Thirty-second Report - Specialist Skills in the civil service

The civil service struggles to attract and retain specialist staff. Since 2010 the civil service has been subject to pay restrictions, which have limited its ability to offer progressive pay packages to staff. Areas such as Digital and Commercial have struggled to recruit and retain specialists because there is strong external competition for these skills. Functions have introduced their own pay flexibility measures to attract external talent and increase skills retention. However, pay flexibility creates pay disparities between departments and an internal market for specialists which risks some government departments and projects missing out on the skills they need. Some functions, such as Digital, have introduced measures to ensure that pay is consistent for similar roles across all departments. Recommendation: The Cabinet Office, HM Treasury and functions should outline in the Treasury Minute response how, and by when, they will review pay exception case processes across the functions to address current pay disparities and avoid creating an internal market for specialists. 6 Specialist Skills in the civil service

There is still a long way to go to ensure the civil service retains and promotes those from different backgrounds. The more diverse an organisation, the better decisions it makes. The civil service has made a commitment to be more diverse at all levels across both departments and functions. To achieve this the Cabinet Office says it has made its recruitment processes fairer. This includes changes to how and where jobs are advertised, and to how interviews and selections are conducted. Functions are also now setting clear standards in relation to recruitment in order to try and address inconsistencies in the process. The Cabinet Office believes these changes will help to ensure that people from different backgrounds are encouraged into the civil service. Alongside this, the Cabinet Office is aware of the need to improve the retention and progression of minority groups. Whilst we welcome the Cabinet Office’s commitment to diversifying the civil service, more needs to be done to improve the intake and retention of minority groups and those with different socio-economic backgrounds. Recommendation: The Cabinet Office should write to us within three months setting out detailed and broken-down information on the retention and progression of staff from different backgrounds and its plans for further reform in this area.

Departmental data is not good enough to support functions’ development of comprehensive workforce plans. The Cabinet Office acknowledges it does not have the data it needs across all functions to accurately assess what skills the civil service has and where these should be deployed to maximise impact. Departments each have their own systems for collecting data on their staff, and as a result departmental workforce data quality and content vary. Some functions have undertaken their own data collection exercises with departments to get around the problem of workforce data quality. Dealing with dynamic challenges such as EU Exit and covid-19 has forced the Cabinet Office to improve its workforce planning and improve the quality of data available to functions. This exercise would see even greater improvement if the Cabinet Office had access to more granular workforce data. Recommendation: The Cabinet Office should set out how it will work with departments to make sure workforce data is collected at the right level, to better address skills gaps and shortages.

Seven years on from their introduction, functions still have not developed clear plans to help maximise their impact, and lack strategic direction. The Department requires all functions to put in place their own ‘capability blueprint’. Blueprints should include a clear operating model and set out the organisational capacity for each function. They are also an important tool in managing coordination between functions and departments. So far, only the Commercial function has a blueprint, with the HR, Finance and Communications functions currently developing theirs. The Department believes that the Commercial function’s blueprint has made great inroads in improving commercial capability across government. Without clear plans, it is difficult for departments to fully exploit functional expertise. Recommendation: The Cabinet Office and functions should work together urgently to complete capability blueprints. The Cabinet Office should write to us by April 2021 at the latest to confirm that these have been finalised. Specialist Skills in the civil service 7

Only a few of the fourteen functions have been able to demonstrate the benefits of their activities. Most functions have not been able to quantify their costs and benefits. The Cabinet Office admits there are difficulties measuring the impact of some functions, such as the HR function. Progress has been made in some areas: the Commercial function regularly collects data on the cost and benefits of its work and has a mature process for evidencing benefits; and the Digital function has undertaken analysis of the cost savings of moving to inhouse specialists rather than relying on external contractors. The Government Internal Audit Agency is currently working on compiling comparative data on costs and benefits for the functions. When complete this will allow the Cabinet Office to better benchmark functions’ performance and identify best practice. However, the quantification of costs and benefits and the measurement of impact is not yet common practice across the functions. Recommendation: The Cabinet Office, HM Treasury and functions should agree a consistent methodology for measuring costs, benefits and impacts across all functions by July 2021 and report to the Committee on functions’ performance. 8 Specialist Skills in the civil service 1 Impact of skills shortages in government

On the basis of a report by the Comptroller and Auditor General, we took evidence from Cabinet Office and HM Treasury on specialist skills in the civil service.1

The Cabinet Office recognised that rules introduced in 2010 on civil service pay make it difficult to attract and retain skilled specialists in some areas.15 Some skills, such as the ability to lead large projects, are particularly scarce. The Cabinet Office told us the areas which experience the highest levels of turnover are those with a strong external market, such as Commercial and Digital. These functions can often find themselves bidding against external competitors who can offer more money.16

Some functions, such as the Commercial function, have introduced pay flexibility in order to try and increase recruitment of specialists. The Cabinet Office told us that the use of flexibilities in the Government Commercial Organisation had been an effective way to bring in external talent and to consolidate internal talent. It said the turnover rate within the Commercial function had fallen from 25% to 7%, a figure that is lower than the average rate of turnover within the civil service. The Cabinet Office believes this marks a dramatic improvement in the rate of retention and that the pay arrangements introduced have successfully encouraged staff to remain in the civil service.17

Pay flexibilities can however lead to disparities in specialist pay, which can create an internal market between departments for those with specialist skills. To tackle this, the Cabinet Office explained how it is managing the issue. For senior civil service pay grades, pay exception processes have been put in place and the Heads of Functions now actively share and assess salary information across both functions and departments. The Cabinet Office told us it has also put in place restrictions to limit the ability of people to move 10 C&AG’s report, The cost of EU Exit preparations, HC 102, Session 2019–21, 6 March 2020 11 Qq 38–39 12 Qq 42–43 13 Q 92 14 Q 14 15 C&AG’s report, Central government staff costs, HC 79, Session 2015–16, 5 June 2015 16 Q 51 17 Q 51 10 Specialist Skills in the civil service between departments to jobs at the same level but for more money. For lower grades, the Cabinet Office explained that in the Digital function a framework of salary allowances has been put in place which allowed them to level pay across departments for the same type of job. It is also looking into the cohesion of pay across different geographical locations.18 Retaining and promoting a diverse workforce

The more diverse the people in an organisation, the better run it is and the better decisions it makes. As part of the Civil Service Diversity and Inclusion Strategy the civil service has committed to setting and working towards targets to increase the flow of ethnic minority and disabled staff into the senior civil service. The Cabinet Office explained that the functions play an important role in improving diversity by setting clear standards for recruitment and career pathways. It also told us that it had made broader changes to how and where it advertises jobs to bring about a better balance of internal and external recruits, and that it had made changes to how it carried out interviews. The Cabinet Office said it has made particular changes to the processes in place for the civil service fast stream, such as making sure the mix of assessors for roles was more diverse.19

The Cabinet Office also recognised the importance of retention. One of its key aims is to look at how people progress within the civil service once they are in post. The Cabinet Office acknowledged it can take three to five years for someone to fully understand their role, and stated that this is the minimum amount of time they would like to see individuals stay in a post if possible.20 The Cabinet Office told us that introducing pay flexibilities had greatly improved retention levels within the Commercial function.21 18 Q 52 19 Qq 65,89, 92 20 Q 51 21 Q 51 Specialist Skills in the civil service 11 2 Planning and data Departmental data and workforce plans

Ideally, all functions would have access to workforce statistics from a consistent civil service-wide data set. However, functions are still largely reliant on departmental data on staffing, which is variable in quality and is not always detailed enough for functions to use.22 The Cabinet Office told us that while it has more workforce data than ever before, it still has a way to go until the data available is granular enough to identify individual skills and shortages. It is keen to make sure that the functions are using standardised data, which is subject to the same definitions and approaches.23

The Cabinet Office is looking to put in place measures that will allow it to identify what skills an individual has so that they can be best deployed to maximise impact. The Cabinet Office noted that the Project Delivery function is ahead of the other functions in this regard, as it has introduced its own Project Delivery Capability Framework which includes an assessment tool for users to evaluate their skills. Some 7,000 individuals have recorded and assessed their skills against this framework. The Cabinet Office aims to replicate this model across the other 13 functions.24 It has also, for the first time, included functional membership as one of the questions in the Annual Civil Service Employment Survey in an attempt to understand functional data at an employee level.25

The Cabinet Office told us that the challenge of EU exit and EU transition, alongside the concurrent risk of the covid-19 pandemic, has sharpened its thinking about skills and has improved the effectiveness of strategic workforce planning across the civil service. The current situation has forced the Cabinet Office to introduce new ways of working, such as cross-civil service campaigns and hubs to move people between departments, and to explore more innovative ways of managing staffing needs.26 Alongside this the Cabinet Office said it had been building capacity and skills within the HR function to carry out better strategic workforce planning. It has drawn on examples from other organisations that already do this well, such as the military and the Metropolitan Police.27 Creating plans to help maximise impact

Developing detailed plans for each function—also known as ‘capability blueprints’— is fundamental to the effective operation of the functional model in government. The National Audit Office report found that without capability and capacity plans in place it is difficult for functions to understand their own impact, or for departments to fully exploit functional expertise.28 The Cabinet Office acknowledged that these blueprints are the starting point for all functional work but confirmed that only one of the 14 functions currently had its capability blueprint in place. For the Commercial function, having this blueprint in place has allowed them to build commercial capability and improve the function’s processes. The Cabinet Office could not explain why the other 13 functions 22 C&AG’s report HC 919, para 6 23 Q4 6 24 Q 76 25 Q 46 26 Qq 30–31, 92 27 Q 82 28 C&AG’s report, HC 575, para 10 12 Specialist Skills in the civil service are taking so long to publish their own plans but did tell us that blueprints were now also underway for the HR, Communications and Finance functions.29

We believe blueprints are a key part in setting out the operating model for each function, and an important control tool for managing the relationships between functions and departments. Once they are in place it will be easier for functions to collaborate and share best practice, as well as work together on common issues. The Cabinet Office told us that the development of blueprints across all the functions will be an important part of the next year and that it already has a lot of activity underway to ensure that these are not delayed further.30

Despite the lack of capability blueprints in place, HM Treasury shared with us positive examples of cross-government collaboration. The Treasury told us it had integrated functions into major investment decisions, with all functions involved in the appraisal of capital programmes throughout the Spending Review process. HM Treasury also told us it was a priority to integrate the functions into the wider Spending Review process and it has been working with the Cabinet Office to develop guidance on how departments should interact with functions throughout this process. This included designing specific templates to ensure the functions input in the process.31 Demonstrating the benefits of the functions

The Cabinet Office’s ‘blueprint’ exercise in 2018 set consistent expectations for functions and introduced more regularised reporting from functions on their performance, costs and benefits.32 The National Audit Office noted that data quality would be central to the success of these reporting initiatives but found cross-departmental data to be poor.33 We asked the Cabinet Office whether it agreed with the National Audit Office’s assessment that data on impacts was poor. The Cabinet Office told us it had a long way to go in this area before costs and benefits data is robust enough to support the value of the functions.34 It noted specific difficulties in measuring impact in functions such as HR which, unlike the Commercial function, does not have clear savings figures associated with it.

The Cabinet Office explained that the Digital function has made progress identifying the cost savings of moving to permanent staff from contract labour and, as part of this, the function has recognised the indirect cost benefit of retaining skills within the organisation. It also told us that the maturity of the Commercial function meant that it is able to point to direct savings as a result of its work, and told us that the increasing standardisation of processes across government—particularly in the Finance and HR functions—will generate future savings which are likely to stem from increasing automation.35

The Cabinet Office told us that the Government Internal Audit Agency (GIAA) is in the process of developing a new project to allow comparison of impact assessments across the functions. As part of this, the GIAA has developed a standardised methodology and metric so that the functions are able to measure impact in the same way, so like-for-like comparisons can be made. The aim is for this work to be completed by Spring 2021.36 29 Qq 45, 69–71 30 Qq 69–70, 72, 74 31 Q 72 32 C&AG’s report HC 919, para 5 33 C&AG’s report HC 515, paras 5, 9 34 Qq 46–47 35 Qq 45, 47 36 Qq 48 Specialist Skills in the civil service 13