Interview: Dr Martin Read

Immediately after the moment at which an established order gives way to a new leadership, says Martin Read, there’s a brief period during which the incoming leaders have the opportunity to create wholesale reform.

“In any regime change, there’s a time when people accept and are up for change – and if the messages are clear and you establish a momentum, they’ll change their ways,” he says. “But if there’s a lot of talk and nothing much happens, people don’t change their ways and easily revert to the way they were before; then it’s harder to get people to realise that you’re serious.”It was, in part, the need to dive through this window of opportunity that prompted Cabinet Office minister Francis Maude’s new Efficiency and Reform Group (ERG) to quickly impose on departments a set of tight spending control regimes. The controls saved money, of course – but they also ensured that civil servants were left in no doubt about the new government’s insistence on radical reform.

“In the short term, you’re putting a brutal shock into the system, so people say: ‘This is serious. We’ve been banned from first-class travel. We’re not allowed a hotel’,” says Read. “They’re shock tactics to get people to focus on some of the bigger issues downstream. You have to move fast to set an agenda.”

These tactics have been applied to the world of government – but Martin Read learnt them in business. After a career in the IT industry, he began advising government on efficiency – first by writing the back office and IT strand of the previous government’s Operational Efficiency Programme (OEP), then as a Conservative adviser, and now as an ERG board member (see box). When he joined the Tories, he recalls, “I had a conversation with Francis and said: ‘If you’re going in to take over a business that’s in bad shape, the standard thing you do is to bump up all the authority levels, so you have to go to a higher authority to spend money’.”

When the coalition government was formed Maude took his advice very much to heart, imposing a freeze on recruitment and advertising, and insisting that all lease renewals, consultancy projects and IT schemes over £1m receive his personal sign-off. “The first computer project that went to Francis, they clearly hadn’t thought it through and they didn’t have answers to our questions,” recalls Read. “It was easy for Francis to throw it out and make them feel a bit stupid. And of course word gets round, so now nobody’s bringing forward a computer project that they haven’t thought through properly.”

Laying down a marker

As Read explains, though, this initial clampdown is a tactic designed to lay the groundwork for a much more ambitious strategy. “The savings are real and worthwhile, but the point is that you’re setting up the momentum of the next phase,” he says. “The first phase is about setting an agenda; making it clear that we’re serious; building momentum; going for the quick wins. The next phase is potentially more difficult, and it’s about doing things and buying things in a much more clever way. That’s the bigger prize.”

Read characterises the next phrase concisely: it’s about “trying to get simplification and standardisation”. But before the civil service can move far in that direction, it needs something else: good management information. One of Read’s first discoveries when he began working on the OEP, he remembers, is that government simply doesn’t possess “the kind of management information that you’d expect to have regularly and consistently if you were running a business”. In industry, he adds, divisional directors are regularly asked by their boss to explain why their costs are higher than those of their peers or competitors: “All that tautness in the system forces you to get more efficient. But there hasn’t been anything comparable in the public sector at all. Operational efficiency isn’t really in its DNA.”

This is not, he accepts, unreasonable or surprising; it simply reflects the public sector’s different primary mission and priorities. “If you’re a permanent secretary, what do you worry about? Well, you sure as hell worry about the minister’s project – that’s got to be right – and you worry about the press. But nobody’s ever asked you about operational efficiency.” What Read perhaps finds a little less understandable is the civil service’s reluctance to help address the problem by adopting common standards for data collection.

“The National Audit Office has a scheme,” he says – used by around 80 public sector organisations, it requires fairly basic data and shows participating organisations how they’re performing against their peers. “It’s very easy to get on it. It’s not about filling in lots of forms; it has very basic parameters, but it allows you to ask the right questions [of your performance]”, says Read. “I said: ‘Why not use this system?’ And it ought to be visible how people are performing; if it’s very public that you’re in the bottom quartile, that you’re miles out of line, you’ll be worried that someone’s going to ask you why.”

I venture that Read’s suggestion, perhaps, met a barrage of objections. “Yes! ‘It’s complicated.’ ‘We do enough form-filling.’ ‘There’s probably a better way of measuring, we should wait until there’s a better measurement’.” Now Read’s manner, generally affable and relaxed, is betraying signs of irritation. And is the ERG now making progress on improving the quality of management information? “We’ve started on a journey,” he says diplomatically. “There’s work going on to try and improve the way information is collected, to make it more consistent.”

Read’s frustration is rooted in the fact that, without this kind of data, organisations can’t even benchmark their current performance or identify their strong and weak points – let alone set about improving themselves. The OEP identified some of the problems and the priorities, but its authors could do little to bring management data up to scratch across government. More recently, retail businessman Philip Green’s efficiency review added little to our knowledge: “Basically, the report emphasised what had been produced in some detail in the OEP,” says Read, eager to change the subject. Yet without reliable performance measures, it’s impossible to realise another of Read’s key objectives: clear accountability at the top.

Read has, he says, been encouraged by the new government’s desire to ensure that “ministers and permanent secretaries are accountable for cost, productivity, efficiency, delivery of projects; and that they get praise – or the opposite of praise – on that basis. Because progress only gets made where people are held to account.” And accountability, he argues, demands management data that is “reported regularly and consistently, that’s auditable, and that’s transparent”.

Simplify and standardise

Accountability will also be strengthened in more qualitative ways, Read believes, by the introduction of “much stronger boards of non-executive directors with outside experience – often business experience – who can provide a mixture of support, advice and challenge”. These boards will hold senior officials to account against clearly-expressed objectives, and carry out the operational reviews whose introduction Read advocated in the OEP.

As accountability and data are strengthened, says Read, government can move on to phase two – and he illustrates what that means by setting out the experience of what he describes as the only department within government whose IT costs have fallen in recent years. Its permanent secretary, he recalls, explained that a “very difficult settlement a few years ago” forced him to “look at what he did and how he did it”. With the main IT contractor, the permanent secretary put in place some controls to ensure that “now every man and his dog couldn’t tell [the contractor] to change things. There was a process for determining when additional costs could be made, and there was analysis of whether it was worth doing or not.”

The results, says Read, were remarkable: while the contractor’s turnover fell, its profits remained static – “and the permanent secretary said that, while it was much cheaper, they were doing better on every performance measure. If you make something simpler and standardise what you’re doing, you’ll do it quicker and get a better result. Doing things cheaply doesn’t mean doing them less well.” The lesson for government, Read adds, is to ask: “Do you really need something with every bell and whistle? It might cost you an extra 20 per cent, but only improve the system by five per cent.”

Of course, in some cases contractors actually prefer complexity, because it reduces transparency and generates more work. “It’s amazing, and I take my hat off to the Microsofts of this world, that they not only contract differently with different departments, but they have confidentiality arrangements so that department A can’t talk to department B about their contracts,” says Read. “We have to stop people from creating bits of madness like that!”

So the future of IT systems and software will be one of standardisation and simplification across government – and that, says Read, means the end of the ‘big bang’ IT project. “All the experience is that big bangs don’t work,” says the former head of IT giant Logica. “What you should have is an overall plan of what you want to achieve, and an architecture for achieving it, then implement it in bite-sized chunks that you can properly test and manage.”

The ill-fated NHS Connecting for Health scheme, he adds, is “a good example of what you don’t do. You don’t have one big bang solution; you don’t get into procurement when there’s no clear specification or you haven’t got the user community bought in; you don’t manage a project somewhere down in the IT department because it’s an ‘IT project’. Most of these are not IT projects, but change projects.” Top managers, Read insists, must take responsibility from the outset: “So many of these projects that got into trouble, the first time the man at the top got involved was when it was already a disaster – and even then it was like it wasn’t their disaster. Well, if you’re running the show, you’re accountable for it!”

Asked about shared services, Read balks at the term. Such projects, he says, “tend to get labelled as a ‘back office thing’. But everything you can say of back office services you can say of transactional services – and because there are more of them, the potential savings are more profound.” In other words, departments should be sharing many of their front office as well as back office functions. There’s also great potential here for ‘channel shift’ to online services – but the reality is that most departments have made little progress in sharing even HR and finance systems.

Shared services shakeup

The back office shared service agenda “didn’t work because it was all a bit too difficult; anyone who was going to do it was taking a bit of a risk”, explains Read. “And the way the central civil service works is that nobody gets any marks for being innovative, taking calculated risks and doing a shared service project well – but people can ruin their careers by doing one badly. They get hauled before the select committee for a grilling.” And some select committees, he suggests, have little understanding of the “real grind of making things happen”; he remembers appearing before the Treasury select committee, and thinking: “I don’t think any of these people have ever run anything.” Along with the complexity of retaining clear accounting lines for departments sharing functions, these factors have meant that “progress has been very limited”.

Asked to sketch out the future for government shared services, Read emphasises that “there isn’t one answer”. Joint ventures could be established with private partners, he suggests, bringing in cash and expertise to create vehicles that could eventually be floated on the market – or handed to their employees as mutuals. It took many years for private companies to realise that they should focus on their core business and farm out the back office work, says Read, and “I don’t think that penny’s dropped in the public sector yet. There’s no doubt that a lot of people are hanging onto their own departments because they see it as a threat if anyone else does [this work], much as business did 30 years ago.” To overcome this reluctance, he comments, the centre will have to be “a bit directive” about identifying opportunities and pushing departments to collaborate.

It will not, of course, only be the centre that propels departments towards reform. “This awful mess we’ve got ourselves into on the public finances has a very strong positive side,” Read comments. “We’ll have to do things differently if we’re going to get the savings required.”
Given enough of a push, Read believes, there are plenty of civil servants ready to step up. During his work with the civil service, he’s seen “some really good stuff in the public sector; I would say best in class.” And while practical and professional skills still need to move further up the Whitehall pecking order – “We’ve got to put a lot more recognition and emphasis on people who can do implementation and delivery, rather than just the policy bit,” he argues – the situation has improved dramatically in recent years.

“You’ve got to give Gus marks for introducing capability reviews,” he says. “That was one of the things that pointed out the hopelessness of trying to do certain things without having anyone in the management team with proper commercial experience. If you were impatient you could argue that we’ve moved too slowly, but there is capability now in most departments to handle professional areas professionally, in a way there wasn’t before.”

Changing the grain

So, the civil service has most of the capabilities it needs for reform; it has the financial motivation, and the guiding hand of the ERG – but isn’t Read concerned that the sheer pace and scale of the cuts will deny officials the time and investment capital to pursue structural and process reform, forcing them instead to simply squeeze the existing system?

“I’m sure the coalition isn’t going to get everything right, but that’s the nature of life,” he replies. “On the big picture and the big direction, I think they’re trying to do the right things. For me, one of the key items of success will be whether, five years out, we’ve made progress in getting operational efficiency into the DNA of the public sector. That’s something that has to be ingrained over a period of time.”

Asked whether the spending review moves the agenda forwards on IT or shared services, Read is cautious. “There’s always a bit of difference between what someone like me would do as an adviser, and the politics of it. Inevitably, compromises get made,” he says. “In terms of what’s going on with the ERG there’s nothing that one’s particularly disappointed about, and a few things that one’s particularly pleased about. But the proof of the pudding will be in the eating.”

The ingredients of that pudding, Read believes, are ready; and civil servants should now be free to cook something a bit adventurous. “There are some people who will be able to do this really well, and they’ll be the stars; and there’ll be others who I think will be put under pressure, and who may or may not be good enough,” he says. “The people at the middle to senior management level are up for change; they just need to be liberated, and for too long they’ve been stuck in treacle. For people who are up for it, this is a very interesting time and potentially a very positive one for their careers – there are some real opportunities for people who want to take them.”