Reasons to be cheerful, despite the challenges

Friday, January 29, 2010

As a career civil servant of some 30 years experience Lesley Strathie knows what it's like to work on the frontline. She tells Alison Thomas how she plans to achieve greater efficiency within HMRC through a change of culture among her currently demoralised 'people'

There is no shortage of rhetoric wafting around the public sector about the need to re-shape government and to achieve better results with fewer resources.

But putting such aims into practice is difficult – and controversial. And in her first interview with external media, HM Revenue and Customs chief executive and permanent secretary Lesley Strathie is flanked by not one, not two, but three press officers, and explains that she chooses her words very carefully. She will, for instance, always talk about HMRC's "people", not its workforce, headcount or staff.

Given that HMRC has lost 20,000 of those people over the past five years, shrinking from 109,000 to 89,000 employees, receives miserable results in staff morale surveys, is under fire from the Public Accounts Committee for deferring investment in technology, from unions over job attrition and the introduction of Lean management techniques, suffered huge data losses which claimed the scalps of the previous leadership, and is under ever-increasing pressure to close the "tax gap" and bring home the bacon for the government, such caution is understandable.

But no one could accuse Strathie of being remote or out of touch, or failing to recognise the scale of the challenge she took on when she moved from her previous job as chief executive of Jobcentre Plus just over a year ago.

Strathie has a pretty clear idea of what life is like for frontline civil servants – she has been there, done that. She followed an unusual career path to the top – joining the then Department of Health and Social Security straight from school in her native Scotland as a clerical assistant in the 1970s and working her way up through the ranks.

She spends one day a week visiting and talking to staff in parts of the vast HMRC empire, a practice she started from her second day in the new job.

"Talking to the people, watching them do their job, hearing what they had to say, was much more important to me than any amount of briefing that anybody was going to give me," Strathie says.

She also aims to be upfront with them about their future.

"For those people who want a future in HMRC, who want to strive every day for the success of this great department, we need to be clear about how they can best make their maximum contribution. And for those people who won't have a longer- term future in the organisation, we must equip them to make the right choices and support them through that. I am absolutely committed to taking every step to avoid redundancies."

But she makes no apologies for the continued process of re-shaping and slimming down the department and adopting Lean techniques, despite union calls for extra staff to help bring in much- needed tax revenues.

"Just like any other business I can't sit here and conjure up resources," Strathie says. "My job is to make sure we are as efficient and effective as we can be, and the way that we collect tax and administer tax credits and the many other strands of policy we are responsible for has changed significantly. With online filing of tax returns, clearly there is still work to do after the filing, but it is very different from receiving six million forms in the post. And more and more of our customers are very able and willing to use modern methods.

"I do think, though, that as we get more efficient we will seek to create other job opportunities in important areas. I am very clear that we want to do more work on protecting revenues, including counter-fraud measures, and there is more to do in the way we collect tax debt. But the challenge is to take a strategic view of the department, where it wants to be in next three to five years and then translate that for our people."

Meanwhile Lean, properly applied, is all about learning from the frontline and from the customer, she argues. "I am a champion of Lean and by that I mean starting with the customer and asking how our different customers engage with HMRC. Most of ours are required to engage with us, we have to remember that – they don't have the choice of going to a different shop.

"So you then find how you get the customer to work with you to deliver most efficiently the business outcome you require, and the rights that the customer has. That means looking at all your processes, engaging the people who do the work, our frontline people from the most junior levels, and eradicating all the wasteful processes.

"And if you eventually work back to the policy, very often you will discover that something in the policy has made it very difficult to administer. There are things we can do about that, depending on whether it is primary legislation or something in the regulations.

"At the end of the day, the resources allocated to run the department reduce year on year, so I have a choice of either standing here in Parliament Street saying 'Work harder', or I do my job, which is to find a much better way to deliver the services we are in business to deliver."

And as head of the operational delivery profession within government, Strathie is also keen to ensure that the people delivering at the sharp end have "parity of esteem" with those in policy roles.

"I have always felt very strongly that you cannot make good policy if you don't involve delivery at every stage, right through to when it lands on the ground, understanding whether it has worked and very quickly getting the message back up the line when it needs to be tweaked or changed."

Unfortunately one of the messages coming back from the frontline at the moment is that the HMRC's people are a pretty despondent bunch – an issue that Strathie is tackling head-on.

"We have the lowest engagement scores in Whitehall and the poorest attendance records, the highest sickness absence in terms of average days lost," she admits. "Both of those to me point to a morale issue and are huge challenges in the organisation.

"We also know from some cultural inventory work and surveys that the vast majority of our managers don't think that they need to change. Now that doesn't add up. Also, although the majority of our people do not want to recommend HMRC as a place to work, they do actually want to stay working here. So there are quite a number of complex messages in there."

The answer, or at least part of it, she suggests, lies in leadership and in business transformation. HMRC is aiming to become slimmer and fitter for purpose, creating an operating model based on its lines of business – business tax; personal tax; compliance and enforcement; and benefits and credits – and removing unnecessary bureaucracy and hierarchies.

"The way that we will deliver more with less is by greater investment in our leadership and being clear about the structure and design of the organisation to equip us for our future strategic direction. Then the next piece is the culture change, because no amount of process and structure will ever deliver maximum efficiency unless we change the way people work. That's usually the biggest challenge in an organisation."

As for leadership, HMRC now has a new governance model, new leadership and a "very strong" executive board, led by non-executive chairman Mike Clasper. It had to hit the ground running following the disastrous loss of discs containing the child benefit records of millions of citizens, and has been working hard to implement the recommendations of the subsequent Poynter report.

"I take it incredibly seriously that we have privileged information about our customers, and both modernisation processes and criminal activity will always pose a threat," Strathie says. "This is not a 'job done – we know that we are secure now'. We regularly conduct threat assessments.

"I don't like it if someone loses a laptop or has it stolen because it has to be replaced. But if we do lose one, it is so heavily encrypted I don't need to worry about people accessing the information. That's real change. I know I have controls on the main systems so that somebody can't access or download millions of records. We, as an executive team, look at one of our strategic risks every fortnight and have a deep dive into it with the risk owner, satisfy ourselves about the risk rating and consider what we can do to mitigate the risks.

"My background has all been about protecting the public purse while delivering welfare benefits. There is always a real tension between how you make this easy for the customer to access versus the safeguards against that element who are going to try to infiltrate systems and defraud them."

Despite the challenges there are reasons to be cheerful, Strathie insists, pointing to successes such as the modernisation of the PAYE system, migrating 57 million accounts onto a single database and creating 44 million unique customer records; the growing millions filing their self-assessment tax returns online; and the speed of the HMRC's reaction in implementing and advising firms on the VAT rate change, and in setting up support services to help businesses through the recession, a "lifeline" that enabled 150,000 businesses to pay their taxes over an extended period.

"It shows how fleet of foot the department can be and how it can manage major change," she says. "I feel very optimistic about where we are. There are lots of challenges, but lots of exciting journeys to complete."