Whichever party wins the next election, UK political culture is likely to maintain the drive for departmental or public body restructures to gain real or perceived efficiency. However, as the recent NAO report, Reorganising central government, clearly illustrates, failure is inevitable without a strong business case and clear objectives from the outset. Equally, the technology, people and property elements need careful structuring to achieve genuine efficiency savings.
The NAO estimated that 51 government reorganisations had cost more than £780m, with technology being one of the most significant costs alongside people and property. The report concluded that little ‘value for money’ had been returned on the investment.
These findings prompted Xantus to work in association with Sourceforconsulting.com to produce a report, Public Sector M&A?, which is based on interviews with independent restructuring experts. The report reinforces this need for a structured approach as well as drawing lessons from private sector mergers for adaptation to the public sector. I should state that this enthusiasm should be tempered by research suggesting that only 30 per cent of private sector mergers actually succeed, while conversely there is clear evidence that not every public sector equivalent is a failure.
So what are the lessons? In talking to a wide range of independent restructuring experts, the essence of success seems to be a diligent approach at the outset; tough decision-making; and accepting that long-term cost savings inevitably requires job losses at all levels.
The Xantus report also finds that technology can make or break any government restructure, with the challenges lying not just in incompatible systems, but in the governance, decision-making and suppliers involved in providing the IT infrastructure.
The starting point of any merger must be due diligence. Assessing the capability of departmental IT is just as important as evaluating the whole organisation. Thorough due diligence should clearly establish whether genuine efficiencies can be made through merger. If not, is there any point in continuing with a costly and time-consuming process?
Change is uncomfortable, but exciting, if driven by a clear vision and strong leadership. This is evidenced in the most successful mergers, along with the fact that 50% of people involved in the change aren’t going to like the decisions made!
Working smarter with suppliers is also essential. In public or private sector mergers, there are often long-term IT service contracts to consider. As with internal staff, confrontation can be avoided by clear assessment of need and presenting change as an opportunity to share in the realisation of future benefits.
Finally, decisions should be just that – decisive. Decide which IT systems to use; decide what departmental structures you need; and decide the cost savings to target. Planning must be careful but acted on quickly, decisively and fearlessly – whatever the political colour of the future.
David Yip is Director of Xantus Consulting
The report, Public Sector M&A? - Examining the parallels between public and private sector restructuring is available at www.xantus.co.uk
