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QUALITY BREAK5 into 1 will go
A study in regulatory convergence
26 April 2007
Ofcom
The Office of Communications
A case study on public sector mergers and regulatory structures
Setting up Ofcom
The legacy bodies Chronology Implementation Key conclusions Questions and discussion
The legacy bodies
Oftel - telecoms Radiocommunications Agency – spectrum ITC – commercial television Radio Authority – commercial/independent
radio BSC – standards and fairness
Chronology
1995 Demos – “Communicating Britain’s Future”2000 EC Communications Directives (July 2003)December 2000 White Paper - “A New Future for
Communications”March 2002 – Ofcom Act, Royal AssentMay 2002 – Draft Communications Act and pre-
legislative scrutinyJuly 2003 – Communications Act, Royal Assent29 December 2003 – vesting date for Ofcom
Ofcom
Office of Communications Citizens and/or consumers Economic and competition regulator Content regulator Delivering the UK’s digital future in communications Stimulate dynamic markets:
– Telecommunications– Radio spectrum– Television– Radio
Implementation
Politics and legislation Finance Structure and scope Transition project Senior recruitment and culture Governance Staffing Systems and Operations Property Public face
Politics and legislation
Cross-departmental – ministerial commitment – core team of officials
Two-stage legislative process – with a forcing function
Firm decisions on legacy issues Early decision on governance model HR issues to inform legislative process Establish principles of parliamentary accountability
Finance - 1
Different legacy finance regimes Departments’ input via HMT Early commitment from Government to finance the
new body – working capital – financial memorandum Early financial arrangements:
– wide range of skills in the early finance team– appoint interim FD– financial modelling including cost allocations– identify financial skills in advance of recruitment
Provision for extensive dual running
Finance - 2
Change management/due diligence standards below private sector norm – professional advice
Establish independence via audit committee Understand crucial IS role for payroll and other HR Establish early links with NAO Control/scrutiny of legacy bodies
– changes in assets and liabilities– commitments– expenditure
Set clear budget targets from early in the project
Structure and scope
New structure sends a key signal – design without obligations to legacy bodies – opportunity for radical review
Minimise potential for turf wars Plan Nations and Regions strategy with vigour –
avoid ‘branch office’ syndrome Role of regulator in policy-making Ofcom model – exec/non-exec Annual plan process
Transition project - 1
Those running the new body need a big say in how the transition is managed
Impact on legacy bodies– timescale– cooperation– work in progress – risk for key personnel in legacy bodies
Heavy-hitting central project team – Professional project management– expertise in finance, HR, IT, property – locate away from legacy bodies
Transition project - 2
External consultants– Independence and expertise– Scoping project– Process owned clearly at a senior level– Over-arching consultancy less relevant for implementation
and delivery, and very expensive Launch plan – to drive the process Communication – clear – crucial Arrangements for continuing projects and regulatory
activity – taking on tasks before vesting
Senior recruitment and culture
CEO appointment sets the tone High quality staff from outside public sector
– pay implications– setting the style– matching/exceeding industry capacities– High expectations of quality and volume of work
Coherence in central Board Role of non-executive members Internal systems to be proportionate to size
Governance
Agree formal memorandum with legacy bodies Firmly locate where responsibility lies at each stage,
esp. financial Make timely, holistic decisions on governance
structure Agree governance issues early with new Board –
then put interim structures in place Appoint subsidiary Boards after Main Board and
executives Establish a formal diversity policy from earliest stage
Staffing - 1
Statutory considerations over transfers condition all subsequent work – avoid irreversible commitments
Implement early HR capacity – appoint HR director – good advisors
Legacy bodies’ HR teams are in a difficult position– may have different aims– provision of information– unwelcome commitments– avoid late changes affecting transfers– need for careful due diligence
Staffing - 2
Ensure early design of rewards package The new body to manage communication to
staffs Begin dialogue early with Cabinet Office for
civil service pensions Union recognition/arrangements/staff
representations will be time-consuming
Systems and Operations
IS considerations are another early priority Specialist consultancy/support is necessary, but
must be challenged and held accountable Seek to accelerate systems implementation – take
items off the critical path Seek common services solutions – commitments by
legacy bodies Provide for vigorous, skilled negotiation IS = business processes, not only technology
Property
There is symbolic importance in location decisions – making a statement about a new start
Avoid over-indulgence in selecting property – extensive research and cost analysis
One-stop-shop project management is effective and cost-efficient
Give early attention to disability issues and access Locate transition team into the new property Involve transferring staff in design and planning
Public face
Media attention will be intense long before actual existence – resource accordingly – Chair/Board at risk
Communications function needs to be up and running early, with agreed key messages and mission statements
Stakeholder consultation– as wide as possible– but a heavy workload, needing professional skills
New body to speak directly to legacy staffs, not the legacy bodies
Establish internal communications function, owned by new body rather than external consultants
Key conclusions - 1
Joined up legislative, departmental process essential Early decision crucial on what type of regulator Key management decisions will inevitably taken at a
very early stage Agreeing the ‘deal’ for recruitment is the pre-requisite
for populating the new body, requiring early appointment of HR director
Pensions are a complex and potential blocking issue Financial arrangements and good management need
to be in place from the start
Key conclusions - 2
Recruitment and reward for senior team was central to Ofcom’s style and effectiveness
Is policy making the proper role of a regulator? External consultancy and research are expensive
and difficult to control, but arguably essential at the early stage
Need to manage a wide range of sectors with potentially conflicting needs and issues
Public sector mergers need a ‘take-over code’ Communication, communication, communication…
Questions and discussion
