Tag Archives: customer variability

189 – Essay No. 2 – Local government, effectiveness and efficiency.

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Posted by Lancing Farrell                                                                              3300 words

false economy cartoon

Image

People in local government regularly discuss effectiveness and efficiency. Often this happens in relation to pressure on revenues, such as rate capping. Most of the discussion centres on efficiency rather than effectiveness, and opportunities to stop delivering those services that are seen as ‘cost shifting’ from other government. The efficiency discussion is often not well informed. Frequently it focuses on inputs while ignoring outcomes and public value. Any savings are usually equated with cost cutting, not creating the same value at lower cost.

Australian researcher and writer Christopher Stone has published several papers on ‘false economies’. Each addresses a different aspect of productivity and efficiency in the public sector.

“Everyone has the right to know that money is not being wasted; that it is being spent as efficiently as is possible.” Christopher Stone, Decoding Efficiency, April 2013.

So, what is efficiency and how does it differ from effectiveness? Continue reading →

105 – Some characteristics of services demands that are important.

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Posted by Lancing Farrell                                                              1100 words

operations typology 2

Image from Operations Management, 1998.

Some time ago I posted on high performance job design using four characteristics or spans; control, accountability, influence and support. At the time I linked the concept to the operations typology describing four characteristics of design of operations for high performance. This post picks up that discussion to look at the characteristics of demands that it is essential to understand if you want to design and manage your operations for high performance or excellence in local government.

A number of recent books on public sector management have discussed demands and how it is essential to understand them in public services because payment is not made at the time of service consumption and, therefore, price does not directly influence the amount and nature of demands placed on the system.

In his Vanguard Method John Seddon describes the importance of fulfilling purpose if failure demand is to be avoided. He also talks about understanding flow in relation to how work enters a system. Both of these ideas relate to demands. If purpose (i.e. the value sought by someone or their demand on the system) is not correctly understood the work system will not meet their need. They will come back.

Mark H. Moore includes operational capacity in his ‘strategic triangle’ concept linking decisions from the authorising environment to the public value provided. An organisation must have the operating capacity (or capability as Moore describes it in his earlier book Creating Public Value) to deliver on the political commitment to create particular public value. Continue reading →

28 – Local government shared services. Is it the silver bullet for rate capping? – Part 1

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Posted by Colin Weatherby                                                                                         620 words

The Victorian state government plan to cap municipal rates has revived discussion about shared services. Some leaders see shared services as a silver bullet to reduce costs. What potential do shared services have to help councils respond to rate capping?

The article Government shared service back in vogue notes that shared services are usually justified by business cases promising operational efficiencies and cost savings. However, the article cites numerous examples of shared services that have failed to deliver.

In 2011, the West Australian government disbanded its Office of Shared Services centre after an Economic Regulation Authority review found the project was over budget and unlikely to deliver promised savings of $57 million a year. Instead the project had cost $401 million and achieved minimal savings.

The Queensland Health payroll upgrade was developed under the auspices of a shared services group. Originally with a budget of $98 million, and due for completion in July 2008, the project was the subject of a royal commission last year and is expected to cost taxpayers $1.2 billion by 2020.

In The Whitehall Effect John Seddon documents examples of similar failures in the United Kingdom. The track record of failure suggests that there are significant risks associated with shared services. So why are they regularly on the public sector reform agenda? Continue reading →

26 – The first 25 posts. What have you missed?

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Posted by Lancing Farrell                                                                                              1100 words

Writers have posted 25 times since the start of the year. A number of themes and ideas have been discussed. This post provides a brief overview.

The goals are set out in post 1 – track current issues and discuss the issues that are ‘everlasting, widespread and insoluble’ (using the least amount of words). A range of issues have since been covered from the daily media, day to day work life, and the things people often talk about but seldom resolve.

Post 2 and 5 discuss local government services – what we do and how we can define it. The conclusion is that local government needs to provide services that fit within legislated requirements, are responsive to broader community needs and expectations, and meet the individual purpose for each person receiving a service. Each service can be defined as a cross-functional process or value chain.

In post 3 the complexity evident in local government is discussed, including the involvement of customers in service delivery, the variability they introduce, the difficulty measuring service quality or setting service goals and measures, and the impossibility of separating service delivery from politics.

The impact of training on performance is discussed in post 4 in response to media criticism of the Australian government public service for its spending on training. The post suggests that understanding, documenting and improving processes would yield more benefit than providing more training for most councils.

In post 6 the differences between customers, clients, citizens, residents and ratepayers are discussed. Understanding which role someone has chosen to take in an interaction is important in determining the value they expect. This can be useful in differentiating between public and private value expectations.

Post 7 looks at public service job cutting and the link to productivity. Some key messages from the Centre for Policy Development report False Economies: Unpacking public sector efficiencies are discussed. The post identifies the importance of defining public value so that any changes to resource levels can be made in the knowledge of the impact they will have on the value produced.

Post 8 presents an imaginary script for an episode of Gordon Ramsay’s ‘Kitchen Nightmare’ in which he assesses the performance of local government as if it were a restaurant.   Hopefully it is both entertaining and thought provoking. What would Gordon Ramsay say?

In post 9 some emerging characteristics of people and councils are discussed. Obligatory empiricism, oblivious narcissism, and consensual lying are put forward as reasons why councils always seem to learn everything from scratch, leaders set out to meet their own needs first, and why people tell others what they want to hear for the sake of convenience.

Post 10 draws a ‘line in the sand’ with a discussion of the changes that have impacted in Victorian local government since the 1990’s. Part history lesson and part explanation of the present, the post concludes that the most influential change has been to the tenure of the CEO and their increased dependence on the goodwill of their council for survival .

Planning in local government gets a thorough airing in posts 11, 12, 18, 19, and 20. In posts 11 and 12 the current organisational planning processes is critiqued. Posts 18 and 19 suggest ways to better integrate planning. Post 20 discusses the role of the Council Plan.  All posts provide commentary on how to develop plans that are realistic, achievable and focused on delivering the value expected by the community. Constraints identified include the need to work within legislated requirements and the need for leadership to really understand ‘the business’ to be able to implement a ‘top down’ and ‘bottom up’ planning process.

In post 13 the role of policies and strategies is discussed. Are they becoming convenient but ineffective solutions to difficult problems, devices to avoid doing something that needs to be done, or just a way to be seen to be doing something?

Post 14 is an attempt to explain why councils stick with conventional organisational structures and avoid dealing with cross-functional processes; why systems seek to control risk and increase compliance without regard for producing public value; and why council culture encourages people to avoid making decisions. The discussion centres on what an organisational culture survey, an ABEF organisational self-assessment, and the Executive’s risk appetite can reveal.

Four books that should be read by every leader in local government are discussed in posts 15 and 17. The books are Recognising Public Value by Mark H. Moore, The Whitehall Effect by John Seddon, Improving Performance – How to Manage the White Space on the Organisation Chart by Geary A. Rummler and Alan P. Brache, and The Leaders Handbook by Peter R. Scholtes. Each book has a different focus and there is a mixture of public sector and business reading.

Post 16 discusses the rate capping proposed for local government in Victoria. The history of rate capping in Victoria and the long-term effects of it that are apparent in NSW provide a backdrop to a discussion about what councils can do in response. This post covers the potential for shared services and the potential impact on capital and operating budget cuts.

In post 21 the way councillors feel about their role is discussed. Do they feel inundated and manipulated or respected and influential? The difficulties they face as volunteers and in becoming skilled in their role, working together in an adversarial system, and coping with very demanding workloads, are covered. The message is stop complaining and support them more effectively.

What does a high performance local government organisation (HPLOGO) look like? In post 22 a methodology is proposed to define and create a HPLOGO. Based on the work of Andre de Waal, a set of characteristics of a HPLOGO are described (as actions) and prioritised.

Post 23 is a bit tongue in cheek. It is an attempt to pick up on the ‘chip on the shoulder’ prevalent in some parts of local government. Is local government a plaintive country tune or a majestic aria?

In post 24 an article by Frank Ostroff from Harvard Business Review (Change Management in Government) is discussed in relation to making high performance happen. He describes four unique barriers to change in the public service related to leader skills, leader tenure, rules that create inflexibility, and stakeholder resistance to reform.

Finally, post 25 looks at local government budgeting and how it is focussed on the past and has difficulty coping with improvement and innovation.   The need to balance investment in compliance with improving customer service and developing new services is discussed with reference to Christopher Stone’s work on public sector efficiency.

3 – Local government and complexity. Is there a simple explanation?

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The last post talked about why services are offered by local government and some ideas relevant to determining what should be offered. That whole post may have seemed like an over simplification. After all, if it was that simple, each local government would have a list of the services they offer and it would be straightforward to communicate to the community which services will or won’t be offered. In practice, it is not that easy to be definite about the services available because almost any service request will be considered and councils are reluctant to say no.

This post is an effort to explain why that is so by discussing the complexity that exists in public services. For some of the ideas I acknowledge posts on the blog site ‘Flip Chart Fairy Tales’.

To begin with, services are complicated by the involvement of end users (customers) in the delivery process. Customers are not consuming something that has been made earlier. They play a voluntary and virtually uncontrollable role in producing a service. And, every customer has different needs and preferences. Therefore, processes for service delivery are not as predictable and controllable as they are in activities such as manufacturing. Despite this, many of the theories and methods for productivity improvement used in local government come from manufacturing. For example, lean.

Next, because of the nature of services, it is easier to measure cost than quality and it is more difficult to make productivity improvements than in manufacturing. Service quality is subjective and depends on the perceptions of the customer. As a result, it can be difficult to tell whether a reduction in cost has led to a reduction in quality. The cost-cutting programs so common in local government often wreak havoc on service quality but it goes unnoticed or unmeasured. In comparison, in the private sector, service businesses have a fail-safe measure of performance – their customers will leave if the quality drops. In public services that are free at the point of consumption and where there is little or no choice of provider, this measure is not available.

Public sector organisations also have to deliver services to whoever comes through the door. Price is not a ‘gatekeeper’ for access to services. And, the people receiving services can come from all parts of society and may have limited education and language skills, making their impact on the service delivery process more significant. Customers introduce variability that complicates service delivery.

Frances Frei describes five types of variability introduced by customers:

  1. They want a service when it suits them.
  2. They can ask for a range of services.
  3. They vary in their ability to do what they need to do in order to receive a service.
  4. They will expend varying degrees of effort to get a service.
  5. They have different opinions about what it means to be treated well.

This adds complexity and unpredictability to delivering services and public service organisations often respond by trying to standardise processes to reduce costs and improve productivity. In practice, this often means ‘designing out’ the source of complexity, i.e. the customer. In public services, the process of standardising service delivery can lead to ‘failure demand’ and increased costs.

John Seddon describes failure demand as ‘demand caused by a failure to do something or do something right for a customer’. It is a particular problem for public services. Because services are free at the point of consumption, if needs are not met people are easily able to re-present or escalate their request, which creates extra demand and increases costs. For example, Seddon estimated that more than 80% of the demand in a health and social care system in the UK was failure demand and that it took 400 hours of work to create 100 hours of value. This may be an extreme example, but it highlights the potential.

The workings of public services are further complicated by the environment in which they operate. It is harder to nail down strategic goals and specific measures for public sector organisations. Local governments often have difficulty defining and measuring what they actually exist to do. That is why their mission statements can seem so nebulous and public value can be so hard to define. Then there are the numerous obstacles to change, including complexity, political resistance, cultural resistance, size and scope, and lack of experience managing change. Improving productivity is difficult and transformational change processes are common.

Restructures seem to follow every change of CEO. Functions are re-assigned and re-named. However, costs are incurred in the processes for delivering services and significant efficiency savings can only be made by improving the way the service delivery processes operate. Geary Rummler and Alan Brache say that an organisation is only as good as its processes and that process improvement presents the greatest improvement opportunity for most organisations. However, improving processes can require a lot of detailed work and knowledge about work flows. Change is more likely to involve ‘incremental adjustment’, which takes more time and effort than the career plans for many executive will allow.

Finally, it is impossible to separate public services from politics. This is perhaps more true in local government where the politicians are highly accountable to their constituents. The competing financial, social and policy objectives can make decision-making much more complex than in the private sector.

Lancing Farell

Flip Chart Fairy Tales. https://flipchartfairytales.wordpress.com/2012/03/19/why-is-the-public-sector-so-complex

Frei, Francis X. 2006. Breaking the Trade-Off between Efficiency and Service. Harvard Business Review, November.

Rummler, Geary A., and Brache, Alan P. 1995. Improving Performance – How to Manage the White Space on the Organisation Chart.

Seddon, John 2014. The Whitehall Effect.