Why are public sector efficiency savings so hard? (Part 2 – The organisations)

Thursday’s post discussed how difficult it is to make public sector processes more efficient. That goes some way towards explaining why public sector organisations find it so hard to make cost savings and productivity improvements. However, there are also wider organisational factors which can frustrate attempts to improve efficiency.

Any attempt to introduce change in an organisation will come up against the following obstacles:

  • Complexity – the extent to which the business goals are unclear and the level of ambiguity in the organisation;
  • Political resistance - the presence of competing interest groups with high levels of power and influence;
  • Cultural resistance – how much a proposed change runs counter to the shared assumptions which prevail in the organisation;
  • Size and Scope - the extent to which the change affects lots of people and crosses organisational and national boundaries;
  • Lack of change experience – the extent to which managers have led similar change programmes in the past.

With the exception of the international dimension, the public sector has all of these factors in spades. They will push against any attempt to make services more efficient.

Complexity and ambiguity are inherent in public sector organisations. To an extent, they feature in all service organisations, where it is relatively easy to measure cost but far more difficult to measure quality. Manufacturing companies can usually tell fairly quickly whether a reduction in cost has led to a reduction in quality. Measuring the quality of tangible products is easier than measuring the quality of services. For service companies quality is more subjective. Again, as we saw with processes in service organisations, the customer plays a greater role. Service quality has much to do with customer perception. 

That said, service companies have a fail-safe measure; customers start deserting them if the service quality drops too far. In public services, which are free at the point of consumption and where there is little choice of provider, there is no such measure. Service quality is therefore devilishly difficult to measure. For this reason, productivity, efficiency and effectiveness are also difficult to measure. This paper on health service productivity notes that there is no consensus about measures of quality, or shared definitions of productivity, in the health sector. As Professor Carol Propper says, “in health care, prices are easy to observe, whilst quality is not.”

All of which makes organisational goals and the measurement of them a lot more ambiguous than they are in the private sector. Public sector organisations often have difficulty just defining and measuring what they are actually for. That is why their corporate mission statements can seem so nebulous. It is not uncommon for senior public sector managers to spend hours arguing about the meaning of words. Kevin Ball describes one such conversation here:

My first introduction to public service HR was in the NHS six years ago. I found what should have been a unifying mantra ‘It’s all about the patients’ became a divisive one as each special interest group – GPs, Consultants, Managers, Nurses, Politicians – used it for their own, different, purposes. Each of those big groups also held myriad smaller groups who would equally war with anyone else over exactly what they meant by ‘improving patient care’. In my experience, this culture of conflict and the organisational politics which it led to is the biggest single barrier to change and improvement in every NHS organisation I have ever seen.

Which brings me neatly onto the second obstacle to change; organisational politics. Complexity and ambiguity not only make productivity and efficiency difficult to measure, they also create openings for politicking. People in the public sector are no more prone to playing politics than anyone else but the high level  of ambiguity gives them much more opportunity to do so.

Most of us go to work to do a good job but we also want to further our careers, increase our levels of power and status and maximise our financial rewards. The secret of successful politicking is to make the latter look like the former. 

Here’s a simple example. An organisation I worked with a decade or so ago decided to review its entire IT infrastructure. At that time, SAP was flavour of the month and IT professionals with SAP skills were in demand. Every techie wanted SAP on his CV. The IT department threw itself into the project; no-one could have accused it of lack of commitment. But as the organisation defined its requirements for its new systems, the IT people manipulated the users into stating these requirements in such a way that SAP would be the only possible solution. Fortunately for the organisation, they did it in such a ham-fisted way that they were spotted.

They had, however, understood that if you can manipulate the definitions in a way that suits your agenda, the rest is easy. Powerful interest groups do this in all organisations but ambiguity widens the scope for such politicking. If you can define ‘patent care’ or ‘well being’ or ‘service quality’ in a way that entrenches or enhances the role of your profession, you can then wave it in the face of anyone who tries to get you to  do anything different.

Conflicting definitions and interpretations are at the root of many of the catastrophic IT failures in the public sector. The shifting sands of strategy and policy often mean that systems have to be re-configured after they are built rather than during the design or pilot phases when it would have been much cheaper. This happens in the private sector too but not nearly to the same extent.

Politicking and empire building also create silos and barriers in organisations. More effective cross-organisational working is usually key to making efficiency savings. One or two powerful fiefdoms can therefore bring an entire efficiency drive to a halt. This level of complexity increases when different organisations have to work together. If the delivery of a service depends on collaboration between NHS trusts, local authorities, charities and government departments, so will the delivery of any efficiency savings. In situations like this, no-one has authority across all the organisations and so the scope for resistance and turf wars is magnified. Saving money through collaboration is a fine idea but the outbreaks of tribalism during the Total Place project show just how difficult this is to achieve in practice.

The cultural resistance to change throughout the public sector is worth an entire series of posts and much has been written about it. As Edgar Schien told us nearly three decades ago, culture is driven by shared assumptions and these assumptions are based on what has worked in the past. In organisations which have had year-on-year budget increases for as long as most people can remember, the idea that budgets will be cut takes some time to sink in. As late as 2009, when the papers were already full of stories about massive spending cuts, one civil servant told me:

There is always money available. If you can make a decent enough case you can get the extra budget you need.

Many public sector managers drew up their budgets with a nudge-nudge and a wink-wink. “This is the amount we’re working to but it’s not the real amount. We’ll get some more at the last-minute. We’ll call it ‘re-structuring costs’ or something.” 

That’s the trouble with deep-rooted cultural assumptions; they are very difficult to shift. Evidence alone is seldom enough to change them. Even when organisational cultures do change, they do so very slowly.

Which brings us to the final factor, management inexperience. The CIPD and others have bemoaned the inability of senior public servants to make any significant improvements to the performance of their organisations. There are managers in the public sector who have made significant productivity improvements but they are relatively few and are thinly spread. Given that drastic cost saving is outside the recent experience of most of these  organisations, this is hardly surprising. Calling people useless for not being good at something they’ve never been asked to do before is rather unfair. Nevertheless, the lack of cost-saving experience among public sector managers will slow down any attempts to make the sector more efficient. Even if they learn quickly it may not be quickly enough. 

But even those with good track records in making organisations more cost-effective sometimes underestimate the scale of the public sector task. Those coming from the private sector thinking that just sacking a few people and making the rest work harder will solve the problem are soon forced to reassess their own assumptions.

In general, then, the obstacles to change are significantly greater in public sector organisations than in commercial ones. This is no-one’s fault. Much of it is due to the nature of public services and the way that they have been run for most of the post-war period. Attempts to blame it on particular groups or individuals risk over-simplifying the problem.

Yet over-simplification is what politicians, journalists and even some public servants (who should know better) often try to do. Trying to condense the complexities I have discussed in these posts into a Question Time answer or a response to a John Humphreys challenge is not easy. In a world of soundbites, simple answers are more readily heard – even if they are wrong. If we just got rid of all the bureaucrats, if we stopped spending money on useless back office services, if we could only make these lazy sods work harder, if we could break the power of public sector unions, if we got rid of all those bloody HR people…..

It’s easier to throw meaningless statistics around the Commons chamber than to get to grips with the hard slog of reforming the public sector.

None of this is to say that public sector organisations can’t be made more efficient; they can. People have done it. It’s just much more difficult than those who have not tried to do it realise. Unless you have tried to get your head around arcane processes, or pored over spreadsheets trying to work out where the hell your costs are going, or explained a new way of working for the umpteenth time to a sea of blank faces, it’s difficult to understand the eye-watering effort involved in making even minor efficiency savings.

Offered the choice between a tough diet and exercise regime or a miracle slimming pill, many overweight people choose the latter. Our politicians display similar behaviour. They look for the magic pill and ignore the sheer scale of the task.

As H.L Mencken said, “For every complex problem, there is a solution that is simple neat and wrong.” Simple and neat might make for good soundbites but creating a more efficient public sector will require cleverer thinking and a hell of a lot more hard work.

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11 Responses to Why are public sector efficiency savings so hard? (Part 2 – The organisations)

  1. Pingback: Why are public sector efficiency savings so hard? (Part 2) - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. The only way I can think to change the culture is to remove any targets relating to quantity as it just creates its own internal industry and deflects resources from their actual daily work. This is probably too radical for most people as quantity measurement is the only proof we have that managers are doing their jobs and performance is getting better or worse. In the private sector this culture is becoming more and more prevalent because it’s easy, whereas improving customer service and assessing the quality of the improvement is hard. In certain industries like Telecoms customer service is barely tolerable but as all the players involved in the market place are equally as bad each other customers are relatively loyal. Now if one of these companies provided a higher level of customer satisfaction than the others they would increase market share and retain more customers.

    As the post says there is no competition in the Public Sector but there is a lot of target measurement which I firmly believe is driving the majority of its inefficiencies. The only measurement I am interested in for the NHS for example is quite simply its capability to ‘Make me feel better’. So this should be the overarching measurement which is based on input from patients. There is still a need to have some performance measures around quantity but these would be purely from an operational standpoint to ensure the data is there for planning and strategic decisions. Setting a target for A&E to process patients within a certain time frame has led to the creation in many hospitals of new units which are based in A&E but called something else like, Medical Assessment Unit. This is clearly a waste of time and resources but driven by a poor understanding of the cause and effect of setting targets.

    Target setting is the area where the culture needs to change the most and this is going to be hard to achieve. In all areas of life we don’t measure how successful we are by the numbers of things around us (caveat – some may appear to do this) but by how content we feel, so why do we think measuring performance by numbers in the workplace and publishing them is going to work?

  3. vincelammas says:

    Rick,

    A great article and one that captures so much. The issues of complexity, politics and culture, scale and capacity are immense in many public sector organisations – none more so than the NHS.

    The NHS is indeed one of the most complex environments anyone would ever encounter (I have compared getting things done in the NHS like trying coordinate to the various national armed NATO forces in wartime).

    Few organisations actually exhibit a single culture, but the NHS demonstrates more diversty than all others. The professional groups have overlapping but different viewpoints and perspectives about what constitutes “quality of care” and how it is best acheived. In that context, “political behaviour” (the process through which people make collective decisions) is inevitable and needs to be handled and channeled, not ignored.

    However there is a “fatal disconnect” between the environmental context of public sector organisations and the top-down management approaches adopted by nationally-run organisations and our politicians (with their tendancy to over-simplify). This traditional management style is simply unsuited to shaping and directing such complex organisms.

    In relation to tribalism encountered by the Total Place pilots, it is no coincidence that obstacles were encountered when talking to both the DWP (a monolithic and unresponsive machine if aver there has been one) and the NHS (which struggles to coordinate any local or joined up activity while senior people are busy “looking inward and upward”).

    In that context, I accept the recipe of decentralisation is right for the UK in the 21st Century though it requires radical change and presents many obstacles. Nevertheless, it is possible for organisations to build the capacity to deliver the required change. The work of John Seddon and other whole systems approaches is pointing the way.

    The serious questions are, in my view -
    Does the Coalition really mean what it says?
    Will it allow public sector organisations freedom to deliver on the vision?

    I would be interested to know what you think, Rick, about the answers to these questions.

  4. PinkPolitika says:

    Rick, yes I’d go (of course) for all the factors you mention, but it may be worth teasing out some more something which is implicit in all these… the issue of organisational / institutional memory.

    When people get pushed around, the DNA of the organisation tends to unravel; so much which has been addressed already then has to be re-invented.

    And the snag here is that, as the ‘It’s all about the patients’ example demonstrates, apparently core messages can be interpreted in many ways – not least, when the politicians are getting their oar in again.

    ‘Meanings’ may have bedded down over time, and they can provide some stability; but all this goes out of the window if people are required to revisit not only the mechanisms, but also the fundamentals, of what they are doing.

    It’s all very well some Coalition politicians now claiming they welcome a bit of chaos as the status quo is abandoned; but it’s rarely those same politicians who are themselves at the sharp receiving end of that chaos.

    It’s the folk who are trying to deliver and manage public sector change who find themselves fighting on even more fronts than usual, as institutional memory is dislodged and clients &c start to make a fuss when things aren’t as they’d expected.

    Sure, some public sector embedded memory / knowledge is inefficient or change-resistent, but chopping it up anywhichway will, inevitably, make transitions at best tough and sometimes impossible.

  5. Rick says:

    PinkPolitika – I could write a ‘Part 3′ of this post on the impact of Big P politics on public sector costs. As you say, the constantly shifting meanings are driven in part by political expediency. Politically driven change racks up costs. The NHS reorganmisation is a textbook example.

    I also think the toxic style of political debate has poisoned the organisational DNA. It has created a culture where some things become undiscussable because it would be politically inexpedient to discuss them. So, for example, we can’t invest £10k now to save £100k next year because the Daily Mail will crucify us for the £10k. We don’t plan for a perfromance dip when we merge NHS trusts because that would mean admitting that the performance dip will occur. Which would never do!

  6. A REPORT launched today by MP Matthew Hancock advises that local authorities should move to greener more sustainable office space to save cash – and public sector jobs. But does the report go far enough? It may explain why public sector efficiencies are so hard to come by too.

    It costs a staggering £208,000,000 a year to run the House of Commons alone – so by relocating the functions of the Palace of Westminster thousands of jobs could be saved.

    Property company Marchday says that by closing the doors and relocating, the Government could make massive savings on the cost of running the establishment as well as providing a greener alternative.

    Today’s report “Leaner and greener: Delivering effective estate management” is the result of research by the Westminster Sustainable Business Forum, and Marchday agrees with it findings (* see Editor’s notes) – but wants the Government to consider taking up its recommendations itself.

    Marchday says exactly the same premise applies to Government as to local authorities – and that the functions of the House could easily be accommodated on its huge 107 acre award-winning sustainable development Lingfield Point in Darlington, County Durham.

    Now Marchday, (which also owns New Lodge in Windsor and Cavendish Square in Central London) wants to put the House of Commons up for sale on behalf of the people of England.

    The £208million for the eight acres of accommodation, operating costs and security does not include MPs salaries or administration costs.

    Marchday wants MPs to be prepared to accept the advice of MP Iain Duncan Smith and move to follow the jobs.
    John Orchard, of Marchday said: “The Palace of Westminster functions as a giant office space with meeting rooms and chambers.
    “It is very costly to run and maintain. Obviously there are cheaper places to be based – for example Lingfield Point – which is an award-winning sustainable business park that offers everything needed to run the country efficiently and cost effectively.
    “Despite the fact that Government has commissioned two reports into devolving civil service jobs to the regions very little changed as a result. (The Lyons Report and the Smith Review, the Lyons Report alone cost £2.22m)

    “News reports make it clear how hard some of the poorest areas of England will be hit by the planned spending cuts and this is a great opportunity to resurrect this idea.

    “The Government is asking everybody else to face the harsh realities that cuts will bring – it needs to take a top-down lead by example approach.

    “Office space at Lingfield Point is available at £10 per sq ft compared to the average of £35 per sq ft in London. The North East has a work-ready army of skilled people and logistical and transport links to Europe that are the best in England.

    “This isn’t about making political points – it is a moral issue – we want the people in charge to think about the human cost of the proposals on the table and how easily some of the effects could be mitigated,” said Mr Orchard.

    Savings would be ongoing and long term and include benefits such as reducing environmental impact, reducing sickness, the fact that running and maintaining new facilities is cheaper and the fact that people work better in clean fresh and well-designed buildings.

  7. Sophie has raised some interesting points here but I think we could go further. Technology gives the capability to hold meetings through the use of Telepresence so regional hubs could be used as a base for MP’s and Civil Servants. This would further reduce expenses and allow MP’s to spend more time with constituents. There would have to be schedules so that all MP’s could get together for critical debates but otherwise you could have offices around the country for them to use on a daily basis. It’s green, allows some level of re-connection with people outside of London and should be inexpensive to set up (at least in the grand scheme of things)

  8. John Orton says:

    Some random comments:
    1) as long as funding comes from taxation politicians will be involved – its their duty.
    2) they won’t leave the NHS alone. They’re democratically accountable. Because of 1) they can’t.
    3) despite everything the shows goes on. Why? Because the people at the front line want it to. It gives their life meaning as well as an income.
    3) the punters like the result of targets and they’re easy to understand for managers.

  9. Pingback: More than Flip Chart Fairy Tales « arbitrary constant

  10. Pingback: Graduation 2012 « Dr Ian C Elliott

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