By Michael Hallsworth, Anne White and David Halpern
July 2, 2009
Changes to Whitehall departments should be about better government but are often more to do with prime ministerial patronage. The Institute for Government looks at the latest casualty, the Department for Innovation, Universities and Skills
Buried beneath the swirl of political controversy last month was the demise of the shortest-lived Whitehall department ever. Just 23 months after its creation, the Department for Innovation, Universities and Skills has been merged into Lord Mandelson’s new super-department, the Department for Business, Innovation and Skills.
But Dius’s premature passing is more than just a sales opportunity for sign-makers and
stationery suppliers – it provides an insight into a frantic world where civil servants must provide services while assembling their own organisation.
Was the creation of Dius worth the pain? And what can it tell us about the future shape of Whitehall?
There’s no doubt that creating a new department causes disruption and costs money – yet establishing exactly how much is remarkably difficult. Although the official Treasury position is that changes have to be funded from within departmental budgets, it is rare to find accurate records of how this is done. Politicians therefore lack reliable information on the likely expenses to weigh against the expected benefits.
An important legacy of Dius – partly because it allowed access to an evaluation team from the Institute for Government and the London School of Economics – is that we now have a clearer idea of these costs and benefits. Dius accounts reveal that administration costs rose by £8.2m the year it was established, through new accommodation and IT infrastructure. Senior figures in the department estimated the one-off direct costs of creation were higher, at up to £13m.
Direct costs give only part of the picture, of course. Dius also had to move into a new building, adopt a new IT system and adjust to new set-ups for human resources, finance and communications. By 2009, there were still significant problems around shared services and pay scales. Since it was a formidable task, it was reckoned that Dius would need three to five years to reap the benefits of these start-up costs. It got less than two years.
What were the expected benefits? In 2007, the Cabinet Office said Dius would provide a ‘strong integrated permanent voice’ to help break down barriers between universities, colleges and business in terms of innovation, training and skill development. Dius, with John Denham as secretary of state, was therefore charged with bringing together higher education, further education, innovation and science – a collection of very different cultures each with autonomous institutions.
The plan was that higher education and skills would be encouraged to engage more fully with their contribution to the wider economy. Some observers also regarded Dius as a way to ensure future education secretaries would be less able to sacrifice long-term investments in science and skills for short-term top-ups of the schools budget. Given that UK department ministers enjoy greater budgetary freedom than any other Organisation for Economic Co-operation and Development country (according to forthcoming OECD analysis), this concern is a credible one for a government seeking to protect a prime area of spending.
But the Dius management board decided the new department would not signal a grand new policy programme; rather, it would focus on delivering services. This decision was credited with ensuring that the changes did not overly disrupt the running of large and important programmes.
The department also attempted to bring together its different parts by adopting a hot-desking policy to encourage more fluid mixing of staff (its offices remained spread across Whitehall and beyond). A staff survey in October 2008, which found 60% of staff had a ‘clear understanding of the purpose and objectives of the department’, conveyed a sense of progress – but also of the distance to go.
By early 2009, there were signs that Dius was beginning to draw together its various components to serve a shared strategic purpose. The department had been restructured around its ‘customers’ – both learners and businesses – and away from the historical focus on the higher and further education sectors.
But despite this progress towards a common understanding of what the department was for, the 2009 Capability Review still noted that many staff did not fully grasp ‘how their role linked across the different groups of the department’.
Part of the problem was that Dius had been created with a brief theoretical explanation of its purpose and a list of objectives – but few tangible goals to explain how it knitted together as a department. Therefore, it had to fashion a sense of its own ‘added value’ while setting up IT systems and dealing with the daily demands of a department of state.
As the UK entered recession, Dius’s corporate strategy work appeared to signal that its set of responsibilities was crucial to kick-starting the economy. In an interview late last year, permanent
secretary Ian Watmore highlighted innovation and skills as the means of building successful businesses and helping people stay in work. If Dius’s purpose was to combine policy strands in a department that tackled economic problems, it begged the question: why not bring business into the fold too?
Enter the DBIS, which was created on the rationale of ‘put[ting] the policy levers... in one place’, in the words of Lord Mandelson. Its remit is extremely broad. While the logic of bringing together related policy levers may seem appealing, it can lead to internal difficulties. Dius’s experience shows how challenging it can be to bridge differing cultures and power bases. When it comes to provision, a complex policy portfolio can mean issues are overlooked or not tackled in a coherent manner.
Furthermore, past experience suggests that redesigning departments rarely offers a perfect solution to ‘joining up’. Any reorganisation is likely to result in some awkward unions and rough edges.
Combining organisations is fundamentally difficult. Figures from consultancy McKinsey on private sector mergers suggest that almost 70% fail to achieve the expected synergies, while profitability may take years to achieve.
Clearly, caution is needed when drawing parallels with the private sector, but such evidence seems to reinforce Lord Butler’s comment that ‘the frictional cost of making changes [to departments] very often does exceed the benefit’.
In many ways, the Dius story confirms the received wisdom of many old Whitehall hands that machinery of government changes distract ministers and civil servants with ‘rearranging the deck chairs’ instead of getting on with the job. Six months into the creation of Dius, this was certainly the private advice given to other permanent secretaries, based on the practical costs involved in setting up the new department. One senior figure warned: ‘If you’re thinking of creating a new department, don’t. And even if you’ve thought about it very carefully and still think it’s a good idea, still don’t.’
Another problem is that repeatedly changing structures can bring diminishing returns. As one of the senior civil servants involved in setting up Dius noted: ‘I was trying to convince people and get them excited about the new department, but many felt they’d seen it all before – and in some cases they had been through five or six such changes over their careers.’
Despite such warnings, Whitehall has seen 17 departments created since 1997 (see box). The usual explanation is that the real driver of such changes is personal Cabinet politics – the need to give senior political figures the portfolio and status they desire. Seen this way, a prime minister’s exclusive and unfettered ability to create departments offers useful political leverage. There is much truth in this, but it’s not the whole story. When given sufficient time, machinery of government changes can provide new ways of meeting amended circumstances and policy challenges – or make employees adjust to an urgent new reality.
For example, many Whitehall insiders and external experts feel that the creation of the Department of Energy and Climate Change in 2008 moved the focus of its 900 staff from the shorter-term concerns of industry (in the Department for Business, Enterprise and Regulatory Reform) and farmers (in the Department for Environment, Food and Rural Affairs) towards long-term strategic challenges. While it is too early to judge, creating Decc might have helped to achieve a genuinely radical shift in environmental policy.
Yet the most interesting and important question hanging over conventional machinery of government changes is whether alternative approaches can provide more benefits at less cost. For example, many countries that rate highest on cross-national measures of good government have adopted a model where senior ministers hold responsibility – and budgets – for big cross-cutting issues, leaving other (often more junior ministers to run conventional departments.
Scotland is increasingly cited as moving towards this model. This approach forces joining up around new priorities without the costs associated with ‘hard’ machinery of government changes. In effect, it turns senior ministers into commissioners within government.
Another alternative is to create flexible pools of resources that can be allocated to address cross-departmental issues, with joint ownership from the centre and departments. For example, Australia’s Department of the Prime Minister and Cabinet increasingly plays this role, as has our own Prime Minister’s Strategy Unit during much of its life. Some departments are also seeking to create a similar model internally, such as that seen in Defra’s Renew programme. Equally important is the creation of an accountability framework that cuts across silos, such as the (yet to be confirmed) incorporation of cross-cutting assessments in the next generation of Whitehall Capability Reviews and appraisals of senior civil servants.
Interestingly, the latest generation of machinery of government changes might carry the seeds of a future Whitehall. The decision not to try to physically pull together all the components of Dius hints at a future where loyalties and focus can be reconfigured without physical movement of the deckchairs.
Similarly, while Decc’s small size was ridiculed by older mandarins (as one ex-permanent secretary commented privately: ‘I know size isn’t everything, but a man in Whitehall is judged by the size of his department’), it may be the model of the slimmer and more strategic Whitehall of the future.
In future, when we look back we may see Dius and Decc as the evolutionary link between the silo-based departments of the 1950s and 1960s and the flexible ‘matrix’ design of 2020s Whitehall, with cross-cutting ministers overseeing a separate set of departments and delivery agents.
Michael Hallsworth, Anne White and David Halpern are based at the Institute for Government, which is launching a study, led by senior fellow Sir Ian Magee into the reasons for, and outcomes of, past machinery of government changes
July 2, 2009
Changes to Whitehall departments should be about better government but are often more to do with prime ministerial patronage. The Institute for Government looks at the latest casualty, the Department for Innovation, Universities and Skills
Buried beneath the swirl of political controversy last month was the demise of the shortest-lived Whitehall department ever. Just 23 months after its creation, the Department for Innovation, Universities and Skills has been merged into Lord Mandelson’s new super-department, the Department for Business, Innovation and Skills.
But Dius’s premature passing is more than just a sales opportunity for sign-makers and
stationery suppliers – it provides an insight into a frantic world where civil servants must provide services while assembling their own organisation.
Was the creation of Dius worth the pain? And what can it tell us about the future shape of Whitehall?
There’s no doubt that creating a new department causes disruption and costs money – yet establishing exactly how much is remarkably difficult. Although the official Treasury position is that changes have to be funded from within departmental budgets, it is rare to find accurate records of how this is done. Politicians therefore lack reliable information on the likely expenses to weigh against the expected benefits.
An important legacy of Dius – partly because it allowed access to an evaluation team from the Institute for Government and the London School of Economics – is that we now have a clearer idea of these costs and benefits. Dius accounts reveal that administration costs rose by £8.2m the year it was established, through new accommodation and IT infrastructure. Senior figures in the department estimated the one-off direct costs of creation were higher, at up to £13m.
Direct costs give only part of the picture, of course. Dius also had to move into a new building, adopt a new IT system and adjust to new set-ups for human resources, finance and communications. By 2009, there were still significant problems around shared services and pay scales. Since it was a formidable task, it was reckoned that Dius would need three to five years to reap the benefits of these start-up costs. It got less than two years.
What were the expected benefits? In 2007, the Cabinet Office said Dius would provide a ‘strong integrated permanent voice’ to help break down barriers between universities, colleges and business in terms of innovation, training and skill development. Dius, with John Denham as secretary of state, was therefore charged with bringing together higher education, further education, innovation and science – a collection of very different cultures each with autonomous institutions.
The plan was that higher education and skills would be encouraged to engage more fully with their contribution to the wider economy. Some observers also regarded Dius as a way to ensure future education secretaries would be less able to sacrifice long-term investments in science and skills for short-term top-ups of the schools budget. Given that UK department ministers enjoy greater budgetary freedom than any other Organisation for Economic Co-operation and Development country (according to forthcoming OECD analysis), this concern is a credible one for a government seeking to protect a prime area of spending.
But the Dius management board decided the new department would not signal a grand new policy programme; rather, it would focus on delivering services. This decision was credited with ensuring that the changes did not overly disrupt the running of large and important programmes.
The department also attempted to bring together its different parts by adopting a hot-desking policy to encourage more fluid mixing of staff (its offices remained spread across Whitehall and beyond). A staff survey in October 2008, which found 60% of staff had a ‘clear understanding of the purpose and objectives of the department’, conveyed a sense of progress – but also of the distance to go.
By early 2009, there were signs that Dius was beginning to draw together its various components to serve a shared strategic purpose. The department had been restructured around its ‘customers’ – both learners and businesses – and away from the historical focus on the higher and further education sectors.
But despite this progress towards a common understanding of what the department was for, the 2009 Capability Review still noted that many staff did not fully grasp ‘how their role linked across the different groups of the department’.
Part of the problem was that Dius had been created with a brief theoretical explanation of its purpose and a list of objectives – but few tangible goals to explain how it knitted together as a department. Therefore, it had to fashion a sense of its own ‘added value’ while setting up IT systems and dealing with the daily demands of a department of state.
As the UK entered recession, Dius’s corporate strategy work appeared to signal that its set of responsibilities was crucial to kick-starting the economy. In an interview late last year, permanent
secretary Ian Watmore highlighted innovation and skills as the means of building successful businesses and helping people stay in work. If Dius’s purpose was to combine policy strands in a department that tackled economic problems, it begged the question: why not bring business into the fold too?
Enter the DBIS, which was created on the rationale of ‘put[ting] the policy levers... in one place’, in the words of Lord Mandelson. Its remit is extremely broad. While the logic of bringing together related policy levers may seem appealing, it can lead to internal difficulties. Dius’s experience shows how challenging it can be to bridge differing cultures and power bases. When it comes to provision, a complex policy portfolio can mean issues are overlooked or not tackled in a coherent manner.
Furthermore, past experience suggests that redesigning departments rarely offers a perfect solution to ‘joining up’. Any reorganisation is likely to result in some awkward unions and rough edges.
Combining organisations is fundamentally difficult. Figures from consultancy McKinsey on private sector mergers suggest that almost 70% fail to achieve the expected synergies, while profitability may take years to achieve.
Clearly, caution is needed when drawing parallels with the private sector, but such evidence seems to reinforce Lord Butler’s comment that ‘the frictional cost of making changes [to departments] very often does exceed the benefit’.
In many ways, the Dius story confirms the received wisdom of many old Whitehall hands that machinery of government changes distract ministers and civil servants with ‘rearranging the deck chairs’ instead of getting on with the job. Six months into the creation of Dius, this was certainly the private advice given to other permanent secretaries, based on the practical costs involved in setting up the new department. One senior figure warned: ‘If you’re thinking of creating a new department, don’t. And even if you’ve thought about it very carefully and still think it’s a good idea, still don’t.’
Another problem is that repeatedly changing structures can bring diminishing returns. As one of the senior civil servants involved in setting up Dius noted: ‘I was trying to convince people and get them excited about the new department, but many felt they’d seen it all before – and in some cases they had been through five or six such changes over their careers.’
Despite such warnings, Whitehall has seen 17 departments created since 1997 (see box). The usual explanation is that the real driver of such changes is personal Cabinet politics – the need to give senior political figures the portfolio and status they desire. Seen this way, a prime minister’s exclusive and unfettered ability to create departments offers useful political leverage. There is much truth in this, but it’s not the whole story. When given sufficient time, machinery of government changes can provide new ways of meeting amended circumstances and policy challenges – or make employees adjust to an urgent new reality.
For example, many Whitehall insiders and external experts feel that the creation of the Department of Energy and Climate Change in 2008 moved the focus of its 900 staff from the shorter-term concerns of industry (in the Department for Business, Enterprise and Regulatory Reform) and farmers (in the Department for Environment, Food and Rural Affairs) towards long-term strategic challenges. While it is too early to judge, creating Decc might have helped to achieve a genuinely radical shift in environmental policy.
Yet the most interesting and important question hanging over conventional machinery of government changes is whether alternative approaches can provide more benefits at less cost. For example, many countries that rate highest on cross-national measures of good government have adopted a model where senior ministers hold responsibility – and budgets – for big cross-cutting issues, leaving other (often more junior ministers to run conventional departments.
Scotland is increasingly cited as moving towards this model. This approach forces joining up around new priorities without the costs associated with ‘hard’ machinery of government changes. In effect, it turns senior ministers into commissioners within government.
Another alternative is to create flexible pools of resources that can be allocated to address cross-departmental issues, with joint ownership from the centre and departments. For example, Australia’s Department of the Prime Minister and Cabinet increasingly plays this role, as has our own Prime Minister’s Strategy Unit during much of its life. Some departments are also seeking to create a similar model internally, such as that seen in Defra’s Renew programme. Equally important is the creation of an accountability framework that cuts across silos, such as the (yet to be confirmed) incorporation of cross-cutting assessments in the next generation of Whitehall Capability Reviews and appraisals of senior civil servants.
Interestingly, the latest generation of machinery of government changes might carry the seeds of a future Whitehall. The decision not to try to physically pull together all the components of Dius hints at a future where loyalties and focus can be reconfigured without physical movement of the deckchairs.
Similarly, while Decc’s small size was ridiculed by older mandarins (as one ex-permanent secretary commented privately: ‘I know size isn’t everything, but a man in Whitehall is judged by the size of his department’), it may be the model of the slimmer and more strategic Whitehall of the future.
In future, when we look back we may see Dius and Decc as the evolutionary link between the silo-based departments of the 1950s and 1960s and the flexible ‘matrix’ design of 2020s Whitehall, with cross-cutting ministers overseeing a separate set of departments and delivery agents.
Michael Hallsworth, Anne White and David Halpern are based at the Institute for Government, which is launching a study, led by senior fellow Sir Ian Magee into the reasons for, and outcomes of, past machinery of government changes
