Change, transformation, cost reduction and service provision
in the Public Sector:
Two contrasting case studies and lessons from them

Don't throw away the opportunity to lower public sector costs and still maintain or improve public sector services.

This extended Public Sector case study contrasts the approach of two city councils we have worked with. Both wanted to address change. One was successful, the other not. One addressed the underlying behaviours, the other did not.

There are lessons here for anyone addressing cost reduction, change and service provision in the public sector.

The pressures on public sector costs and services

Cuts in public expenditure combined with the protection of front line services is again at the top of the government agenda. Its an issue taxing the minds of senior civil servants in all parts of the public sector, be they in health, local government, central government departments, or any publicly funded body. We have come across health bodies looking to reduce management costs by 30% in some specific areas. Central government departments cutting back and merging. City councils cutting £150m from a £450m budget and staff being asked to take pay cuts and apply for their jobs at lower salaries. The rationalisation of public sector provision is in full flow. It is challenging many people.

We have been here before. Many times. How to get value for money in the public sector, has been a topic of continued attention for the past 10 years. A topic that has frustrated many top executives, whilst others have succeeded.

I know the cuts are deep, but do be careful of the idea that cutting costs always lead to cuts in services. As I explain in this counter-example from an ACCA public sector transformational change conference, where costs were cut and services improved, through some intelligent change management.

Putting that example to one side, and given the current climate, I wanted to tell you of a salutary tale from our experiences. It is an unusual client story for us. Most of our clients are using our approach five plus years after we have worked with them. This client isn't (yet). It is a story of a failure to change and a failure to implement. Instead, six years later, the people in that organisation we touched, influenced and convinced were still trying to deliver what we set out to deliver with them...

First let us tell the story of a successful change in a very similar a city council.

Successful Public Sector change in a City Council

In this engagement in the public sector (Peterborough City Council) we used practically the same fundamental approach and techniques for a Modern Public Sector Balanced Scorecard (with some refinements), but we started with engagement by the Chief Executive. She saw the problem as one that started in the management team meeting and permeated through the organisation. We were able to show her how to fix the problem there and then how to permeate the modern balanced scorecard solution through the organisation. We were able to closely with the executive team. The Chief Executive, and her team, became the strongest advocate of the joined up thinking approach. As the management team started to behave in a joined up way, inside and outside their management meetings, then the organisation would follow.

Joined up working and improved governance

As a result, without any structural changes we created mechanisms (strategy maps and shared balanced scorecard objectives), of joined up thinking and working. The strategic plan was organised around six outcomes for the community. It also took only two, painless, weeks to produce that year, as opposed to the nine painful weeks the year before. The Governance structure of political committees was adjusted to align with the six outcomes which dramatically simplified the governance. Directors were made jointly responsible for outcomes and objectives, whist retaining responsibility for delivery in their departments. New, joined-up teams were created across departmental boundaries. Many of the people in these teams had never met before - even though the shared outcomes for the community. We have helped them start to break down their old silos and start joined up thinking and working

In terms of change in behaviour the effect was extremely powerful. As one Director put it,

"I can't think of another project where there has been such sign-up to the approach from every directorate. We have not embedded things in the same way before as we have with this balanced scorecard project.".

A senior manager said,

"With our strategy maps, we all carry a piece of the strategy in our pockets. I can ask anyone about their part of the strategy and we simply discuss each other's strategy map"

Finally, as the Chief Executive wrote:,

"I am writing to thank you for the tremendous contribution you made over the last few months helping us design and introduce our balanced scorecard performance management system.

Your energy, stamina and commitment were critical to the project succeeding within its extremely aggressive timescales, and the extent to which you have achieved buy-in from teams across the Council is a testament to your skills in engaging people and marshalling internal resources to lead the development processes.

I am particularly pleased that so far, and significantly because of the way you sequenced the design activities, we have managed to make the scorecard a strategy alignment tool, and avoid degrading it to simply another way of capturing performance indicators.

I know we have a lot of work to do to upgrade the content and make sure that senior managers focus on strategy, resource, process and service alignment, but I am confident that we have given ourselves the best possible starting position to achieve this."

Gillian Beasley, Chief Executive, Peterborough City Council

So with Peterborough we were able to help them position themselves to implement the sort of radical changes and joined up working they were looking for. You can read a more detailed version of this Strategic Balanced Scorecard in a City Council.

A salutary lesson of failed public sector change

Now lets return to the (what we regard as a) failed engagement. Back in 2005, we had another city council public sector client, (no names, no pack drill here).

In terms of change the challenges were similar. They had silos they wanted to break down. They wanted the departments to work more closely to deliver services to their population. They wanted to get away from eight different ways of planning to a common approach that helps the departments share and own objectives together, and helped senior managers see the overall picture. The audit commission had said they needed to improve their performance management approach across the organisation.

We were asked to provide a modern balanced scorecard based strategic planning and performance management approach that would support and address these issues. We were to design the approach, train their staff and help their staff to adopt and integrate the approach into their way of working. However our intervention was limited to training the middle managers and planners in the organisation in the new way of working.

Making progress, breaking down cultural barriers

Despite this, within a few months we (the client and Excitant) were making progress. They were moving from a variety of planning approaches, to adopting a common approach. They were using the approach in individual departments. They were starting to talk to each across department boundaries to share thinking and ideas.

"We have been here before"

We had also explicitly identified many of the cultural issues: the fundamental blocks of thinking and behaviour that stopped the organisation from changing and been effective. So we decided to expose these in a presentation to the Senior Management Team that covered all the departments. From the limited remit (and budget) we had, we were uncovering, exposing and tackling the fundamental beliefs and behaviours amongst the council's staff, that stopped the changes happening. We provided examples where we were encountering resistance and reluctance to change. We exposed where there were cultural barriers and behaviours that undermined the change. We made them clear and explicit.

When we finished our presentation, the first question was from the Chief Executive, but it was not to us. It was to his own management team. He asked,

"So where is our change management programme then? Wasn't it supposed to address these issues?"

Their change management programme should have been addressing these cultural issues, but it had fallen by the wayside. It simply was not addressing the fundamental changes. It had become the delegated responsibility of the Learning and Development team, and so it was only tinkering around the edges. The senior management team were not addressing the changes that they needed to make themselves to make sure the rest of the organisation changed.

We believe that addressing the cultural behaviours and beliefs is the only way to achieve change in any sustainable way . The greatest process in the world will crash and burn if it fails to address the cultural aspects, underlying beliefs and behaviours.

Here is an example of deeply embedded change that can be addressed. It was from the first city council example.

There is only so much you can achieve from the outside. It requires the inside to want to change. It requires the senior management, individually and collectively, to recognise the behaviours, and the source of the behaviours, are in themselves. They need to realise they need to change as well, not just tell others to change, and to explicitly act and behave to support these new behaviours. New behaviours and cultural; norms need explicit signals of permission and time for people to learn that the change is due. This is true in a public sector culture as in any organisational culture.

Well-intentioned silo thinking

This example explains how silo thinking can be embedded in an organisation and actually be well intentioned.

Making progress

At least we were making progress. You turn a tanker slowly. The ideas, principles and approach of joined up thinking was starting to permeate the planning sections and the minds of some key directors. They were asking how partners could explicitly help with delivery. Bear in mind this is four years before Local Area Agreements and Local Strategic Partnerships were introduced, yet we were using the same principles.

We were giving them the chance to be ahead of the game in delivering public sector services more effectively . Some were using the approach to demonstrate how savings could be made and services fundamentally improved. Previously there was little link between the capability of the organisation and its performance. Plans were been developed that explained, explicitly, how improving the capability of the departments and the organisation, underpinned its long term performance and delivery of services.

The deeper, embedded behaviour

Then came along Gershon. The Gershon review demanded cuts across the public sector. The client was ideally placed to respond, intelligently. But they turned away. The Finance department's response to Gershon was to ask each Director of Services to find 10% cuts in their department. Not finding savings across the organisation, but in their department. Effectively they asked the Directors to think and act in silos again.

Guess what - they did. In effect the directors retreated into their silos to find savings. Occasionally one Director would pop their head out of the silo mentality and suggest that if they and another department cooperated so they could save money in both. But if this ever required a 1% increase in one department to save 5% in another department, you can imagine what reaction there was. Power would have been eroded within the "Losing" department. (Bear in mind prestige is often related to department size and budgets). The culture of cuts and reduced budgets on a department by department basis destroyed all the work they had done building up their integrated thinking.

This video explains how people can be trained to adopt an irrational behaviour and not even be aware of why they are doing it.

 

They reverted back to their trained behaviour - operating in silos. It wasn't prepared to be tough on the way it behaved or recognise where the underlying problems lay. As this video explains, it is often trained behaviour over time that people revert to.

What happened next?

Ultimately the cuts did not happen effectively. They cut some money, but probably not as much as they might have. Did services suffer or did they improve. Hard to tell. The council continued to have a poor best value score, though it did rise a level in the year we worked with them, primarily by focusing on the two or three critical measures that were holding them back. Not by changing underlying behaviours.

Four years on, the then Chief Executive and many of the directors from that time have changed. The new Chief Executive resorted to a fundamental structural change involving a large team of management consultants to completely re-organise the council. A programme that has taken over a year to conceive (I'll let you estimate the sums in terms of consultancy fees) and will take another two or three years to bed in.

The irony is that the structural change, and re-organisation, has moved people in roles that they are unfamiliar with, has create a new set of boundaries (are they any better than the last set?), and made many boundaries artificial by separating commissioners (thinking strategy) from providers (delivering services). Meanwhile they are still trying to tackle the cross cultural ownership and responsibility. Except this time with a more complex, commissioner/provider or strategy/operational, boundary to fight over as well. (Those in the NHS and in PCTs will recognise the artificial boundary that this creates and the problems associated with this pseudo-market mechanism.)

In other words they have spent a lot on superficial change without addressing the fundamental underlying behaviours, and the way people think and act. Things have not improved, but the deck chairs are in much neater piles. The processes have changed, but have the underlying behaviours and beliefs? Not from what I have heard.

The big lessons for public sector transformation and change

So what are the big lessons from this?

• The issue of change is about how people are trained to behave. You have to address the fundamental underlying behaviours, attitudes and beliefs. Often these have been trained into people and need to be trained out.


• Change required explicit senior management intervention. it can't be left to middle managers, the training department or consultants. Senior management need to recognise they also need to change.


• You can try and change the process but the deeper underlying behaviours will always dominate. You have to address these, explicitly. Give people permission to change.


• Sometimes what seems irrational is well-intentioned. They are just trying to do the best in the constrained situation they are in. Managers have created these constraints - current or past. It is vital to recognise these and change them.


• Public sector cost reduction, does not necessarily mean a proportionate reduction in services. If you can address the underlying issues, as in the call centre, and in the joined up working amongst city council departments, it is possible to reduce costs and improve services. You need to change the permission people are given to change the way they think, behave and act.


• You have to be sure that you are not holding that hose pipe on the gorillas.

More information

The successful change project is described in more detail here

Other parts of the Public sector transformation talk are available here

There are more examples of transformation and change using the modern balanced scorecard in our case studies

But if you really want to address the fundamentals, then have an exploratory discussions with us.