HMRC running out of time to regain its sense of purpose

Leadership is the key to the effective management of the radical changes that have taken place at Revenue & Customs

Chris Mills PIPC

Times Online, January 2010

It is ironic that HM Revenue & Customs (HMRC), which has undergone radical change, should be incapable of managing change effectively. But as the Cabinet Office review of HMRC’s performance points out, this is likely to be a question of leadership rather than general competence.

Staff within HMRC are rightly praised within the Civil Service for their tenacity and passion to do a great job. However, many believe that they have been doing the wrong job, the wrong way, for too long. Since 2003 they have been subjected to a rather clumsily conceived merger (of Inland Revenue and Customs and Excise) followed by a number of divestments. The upshot is an organisation that is perhaps more focused (on tax-raising) at a strategic level but has lost its sense of purpose lower down.

As all merger integration experts will testify, the key to success is usually to be found in developing the right level of engagement among key operational staff, motivating them to drive the process quickly and effectively. This requires a clear view of the strategic goals and a comprehensively thought-through model for the entire organisation, which encompasses vision, strategic performance measures, organisational structures, projects and business-as-usual activities, together with the right combination of skills, competencies and behaviours needed by all staff.

More important than any of these areas individually is the need to demonstrate clear alignment between all of them. Research shows that organisations that do not seek this rarely achieve their performance goals. This is at the heart of HMRC’s problems.

If staff there understand the organisation’s goals at strategic and operational level, they will also understand how their own job contributes to those goals, and they are likely to be well-motivated.

While they may be agreed on an overarching strategy and vision for the organisation, experience suggests that senior managers are more likely to be focused on building the profile of their own area (and themselves) than looking out for the good of the department as a whole. And until they feel that their advancement is clearly linked to HMRC’s overall success, who can blame them? The answer? Produce a detailed alignment model right now and get everyone involved in it before the general election causes paralysis in government.

Good leaders do more than paint a rosy picture of the future — they create a framework in which everyone understands their role in achieving that future. Lesley Strathie, the new CEO/Permanent Secretary has publicly recognised this and is clearly keen to listen to staff and get the balance right.

However, the precedents are not good. Senior civil servants have often been criticised for their apparent inability to translate good strategies into effective action. This has led to an overuse of consultants and other external staff, simply to make things work, rather than providing the bursts of expertise for which they are better suited. In the present economic climate, this is a model that can no longer be sustained. Moreover, it is a good way to ensure that change is resisted rather than embedded. Ms Strathie and her leadership team may be running out of time to address this.