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Leadership in Turbulent Times: The importance of influence, risk management and engagement

18 September 2018

Introduction

Arms-Length Bodies (‘ALBs’) have come under significant scrutiny in recent years due to the pressures of austerity and frequent changes in the legal and political landscape. This seems likely to continue in the near future alongside the Public Bodies Reform Programme. In this paper we set out to identify examples of best practice in maintaining upwards influence, managing risk and engendering employee engagement.

We want to support the public sector throughout this period and aid in developing awareness of the challenges ahead. This year, in the largest event of its type that we have held, we brought together a diverse and knowledgeable group of stakeholders and asked them to focus on some of the areas that are put under the spotlight in times of uncertainty:

This paper addresses these questions and themes in more detail including recommendations for tackling these tricky areas in these turbulent times.

Following our round table event, research and our experience in this area, we make the following observations:

  • As we navigate the struggles of austerity and the increasing uncertainty of Brexit, strong relationships between ALBs and their partner departments have never been so important. An increasing agenda towards productivity and balanced relationships is emerging, however there are still nuances and inconsistencies faced by both parties in these relationships.
  • Seeking out the right relationships can be a difficult challenge but constant changes in the political agenda and personnel are a well-understood problem faced by ALBs. There is strong emphasis on the importance of forming relationships with policy makers, civil servants and those who have the potential to span numerous changes in leadership.
  • As society moves towards championing social autonomy and an increase in publicly available information, trust in experts and leadership is deteriorating. The risk of misinformation and media attention are problems increasingly faced by central government and there is need for ALBs to acknowledge and address these pressures. Wherever possible, risk should be managed with clear statements, strategy and the preservation of important relationships through ongoing communication and dialogue.
  • Individual incidents, such as the case of John Worboys or Grenfell, have the power to dominate an entire department’s agenda. Managing the media fall-out and PR can often evidence a substantial area of risk. The increased use of social media by public bodies has aided in the control of crisis management as it enables accurate information to be fed to the public as it is available. This can seek to avoid misinformation filtering through other media outlets.
  • Risk management is a potential area where layers of policies and procedures can lull organisations into a false sense of security. However, risk management requires a human aspect and instilling beneficial risk management procedures can often be a top down exercise. Unfortunately, major risk incidents often precede or result in a high turnover of senior level staff in both ALBs and their partner departments which can have a detrimental impact on risk management and employee culture moving forward.
  • In times of austerity employee engagement is one of the first areas to suffer. It can become a tick box exercise with resource seen as better spent elsewhere. However, there was both evidence and opinion that investment in employees remains essential, even in tough times, to seek to have a substantial impact on productivity of the workforce.
  • Fostering the right culture and gaining the right people can frequently be the most important factor in ensuring employee engagement. However, there are increasing innovations in the workplace which seek to improve the experience employees have on a day to day basis, prioritising a work life balance, including wellness hours and flexible working arrangements. Many had seen that introducing new working policies had increased productivity and actually resulted in people wanting to work harder and longer to support the organisation in difficult times.

Where are we now?

In our 2017 paper 'Our changing state: mergers and demergers of Non-Departmental Public Bodies' we reflected on the history of ALBs including the introduction of the Public Bodies Reform Programme by the Coalition Government in 2010.

The main drive of reform stemmed from driving down the budget deficit as part of an unprecedented period of austerity. Partner departments and ALBs alike were forced to innovate and step outside of their comfort zone. However, matters that in previous years were top of the agenda such as restructuring and devolution are now overshadowed by the unpredictability of the future.

With Brexit dominating the political landscape we are now in a period where everyone is concerned about their views being heard and reflected in the current and future negotiations and changing landscape. How to foster positive relationships between those on the ground and those negotiating has never been more important. Brexit also served to highlight the substantial portion of the population who have become disaffected with politics, reflected in America by the surprise election of Donald Trump. Society is moving in a clear trajectory toward distrust of politicians, leaders and experts, in favour of often unverified information widely available online.

Managing publicly available information is becoming increasingly difficult and adding to an environment where risk of poor PR management has come to the forefront for many. From the technological advances used in the US Elections, to the startling rise in “fake news” many feel that we have a significant way to go to achieve effective crisis management in this new arena.

Reacting to the ever changing state of play is a difficult hurdle to climb and our perspective of the challenges faced by public bodies is significantly informed by our relationships with clients who are living and breathing the changes as they happen.


Influencing upwards – the value of gaining the most from important relationships

The challenge of enhancing influence is one which faces every ALB and their partner departments. Ultimately influence is a multi-factorial issue. To set the foundations for influence an organisation must:

  • have clear objectives which are agreed with stakeholders and sponsor departments
  • establish plans to achieve objectives
  • publicise those objectives and plans to stakeholders
  • demonstrate a commitment to objectives and plans through operational activity.

This is perhaps most difficult in the political landscape where constant change in leadership and political agenda can make influencing the right people, at the right level, at the right time a minefield. The attendees at the round table event were however clear that the best way to achieve influence was through establishing strong and balanced relationships.

The history

In July 2016, the National Audit Office Report (NAO Report) sought to compare and contrast the departmental oversight of ALBs across four departments, which together accounted for approximately £25 billion in ALB spending in 2014-15. The NAO Report identified a mixed approach to ALB oversight by departments and emphasised that a consistent framework for all parties to work toward would aid in reducing confusion, duplication of work and assist in the proper utilisation of ALBs and their expertise.

Throughout the NAO Report it is clear that the balance toward scrutiny of risk and governance structures had in the preceding years begun to tip too far.

"…getting the best from ALBs means balancing assurance and control with an appropriate degree of independence consistent with an ALBs function… This is, in itself, not an easy balance to strike"

 

In response to the NAO Report, the Government has produced the ‘Code of Good Practice for partnerships between Departments and ALB’s’ (the Code). The Code was published in February 2017. It creates the four principles of successful collaborative working, to include ‘Purpose’, ‘Assurance’, ‘Value’ and ‘Engagement’.

There is a clear intent to shift the focus back toward a balanced and productive relationship between ALBs and their partner departments.

The Association of Chief Executives and the Public Chairs Forum with the Institute for Government, circulated a survey to relevant individuals across ALBs and partner departments alike to assess how relationships with departments were developing in light of the new Code. The results were published in their report, ‘Cracking the Code of good practice’ and generally evidence positive progress, with 88% of respondents feeling they had the opportunity to contribute effectively toward policy (despite the timeliness of such involvement remaining an issue). The survey has recently been repeated with the results yet to be published.

It’s about relationships

"The Code is a bit like a contract: if you have to look at the Code too much, the relationship isn’t working"

Peter Unwin Chief Executive Whitehall & Industry Group

 

The round table event reflected an environment which placed siginficant value in relationships. Particularly, consideration was given as to how to strike the right balance in such relationships in the atmosphere of austerity. Inconsistency of oversight throughout different departments is still a prevalent concern, with smaller and self-funded organisations finding they achieve a substantial amount of autonomy whilst larger organisations with substantial government funding struggled with a high level of scrutiny and were concerned on how to maintain independence. 

The heart of the relationship between partner departments and ALBs lies in each party reflecting on both the strengths and weaknesses of the other. Those successful at forging strong relationships recognise political imperatives and yet maintain true to their essential purpose. The best relationships are those founded upon mutual respect and in the event of disagreement private discussion is a far better starting point than a public statement that may act to derail an otherwise strong relationship with the partner department.

A further point of contention was how to seek the right relationships. With political leadership changing frequently, attendees highlighted the importance of seeking influence across the spectrum of government, including civil servants and devoting attention to “policymakers who will outlast the regime” (Julie Lunt, Chief Officer Legal & Governance, Natural England). Individuals found that how to achieve the most beneficial relationships was nuanced dependent on department and personality and the trick lay in identifying the boundaries of those relationships and respecting them.

Conclusion

In 2016 the House of Commons Committee of Public Accounts considered the NAO Report and found across Government ‘approaches that focus unduly on compliance and control, rather than improving the value contributed by [ALBs]’. Such findings reflected an atmosphere at a time where reducing the financial deficit was everyone’s top priority and there is evidence of a positive move away from such restrictions in favour of encouraging value. As with all of our topics the very core of change is driven by people and fostering an ethos that champions the benefits those different parties can bring to the table.


Managing risk in an environment of technological innovation and increasingly diminished trust in the word of experts

The political and economic turbulence of recent times has shone a light on the value of effective risk management, from the meltdown of the financial sector to the very recent data protection breaches at Facebook.

Of course, public sector and ALBs are by no means immune to such disasters, with the WannaCry cyber-attack on the NHS and the failure of Carillion acting as clear evidence that debilitating risks transcend organisation sectors and size. Rapid technological advances have coincided with almost 10 years of public sector austerity to drive change and this has seen public sector organisations attempt to emulate their private sector counterparts by trimming risk processes to keep them simple yet effective.

The benefits of effective risk management are relatively agreed upon. It can allow for improved decision making and forward planning due to an improved awareness of the risks that an organisation faces. In a world where public sector scrutiny is at an all-time high, effective risk management can reduce volatility and enhance an organisation’s external image and reputation.

Implementing a risk management system

Risk terminology, roles and responsibilities, and risk management principles can be communicated via a risk management policy (even in larger public sector organisations ), which is usually informed by continuous assessment of the risks an organisation faces in the context of that organisation’s risk appetite, defined by the Institute of Risk Management as ‘the amount and type of risk that an organisation is willing to take in order to meet their strategic objectives’ .

The risk appetite can be difficult to evaluate and communicate, to such an extent that large public sector organisations often view themselves as too varied for just one definition of risk appetite, with a small number setting risk appetites for different service areas (something the National Audit Office found to be generally ineffective). The risk appetite is usually communicated via a written statement which can be continuously revisited and amended by the board in line with changing internal and external circumstances.

How organisations identify and manage risks varies to large degree and what follows is an example of some of the techniques the Ministry of Justice use, as explained by Justin Russell (Director General of the Offender Reform and Commissioning Group) at the round table event.

Example - The Ministry of Justice (MoJ) – risk identification and management in the prison system

There are approximately 85,000 individuals in the UK prison system and hundreds of thousands on probation. The prison system is continually looking at how technology can play a large role in identifying high risk individuals based on data and algorithms. Two examples of this include:

- electronic tags which can measure alcohol consumption (risk identification)

- the use of video conferencing (such as Skype) as an alternative to physical court appearances, to reduce the risk of transporting offenders (risk mitigation).

There is a clear trend toward favouring the increased use of data and technology in risk management, with the caveat that certain ALB’s may not have access (due to the sector they operate in) to the requisite data required in order to manage particular risks. It is also important to bear in mind the distinction between ALB’s which have risk management as one of their primary purposes (such as the parole board at the MoJ or certain departments within the Environment Agency), and those where risks are largely institutional (such as technology failure or financial management). The former can expect heavier investments in technological risk management.

Justin Russell - Director General of the Offender Reform and Commissioning Group

What’s clear is that, despite the increasing advancement of data and artificial intelligence, many at the round table event viewed a human overlay at some point in the process as remaining vital.

Practising effective risk management

When applying risk management systems, organisations are warned against a theoretical ‘check box’ approach that lacks subjective judgment, which can lull them into a false sense of security. Similarly, heavily regulated sectors can often fall into the trap of relying on regulation to act as a risk management safety net – when in reality a body of regulations should complement an existing internal risk management system.

The seniority of those responsible for overall risk management can dictate how embedded risk management is into the culture of an organisation. It is crucial that senior management and the board, as the leaders of an organisation, ‘buy-in’ to the idea of effective risk management. It is these leaders that are responsible for creating a culture of risk management by adopting a ‘transformational leadership style’ in supporting risk management. Further, it is now widely regarded that risk management should not only be reserved for those with express responsibility for the same, but rather that a culture of risk management will lead to front-line employees practising good risk management as a means to achieving the organisations' aims – a thought echoed at the round table event. There are various ways to embed this culture, which may include charging operational managers with promoting it or through bottom-up risk identification procedures. This can also have the advantage of preventing silos from forming within the organisation, a risk management pitfall which RBS fell into in 2007.

Overlooking the whole system should be an efficient internal audit function, which can play a crucial role in preventing or mitigating large risks. However, in the public sector, it is thought that over recent years internal audit has been a particular victim of austerity. This is why the role government departments play in partnerships with ALBs is ever more important – if the department has an understanding of both the risks the ALB faces and its required level of independence then the department can provide an extra layer of assurance. To maximise the effectiveness of this relationship, the department’s governance should not encroach on the ALB’s but complement it, and the information flow between the two should be sufficient enough to enable this to happen.

Getting risk management wrong

"A single case can come to dominate the public’s perception of public bodies, with the Stephen Lawrence tragedy being just one example"

Justin Russell

 

For ALB’s and public bodies generally, a misstep in risk management carries with it potentially huge reputational damage. Of course, this is also true of the private sector, but quite often the public sector and ALB’s have people’s lives in their hands, and it is these people that are, putting it simply, funding the existence of such bodies in the first place. This is perhaps one of the main reasons why media scrutiny of public bodies can be so intense. Tabloid newspapers in particular can frame the public’s perception of a public body with two or three adverse, and perhaps sometimes sensationalist, headlines.

A recent example of this is the John Worboys case, where the Parole Board decided that a serial and high profile sex offender should be released from prison on parole and it soon transpired that a good number of his potential victims had not been informed. The tabloid reaction to this was fierce, Justin Russell spoke of the impact that this had on the department at the round table event, as he noted that it’s not just about following reasonable processes, but ensuring that the public (and by extension, the media) see that those processes are being followed. This may mitigate the reputational impact that ensues (to some degree, at least).

Extreme external public pressure can lead to a knee-jerk reaction and single isolated events influencing entire risk management systems in an attempt to be seen to be rectifying any perceived issue. This can often manifest itself in the loss of senior managers, something that may neither necessarily be good for risk management of ALBs nor their success as a whole.

Financing Risk

Tim Devine, Managing Director of Gallagher’s Public Sector & Education Practice risk and insurance adviser to over 200 public sector organisations, highlights the need to consider options for risk financing. “The Government provides guidance on this topic, but this leaves uncertainty as to how claims will be financed. Will losses sit with the Treasury or individual ALB’s budgets? Does the value of the loss drive the outcome? For example, small losses sit with the ALB, catastrophic losses with the treasury. Where do medium losses sit?”

“Complex risks such as major construction projects may be better protected by a form of insurance, which can indemnify the employer (ALB) and the contractors via a method controlled by the ALB itself. This method is more difficult via a self-insurance mechanism.”

“Ultimately you may be uncertain of what protection is being afforded from central government. As a minimum, we would recommend you consider the options available, even if it is determined that external insurance is not required.”

Conclusion

Whichever risk management philosophy is adopted, what’s certain is that an ever changing risk environment only looks set to continue as a lack of resources necessarily drives new ways of working. In the face of extreme and lasting reputational damage that an ALB and/or its partner department may suffer in the event of a single misstep, effective leadership and partnership is needed perhaps now more than ever in order to effectively and innovatively manage risk.


The importance of ensuring effective employee engagement in both the work of organisations and their values

Overview

Employee engagement has been the subject of discussion and research for many years. The public sector is one of the worst hit by such difficulties, with many finding the challenges of encouraging employee engagement in the face of pay freezes, job cuts and an aging population ever more difficult. At the same time, the sector is under pressure to provide more customer focused services and greater value for money. For some, this has led to innovation and substantial development in enhancing employee engagement, whilst others have struggled to push this to the top of their agenda.

In 2009, Macleod & Clarke completed and published a substantial report looking at employee engagement and its potential benefits for companies, organisations and individual employees. There can be little doubt that most public sector bodies (ALBs included) depend upon workforce performance. In the report – Macleod & Clarke stated that, at its core:

"If it is how the workforce performs that determines to a large extent whether companies or organisations succeed, then whether or not the workforce is positively encouraged to perform at its best should be a prime consideration for every leader and manager, and be placed at the heart of business strategy"

Macleod & Clarke

Barriers to engagement

There are various barriers that impact employee engagement which organisations may wish to consider and account for when implementing strategy and policy. These can include a lack of awareness, uncertainty about where to start, the risks of underestimating the importance of engagement and the general characteristics of the workforce. The management and organisational structure can also be hard to manage especially in an environment constantly affected by changes in political leadership. This can include: reactive decision making; inconsistent management style; lack of fluidity in communication and knowledge sharing – rigid communication channels or cultural norms; low perceptions of senior management visibility and quality of downward communication; and poor work-life balance.

Some of the key concerns raised at the round table event included short and long term absence, fear and inability to adapt to change and people who come into work to work and do not care any further than this e.g. people who feel disenfranchised and are apathetic to the success or failure of the organisation.

Enablers to engagement – how to actively encourage engagement in your organisation?

The key is first to work out where the issues are for your specific organisation. Graham Farrant, Chief Executive and Chief Land Registrar at the Land Registry spoke at the round table event about the steps taken by the Land Registry in targeting employee engagement. As part of this work, the Land Registry identified an average length of service of 23 years, evidencing substantial commitment to the Land Registry and its values as an organisation, yet only 35% of people felt actively engaged.

Once an organisation has established the issues it faces it can more appropriately channel its efforts to more effective initiatives for its employees, recognising that the work force is a variable entity. Review of engagement can be done by senior management visiting offices, running surveys, sitting with people, running focus groups and ensuring that all levels of employee have a chance to feedback. Identifying patterns within offices and teams can further target the cause of disengagement.

Here are a number of enablers or drivers of increased engagement that our attendees discussed:

  • strategic narrative - This emphasises the role of leadership in setting out a clear vision and aim of the organisation – creating and ensuring employees understand a strategic narrative which they in turn buy into is essential. Gaining input from employees in the development of the vision and ensuring this is well publicised in the working environment can be key to seeking employee buy-in. The general consensus at the round table event was that employees that buy into the vision and strategic narrative are more likely to engage and push the organisation’s agenda forward. Continuity of purpose, in the face of the changing political landscape was also identified as something to be aware of
  • engaging managers - Managers who ensure employees have personal development plans with regular formal performance appraisals tend to encourage higher engagement levels than those who do not. Attendees at the round table event discussed the importance of visibility of managers and directors by getting them out amongst employees. This included visiting different sites, posting regular blogs (a Land Registry initiative) and sitting within teams to see how they work. Another point raised at the round table event was that changes in management can have a negative impact; through inconsistency of managers engaging in the process and organisations should ensure continuing training and awareness of managers on the importance of listening to employees and working with employees on their development plans
  • employee voice – As discussed at the round table event, there are a wide range of channels open to leaders and managers to communicate with employees and receive feedback including staff surveys, focus groups, briefings with groups of staff, consultation events and other staff consultations. Employees should feel safe to challenge and have a neutral environment to do this. Graham Farrant, suggested identifying those who are not often involved or selected to take part (possibly because they are less engaged and less positive) to ensure these opinions are understood and not overlooked in favour of the same voices
  • integrity - Organisational development and leadership development lie at the heart of the change process and setting and reiterating core values are important to this. As Graham Farrant has found, when there are big organisational changes that employees are resistant to, employees are more on board when you explain what the changes mean for them and how it can benefit them in performance of their role – especially when you link this with their belief in the organisational goals and purpose.

Attendees at our round table event also highlighted that the working environment and role of technology can have a substantial effect on engagement. Many found that offering employees flexible working arrangements can encourage engagement with many working more effectively and being more willing to aid when needed, knowing they can recoup the time or work at home should it be needed. The Welsh Government have also introduced a wellbeing hour each week where employees are encouraged to do something on their own / yoga etc.

Technology was also discussed in detail. Some consider that there is a concern when introducing new advancements and innovations that the workforce can be resistant or fear that such adaptations can frequently come hand in hand with mass redundancy. However, many more had found that introducing new technologies in a clear way which highlighted the benefits to employees, and involving employees in their introduction, reduced such concerns and enabled employees to understand the improvements the technological advancements could make for their day to day responsibilities

Measuring engagement – making it more dynamic

This is not a science, but the development of survey tools and questionnaires allow levels of ‘engagement’ within an organisation to be measured. Exactly what aspect of engagement these tools analyse will vary depending on what the questions are targeting. The key is data collection. Types of information to collect could be:

  • the attitude and pride in the organisation
  • the faith in the organisation’s products/services
  • the perception of whether the organisation enables the employee to perform well 
  • the willingness to behave altruistically and be a good team player
  • the general understanding of the bigger picture and willingness to go beyond the requirements of the job.
     

During the round table event, discussion was had on using more dynamic ways of measuring engagement. Jenny Hully’s organisation National Physical Laboratory has been working to consider more dynamic ways to monitor and analyse engagement rather than a fixed, one off, lengthy questionnaire which is static in time e.g. a system of trackers which employees can alter the rating on an ongoing basis, to say how much something is important to them and how satisfied they are. This can provide a more real time tracker when considering trends and the impact of various policies and changes made.

Conclusion

Employee engagement is about interaction and building relationships within an organisation. An engaged workforce can drive an organisation forward, whether in the public or private sector. An organisation should not underestimate the power the workforce has – harnessing this power by engaging employees can improve service deliverability and relations with the public.


Where is the future going?

Influence

Looking ahead, there is always going to be importance placed upon relationships with sponsor departments at both the political and official levels. Successful ALBs will integrate their activity so as to establish, develop and maintain a broad range of such relationships. Those ALBs that are able to evolve their role so that it is fit for purpose in the 21st century will be at a premium and such transformation is likely to provide a spring-board for enhanced relationships with government.

Risk Management

An ever changing risk environment only looks set to continue as a lack of resources, Brexit-induced changes and digital developments necessarily drive new ways of working. There is no substitute for investing in good people and processes to tackle the challenges which lie ahead. In the face of the extreme and lasting reputational damage that an ALB and/or its partner department may suffer in the event of a single misstep, effective leadership and partnership is needed perhaps now more than ever in order to effectively and innovatively manage risk.

Employee Engagement

We cannot see a future where ALBs will not be deeply reliant upon an engaged and effective workforce. It is essential that ALBs identify objectives which the workforce believes in and that managers gain the trust of their colleagues. Whilst there are many new means of engaging with your people, we think that there will always be a need for face to face communication. Purposeful delivery relies to a substantial degree upon the contributions from the people of your ALB, treat them well and with respect and they will help to achieve agreed objectives.

Conclusion

What shines through our research into these three topics is the responsibility placed upon those charged with delivering public services to do so in as effective a manner as possible. ALB leaders must have open minds to the evolution of the factors which affect their own raison d’etre. So much turns upon the quality of an organisation’s people and when well motivated and supported they will forge stronger relationships, promote the ALB in a positive manner and manage its risks appropriately. 

ALBs must consider their fitness for purpose and explain and agree their objectives with sponsor departments and staff regularly. Those objectives must then be clearly publicised and accessible to our digital society. 

At Browne Jacobson we look forward to helping our public sector clients to successfully face the challenges ahead.

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Our Leadership in Turbulent Times paper examines the importance of strong relationships between Arms-Length Bodies and their partner departments.