EXECUTIVE SUMMARY

Issue: The %age of Non-Executive Directors (NEDs) from minority ethnic backgrounds is less than the %age of UK Citizens having a minority ethnic background. 

New Policy:  For each new NED low risk opportunity, successful candidate is randomly appointed from a sifted pool of applicants meeting the criteria for the NED opportunity.

Deliverability: HIGH.

Benefits: %age of NEDs from minority ethnic backgrounds should increase thus delivering the Declaration on Government Reform. Process fully transparent.

Project Cost : £0.3M cost in FY24/25. 

BACKGROUND

Government and NAO has reviewed NED positions across UK Government Departments, Agencies and Arms Length Bodies.  At Government Department level, only 36% of NEDs are women and the Government Lead Non-Executives latest report [1] states “It is important that we are able to identify all dimensions of diversity, including ethnicity and disability. We are committed to introducing a robust data collection mechanism in readiness for future reports.”  Assuming that this initiative to collect robust data will not complete before 2025 then the current situation will not be known before 2026 when any under-representation of ethnic minority groups could then start to be addressed.

Ethnic minority groups are under-represented across the NED populations across Government Departments Agencies and Arms Length Bodies.  For example a recent NAO report [2] stated that the Cabinet Office had reported for 2021/22 that only 12% of all appointments and re-appointments went to candidates from an ethnic minority background.  Action is needed to improve the situation. A draft Strategic Outline Case (to HM Treasury 5 case model) has identified the following barriers faced by under represented groups:

Qualifications: Many NED advertisements demand qualifications which the majority of the UK population cannot meet, example: “educated to master’s degree level or equivalent”.

Restricting Fair and Open Competition: Many NED advertisements require prior experience of the advertising organisation or similar in the same field.  This prevents fair and open competition as the 99% of the UK population will not have work experience of the advertising organisation or similar organisations in the same field.

Previous NED experience: Most NED advertisements require previous board-level experience gained in an organisation of scale and complexity. This is a “Chicken and Egg” restriction preventing under-represented groups from applying as individuals would not have had previous opportunities to gain such experience even though after being appointed they could gain skills and knowledge through shadowing/mentoring.

Requiring previous senior management experience:  Many NED advertisements require (1) a record of change management, including embedding cultural change, gained at board or senior executive level in an organisation of similar size and/or (2) Experience of board membership in an organisation of similar size and complexity whether in the private, public or voluntary sectors.These “Chicken and Egg” restrictions prevent under-represented groups (especially younger candidates aged under 35) from applying as they would not hold senior management/board level experience, even though after being appointed they could gain skills and knowledge through shadowing/mentoring

Recruitment Costs : NED advertisements are often by organisations using recruitment/ executive search agencies to advertise the opportunity, sift candidates and carry out the recruitment process which incurs a cost of thousands of pounds per appointment.

REQUIREMENT : CRITICAL SUCCESS FACTORS

Requirement is for a best VfM solution which enables HM Government NED population to be representative of all UK Citizens.  Critical Success Factors are:

●        Strategic Fit: Increase %age of minority ethnic/disabled NEDs by 2030.

●        Deliverable: The option has a realistic likelihood of being delivered.

●        Value for Money: Avoid increases in NED appointment costs.

●        Value for Money.  Reduce NED appointment costs.

●        Be acceptable to taxpayers/citizens.

OPTIONS ASSESSED TO MEET THE REQUIREMENT

Guidance provided in the HM Treasury ‘Guide to Developing a Business Case’ (2018) was followed and a range of options were generated:

Business As Usual (Do Nothing) – Under this option HM Government Departments, Agencies and Arms Length bodies would continue to be able to carry out their own local processes for recruitment of NEDs. This would be informed by current initiatives underway to review the NED population and identify corrective actions needed.  This option was assessed, and indications show that it would not deliver the Critical Success Factors.

Do Minimum – All NED recruitments carried out by Central Government (Cabinet Office).  This option would incur additional costs and increased appointment delays compared to the Do Nothing option.  Option will not meet the requirement.

Novel – Randomly select new NED from a sifted pool of candidates for low risk NED opportunities (ie not critical positions).  Removing human assessment from those recruitments should ensure no favouritism or bias, reduce costs as no interviewing process and appointed candidates should reflect the ethnic breakdown of eligible candidate pool/s.  Following sifting against criteria (UK citizen, standard skills, not barred from holding a Director position, no convictions, no bankruptcy, not a member of a banned organisation, no relationship to organisation employees, not employed by the organisation etc), the names of eligible candidates (and their “lot” number) would be published on the organisations internet pages (see overleaf) before Saturdays National Lottery draw.  The “bonus” ball drawn would select the successful candidate. Process would be transparent and meet Government aspirations. The successful candidate would then be issued with their letter of appointment and join the relevant Department Agency/ALB within 60 days of the original advertisement and then attend 30 days training/mentoring/shadowing.

OPTIONS ANALYSIS

Analysis carried out as part of the draft Strategic Outline Case (SOC) shows that the Novel option is best placed to meet Critical Success Factors while delivering cost savings.

INDICATIVE KEY DATES FOR IMPLEMENTATION STRATEGY

Apr 24 - May 24  : SOC submitted to the Cabinet Office.

May 24 - Jun 24  : Cabinet Office approves SOC.

Jul 24   - Aug 24 : Small NED recruitment policy team write Outline Business Case (OBC), led by an interim temporary Director.  Cabinet Office instructs all Departments/ Agencies/ALBs to send all NED position details to NED recruitment policy team.

Sep 24 - Nov 24  : OBC completed and OBC submitted to Cabinet Office.

Nov 24 - Dec 24 : OBC approved.  NED recruitment process paper written and issued to all Department/Agencies/Arms Length Bodies for comment and approval

Feb 25 - Feb 25 :  Full Business Case (FBC) written and submitted.

Mar 25 - Mar 25 :  Cabinet Office approves FBC.  Interim Director ceased.

Apr 25 onwards : NED appointments carried out in accordance with NED recruitment process paper. Cabinet Office audits Government Departments, Agencies and Arms Length Bodies to ensure appointments carried out in accordance with the new NED recruitment process and that the NED ethnic population represents UK ethnicity statistics.

Number of Candidates

Bonus Ball

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

1

A

A

A

A

A

A

A

A

A

A

A

A

A

A

A

A

A

A

A

Example

2

NHS XXX Trust - NED competition

3

Number of eligible candidates is 10

4

B

5

B

B

B

B

B

Name

Assigned to

6

B

B

B

A Yoghurt

A

7

B

B

C

T Law

B

8

B

C

D Kettle

C

9

B

C

C

C

C

D Orange

D

10

B

C

C

D

L Coriander

E

11

B

C

D

A Beetroot

F

12

D

D

D

A Turnip

G

13

B

C

C

D

E

A Carrot

H

14

D

E

G Pea

I

15

C

D

E

Z Sprout

J

16

B

C

D

E

E

F

17

E

F

Bonus Ball drawn is Number 12

18

C

D

E

F

19

D

E

F

F

G

Successful is B = T Law.

(as for 10 candidates, Bonus No 12 fell between numbers 7 and 12 which are assigned to Candidate B)

20

G

21

B

C

E

F

G

22

D

F

G

H

23

D

E

G

H

24

F

H

25

C

E

G

H

I

26

D

F

G

I

27

H

I

28

E

F

G

J

29

H

I

J

30

I

J

31

B

C

D

E

F

G

H

K

32

K

33

G

H

I

J

K

34

F

J

L

35

E

I

L

36

H

K

L

37

D

G

I

J

M

38

F

H

K

M

39

J

L

M

40

G

N

41

C

E

I

K

N

42

J

L

M

N

43

F

H

I

K

O

44

O

45

G

L

M

N

O

46

D

H

J

K

P

47

L

P

48

J

O

P

49

E

I

M

N

Q

50

Q

51

F

G

K

L

M

52

H

O

P

Q

R

53

I

N

R

54

K

55

J

M

N

S

56

L

P

Q

R

S

57

O

58

T

59