Why wouldn’t a bright, energetic, ambitious accountant with their eyes on a
financial directorship join the public sector? The usual answer is because they
are bright, energetic, ambitious.
In other words, the public sector has a real challenge on its hands in trying
to embed strong financial management skills into key positions. There are a
number of reasons why the public sector should wish to do this. As the excellent
HM Treasury publication, which takes this theme for its title, Embedding
Financial Management Skills in Government, points out: “Good financial
management is like fresh air, exercise and a healthy diet. Organisations need it
every day to stay fit and to live a full and active life.” Who can argue with
The problem is that the public sector has woken up rather late in the day to
the realisation that, while a generalist civil servant is an excellent beast, it
is perhaps not a good idea to give billion-pound budgets to people who lack even
a nodding acquaintance with double-entry bookkeeping, however splendid they
might otherwise be.
The civil service was founded on the idea that a gentleman amateur who can
parse his Greek and Latin can turn his hand to anything. In general, this may be
true, but it is also doubtless true that they can turn their hand to financial
management rather more easily, and with a better chance of success, if their
seniors steer them towards some basic courses in accountancy as part of their
A better idea, though, would be to forego the training of amateurs and hire
full-on professionals. But that takes us full circle to our opening remarks: who
In practice, however, HMG has managed to devise a stop-gap solution while it
girds its loins to produce a more elegant longer-term solution. The short-term
fix is to hire interim financial managers and to swallow the costs associated
with paying these temporary members of staff three or four times the salary that
would have been paid to a public sector employee in the same position.
As Andrew Simmonds, senior account manager at Hudson, a global recruitment
consultancy providing finance professionals for the public sector, observes, the
whole economy, public and private alike, suffers from a skills shortage. Skilled
people are hard to find in finance, IT, HR and half a dozen other specialist
areas. With both the public and the private sector chasing skilled accountants,
there are no prizes for guessing who wins in the war for talent.
One card up HMG’s sleeve, however, is that while pay grades for civil
servants are cast in stone and have virtually zero flexibility, it is possible
to pay bonuses of up to 60% of pay for key categories of staff, including
finance directors. “The civil service can do this because even with the bonus,
the cost of a permanent finance director in the public sector will be
significantly less than the cost of paying for interim staff to fill that
position if the incumbent leaves,” says Simmonds.
The problem that HMG has, however, is that finance directors are streetwise.
Someone from industry or commerce might get a finance director position in this
or that government department but then, having worked there for a few years,
they know that they can earn significantly more – while still undertaking a
‘public service’ role – by leaving the service and returning as an interim
finance director. This secondary ‘bleed’ of skilled talent is very hard to stop.
Another source of ‘bleed’ driven by the market, ironically, has its roots in
the civil service’s drive to push through strong financial disciplines. This
leads it to hire interim specialists, often seconded from management
consultancies. This gives the consultancies a motive to headhunt skilled finance
directors with public sector experience, so the wheel goes round and round.
Tired or fired
There is, apparently, another category of finance director, rather more
valuable, perhaps, to the public sector, that the civil service may well be able
to attract and retain. This is what we might term, “the tired finance director
or the fired finance director”, the man or woman who has become a little jaded
by the hire ’em, fire ’em mentality of the private sector.
Many finance directors find four years with a plc an unusually long tenure in
a world where disasters happen. To the tired finance director, a comfortable and
relatively safe berth in the public sector, with a wonderful final salary
pension, may well look like an attractive opt-out from the hazards of commercial
life. Caught rather late in life, the tired finance director is also less likely
to be tempted to play the interim game simply to maximise their cash reward.
Of course, there is much to be said for growing your own, and the civil
service bit the bullet two years ago. In conjunction with the Chartered
Institute of Public Finance and Accountancy (CIPFA) and Warwick Business School
and HM Treasury, the civil service introduced a two-year finance diploma for
senior civil servants (specifically, the Postgraduate Diploma in Public Finance
& Leadership, which leads to membership of CIPFA).
The inspiration was a declaration by the then-prime minister, Tony Blair, in
2004, that all government IT, finance and human resources departments should be
“…filled by people with a demonstrable professional track record in tackling
major organisational change, whether inside or outside the service.”
What this meant was that managers in key governance functions in the civil
service could henceforth expect to require professional qualifications, in
addition to their doubtless glittering academic qualifications, if they wanted
to advance their careers.
Tony Blair’s comments led to the Professional Skills for Government (PSG)
agenda and the finance transformation programme led by HM Treasury. In fact,
they were one of a number of changes sweeping through the public sector, all of
which are generating what the Treasury calls “a timely opportunity to capture
hearts and minds and to secure powerful corporate commitment to embed financial
management skills more widely within departments”.
Two other drivers for this are the 2007 Comprehensive Spending Review, and
the Gershon efficiency agenda. Both make it plain that the significant increase
in public sector spending that has characterised the past decade is going to end
for all departments, and that many will find themselves having to operate with
“Ministers and civil servants are having to look for new ways to improve how
government bodies operate to deliver what is asked of them,” the Treasury says
in a second publication, Doing the Business: Managing performance in the
public sector – an external perspective. Published in February this year,
this publication focuses on achieving management efficiency through the better
management of performance. This clearly goes beyond the finance function, though
it implicitly relies heavily on the finance function’s ability to deliver strong
As the Treasury puts it, “Performance must not be just a centrally-driven
exercise or seen as the sole preserve of finance or some other corporate
function.” The Treasury’s vision is to create a culture of performance
management, embedded organisation-wide. This, the Treasury says, would create a
public sector whose departments automatically demanded high quality financial
and non-financial performance information, and which are more confident of their
abilities to achieve outcomes cost effectively, and that are more innovative and
better able to prioritise and deliver broader strategic options.
Peter Morley, technical director at Insight Management and Systems
Consultants Ltd, was on the Treasury committee that formulated the Performance
Management publication. In his view, despite the difficulties, HMG is managing
to attract some very good finance directors, indeed. He cites Huanada Nouss, a
former Diageo finance director who joined the Department of Communities and
Local Government, two years ago following a reorganisation at the FTSE-100
“Nouss joined at grade six and is now grade three or maybe even grade two,
which is a very senior position in the civil service, and one that she has
reached in a very short space of time. So it is not impossible for the civil
service to attract people who can clearly demonstrate their worth,” he says.
Another finance director who proves the point is Richard Calvert, now finance
director of the Food Standards Agency, whom Morley calls “a very bright and able
individual and another excellent example of a high calibre individual with
strong financial skills joining the civil service”.
Morley argues that there remain some very good reasons why people join the
public sector, including work-life balance and being able to make a very
significant change through a very important department. “Delivering a real
change in outcomes for departments by leadership in financial management can
often reward high-flyers just as powerfully as more cash in their pockets,” he
So are these initiatives working? Morley argues that they undoubtedly are.
“When you see how far the government has moved from cash accounting to resource
accounting, which was the application of UK GAAP, and how it is now preparing to
adopt IFRS over the next few years, we are in an unimaginably different position
to the one government was in 10 years ago. There is much better visibility of
assets and liabilities,” he says.
Since Morley made these comments the government has announced that the
introduction of IFRS in the public sector will be delayed by at least a year to
2009/10. But, though later than planned, the end result should be that the whole
of the government’s accounts, as prepared by the Treasury, will give a UK
balance sheet that is much more readable and that will enable people to see what
outcomes are being delivered by departments in return for the resources they