There’s more to the Foreign and Commonwealth Office than diplomacy and policy, with the government department harbouring one of the most overtly commercial operations in the civil service. Danny Payne, chief executive of FCO Services, tells CSW’s Jonathan Owen how the trading fund set up less than a decade ago has come of age
Forget oil paintings from Britain’s glorious past, or even a portrait of Her Majesty. The main objects on display at the London branch of FCO Services are a white cycling jersey, helmet and a racing bike.
They belong to keen cyclist Danny Payne, the organisation’s chief executive, and a man who – along with his devotion to life on two wheels – is all about business. By some measures, Payne could be seen as one of the country’s most successful civil servants. He may not be known for his expert advice on policy, but he certainly knows how to make money for his parent department, the Foreign and Commonwealth Office.
CSW meets Payne in a board room just off his open plan office, where even the chairs are in pinstripes, for his first interview since taking charge of FCO Services a year ago. Arms folded, Payne locks eye contact, and we begin.
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He explains how FCO Services has its roots steeped in history, dating back to the Diplomatic Wireless Service in the Second World War. But recent years have seen a transformation in the way it works. A decision to turn it into a trading fund less than a decade ago has paid dividends, quite literally.
FCO Services is run as a commercial business – with the profits ultimately returned to the public purse. No annual funding is given to the organisation.
“We don’t get given any money at all. I have a team of commercial and sales specialists and we have a marketing and sales plan and we go to market like any commercial business would and we win business on merit, reputation and price,” says Payne.
He did not grow up with dreams of becoming a civil servant. Payne was an engineer and carved out a successful career working on major infrastructure projects for the likes of WS Atkins, Carillion and Sir Robert McAlpine. After a five year stint at Network Rail, which saw him add business management skills to his CV, he was approached by a headhunter looking for people to join the newly formed FCO Services.
"People see themselves winning, customer confidence has been improving, and winning brings a confidence to people" – FCO Services chief executive Danny Payne
That was in 2008. Eight years on, he has risen to become chief executive. Payne jokes that the best part of his job is “the number of stories that I now have in my repertoire.” But he is deadly serious when he adds: “It’s an utter privilege to be exposed to some of the most fascinating things that people do around the world.”
FCO Services works in some 265 cities throughout the course of a year, with staff in up to 120 countries. It does everything from designing and building embassies to installing security systems, translation work and running Britain’s diplomatic bag service. Payne sums up the function thus: “We support policy work by giving [FCO staff] the equipment and a place to work and the security that they need.”
That often means that FCO Services finds itself working to support the FCO’s rapid deployment team in the aftermath of disasters such as the earthquake in Nepal last year, or terrorist attacks – including those in Tunisia and Egypt in 2015.
Although the FCO is the owner of the trading fund, the government department does not automatically hand contracts to FCO Services. And the trading fund does not place the FCO over other customers, which include Whitehall departments and foreign governments: “I think it would be unprofessional not to deliver on a commitment for any customer,” Payne says.
Asked about the differences between business and the civil service, he says: “I don’t get the sense of confidence that you would normally get in delivery organisations in the private sector, so there’s something about people not having enough confidence in their own abilities.” In the case of FCO Services, however, success has bred confidence. “I’ve seen increasing confidence ever since we’ve become a commercial entity, so people see themselves winning, customer confidence has been improving, and winning brings a confidence to people.”
The trading fund makes revenues of more than £136m a year. Last year it made an £11m operating surplus – more than double the £4.7m surplus in 2014/15. It also recorded its highest ever customer satisfaction score, 88.5%, and passed the billion pound mark for money generated since it was formed – during which time it has paid the FCO £15m in dividends.
However, morale is an issue, with staff engagement at FCO Services at 57% – below a ministerial target of 59% set for the trading fund last year. How difficult is it to attract the best people within the constraints of civil service terms and conditions?
Payne admits “it is a challenge” and adds: “We have to operate within the rules because ultimately we are a civil service organisation. I think it does cause at times a little bit of tension because if you’re being commercially successful and ultimately the benefactor of that commercial success is the government…if you’re struggling to pay your mortgage then clearly that can be a distractor.”
The commercial approach taken by the FCO’s trading fund is something other government departments could learn from, he argues. It drives a “genuine commercial attitude to money and delivery, so if you really want to deliver something and the risk is that no one will give you a budget unless you are good at it, it actually drives a different behaviour and a different attitude.” This means the focus is on customer service, delivering to the budget, and quality at the right price. “So if you want to reduce the cost and the failure of delivery then I think being more commercial is a way to do it.”
Asked about the challenging aspects of his job, Payne replies: “We could definitely do more…and we don’t have quite as much freedom as perhaps a commercial business might have to take on more.” Nonetheless, relationships with ministers have been “positive” and Payne has a good relationship with Sir Simon McDonald, FCO permanent secretary.
He is not unduly bothered by Brexit, saying “in the medium term I don’t see a huge impact.” His motto is “create don’t wait” and he says: “You can’t assume that what you’re doing today will be enough to carry you through changing times.” Having a commercial attitude encourages “you to seek out different ways to do different things.”
One example of this is a series of regional hubs being created to help drum up new business. One new office, in Bangkok, opens this month. Others will follow in Brussels, Pretoria, and Washington DC.
Asked how he unwinds from the pressure of leading FCO Services, Payne cracks a rueful smile and admits: “I’m a terrible hobbyist, that’s probably the thing that drives my wife to distraction.” He cycles to work three times a week, in a roundtrip which is around 60km. Payne goes kick boxing and is not far off his black belt, although his two children Oliver and Verity have already beaten him to it. He’s also a keen drummer, and likes going scuba diving.
After eight years at FCO Services, Payne is in no rush to move on. He has a four year term as chief executive and says: “If I’m there in four years’ time and the FCO asks me to stay on then I’ll take that very seriously, it’s an infectious business and it’s difficult not to really love it.”
One of the main reasons for this is the workforce of over 1,100 people that he leads. “I’m incredibly proud of how FCO Services people have taken what was the concept of a trading fund and actually made it fantastic. They’ve made it truly successful, so in terms of what people are able to achieve, I think the FCO Services people should be very, very proud.”