By matt.foster

17 Nov 2015

The Department for Business, Innovation & Skills may be facing a tough Spending Review settlement, but permanent secretary Martin Donnelly tells Matt Foster that the “honest and open” culture at BIS will endure – whatever the chancellor decides

Martin Donnelly readily admits that he is not “a natural extrovert”. But the softly-spoken permanent secretary at the Department for Business, Innovation & Skills (BIS) has overseen something of a quiet revolution in the culture of his department. Earlier this year, BIS announced that it had achieved gender parity in its most senior roles – a 50/50 split between male and female leaders. While that is a striking figure in itself – the latest statistics show that just 39% of the senior civil service are female, even though women outnumber men across the wider workforce – Donnelly insists that the achievement in his own department is part of a wider change in thinking that’s about more than just numbers. 

“It’s about setting up a culture of teamwork, openness and supportiveness, in which everybody feels at home,” he tells CSW from his Victoria Street office, which, as well as a tempting bowl of mini Toblerones, boasts a spectacular view of Westminster Abbey.

The department has established support groups for parents and carers, prioritised flexible working, and ran a series informal talks – under the title “Have your cake and eat it” – encouraging senior female leaders from the department and beyond to open up about times where unsympathetic management had held them back. 

Spending Review will not mean backsliding on BIS diversity progress, vows perm sec Martin Donnelly
BIS permanent secretary Martin Donnelly seeks ministerial direction over Redcar apprentice plan
Post Spending Review webinar with CSW and KPMG

Donnelly even drafted in coaches from the Royal Academy of Dramatic Art (RADA) to run courses aimed at helping sometimes-reticent senior leaders to be more open at work. The perm sec says the scheme, which has complemented separate confidence and assertiveness training organised by the Whitehall & Industry Group, will soon be rolled out at deputy director level.

The RADA training has, he explains, covered the “basic techniques of communication, of breathing, of posture” and served as a “very, very powerful” tool in building confidence. 

“It comes back to this point — we’ve got to get personal. You can’t follow me as a leader if you don’t know who I am. And I have to be prepared to tell you, not the pretend story, but the real one, about who I am, where I come from, what matters to me, what I find difficult. And to do that needs practice.”

As well as trying to encourage a broader cultural change in BIS, there has been a more practical edge to the diversity push. The department kept a closer eye on female representation in the lower grades to ensure that the next generation of senior civil servants is not being neglected; rolled out unconscious bias training for BIS leaders; and offered female staff returning to work after maternity and other forms of leave the guarantee of six months of flexible working on weekdays entirely decided by the women themselves. That move, Donnelly wrote in a recent article, meant BIS had “hung on to a lot of very talented people” and given women “precisely the bridge they need between time off and the next big job”.

Donnelly undoubtedly arrived at a tough time for the department, taking on the top job just days before George Osborne unveiled his 2010 Spending Review. Fast forward five years, and there’s every sign that the chancellor’s next round of cuts will put BIS to the test once again. Donnelly says it was partly in response to the demands of the last round of austerity – which saw the department’s resource budget cut by a quarter and administrative spending reduced by 40% – that he and his senior team strove to make BIS a more inclusive, flexible, and less “macho” place to work.

“We’ve gone on quite a journey to build levels of trust inside BIS,” he says. “It’s been hard – we started nearly five years ago now with a very difficult change programme. We reduced our core staff by over 22% and we did it quickly to minimise uncertainty. But it left a terrible legacy of mistrust and concern and worry. 

“Over the years we’ve rebuilt the department, by listening to what people want and need. And we’ve found that to do that requires a form of leadership which has to be very open and personal. I expect my senior team to talk about themselves. I talk about myself, with all of my weaknesses and vulnerabilities. And that gives everyone else permission to do the same.”

Donnelly acknowledges that this very frank style of leadership is at odds with the view many still have of the kind of hard-nosed, coolly analytical attributes it takes to get to the top of Whitehall. But he is adamant that this management approach is not optional – it’s essential to making BIS a “more effective delivery department”.

“I started life in the Treasury and it was very much impersonal, about stepping back and not allowing emotions or sometimes individual issues to affect what you were doing,” he says. “But we now understand that if we don’t tell each other, in a human way, our stories, not just about ourselves, but about our work, about why our work matters, and the difference it makes, we can’t improve it.”

There’s arguably never been a more important time for BIS to be able to clearly articulate its purpose. The department started life as the home of Labour grandee Lord Mandelson, coming about through the merger of the Department for Business, Enterprise and Regulatory Reform with the Department for Innovation, Universities and Skills. It was intended to provide government with a kind of interventionist super-department in the wake of the financial crisis, and under the coalition government, BIS served as the home of another political heavyweight, the Liberal Democrat Vince Cable. During Cable’s time, the department oversaw major policy initiatives like the launch of the Green Investment Bank, the privatisation of Royal Mail, a controversial overhaul of university funding – and the creation of the UK’s first proper industrial strategy for 30 years.

But with the end of coalition and the next wave of cuts in sight, some have questioned whether BIS – now led by the avowedly free-market Conservative secretary of state Sajid Javid – still has a future. Cable’s former special adviser Giles Wilkes recently took to the FT’s comment pages to argue that the Treasury was preparing to fully reassert itself on economic matters.

“With neither an animating vision nor a big beast’s ego to feed, it is hard to see the point of BIS,” Wilkes wrote. “As it declines into an ever emptier shell lying in sad splendour opposite Westminster Abbey, it would be kinder to strip it back down to the humbler, Treasury-dominated department it once was.”

The quote prompts a chuckle from the department’s perm sec when he’s reminded of it. Donnelly acknowledges that the election was “a big change” for BIS (although one he says officials spent a lot of time wargaming for: “We let some of the private officers play special advisers, which they enjoyed!”). Yet he is clear about the continued relevance of his department.

“Essentially, we’re a department that’s focused on growth, on business, on jobs and on opportunity across the country. We bring together a whole set of policies that affect those outcomes – from trade, and supporting start-up business, through reducing regulation, to ensuring that science and innovation feed into the real economy. We make sure that government is effectively partnering with industry in key sectors, that we’re delivering the skills that business needs. All of those things have to be done. 

He adds: “You can do them in different places. But the advantage of BIS is that we’re able to pull them together and get the maximum benefit from running our policies as a coherent whole. And, of course, we do that working extremely closely with the Treasury, with its macroeconomic overview. But there are an awful lot of the long-term issues which affect growth, jobs and prosperity in Britain which BIS works on.”

Donnelly also points out that not all of the areas BIS covers – including overseeing competition and trade policy – cost the exchequer money, either. “We’re not just a department that delivers outcomes for individuals or business,” he says. “We’re also a department that manages a whole range of important economic levers.”

The department has certainly started the parliament on the front foot. As well as offering up £450m of in-year savings already for Osborne’s Summer Budget, it has drawn up plans for a decidedly interventionist apprenticeship levy, which will charge larger employers a percentage tax on their payroll to help fund three million new training places. Donnelly says his department has “worked closely” on Osborne’s high-profile pledge to boost the national minimum wage to £9 an hour by 2020, and an extensive higher education green paper – promising a new regulator for the university sector – has also been published.

While detail on the future shape of BIS will have to wait until November 25, the department has already drafted in consultants from McKinsey to help it draw up a plan for the future, dubbed “BIS 2020”. Appearing before MPs on the BIS select committee in October, Javid said scrapping the department would be a “step backwards”. He did, however, hint at more cuts to BIS’s estate – already significantly reduced since 2010 – as well as to the department’s network of 45 partner organisations, which currently channel more than 80% of its spending.

So if the department is looking to reduce its reach, how does Donnelly plan to ensure that BIS doesn’t end up with all of its expertise huddled here at 1 Victoria Street?

“It’s very important for us to stay really connected, geographically and sectorally, across the economy, with universities, small business and start-ups,” he says. “We will be looking as to how we can simplify the way we work. And one of the BIS 2020 challenges for us is to try to ensure that we remove duplication and rationalise on a smaller number of centres of excellence. 

“We’re also going to need a regional network. We have a light-touch regional network at the moment through BIS Local, and we can strengthen it when we need to, working in partnership with local authorities. So I would expect that regional presence to continue, but over time for us to seek to really concentrate our expertise in different areas like grant-giving, for example, in centres where we can really get the most bang for our buck.”

Donnelly clearly believes that the more open culture he has fostered at BIS will stand the department in good stead as it deals with the challenges of BIS 2020 and the Spending Review. And he’s adamant that, at a time of tight resources, the diversity agenda he has championed will not revert to being seen as a bonus feature.

“If people thought that, I would have failed,” he says. “It is fundamental to the way we do things here that our values are the one thing which stay completely the same as we reform, as we modernise, as we upskill, as we become more digital. And the secretary of state is completely with us. We have an effective partnership with ministers around our agenda and around our values.”

Donnelly acknowledges that staff will be concerned that “somehow the department will leave them behind as pressures mount”. But he adds: “It’s our job as leaders to make clear that that is never going to happen, to make clear that we improve by building on the values and behaviours that make BIS a department that people want to come and work in, where they do want to go the extra mile, where we don’t take advantage of them, and where we make sure that team working means we support each other when things do get rough.”

While BIS’s success on gender diversity is rightly a source of great pride, Donnelly isn’t complacent, saying the department is now making a renewed push to ensure that LGBT, black and minority officials, and those with disabilities, also have the chance to flourish. But it’s not just BIS where Donnelly believes a change in culture is afoot. Over his 35 years in the civil service, the perm sec has seen Whitehall become “less hierarchical, more flexible, more focused on team work” – as well as “a lot busier”. 

Given that heavier workload, does Donnelly ever find time to turn the phone off and unwind? His reply comes with with a raised eyebrow and a sideways glance at his press officer. “If I turned my phone off, how would I get my emails from the cabinet secretary?”

But he does list a few moments of welcome downtime: “I play the piano and folk guitar a bit. Last night I was listening to the latest Florence and the Machine album while making supper. I like to play some tennis and do some jogging. And I love going to the theatre, watching how actors tell their story. We all do some of that – but it’s fascinating to see just what powerful emotions people can project.”

...How BIS retains staff a time of pay restraint
“It’s a challenge for me and the leadership team, and one that we’re very focused on. A lot of people in this department do have skills they could use elsewhere. Equally, I’ve recently met people who’ve joined our finance function in BIS because they want to work in a very high-performing team [...] So part of it is to build a department where people feel that they are valued, that they can develop their careers, and that they don’t have to conform to a particular model. We will be flexible according to their life as it evolves.”

...Why leaders need to open up
“There’s nothing soft-edged about building a successful working culture. What we are not is a macho culture. And we’re not about individuals saying how great they are compared with everybody else. We work together and people respond to that and we produce really good outcomes on that basis… I’m now convinced that being prepared to be open about who you are, what’s happened to you, what you’ve done, what you’ve got wrong as well as what you’ve got right, what you’ve learned, is the key to connecting with people. You build effective teams by valuing other people that you’ve connected with: who know and trust you, and who you know and trust.”

Martin Donnelly: CV highlights
1980Joins HM Treasury after studying at Oxford and the College of Europe
1988: Appointed private secretary to Northern Ireland secretary Tom King
1995: Stint at the French finance ministry
1997: Appointed deputy head of the Cabinet Office’s European affairs secretariat
2004: Joins Foreign and Commonwealth Office (FCO) as deputy director general for Europe 
2010: Named acting head of the FCO
2010: Becomes permanent secretary at the Department for Business, Innovation & Skills

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