Can private sector bosses help the government make savings?

According to the Independent, Cabinet Secretary Sir Gus O’Donnell is planning to ask business leaders for help with downsizing government departments and identifying those ever elusive efficiency savings. The government is refusing to say who the private sector bosses are but the Indie puts a number of names in the frame, for example:

Richard Baker, who as chief executive of Boots led a reorganisation of the company that led to over 2,000 job losses.

That’s 2,000 out of the group’s 100,000 or so. Around 2 percent.

Then there’s:

Sir Roy Gardner, the former chief executive of Centrica, the company which used to run British Gas and the AA. At Centrica, he oversaw a major restructuring of the business which led to over 1,000 job losses.

That’s just over of 2 percent of the 43,414 that were at Centrica before the cost reduction plan.

I’m not trying to knock these businessmen; both have good track records and left their companies in considerably better states than when they arrived. But the cuts described here are tiny compared to the 25 percent that some public sector organisations will have to lose. As I’ve said before, very few people have cut the size of an organisation to this extent.

By all means, ask experienced private sector managers for help, provided that they don’t charge too much, but don’t assume that they will have the answers. The public sector is capable of chewing up even the most seasoned corporate troubleshooters. It will take more than the wise words of some high-profile business leaders to make the sort of efficiency savings that the government, despite mounting evidence to the contrarystill insists are possible.

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3 Responses to Can private sector bosses help the government make savings?

  1. OK: you’ve convinced me. The detailed series of posts you’ve provided from a management perspective suggests that, quite simply, cuts of the magnitude envisaged by the Coalition simply cannot be carried out in an orderly or rational way, at least not on the time scale envisaged.

    So the question comes – what is going to happen ? Because local authorities have little legal choice but to attempt to balance budgets – changes in the law mean we can not longer expect any kamikaze Lambeth or Liverpool style refusals to set budgets. Even less should be expected in the way of formal resistance by other public sector institutions.

    Doe it not follow therefore that either we get ‘overspends’ (I use the term in its purely technical sense, I don’t believe we would be ‘overspending’ against need) more or less everywhere, which would be more or less equivalent to the government losing a significant capacity to govern, or some crazy things happen – whole departments sliced away /issued P45s in late March and so on – which lay the seeds for chaos in the public services. No doubt this is over-egging the pudding a little, but I’m sure you take my point.

    Anyway, I’m genuinely interested in your perspective on this. If things really are impossible – what then happens in systematic terms from your managerial viewpoint?

  2. Pingback: Can private sector bosses help the government make savings? - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  3. Rick says:

    Sorry Charlie, I meant to reply to this sooner.

    I don’t believe the cuts can be made just by making things more efficient. That means frontline services will have to be cut. Even these cuts, given the timescales, will probably not be well thought through. Add to that the restructuring of the NHS and its knock-on effects, and the chances of a well-executed downsizing look pretty remote.

    The most probable outcome is that parts of the public sector start to behave like distressed organisations as the money runs out and they stare financial collapse in the face. When this happens in the private sector you get frantic cutting and fire-sales of assets, including whole divisions of the organisation.

    I think there will be ‘fire-sales’ of public sector contracts – ‘whoever reckons they can deliver this service for what we’ve got in the budget gets the contract and we don’t ask too many awkward questions’. Big contractors will be well positioned to clean up – ‘Don’t worry, Mr Councillor, I can take all this off your hands, provided you give me the whole lot, of course.’

    This won’t happen everywhere. Because the government is hell-bent on localism, different solutions will be found in different areas. Places with good managers, money in the bank and no historic laibilities will do better than those with poor managers, already-high debts and a history of failure. Oh, and wealthy, well-educated and community-minded locals will help too.

    Whatever happens, there will be cuts to services; some of them quite severe. What happens if a council or NHS trust finds that it can’t even meet its statutory obligations? God only knows. I’ve no idea what governments are supposed to do if a council goes bankrupt. Let’s hope it doesn’t come to that.

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