Last year 110 top UK managers and professionals earned £1m or more. Rewards in the public and not-for-profit sectors are well below this, but they are creeping up, evidenced by the recent appointment of the Presiding Officer of the Welsh Assembly at £117,000 a year.
Indications like this led Virginia Bottomley, Health Minister from 1989-95 – now a headhunter with Odgers Ray & Berndtson – to think that the NHS needed to go well over its bid figure of £100,000 a year to attract a good CEO for an organisation with an annual budget of £35bn and a million employees.
The NHS is Europe’s biggest employer. But there are plenty of CEO positions in central government and its various agencies, in local authorities and even in the not for profit sectors with budgets as large as those of most PLCs. So why is it that such organisations appear to ignore the private sector when making senior appointments?
“That is not so any more,” says Mrs Bottomley. “Functional heads, particularly in finance and IT, are being recruited from wherever the best person for the job can be found.” Among many examples, she cites Sheila Masters, now Baroness Noakes, who was seconded from KPMG to be head of finance for the NHS and transformed the nature of that job.
The use of search consultants for senior positions in the public and not-for-profit sectors is growing. “There was some resistance at first, but there is now an acknowledged need to go outside time-honoured internal recruitment methods to find the best person for the job,” she says. She acknowledges that CEO positions still tend to be filled by people already in the public sector, although searches are carried out across a wide spectrum within those parameters. The appointment of Faith Boardman from Customs and Excise to sort out the troubled Child Support Agency is one such example.
Public vs Private Sector
Disparity in remuneration levels is a factor when it comes to recruiting for top public sector jobs from the commercial world. Mrs Bottomley, whose own career has extended over full and part-time public sector appointments, to senior cabinet jobs and now into business, thinks that it is more complex than that. “There are different processes in the public sector, different kinds of accountability when you are dealing with taxpayers’ money compared to being answerable to shareholders.
There are also different attitudes to risk taking.” The unifying theme in public and not-for-profit appointments is a strong belief in the traditional values of the Civil Service – honesty, transparency and the whole ethos of work in the public interest.
Some people who have already accumulated a lot of money in the commercial world are attracted by the idea of putting something back into the community at a point where they still have many years of active working life ahead of them. Successful business people have made late career switches in to running charities. Some very big private sector names and money earners have gone into the public sector as advisers to government departments, as chairmen of local and national agencies and trusts, and into government itself via Minister of State appointments in the House of Lords. It is a major change towards a more professional approach to running the country that began under Margaret Thatcher and John Major. It has also been enthusiastically carried forward by New Labour.
“Some government ministers in the commons have had their chestnuts pulled out of the fire by House of Lords’ appointments of experienced business people,” she says, though she is not mentioning any names!
It is fair to say, however, that not all of these appointments have been successful. Public and not-for-profit sector employees do not take readily to managerial culture in its undistilled form. They are apt to feel that if that had been what they wanted, they would have gone into the commercial world in the first place.
“The sensitivities of such appointments are enormous,” says Mrs Bottomley. “We spend a lot of time with clients talking about the political issues, the organisational culture, the kind of accountability, and the degree of autonomy the jobholder will have. It is absolutely vital to the success of the appointment that the rules of engagement are understood and accepted by both parties.”
Mrs Bottomley thinks that it is likely that a spell in the public sector will become part of the career pattern of private sector managers and vice versa. She points to the fact that the former are increasingly coming into contact with local and national government, by being asked to appear before parliamentary committees, regulatory bodies and local councils. At the same time, the fact that having an MBA is rapidly becoming a sine qua non of senior public sector appointments is exposing them to business issues in a way that was unthinkable even five years ago.
“Convergence between the two sectors is growing – and it is healthy,” Virginia Bottomley concludes.