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Agenda Item No. 3

 

The Vale of Glamorgan Council

 

Special Council Meeting : 2nd September 2014

 

Report of the Leader

 

Senior Management Restructure Issues

 

Purpose of the Report

1.         To ask Council to consider and approve arrangements for the ongoing designation of the Head of Paid Service (and related senior management arrangements) in the light of the current Managing Director's intention to retire from service.

Recommendations

1.         That Council approve options in relation to the review of the statutory position of Head of Paid Service as set out in paragraphs 26 to 36.

2.         That consideration of the outcomes from the review is referred for decision by Council on the 17th December 2014.

3.         That Council approve arrangements for the flexible retirement of the current Managing Director/Director of Resources as an interim measure from the 24th November 2014 up to the 31st March 2015 and in accordance with the proposals set out in paragraph 66.

4.         That delegated authority is given to the Head of Human Resources to progress matters relating to the contractual details pertaining to the flexible retirement arrangement (including referral to the Early Retirement/Redundancy Committee) in consultation with the Leader of the Council.

5.         That, subject to 1-4 above, delegated authority is given to the Managing Director to progress the necessary commissioning arrangements in relation to the review of the senior management structure in consultation with the Leader of the Council.

6.         That, in the circumstances where recommendations 3 and 4 are not approved, Council approves the waiving of the last month of the Managing Director's contractual notice period for the reasons as set out in paragraphs 77 to 78.

Reasons for the Recommendations

To ensure compliance with the requirements of the Council's Constitution, the Local

Government and Housing Act 1989, the Local Government (Wales) Measure 2011, the Local Authorities (Standing Orders) (Wales) (Amendment) Regulations 2014 and to ensure continuity of sustainable management arrangements over the next seven month period.

Background and Update

2.         Members will be aware that proposals to implement the senior management reduction arrangements were approved by Council on the 16th April 2012.

3.         An important part of the arrangements was the appointment of Mrs S Davies to the combined role of Managing Director/Director of Resources from 1st August 2012.

4.         Appointment to the role of Managing Director was approved on an honorarium basis for a three year period (up to the 31st July 2015) and included statutory designation as the Council's Head of Paid Service.

5.         It was agreed that the role should be reviewed at the end of the three year period.
This was important in order to assess the effectiveness of the combined role in the light of experience. Such a review is due in July 2015.

6.         It is felt that the arrangements have proved successful for the Council over the last two years and have helped to provide strong and stable leadership. The arrangement provided the opportunity to amalgamate two roles which contributed significantly to the required financial saving during 2012/13.

7.         Members will be aware, however of the demanding nature of this combined role and particularly as the strategic and financial challenges for the Council increase.

8.         Members will also now be aware that the current post holder has indicated her wish to retire from her post on the 24 November 2014 and ahead of the scheduled end of the honorarium period on 31 July 2015.

9.         The purpose of this report is therefore to ask Council to bring forward the review as referred to in paragraph 5 and, more specifically to consider options for covering the statutory duties of Head of Paid Service in the short and long term.

Relevant Issues and Options

10.      The imminent loss of the current post holder comes at a difficult time for the Council in terms of the increasing budget challenges, the need for leadership and momentum in relation to a range of challenging work programmes and the continuing uncertainty of local government reorganisation.

11.      Members will be aware of the financial challenges set out in the medium term financial plan (2014/15 to 2017/18). Over the next few months it will not only be imperative that the budget for 2015/16 is signed off but that progress continues to be made in bridging the unprecedented funding gap over the next three years.

12.      A key platform for the above will be the setting up of the "reshaping services" work programme as approved by Cabinet on 11th August 2014 and as a basis for a wholesale transformation process over the next three years. The success of this will depend, in large part, on leadership and momentum over the coming months.

13.      Related to the above will be the need to finalise negotiations with the trade unions on a holistic review of terms and conditions and also oversee significant collaborative activity in relation to health and social care integration and the setting up of a combined Regulatory Services function with Cardiff and Bridgend Councils.

14.      The foundation for much of the above work will need to be set over the next few months albeit the work will clearly continue over coming years.

15.      A further and complicating consideration for the Council will be the spectre of local government reorganisation. Members will be aware that the Welsh Government is currently seeking a response to the White Paper "Reforming Local Government". Expressions of interest for voluntary mergers are required by November 2014 with fully developed submissions needed by June 2015. In the meantime it is understood that an alternative reorganisation model has been drafted by the Welsh Local Government Association (WLGA) and is currently being considered.

16.      The Council clearly has to have regard to the "Williams" debate as part of any consideration about future senior management arrangements. Equally it is important that the Council is not overly distracted by the issue (to the detriment of our own service critical priorities) and particularly given the potentially lengthy implementation timescales as set out in the above mentioned White Paper.

Progressing the Recruitment Process - options for consideration

17.      It is important for Council Members to be clear about the potential options for responding to the intended retirement of the current Managing Director and the potential senior management gap in both the short and the long term.

18.      A summary of the main options is set out below. It may be necessary to commission further work (and potentially external advice) on a number of the options in order to properly inform the decision of Council and to ensure that there is no conflict of interest for any officer of the Council.

Pursue an immediate "like for like" appointment

19.      A clear option for the Council would be to pursue immediate arrangements for recruitment to the current and combined post of Managing Director/Director of Resources. Such arrangements could be progressed from September onwards.

20.      This would have the benefit of providing certainty for the Council going forward and reducing the period where the Council is potentially without a Managing Director. It may be possible for an appointment to be secured by December 2014 (if internally recruited) or April 2015 (if an external appointment is made).

21.      Members should be aware that the post will now need to be subject to external advertisement given the requirements of the new Local Authorities (Standing Orders) (Wales) (Amendment) Regulations 2014.

22.      Such an option would require the Council to formally confirm the establishment of the post on a substantive basis (rather than the temporary basis on which it currently rests) but without significant change to the terms and conditions of service.

23.      In pursuing this approach Members would also need to consider formally re-allocating the statutory role of Section 151 Officer - a responsibility which is a substantive part of the role of the Director of Resources but temporarily assigned to the Head of Finance on an honorarium basis up to 31st July 2015.

24.      As indicated this approach would provide a degree of certainty for the Council going forward and particularly if there is to be a continuing and lengthy period of uncertainty in relation to the outcomes of the Williams Review. Members will be aware that the lead in period for local government reorganisation could be up to 2020 and beyond.

25.      An early recruitment campaign would, however limit the opportunity for the Council to properly consider its options in relation to the Welsh Government's White Paper and any emerging considerations and issues from the WLGA's alternative paper. As previously indicated the deadline for submitting expressions of interest in relation to voluntary mergers is November 2014.

Delay the recruitment process pending a short term structural review

26.      Members will be aware that a decision to progress an early recruitment campaign may also restrict the opportunity of taking a more considered view of the Council's future senior management needs.

27.      In view of the above, Council may wish to consider alternative options in relation to the future senior management arrangements before committing to a specific way forward (and recruitment campaign).

28.      It will be noted that the decision to combine the role of Managing Director and Director of Resources was a pragmatic decision taken in April 2012 to ensure leadership stability over a three year period.

29.      It cannot be assumed that a straightforward "like for like" appointment would necessarily be the right decision for the Council going forward, or indeed a post that would be easy to fill. The combined requirement for a Managing Director with specific experience in managing corporate resources will potentially limit the field of applicants for the post (whether internally or externally).

30.      For this reason it may be prudent to commission a review of potential senior management structural arrangements over the next few months in order that a considered decision can be taken. This would mean effectively bringing forward the review that was originally scheduled for July 2015.

31.      Such a review would provide the opportunity to reflect on the experience of the last two years and the challenges of the future. It would need to address the difficult balance between ensuring management capacity and not increasing management costs.

32.      Such options could for example, include the establishment of the Managing Director role as a discrete role, separate from the duties undertaken by the Director of Resources. The responsibilities of the latter role would need to be reviewed in the context of capacity within the Resources Directorate Management team.

33.      Consideration of options would also need to include allocation of responsibility for the Council's Returning Officer, currently undertaken by the Managing Director and important given the UK General Elections in May 2015.

34.      There are potential conflicts of interest to be considered in relation to the provision of advice and guidance on future senior management structural options. For this reason Council may wish to commission independent advice. This could be completed over the autumn period and in readiness for a further report to Council on the 17th December 2014 and a recruitment campaign in January 2015.

35.      Such an approach may serve to potentially widen the field of applicants for the role of Managing Director from both inside and outside the Council.  A delay until the New Year would also provide the opportunity of assessing and responding to the current proposals contained within the Welsh Government's White Paper.

36.      The pursuit of this option would mean that there would be a short period where the Council has no substantive Managing Director or Director of Resources. It would be necessary to ensure that effective interim arrangements are in place and that there is no loss of momentum in relation to the Council's work programme as referred to in paragraphs 10-16.

Delay the recruitment process pending clarity on external factors

37.      A further option would be to delay any decision about the Council's future senior management structure arrangements until there is greater clarity in relation to local government re-organisation.

38.      Members will be aware that the Welsh Government intends to publish a legislative bill in January 2015 to deal with the position on voluntary mergers, boundary commission issues, potential incentives for voluntary mergers and other preparatory matters. A second bill is then planned for the autumn of 2015 which will set out the position in relation to the preparation for other mergers.

39.      There is little doubt that that local government re-organisation will have a direct or indirect impact on the senior management structure of all Welsh authorities. It is also true that greater clarity now would potentially influence the approach taken in relation to the review of this Council's senior management arrangements including the role of Managing Director.

40.      The main concern however is timing. The Council need to be able to plan now in order to attend to the increasingly challenging service and financial pressures. The reality is that the journey of wider local government reorganisation is going to be a long one and the chance of significantly greater clarity over the next 6 months is slim.

41.      A delay in dealing with the senior management issue much beyond the end of the financial year will not therefore be helpful in progressing current priorities.  The Council's options in relation to this matter may also begin to be restricted as a result of the emerging details contained in next year's legislative Bills.

Measures to cover role of Head of Paid Service on temporary basis

42.      Regardless of the options as set out above, interim arrangements will need to be put in place to cover the role of Head of Paid Service from November 2014 onwards. The length of the interim period will vary dependent on which option is chosen. 

43.      Such arrangements will be important to ensure that there is continuity of leadership and momentum during a challenging period and the work as set out in paragraphs 10 to 16 is progressed effectively.

44.      There are a number of ways such arrangements could be progressed including the appointment of an external interim manager, the setting up of internal cover arrangements (subject to the restrictions as set out in paragraph 50 below) or the short term retention of the current post holder on a flexible retirement arrangement.

Interim management arrangements - internal or external

45.      The appointment of an external interim manager could be explored relatively quickly and if successful would help to maintain some leadership continuity beyond the end of November. Such an appointment will not however be easily achieved.  

46.      Members will be aware of the potential costs of such a measure and the dangers of not achieving the right corporate and cultural 'fit' during a short interim period.

47.      Consideration will also need to be given to the delay in performance (and loss of productivity) during the inevitable "running-in" period of an interim manager and the cost effectiveness of such an appointment for such a potentially short period.

48.      The estimated cost of interim management is covered in paragraph 84 below.        

49.      The setting up of internal cover arrangements for the Managing Director/Director of Resources is a consideration and particularly given the corporate commitment and range of expertise of the current Corporate Management Team.

50.      There are already Deputy Managing Director arrangements in place to cover the short term absences of the current post holder. The statutory responsibility for Head of Paid Service cannot, however be designated on a "rotating basis" and would need to be allocated to one officer pending a substantive appointment.

51.      It is suggested that internal cover arrangements would be a consideration if the period of cover was relatively short as would possibly be the case if pursuing the "like for like" option at paragraphs 19 to 25.

52.      In any other circumstance, it is suggested that such an 'internal cover' approach would raise significant management capacity issues given the pressures on current Corporate Management Team members and the need to balance day to day service pressures with the corporate demands as referred to in paragraphs 10 to 16.

53.      An alternative consideration would be to retain the services of the current post holder until 31st March 2015 on the basis of a flexible retirement arrangement. This has been suggested by the Leader and agreed as a possibility with the current Managing Director (subject to the approval of Council). The detail of this option is set out below.

Consideration of a phased and flexible retirement arrangement

54.      Members will be aware that flexible retirement is a facility accessible by all employees as part of the Local Government Pension Scheme (LGPS) whereby staff aged between 55 and 75 are able to access their pension and continue in their employment. Such an arrangement must, however require a reduction in working hours or grade and have operational or financial benefits.

55.      This Council have supported a range of applications in the past. Such applications have generally been approved as a means of retaining key staff who may otherwise have retired from service and a way of ensuring a managed transition and transfer of knowledge prior to a known retirement date.

56.      Approval of such a proposal in the case of the current Managing Director would require a reduction in contracted weekly hours of at least 40% with a commensurate reduction in pay. This is the minimum reduction permissible under the Council's Pensions Discretions Policy. A lesser reduction would be permissible under the LGPS Regulations but would require a change in the Council's Policy.

57.      The post holder would incur a salary reduction but would be entitled to access to full pension benefits from the date of the flexible retirement. The LGPS regulations would mean that there would be no reduction of pension benefits for the postholder and as such there would be a small actuarial strain cost for the Council. This would be broadly offset by salary savings during the period (see paragraph 80).

58.      Applications for flexible retirement can only be considered where there is a financial or operational benefit for the Council and would normally need to be supported by the Head of Human Resources and Head of Finance prior to submission to the Early Retirement/Redundancy Committee. In this case it would obviously be necessary to seek the approval of Council in the first instance.

59.      Such an option would have operational benefits for the Council whilst remaining broadly cost neutral. It would provide continuity of leadership during a critical period and ensure the progression of the key priorities as set out in paragraphs 10 to 16.

60.      The arrangement would also provide important flexibility for the Council during what would be a challenging transitional period.  It is an arrangement that would persist long enough to ensure hand-over arrangements with a new Head of Paid Service whilst also providing a month by month "extension" contingency if the Council is not in a position to make an appointment at that time.

61.      There would be no "running in" period for the current postholder or a loss of pace and momentum. Such an arrangement is therefore considered to be more cost effective than, for example than an external interim manager engaged for a short period.

62.      Members will also note that the arrangement would enable the current post holder to offer advice and support in relation to the review of the senior management structure as proposed in paragraphs 26 to 36 above. Unlike all other members of the Corporate Management Team she would not, at that stage be conflicted and would be able to offer independent and valuable support.

63.      An important consideration in relation to the above is the potential start date of any flexible retirement arrangement. If approved, such arrangements could commence on the 1st October 2014 (the first month following any decision of Council on this issue). Although this would serve to increase the actuarial strain costs for the Council (given the earlier release of pension benefits) such costs would be offset by higher salary and overhead savings over a longer period.

64.      Given the challenges as set out in paragraphs 10 to 16 it is, however suggested that the retention of the Managing Director on a full time basis up to 24th November 2014 would be of greater benefit for the Council and help to reduce concerns about management capacity during what will be a challenging transitional period. Although the actuarial strain costs would be lower at that point, the salary and overhead savings would also be less (given the reduced period of flexible retirement).

65.      The marginal costs of the options set out in paragraphs 63 and 64 are covered in the Resources Section (see paragraphs 79 to 86) and are compared with the costs of employing an external interim manager for the same period.

66.      On the basis of the above, it is proposed that a flexible retirement arrangement for the postholder commences on 25th November 2014, on the basis of 22 hours a week and up to 31st March 2015. It is also proposed that the arrangement is extended as necessary on a month by month basis from 1st April 2015 subject to the agreement of the postholder and in the circumstances as referred to in paragraph 60 above. It is proposed that such extensions are authorised under the delegated authority of the Head of Human Resources in consultation with the Leader of the Council.

67.      Flexible retirement is not, however a long term and sustainable solution and can only be viewed as a transitional measure. The post holder has indicated her wish to retire and it will be the responsibility of the Council to focus on arrangements to seek a replacement. If supported, the arrangement would require some re-prioritisation of the post holder's workload and appropriate handover of activities.

68.      It is for this reason that it is suggested that any arrangement should not initially extend beyond 31st March 2015 unless on a "month by month" basis in the circumstances as set out in paragraph 60 above.

69.      An alternative consideration would be to delay any decision about interim cover arrangements (including that relating to flexible retirement) until the response to any recruitment campaign is known. This may support the business case for any cover arrangements or conversely render them unnecessary. This approach has merit but would only be appropriate if considering the "like for like" option at paragraphs 19 to 25). The post holder would have already left the authority in the scenarios set out in the other two options (at paragraphs 26 to 36 and 37 to 41).

Summary

70.      The main consideration for the Council will be to put in place arrangements to ensure continued and strong leadership going forward and the progression of key service and organisational transformation projects over the coming months.

71.      The retirement of the Managing Director will clearly increase the challenges ahead. It is important that all options in relation to the Council's senior management arrangements are considered appropriately.

72.      This will need to be done in the light of experiences over the last two years, with a view to future service delivery challenges and with due regard to the prospect of local government reorganisation and other external factors.

73.      It is suggested that the above is undertaken in accordance with the options set out in paragraphs 26 to 36 and a further report is submitted for consideration by Council at the meeting on the 17th December 2014.

74.      It is also suggested that the complementary interim arrangements (in relation to the flexible retirement of the postholder) are considered and approved as set out in paragraphs 54 to 68 above.

75.      If the proposed arrangements for flexible retirement are not approved then Council will be requested to approve the waiving of the last month of the postholder's contractual notice period.

76.      As members are aware the current honorarium period for the role of Managing Director is due to end on 31st July 2015 unless terminable beforehand by six months' notice. The postholder's intended retirement is based on a requested leaving date of 24th November 2014, some one month short of the contracted period.

77.      It is suggested that the waiving of the last month of the notice period is more than reasonable given the post holder's 41 years' service record within local government, her contribution to this Council since her appointment in 1992 and her contribution to the leadership of the Council since her appointment as Director of Finance, ICT and Property in 2000.

78.      Members will also be aware of the particular contribution the postholder has made in the role of Managing Director/Director of Resources since the senior management reduction exercise in 2012 and her personal commitment to making a success of the role in increasingly challenging circumstances.

Resource Implications (Financial and Employment)

79.      The proposals set out in paragraphs 54 to 68 of this report would result in a marginal cost to the Council during the flexible retirement period if comparing against the full time cost of the current postholder (during the same period).

80.      Such costs would vary depending on the length of the flexible retirement period. If the arrangement starts on the 1st October 2014 then the overall cost would be £3,889. If the arrangement is delayed until 25th November 2014 (the day after the postholder's requested retirement date) then the cost would be £5,710. Details as follows:-

                          A

       B

      C

     D

        E

          F

Period of Flexible
Retirement

Part-time
salary
(£) *

Pension
Strain
(£)

Total
(B + C)
(£) *

 

Full-time
salary
(£) *

Difference
(E - D)
(£) *

01-10-14 -  31-03-15

50,497

39,065

89,562

85,673

3,889

25-11-14 -  31-03-15

35,565

30,076

65,641

59,931

5,710

* includes on-costs for national insurance and pensions contributions

 

81.      Members will note that the later the start date of the flexible retirement period then the lower the actuarial strain costs (as shown in column C). The converse is true in relation to the savings in salary and on-costs.

82.      For every month that the flexible retirement arrangement is extended beyond
31st March 2015 there would be a financial saving of £5,862. Such an extension would only be considered in the circumstances set out in paragraph 60 in the report.

83.      The Managing Director has, however asked to leave on the 24th November and as such any comparisons need to be made against the costs of other interim arrangements during the period 25th November 2014 to 31st March 2015.

84.      The cost of employing an external interim manager over a four month period is estimated to be approximately £65,000 based on a three-day work pattern (less         
annual leave) and an estimated daily rate of £1,270. The daily rate is based on information available from the Institute of Interim Management.  The above figures also take account of the inevitable "running in" costs of an interim manager and the associated loss of productivity.

85.      The costs of independent advice on senior management structures (see paragraphs 30 to 34) and subsequent recruitment costs will also be required but cannot be estimated at this time.

86.      Members will also be aware that the current arrangements for the Managing Director are time limited to July 2015 and scheduled for review at that stage. A restructuring exercise leading to the deletion of the substantive role of Director of Resources may present a potential redundancy situation at that time. This will be a consideration for Members in considering the proposals set out in this report.

Sustainability and Climate Change Implications

87.      There are no sustainability and climate change implications arising from this report.

Legal Implications (to Include Human Rights Implications)

88.      The Council has a statutory responsibility to designate one of their officers as the Head of Paid Service and requires Council to ensure that such officer is subject to reasonable terms and conditions as Council sees fit. The recommendations within this report seek to ensure that this statutory responsibility is fulfilled.

89.      The provisions relating to a proposed flexible retirement arrangement are compliant with LGPS Regulations and the Council's own discretionary powers policy.

90.      The approval of the proposals would require a variation to the contract of the
Managing Director's existing honorarium contract (in terms of the length of the remaining contract and the weekly working hours).

91.      The contractual notice requirement in relation to the role of Managing Director is set out in paragraph 76 above together with the suggested rationale for waiving part of that notice period should the flexible retirement arrangements not be approved.

92.      The proposals set out in this report raise a number of potential conflicts of interest for members of the Council's Corporate Management Team. In view of this, external legal advice has been sought and received on the employment law implications and related matters. All aspects of such advice have been taken into account in finalising the report. The advising legal representative will also be in attendance at the Council meeting should there be any questions or points of required clarification.

93.      The report has also been shared and discussed with officers from the Wales Audit Office who have indicated that they are content with the proposals and underlying business case and rationale.

Crime and Disorder Implications

94.      There are no crime and disorder implications directly arising from this report.

Equal Opportunities Implications (to include Welsh Language issues)

95.      Any recruitment process resulting from proposals in this report would be managed in accordance with the Council's equality proofed recruitment and selection policy and the requirements of the Local Authorities (Standing Orders) (Wales) (Amendment) Regulations 2014.         

Corporate/Service Objectives

96.      The proposals within this report have been designed to help meet the financial objectives as set out in the Medium Term Financial Plan and to ensure a sustainable management structure for the Council.

Policy Framework and Budget

97.      This is a matter for consideration by Council.

Consultation (including Ward Member Consultation)

98.      Consultation has taken place with all Cabinet Members, Group Leaders, Members
of the Corporate Management Team and with the recognised trade unions

Relevant Scrutiny Committee

99.      Corporate Resources.

Background Papers

Council Report 16th April 2012.

 

Officers Consulted

Corporate Management Team

 

Responsible Officer:

Councillor Neil Moore - Leader of the Council