectiveness, but there is a case for an independent watchdog, operating as a critical friend across all aspects of effectiveness. •

Reorient and expand the remit of the Civil Service Commission to be an independent critical friend of the Government’s approach to talent management. The new remit would be to: o Publish a regular and honest assessment of Civil Service effectiveness. o Make legally binding recommendations to the Government on actions to be taken to address weaknesses. o In view of the expanded remit, the First Commissioner appointment should be of someone with extensive leadership experience outside the Civil Service, with particular reference to strategic people management.

Authors Sophie Miremadi is a former senior civil servant, consultant and public affairs professional. Sophie is the Project Director for the Commission for Smart Government. Francesca Reed is an analyst at FMA, supporting the Commission as an independent researcher. At FMA, Francesca provides research and financial analysis to assist foreign governments on public sector reforms in a range of areas including financial management, major projects and procurement. She graduated from Homerton College, Cambridge with a degree in Education and Theology.

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