Change for the better

12 Jun 09
The recession presents a threat to the public sector - but it also offers managers an opportunity to innovate in ways they could not during the boom years.
By Peter Glynne

23 January 2009

The recession presents a threat to the public sector – but it also offers managers an opportunity to innovate in ways they could not during the boom years. Peter Glynne makes the case for a sustainable approach to achieving efficiency savings

Public sector organisations were under pressure to maximise their efficiency long before the economic downturn. Now, with a recession looming, it has become even more urgent if they are to weather the storm ahead.

They are already expected to find a minimum of 3% efficiency savings each year over the current Comprehensive Spending Review 2007 period. From 2010/11 onwards, they will be expected to find further savings, as outlined in the Operational Efficiency Programme in the 2008 Pre-Budget Report. The five cross-cutting areas being examined by the OEP are: back office and information and communication technology; collaborative procurement; asset management and sales; property; and local incentives to innovate in frontline services.

The 2008 PBR also announced that £3bn of capital spending was being brought forward from 2010/11, covering areas such as roads, housing and regeneration, schools and further education.

There are also a number of sizable reform programmes taking place across central government, health, education and local government. For example, the Northern Ireland government is undertaking a major transformation of central government and the wider public sector.

In the current economic climate, there are opportunities to make changes that would not necessarily be made in more prosperous times. To maximise these, public sector organisations need to re-evaluate their approach to realising benefits. In this context, a benefit is defined as a measurable improvement in business performance resulting from the delivery of change through a project or programme.

But benefits management is one of the least mature aspects of project, programme and change management. Traditionally, success in realising benefits has been measured through a post-implementation review of a business case. This audit-led approach does little to ensure that the benefits are planned and managed from the outset. It often creates a culture where the benefits are centred on securing approval for the business case and limited thought is given to ensuring that the approach drives sustainable value. Benefits realisation always lasts longer than the initial project.

Keeping the focus on the benefits can be challenging for many organisations. Added to this, project managers are often under pressure to deliver on time and to cost which can lead to a compromise on quality and on the benefits. It is not surprising that there is often confusion around what constitutes good practice in benefits management.

The most successful organisations use an approach based on three factors, which need to be closely aligned: organisational culture and leadership; management information; and the approach to benefits management.

Leadership is obviously vital. The economic downturn will affect the finances and operations of public sector organisations. To respond effectively, senior management needs to be fully open to change and, more importantly, to realisation of the benefits.

Early communication and awareness of stakeholders’ interests is essential. For example, staff in a customer contact centre are often interested in benefits that will improve their everyday working experience or their level of reward. Conversely, the executive board will be interested in the benefits that will achieve the strategic business plan.

Benefits are an emotive issue in most organisations and go right to the heart of the reasons for change. For example, a cost reduction programme that reduces the frequency of bin collections in a local authority will always be controversial.

There are many high-profile examples across the public sector where programmes have failed to provide the intended benefits – and these represent important lessons for the leadership of all public sector organisations.

Another major issue for organisations is management information . This means getting the correct information to the correct people at the correct time. Too many organisations rely on complex spreadsheets to produce information on benefits. In all but the simplest of cases, this proves difficult to aggregate and summarise and risks becoming a considerable administrative overhead.

In light of cost pressures, financial benefits must align with operational forecasting and budgeting across the wider organisation. Both sets of figures need to be consistent.

Many organisations use specialised software applications for forecasting and budgeting and, where appropriate, financial benefits should be profiled using the same approach. As part of a tactical response to the downturn, public sector organisations need to make greater use of their management information for effective decision-making.

While the economic change is a threat, it is also an opportunity to transform business operations in fundamental ways. To do this, a standard approach to benefits management, centred on sustainable value, is needed.

For example, a local authority setting up a shared services centre for finance should: identify the most relevant benefits through working closely with staff; profile the identified benefits to capture information on ownership, measurement criteria, level of priority, relevant dates and risks; quantify what benefits the centre will provide; conduct formal ongoing reviews when the centre is up and running; and take corrective action when it is clear that the benefit target is not being achieved. These steps are iterative and need to reflect constant change across the local authority that will affect the operation of the shared services centre.

Many organisations’ experience of benefits management is that it is largely process-driven and does not provide the intended value. For example, one public sector organisation’s review of its approach found that 68% of its managers had little or no confidence in it. It responded by making frontline operational managers work alongside the project and programme teams and be more closely involved in planning.

There are a number of critical factors for the approach to be successful in any organisation. In the case of the local authority shared services, for example, these are: ensuring the approach is supported by the entire management team; including those directly involved in the project; keeping it in line with the three- year strategic business plan; and evaluating how each benefit contributes to the strategy.

A governance model also needs to be developed, which ensures that the relevant managers are accountable for their areas – although the executive board should take ultimate responsibility for achieving the benefits. Many public sector organisations find it hard to identify meaningful information to measure benefits. The report, Value for money in public sector corporate services: a joint project by the UK public sector audit agencies, published in 2007, should help. It provides a useful framework of performance indicators that can be used to measure the realisation of benefits across finance, human resources, information and communication technology, estates and procurement.

The Office of Government Commerce and the Treasury are also strongly focused on building capability in benefits management across the public sector.

In these turbulent times, a structured yet simple approach to benefits-driven change could be the silver bullet that many public sector organisations are looking for.

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