Is the public sector inefficient?

Is the public sector inefficient? Public and Commercial Services Union boss Mark Serwotka clearly thinks not:

There does not need to be a single penny taken away from a single public service, or a single job lost.

Merseyside’s chief fire officer Tony McGuirk has a different view. In a speech that inevitably landed him in trouble, Mr McGuirk criticised an ‘epidemic of failure to deal with poor attendance’ and said that managers need to have the muscle to sack lazy employees.

We’ve got some bone-idle people in the public sector – there I said it, bone-idle people.

As usual, the truth is somewhere between these rather extreme positions but there is clear evidence that, when compared to other organisations, many public sector bodies are inefficient.

The CIPD’s recent report on public sector management is damning. Its research found that, in general, public sector managers failed to manage performance, absence and conflict as effectively as their counterparts in other sectors. The findings on disciplinary issues were particularly revealing:

[P]ublic sector organisations average one formal disciplinary case per 364 employees each year, compared with one disciplinary case per 119 employees among private services employers and one disciplinary case per 72 employees among manufacturing and production organisations (CIPD 2007). New analysis of the research for this report confirms that public sector organisations discipline proportionally far fewer staff than those in the private sector, regardless of size of organisation.

Public services employers also spend far longer than their private services counterparts dealing with formal disciplinary and grievance cases, averaging 21 days of management time on every formal disciplinary case (11.5 days for private services organisations) and 12 days on every grievance case (6.7 days for private services employers).

In addition, when the formal disciplinary or grievance procedure is used, public sector organisations spend significantly more time managing conflict than those in the private sector (CIPD 2007), averaging 21 days in management time per disciplinary case (12 days among private service employers) and 12 days for each grievance case (7 days among private services sector employers). 

In other words, the public sector doesn’t discipline poor performers as much as the private sector and, when it does, it spends a lot more time farting around while doing it!

The Operational Efficiency Programme (OEP) data released last December tell a similar story. (The data is in Annex A here.) The OEP found that the average ratio of HR staff to employees across all organisations was 1:85. The mean in central government is 1:50. Of course, the excuses will come thick and fast here. Benchmarking is crude, you don’t know if you are comparing like with like and HR ratios are determined by the size and circumstances in the organisation. All these  things are true but take a look at this data. The mean ratio is 1:50 for God’s sake! That’s more than half as many HR people than you would expect to find in the average organisation. The median ratio is 1:44 and some large organisations have one HR person to every 20 or 30 people. OK, there may be some mitigating circumstances but we’re talking about organisations here with two or even three times the normal number of HR people.

But that’s just HR. What can the state of the HR function tell us about the rest of the organisation? Quite a lot actually. HR functions do not exist in a bubble. It is extremely rare to find an organisation with efficient operational departments and a severely over-staffed HR function. Inefficient and over-staffed HR departments are usually a result of inefficiencies in the wider organisation. It may be that extra HR staff are needed to shore up incompetent managers or it may simply be that there is no cost-control and all departments can empire build at will. Whatever the reason, in most of these organisations, the large HR function will be a symptom of inefficiencies in the wider system.

The government has been tardy in publishing the OEP data for the rest of the public sector. If anyone knows when that’s going to happen, please let me know. It would be interesting to see similar data from the NHS and local government.

Efficiency can hard to measure but, such data as we have from the HR world, indicates that the public sector is indeed inefficient when compared to other organisations. That’s not to say that all public sector organisations are inefficient. It’s a shame that Tony McGuirk chose to make such a sweeping statement and that the press has chosen to focus on some of his more inflammatory remarks, because the changes brought in at Merseyside Fire Service are a good example of intelligent public sector reform. It’s worth reading the whole Audit Commission report but, in short, by investing in fire prevention and education, the service was able to reduce its costs by reducing the number of fires. In time, this enabled reductions in staff.

There are some excellent examples of efficient and highly effective organisations in the public sector. At their best, they are more efficient than many private sector organisations. The overall picture, though, is not good. The public sector is overstaffed and inefficient. It is in desperate need of reform. That would be the case even if the country were not grappling with a huge public debt.

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4 Responses to Is the public sector inefficient?

  1. Pingback: Is the public sector inefficient? - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. CharlieMcMenamin says:

    Rick
    I normally find your take on such matters interesting and perceptive but you’ve lost me here, at least on your first point. Neither the number of disciplinary actions nor the length of time it takes to resolve them is an efficiency measure. The figures you provide may actually simply reflect extraneous factors such (a) the greater rate of unionisation in the public sector meaning more such actions are properly and fairly contested; (b) a greater propensity in the public sector to manage by consensus/inspiration – which may well be as good thing (it depends on the nature of the workforce and the task to be achieved, doesn’t it?).

    The question of HR staff ratios is more thought provoking, though. But does the study distinguish between those organisations which, in effect, have combined HR and training functions and those with separate training departments?

    No one is against the public sector becoming more efficient. But many of stir uneasily at the idea that it automatically assumed to be inefficient. This seems simply a bit of home counties saloon bar ideology rather than anything else.

  3. Rick says:

    Thanks for the benefit of the doubt Charlie – saying that I’ve lost you rather than saying I’m talking drivel!

    Interestingly, the figures in the CIPD report are consistent even for large organisations – so even those private sector organisations with staff representation and more rigid procedures seem to be quicker at dealing with griveances than public sector organisations.

    The presence of unions doesn’t mean that you have to over-proceduralise disciplinaries and grievances. Indeed, there is nothing in the civil service code that is any more onerous from the employer’s point of view than you’ll find in any large organisation. Over time, public sector managers have colluded with unions in creating a whole industry around grievances and disciplinaries which slows down the process – often to the disadvantage of the employee as well as the employer. For example, having people suspended from work for several months does no-one any favours. That is almost unheard of in the private sector.

    I’m also not sure that the public sector manages by consensus/inspiration any more than the private sector. I’ve seen just as many autocratic bullying bastards in the public sector as I have in private organisations. This is the flip side to their not being able to handle perfromance. Often, managers have a binary response. Roll over and die or terrorise people until they do what you want. Sometimes the same person can flip between the two.

    I should also add that it’s not just the private sector that manages performance better; some of the most hard-nosed organisations I’ve come across are charities. They simply can’t afford to carry passengers and tend to tackle performance issues very quickly.

    The intention behind this post was to show that the suggestion that the public sector is, on the whole, inefficient is more than just home counties saloon bar ideology. There is, in fact, some substance behind these claims.

  4. CharlieMcMemamin says:

    Thanks for the response. I understand, of course, the motivations behind your post. So let me say I have never worked (for any length of time, anyway, nor in any job I felt to be permanent) in either public or private sector, having always been either employed by non state not-for-profits or been self employed.

    But, of course, I’ve had dealings, professional and personal, with both sectors. There is rubbish performance in both sectors (and in non-for-profits), and nightmare/weak managers in both without a doubt. Competence isn’t restricted to one sector of organisational governance.

    But looking back over 30 years do I think, on average, the responses/service I have got from, say, my local council is superior from/better value than that provided by, say, my bank? Yes, without a scintilla of doubt – and I live in Lambeth, once the butt of jokes. I disagree that it is obvious that the public sector is more inefficient and I still don’t think the figures you provide prove otherwise.

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