202 – Essay No. 6 – Local government and public value.

Posted by Lancing Farrell                                                                                              6500 words

bureacracy

Value is often mentioned in local government when talking about services, particularly ‘best value’. However, there is often inadequate understanding about the different types of value, the difference between private and public value, and how value is actually created and managed by an organisation. Sometimes there is the assumption that because we have been busy, that we must have created something worthwhile.

This essay brings together ideas from several earlier posts and is constructed around four hypotheses:

  1. That there are different types of value created by organisations and for local government public value is the most important.
  2. Public value is the primary value that must be understood and delivered if councils are to deliver what is expected by the community.
  3. Value-led management is a way of managing that could transform local government and make it more responsive and effective in serving the community.
  4. There are simple and effective tools that can be used to improve value creation in local government.

Hypothesis 1: There are different types of value and public value is the most important for local government.

Private value

In a metaphorical sense the value that you add is what you ‘bring to the party’. This is determined by what other people think you have contributed and by thinking about what the party would have been like if you hadn’t arrived.

There are different types of value and it is worth briefly considering the difference between private value and public value. Public value is the collective view of the public or community about what they regard as valuable, especially with regard to the use of public money and authority. Moore describes this as occurring along a spectrum from value that is 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 of citizens.

Moore degrees of publicness

At the private value end of the spectrum, the focus is on the individual service recipient and delivering value that satisfies their expectations.   At the public value end of the continuum, the focus is on achieving the social outcomes sought by the community or public.

Azaddin Salem Khalifa has identified four types of private value in the literature, each defined by, and useful to, different groups:

  1. Shareholder value – defined by economists and focussing on financial markets and returns to investors.
  2. Customer value – defined by marketers and focussing on profitable customer relationships.
  3. Stakeholder value – defined by stakeholder theorists and focussing on social responsibilities beyond shareholder value creation and including stakeholder such as employees, consumers and society at large.

It can be argued that customer value is the key to shareholder value and, therefore, customers are the most important stakeholders in determining value.

Customer value

Customer value is determined by the customers’ perceptions not by the suppliers’ assumptions: value is not what the producer puts in; it is what the customer gets out.

Khalifa describes three categories that customer value can be grouped into:

  1. Value Dynamics Models (also known as Value Components Models)

This model includes three components of value:

  • Dissatisfiers (i.e. characteristics or features that are expected in a product or service and generally taken for granted.) Since they are expected to be there, their presence only brings customers up to neutral but absence annoys them. As such, they are basic, must-have needs, and can drive customer dissatisfaction if they are not met.
  • Satisfiers (i.e. features expected or explicitly requested by customers.) They typically meet performance related needs and customers are disappointed if these needs are poorly met but have increasing satisfaction (and perhaps even delight) the better these needs are met.
  • Delighters (i.e. new or innovative features or characteristics that customers do not expect). Customers are surprised in a good way. Delighters innovatively solve a latent need of the customer. Since they are unexpected, there is no negative effect if they are absent.
  1. Value/Exchange Models (also known as Benefits/Costs Ratio Models)

In this model value is defined in relation to the difference between customer perceptions of benefits received and sacrifices made. Benefits include the tangible and intangible attributes of the service offering. Sacrifices include monetary and non-monetary factors, such as the time and effort required to access and use the service. The judgement of value results from the trade-off in desired outcomes and costs. In considering benefits and sacrifices, four consumer definitions of value are described:

  • Low price (Focus on sacrifice).
  • Getting whatever the consumer wanted (Focus on benefits).
  • The quality obtained for the price paid (Trade-off between sacrifice and benefit).
  • Total benefits obtained for total sacrifice incurred.
  1. Value Build-up Models (also known as Means-Ends Models).

This model assumes that customers access and use services to accomplish favourable ends. The choice of service is a means to enable the customer to achieve their desired end state.   The customer attaches value to the service according to its perceived ability to meet their needs. A service that satisfies customers’ practical needs delivers functional value, whereas a service that satisfies customers’ self expression needs delivers symbolic value. The value that matters is in the customer’s experience not the value in the actual service delivered.

Integrated Model

Khalifa believes that there is a need for a ‘configuration that integrates the diverse views on customer value in a coherent way’ that will broaden the perspective of managers, and give a more complete picture of customer value. The models of customer value are not intended to be stand-alone models. He sees them as highly related to each other and forming a cohesive, ‘nested, framework as illustrated below.

integrated value model

He believes that ‘elements related to customer’s total experience and philosophy of life that build up value, enhance it, and magnify it, can be incorporated in the (service) design; and elements that reduce value or diminish it should be detected and eliminated’.

To be able to offer customers superior value for exchange, an organisation needs to understand how value is generated and accumulated for customers, and what forms customer value can take.

value exchange model

The value exchange model makes sense for local government. At the end of the day, customers need to expend effort commensurate with the benefit they get. Hence, focussing on convenience in services is important.

The value build up model in the next circle provides understanding of the factors that influence the accumulation of value to the customer.

value buiuld up model

This model has real significance in public services where special meaning is attached to services that transcend simple transactions between suppliers and consumers. There is often a sense of ‘greater good’ involved in serving the public interest. People expect that public services treat them respectfully and observe all of their human rights. Value accrues when services support self-actualisation and the achievement of human potential.

Lastly, in order to build up value, it is essential to know what elements or components create or destroy value – hence the value dynamics model.

value dynamics model

Unfortunately, outrage is not uncommon in public services. Despite growing scepticism about the efficacy of governments at all levels, people often have high expectations of the public services they will receive and how they will be treated in the process. They expect equity and fairness.

The explicitly expected (i.e. expected value) curve is only accurate in relation to some local government services, yet it is the most commonly measured dimension of customer service. The fact that satisfaction is the difference between expectations and experience is overlooked.

Shareholder value

Stuart L. Hart and Mark B. Milstein describe a shareholder value framework based on the need to manage short-term results in the organisation today while simultaneously examining future growth or responsiveness needed, and the need to grow or change and protect internal organisational capabilities while simultaneously ‘infusing’ the organisation with new perspectives from outside.

shareholder value

This is a useful model for local government where urgency, and the immediacy of council politics, often keeps management effort focussed below the horizontal line. Compliance, avoiding the attention of the local media, avoiding critical reports from State government overseers, and vocal minorities complaining about any change effectively keeps councils in the here and now.

When councils fail to keep pace with changing community expectations or to deliver services in ways that meet customer expectations or to support State policy objectives, they face externally imposed change – i.e. compulsory competitive tendering, electoral reform, municipal amalgamations, and rate capping. All of these have been experienced in Victoria in an effort to ensure that councils deliver ‘best value’ and meet the needs of their communities and the expectations of the State.

If councils spent more time ‘above the line’ thinking about the changes occurring in society and their community, and taking the risks required to break free from current or historical patterns of activities, they could avoid these interventions. At least they would have community support for resisting them.

The closest approximation to shareholder value in local government is ratepayer value. Ratepayers own property and pay the land taxes that primarily fund local government services. They have a stake in the council that is different to all others.

Stakeholder value

The value sought by other stakeholders is nonetheless important in local government. Value is not only created for the benefit of the ratepayer, even though they are paying. This is often difficult for them to understand. Council’s have responsibilities to residents, visitors, voters, customers, and the community at large.

Most councils now have a ‘community engagement strategy’ that prescribes how various types of stakeholders will be engaged on issues depending on whether the issue affects some or all people living in the municipality. The intention is to enable people to influence decisions that affect them in ways that presumably create the value they need or want from their council.

Hypothesis 2: Public value is the primary value that must be understood and delivered if councils are to deliver what is expected by the community.

The public value was concept pioneered by Mark H. Moore, Hauser Professor of Nonprofit Organisations at the John F. Kennedy School of Government at Harvard University. He describes the aim of managerial work in the public sector as creating public value for the community. This is the equivalent of managers in the private sector creating private value for shareholders.   He says

“… it is not enough to say that public managers create results that are valued; they must be able to show that results obtained are worth the cost of private consumption and unrestrained liberty forgone in producing the desirable results. Only then can we be sure that some public value has been created.”

Moore believes that the public sector can create an equivalent to the ‘bottom line’ available to the private sector. To achieve this, he has developed the ‘public value scorecard’, based on the idea of the balanced scorecard, containing a ‘public value account’ (a clear, explicit and measurable statement of the public value that has been created and the costs involved in creating that value); measures of the organisations standing with the stakeholders providing social legitimacy and authority; and measures of the organisation’s ability to deliver the outputs required to achieve the desired public value.

This is a structured process to measure the public value created and, surprisingly, setting up the measures seems to be the best way to focus on creating it. Applying the concept of public value has been a challenge for those interested in using Moore’s ideas in their work. The concept of public value is easy enough to understand but identifying and describing public value has proven to be difficult. However, if you start with the measures it defines itself.

Moore defines public value as the collective view of the public or community about what they regard as valuable, especially with regard to the use of public money and authority. He sets out four key requirements of public managers in creating public value:

  1. Articulate a clear, complete and compelling idea of the public value to be produced.
  2. Develop a set of measures to record performance in producing that value.
  3. Invite and embrace external accountability for defining and creating value.
  4. Create management systems that distribute internal accountability for value creation across managers and employees so that they feel motivated to perform in the short-term and to innovate and learn over the long-term.

A process is required to determine what constitutes public value for each community that includes ways to check in periodically to stay in touch and be responsive to changes in needs and expectations. A serious focus on public value would help determine the operational capability required to deliver valued services and to design those services to meet expectations.

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? As Moore says

“Unless there is a clear understanding of the value to be produced, how can you design operations to produce or measure performance in delivering it? “

Moore has identified a fundamental conflict for public managers in delivering the public value expected. Is it the individual or the collective who are the ultimate arbiter of value? Is it the satisfaction of clients or service recipients that is important or the achievement of social outcomes? Every day public servants deal with conflict between individuals and their expectations of value and the broader community value.

Typically, the community expects that their taxes will pay for standardised services that are cost-efficient and equitable. When individuals want customised services that provide them with additional benefit using community resources, what are public managers to do? If the individual expectations of value are not met it will be an unsatisfactory customer experience.

Creating public value can be more complicated than the equivalent private sector creation of shareholder value. This is partly to do with the inherent complexity of public value, although private sector concepts of value are also becoming more complex with introduction of the ‘triple bottom line’ and expectations regarding corporate social responsibility.

The recognition of public value is further complicated by the accountability for public sector performance. Demands for accountability in the public sector are continuous and come from individuals who complain or join forces with others to form interest groups; the media amplifies the complaints of individuals and groups; councillors represent their constituents and demand accountability; and the Ombudsman, Auditor General and Local Government Inspector are powerful external sources of accountability. The demands for accountability come from many different places and focus on different aspects of performance. Some are more disciplined and consistent than others.

Ideally, these sources of accountability would integrate to form a compelling demand for performance that is focussed on an explicit public value account that clarifies expectations of public managers. However, more often auditing focuses on cost controls and procedural compliance. Politics focuses on the issues of the day. The pluralist system focuses on whatever captures the interest of any individual or stakeholder. Complaints focus on the bad experiences of individual clients. Determining whether or not public value has been provided is complex.

How is value created and managed?

It is a basic idea in management that businesses need to take a position in regard to their market. This is usually evident in their strategy, which describes the value the organisation decides it can create and how it will do that profitably. In the local government context it means the position taken in relation to the community receiving services, the public value to be provided by those services, and how the organisation will be structured and managed to deliver services that create value at break-even or surplus.

A ‘theory of value creation’ underpins strategy. If organisations don’t have an understanding of how what they do creates value, they risk working hard to create something that is ultimately valueless. This will be evidenced by having no customers, having dissatisfied customers because the value doesn’t satisfy them, or having satisfied customers but failing to capture the benefits of the value created. This last point is worth discussing. If a business creates value that is not tangible or visible to customers, and therefore is not appreciated by them, they risk being unprofitable and bankruptcy unless remedied.

When this happens in public services it does not lead to bankruptcy. Instead the organisation continues to operate and deliver services to customers with ingrained dissatisfaction about performance who make disparaging comments and criticisms that damage organisational image and reputation. There is little or no customer trust or loyalty but there is lots of repeat patronage. Feeling captive and forced to pay for services that they do not believe meet their needs or provide good value, customers become very unhappy.

Creating effective strategy is a particular problem for local government. Councils are multi-service organisations serving a defined geographic community or customer base, which can itself be quite diverse, to deliver whatever services they want at whatever service levels they decide they need. It is quite different to private sector strategy decisions where organisations tend to focus on particular services delivered to defined markets or market segments and the primary goal is to deliver value that satisfies customers, generates demand over the long-term, and returns a profit to shareholders.

Constantinos C. Markides, the Robert P. Bauman Professor of Strategic Leadership at London Business School, says:

“A strategic position is nothing more than the answers a company gives to three simple, but difficult-to-answer, questions:

  • Whom should I target as customers and whom should I not?
  • What should I offer these customers and what should I not?
  • How can I do this in the most efficient way?

These are not easy decisions to make, and each question has many possible answers, all of them apparently logical. As a result, these kinds of decisions will unavoidably be preceded with debates, disagreements, politicking, and indecision.

Yet, at the end of the day, a firm cannot be everything to everybody, so clear and explicit decisions must be made. Companies that fail to make clear choices on these dimensions drift aimlessly without a clear direction until they eventually fail.”

Any activity involving ‘debates, disagreements, politicking, and indecision’ will not be easy for local government. As a result, the questions posed by Markides are seldom answered explicitly enough to enable them to be communicated and operationalised effectively and efficiently. Failure is evident everywhere in discontent, disrespect, mistrust and resistance to paying taxes. The recent ‘king hit’ and ‘body slam’ of councillors at a Council meeting Victoria is evidence of deep dissatisfaction. Jokes, criticisms and violence are part of the ‘line of resistance’ and a continuum of public dissent.

The challenge for councils is the wide variety of demands that exist within the community for services as individuals seek private value from the taxes they have paid. It is the responsibility of the council to understand the collective view of the community and the agreed range of services they regard as valuable with regard to the use of public money and authority – i.e. how to create the value expected by the community. It is then up to each council to budget to deliver the agreed value and use resources efficiently in doing so.

The model below is useful to help frame discussions about value in local government. It shows the total private value individuals might choose to pursue, the agreed public value to be provided, the resourcing and the value that can be expected, and the actual value produced using a series of concentric rectangles.

value diagram shaded

Strategy should revolve around the which parts of the community will receive services providing either private or public value, the authorisation and legitimisation of those decisions, and how resources will be used to deliver the expected value. It is unrealistic to think that all private value expectations will be satisfied and strategy will also need to address how this will need to be managed.

Once strategy has been determined a business model is required that can deliver that strategy. David Teece says:

“Whenever a business enterprise is established, it either explicitly or implicitly employs a particular business model that describes the design or architecture of the value creation, delivery, and capture mechanisms it employs.

The essence of a business model is in defining the manner by which the enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit.

It thus reflects management’s hypothesis about what customers want, how they want it, and how the enterprise can organize to best meet those needs, get paid for doing so, and make a profit.”

The difficulties for local government are again apparent. Management must be clear about what the community wants and how to deliver it by designing an organisation structure and work processes, and managing the people who work in those processes to create the required value efficiently. This is made difficult by the nature of public services in which tax payers are not the recipients of all services, and payment is not made at the time of service consumption. Exercise of choice, sensitivity to price, and willingness to pay are not available as guides to value.

Sayan Chatterjee has identified four choices of business model. These are:

  1. Efficiency-based – the logic is to use human or capital resources to produce commodities.
  2. Value-based – the logic is to position outputs as a “want” items and command a price premium.
  3. Network value (loyalty-based) – the logic is to supplement the profit logic of the Value-based model with attributes that attract and retain customers.
  4. Network efficiency – the generic value capture logic is to increase the volume of transactions and create efficiencies across a network of suppliers and customers.

In local government, two of the choices are more common –efficiency-based and value-based. You could argue that some of the other models apply, for example network efficiency where councils are in an alliance, but it is an unnecessary complication at this stage to consider them. Once a business model has been selected the link to strategy becomes clearer. This is worth some discussion.

Efficiency-based

The efficiency-based business model relies on using human or capital resources to produce commodities efficiently. In the private sector, a business using this business model must compete through superior asset utilisation. It is a common expectation of councils that they will produce basic services efficiently. People often talk about ‘roads, rates and rubbish’ as being the appropriate focus for councils – i.e. rates are paid for efficient services to property. The idea is that these services are provided equally and at low cost to all properties.

Improving the performance using an efficiency-based business model requires capacity to be ‘unlocked’ through process innovation. Over time, the true capacity of productive resources is reduced by process constraints. Eliminating these constraints will result in higher asset utilisation and lower risk. One way to do this is to ensure that demands placed on the work system are smoothed to match capacity. This is usually done by shifting those demands in time and place.

This happens in local government through the standardisation of services to create scale economies and eliminate customer-introduced variability. The desirable demand characteristics for services delivered using the efficiency-based business model are high volume, low variety, low variation and low customer contact.

Value-based

The value-based business model relies on positioning its outputs as ‘want’ items that command a price premium. In the private sector the use of this model is obvious – Apple has made a fortune using it. In the public sector it applies where customers want choice or if services need to accommodate customer-introduced variability. In these situations, councils are expected to create the value sought by the service recipient.

It has interesting implications that are often not thought through when councils commit to using a value-based business model, often for services delivered to people and sometimes for services delivered to places. If the service has been funded for efficiency-based delivery, adopting a value-based approach will most likely lead to budget overruns. Service recipients are also likely to be dissatisfied if the organisation is attempting to meet their needs within very tight resource constraints.

When price signals are absent and services are free at the point of consumption (because they have been paid for in the annual land tax) it is difficult to meter out services equably. There is a real risk that the ‘squeaky wheel will get the oil’ and demanding customers will get more than their fair share.

Organisations using a value-based business model invest in capital or human resources to create products or services that will command a price premium. They also focus on visible outputs. In the public sector this translates as the need to justify any additional cost in providing a value-based service instead of an efficiency-based service. If additional cost is to be incurred, the benefit must be apparent. This is an important point. If the value created is not visible to the recipient, it is a waste of effort.

Operational capability or capacity feature in Moore’s ‘strategic triangle’, which has had currency since the mid 1990’s. You regularly hear people talking about the ‘authorising environment’ at the apex of the triangle.

Mark H Moore strategic triangle

It is worth a briefly describing what I mean by operational capability. In the context of the strategic triangle it is how well or reliably policies and programs work to create value. In a more general sense it involves focussing on what delivers value for the customer and designing processes to deliver it and meet their expectations.

Key concepts include understanding the various types of demands and how that characterises your operations (i.e. volume, variation, variety and customer contact); the primary and secondary performance objectives that must be achieved to create value (i.e. cost, quality, speed, flexibility or dependability), designing your supply chain (i.e. balancing efficiency and responsiveness), and more. The latest focus is ‘customer-centred’ service design to ensure that the sequence of activities in a process to deliver a service are mapped and arranged to optimise the experience of the customer within the resources available to the organisation.

Moore also describes a ‘public value chain’ in which inputs are transformed into valued social outcomes (i.e. public value). The public value chain can be described for each service delivered or all services collectively.   In this process there is a demand chain and supply chain. The idea that there are service outputs from the supply chain that become valued socially outcomes after interactions with customers is important. It is a feature of services, particularly public services, that value accrues in the delivery process. It has a direct link to the Value Build-up Model of customer value.

public value chain

This is a useful way of thinking because local government tends to not to focus on demands. We are more comfortable dealing with supply because we understand it and have control over it. At the point that the demand and supply parts of the value chain meet David Walters and Mark Rainbird have the value proposition. Their process is more detailed and includes demand analysis and value drivers leading to the value proposition, which in turn determines operations strategy and service delivery methodology.

value chain

For those councils considering service reviews, the demand chain could for the focus for an initial high-level, strategic review preceding a more detailed and intensive operational review that is given a particular focus from the initial review. In particular, the more detailed review could incorporate consideration of ways to ensure that the service has sustainable operations. This is frequently overlooked in local government in the haste to achieve short-term goals.

The value proposition defines the public value to be created. Value proposition statements vary widely.   An example of a simple statement is:

“For (customer) the (service name) offers (explicit description of customer benefit or value from the customer viewpoint) because (description of the organisational capability that creates the value).”

e.g.

“For residential properties the waste collection service offers choice because wastes are collected separately and a variety of bins sizes are available to residents who then pay for the combination of services that best meets their needs”.

Others translate the understanding of customer value into a description of the organisational capabilities and activities necessary to create the value. The public value proposition should be the organisational mission if it is to cover all services. Alternatively, it can be specific to individual services or sets of services. Some councils have defined 25 service sets that comprise about 100 services. The sets or services could each have value propositions.

Once there is a clear focus on value a way to manage the organisation to achieve it is required. I call it value-led management. Essentially it involves a focus on public value through the mission statement and value propositions being prepared for each service or service set. Management effort is then put into creating and measuring the value described.

Jeffrey Pfeffer describes what he believes leaders really do in his book ‘Leadership BS’. One successful leader he describes is Amir Dan Rubin, the CEO of Stanford Hospital and Clinics, who built a ‘robust operating model’ around a ’performance management system’ and appointed a leadership team that had a performance management orientation.

“For every aspect of operations, the question was “Do you have a standard?” Standards and measurements, made visible through charts in every unit, were what drove the remarkable performance improvement – not nice words or inspiring stories.”

By identifying the appropriate ‘standard’ (i.e. mission statement or value proposition) and systematically measuring it (i.e. public value scorecard) local government could transform the value it creates. Rather than ‘best value’, councils would be producing the public value that their community wants. I call this value-led management.

Hypothesis 3: Value-led management is a way of managing that could transform local government and make it more responsive and effective in serving the community.

Value-led management is simply focussing on value in the activities of leadership and management of the organisation. It is about being specific about the value being produced and differentiating between private and public value – and helping staff to know the difference when delivering services.

A measurable mission statement capable of being used to guide operations is required for the organisation. Services must be understood as value chains and have specific value propositions that can also be measured. Differentiation between types of value (i.e. private and public) is required and conscious effort needed to determine how that value is to be provided. This includes selecting the appropriate business model for each service and developing an operations strategy.

A public value scorecard is necessary to determine whether the required public value has been provided and that intended and unintended consequences have been considered. In addition, a comprehensive measurement system is required that includes a ‘real time’ dashboard to enable corrective action and a set of periodic formal and informal measures.

It is applying the performance logic of Amir Dan Rubin – do you know what you are doing and are you measuring it. In public services this is more difficult because customers and the services being delivered can be more complex but the same approach is required. Mark H. Moore has made it possible by developing the tools that support public value creation and recognition. Managers just need to use them.

Hypothesis 4: There are simple and effective tools that can be used to improve value creation in local government.

These tools are not complicated and together they provide a holistic way of thinking about the value that matters for local government – customer value, shareholder value and public value.

  1. Integrated customer value framework

This framework integrates the diverse views on customer value in a coherent way to provide a more complete picture of customer value.

integrated value model

Its creator, Azaddin Salem Khalifa, believes that ‘elements related to customer’s total experience and philosophy of life that build up value, enhance it, and magnify it, can be incorporated in the (service) design; and elements that reduce value or diminish it should be detected and eliminated’.

The value exchange model is defined in relation to the difference between customer perceptions of benefits received and sacrifices made. Benefits include the tangible and intangible attributes of the service offering. Sacrifices include monetary and non-monetary factors, such as the time and effort required to access and use the service. Value results from the trade-off in desired outcomes and costs.

The value build-up model assumes that customers access and use services to accomplish favourable ends. The choice of service is a means to enable the customer to achieve their desired end state.   The customer attaches value to the service according to its perceived ability to meet their needs. A service that satisfies customers’ practical needs delivers functional value, whereas a service that satisfies customers’ self expression needs delivers symbolic value. The value that matters is in the customer’s experience not the value in the actual service delivered.

The value dynamics model describes the elements or components thatcreate or destroy value:

  • Dissatisfiers – characteristics or features that are expected in a product or service and generally taken for granted. They are basic, must-have needs, and can drive customer dissatisfaction if they are not met.
  • Satisfiers – features expected or explicitly requested by customers. They typically meet performance related needs and customers are disappointed if these needs are poorly met but have increasing satisfaction the better these needs are met.
  • Delighters – new or innovative features or characteristics that customers do not expect. They may innovatively solve a latent need of the customer. Since they are unexpected, there is no negative effect if they are absent.
  1. The strategic triangle

The strategic triangle was described by Mark H. Moore in 1995 in his book ‘Creating Public Value’. It identifies three ‘environments’ in which public service managers operate – the authorising environment, the public value environment and the operating capability environment.

Mark H Moore strategic triangle

Moore says that managers in the public sector need to answer the following questions before committing to a course of action:

  • What is the public value that you are producing?
  • What sources of legitimacy and support create the authorising environment for that action?
  • What operational capabilities does your organisation need to have or develop to carry out that action to produce the required value?

Skills are required to operate in the political environment, understand customer demands, and know how to design operations to deliver the required value sustainably over time. Some of the techniques relevant to each element are:

  • Legitimacy and support – policy development, community engagement, organisational engagement, asset management strategies, legislation and local laws.
  • Public value – customer demands for services, customer charter compliance, expectations analysis and satisfaction surveys.
  • Operational capability – service planning, defining performance objectives for services, understanding capacity necessary to meet dependent and independent demands for services, operations typology/design, customer value gap analysis, and service design.

The strategic triangle helps explain some of the complexity and helps to simplify ideas so that people can act on them.

  1. The ‘degrees of publicness’ continuum

Developed by Mark H. Moore, it provides an easy way to contextualise service demands. The movement from essentially private value when individuals seek to have their material well-being needs met, through to collective action on matters of social justice, can be evaluated.

Moore degrees of publicness

It is helpful to work out where on the continuum are you when dealing with a customer on a service matter. Often customer interactions start at the private value end of the continuum in satisfying an individual demand and it will move upwards towards public value when council policy is explained and the reasons are understood. Many people just want what they want with the least amount of effort until the position of the collective is explained.

  1. Public Value Tool

The public value tool helps to determine whether you are looking at essentially private value or public value and if the primary determinant of whether or not that value can be created is reaching agreement or obtaining resources. It is particularly useful with groups and can be used to focus a conversation on the actions that will be most effective in improving value.

value diagram shaded

I have used it to focus effort on the critical gaps. When it is drawn outwards-in sequentially, people soon get the idea and can help you to locate their issue in the relevant gap. Then solutions can be developed that are effective in creating the required value.

  1. The shareholder value quadrant

Developed by Stuart L. Hart and Mark B. Milstein, the shareholder value quadrant can be used for evaluation or planning to create any form of sustainable value. I have used it to improve the environmental sustainability of a council. Once you start to think in terms of today and tomorrow, and inside the organisation and outside in the world of the customer, it forces broader thinking.

shareholder value

It is useful in conjunction with value measurement tools such as the public value scorecard. The ‘reputation and legitimacy’ quadrant picks up the starting point of Moore’s strategic triangle – legitimacy and support. Most councils spend too little time thinking about future value creation requirements and the ‘growth path and trajectory’ quadrant needs to be translated into council-speak – maybe it could be ‘asset, population and societal change’. Rather than planning the creation of new value it is anticipating change in value requirements.

  1. The Value Dynamics Model (Kano’s model)

It is worth remembering that customer satisfaction = expectations +/- experience. Satisfaction is a product of what you experience in comparison with what you expected. Councils do very little to influence or shape expectations of services. As a result, satisfaction is often low because everyone has a different expectation of what the service will be. Often this includes customisation to meet their specific needs when the service is mass produced and has been standardised for efficiency.

Kano model and brand

If the Kano model is used to understand value and how it can be produced, the positioning of the various services becomes important in terms of how they are managed.

In many ways it is a pity that councils have not thought more about value in their haste to reduce costs. Rather than ‘support their price’ (i.e. demonstrate the value created through expenditure of public money), councils have been quick to cut inputs. Where this has been supported by intelligent private sector service providers it has resulted in improved value that regularly meets expectations.

Where this has not been available, it has simply eroded value and diminished local government as a service provider and manager of community assets.

Chatterjee, Sayan 2013. Simple Rules for Designing Business Models, California Management Review, Winter.

Khalifa, Azaddin, 2004. ‘Customer value: a review of recent literature and an integrative configurationin Management Decision, Vol.42, No. 5.

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