23 November 2007
Despite the rhetoric, the public sector is still handcuffed by bureaucracy and targets. A better solution is performance contracting, which has worked in prisons and has the power to bring creativity and accountability to other services, too, argues Gary Sturgess
Why are there so few great books on public service management? Over the past two decades, only one has sold well – Osborne and Gaebler's Reinventing government – and that was published 15 years ago in North America.
Why is there only one great school of government throughout the English-speaking world? For more than a quarter of a century, the UK has led the world in public service reform. Yet we still have no institution comparable to the Kennedy School at Harvard, an international centre of excellence in this field.
Why is the profession of management not respected in government in the same way that it is in the private sector, and why is there not the same sense of vocation among young executives? Why is there no popular literature on public service management, comparable to that which exists in the private sector?
The answer is that management is not valued as a discipline in the same way that it is in business. The main reason is that the public service economy is dirigiste. The entire sector – which makes up around 25% of the national economy – is centrally planned.
Service managers are dominated by a succession of five-year plans and performance targets set by a state planning commission at the heart of government. And where concessions are made to frontline professionals, public service managers – the professionals most directly challenged with reconciling 'value' and 'money' – are rarely acknowledged.
There has been change, but the gains by frontline managers have not been great. The 1988 Next Steps initiative, which created new executive agencies to carry out work previously done by government departments, was a shift in the right direction. But the principle of greater managerial autonomy was not carried down far enough; hospital chief executives, local education authority managers and prison governors remained heavily regulated.
Delivery targets, as first implemented, intruded even more deeply into managerial discretion. The government's new performance management framework is meant to lighten this load and there was certainly a recognition in the recent Comprehensive Spending Review of the need to deregulate frontline delivery.
But without fundamental changes to the structure of the public service economy, the commitment to reduce by 30% the amount of data collected from the front line is unlikely to be achieved.
One of the most significant reforms in this regard over the past 15 years has been the development of performance contracting. Under this regime, public service managers report that they are more often treated as professionals and allowed to get on with the job. In most cases, performance contracting involves the provision of public services under a formal agreement with a private firm, but many of these contract managers have previously worked in the public sector, meaning they are in the unique position to compare the models.
The Serco Institute interviewed around 100 contract managers from around the world who had transferred from the public sector. Overwhelmingly, they felt that they were better positioned to deliver better services under the contractual model. Two reasons stood out. One was that they had greater autonomy than under traditional bureaucratic structures – freedom to build teams, freedom to shape service solutions and freedom to adapt quickly when things went wrong.
The other reason was that they felt more personally accountable. The contract was like a bubble, with a clear line of accountability upwards, through them. Bureaucratic management was like a layer cake, so that accountabilities could drift between levels.
There is seemingly a paradox here – greater autonomy and greater accountability. But, as some of our respondents pointed out, these are simply two sides of the same coin. There can't be true accountability without real responsibility.
This is not an argument for contracting out public services. But it seems likely that the managerial model that has developed in response to performance contracting might have implications for the public sector more broadly. The government is right about the deregulation and devolution of public services. But if it wants to liberate frontline service managers, it needs to pursue this strategy with much greater confidence and much further down the organisational hierarchy.
Service managers are one of the keys to value for money in public services. They are close to the front line, so they have a direct interest in the way services are delivered, but they are also the first level that we can expect to hold responsible for efficiency.
Several years ago, the Treasury began investigating the sources of public services productivity. But there is nothing to suggest that the government has continued with this project. In the CSR documentation, public service reform is addressed in conventional terms – 'targeting resources on the most effective policies, reforming delivery to raise productivity and increase efficiency wherever possible' – but the promising work on public services productivity has collapsed into an exercise on measurement (albeit an important one), led by the Office for National Statistics.
Although more research is vital, there is already a significant body of evidence indicating that competition and contracting can markedly improve public services' productivity.
The Serco Institute is about to publish an analysis of international studies of competition. In each of the sectors we have studied – defence, health, prisons, municipal services and refuse collection – there have been vigorous methodological debates, but the conclusion is that competition makes a significant difference.
Public or private ownership is largely irrelevant: it is competition that matters. More attention should be paid to the sources of these savings but there is ample proof that competition for the management of public services can deliver financial benefits through better service design and smarter people management.
There must be limits to competition. The same market models do not work in all cases and great care must be exercised in the design and management of these instruments. But competition and contracting have a great deal to offer in stimulating innovation in delivery, in motivating managers to assume the risks of implementation, and in disseminating best practice across the public service economy as a whole.
A good example comes from the custodial sector. It is generally acknowledged in this country that prison contracting was central to the introduction of management initiatives such as 'dynamic security' (in which prison officers worked more closely with prisoners) and service standards for individual establishments in the early 1990s.
These policies had been discussed for almost a decade, but limited progress had been made until contracting made it possible to insist on performance standards, and contractors imported the latest thinking about direct supervision from North America.
Moreover, benchmark competition was fundamental to the dissemination of these ideas across the publicly managed prisons. The former director-general of the Prison Service, Martin Narey, acknowledged the role that contract prisons had played in implementing the government's 'decency to prisoners' agenda, which included basic courtesies such as calling inmates by their first names. This was introduced in the first of the privately managed prisons and then copied by the other private operators. But it would take a decade or more for this initiative to be widely implemented across the system.
It is perhaps inevitable that, right across the public services, ministers are simultaneously struggling with devolution and integration. But if frontline service managers are to be liberated from the red tape, and at the same time challenged to enhance the productivity of public resources, then much greater attention must be paid to how the public service economy is structured.
Gary Sturgess is executive director of the Serco Institute, which this month publishes Competitive edge: does contestability work?
PFnov2007
