International recruitment arrangements for Public Service chief executives and application to Paula Tyler, Chief Executive, Department of Child, Youth and Family Services

18 November 2005

Minister of State Services

International recruitment arrangements for Public Service chief executives and application to Paula Tyler, Chief Executive, Department of Child, Youth and Family Services

Introduction

1 You have asked for a report outlining the practices followed by the State Services Commission (SSC) for international recruitment of chief executives and how these arrangements were applied to Paula Tyler, Chief Executive, Department of Child, Youth and Family Services (CYF).

2 You have also requested that SSC review its recruitment contract practices and implement a clause in the contracts of new chief executives that claws back some or all of the costs of relocation in the event of a chief executive leaving their position early.

3 This report is in three parts. Part one summarises SSC's international recruitment practices, part two outlines how these were applied in the case of Paula Tyler, and the third part outlines my comments and advice on the way forward.

4 I have provided a copy of part two and the appendices to Ms Tyler. She confirms that she has a similar understanding of the events recorded and is aware that these personal details may be released.

Part 1 International recruitment

5 Any Public Service chief executive appointment is significant for New Zealand. In order to appoint candidates with the right blend of experience, skills and personal attributes for a chief executive role, an international search may be undertaken.

6 The decision to undertake an international search is not taken lightly, but for some appointments it is the only practical option.

7 Since 1988, nine chief executives have been appointed from overseas. The SSC has developed a set of practices for international candidates that apply prior to and post the appointment process. These practices are constantly under review and have evolved over time. This report details current practices.

Prior to Appointment

8 When considering potential overseas candidates for chief executive level recruitment, audio or video conferencing may be used by SSC. At the final stages of a recruitment process, an extensive managerial assessment centre process and face-to-face interview with a panel does need to take place. This is good practice to ensure candidates and the interview panel have an appropriate and extended opportunity to interact.

9 During the recruitment process consideration is given to payment of appropriate travel and accommodation costs for the candidate to travel to New Zealand. Business class airfares can be paid due to the need to conduct official business soon after the flight.

10 The amount of accommodation paid for to complete the recruitment process can vary, depending on the logistics of assessment and of convening panels for interview.

11 The payment of reasonable travel and accommodation costs for the recruitment process is not recovered by SSC. Any attempt to make the payment of such costs conditional on the appointment and/or successful conclusion of the term of appointment would be a significant deterrent to suitable candidates going through the recruitment process. It would amount to charging international candidates a fee for them to be considered for the position. That would not be a good approach.

Post appointment

12 When an appointment of a chief executive from overseas is made, consideration is made of the relocation costs that may be reimbursed or contributed to by SSC. Comment obtained from recruitment consultants used by SSC for this type of appointment confirms that payment of relocation costs when recruiting senior talent from overseas is a normal and accepted part of the employment process.

13 The reimbursement of 'actual and reasonable expense' for the relocation of an overseas candidate is accepted by SSC as part of the typical cost of recruiting a chief executive from overseas. This is also true for the costs of relocation of a chief executive from another centre within New Zealand, such as from Auckland to Wellington.

14 The definition of what constitutes an 'actual and reasonable expense' associated with relocation has been considered in various contexts by SSC to include expenses such as legal and agents' fees relating to the sale of a home.

15 The issue of purchasing new household items versus paying to freight them arose previously in the context of another chief executive relocation to New Zealand. At that time, it was found that purchase of new household items in New Zealand would be cheaper than the cost of shipping the household items from overseas.

16 These examples have informed SSC's current practice, which emphasises flexibility within reason when considering the 'actual and reasonable expense' associated with relocation. What is stressed is that the expenditure for relocation or setting up a household in New Zealand must be within the set budget and meet the documentary requirements expected by SSC.

17 It should be noted that the remuneration range determined by SSC for a specific chief executive role is not altered when an overseas appointment is made. In many cases, international chief executive remuneration rates are considerably higher than in New Zealand for equivalent positions.

18 The reimbursement of relocation costs does not convey a benefit to the new appointee. On the contrary, the practice ensures the appointee is not financially penalised by relocating to another part of the world in order to take up a new role.

19 Where further relocation costs involving a chief executive's return to their country of origin are included, it is generally conditional upon the chief executive having completed the term of their employment agreement.

20 SSC is not aware of any previous circumstances where Public Service chief executives were recruited from overseas, were reimbursed relocation expenses and who did not complete all or virtually all of their contracts.

Repayment Clauses

21 On review of SSC employment agreements with chief executives recruited from overseas, only one (from 1992) included a clause that required a partial repayment of relocation expenses in the event of resignation by the chief executive. The amount to be repaid in the event of resignation was proportionate to the amount of service left remaining in the total term of the employment agreement.

22 Repayment clauses have not been included in recent chief executive employment agreements where relocation expenses have been reimbursed, as generally the logic of recovering a reimbursement is very weak. The SSC has encouraged chief executives to stay the full term of their appointment through the practice outlined above of making relocation costs back to their country of origin conditional on the completion of the full term of their contracts.

23 In terms of typical practice in this area, the indication from recruitment consultants used by SSC for this type of appointment is that repayment clauses for relocation costs are uncommon and can be seen as a disincentive when trying to attract talented people for roles in New Zealand.

24 However, SSC believes it appropriate to now consider the use of some form of proportional repayment clause for inclusion in future employment agreements with chief executives recruited from overseas. This might apply in respect of the value of assets that have been acquired with a relocation reimbursement and for an appropriate initial period of the agreement.

Part 2 Recruitment of the Chief Executive of Child Youth and Family

Recruitment background

25 The search for an appropriate chief executive for CYF was a particularly difficult one, taking approximately one year to complete.

26 The chief executive position at CYF became vacant on the departure of the previous incumbent, Jackie Pivac on 30 November 2003. This followed the completion of a baseline review of the department.

27 The baseline review highlighted that a number of actions were required and the review proposed a three-staged plan:

• Stabilise the department's position so it is better able to provide services to children and young people who need them.
• Support CYF to become a learning organisation.
• Improve service quality and reduce the recurrence of harm, neglect, insecurity of care and reoffending.

28 The primary responsibilities for an incoming chief executive were identified as implementing the baseline review and, in a two or three year timeframe, transform the department into a dynamic, positive and high performance organisation.

29 It was the view of the then State Services Commissioner that the appointee needed to be a seasoned chief executive, familiar with the environment in which the department operates, and with a personal style that will allow them to engage effectively with staff, clients and stakeholders.

Appointment process for CYF

30 The normal process was followed for the recruitment of the new chief executive of the Department of Child Youth and Family Services. The search process for the chief executive did include an international search. There was a desire to get the very best candidate to implement the decisions from the baseline review and to re-build confidence in CYF.

31 Several candidates were identified. Four of these were shortlisted for interview. Three of the four candidates interviewed were from overseas. Video conferencing was used during the shortlisting process.

32 During the interview process, Paula Tyler's partner, Peter Kruselnicki, arranged to visit New Zealand with Ms Tyler at his own expense to assess employment and accommodation prospects. In the event, as a result of illness, his plans were disrupted which increased the cost of his travel. In the circumstances the State Services Commissioner agreed to reimburse Mr Kruselnicki for this unexpected additional cost of travel and associated accommodation. This cost is itemised in Appendix One.

33 Paula Tyler was the successful candidate following the assessment and interview process. Ms Tyler had very relevant experience for the role. She had spent most of her public sector career in social services in a variety of policy and management positions. She had been in the role of Deputy Minister (equivalent to a New Zealand Public Service chief executive) of Alberta's Children's Services Department since 1999.

34 The overall cost to recruit a chief executive for CYF was $134,417. Of that sum only $14,533 is attributable to travel and accommodation for Ms Tyler and her partner. In particular, in Paula Tyler's case an extended period of accommodation was necessary in Wellington, as her assessment centre process and face-to-face panel interview were four days apart. These costs are detailed in Appendix One.

35 Given the significance of the role to New Zealand this cost is not excessive. Finding the right person to lead this department was the single greatest contribution SSC could make to the rebuilding of CYF.

Employment agreement for CYF

36 Ms Tyler agreed to a standard Public Service chief executive employment agreement but with some additional clauses reflecting her relocation to New Zealand, as follows:

• Payment of actual and reasonable expenses (on production of receipts) associated with relocating from Edmonton to Wellington up to a maximum of NZ$40,000 and from Wellington to Edmonton at the end of the term of appointment up to a maximum of NZ$40,000.
• Payment of business class airfare from Edmonton to Wellington return for self and partner as part of the relocation.
• Payment of accommodation expenses in Wellington, up to a maximum of NZ$1,300 per week, for a maximum period of six weeks, at the beginning of her term as chief executive.
• As her partner was unable to come to New Zealand for six months or more, payment of two economy class airfares from Edmonton to Wellington return, to facilitate domestic arrangements and job search by her partner.

37 As outlined in part one, the definition of what constitutes an 'actual and reasonable expense' associated with relocation has been considered in various contexts by SSC and a reasonably flexible approach has been agreed. Ms Tyler was offered the choice of either relocating furniture or to purchase furniture upon arrival. There were significant costs for Ms Tyler in setting up a new household half way around the world and the reimbursements were within SSC practice and the set budget. The breakdown of costs applying to Ms Tyler's relocation are detailed in Appendix Two.

38 You will note that the agreement reached above included two economy class airfares to New Zealand for Paula Tyler's partner Peter Kruselnicki. It is natural that Ms Tyler wished her partner to find work in New Zealand. Her partner was a senior public servant in Canada so the SSC agreed to assist with introductions and information about opportunities in New Zealand. It should be noted that no job offer was made by SSC.

39 The programme of introductions arranged for Mr Kruselnicki did not generate a full-time employment offer. However, there was recognition of his experience and arrangements were made to enable Mr Kruselnicki to be seconded from the Alberta State Government to the Victoria University of Wellington School of Government as a Visiting Professor. As is standard in such agreements, the costs of this secondment were borne by the benefiting country and four government agencies supported Mr Kruselnicki's university work and a range of public sector management assignments. There was a regular review process for Mr Kruselnicki's work.

40 In August 2005 Mr Kruselnicki informed me that he was leaving the university as he had been appointed to a senior role in the Alberta State Government and they had ended his secondment to New Zealand. The arrangements leading to Mr Kruselnicki's new job in Alberta were nothing to do with the New Zealand Government. The New Zealand Government incurred no cost associated with any interviews or discussions that he may have undertaken.

41 In October 2005 Ms Tyler informed me that she had chosen to leave early from her role to return to Canada for family reasons. This was a very difficult personal decision for Ms Tyler to make.

42 In the light of the damaging public speculation surrounding her departure, Paula Tyler has informed me that she intends to leave behind all the items that were acquired by use of the relocation funds that she was entitled to. She intends that I dispose of these items to charity. Ms Tyler has no obligation to leave these items, they are hers. This is a very substantial gesture by Ms Tyler.

Part 3 Closing comments

43 Ms Tyler will leave in December 2005.

44 Overall, Ms Tyler has made a strong contribution. In hindsight, even with her early departure, she has proved to be a very good appointment and New Zealand had very good service from her.

45 As chief executive she has led an extensive refocusing programme for the processes, systems and structure of CYF and has appointed a strong management team who will now be able to carry on the important work of the department.

46 Throughout the appointment process and subsequent employment period Ms Tyler has acted professionally, with honesty and integrity, and within the terms of her employment agreement. I consider that she has been modest in her use of her relocation entitlements. It is unfortunate that she has chosen to resign nearly half way through her term but it is within her rights to do so.

47 As outlined earlier, with regard to return relocation costs to Canada, Ms Tyler's employment agreement does not provide for the reimbursement of her costs or expenses in the event that she does not complete the full term of her contract of employment. In spite of that, Ms Tyler has decided that she will not keep any of the items that she acquired by use of her relocation entitlements.

48 The SSC has now begun the process of appointing a new chief executive for CYF. This involves reviewing the job description and discussing priorities for the role with Ministers.

49 To my knowledge, the specific issues raised by Ms Tyler's early resignation have not previously been a matter of concern for SSC. Her specific circumstances were unique.

50 On reflection, I consider it would be appropriate to introduce some form of proportional repayment clause in future employment agreements that would recover a share of the value of assets acquired with relocation reimbursement within an initial term of the contract. The scope and nature of such a repayment clause will be carefully considered so that it will not be seen as a potential disincentive in a market where there is considerable competition for senior management talent, and will need to be tailored for each appointment.

Recommendations

51 It is recommended that you:

Mark Prebble

State Services Commissioner

Appendix 1: CYF Recruitment Costs (excluding GST)

Appendix 2: Costs associated with Ms Tyler

Interview (travel and accommodation) - both included in Appendix 1 above

• $11,992 (Ms Tyler)
• $2,541 (Mr Kruselnicki)

Transfer (airfare and accommodation)

• $5,749 (airfare Edmonton to Wellington for Ms Tyler to take up her appointment)
• $3,318 (Return airfare Edmonton to Wellington for Mr Kruselnicki to seek employment opportunities)
• $3,539 (Return airfare Edmonton to Wellington for Mr Kruselnicki to seek employment opportunities)
• $4,241 (temporary accommodation at Terrace Villas 26 July to 21 August 2004)

Relocation

• Storage, Immigration, Shipping: $15,116
• Household goods

Total costs associated with Ms Tyler: $71,379