Councils have been urged to cast their net further

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The recruitment process for chief executives has been criticised.

But the amount that the best and brightest in local government get paid has risen to the fore following the publication of the Audit Commission's Tougher at the Top? report last week (LGC, 24 July).

At the heart of the discussion paper is the contention that counties and single-tier authorities looking for new chief executives are not casting the net wide enough in their bids to fill top-position vacancies. Too often they poach chiefs from other top-tier councils. The process, the commission said, is creating a diminishing pool of talent, pushing up pay and costing a fortune in recruitment fees.

Unsurprisingly, perhaps, the mainstream media focused on the commission's line that pay for top-tier chief executives has rocketed by 90% to a median £150,000 over the past decade, coupled with predictable quotes from the TaxPayers' Alliance.

However, the rumblings of a groundswell of opinion seemed more plausible when both local government minister John Healey and shadow communities secretary Eric Pickles came out with responses that also condemned the current state of affairs.

The Audit Commission said that an 11% to 17% increase in the turnover rate of chiefs between 1998 and 2007 was associated with a greater accountability linked to comprehensive performance assessment (CPA) star ratings.

The commission revealed that while the proportion of posts filled by internal promotion and promotions from other authorities had declined, the proportion of chief executives being hired from other top-tier councils had increased from 17% to 29%.

It said that while weaker authorities had higher chief executive turnover rates before the introduction of CPA in 2002, the trend for such authorities to appoint other councils' chief executives had since grown.

The commission concluded that as well as driving up wages, the cost to councils of replacing departing chief executives was significant. It cited one, unnamed, authority that spent an estimated £440,000 on severance packages for three chief executives who were in post for a combined total of 67 months.

It also claimed that executive search firms charged around 30% to 50% of a post's salary for their role in the hiring process.

But its killer blow was the conclusion there was "no statistical evidence" that another council's chief executive was any better at delivering improved CPA results than a first-tier officer promoted into the role.

The report did, however, concede that the task of turning around a poorly-performing local authority may be seen as too daunting for those seeking their first executive job.

In response to the report, Mr Healey praised the work of chief executives. But in the same breath, he dubbed the current situation unacceptable. He then went on to reveal that talks with Local Government Employers (LGE) were underway to find a solution.

Sources close to the negotiations said that capping chief executive pay would not be an option.

More likely would be guidelines for hiring new chiefs and more work on making sure the full range of recruitment options was fully considered, including succession planning — so far not widely practised at local
authorities.

One LGE source with knowledge of the discussions said the introduction of comprehensive area assessments — supposedly less league-table focused than the CPA — may go some way to stop councils seeking to appoint chief executives with a track record of delivering on the indicators.

David Clark, director general of the Society of Local Authority Chief Executives & Senior Managers, and a former chief executive of City of York Council, said it was wrong to focus only on the performance-management aspect of a chief executive's job.

He agreed the turnover of chief executives was high, but insisted pay was "about right" and added that if district council pay was factored in, average chief executive pay was around £106,000.

He said that pay in the sector still lagged "woefully" behind the private sector, a point the Audit Commission grudgingly conceded when comparing the median £400,000 in salary and £600,000 in additional payments given to FTSE250 chief executives.

Jonathan Flowers, managing partner at recruitment consultancy Veredus, said that as the performance regime in local government had become tougher, many councils felt the amount of risk they could afford to take in hiring a new chief executive had decreased.

"They need people who can achieve quickly," he said. "This will tend to favour people who have proven themselves in the top role."

But, Mr Flowers said, the situation was an open gauntlet for district chief executives with good track records.

He also disputed the Audit Commission's claims over the fees attracted by recruitment consultancies.

Joan Munro, national adviser on workforce strategy at the Improvement & Development Agency, said local government would be "cutting its own throat" if the recruitment merry-go-round was not stopped.

However, she added that more succession planning seemed to be taking place. She said a survey five years ago had indicated just 5% of authorities were taking steps to tackle the issue, while the figure had risen to 28% two years ago and that further progress was expected when the results of an ongoing survey were known.

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Nigel Keohane, a researcher for the New Local Government Network (NLGN), said that only recruiting from a pool of other authorities' chief executives was short-sighted. "There are examples of people coming from the private sector who have done very well. And you can recruit a chief executive from a primary care trust rather than a local authority."

Mr Keohane, author of NLGN's Leading Lights report on council recruitment published earlier this year, said that effective ways to spot and nurture talent across the local government community were a crucial step towards increasing the number of potential candidates for top jobs.

"If you had really, really good internal succession, you'd be able to recruit a chief executive from your own local area and we wouldn't be getting the same job-to-job movement," he said.

Mr Keohane added that local authorities' increasing place-shaping role would also make it easier for people to move into top local government positions from outside the sector — as well as potentially keeping serving chief executives around for longer.

"Under place-shaping, people become more identified with their local areas and as that happens, there may be an inclination to stay in an area longer because you've created those relationships with partners," he said. "There may also be incentives to recruit from within the place-shaping community."

Two examples from this year alone of senior police officers moving from their respective forces to director-level posts at local authorities appear to underline just that potential.

Most recently, Bristol City Council appointed Sheffield police commissioner Jonathan House as its new deputy chief executive. He cited partnership working with Sir Robert Kerslake, during his time as chief of Sheffield City Council, as the inspiration for the move.

But whatever comes of the recent flurry of interest in where the next generation of chief executives comes from, we can be sure that those doing the hiring will be far more concerned about how to bring the best to their own council than on any of the side effects of their choices.

Any guidance that tells an appointments committee to go against its better judgment on who is the right candidate for their council's top job is still likely to get short shrift. And a salary pot that gets pushed up tens of thousands of pounds at a time is still only going to be a drop in the ocean for individual council tax bills.

Falling on the CPA sword

The Audit Commission draws a direct link between a need for local authorities to improve their comprehensive performance assessment (CPA) score and their recruitment of another chief executive from a top-tier authority.

Analysis of the relationship between chief executive turnover and CPA scores reveals some key connections between an unacceptable rating and a chief executive's future in the sector:

• An authority scoring nought or one in its CPA score in any given year is more than twice as likely to see its chief executive retire or be sacked in that year than a council scoring three or four

• Authorities scoring nought to two in any given year are more likely to see their chief executive leave to take up work outside local government

• A chief executive at any authority scoring nought or one in its CPA is very unlikely to become a chief executive in another authority in that year