Managers must seize the chance to transform public services

The former boss of Jaguar Land Rover says lessons should be learned from the private sector's response to the recession

By David Smith

“Dear Chief Secretary, I'm afraid to tell you there's no money left”

For many in the private sector, the last two years were the toughest of our careers.  The global market volatility triggered by the near collapse of the banking system in September 2008 sent shockwaves across the globe – certainly in the automotive industry. The resultant extreme movements in demand, unusual competitor reactions, supply chain vulnerability and huge stresses on previously profitable businesses required drastic revisions to previous plans. 

This tested the mettle of most CEOs to the limit.  Those who had been around for a while could probably draw on past experience (one of my favourite bits of business advice is from Ecclesiastes – “there is nothing new under the sun”) but for others this has been a period of intense discovery needing a good dose of new tricks.  For most of us, past performance was no longer any guarantee of future results.

So for those now heading up major organisations in the public sector, the departing Chief Secretary’s words, although written in jest, summarise an incredibly difficult situation succinctly.  I remember reading the following words from Michael Jacobides early in 2009 and thinking just what a difficult situation, but also what a unique opportunity, we were facing at Jaguar Land Rover: "The good news is that no one needs convincing that the platform is burning. The flames are around our ears. What is important now is not to let a good crisis go to waste."

It’s a good and humbling starting point for any CEO facing momentous change - and we are facing momentous change. Any public sector organisation that is not setting out clear plans to deliver 20 per cent plus improvements in efficiency, with a great deal of that in cash savings, is not correctly reading the sheer magnitude of the fiscal adjustments required in the UK. It’s coming and the question is: can public sector leaders step up to these unique challenges and get ahead of the curve so that they can protect core public service delivery and continue to invest in the future?

A really telling statistic from a survey last year is that as many as 40 per cent of senior managers doubted their own leadership had a credible plan to deal with the crisis, with a similar number doubting the ability to execute. I suspect this is equally true in the public sector today.

So what lessons can be drawn from the last two years to guide those in charge of our public sectors?  I would offer five thoughts from my own experience:

-    First, communication really is key and the shadow of the leader genuinely matters. This was the best piece of advice I got from a former boss. If you are downcast and looking at your shoes for answers, what will the rest of the team make of that?  Does that mean smiling like a Cheshire cat?  No, but it does mean honesty, straightforwardness and positivity need to be combined. The only way to do that is to tell it how it is, directly, frequently and, most importantly, to get around and not retreat to the operations bunker. For me, the ability to stay inclusive in adversity is the sign of a good leader. The new web 2.0 technologies provide interesting opportunities here – they have probably both fed and accelerated the pace of the downturn, but also provided new tools to savvy managers to manage its effect through good communication.

-    Secondly, you need active and broad support from your stakeholders. There are plenty of people willing to take shots at you, even while you are wrestling the alligators in the swamp. Who are your friends and how can they help you now?

-    Thirdly, this needs to be personal – personally led by the CEO and those who have to implement the new plans in getting to a new set of solutions. Often the journey is as important to really good people as perfection in the answer. And it’s not all about big ideas. I got close to 1,000 ideas from workshops I led around the business early on – I remember the thrill when a small team at one of our plants told me how they had achieved double-digit savings in energy costs without a penny of new capital investment through better planning of work patterns and machine shutdowns.

-    Fourth, don’t confuse revenue and capital. Or perhaps more importantly than the accounting definitions, don’t confuse operating spend with investment. Of course, even if they had no imminent cash crisis, many businesses responded to the recession with traditional drastic cost actions, moving quickly from feast to famine. The more astute, however, used the external rationale to push through painful decisions and reinforce lean disciplines while moving on new plans. Smart even aggressive pruning is likely to be far superior to a haircut approach that does not differentiate future potential. I certainly held fast in prioritising future product investment, even when liquidity was incredibly tight and drastic actions were required.

-    Finally, broaden out your tactical and strategic options. Look again at the fundamentals you are trying to deliver to the taxpayer so that you can make the right choices from strong principles. Whether it is value-added or value-for-money, there are lots of examples from the private sector and I am sure plenty of best practices in the public sector to learn from.  Don’t be proud. Arguably the most successful US President, Franklin Roosevelt, talked about bold, persistent, experimentation: “Try something; if it fails, admit it frankly and try another.” The necessity to move from a "hedging" view of the risks facing you to a broader integration of external risk management into your strategy - and considering radical solutions - is clear. You will need a readied set of "triggered responses", agreed with your stakeholders, that can be quickly and effectively deployed. And the earlier you start the better.

I recently read an excellent summary of the success factors in driving transformation change but I wonder how often these simple rules are followed:

• Good communication - what are we here for and, as importantly to the individual, what’s in it for my future?


• Learning - what do I need to do, why and how?


• Organization - who will do what?


• Performance - how are we going to measure progress?

For CEOs, driving transformational change is still one of the biggest challenges. How do you get the whole team moving to deliver change? For me, the answer lies in motivating passion and creativity to get the best out of the broad team through a clearly communicated change process. This is a far more effective delivery mechanism for change than a micro-managed plan that depends on fear or passive obedience.

Personal accountability and timeliness are also key. During the crisis, I made and stuck to a commitment to give a response within 24 hours of anything hitting my in-box for a decision. It’s important to make the tough decisions quickly and then to implement them as fairly and humanely as possible. Throughout the crisis, despite the very difficult challenges, I maintained a positive dialogue with our employees and our unions. In fact, I think the realistic approach of our unions was one of the most enduring positives to come out of the crisis, but it was only available through trust and openness requiring a high degree of integrity on all sides.

So this is a unique opportunity for public sector leaders to really make a difference, to drive the agenda, increase responsiveness and deliver the fiscal savings that will avoid even worse cuts later in long-term investment.  Don’t be afraid to get some big number targets out there - and challenge the whole team, including your Whitehall masters, your unions and your business partners to deliver.  They can do it and you may be surprised by how much they all want to help if you show the right lead.

28 May 2010

David Smith. Former Chief Executive, Jaguar Land Rover