181 – Applying the public value concept in local government using systems thinking

Posted by Colin Weatherby                                                                                         1100 words

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Systems thinking is potentially a great lever for improvements in the design and delivery of local government services. However, it will require a major shift in thinking about how work is designed and managed because the systems thinker is focussed on the purpose of a service from the customer’s point of view.   This is a change from the needs of the organisation and the people working in it driving the design of work and delivery of services. Here are some thoughts building on the earlier post by Parkinson.

Local government needs to work harder to put the needs of customers first despite the realities of multiple and conflicting accountabilities, limited potential for increased income from rates, difficulty defining who the customer is, and increasing expectations of service levels, reliability and speed.

The principal focus of systems thinking is designing and managing the organisation with the customer mind. According to Kristian and Jonas Nielsen it involves understanding demand, managing flow, understanding what is value and what is waste, and using capability measures that tell us how well we are performing against our customer-defined purpose. Systems thinking is focussed on managing value and fulfilling the customer-defined purpose.

Mark Moore describes public value is the collective view of the public or community about what they regard as valuable with regard to the use of public money and authority. As such it is the community-defined purpose for the organisation. If public managers don’t try to understand what constitutes public value for their citizens, how can they set out to deliver it through their operations and then be held accountable for their performance?

Systems thinking provides a framework to review and change service delivery operations to achieve public value.

What is systems thinking?

Peter Checkland Published a seminal book on systems thinking in 1981. He describes system thinking in the following way:

“… ‘systems thinking’ implies thinking about the world outside ourselves, and doing so by means of the concept ‘system’ …”

In this context, a ‘system’ embodies the idea of a set of elements connected together which form a whole with properties that are the property of the whole, rather than the properties of the component parts.

The key challenge for a public service organisation using systems thinking is identifying and absorbing the variety and variation of demand. To be successful, it is essential to understand the nature of the demands that customers are placing on the system. This is particularly important if the service is designed to allow frontline staff to assist the customer in ‘pulling’ value from the system. This is a fundamental challenge for many councils because customers introduce variability and efficiency measures seek to eliminate it.

Systems thinking and design puts staff at the centre of the enterprise, enabling them to contribute and absorb the variety in demands. The insights of frontline staff in understanding customers in context and responding to their real needs, not simply offering standard services, are essential. This is discussed later in relation to customer-introduced variability. For the purposes of this paper, customer includes end users, service recipients, clients, organisations, or citizens, depending on the service.

In a report released in 2014, Locality and John Seddon criticise recent changes in public services because of the focus on efficiency from economies of scale and specialisation or standardisation. They believe that understanding demand from the customer’s point of view, designing services to absorb variety, and measuring achievement of purpose will reduce costs by eliminating failure demand. They describe this as ‘managing value, not cost’.

The principal focus of systems thinking is designing and managing the organisation with the customer mind. It involves understanding demand, managing flow, understanding what is value to the customer and what is waste, and using capability measures that tell us how well we are performing against our customer-defined purpose. Terms such as ‘demand’, ‘flow’, ‘value’ and capability are often used in local government without really understanding what they mean and how to apply them.

Flow, in particular, is an important concept. Locality and Seddon describe the service design principles underpinning ‘economies of flow’;

  • Any waste in a system represents failure to provide value for customers.
  • The service design should seek to provide value alone.
  • Focussing on managing value to drive costs down.
  • Control should be located where the work is done.

In manufacturing, organisations are able to be hierarchical and managed using command and control because the products are standard and they have economies of scale. It is very difficult to use the same approach in service organisations where the command and control organisational design typically responds to the variety of customer demands by establishing procedures, standard forms, functions, levels, specialised functions and similar. The consequence is inflexible and unresponsive operations that create waste and fail to meet customer expectations.

John Seddon contrasts command and control thinking with systems thinking to highlight the emphasis on customers, demands, capability, cooperation, learning and adaptation that is made possible through a systems thinking approach.

Command-and-control versus systems thinking (Seddon, 2003)

COMMAND-AND-CONTROL THINKING SYSTEMS THINKING
Top-down, hierarchy PERSPECTIVE Outside-in, system
Functional DESIGN Demand, value and flow
Separated from work DECISION-MAKING Integrated with work
Output, targets, standards:

related to budget

MEASUREMENT Capability, variation:

related to purpose

Contractual ATTITUDE TO CUSTOMERS What matters?
Contractual ATTITUDE TO SUPPLIERS Cooperative
Manage people and budgets ROLE OF MANAGEMENT Act on system
Control ETHOS Learning
Reactive, projects CHANGE Adaptive, integral
Extrinsic MOTIVATION Intrinsic

Local governments are command-and-control organisations. In Victoria, this is legislated through the chain of command established in the responsibilities of the council, the CEO, and the organisation. This is a key constraint on introducing systems thinking. Typically council organisational design is hierarchical, reflects professional disciplines and functional responsibilities, decision-making is centralised with the executive, services tend to be reactive, and there is a strong emphasis on control. Instruments of delegation or authorisation issued by the CEO demonstrate the focus on hierarchy and control.

Systems thinking and public value

Systems thinking is focussed on managing value and fulfilling the customer-defined purpose. Public value is the collective view of the public or community about what they regard as valuable with regard to the use of public money and authority. This occurs along a spectrum from value obtained from public services that is essentially private value, similar to the concept of customer value, to public value that reflects the aggregate value expectations or desires of citizens. As such it is the community-defined purpose for the organisation.

Unless public managers understand what constitutes public value for their citizens they cannot set out to deliver it through their operations and then be held accountable for their performance. Systems thinking provides a framework to learn from customers and the community, be confident about what will provide value, and to review and change service delivery operations to achieve public value.

Checkland, Peter, 1981, ‘Systems thinking, systems practice’.

Moore, Mark H. 2013. ‘Recognising Public Value’.

Nielsen, Kristian Astrup and Nielsen, Jonas Astrup, 2009. ‘Systems Thinking – Understanding Services as a System’.

Seddon, John 2003.’Freedom from command and control’.

Seddon, John and Locality, 2014. ‘Saving money by doing the right thing – Why ‘local by default’ must replace ‘economies of scale’.

 

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