Outcomes-based approaches like Payment by Results are increasingly being used in public service delivery – but while they can improve results, they work best as part of a more integrated approach
There has been a noticeable increase in the use of outcomes-based approaches to public service delivery at both national and local levels. This is alternately referred to as ‘outcomes-based’ or ‘results-based’, or described as ‘impact’. The common theme is looking at the effect a particular activity or service has on those whom it is intended to benefit. Service delivery is viewed through the lens of ‘outcomes’ as opposed to ‘outputs’, with the potential for better solutions that may also deliver savings longer term.
Outcomes-based approaches can be applied internally as well. Managers can use it to shift their organisation away from a focus on outputs to asking why it does what it does, what it is looking for in terms of ultimate results and whether it could be done more efficiently while delivering better results for customers.
In commissioning, outcomes are seen as a way of incentivising service providers to deliver improvements. It shifts the basis of payment away from the number of ‘units’ delivered and towards payment linked to how well specified outcomes are achieved. The outcomes may be economic, environmental or social, or a combination of all of these, as long as they are clear and measurable over a set period of time.
Payment by Results (PbR) is one such approach. Its development in the UK public sector began with initiatives in the health sector more than ten years ago.
Other PbR initiatives followed, spanning public service areas including interventions aiming to improve family and child health and wellbeing, reduce reoffending, provide alternatives to custodial sentences for young offenders, improve independent and semi-independent living options for frail elderly and better management of chronic health conditions. There is increasing interest in how outcomes approaches can lead to real savings for organisations from improved results.
But approaches such as PbR present a number of challenges, as detailed in various studies. They require careful scrutiny of aspects such as specifying clear outcomes and ensuring that measurements don’t lead to gaming or other distorted behaviours; accurately attributing outcomes to specific services or programmes; and ensuring the attention stays on delivering what is needed, and not purely on ensuring set targets are achieved.
While it is relatively straightforward to specify and measure certain short-to medium-term outcomes, such as securing employment or reduced reoffending, in other instances the link between services provided and outcome may be less clear.
In addition, there may be more than one factor influencing the outcome, including a range of different service providers and services over time. At the heart of the matter is the fact that outcomes and the people they affect are complex things.
But these challenges are not insurmountable. Practical guidance is available on, for instance: identifying and clarifying outcomes; measuring outcomes and the use of proxies; assessing results, including the use of statistical tools, measures for minimising gaming, refining incentives and reviewing indicators. CIPFA is currently working on a publication, due out later this year, which will include information on these.
While outcomes-based approaches are useful, they make more sense as part of a broader consideration of the ultimate purposes behind an organisation’s activities, the real needs of those intended to benefit from these activities, and the extent to which its processes and systems match up to that. The better the outcomes, the more effective and efficient the resource use.
Therefore, any focus on outcomes needs to be a part of a more comprehensive and integrated way of thinking about how an organisation adds value. It should use an approach that enhances understanding of the relationships between the resources the organisation draws on (its ‘inputs’), the way it provides value, external factors, its outputs, and the resulting outcomes for stakeholders, the economy and the environment.
John Maddocks is technical manager at CIPFA.
For more information on integrated thinking and reporting, see www.cipfa.org
