[Skip to content]

Public Finance logo
News and expert comment on public policy and finance
Public Finance Google plus Public Finance Facebook Public Finance Twitter Public Finance YouTube
.

Off the beaten track, by Craig Baker and Patrick Lord

More information

06 May 2005

Cost savings are the most readily identifiable outcome of government efficiency drives. But, as Craig Baker and Patrick Lord point out, it is vital to find ways in which to track equally important intangible benefits

Departments and agencies across government are busy designing and implementing plans to make themselves more efficient. Amid all the planning and implementation of efficiency programmes, which for many departments involves a major restructuring that could affect thousands of staff, there is a danger that some will fail to track the benefits adequately and ensure that they are delivered.

The efficiency agenda is not simply about cutting costs, but also about providing high-quality public services at reduced costs, so the benefits that departments need to monitor cover both financial benefits and a more complex array of intangible benefits. These include customer satisfaction, identification of the appropriate range of services provided, accuracy, and turnaround time.

In our experience, failure to put in place mechanisms for tracking key benefits leads to failed projects. Without such procedures, the efficiency programmes will not have the intended impact.

We have been involved in efficiency programmes and other public service change programmes in UK central government, including projects for the Department for Work and Pensions, the National Health Service and the Ministry of Defence, and also in regional agencies and public sector bodies around the world.

In our experience, programmes typically fail for predictable reasons:

  • they focus only on the financial benefits, pushing difficult-to-measure intangible benefits to one side;
  • implementation plans lack an understanding of how the organisation actually delivers results;
  • the plans don't specify how benefits will be monitored, which makes it difficult to measure success; and
  • plans gloss over specific actions required to turn an implemented plan into real bottom-line benefits.

The Office of Government Commerce has been aware of this problem for a while, and has produced guidance for public sector organisations to help them ensure that 'benefits management' is taken seriously and built into projects. However, although the OGC's documentation and procedures are comprehensive and detailed, it is not clear how they can be effected.

So how can public sector bodies demonstrate that the efficiencies they are planning really can and will be realised by 2008? And how can they actually achieve the targets?

Put simply, they need to test whether their plans will deliver real efficiencies and put in place the right management systems. We have identified four basic rules that can help them achieve this.

First, focus on the objectives that really make the difference, not the ones that are easy to measure. Across all the government agencies we have worked with, most project business cases have only one real objective worked out, even if it's not the primary one: to cut costs. Intangible benefits, such as improved information or customer satisfaction, are rarely quantified and set as targets.

However, it is almost always the intangible aspects that are the key levers in delivering operational performance and efficiencies. By misunderstanding their importance, the project runs the risk of damaging both internal and external perceptions of success.

In one recent example we are familiar with, an agency is pressing ahead with plans to reduce its workforce by outsourcing functions to a third-party supplier. However, because it did not plan this jointly with the supplier and, in particular, has not agreed the critical performance objectives beyond financial ones, the supplier is struggling to meet the requirements and is at a high risk of providing a significantly worse service than before.

Although it is essential to secure agreement on the performance criteria that are most important, and to set these as objectives in addition to savings targets,

it is also vital that not too many objectives are set. If there are more than half a dozen key objectives it becomes difficult for people to focus on delivering

the critical ones, leading to confusion and futile manoeuvring to justify meeting one objective at the expense of another.

Secondly, make the business case drive the design of the solution, not the other way around. A project can only deliver meaningful change if those who are managing it understand how the organisation's capabilities affect performance in the relevant areas. Projects often focus on the solution first and calculate benefits afterwards.

Our experience shows that it is far better to develop models of what drives organisational performance in order to identify the real drivers of change as distinct from the assumptions, and then plan a solution that will address them.

On a project we know of where the critical objective was to get customers to make payments for services, the initial approach focused on making stronger threats of enforcement for non-payment. However, when models were developed to understand what really drives compliance, we identified the duration of case assessment as a major factor, suggesting new and simpler solutions to the problem.

Thirdly, adopt a results focused mindset from the outset, not a post-project justification approach. Good change control is essential to project management, as long as the business case is not forgotten by the time implementation starts. If the business case is properly constructed, the project will be on track to deliver outcomes from the start. But the impact of changes in scope on the outcomes should be monitored throughout the project so that there are no surprises later, and so there is an opportunity to do something about a possible shortfall before it is too late.

One agency we worked with put enormous time and effort into post-project reviews, primarily driven by the need to find something positive to say about projects that delivered little value, or sometimes even made matters worse. However, because the original objectives had not been clearly defined and measured, the review team used anecdotal evidence to identify minor benefits that were sometimes unrelated to the original aim of the projects. We reviewed and helped clarify the objectives of all 70 or so projects under way to identify those that were not clearly supporting the agency's goals. As a result, about a third of them were stopped. This sent out a clear message that projects had to be focused on results from the outset.

Delivering results is not about implementing a solution and trying to make the most of it afterwards. It is a proactive frame of mind adopted from the start of a project involving constant assessment of whether

the project is on track to deliver the results before, during and after implementation. So it should become second nature to consider any change in scope or any project issues in the light of their likely impact on delivering results. And this requires the intangible objectives to be measured and monitored comprehensively from the start of the project until a point well after implementation when benefits have all been demonstrated.

Finally, remember that results are delivered by the organisation, not by the project.By implementing new ways of working, the project enables the organisation to improve. But it is critical that the organisation understands how to capitalise on the changes to deliver results, and develops specific plans to realise benefits.

A recent project aimed to improve the quality of service on the 'new customers' team, and speed up handling of information processing and reduce the number of staff in the old customers team.

After implementation, the old customers team started hitting targets and going home early. The new customers team, however, failed to cope with their increased workload and started working overtime, and the quality of their work decreased. The project had delivered the processes, IT and training, but had failed to plan for the transfer of staff between the two teams. Because this wasn't planned in advance, benefits were not actually realised for another three months.

So it is vital that the organisation is ready to exploit change, by planning activities such as moving or removing people from teams, renegotiating third-party contracts, and incorporating cost reductions into the subsequent year's budget. These actions should be captured in a 'benefits contract', which clearly sets out the changes that the project will implement and the associated actions that the organisation commits itself to take in order to deliver the benefits.

Adopting these four practical rules will help public sector bodies demonstrate that the efficiencies they are planning really can and will be realised by 2008 and, with good management and good planning, they will be in a strong position to achieve their targets.

Craig Baker is a vice-president and Patrick Lord is a manager at consultants AT Kearney

PFmay2005

Comments