Does the public sector need discipline and fear?

Oliver Letwin is a very clever man who sometimes says daft things. He had public sector employees around the country spitting feathers over the weekend when he suggested that “some real discipline and some fear” were needed to make them improve their performance.

As often with Mr Letwin’s outbursts, there is enough of a grain of truth in them to make them sound credible. The public sector certainly needs to improve the way it manages performance. As the CIPD noted last year, public sector managers are more reluctant to discipline poor performers than their private sector counterparts and they take a lot longer about it when they do. In many organisations, unacceptable performance and behaviour is tolerated for far too long. Managers need to get better at giving more people a good slap a lot sooner.

It is also true that public sector productivity has declined since 1997, by an average of 0.3 percent per year, according to the ONS. To an extent, though, this is inevitable when staffing levels are increased rapidly. A service can become more effective without becoming more efficient. If outputs don’t keep pace with inputs then productivity will fall, as this handy post from the LSE explains.

This graph, created by LSE’s Politics and Policy blog from the ONS data, shows that public sector delivery improved but not at the same rate as the increase in resources.

Source: UKCeMGA (2009) “Total Public Service Output and Productivity”

Let’s take a simple example. Suppose a school has 120 pupils in a year, split between 4 classes of 30. Its SATS results show that, at age 11, only 60 children, 50 percent of the year, reached the standard expected for their age. The governors decide this is not good enough so they recruit two extra teachers and reduce the class sizes to 20.

The following year, 84 pupils achieve the desired standard. The rate has shot up to 70 percent and everyone congratulates themselves on a job well done. However, while the overall performance of the school has improved, the productivity hasn’t. When the school had a 50 percent pass rate, it had 15 passes per teacher. Now, it only has 14 passes per teacher. It could, of course, improve its productivity by sacking the two new teachers but that would not go down well with the parents.

OK, it’s a crude example but it illustrates the public sector’s dilemma. In the criticism of Gordon Brown’s spending spree, it is often forgotten that he was delivering things that people said they wanted. Smaller class sizes, more police, cleaner streets, more nurses and doctors. As often happens when you throw money at something, in most public services delivery improved but it improved at a slower rate than the increase in staff and other resources. 

How easy will it be to improve this productivity? Not very. It is interesting that Mr Letwin made his comments at the offices of KPMG. Last year, their report concluded that, if the public sector improved its productivity at the same rate as the private sector, it could save £60bn in 10 years. The problem is, the government has committed to cutting costs by £52bn in half that time, so unless the public sector manages to improve productivity at rates rarely seen elsewhere, it is almost inevitable that the overall output of public services will fall.

Will more discipline and fear help? Probably not. A bit more discipline wouldn’t go amiss in some areas but it’s not going to save £52bn. If anything, language like this will just further piss off the already pissed off public sector managers, the very people on whom the government is relying to make the changes work.

Rather like my hypothetical school, the savings will be achieved by reducing the number of staff and, in so doing, reducing the standards of the service. The services might become more efficient but, even if they do, they will be delivering less. Given the scale of the savings needed, more fear and discipline won’t make a hell of a lot of difference.

Update: Good posts on this from Chris Dillow and Broken Society.

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6 Responses to Does the public sector need discipline and fear?

  1. Pingback: Does the public sector need discipline and fear? - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. Paul Johnston says:

    Rick – I think part of the problem here is the difficulty of measuring public sector productivity. I am not an expert on this issue, but my assumption would be that since private sector activity is primarily geared towards impacts that can be financially measured, then measuring productivity is not too difficult. So, of course, firms do do stuff that benefits society and which is not captured in its productivity measures, but those impacts are generally of marginal significance. By contrast, lots of what public sector organisations are trying to do is not aimed at benefits that are easily financially measurable and those impacts are fairly central to what they are trying to do. Your school example probably illustrates the point. If the school was a company and it generated revenue for its exam results, then it should sack the extra teachers. However, if the aim is to produce a better educated future generation, then it might well be worth employing them.

  3. Great to see you mentioning our article in this post. Any chance you could credit the graph to British Politics and Policy at LSE as well (we created it from ONS data)?

  4. Jim says:

    You assume (in your example of a school) that the only way to increase the number of exam passes is to spend more money on teachers. Its entirely possible that you could a) sack incompetent teachers and hire better ones, or b) make efficiencies elsewhere and be able to afford more teachers on the same budget, or c) employ better educational methods.

    If (to continue the schools example) every parent has a voucher that was worth £X/child, and could go where it liked with their money, what effect would that have on schools? Bad ones would go to the wall, good ones would prosper. Exactly the outcome we are looking for I’d say.

    The biggest barrier to increased efficiency in the public sector is the total lack of accountability to the person receiving the ‘service’. And its no good having ‘targets’ and ‘codes of conduct’ because we all know that has little to no positive effect. The only thing that works is the knowledge that if you mess up big time, the company/business/organisation can cease to exist and you lose your job. That if you do not provide a level of service that the customer likes enough then they can go elsewhere. Look back at what were the biggest 50 companies 50 years (or even 25 years) ago, and you will see that a large % have gone. Either completely, as in bust, or split up, or taken over, or rationalised. That is the market at work. New sectors opening up, and the laggards being disposed of.

    A monopoly is a monopoly is a monopoly, whether its in the private sector or the public one. In the private sector we generally do not allow monopolies, and in those rare areas where they do exist (water, utility networks etc) we control their pricing ability by statute. Unfortunately the public sector is more in the ‘free at the point of consumption’ business, so there is no price to control. And its considerably harder to legislate for good customer service. How can you legislate that a child should get as good an education as its ability and work rate demand? You can’t, as there are too many variables.

    So the only solution is to (in as many cases as possible) open the public sector to consumer choice. Give the public the money and let them do the choosing, as they do in all the other areas of their lives.

  5. Paul Johnston says:

    @Jim but who is the consumer? In the school example is it: the parent, the child, local businesses who need people with the right skills, local residents who need reasonably social people etc etc. The problem with public services is that they raise more complicated issues than those a consumer faces in deciding whether to pay an IPhone or an Android.

  6. Pingback: Oliver Letwin: Fear doesn’t come cheap « We Love Local Government

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