Institute of Directors annual convention 2019: Permanent Secretary speech

Thank you, Malcolm.

It is over four years since I took up this post. How time flies… 

I remember during my first year how regularly and passionately I spoke about living - and leading - in a VUCA world. Volatile, Uncertain, Complex and Ambiguous. Indeed this was to the point when a member of staff wrote on the bottom of one of my internal blogs – “why doesn’t the Perm Sec just VUCA off"... We encourage open feedback in the SG… 

However - much as I might have thought that life then felt VUCA – how wrong I was! These are the VUCA times! Indeed, ‘uncertain’ may feel like a bit of an understatement at the moment – we civil servants aren’t known for our exaggeration. But suffice to say each and every one of us is leading in a fast-moving and uncertain world. Change is constant and diverse. In fact change will never be as slow as it is today. There is massive technological innovation. There are major geo-political shifts, tensions and events – in the US, in China, in Russia and beyond.  

And of course, there is Brexit. We in Government are pretty familiar with challenging circumstances. (I recall Mr Swinney Deputy First Minister once describing the Fiscal Framework negotiations with the UK Government as a walk in the park compared with negotiating the tooth fairy rate with his son…)

But Brexit has been described by many as the biggest challenge facing the UK since WWII. The twists and turns continue and we are not yet clear on which of a range of possible scenarios will prevail. The first December general election in almost 100 years may not in itself bring much clarity. And we know that devolution remains a journey, not a destination... I appreciate the business community is feeling the bite of this ongoing uncertainty – and if it is any consolation, so is the civil service. But we continue to be as prepared as we can be, for a range of outcomes and their impact on, and implications for, Scotland.  

So how do we lead through all this change and uncertainty? Well let me start by ditching a few myths. 

Firstly, that business and government leaders are somehow at cross purposes - scowling over regulation, disagreeing on ‘PC policies’ and each claiming the other doesn’t understand.  

In fact, I believe our changing society, the rise of pressing global issues, activism, and trends require us, more than ever, to work together - to be values-led, find creative solutions to our problems, listen to our customers and communicate with authenticity. 

The second myth is that turbulent times require what’s frequently called ‘bold leadership’. We have seen some examples of that in the recent weeks... 

The traditional view of bold leadership is that we can protect, we can steer and we can control. This simply isn’t feasible, far less desirable in the context and climate in which we now live. 

As a senior leader, I don’t serve the Scottish Government, or indeed Scotland’s communities by pretending we can protect them from change. We can help them prepare for change but we can’t hold it back. 

No, a different kind of leadership is now required – one that doesn’t pretend to know all the answers, that is comfortable with ambiguity and is capable of responding in the moment. Leadership that is inclusive, cooperative, agile and open.  

We need to be ready to challenge ourselves and our people – collectively and individually -  and be rigorous about how we understand and measure progress. 

That takes me onto the third myth - the kind of talent and  leadership style we need to nurture in our institutions and organisations.

In many organisations I see people who are terrific technical contributors but who find the step up to broader leadership roles a huge challenge. They believe that a more senior role simply requires more intense – uber - versions of their current leadership style and role. That better and more detailed knowledge of their specialism will suffice.   

But we know this isn’t the case - to be effective at this next level leaders need to be prepared to find a new basis for their contribution – one that allows space for others, that makes connections and creates the right conditions, one that hears all the voices, one which means embracing uncertainty but nevertheless presents a compelling vision of the future and the pathway to realising this.  

For Scotland, this leadership takes place in the context of the Scottish Government’s  National Performance Framework – our ‘North Star’ - which embeds a broader understanding of economic success by having a wider array of measures to consider our progress. And it demands a different style of leadership. 

Recently I was speaking at the OECD in Paris, who describe the Scottish Government’s National Performance Framework as perhaps “the most developed outcomes-based approach by government anywhere in the world”. But we are not complacent - we know we have more to do in telling and selling its story, and ensuring it really ‘bites’ on decisions about our public services – short and longer term.  

It was Geoff Mulgan, Chief Executive of the think tank NESTA, who said that governments everywhere tend to overestimate what can be achieved in the short-term and underestimate the depth of change they can secure in the longer term. Sir John Elvidge, if I may refer to him as the midwife to the National Performance Framework some 10 years ago – and here tonight, who understood this very well. The Framework supports long term political commitments in a short term political world.

In his work ‘The Theory of Moral Sentiments’ Adam Smith argued that “governments are valued only in proportion as they tend to promote the happiness of those who live under them.”

Smith was right. But, despite this, GDP has too often come to be used as the primary measure by which we judge a nation’s success.

GDP measures the wealth of a nation, but it says nothing about how that wealth is distributed. It measures the output of work, but says nothing about whether that work is fulfilling. It places a value on the consumption of illegal drugs but not on unpaid care. And activities which boost GDP in the short-term, can make the planet uninhabitable in the long term.  

Of course growth is important - we need competitive and productive businesses - but it cannot be the sole metric of a country’s success. 

And that is why the Scottish Government is also now collaborating with the governments of New Zealand and Iceland in leading work on the wellbeing economy.

And it’s why the National Performance Framework has the more traditional economic measures of success alongside many others. This gives us a broad picture of Scotland’s progress and our collective wellbeing. We measure quality of care experience, the happiness of our children and access to green and blue space among the 81 indicators that show progress on the National Outcomes.

And the National Outcomes themselves show what matters to Scotland. As well as elements you’d expect to see - like a globally competitive economy and protection of the environment - we have love, culture and openness.

This framework is all about partnership and collective leadership. It sets out a common purpose, values and National Outcomes for Scotland. It gives long-term, strategic direction, and is  underpinned in law. So, whichever political party or parties is in power in the future, the National Performance Framework applies. Quite simply -  it is how we do government in Scotland.

And indeed it is for all of Scotland, not just for government. This matters. It matters because whatever your politics, and whatever your role in Scotland’s story – there is a common language, and ambition for our country as a whole. It can be – and is – a uniting force. 

Let me give you a couple of practical examples of the Framework philosophy in action.

The first of these is when the Scottish Government, local government and our Enterprise Agency were working with Michelin to secure a future for the company’s site in Dundee. The Framework guided and informed how leaders from public and private sectors worked across organisational boundaries to the same ultimate end goals. A One Scotland approach.

The second example is in the design of our new social security system in Scotland. The underpinning legislation made clear that social security is a human right, an investment in our people and communities, that should contribute to reducing poverty. The National Performance Framework values – kindness, dignity and compassion – are reflected in the way people are treated and services delivered. These are not just warm words, they are guiding hundreds of millions of pounds of investment in Scotland. It is estimated that by 2025 - Social Security Scotland will support 1.8 million children and adults.

This broader definition of success is also evident in our economic strategy, which gives equal importance to tackling inequality, and increasing competitiveness. 

Because there is a growing body of evidence from the OECD, World Bank and IMF that the delivery of sustainable growth and the reduction of long-standing inequalities are reinforcing, not competing objectives.

Fairness and removing inequality are key to Scotland’s economic success. And I come back to the One Scotland approach. If as leaders we do nothing, the cost of social failure will be borne by all of society - including business. 

I can illustrate the links between the National Performance Framework, our wellbeing agenda, and the economic strategy, through three key SG policies.

The first is the creation of a new Scottish National Investment Bank. The new Bank will be a cornerstone of Scotland’s economy and will start investing in businesses and communities next year. It will help to address major societal challenges in order to achieve transformative and inclusive change, and provide patient finance for ambitious companies and important infrastructure projects. All of this will be aligned with our National Performance Framework. 

And the Bank is directly linked to the second policy area: the global climate emergency - the single biggest challenge we all face. Transition to a net zero economy will be one of the Bank’s key missions. 

The Governor of the Bank of England, Mark Carney gave a stark warning recently that companies and industries that ignore climate change will go bankrupt. Our response will need extensive changes across our economy. There are opportunities that Scotland must take.

By being at the forefront of a move to a net zero emissions economy, Scotland can benefit from the emerging markets for low carbon skills, solutions and technologies, building on our existing strengths. But our transition cannot only be about meeting our climate change targets. It is an opportunity to help shape a more equitable and inclusive, growing economy. The transition to net-zero must be just, with opportunities for all, and no community left behind.  

And that leads me to the third policy - Fair Work. Evidence tells us that businesses who treat their employees fairly can experience improved productivity, performance, and innovation. That is why we are prioritising our Fair Work agenda - to embed fairer work practices in workplaces across the country.

We must ensure that growth is sustainable and leads to increased wellbeing for all the people of Scotland no matter where they live, or who they are. This means a country that delivers more, better quality jobs, jobs that are fulfilling and contribute to individual wellbeing and our economy. Well paid, secure employment not only offers individuals a route out of poverty, but enables us to sustain our finances and deliver better services.    

None of this can or will be achieved by government alone. We want – and need - to listen to the voice of business to work in partnership, to explore, promote and support other policies and actions to tackle obstacles and capture competitive opportunities. Indeed – with Brexit – the quality of our partnership has never been more important.  

So what is your leadership role here? I have two suggestions. 

One  is to be a part of the drive for both equality and fairness that boosts productivity and competitiveness through the Scottish Business Pledge.  

The Pledge is a partnership between employers, employees and government, and brings together elements of inclusive, Fair Work and business practices to demonstrate to companies across Scotland how they can support sustainable inclusive growth.

It includes 4 key mandatory elements: 

• paying the real living wage
• acting to address the gender pay gap
• avoiding inappropriate use of zero hours contracts, and, most recently
• environmental impact

My second suggestion is more of a personal challenge. 

We need to prioritise our shared interest in developing the quality of Scotland’s leadership, and in so doing, create a resilient and inclusive talent pipeline, that truly reflects Scotland and its diverse communities. As leaders, it is our job – no, is our responsibility - to source, attract and invest in the widest of skillsets, of experience and of perspectives in order to grow our organisations. So are you the leader who is publicly, proactively and tenaciously pursuing a diverse and inclusive workforce? If not, why not? Because as we all know - the standard you walk past is the standard you set. Or, more pithily, ‘what you permit, you promote’.

Earlier on I referred to the unifying force of the National Performance Framework. And, I believe, Scotland already has a natural advantage here. Because when I visit different and  diverse parts of this country – and I do, regularly – I am struck by how people from very different places and spaces simply want to do their best for Scotland. That is such a very precious asset. 

And one we can ill afford to squander. 

So let me summarise in three points.

• the nature, role and impact of Scotland’s senior leaders in business and government has never been more important
• our leadership partnership has the potential to make a real difference, even in these VUCA times
• together we can and will build a resilient, economically sustainable, successful and, crucially, inclusive Scotland

Why ever would we not?