Since 1974 we have seen the introduction of the Chief Executive Officer in to the world of local government. They arrived with the hated new counties of Avon and the rest cobbled together out of smaller cities and rural areas with differing senses of loyalty. They were introduced in the naÃ¯ve belief that they would make local government more efficient and better managed, drawing on a false analogy with business. The bogus Counties have now been swept away. It is time to review what the CEOs have achieved and ask if the idea has lived up to expectations?
I know some very good Chief Executives in medium and larger sized British businesses. They all earn six figure salaries, but they deliver great value for their customers and profits for their shareholders. They have the following main responsibilities:
1. To deliver revenue growth, by selling more things to more customers.
2. To control costs â€“ in the case of manufacturing usually to reduce the costs per item produced each year
3. To recruit, motivate, monitor and control a team of senior managers to run the business and through them to keep up morale and achievement throughout the company.
4. To report fully to the Board on performance, and to take a leading role in consultation with the Chairman in developing the strategy for the business.
In order to do this modern private sector CEOs have to work very long hours. Most larger businesses are global or widely spread, with CEOs having to travel away from home regularly to meet customers, visit suppliers and control far flung factories, sales offices and administrative offices. They are often away at week-ends. Their rewards contain a substantial performance oriented element that depends on delivering the profits in the budget, and their jobs are on the line if performance falls too far.
In contrast, the CEO of a Council does not face many of these requirements.
1. The CEO does not have to bother about revenue and customers at all. Most of the revenue comes from national taxpayers in a pre-arranged annual grant, and the rest from a local tax. All the Council does is send out letters to reluctant payers reminding them they will be put in prison or their goods seized if they fail to pay. Councillors deal with the â€œcustomersâ€.
2. Most Council executives present their Councillors at the beginning of the annual budget process with a long list of demands for extra spending, and claim that crucial and valued services will have to be cut if the higher administrative budget is not agreed to along with extra tax to pay for it. I have never met a Council CEO who thinks they can deliver as good or better service for less money (in the way industry has to to stay in business) and volunteers a cut in the Council Tax for the first budget draft. If cost control breaks down during the year in a particular service or area, the CEO simply presents a demand for revised budget amounts to be spent, raiding the contingencies fund and the Council balances to pay for it.
3. The CEO does help recruit the senior management team, and does have the task of guiding and chairing its meetings. However, Councillors are also involved and the responsibility is therefore more blurred than in a business. Council CEOs rarely in my experience monitor and manage absenteeism, one of the most obvious ways of watching morale. A CEO facing a problem of low morale is as likely to tell Councillors it is their problem than to fix it.
4. The CEO does not report to the Council in the way a CEO reports to a company Board. Individual Councillors have executive roles, and they are responsible for reporting to Council. The CEO is not usually allowed to speak at Council meetings, though in a way these meetings ought to be primarily reviewing the CEOâ€™s performance at delivering the Councilâ€™s strategy. A well led Council does not need a CEO to craft or develop a strategy, as the strategy is the set of policy proposals and promises the majority group offered to the electorate when they secured their victory.
Some Council CEOs work long hours, because they may need to adjust their diaries to have time to talk to part time Councillors, and tbey may face difficult problems in particular services that need their help. I accept that many CEOs are hard working and well intentioned people. I just think the role they are in is ill defined and their actions largely governed by an ever tinkering central government. They do not have to travel abroad, find time for customers, and rarely work week-ends as Councils have all their meetings during the week. Many enjoy the benefits of public sector flexi hours, which allows the long week-end. Most CEOs now have CEO departments â€“ to their salaries of Â£125,000 to over Â£200,000 we should add much more as pay for the staff who help them do their work. A typical CEOâ€™s department is now spending several hundred thousand pounds and in many cases well into seven figures.
If Councillors wish to continue with CEOs to â€œrunâ€ their Councils, they need to get smarter at motivating and incentivising them. To some extent, with this government, the CEO will remain whatever the Council does a well paid clerk filling in forms and trying to meet box ticking requirements put on them in profusion by the central government. At the very least Councillors need to specify what the CEOâ€™s responsibilities are, set some hard targets to hit, and to make some of the large payment to them only if they achieve the results. Surely, for example, the CEO could be set a tough target to cut the total administrative costs and outside consultancy budgets of the Council each year, instead of automatically budgeting for an increase? Most Councils start from a well padded budget in these areas. Those Councils which do offer some performance pay often adopt soft targets which do not stretch the executive concerned. It would be interesting to know how many CEOs have been denied all their performance pay for bad performance.
There are other models that could be used. A Council could dispense with a CEOâ€™s department. The Councilâ€™s chief financial or legal officer could be made the chairman of the executive team, taking on the executive leadership role, whilst the Councilâ€™s strategy could be very clearly the responsibility of the Leaderâ€™s office. Alternatively, CEO departments could be slimmed down, and the different nature of the CEO role in local government from business recognised by suitable targets and monitoring of what the CEO can and should do.
The current system is not working. A rapacious central government keeps burdening local government with more and more things to do whilst often not offering sufficient grant to do them. At the same time local government can become careless about its own costs, resulting in unacceptable Council tax rises. Often a good Council is forced into extra administrative staff and extra external consultants to comply with the nit picking requirements of Whitehall.