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Oh dear!

If you are in a water company doing any form of outcome work for OFWAT, you must beware (and read) the accompanying Outcome thinking White Paper on the principles that underly proper outcome thinking.

I think it is great that OFWAT are planning to use Outcome thinking in their price determinations but, for goodness sake, their examples of outcomes show a complete mis-understanding of outcome thinking and what it means!

As a result I have ended up writing a Outcome thinking White Paper for some clients in the water industry on the subject of outcome thinking, the logic model and its underlying principles.  (I do this when I get angry, and boy did this make me angry).

[Update: Mar 2014: Since originally writing this article in Oct 2012, I have helped two companies develop their outcomes.  That Outcome thinking paper became the basis of one of those company’s outcome statements to OFWAT.  The other handed over copies of my book, Strategy Mapping for Learning Organizations, to the regulator when they submitted their submission to OFWAT.]

What goes wrong with OFWAT’s approach to outcome thinking?

Let us  look at just one OFWAT paper.   “Inputs, outputs and outcomes – what should price limits deliver? A discussion paper”.

  • On page 7 they define inputs, outputs and outcomes as a hierarchy.

Here is the first problem.  The input output outcome model is NOT a hierarchical model – it is a rich cause and effect model.  But at least the say Outcomes are what customers value.

  • Page 8 they say “Outcomes are the higher-level objectives that company actions, activities and achievements are intended to help deliver.”  Umm.  Confused message.  Outcomes are not “the higher level company objectives”.  Outcomes are explicitly outcomes for customers.  They say examples might include:
    • providing safe drinking water;
    • providing sewerage services consistent with maintaining public health;
    • reducing carbon emissions;
    • fair, transparent and acceptable bills for end-customers;
    • compliance with legal requirements; and
    • sustainable use of water resources
Oh dear! Every single example in this list is something that the company would do.  Not what the customers want.  The trick is to look at the subject of the sentence.  Who “provides safe drinking water?” The company provides safe drinking water.  Not the customer.  So this is a company output , NOT an outcome.  An outcome might be “I know that my water is safe for my children to drink”.   Who reduces carbon emissions?  Answer, the company.  The consumer is not involved.   This is a classic case of mistaking what you produce, (outputs)  for what the customer wants (outcomes).

The outcome should include the thought, how does this change the  life or well-being, of the consumer, now or in the  future?

  • On page 9 they cite a collection of so-called “Outcomes” from the “Strategic statements of companies”.

Let us be clear.  All these examples, without exception, are statements of outputs from the companies and the company’s objectives.  They are NOT outcomes!  They are strategic objectives, for the company.

  • On page 11 they refer to outputs.  They say, “Outputs are the observable and measurable activities, actions or achievements that a company needs to deliver to bring about the outcomes that customers and broader society value.”
Precisely. yet each of the examples earlier are outputs, NOT outcomes.  Did they not look at their own advice?  The examples continue in this erroneous vein.
This is a basic error of understanding of the Logic Model (where the input, output, outcome model originally comes from).   Confusing what you produce with the benefits for the beneficiaries is a fundamental difference between outputs and outcomes.
Having no strategy for influencing the benefits of behaviours and outcomes for beneficiaries, is also a mistake.  This is called “The theory of change”.  Having a strategy to deliver your outputs is only a part of the story.

Why so few good examples in the  UK public sector? They omit the underlying methodology – the study of the method.

Unfortunately there are many such mistakes in outcome thinking in the UK public sector.  So, I investigated why I knew of so few examples of good practice in the UK public sector – and found out why!  The reason there are so few UK examples is that, in all the UK central government examples and references, the original underlying approach is completely discarded and there is almost no reference to the solid theory, thinking and experience base that sits behind it.  They have not studied the method and its origins.  They have taken a rich model and discarded all the useful bits, just keeping the empty skeleton – the inputs, outputs and outcomes (and ignored some of them).

Let me explain.  Read my Outcome thinking White Paper and you will see what I mean.   Every UK public sector reference I found to the approach, is superficial and simplistic: an approach that won’t help anyone.

OFWAT examples of  outcomes are simply wrong and misleading

It is worse.  Many have basic mistakes, even in these simple descriptions.  For instance I looked at some of the OFWAT examples and their papers show a complete mis-understanding of the model, and especially what outcomes are and how to define them.   They variously describe outcomes as “Strategic objectives” and “Higher-level objectives that company actions, activities and achievements are intended to help deliver”.  Both are completely incorrect and misleading.   If what I have found is their best attempt, and you or any other Water Company)follow their guidance, you all will be up a gum tree, in the poo, and down a rabbit hole, without a paddle, all at the same time!  Seriously.

[Update Mar 2014: This outcome thinking regulatory approach is now being applied by OFGEN to electricity companies – I hope their thinking is clearer.]

It is clear that OFWAT (in these papers anyway) do not understand this outcome based method, its deeper approach and the implications.  That has severe consequences for the Water Companies.

Put another way, you have the chance to leap ahead and demonstrate best practice to them.

Consistent with the underlying thinking we apply with our clients.

What I did find, is that the approach I use so often to map how an organisation will influence its customers, or a public sector organisation will benefit its beneficiaries, and the principles behind it, are perfectly in line with the underlying methodology.

It will produce useful inputs, outputs and outcomes: it will also help you with programme design and untangling the complex integrated strategies you talked about.  It will all help you here.

The origins of outcome thinking: the Logic model

Getting technical, the I-O-O approach originates in “The Logic Model” which comes from the External Evaluation of programmes of social change.   It did not originate in programme design.  So, trying to use it for programme design could be a mistake (unless you knew the tricks deeper in the approach – known as “Theory of change” which is useful for programme design).

Fortunately, deep in the various guidelines I found, there are clues as to how to do design that produces meaningful inputs, outputs and outcomes.  Curiously, this is all very analogous to the strategy map design in its thinking and principles, so I was feeling more and more comfortable the more I went into this.  It is comfortable familiar home ground to me.

Social change, evaluators and outcome thinking

The Outcome thinking White Paper provides loads of references that you could follow-up.  It refers to three manuals published by US “Program evaluators” who are looking at the impact of social change programmes on societies and people.  They have many good examples.

So, I hope this is helpful.

Have a read of the Outcome thinking White Paper.   If you are in the water industry (or even in OFWAT) I think it is mandatory reading.  It will help you understand how outcomes should be developed and will help you develop outcomes and strategies that can be tracked and usable for the price determination process.

Go to the outcome thinking page, and download the paper. I am sure you’ll appreciate that it was worth it.

And if you want help developing outcomes PROPERLY, you should talk to someone who has done it properly.

We have a track record of helping organisations develop outcome thinking and action. Outcome thinking and Outcome models originally come from the evaluation of social change in the charitable sector in the United States.  They found their way into the UK public sector (where they are again poorly understood).  We have worked with organisations that use outcome thinking precisely for this purpose, such as Fund providers. We have helped public sector organisations (such as the NHS and City Councils) develop their outcomes and models of change.  We have also helped commercial organisations develop their strategy for changing and improving customer outcomes, because the customer perspective of Excitant’s fourth generation balanced scorecard approach uses a very similar model.  We also have water industry experience at a couple of Water companies.

Since originally writing this paper we have now worked with three major water companies and the Water Industryresearch organisation.

If you have any doubts that you are developing appropriate outcomes that can be delivered, then I would welcome the opportunity to explore the issues and how we might help ensure you develop meaningful, achievable outcomes.  To arrange a short discussion, simply give me a call.  My number is at the top of the page.