Constitution Unit publishes new study on non-executive directors in Whitehall

 

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In 2017, the Constitution Unit conducted the first-ever study of the work of non-executive directors (NEDs) within Whitehall. In this blog post, project leader Robert Hazell and Lucas Chebib, one of the project’s research volunteers, discuss the methodology and findings of the report. 

The Constitution Unit has just completed the first major study of non-executive board members in Whitehall (commonly known as non-executive directors, or NEDs). The report concluded that non-executives are high calibre, committed people, whose expertise is greatly valued by the civil service. However, NEDs themselves often said they find the role frustrating, and feel they could be much more effective if the system only allowed.

The study was carried out over 18 months by four former senior civil servants, with assistance from five research volunteers. The team compiled a detailed database of all NEDs; organised a survey; conducted almost 70 interviews; and tested their findings in private briefings and seminars. The full report is published here; what follows is a summary of the main points.

Who the Non-Executives are

Non-executives were first introduced in the early 1990s. In 2010, the new Cabinet Office minister, Francis Maude, gave them a strong boost, announcing that boards would be chaired by the relevant Secretary of State, with at least four NEDs, largely drawn from the commercial private sector. In April 2017 there were 80 NEDs in 20 departments.

Almost 150 NEDs have been appointed since 2010. They are high calibre, mainly from business but also professional backgrounds, very senior in their own fields. They are not in it for the money, or to build a CV: their motivation is one of public service.

What they do

Appointment is for a three year term, which can be renewed once. The average time served is 41.5 months, suggesting a lot of NEDs leave early, or serve only one term. The advertised time requirement varies from 20 to 35 days a year; however, a survey conducted for the report showed that NEDs do a lot more, contributing 45 days on average.

NEDs advise on projects, conduct reviews, mentor senior staff, and generally act as in-house consultants. They contribute generic expertise – finance, HR, digital, data, change management, etc – and subject-specific expertise – food, transport, trade, etc. They are paid £15,000 per year, with the lead NED in each department being paid £20,000. One third of NEDs waive the fee.

The impact they have achieved

Most NEDs say they make their greatest contribution outside the board. This includes leading on assigned themes (talent management, procurement, digital delivery); coaching and mentoring; advising on major projects, and testing delivery chains. Senior officials greatly value their advice and expertise, the mentoring role, their willingness to take on additional tasks.

NEDs expressed less satisfaction with the central part of their role, as board members. Few Whitehall boards are said to be working well. Ministers fail to understand their purpose, dislike being challenged, and find it hard to set priorities, especially if that involves dropping things to make way for new ones.

Boards only work well when the Secretary of State takes them seriously, which not enough do. But there was no wish to revert to the pre-2010 model, with non-executives sitting on a management board chaired by the Permanent Secretary. It was felt NEDs would be taken less seriously by the department, if not part of a board chaired by the Secretary of State.

Nor was there any wish to strengthen the boards by giving NEDs stronger powers, closer to the private sector model. Accountability in Whitehall cannot easily be shared: ministers are accountable to parliament for policy, and the Permanent Secretary for propriety and value for money (which now includes feasibility). NEDs had no wish to share this accountability; they accepted that they could only have an advisory role.

The Government Lead Non-Executive, Lord Browne (2010–14) and his successor, Sir Ian Cheshire, have both sought to improve Whitehall’s overall performance, not just within departments. Cross-departmental groups of NEDs have shared best practice on talent management, the governance of arm’s-length bodies, and management of risk. But there are limitations to what they can achieve, being only part-time. In addition, their impact is limited by weaknesses in the centre of Whitehall, and lack of prime ministerial interest, exacerbated by Brexit.

Strategic planning and delivery

NEDs easily find affinity with Permanent Secretaries, with shared interests in leadership, management and delivery. But the key relationship is for the lead NED to gain the trust and respect of ministers. This takes time; and it is not helped by high ministerial turnover, as happened following the 2015 and 2017 elections.

The single departmental plan (SDP) is the vehicle to ensure realistic planning matched to resources. Framing and managing SDPs should oblige ministers to decide which projects to shed or downgrade. SDPs have improved, but with great variation between departments. The real test will be whether plans are used in-year to monitor and manage performance, or just go back on the shelf.

NEDs are closely involved in the single departmental plans. But there is still reluctance to challenge ministers’ wish to do everything, with consequential risks of overstretch. NEDs’ role could interlock more with the Permanent Secretary’s duty as accounting officer to seek ministerial directions before proceeding with programmes which are not feasible, or offer poor value for money.

Strengthening the contribution of Non-Executives

A familiar refrain during the interviews conducted for the report was that the role of NEDs is too vague, and needs clarifying. But when we probed this, and asked whether clarification means codification, or more powers, the report found no wish for NEDs to have more formal powers. They prefer soft power to hard power. Their current Brexit powers include: chairing the audit and risk committee; ensuring the chair acts on regular performance evaluations of the board; the right to have their concerns formally recorded in the board minutes; the right to echo any concerns in the department’s annual report, and the annual report of the Government Lead Non-Executive.

The final chapter of our report considers how NEDs could make greater use of their powers. The role of NEDs is to challenge, and they are failing in that core task if they do not challenge more effectively the unreality of many departmental plans.

With their advisory status, the only powers available to NEDs are those of persuasion, and publicity. Because of the crucial need to build relationships of trust with ministers and senior officials, they have understandably been reluctant to go public. The central concern is overload, now exacerbated by Brexit. However, as Whitehall confronts the immense challenges of Brexit, non-executives may need to lower the mask. It will not be easy, since they can see the intense pressures on the civil servants in Whitehall; but they do those officials and themselves no favours if they remain too silent for too long.

About the authors

Robert Hazell is a former Director of the Constitution Unit and led its project on Non-Executives in Whitehall. The associated report was published on 18 January. 

Lucas Chebib worked as a research volunteer on the same project in autumn 2017. 

 

2 thoughts on “Constitution Unit publishes new study on non-executive directors in Whitehall

  1. It is a step in the right direction. NEDonBoard, the professional body of non-executive directors & board members in the UK, champion the NED role in 2018. We agree the contribution of Non-Executives needs to be strengthened.

  2. This is, to say the least, unsatisfactory.

    There can be no doubt that we are suffering the worst and most corrupt governance in living memory, making Reginald Maudling look like a naughty boy in a sweet shop.

    Why no mention of the NEDs’ role in this sewer?

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