Tag Archives: John Seddon

31 – Measures, targets, KPI’s, KRA’s and CSF’s. What are we talking about?

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Posted by Lancing Farrell                                                                              740 words

There is a lot of talk in the public sector about measurement. Some people say that you ‘can’t manage what you can’t measure’ or, ‘what gets measured, gets done’. There is no doubt that measurement is inextricably linked to the pursuit of better performance and greater accountability. In local government, we seem to be desperately looking for things we can measure that will tell us how well we are doing. But are we measuring the things that count? Continue reading →

29 – Local government shared services. Is it the silver bullet for rate capping? – Part 2

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Posted by Colin Weatherby                                                                         950 words

In the previous post, I discussed economies of scale and the cost savings possible through shared services. This post continues the discussion, starting with the implications of front and back office separation.

The history of ‘back office’ and ‘front office’ separation is worth some discussion. According to Seddon, it began with an article by Richard Chase in the Harvard Business Review in 1978. In the article, Chase recommends separating the ‘high customer contact’ and ‘low customer contact’ elements of the service system because of the different operations involved. Low customer contact operations are more efficient and, as a result, have lower costs and it makes sense to isolate them from the disruptive effects of customer interactions if it can be done without sacrificing service effectiveness. However, service effectiveness is exactly what Seddon believes has been lost in many of the cases he cites. 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.

16 – ‘Council rates capped from mid-2016’, The Age, 21 January 2015

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‘Council rates will be capped next year with the state government forcing councils to justify any increases above the rate of inflation. Councils must now send their budgets to the Essential Services Commission for permission to raise rates above inflation. Inflation – as measured through the consumer price index [CPI] – is currently running at 2.3 per cent. Last financial year rates increased by an average of 4.23 per cent.’

Some people will be thinking it is about time that municipal rate rises are curbed. Nobody likes paying more taxes. But is it a smart move?

Rate capping has been in place in NSW for more than 30 years. In 2013 the NSW Treasury Corporation reported that a quarter of the state’s 152 councils had a ”weak” or ”very weak” financial sustainability rating. If not corrected, half would be ”very weak” financially within three years. In 2014 the number of councils requesting rate increases above the 2.3% cap set by the Independent Pricing and Regulatory Tribunal almost doubled. The requested increases ranged from 5.5% to 11%. The increases reflect the financial realities confronting local government and ‘catch up’ increases to cover lack of revenue

NSW councils have responded to the rate capping in different ways. Ryde Council has created an RSA-type animation that neatly explains to residents the choices that need to be made.  It illustrates the implications of the demands for growth in services and infrastructure when revenue is declining.  New works are less possible and maintenance and cleaning standards have to be reduced with long term impacts on infrastructure.  Ryde is having to define ‘core’ services, i.e. what is essential versus what is nice to have, and balance reducing service levels with increasing rates.  It is a simple and effectively told story (https://www.youtube.com/watch?v=iR_BJKAo0dA).

The overall effect of rate capping seems to have been a reduced ability to provide services to the community, accumulated backlogs in infrastructure renewal or replacement, and increased reliance user charges for revenue. According to Brian Dollery and Albert Wijeweera the increase in rates in NSW since 1995 has been about half the increase that has occurred in Victoria and council rates per capita are lower that every other state and only higher that the Northern Territory.

Councils in Victoria experienced enforced rate cuts and capping for a period of time in the 1990’s. The Kennett Liberal/National coalition government capped rates in 1995 and imposed a cap of one percentage point below inflation. The cap was lifted in 1997 to allow increases of up to 3 per cent – with Ministerial approval. In 1999 the Bracks Labor government scrapped the cap altogether. The councils unable to draw on financial reserves or liquidate assets were profoundly affected and the impacts, similar to those now evident in NSW, were enduring.

The arguments in favour of rate capping are worth some discussion. They revolve around preventing councils from abusing monopoly powers in delivery of services; stopping expenditure on services or infrastructure that the State government regards as ‘non-core’; reducing the risks of poor governance; and limiting the ability of councils to provide services that are better provided by the private sector. Essentially, it reflects a lack of trust by the State government – councils won’t make sensible decisions without supervision.

In practical terms, what is it likely to mean for Victorian councils from day to day?

For a start, some councils are talking about entering into shared services to reduce costs. This has been a popular idea with CEO’s for a while that has failed to take effect. But will shared services really help? The evidence suggests that the savings are seldom as great as people think and there are initial costs involved in making those savings. John Seddon writes eloquently on the shortcomings of shared services. More in a future post.

What else can councils do? Reducing expenditure on capital works to enable funds to be used for recurrent operational expenditure is one likely response. In the short term this is fine if there are not pressing asset renewal demands or community demands for new assets. Cutting back expenditure on new assets will be easier for developed municipalities. It will not be as easy for developing municipalities where population growth is creating demand for new assets to meet community needs. In all municipalities, reduced expenditure on asset renewal will ultimately result in reduced fitness for purpose and increased future costs.

What about cutting recurrent operational expenditure? This is much more difficult because the community is likely to immediately lose services. There will be opposition from those who no longer receive the benefits of a service that is cut. The typical council operational budget is about 60-70% salaries and wages, 10-30% contractors and materials, and 5-10% plant and equipment. There will need to be a reduction in staff numbers for the cuts to be meaningful. This is likely to result in industrial disputes. If staff numbers are not reduced, there will need to be big cuts to expenditure on contractors and materials and/or plant and equipment, which impacts directly on the ability of staff to be productive.

Reducing expenditure on contractors is probably the easiest cut to make, especially if it doesn’t directly impact on delivery of services to the community. For many councils, this type of cut will impact on major maintenance/minor renewal of assets, which often sits outside the capital budget because the amount is below the threshold for capitalisation or the works do not increase asset life and cannot be capitalised. In the 1990’s it was cuts to this type that had long-term impacts when assets failed and needed premature renewal because of inadequate maintenance.

Rate capping has been shown to reduce the ability for councils to respond to community demand for services and to adequately care for physical infrastructure. It takes away the potential for local communities to determine the amount of funding they want to provide for council activities. It might drive administrative efficiencies, but at what cost? More than anything, it says that the State government knows more about meeting local needs. In every respect, it is just wrong.

Colin Weatherby

Dollery, Brian and Wijeweera, Albert 2010. An assessment of rate-pegging in New South Wales local government, in Commonwealth Journal of Local Governance, Issue 6: July (http://epress.lib.uts.edu.au/journals/index.php/cjlg/article/view/1619)

Seddon, John 2014. The Whitehall Effect.

The Age. http://www.theage.com.au/victoria/council-rates-capped-from-mid2016-20150120-12tz7k.html

15 – Interested in local government management? Four books you should read and why. Part 1

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I like to read. I know that not everyone else does and when you know someone who reads and likes to talk about it that it can be a bit painful. Nonetheless, I am going to do it again. This post is about the books that I discovered and found interesting in 2014 – books that should influence management in local government. I think they contain relevant and useful ideas to improve what we do. Ideas from all of them feature in posts.

1. Recognising Public Value by Mark H. Moore. Published in 2013, this book expands on the thinking in his earlier book Creating Public Value (published in 1995) in which he described 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.”

In his latest book, he takes this idea further to show how public value can be recognised and measured. The central idea is that the public sector can create an equivalent to the ‘bottom line’ available to the private sector. To achieve this, Moore 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 they have 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.

In developing his case for the public value scorecard, Moore covers a wide range of issues, including discussion about private and public value; arbiters of value; costs of using public authority; sources of accountability for the public sector (very interesting reading); the public value chain; and the importance of performance measurement. Both of Moore’s books use case studies to illustrate his ideas, which makes the practical application of his thinking easier to understand. This book should really be compulsory reading for anyone in a leadership role in the public sector because it provides a practical, high-level framework for thinking about why a public organisation exists, what it intends to achieve, and how that can be measured.

2.  The Whithall Effect by John Seddon. Published in 2014, this book consolidates much of John Seddon’s writing about the public sector. If you have read his earlier book Systems Thinking in the Public Sector (published in 2008) you will be familiar with many of the ideas. There are five sections in the book. The first covers the ‘industrialisation’ of services and the many misconceptions that Seddon believes are evident in current service design and improvement, especially those borrowed from manufacturing. The second covers his approach, including his ‘Vanguard Method’ used to understand the current situation before improvements are made. The third section is a critique of government ‘reforms’ of public services that have not produced the results expected. The fourth section addresses current ‘ideology, fashions and fads’ in public services. The last section has his recommendations for change in Whitehall to improve public services in the UK. Overall, the book covers a lot of material, much of it supported by case studies.

Seddon is highly opinionated and critical of failings in government policy and action. This doesn’t detract from the fundamental messages in this book; services need to be understood as a system and there are (more) effective ways of doing this; interventions in service systems should be planned and use knowledge of customers, demands and work flow to inform them; measures must be relevant to the customer and used by the people delivering the service.

In a very practical way, Seddon provides tools for taking Moore’s ideas about public value into action. Seddon is much more focussed on private (customer) value, or the customer-defined purpose, and would no doubt argue that fulfilling purpose is a form of public value. In a way, I think ‘public value’ is just ‘purpose’ writ large. This book should also be compulsory reading for all leaders in the public sector. The ones who read, anyway. Firstly as a tale of what happens when changes to services are predicated on political, and not customer or public needs; secondly to provide a way to understand services as a system; and lastly to reinforce the importance of effective measurement of performance.

More books in Part 2.

Lancing Farrell

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.

2 – Why do we provide the services that we do in local government?

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For some practitioners this is a question that is unasked and, therefore, unanswered. For me, the answer is critical in developing my practice and managing for high performance. This is my attempt to provide an answer applicable to any local government.

To begin with, we have legislative guidance. Former local government CEO Catherine Dale, in her thesis for her Doctor of Philosophy, says the functions of a Victorian local government include advocating; planning for and providing services and facilities; providing and maintaining community infrastructure; undertaking strategic land use planning; raising revenue; and making and enforcing local laws. These functions are mostly very broad and open for each municipality to implement according to their community’s needs and preferences. It is a starting point for understanding why services are provided.

Specifically in relation to public services, Mark Moore argues that governments provide public services to create public value. He 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 says that public managers (i.e. elected representatives and bureaucrats) need to try and understand what constitutes public value for their community so that they can set out to deliver it through their operations and be held accountable for their performance. Moore sets out four key requirements of public managers in creating public value. They must:

  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. This could be one of the key objectives of community engagement programs. Too often, community engagement seems to occur so that the council is seen to be doing it, or to consult over a single project or plan. 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.

In contrast to Moore, John Seddon is less directly focussed on the concept of public value or value in general, and says that ‘purpose’ should be the main focus of services. He argues that it is in the interests of all taxpayers when services are delivered in the most efficient way to meet needs.  Accordingly, Seddon says that understanding the customer or citizen purpose in interacting with the organisation is the key to ensuring that services meet customer needs and expectations. In this model, the services offered and the way they are delivered would be determined by the service consumer and their private value expectation. Seddon places significant emphasis on the worker delivering services and their role in responding to customer–introduced variability and tailoring service delivery.

I think local government is expected to deliver whatever services are required for the community to be safe, healthy and fulfil its potential. This is expressed in many different ways. One council says that its mission or purpose is simply to make the municipality ‘a better place’. Obviously there is an inherent community expectation of value. People are paying taxes and giving authority to the council. They want something in return. As Moore explains, understanding what they want and how it constitutes public value is essential to high performance and success. It should determine the policy settings for services. At the point of a customer receiving a service, understanding their purpose in seeking the service becomes paramount if they are to be satisfied. As Seddon points out very effectively, failure to fulfil purpose leads to ‘failure demand’ and inefficiency.

In a nutshell, the services offered by each local government need to fit within legislated requirements, be responsive to the broader community needs and expectations, and meet the individual purpose for each person receiving a service.

Lancing Farrell

Dale, Catherine 2008. The Role of Local Government for a Contemporary Victorian Community.

Moore, Mark 2013. Recognising Public Value.

Seddon, John 2008. Systems Thinking in the Public Sector.