By Joshua.Chambers

08 Aug 2012

Soon after the 2010 election, the coalition beefed up departmental boards and recruited a set of powerful non-executive directors. Joshua Chambers meets Lord Browne, the ‘lead NED’ reforming Whitehall from the inside

As chief executive of BP he worked with world leaders galore, including Lady Thatcher, Tony Blair and George W Bush. So what does Lord Browne – now the government’s lead non-executive director (NED) – think makes a good leader? And who’s the most impressive politician he’s worked with?

Browne – who, it should be noted, advises Cabinet Office minister Francis Maude – seems to dodge my trap by stating that “I’ve met so many great politicians and leaders around the world in my 45 years [of work] that it’s wrong to single them out if they’re still alive”. But then he can’t resist doing just that, plumping for Nelson Mandela; and who can blame him?

Browne once invited Mandela to give a lecture to the British Museum – sponsored, of course, by BP – and Mandela accepted on the condition that he could address all the staff in the oil giant’s headquarters. “There was a great bubbling of people and noise, and after lunch we went to the huge atrium where he was to speak,” Browne recalls. “Everybody wanted to touch him, and my definition of a great leader is someone who everyone wants to touch, because they regarded him as a very important part of their lives.”

When Mandela introduced himself, he told the staff that his purpose that day was to inspire revolution in the workers, which certainly makes a change from your average corporate motivational speech. And while Mandela didn’t manage to inspire revolution at BP, Browne has certainly taken on some of that revolutionary zeal in his current role as the government’s lead NED. He’s shaken up the system by putting business figures on the boards of every departments, providing advice, support, and scrutiny.

Browne himself has substantial business experience, and was chief executive of BP for 12 years until – after his ex-boyfriend sold a salacious story to a national newspaper – Browne lied in court in 2007 to discredit his former partner. He had to step down as BP boss, and spent years slowly rebuilding his reputation until 2010, when the coalition asked him into the heart of government. Browne’s now a key player in Whitehall who’s well-placed to explain what NEDs want from civil servants, and what his colleagues think should change in the way that government operates.

The business of government
We’re sitting in the swanky offices of his energy investment fund, and Browne explains why he thinks the civil service needs more business expertise. “Given the state of the world and Britain’s position in that world, it’s necessary for us to regain competitive and comparative advantage by doing things better,” he says, slowly and deliberately. “One of the reasons I accepted this job was that I thought that, if there’s a chance of making the way government works better by using some of the techniques and learnings from business – not making government into business; that’s impossible and it’s wrong – then it is worth doing.”

There are three key skill sets in which the civil service has a lot to learn from business, Browne thinks: commercial skills; project management; and management information. A fourth might be media handling techniques – Browne’s are well honed, and he moves to take control of the conversation at an early stage. He pauses for a long while before he answers each question, and gives no impression of considering an interruption until he’s said his piece. It’s a different style from that of many senior civil servants, who tend to start talking straight away, finding their way to their desired answer as they are speaking. Perhaps this is the difference between civil servants, who are used to advising, and chief executives, more used to deciding.

In their role as NEDs, however, these business chiefs are mainly working as advisers – both for secretaries of state and, Browne’s keen to stress, for permanent secretaries. “I think most of the non-executives – in fact all of them, I’m sure – don’t really differentiate. The advice to the political side, the advice to the civil service side, is given on an equal basis.”

So do NEDs ever find themselves giving political advice? No, says Browne: only politicians are qualified to do politics. But NEDs do give advice “which might have a political impact, should the secretary of state chose to use it in that way. So you may choose to reorganise or reorder the way you do things,” he explains, or to break a project into separate pieces.

Banking on non-executives
Over the past few months the newspapers have been full of banking scandals, from the rigging of interest rates to the mis-selling of financial products. And none of these stories show the non-executive system in a good light; the banks’ boards appear to have been either powerless or ignorant. Browne accepts that non-executives haven’t managed to control the banks’ behaviour, and says that the value of the whole system “depends on how it’s used.”

In government, though, he thinks that the introduction of NEDs has been valuable: their advice is much in demand, and many are working more than their contracted hours. Further, “a lot of the agenda on civil service reform has come from observations made from the non-executives,” he says. “But do I think they’re contributing fully? No, I don’t.” He repeats a statement he made to the Public Administration Select Committee (PASC): at present, he believes, NEDs are achieving about 20 per cent of their potential. The nascent boards are still settling in, he says.

Even when they’re making a bigger difference, Browne warns, it will be hard to measure their value. “Most people think non-executives’ contribution is measured by the number of avoided errors,” he says; something that can’t be quantified. “In a corporate sense, you can’t actually measure the value of a non-executive.”

Trust in the lord
The key to ensuring that NEDs do make a difference – measurable or not – is honesty about departments’ weaknesses and failures, Browne believes. He told PASC that NEDs are struggling to get an accurate picture of past mistakes, and he adds that “it’s still difficult. You need to build trust; it’s inhuman to believe that people will come up to you as a stranger and say: ‘The first thing I want to tell you is all the things I’ve done wrong.’ That can only come about over time.”

Given that NEDs primarily act as advisers to secretaries of state, is it possible for them to gain the trust of permanent secretaries too? “That is the way that non-executives behave in corporate life: they build trust amongst the board, they build trust with the executives, and they build trust with their shareholders,” he responds. Browne admits that when the system was first introduced, permanent secretaries “probably didn’t like what they saw,” but that’s because “Whitehall is replete with cynicism.” Now he thinks there are signs of civil servants warming to the system, because boards are “a place you can go and say: ‘I really think this isn’t going well. Can you help me sort something out?’”

I can’t resist: is that true of his own experience? Did the former Cabinet Office permanent secretary Ian Watmore, who left in a hurry in June, say that to him? “No, he wasn’t saying it to me – but plenty of other people have said things like this to me, and I’m not going to say who,” he replies. Permanent secretaries coming to NEDs with their concerns “doesn’t happen everywhere, if it happens,” he adds. “Since I’ve scored [us] two out of 10, if 20 per cent are doing this then I’ve accurately scored things.”

There’s one more potential problem: how can NEDs build trusting relationships with permanent secretaries when they’re also partly responsible for appraising them? This isn’t an issue, says Browne: “It’s the same in a company. A chief executive only has one person to go to discuss what’s going on: the chairman. And the chairman is the only person who can fire the chief executive. It’s a very complex relationship as a result, but it’s not new. It really is about building a deep trust and not abusing that trust at any stage.”

Meet the family
Who are these people that permanent secretaries must trust with their weaknesses and problems? “Mostly they come from large, complex organisations, because I think that’s a good start for understanding the complexity of government,” Browne says.

NEDs are appointed initially for three years. But, given that they’re chosen by the secretary of state, does Browne think they will have to move around or leave when reshuffles take place? He doesn’t dispute the point, responding thoughtfully: “Perhaps, perhaps, but I would hope it isn’t just personal. You can build trust with several people… as opposed to simply with the secretary of state.”

Some departments were slow to choose their NEDs. What were they looking for, and are there some areas where it’s more valuable to have policy expertise than the business experience that Browne’s trumpeted? Yes, he replies: the big delivery departments, such as the Department for Work and Pensions, need business advice; but others, such as the Treasury or the Foreign Office, focus mainly on policy and so need people with more expertise in that specific field.

So the NEDs are actually quite a diverse bunch; but is there a sure way of impressing them? Well, says Browne, there is one thing they all look for in civil servants: precision. When considering a plan, he says, “they like to see what you are saying, how you are going to get it done, and that you know you’re getting it done.” To give more certainty on this last point, he adds, NEDs are pushing for better management information so that they can accurately measure and compare departments’ performance.

They are also pushing departments to reduce the number of priorities they have at any one time. Too often, says Browne, departments have included among their priorities quite routine activities, leading to a lack of focus on where things need to change. “There are always lots of things to do, that’s for sure,” he says. “But there’s also a lot of ‘business as usual’, and it needs to be treated as that.”

First impressions
What do Browne and his colleagues make of the civil service as an organisation? He’s fundamentally positive about it, although he slips in a sugared pill. “The civil service attracts remarkable people, that’s the first big observation. The second big observation we have made is that many civil servants have been asked to do things that they have not necessarily trained to do. And most non-executives think that’s unfair, because in today’s world, some roles do need high expertise – they can’t be handled by the general purpose person. If you put general purpose people into roles that need specific skills – for example, running an IT project – it’s very important to have people who really know what they’re doing. Otherwise, the risk of failure’s high.” That’s why Browne and his fellow NEDs pushed for the establishment of the Major Project Leadership Academy, and they also want to see more done to boost civil service commercial skills.

Browne’s third observation is one for ministers and civil servants alike: “Non-executives have observed that the civil service tend to do their job without being thanked a lot. And in business, you spend a lot of time thanking people.” These comments don’t come in isolation: they follow a period where some newspapers have been consistently attacking the civil service, especially on the topic of performance management.

Browne doesn’t want to comment directly on this media criticism, but he does discuss performance management: “Since it is not the case that everyone is a bad performer, it is illogical to only talk about bad performance. You have to talk about good performance first, because the vast bulk of people do a job very well. And without giving them the incentive and praise to do better, then you’re conducting a losing game because there’s nowhere to go except out.” Most people in an organisation, he adds, know who the poor performers are; leaders must address this problem openly, or morale will decline.

What happens when a leader is performing poorly? In the past, the civil service has been criticised for moving poor performers sideways rather than sacking them. “If people are moved sideways – and it wouldn’t be the only organisation where people are moved sideways – they tend not to last. You know, it’s a temporary thing,” he says. “My experience in moving people sideways is that it doesn’t really work, because in the end if they’re not good at one job, they’re probably not good at another one. And the truth is [already] out.”

As for the good performers, Browne encourages them to think radically. Many permanent secretaries would like to innovate, he says, but they’re “very self-editing in that they presume certain things can’t be done because of the politics. They get very pragmatic and say: ‘We’re not going to do it.’ In business, people would be testing the boundary a bit more.”

When officials do push those boundaries, Browne notes, “they’re put back into the box by something [bad] happening, and one of the committees in the House of Commons will say: ‘You shouldn’t have done that.’”

Yet Browne is unsympathetic to civil servants who argue that Parliament’s growing assertiveness in holding them to account is making their jobs harder. He understands PAC’s frustrations, he says, and argues that everyone is accountable – in business as well as in government. “As head of BP, I did 44 appearances in front of shareholders – once a quarter, for twelve years – which is probably more frequent than a permanent secretary appearing in front of the PAC. And they don’t just say: ‘Tell us something wonderful.’ It’s: ‘Why have you done this? Who’s accountable for that? What have you done? Why are you £5,000 a day off your target?’ So you are open to interrogation by the people to whom you’re accountable, and that’s tough.”

One thing that’s irked PAC is the high turnover among senior civil servants – and this also worries Browne. The government needs to retain the best talent, he says; and while it will never compete with business on pay, it needs to make sure it isn’t being left too far behind. Talented managers and specialists, he warns, mustn’t end up thinking: “‘I still want to do this, but I can’t. It’s ludicrous: I’m being paid far too little. I can’t live anywhere close to the office; I don’t have enough time off to participate in running my household with my partner; I have to work too long hours’,” Browne warns.

Browne himself is entitled to claim a £15,000 salary: certainly not enough to attract a businessman of his experience. Yet he seems energised by the job he’s been given: change is required in government, and Browne thinks he can help it become far more efficient and businesslike. After his brief hiatus from the national stage, Browne himself is back in business, so to speak. And he gives every impression of relishing the task ahead.

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