Worth their weight in gold?

05 January 2012

Local authority chief executives are among the highest paid employees in the public sector, but can their generous salaries and pension packages be justified? It depends who you ask, says Blair McPherson

The Daily Mail believes no one in the public sector should be paid more than the PM because running the country has to be the most important job in the public sector.

Eric Pickles, former leader of Bradford Council and Secretary of State for Local Government, thinks chief executives, with their corporate credit cards, inflated salaries and tendency to leave one highly paid post with a generous early retirement package only to emerge a few months later in another highly paid post, are taking the micky.

A local authority admin worker on £15,000, the social worker or teacher on £25,000, can't comprehend how anyone can be worth more than £200,000 a year.

Those who recruit chief executives – the management consultants who head hunt – claim that if you want to recruit the best you have to offer top dollar.

The councillors who appoint chief executives want someone with a proven track record of success at this level, which means paying an existing chief executive more to come and work for them.

Chief executives point out that a large local authority can have a budget of around a £1bn, tens of thousands of staff and very demanding performance targets.

There is no doubt that over the past 10 years chief executive pay has risen dramatically. Nor is there any doubt that the job has become more demanding. Local authorities find themselves in league tables and those who fail to perform are put in special measures.
Chief executives must deliver unpopular budget cuts, placate a hostile local media, and reassure nervous local politicians. The assumption is that the right chief executive guarantees success and success demands high rewards.

In today's performance-driven public sector, chief executives are judged by results. Senior managers are expected to deliver improved performance and budget cuts.

To what extent is success based on the actions of a few or the efforts of many? Do chief executives take too much credit when things go well and too much blame when they don't? How much difference can a chief executive make and to what extent is success a matter of having the right people, or even luck?

League tables and judgement by results feed a macho management culture where the belief is encouraged that one individual or a charismatic leader can, by sheer force of personality, dramatically improve performance and public perception.

Such leaders try to convince everyone they are in control. But are the most successful chief executives simply those who inherit the best staff and a growth budget? Or do some just get lucky?

It's pretty obvious that if you have a strong, dynamic and experienced team you are going to be successful, all the more so if you have the budget to fund new services and pilot innovative initiatives.

How much is success down to luck? They will never admit it on the MBA courses, but success may be as much to do with luck as skill. For every scandal, there are 100 chief executives thinking "there but for the grace of God..." A small change in the government's funding formula benefits some organisations at the expense of others. Suddenly, you don't have to cut services, close establishments or increase charges. Instead, there is capital for refurbishment, money for new initiatives and good news stories – just luck.

After an inspection-free period you are due a major inspection. If it comes this year in the middle of your reorganisation you will be vulnerable. But, if it comes next year, you will be able to show the service in the best possible light. Whether it is this year or next year could be decided on the toss of a coin, a high-profile complaint or the timing of a critical article in the local press – luck again.

Chief executives can and do make a difference, they influence the culture of an organisation, set priorities and articulate the vision. They describe how things will look in the future. They inspire.

Chief executives and their directors take too much blame for poor performance and too much credit for improved results because they have only a limited influence on the day-to-day activities of the organisation. Whether the organisation is a good place to work, a place where service user satisfaction is high and performance improving is down to the leadership of managers at all levels, the commitment and skill of staff – and no doubt some luck.

So large salaries for chief executives can be justified on the organisation's size, complexity and political sensitivity, but not on the basis that some individuals warrant superstar status because they can guarantee success.

Blair McPherson is a former local authority director and author of Equipping Managers for an Uncertain Future, and People Management in a Harsh Financial Climate ?– published by www.russellhouse.co.uk