Making the transition from the public sector to a career in governance is becoming more commonplace as would-be directors search for opportunities to use their skills. Tony Featherstone reports.

    As a former top public servant, Peter Shergold AC FAICD recalls working on issues from the sublime to the ridiculous, that changed by the hour, as well as having to consider perspectives that ranged from far-left to far-right politics and were sometimes skewed by vested interests.

    Shergold’s long career in the public service, which culminated as secretary of the Department of Prime Minister and Cabinet (2003 – 2008), prepared him for a transition to corporate governance, but not for reasons many governance observers would expect.

    Shergold says a capacity for intellectual flexibility is the biggest asset former public servants, particularly those who held senior roles in central agencies, bring to boards. “You get very good at moving from one issue to the next, across diverse areas, when you run a big government department,” he says. “You learn to allocate your time carefully, focus intently on the issue at hand, and think quickly because issues are often overtaken by the day’s events.”

    Shergold is among the highest-profile federal public servants who have successfully transitioned to academic, charity and listed-company governance. He is chancellor of Western Sydney University, chair of Opal Aged Care, and a non-executive director of AMP and Corrs Chambers Westgarth. He also sits on not-for-profit (NFP) and government enterprise boards.

    Shergold’s fellow public service governance alumnus include Ken Henry AC, the former secretary of the Department of Treasury and now chairman of National Australia Bank and a non-executive director of the ASX. Henry achieved a coveted chairmanship of a big-four bank within five years of leaving the public service, such was his standing in industry. Other former public servants who have become in-demand directors include Lisa Paul AO FAICD, a secretary of the Department of Education and Training, who is a now director of listed education provider Navitas and Social Ventures Australia.

    Dr Ian Watt AO has built a strong governance portfolio since leaving his role as secretary of the Department of Prime Minister and Cabinet, and head of the Australian Public Service in 2014. Watt chairs the defence technology group BAE Systems Australia and serves on the boards of Citigroup, Smartgroup Corporation, the Grattan Institute, the Committee for Economic Development of Australia (CEDA), and O’Connell Street Associates.

    These and other former public service chiefs have followed in the footsteps of government mandarins such as Ted Evans MAICD (former Westpac Banking Corporation chair), Max Moore-Wilton (former Sydney Airport chair) and the late Ashton Calvert (former Rio Tinto director).

    Former Reserve Bank of Australia (RBA) governors have also built governance careers. Bernie Fraser has had several directorships of industry superannuation funds and banks, and Ian Macfarlane AC is an ANZ Banking Group director and a former Woolworths and Leighton Holdings director. Glenn Stevens AC MAICD, current RBA governor, is expected to be in demand in corporate Australia when he leaves the bank in September.

    In demand

    The contributions of current and former public servants to the NFP sector, while not as prominent as those on ASX-listed company boards, is equally important. Executive search firms say public servants are in demand on NFP boards for their skill in helping organisations understand growing regulatory and funding pressures.

    More listed-company boards are expected to recruit former senior public servants this decade. Their deep understanding of public policy formation and government, and professional networks at federal or state level, add to board diversity. Recruiting directors with extensive government experience has merit. Most Australian boards are stacked with directors from industry. Unlike in the US, it is still rare for Australian executives to move between business, academia, politics or the public service, even though there is much to gain from such cross-fertilisation of experience.

    Shergold says boards that view senior public servants as “door openers” in Canberra, or choose them only for their government expertise, are missing an opportunity. “Clearly a long career in the public service equips one with strong knowledge of how public policy and budgets are constructed, and the inner workings of government,” he says. “These are valuable skills for any board, but ex-public servants can make a much broader contribution to an organisation’s governance and strategy.”

    Experienced public servants, says Shergold, are used to advising their minister and working with a range of stakeholders in a bureaucracy. “Good secretaries provide frank and fearless advice to their department’s minister, who ultimately decides on key issues. Good boards provide strategic advice to the CEO, but they do not run the organisation.”

    An ability to work behind the scenes is another strength of public servants, says Shergold. “You learn about the power of invisibility and work in a way that is actually quite covert and not always obvious to the public. It’s not dissimilar to boards that do most of their work behind closed doors and where the CEO is the public face.”

    Shergold says his public service training equipped him to consider issues from different perspectives and work in a number of areas. “Running a central agency forces you to cut across sectors and the intersection of governments. That skill translates well onto boards because the best directors can analyse a range of issues and join the dots.”

    Shergold says public servants who aspire to governance should do the AICD’s Foundations of Directorship course and gain experience on government or NFP boards before leaving the public service. “They should also develop their commercial skills because government skills alone are not enough for successful board careers.”

    Henry says corporate Australia has overlooked the public service as a talent pool for executive and board roles. “Canberra can seem a long way away for those in business, not in a geographic sense but in the day-to-day issues that preoccupy government. There tends to be suspicion on both sides about the suitability of public servants in business. However, the connections between issues in Canberra and business are quite close.”

    Public servants, too, may have overlooked opportunities on corporate boards, says Henry. “These roles can be a little unfamiliar, even a bit confronting, to people who have spent their working life in the public service. But there are a lot of interesting opportunities and challenges for ex-public servants in business; they are much more suited to corporate roles than they realise.”

    Henry says senior public servants bring leadership skills to boards. “They know what it takes to manage people, large programs and projects in complex systems, and understand risk management. A fundamental tenet of public service leadership is ensuring the department has the capability to service current and future governments. You think about long-term succession planning and sustainability – issues that are fundamental to good boards.”

    Resilience is another characteristic of senior public servants, says Henry. “Those who make it to a top role and stay with it for several years have an ability to deal with ambiguity and pressure, through changes of government and budget cycles. The best public servants tend to be self-motivated, energetic types who are good at solving problems and thinking outside the square.”

    Henry says the challenge of moving from full-time executive work to a part-time non-executive role is far greater than the challenge of moving from the public to private sector. “Much of what a corporate board does, particularly in areas such as strategy, succession planning and sustainability, will be familiar to senior public servants, especially those with significant government board experience. Issues such as executive remuneration are less familiar, but it is nothing they cannot grasp.”

    Henry still misses aspects of the public service. “Some part of me will always miss the public policy aspect of the work, but you can’t do those roles forever and no individual should own them,” he says. “I suspect we will see more senior public servants who have achieved everything they can in the government sector, and who realise they will be working for a good deal longer, looking for fresh career challenges and finding them on corporate and NFP boards.”

    Challenging transition

    Henry, Shergold and other public service stars made a seamless move into governance. But the transition can be deceptively challenging. Ideally, public servants with an eye on boards should build their visibility in corporate circles well before leaving government. With that comes real or perceived conflicts of interest if public servants get too close to business.

    Finding a corporate mentor and registering an interest with executive search firms are other career transition-planning steps, but they too have potential conflicts if not managed well. Gaining board experience is typically limited to government advisory boards, some of which provide limited governance experience, or NFP roles. The public servant has to leave government before taking on a corporate role, unlike CEOs who for governance experience sometimes join the board of another company in an unrelated industry.

    Keith De Lacy AM FAICD, a former Queensland Government treasurer and current company director, has long experience with the public service. He says the private sector does not regard public servants, as a group, highly. “They are not seen as hard-edged business types prepared to take risks and live and die by their decisions. They come from an environment characterised in the private sector mind as secure, superannuation and a job for life – what would they know about putting it all on the line, about the real world?”

    The public sector’s lack of encouragement for risk-taking, an essential part of growing companies, is part of the problem, says De Lacy. “There is a very big penalty for getting it wrong in the public service and little reward for getting it right. Hence the perception of bureaucratic decision-making.”

    De Lacy says there are significant intellect, experience and business relationships in the public service’s top echelons. “Many have been involved with very tough public sector business pursuits. It is a shame that all this capability has been largely excluded from the corporate world. There has been remarkably little cross-fertilisation between the private and public sectors in Australia and I think we are the poorer for that.”

    De Lacy says ex-public servants can help boards deal with an ever-increasing, government-inspired regulatory morass. “We all whinge about red tape. Who better to have on board than someone who understands the public sector psyche, the process and the pitfalls; people who understand the regulatory environment and the philosophy behind it, and the different way the public sector will respond to company overtures?” he says.

    “If we can overcome some of the barriers and prejudices, we can substantially increase the pool of talent available to drive the private sector and the Australian economy.”

    Korn Ferry head of board services Robert Webster MAICD says public servants need to demonstrate their commerciality before securing directorships. “They must show a capacity to connect to the business community and an ability to help organisations grow their bottom line, something government departments do not have to worry about.”

    Webster, a former NSW Government minister, says boards are starting to show greater interest in recruiting public servants. “I wouldn’t say there is a groundswell of activity, but companies are concerned about greater regulation and see the benefits of having directors with a deep public-policy background.”

    He says the NSW Government, under Premier Mike Baird, is successfully appointing more private sector executives. “Perhaps we are starting to see a trend of greater collaboration between the private sector, government and academia. It makes a lot of sense for the public sector to look to industry for talent, and vice versa.”

    Alison Gaines FAICD, Gerard Daniels’ general manager, Asia Pacific, says the NFP sector in particular has much to gain from attracting public servants to boards. Gaines, a leading board and executive search consultant, has sat on several NFP boards with current or former public servants.

    Public servants can help NFPs that are, or can be, disrupted by government policy or funding changes. “They add a lot to boards in sectors such as higher education, health, disability or aged care that face changing federal or state government regulation,” says Gaines.

    She says the professional style of top public servants works well in boardrooms. “Collegiate decision-making is an important part of the public service culture in senior roles. People are used to teamwork and having shared responsibility for decisions. Those skills translate nicely to boards.” 

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