journal Sharing Best Practices in Managing Public Sector Resources AUTUMN 2006 VOLUME 18, NUMBER 1

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1 journal Sharing Best Practices in Managing Public Sector Resources AUTUMN 2006 VOLUME 18, NUMBER 1

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3 journal Autumn 2006 Volume 18, Number 1 inside fmij The Financial Management Institute of Canada Managing Editor Claire Kennedy Assistant Managing Editor Lyne Gélinas Editorial Board arkay Rocky Dwyer Bruce Hirst Wayne Job David Jones Claude Legault André Robert Martin Ruben Germain Tremblay Stacy Van Humbeck Gilles Vézina Departments 2 Message from the President 6 From the Desk of the Managing Editor 8 Financial Musings and Insights 10 FMI Board of Directors Professional Development Week Chapter News Features 11 Financial Administration: Getting From Here to There Paul J. Gauvin 16 Lean Manufacturing in the Public Sector: One Step too far for New Public Management? Dr. Zoe Radnor 20 The Accounting Officer: What are Canadians Getting? Alan Gilmore 24 Need to Develop an RFP? Read This First! Michelle Schulte 28 Play it again Sam! Strategic Planning The Resurrection Rocky J. Dwyer 33 Whistleblower Protection for Financial Managers Christopher J. Stasuik and Matthew McGuire Desktop Publisher Ian Culbert FMI Administrator Joanne Steadman Columns From Behind the Green Eyeshade 43 Hey Buddy! Wanna buy a $2,000 hammer? Bruce Manion The fmi journal is published three times a year by the Financial Management Institute of Canada. All rights reserved. Reproduction in whole, or in part, without written permission from the publisher is prohibited. Opinions expressed are not necessarily those of the Financial Management Institute of Canada. Publications Mail Agreement Number Return undeliverable Canadian addresses to: Circulation Department Financial Management Institute of Canada P.O. Box 613, Station B, Ottawa, ON, K1P 5P7 Telephone: Fax: national@fmi.ca WWW English section: WWW French section: For marketing opportunities, please contact Bruce Shorkey at (613) or bruceshorkey@rogers.com AUTUMN 2006 FMI JOURNAL 1

4 president MESSAGE FROM THE The FMI organization is now coast to coast with thirteen chapters spread all across Canada! I would like to congratulate Jean Laporte and the Board of Directors for a very successful year. Under Jean s guidance and leadership as President, there were a number of very significant accomplishments that will serve as excellent building blocks for the activities of the coming year and for many years to come. It is indeed a privilege to serve as your President for and I would like to take this opportunity to tell you a little bit about myself. I received my Chartered Accountancy designation in 1993 while employed as a Senior Auditor by the New Brunswick Office of the Auditor General. In 1994, I moved to my current position as Director of Finance and Human Resources at the Legislative Assembly of New Brunswick. I have been a member of the FMI Chapter in Fredericton, New Brunswick for twelve years, including eight years as a member of the Board of Directors, and served as Chapter President for two years from 1997 to I also served as co-chair with Cheryl Munro, for the very successful PSMW held in Fredericton in May In March 2005, I accepted the opportunity to serve as Vice-President of the FMI organization for the year. In that capacity I chaired the National Chapter Working Group, working with FMI representatives across Canada on a number of projects including the Chapter Investment Fund, the Chapter Liaisons roles and responsibilities and updating the FMI website. At this time, I would like to welcome the FMI National Board of Directors, including the Chapter Presidents, who have enthusiastically accepted the challenge of ensuring that our organization continues to add value to the financial community and that it continues to respond to the needs of our membership. I look forward to working with this team of energetic, motivated and dedicated professionals. Growth and improvement of the FMI will be the focus of the Board of Directors for This focus includes continuing to develop and document the policies and processes, including the Strategic Plan, developing and enhancing the capability of FMI National office in meeting the increasing needs and requirements of the Chapters, and continuing to improve the support provided to chapters, specifically in areas that build the FMI organization as a whole. As my predecessor, Jean Laporte, noted in the last FMI Journal, the Chapters are the lifeblood of the FMI organization, and the diversity of the individual Chapters is a reflection of our country. Our organization benefits from the combined strengths of the Chapters, and specifically the volunteers and Boards of Directors in each of the Chapters. I have enjoyed and benefited from being involved at the local Chapter level and I encourage each of you to get involved, volunteer and join a local board or committee. From working with other professionals, networking opportunities and professional development, the skills and experiences gained cannot be easily obtained from a book or course. I look forward to Peter Wolters President, meeting many members and volunteers during the next year and I will especially enjoy meeting all those individuals who have served the FMI in the past and helped make it the great organization it is today! PD Week and PSMW have offered significant professional development and networking opportunities for many years and have well-deserved reputation as a forum for sharing best practices in the public sector management. Planning and arrangements are well under way for PD Week 2006 from November 28 December 1, 2006 in Ottawa, Ontario. I encourage each of you to visit the FMI web page to review the outstanding agenda and related speakers and presenters for what promises to be another successful PD Week. In addition, PSMW 2007 will be in Winnipeg, Manitoba from May 27-29, 2007 and plans are already well underway. Our organization is strong and growing stronger every year. On behalf of the Board of Directors, I encourage each of you to come and join us at our local Chapter events, at PD week and/or at PSMW as together we move the FMI organization forward and continue towards our goal of becoming the pre-eminent source in Canada for best practices related to the management of public sector resources!! 2 FMI JOURNAL VOLUME 18, NO. 1

5 Executives Executives holding a CMA designation CMA executives have a broader range of skills Exclusively for executives with five or more years of senior-level financial and strategic management experience. Reach the next level of strategic and financial management success. Gain the professional recognition essential to success for decision-makers in today s complex marketplace a CMA. Earned part-time over two years. Obtain your Certified Management Accountant designation by combining self-study, ten weekends and three week-long interactive sessions with your peers from across the province programs commence in the fall. Dual CMA/CPFA Designation Program Two prestigious international accounting organizations have joined forces to create a unique opportunity for current and aspiring government financial officers. CMA Canada has designed a dual designation program for the Canadian public service sector in conjunction with the Chartered Institute of Public Finance and Accountancy (CIPFA). This unique program, built on the renowned strengths of both designations, yields the dual Certified Management Accounting/Chartered Public Finance Accountant designation (CMA/CPFA). The CMA/CPFA Dual Designation Program consists of four courses offered throughout the year: Governance and Public Policy, Public Finance, Financial and Performance Reporting, Audit and Assurance. To learn more about earning the CMA designation or the CMA/CPFA dual designation call/ Jacques Tremblay, CMA, at or eastern@cma-ontario.org

6 journal The fmi journal is Canada s leading magazine for public sector professionals involved in the field of public sector financial management. Its major articles, columns and news cover a broad range of government accounting, auditing, and financial management topics of concern to professionals. fmi journal readers hold influential positions in public accounting, and have responsibilities in a variety of areas: financial management, information systems, administration and human resource management to name a few. Its authors are individuals who hold senior or experienced positions within government and the private sector. These individuals share their experience and expertise in areas of concern to professional public sector accountants and managers with financial responsibilities. Virtually any topic of interest to the financially-oriented public sector executive may be found in the fmi journal. A non-profit organization, the FMI has opened 13 chapters across Canada in the past 40 years. Today, the fmi journal enjoys a readership of more than 2,000 professionals. The organization hosts two annual national conferences: PD Week based in Ottawa and held in late November, and the Public Sector Management Workshop which takes place in May at a different location each year. Win a Trip to Winnipeg! The Alan G. Ross Award for Writing Excellence is awarded annually to the individual(s) who contribute the best article (feature or column) to the fmi journal during the year. The award is a plaque and a complimentary trip to the FMI s annual Public Sector Management Workshop. If your article is printed in the Winter, Spring or Fall 2006 issue, you will become an eligible contestant for a trip to Winnipeg in the Spring of The fmi journal editorial team members look after, at a minimum, the subject areas following their names: arkay - financlal muslngs & inslghts Rocky Dwyer - Liaison with Academic Institutions - (613) Bruce Hirst - Federal Financial Management - (613) Wayne Job Electronic Commerce and Information Technology (613) David Jones - Office and Home of the Future - (613) André Robert - Audit Management - Internal - (613) Martin Ruben - Audit Management - External - (613) Germain Tremblay - Provincial Financial Management - (613) Stacy Van Humbeck - Human Resources ZManagement - (613) Gilles Vézina - Management Issues - (613) These editors welcome timely and relevant articles from you. Feature articles are generally 2500 to 4000 words. Other articles or input to a regular column are normally shorter (500 to 2500 words). Letters to the editor are also welcome. Please address your correspondence to any of the team members or to Claire Kennedy, Managing Editor: fmi journal Financial Management Institute P.O. Box 613, Station B Ottawa, Ontario K1P 5P7 If you wish to be considered as an editor of the journal, please write to the Managing Editor, and indicate your area of expertise and the type of articles or column to which you wish to coordinate or to which you would like to contribute on a reasonably continuing basis. The recommended form of input is in Microsoft Word or WordPerfect formats. It is preferable that the documents be in bilingual format. Graphics must be kept separate (not inserted into the text). Advise what software was used to produce the graphic. The author s photo and short biography are also requested. The FMI can no longer supply quantities of additional copies to readers. Reprints, however, are available at a reasonable price. The minimum order is 50 copies. Subjects of Interest to Our Readership Accountability Human Resource Management Asset Management Humour Audit Practices Information Management Banking & Cash Management Planning & Resource Allocation Best Practices Precis of Recent Government Business Planning Leaders Publications or Speeches Career Advice Public Service Renewal Community Profiles Revenue Management Electronic Commerce Salary Management Expenditure Management Summary/Highlights of Conferences or Seminars Federal/Provincial/Municipal Reviews Systems Government Accounting Policy Technology Trends

7 The CMA/CPFA Dual Designation Your key to expanding career opportunities in government and beyond. Federal government employees can now receive comprehensive public sector financial management and strategic leadership training through a new dual designation program that is being offered by Certified Management Accountants of Canada (CMA Canada) and the U.K.-based Chartered Institute of Public Finance and Accountancy (CIPFA). The program is offered in English and French. Candidates who successfully complete the program will receive a dual professional accounting designation as a Certified Management Accountant (CMA) and Chartered Public Finance Accountant (CPFA). An executive program is available to seniorlevel financial management professionals to earn the dual designation at an accelerated rate, recognizing the skills and experience of qualified candidates. Developed through extensive consultation with the Comptroller General of Canada and his senior staff, the CMA/CPFA dual designation program equips candidates with the best level of knowledge and competencies for existing government financial officers, or for those who aspire to be government financial officers. The dual CMA/CPFA designation will create opportunities for career advancement in the Canadian federal government, as well as provide a portable qualification that will open doors to public finance management around the world. For more information about the CMA/CPFA dual designation program, please contact: Jacques Tremblay, Regional Director of Marketing (Eastern Ontario), CMA Ontario, Tel , jtremblay@cmaontario.org Roch Gilbert, Co-ordinator, Admission and Quality, CMA Québec, Tel , r.gilbert@cma-quebec.org To learn more, attend our CMA Canada seminar on the CMA/CPFA dual-designation program at FMI Professional Development Week 2006, Ottawa Congress Centre, Thursday, November 30th, from 10:45 a.m. to 12:00 noon.

8 managing editor FROM THE DESK OF THE The lazy days of summer are behind us, the back-to-school ordeal was survived and we are ready to tackle the challenges awaiting us at the office. The FMI Chapters have been very creative this past summer in preparing program events and training activities for the upcoming year that will significantly contribute in informing you of key issues and broaden your skill sets to address them. The fall is also synonymous with the yearly FMI Professional Development Week held in Ottawa for several years. The theme this year for the PD Week is Spotlight on Accountability. Its relevance and interpretation still generate controversy in both the private and public sectors and will continue to dominate in years to come. Canadians are demanding that increased accountability be placed not only on government at all levels but also on individual managers. A number of measures have been announced in response to that demand such as the Federal Accountability Act and the increased personal liability of managers in their organizations. However, we still need to understand their application in our functional role and the society at large. This edition of the Journal is very proud to present several articles from leading professionals who will share with you their knowledge and thought provoking views in their areas of expertise. Mr. Paul Gauvin, well known leader in promoting sound financial management practices in the public sector and the recipient of the prestigious Fellow of the Society of Management Accountants designation, offers highlights on successful strategies to further excellence in public administration. His article, Financial Administration: Getting from Here to There, is particularly relevant given the priority being placed by the Government of Canada on accountability, stewardship, financial integrity and transparency. Therein, Mr. Gauvin points out critical areas where gaps must be filled to achieve our goals. These include professionalism and competency in the financial and audit community; modernization of the classifications standards; adequate financial resources; departmental delegation; ethics and values; and, integrated corporate information systems. An article co-authored by Christopher Stasuik and Matthew McGuire examines Canada s newest whistle-blowing protection initiatives for financial managers. Their article will also inform you of the expended Public Sector Integrity Commissioner s powers under the proposed new legislation. You will also become familiar with the impact of the proposed amendments for both contractors performing government work and crown corporations. Professor Radnor s article examines why the public sector productivity growth does not appear to have followed the same trajectory as that of the manufacturing industry. Her article points out the cultural and organizational factors influencing the success in achieving improved efficiency level in the different sectors. Once again, Alan Gilmore shares his wisdom with us on demystifying how Canadians will benefit from the Federal Accountability Act. Alan also provides us with a useful comparison of responsibilities between Claire Kennedy Canadian an U.K. Accounting officers. A common attribute among leading organizations is both the ability to develop and execute business plans in a savvy, flawless manner. Is it an art more than a science? Rocky Dwyer s article examines the major elements key to a successful planning model and the major steps to implementation. Another article provided by Michelle Schulte offers sound advice to managers struggling with the complexity of the procurement process more specifically, the preparation of Request for Proposals. As usual, Bruce Manion has managed to tackle the topic at hand with an original twist! He manages to nail accountability on the head with his tale of a $2,000 hammer! Once again, we are very pleased to recognize the contribution of the FMI sponsors, exhibitors and advertisers who supported our activities during I would like to wish the warmest welcome to Lyne Gélinas, the new FMI Journal assistant editor. Lyne has been actively involved with the FMI for several years and her experience will greatly benefit the Journal team. The upcoming PD Week has topics dealing with a wide range of issues and I hope you can make the time to take advantage of it! 6 FMI JOURNAL VOLUME 18, NO. 1

9 RFPs that deliver results! RFP SOLUTIONS Procurement Strategies for Government, is an Ottawa-based firm of procurement, legal, accounting and engineering professionals. RFP SOLUTIONS works exclusively for government agencies, to help public sector managers reduce the risks, delays and complexities associated with the RFP process. RFP SOLUTIONS has contributed to numerous government RFPs in areas such as IM/IT professional services, communications, training, audit and evaluation, and consulting services. RFP SOLUTIONS clients include Canada Revenue Agency, Indian and Northern Affairs, RCMP, Auditor General, Health Canada, Foreign Affairs, Justice, Industry Canada, Canada Post Corporation and numerous other public sector organizations. If you wish to contact us, please call (613) and ask for David Swift, Managing Director. David can also be reached at: To learn more about RFP SOLUTIONS, please visit our website at:

10 financial musings & insights PLANETHOOD FOR PLUTO! YOU CAN TELL A MARKETER (1): Got one of those calls recently. Told the caller we were very busy and very interested. Could we get the phone number and call back? Negative. We kept pleading, also asking what time the caller ate supper. NOW THAT S SICK!: Do Viruses ever get sick? DOUBLE DOUBLE (NOT LATTE): Do witches run spell checkers? HARD SOFTWARE: Bought a piece of software, read the manual. How come programmers find it so easy to master the special languages that run computers, yet they cannot write instructions for us in decipherable English (or French, or Latvian, or... ) YAOL: Is AOL so expensive because someone has to pay for those free disks? SPY vs SPY: In Russia, a KGB keyboard has no escape key. SOFT HARDWARE? Why do they call it a hard disk if its damaged with the slightest impact? YOU CAN TELL A MARKETER (2): Want to stop them dead in their tracks? Ask What are you wearing? TIE A YELLOW RIBBON: Seen those ribbons, various colours, twisted into a loop and worn on lapels, bumpers, etc? Saw a plaid one and asked what it supported. answer was Ribbon manufacturers. FROM DUST TO DUST: Saw a clod of dust along the highway - difficult to see what was causing it. Got closer - it was a dust control sweeper. UNITS - 1 LITE YEAR: days of drinking low-calorie beer because it s less filling: TEED OFF: Primitive natives beat the ground with clubs and yelled, it was called witchcraft; today, we call it golf. IN THE MIDDLE: Golf is a game in which the slowest people in the world are those in front of you, and the fastest are those behind. GOLF PROSE: Use golf cart, not a caddy: The cart cannot count, criticize or laugh. LOST OUR GRIP: We used to have a handle on life, but it broke. PSST: Co-worker is jealous because the voices only talk to me. UNITS - 3 A straight line: Shortest distance between two jokes. DOWN TO EARTH: It seems that Earth is the insane asylum for the universe. WORK IN PROGRESS: The boss is not a complete idiot; some parts are missing. He took an IQ test and the results were negative. GENESIS ENCORE: God must love stupid people; He made so many of them. EVERYONE OUT OF THE POOL: Some people s gene pool could use a little chlorine. UNITS - 4 Microfiche: 1 very tiny fish. SLEEP IT OFF: To him consciousness is that annoying time between naps. PROCRASTINATE... NOW: Will fill this one in later KERMIT SAYS: Time is fun when you re having flies. HECK: Where people who don t believe in Gosh go. WATER COOLER CHAT: We divorced over religious differences. He thought he was God, I didn t! DOG THINK: When we get to heaven, can we sit on your couch? EVER WONDER?: Why a dog suddenly stands straight up when he s under the coffee table. ANSWER PLEASE: If people point to their wrist when asking for the time, where do they point to when they ask where the bathroom is? CAN T CATCH ME: Watched the Roadrunner. If Wiley E. Coyote has enough money to buy all that ACME crap, why didn t he just buy dinner? ORIGIN OF THE SPECIES: If electricity comes from electrons, does morality come from morons? IMPOSSIBLE: It s physically impossible for you to lick your elbow. CAN T WIN: For every action, there is an equal and opposite criticism. THE HURRIEDER I GO.. : The sooner you fall behind, the more time you ll have to catch up. RIP: Once in heaven, do you get stuck wearing the clothes you were buried in for eternity? STRAIGHT: Granny is over 80 and still doesn t need glasses. Drinks right out of the bottle. CAF-FIEND: A day without coffee is like night...you sleep through it. FORGET ASPIRIN: Doc said Take two cups and call me in the middle of the night. HE S INSPIRED: While working under the sink, he get this insatiable urge to paint a church ceiling. EVER WONDER?: When in grade school, we were told that in case of fire we had to line up quietly in a single file line from smallest to tallest. What is the logic in that? Do tall people burn slower? I DO? Bigamy is having one wife/husband too many. So is monogamy. GIMME A SECOND LINE FOR THIS POEM (1): T was the end of the month. 8 FMI JOURNAL VOLUME 18, NO. 1

11 FINANCIAL MUSINGS & INSIGHTS EVER WONDER?: Which came first the intestine or the tapeworm? AIN T IT TRUE: From a worldly point of view, there is no mistake so great as that of being always right. GIMME A SECOND LINE FOR THIS POEM (2): O fair and tasty orange. OVERHEARD IN THE OFFICE: My husband says I never listen to him (at least I think that s what he said). SIX FORCES OF NATURE: Magnetism, Gravity, Duct Tape, Whining, Remote Control, and The Force That Pulls Dogs Toward The Groins Of Strangers. EERIE HUH? Just had an out-of-money experience. GET EVEN WITH HIM: Buy a lot of orange traffic cones and reroute traffic into his driveway. GIMME A SECOND LINE FOR THIS POEM (3): Your hair has turned to silver. OD ID: When you get your drivers license renewed, get drunk before they take your picture. That way, when a cop pulls you over and looks at the picture on your license he ll say, Yeah, you look fine, and let you go. TOO POOPED?: Train your dog to poop right on the shovel. It makes clean up a lot easier. PEDESTRIAN HUMOUR: There are two kinds of pedestrians: the quick and the dead. Rx: Whenever you feel blue, start breathing again. WEATHER OR NOT: Take a lesson from the weather. It pays no attention to criticism. IMPOSSIBLE: Almost everyone who reads this will try to lick their elbow. YOUR CAR IS OLD WHEN...:Your gas gauge measures in cubits. GIMME A SECOND LINE FOR THIS POEM (4): She was lovely all decked out in purple. TELESENSE: They say DON T REPAY LOANS send for help. Why don t they borrow lots and not repay instead. WORSE AND WORSER: It s bad to forget to zip up your fly. It s worse to forget to unzip your fly. OUR ACCOUNTANT IS SO LIFELESS: He is alive, but only in the sense that he can t be legally buried. HE S SO OLD THAT: When he was a boy, the Dead Sea was only sick. DOWN UNDER: Do people in Australia call the rest of the world up over? IMPOSSIBLE: You tried to lick your elbow, didn t you? EVER WONDER? Does killing time damage eternity? EVER WONDER?: Why it is that when you re driving and looking for an address, you turn down the volume on the radio? : Are part-time bandleaders semi-conductors? EVER WONDER? Can you buy an entire chess set in a pawnshop? EVER WONDER?: Do pilots take crashcourses? PHILOSOPHY 101: Have you ever imagined a world with no hypothetical situations? EVER WONDER?: If space is a vacuum, who changes the bags? SLIM AND SLIMMER: They say swimming is good for the figure. Oh Yeah? Look at a whale! EVER WONDER?: Why we sing, Take me out to the ball game, when we are already there? CARPERPETUATION (kar pur pet u a shun): The act, when vacuuming, of running over a string or a piece of lint at least a dozen times, reaching over and picking it up, examining it, then putting it back down to give the vacuum one more chance. NOTE RE: 2 nd LINE: Can t be done huh? WE RE A GOOD FIT! National Bank of Canada is proud to contribute to the development of the public sector in Canada by way of partnerships with the various levels of government and related organizations and companies. A team of professionals is available to offer you specialized services and develop made-to-measure solutions for your needs. You can reach our dedicated team at (514) or via at governmentbusiness@nbc.ca AUTUMN 2006 FMI JOURNAL 9

12 HEADER FMI Board of Directors Executive Committee Phone Fax President Peter Wolters (506) (506) Vice President Mark Huard (613) (613) Secretary/Treasurer Duane Wilson (613) (613) Past President Jean Laporte (819) (819) Marketing & Communications Anik Lapointe (819) (819) Partnerships Bryn Weadon (613) (613) Administrator Joanne Steadman (613) (613) Directors Managing Editor, fmi journal Claire Kennedy (613) (613) Assistant Managing Editor, fmi journal Lyne Gélinas (819) (819) PD Week 2006 Chair Marcel Boulianne (613) (613) PD Week 2006 Vice-Chair Monique Arnold (613) PSMW 2007 Winnipeg Local Chair Ronald Smith (204) PSMW 2007 Winnipeg National Chair Germain Tremblay (613) (613) Liaison East Derwin Banks (902) (902) Liaison Central Hugo Pagé (613) (613) Liaison West Ron Stoesz (204) (204) Special Director, Strategic Plan Implementation Kim Elliott (819) (819) Chapter Presidents Alberta Suzanne Kyle (780) Capital (Ottawa) Philip Mostert (613) (613) Fredericton Christine Robichaud(506) (506) Halifax Kathryn Burlton (902) , x 2843 (902) kburlton@hrsb.ns.ca Manitoba Cheryle Boutilier (204) (204) cheryle.boutilier@rcmp-grc.gc.ca Montreal Mario B. Roy (450) (450) mario.roy@del.longueuil.ca Ontario Richard Slee (416) (416) richard.slee@fin.gov.on.ca Prince Edward Island Andrew Burt (902) (902) adburt@gov.pe.ca Québec Bertrand Carrier (418) (418) bertrand.carrier@vgq.gouv.qc.ca Regina Mike Pestill (306) (306) mpestill@justice.gov.sk.ca St. John s John Martin (709) (709) jmartin@gov.nl.ca Vancouver Sundeep Cheema (604) (604) sundeep.cheema@rcmp-grc.gc.ca Victoria Gordon Gunn (250) (250) ggunn@kpmg.ca Marketing Coordinator Bruce Shorkey (613) bruce.shorkey@rogers.com FMI Membership Have you renewed your membership? If you have not received your renewal information, contact your local Chapter. Do not delay! There is an exciting year planned. To be eligible for preferred member rates, your membership must be current. Remember the benefits FMI membership offers: Networking opportunities with over 2,000 professionals in the finance field across Canada; Professional development conferences, seminars, workshops at preferred rates; Eligibility for awards and recognition; Leadership participation in 13 FMI Chapters across Canada; fmi journal; And much, much more! Contact your local Chapter President for information regarding mailing addresses and program activities. Alberta $30.70 Quebec $25.00 Fredericton $32.25 Prince Edward Island $25.00 Halifax $50.00 Regina $25.00 Manitoba $25.00 St. John s $30.00 Montreal $30.00 Vancouver $30.00 Ontario $40.00 Victoria $25.00 Ottawa/Gatineau (Capital)$37.45 or send the completed application and payment to: FMI P.O. Box 613, Station B Ottawa, Ontario, K1P 5P7 10 FMI JOURNAL VOLUME 18, NO. 1

13 Financial Administration: Getting From Here to There Paul J. Gauvin Financial administration in the Federal Government has advanced significantly over the years and we have much to be proud of in terms of our accomplishments. However, many challenges and opportunities still exist to bring financial administration even further along the road of excellence. This article highlights some of the priority issues which, if successfully addressed, will help us to effectively get from here to there. Defining From Here to There Here is the generally sound state of financial administration today which reflects important progress in many areas notwithstanding a constantly changing working environment such as: the implementation of Modern Comptrollership, and the culture of accountability that this has encouraged; the implementation of the Financial Information Strategy and its positive impact on Government accounting practices; the vastly improved financial and other reporting to Parliament and Canadians through the evolution and refinement of the Departmental Performance Report, the Report on Plans and Priorities and the annual Management Accountability Framework Progress Report; the re-establishment of the Office of the Comptroller General (OCG) in 2003, and the leadership and functional direction provided by the OCG since that time; this has been instrumental to strengthening functional direction to departments, and to advancing a range of financial management improvement initiatives; and, Treasury Board Secretariat (TBS) leadership in areas such as policy suite renewal across finance, asset management, audit, evaluation and other disciplines which articulate, among other things, specific accountabilities for e.g. the Deputy Head, Chief Financial Officer, and Chief Audit Executive, as well as expressing clear expectations of departments for compliance and the consequences of non-compliance. Certainly this approach has been most welcomed. There is the desired future state for financial administration as I see it. This means, for example, that: finance and audit capacity gaps have been filled across all departments and that professionalism and competencies have been further strengthened at all levels; there is recognition and acceptance that the financial community needs proper resourcing i.e. both dollars and classifications (in the same way this has already been recognized for the audit and evaluation communities) to enable financial functions to capably take on the more complex roles and responsibilities demanded today; integrated corporate information systems provide timely, accurate financial and non-financial information, they minimize cost, duplication and overlap and they maximize interoperability and information sharing; there is a need to further streamline and simplify an already overburdened system by giving consideration to increased departmental delegation, particularly for low risk/more routine activities; and, there is a continued emphasis on accountability, and on the highest possible ethics and values in the workplace. Perhaps most importantly, there also includes continued important leadership by the Centre e.g. particularly Treasury Board Secretariat and the Office of the Comptroller General. This leadership is critical to actively driving the implementation of plans and initiatives (in collaboration with departments and agencies) to further strengthen Paul J. Gauvin In November 1999, Paul J. Gauvin was appointed as Deputy Commissioner, Corporate Management and Comptrollership at the Royal Canadian Mounted Police in Ottawa. A native of Moncton, New Brunswick, Mr. Gauvin began his career as an accountant with Blue Cross/Blue Shield. Since that time, Mr. Gauvin has dedicated over 30 years to public service, in increasingly senior financial and program management positions, including in the Atlantic Canada Opportunities Agency where he served as Senior Vice President, Policy, Planning and Programs as well as in some of the largest, most complex federal government departments, including Employment and Immigration Canada and Transport Canada, where he served as Senior Financial Officer and Senior Assistant Deputy Minister, Finance and Administration. Among his career accomplishments are his leadership of the successful development and implementation of the Government s first major integrated finance and materiel management system and his role as Chief Negotiator for the Government s commercialization of the Air Navigation Service, a $1.5 billion sale to the private sector and the single largest Government commercialization activity. The sale was a cornerstone of the Government s deficit reduction, streamlining and divestiture agenda and it continues to serve as a model for other privatization initiatives. In addition to providing critical, strategic financial management leadership within the RCMP, Mr. Gauvin also led the RCMP s successful collaboration with PWGSC which resulted in Government approval to relocate several thousand Headquarters employees to a much-needed, more modern, operational policing facility in Ottawa. Mr. Gauvin is a former Past President of the Financial Management Institute and a champion of the excellence and professionalism of the finance community. He is the recipient of numerous honours and awards, including the National Transportation Week Award of Achievement and the Public Service Award of Excellence, and a frequent speaker on the challenges of government financial administration, implementation of major financial systems, and divestiture. In October 2003, Mr. Gauvin was awarded the Fellow of the Society of Management Accountants Designation (FCMA) by CMA Canada, a prestigious, national honourary designation recognizing his achievements and for bringing distinction to the CMA profession. Mr. Gauvin is married to Anne and has two adult children, Monique and Mark. financial management and internal audit and evaluation across Government. A Changing Environment Public servants are fortunate to work in AUTUMN 2006 FMI JOURNAL 11

14 FINANCIAL ADMINISTRATION an extremely interesting and diverse work environment, with many different opportunities for career fulfillment. However, today s public sector environment also has many challenges. It is strongly rules-driven and characterized by intense public scrutiny. There is a priority on accountability, transparency, values and ethics and there is also zero tolerance (and stringent consequences) for error or misjudgment. Both the public and Parliament expect that departments will demonstrate rigorous stewardship of resources as well as economy, efficiency and effectiveness. And, as hard working, responsible, good corporate citizens, the vast majority of public servants effectively meet these expectations every day. In fact, we often do ourselves a disservice by continuing to focus on the very few isolated exceptions to this. It is also true that today, some traditional roles are changing. For example, under the Federal Accountability Act (FAA), it is intended to strengthen auditing and accountability in departments through a number of measures including designating Deputy Heads as Accounting Officers. According to the FAA, Deputy Heads would be accountable before the appropriate committee of Parliament to answer questions related to e.g. their responsibility to ensure that there are effective systems of internal control; and to sign departmental accounts. Entrenching the responsibilities of Deputy Heads in legislation creates a significantly different level of accountability. Therefore, efforts must be made in the very near term to ensure all Deputy Heads have a consistent understanding of what this new level of accountability truly means. In addition, the requirement for Deputy Heads (and Senior Financial Officers) to certify on Financial Statements that an effective system of internal controls is in place in order to minimize risk, requires a different level of review, advice and assurance such as that provided by internal audit, in order to contribute to the integrity of the process. This would include the identification of potential or actual gaps in internal controls that need to be addressed or the identification of opportunities to optimize the effectiveness of existing internal control systems. So, internal audit s involvement in this process should be encouraged across all departments. Professionalism and Competency in the Financial Community While there are many talented, capable financial officers already in the Public Service, there is still a significant shortage of experienced, competent and professionallyaccredited Senior Financial Officers/Senior Full Time Financial Officers (as well as Financial Officers at other levels) to meet departmental needs. This gap has serious implications particularly given the current environment s priority on sound and rigorous stewardship of public resources. While a number of initiatives are being taken to strengthen the quality and capacity of financial management e.g. through recruitment and development activities, there is still a significant difference in capacity among departments. There is also intense competition for the scarce, qualified professionals already in the system. The opportunity presented by external recruitment is certainly an important option but we need to be realistic in our expectations. External recruitment can involve a significant time lag while the individual becomes familiar with the Federal Government s complex legislative, policy, and management/decision-making frameworks as well as Government priorities which drive departmental agendas. It is true that some private sector individuals may have already had the opportunity to be exposed to the Federal Government but these situations are far less common. Whether internal or external recruitment, this is a major human resource issue for the financial community. Internal and external recruitment frequently take an inordinate amount of time due to the intricacies of the competitive staffing process and the need to ensure fairness. We therefore need to ensure that our partners in the staffing community understand the urgency of our requirement and that collectively, we identify options to streamline the efficiency of the staffing process to maximize results. Modernizing Classification Standards There is also an urgency to addressing the classification needs of the financial community. As with many other Public Service occupational groups, existing classification standards need to be modernized to reflect the realities and demands of a 21 st century Public Service. For the financial community this means significantly expanded roles. For example, it is expected that, more than ever before, financial officers will serve as catalysts and contributors to improving program management; and that integrated financial and non-financial information will be critical to the integrity of management decision-making and optimally, to enable managers to leverage scarce resources in the delivery of departmental mandates. In addition to more appropriately recognizing increased functional accountabilities, however, the modernization of financial classification standards would contribute to the implementation of practical management structures within financial organizations; and, it would also contribute to a further professionalization of the work environment for development and career pathing/progression purposes. It may be that the current compression within the FI category to four levels is no longer appropriate in today s environment, although I am not prejudging the outcome of any classification review. Ultimately, the goal should be to ensure that qualified individuals move through the system to take on more senior responsibilities in proportion to the depth and breadth of their experience and expertise. This would go a long way towards ensuring that departments have the caliber of financial professionals they require to meet their needs. Again, however, we need to ensure that our partners in the classification community understand the nature and urgency of our requirement and the need for results. The review of classification standards should not be laborious, lengthy and unnecessarily complicated. Ideally, it should build on existing standards as opposed to completely reinventing them. And, while there should be the appropriate level of consultation and input across the financial community, in the end, the goal of any consultation should be to facilitate as opposed to delay moving this forward as a priority. Financial Resources The financial community needs adequate resource levels to allow it to take on the additional, complex and resource-intensive roles and responsibilities demanded today. 12 FMI JOURNAL VOLUME 18, NO. 1

15 FINANCIAL ADMINISTRATION For example, there is the expectation that: financial officers will provide a significantly enhanced challenge function and add strategic (in addition to functional) value to the development and refinement of business plans, business cases, Treasury Board Submissions, and Memoranda to Cabinet; financial officers will be valuable, contributing partners with their business and service line clients, providing financial strategies and advice to enhance program development and delivery and to enable managers to demonstrate sound stewardship of resources; and internal (financial) control will extend beyond accounting and financial systems to e.g. crucial measures that provide reasonable assurance that financial records are complete and accurate, and that financial and non-financial information used for monitoring and reporting purposes is appropriately integrated, relevant, reliable and timely. Moreover, although Program Review occurred several years ago, in some quarters the finance function has still not fully recovered from the serious depletion it experienced (as did many other valuable support functions) in spite of ongoing rebuilding efforts. We fully understand that departmental priorities will and must focus on meeting the program and service delivery needs of Canadians. But we can t have it both ways. On the one hand, the Government is placing a priority on accountability, stewardship, financial integrity and transparency and it is correctly looking to the financial community to provide leadership. On the other hand, there does not appear to be a recognition that the financial community is not currently adequately resourced to meet new challenges. There needs to be a better resource balance. The needs of the finance community must be recognized in the same way as they have been recognized for other professional communities such as internal audit and evaluation. An adequately resourced finance function is a critical element of the financial integrity of departments and agencies. Increased Departmental Delegation In spite of important efforts and progress by the Centre over the years to increase departmental delegations, there are still many irritants in the system which requires all departments to spend scarce resources fulfilling routine externally-imposed requirements. It appears that regardless of capacity, maturity and size, all departments are generally treated the same e.g. small departments with significantly less program or financial risk versus large departments with more complex budgets, programs, etc. For example, on the issue of delegation of capital authority, there is little difference between a department having $3M authority and having $5M authority. Both levels of authority require the same rigor and discipline i.e. strong project and financial management, monitoring and control. The goal should be to let departments manage responsibly, and to hold departments accountable for results. It is understood that of the several hundred Treasury Board Submissions handled by TBS analysts and the Board each year, less than 10% are considered high risk. The remainder is of a low risk/more routine nature. Additional opportunities must be seriously examined to further streamline and simplify an already overburdened system, consistent with the TBS s stated objectives to be more strategic, to be less transactional, and to reinforce departmental accountability. Professionalism and Competency in the Internal Audit and Evaluation Community Similar to the finance community, there are many talented, capable individuals already within the audit and evaluation community. However, we are still experiencing shortages in the number of qualified functional specialists in spite of the additional resources that have been allocated to shore up audit and evaluation expertise. There is also intense competition among departments and agencies to attract and retain the limited number of qualified individuals already in the system as well as to recruit from the outside. The same challenges to external recruitment as exist for the finance community also exist for audit and evaluation i.e. external recruitment can involve a significant time lag while the individual becomes familiar with the Federal Government s complex legislative, policy, and management/decision-making frameworks as well as Government priorities which drive departmental agendas. Whether internal or external recruitment, this is also a major human resource issue due to the intricacies of the competitive staffing process and the need to ensure fairness. Again, our partners in the staffing community must help to streamline the efficiency of the process. A Changing Audit Environment The audit environment is changing. For example, there is a new emphasis on increased independence for the Chief Audit Executive, and the audit function in general, and the Government is committed to having departments implement departmental audit committees comprised primarily of members from outside the Federal Government. On the issue of increased independence for the Chief Audit Executive, a balance must still be achieved between independence and the role the CAE plays as a senior member of a department s senior executive committee. The CAE is not an observer at these meetings but rather a participant, contributing, as do other senior executives, to the shaping of strategic agendas, and to providing perspective and input to planning and decision making. The CAE and the internal audit function also play an important role in providing useful, high quality functional support to departmental management at all levels. Such support includes ensuring that audit reports (whether internal or external) provide fair and balanced findings and consistently reflect a professional tone. It also includes having an audit specialist provide his/her expertise to assist program managers to understand the basis for any audit findings, and (since managers are not audit specialists) assisting them to understand the process of responding to, or challenging, such findings particularly where the department s integrity is being unfairly undermined. This support is entirely consistent with what departments need. As for the requirement that departments establish audit committees comprised of members from outside the Federal Government, this represents a fundamental change in the way we will do business. At the present time, many departments are proceeding along their own paths in the implementation of this requirement. However, greater AUTUMN 2006 FMI JOURNAL 13

16 FINANCIAL ADMINISTRATION consistency across departments would not only increase the likelihood of success, but it would also facilitate the sharing of lessons learned. Ultimately, it would enable a more consistent evaluation of the benefits of this new approach to determine if they are as originally envisioned. In addition, the Centre could provide invaluable assistance to departments by helping to assemble a list of possible candidates with the appropriate qualifications (based on established criteria) from which departments could select. There will be a learning curve for any such individuals and so, it would also be helpful if there were some standard type of orientation to the Federal Government that any such outside individuals should receive. Departments would be responsible for their own departmental orientation of individuals. Greater consistency would benefit not only departments, but also those serving on departmental audit committees and the Government as a whole. Integrated Corporate Information Systems Sound financial systems, together with human resource and operational data modules, are central to everything we are trying to accomplish to improve financial management. For example, well-functioning systems provide the important financial data used to support operational decision-making, reporting in such areas as budgetary management, the development of wellfounded business cases, and the production of accurate and timely Public Accounts and Financial Statements, etc. In addition, transaction analysis provides information for both internal and external auditors, internal control systems and for the various accounting operations functions. Under optimum circumstances, there should be one system for all of the Federal Government, but particularly for the five or six very large entities, and supported by standards and mandatory information requirements provided by the Centre. Departments would then be accountable for meeting such standards and for accurately providing the required information. For medium to very small agencies, systems should be specified through cluster groups or Shared Services. We need to recognize the reality that there is a significant difference among the capacity and expertise of small and large departments. While the Government has invested substantially in large and sophisticated systems, e.g. SAP, Oracle, PeopleSoft, etc. there are also many other systems that are being developed for specific applications such as Shared Travel Services, Electronic Supply Chain, EMIS, etc. that do not appear to take into account what already exists. This results in: complicated, costly labor-intensive interface issues; ineffective, duplicate data capture and unproductive work; system changes and upgrades (which are a regular occurrence) which must be tracked and addressed to ensure interfaces are still functioning or to identify what new interfaces, remedial measures or work-arounds are required; new and ongoing training and refresher training for users, system support personnel as well as system technical experts; diverse system documentation including technical and user manuals; costly and diverse maintenance programs; and, an inability to usefully share lessons learned in any meaningful way which might normally benefit departments in an environment of similar systems and applications. We must become smarter and as a result, more efficient and effective, by maximizing the potential of our large powerful systems in the same way as they do in the private sector where the bottom line is one of the key, if not the key, indicator. One large system without the need for multiple, complex and costly interfaces should be regarded as the preferred approach. Ethics and Values The importance of ethics and values in the workplace cannot be overstated. These qualities are at the heart of sound management and decision making and they are critical to reinforcing public trust in Government institutions and Government employees at management and other levels. I have already commented that the vast majority of public servants are responsible, hard working good corporate citizens who understand the importance of values and ethics in the workplace. Having said that, we still need to take a more integrated approach to reinforcing this issue across departments. It is unrealistic to expect that providing a 2-day course on Values and Ethics will be sufficient. In addition to reinforcing the Public Service Values and Ethics Code, we need culture change in the work environment, ongoing reaffirmation, constant vigilance, zero tolerance with measurable and uniformly applied consequences, and other initiatives to reinforce ethics and values. And we have already made some important steps towards doing so. For example, the October 2005 TBS review of the Financial Administration Act entitled The Financial Administration Act - Responding to Non Compliance - Meeting the Expectations of Canadians took a comprehensive look at the complex issues surrounding compliance and sanctions under the FAA and related policies; the current renewal process for the TB policy suite has embedded consequences for non-compliance in many policies; and most recently, the provisions within the Federal Accountability Act Action Plan have important implications for further strengthening departmental administration. But collectively, we still need to do more. At the same time, it is also important to recognize that we operate in an environment of risks and that these will never be totally eliminated. Therefore, we must do our utmost to minimize significant errors within the resources we have available. It is unreasonable to expect that departments will be resourced to check 100% of transactions nor will we always have 100% of the required information needed for fail-safe decision making. For most departments, this means concentrating on the areas which are most vulnerable and known to represent the highest risk. The recent remarks by Sheila Fraser, the Auditor General of Canada in an interview in the Spring/Summer edition of the FMI Journal (Volume 17, No. 3) were very interesting and very timely. Two extracts from this interview are particularly appropriate to a discussion of the issue of values and ethics. She said: What has impressed me most is the quality of the people who work in government. I think Canadians really underestimate the competence, the loyalty, and the professionalism of the Public Service of Canada. 14 FMI JOURNAL VOLUME 18, NO. 1

17 FINANCIAL ADMINISTRATION While the Auditor General is speaking here of public servants generally, in my view, her remarks apply particularly to the recognized competence, loyalty and professionalism of the financial officer community. Later in the article, Ms. Fraser went on to say: I don t think the private sector is as wonderful as people think. There is some truth to the fact that the public sector is more cumbersome. However, large corporations in the private sector can also be bureaucratic. Unfortunately, recent events in the private sector indicate that there are some serious issues around transparency and ethics. In my view, the public sector is more transparent.... I can assure you that if the audit reports of some of the large private companies were published in the front page of the newspapers, they wouldn t all be glowing testimonies to good management. This, too, is relevant because operating in the private sector sometimes may appear less complex perhaps because it is not governed by the same legislative and policy frameworks as the public sector. But, regardless of the working environment, strong ethics and values are a common denominator and a common indicator of sound management. Some Closing Comments To summarize, I want to recognize the positive progress that is being made in many different areas to strengthen financial administration, led by the Centre. But while much has been done, much remains to be done and there is already an ambitious agenda with many different priorities. The risk of proceeding along too many different parallel paths is that we may lose focus. We need an integrated plan that brings together core issues of immediate importance, and leaders that will drive their implementation to get us from here to there. As highlighted in this article, from my perspective, these core issues are: enabling Deputy Heads to fully understand their new role as Accounting Officers, as well as the role that SFOs must play in this process; strengthening the professionalism and competency of the financial community as well as ensuring proper resourcing and modernizing classification standards; further shoring up internal audit and evaluation expertise, the provision of solid guidance and assistance to departmental managers notwithstanding the issue of independence, and greater consistency among departments as they move to implement a new approach to departmental audit committees; giving further consideration to our approach to the selection and implementation of integrated corporate information systems and to allowing departments greater latitude; encouraging the involvement of internal audit as another level of review, advice and assurance in the Deputy Heads and SFOs certification on the system of internal controls within departmental financial statements; Printing Costs giving further consideration to increased departmental delegation of authority; and, continuing to place a priority on reinforcing ethics and values in the workplace. We have good reason to be optimistic about the future of financial administration. We already have some of the best and brightest functional experts, strategic and functional leadership from the Centre, and a reputation for professionalism. This, combined with our commitment to working hard to meet the many challenges and priorities in today s environment, will bring financial administration even further along the road to excellence. Printing costs are a significant portion of office operating budgets. We have provided cost saving solutions to our customers for over 30 years. Let us do the same for you. Largest Inventory in National Capital Region Just In Time Delivery Online Ordering Hewlett-Packard & Lexmark Business Partners NMSO # E60PS /005/PS 100% Canadian Not Just Pennies Ottawa Toronto Montreal AUTUMN 2006 FMI JOURNAL 15

18 Lean Manufacturing in the Public Sector: One Step too far for New Public Management? Dr. Zoe Radnor Senior Lecturer/Associate Professor in Operations Management, Warwick Business School, University of Warwick, Coventry, UK, CV4 2AL Dr. Zoe Radnor As many of us are aware public sector productivity growth does not appear to have followed the same trajectory as that of manufacturing industry. In the UK NHS, for example, real terms spending has increased by 30% since 1996 whilst, the recorded increase in output is only 2% higher. This increase in spending has caused much greater pressure on public services to focus on productivity and waste reduction. The pivotal publication of the Gershon report, in July 2004, stated that the public sector should find ways to achieve substantial cost savings ( 20 billion) both cash and non-cash savings by 2008 (Gershon, 2004). This pressure, to improve the productivity and performance of public services has lead to many calls from industrialists, management consultants and policy officers for the transfer of industrial practices into the public sector. In particular, Lean Thinking has been proposed as one way to achieve substantial cost savings and quality improvement. Many management consultancies have entered the arena claiming to have a Lean solution and methodology. At the Local Government Association (LGA) Improvement conference in February 2006 at least 6 of the stalls present were selling the virtues of Lean. However, when questioned only 1 or 2 had any real experience of Lean application in the public sector. Within the UK some management consultants who have and are implementing Lean include Vanguard, Simpler and Ross International. But is their model of Lean appropriate to public services and is there evidence that Lean actually achieves the outputs and outcomes promised regarding efficiency savings? Most people recognise the roots of Lean thinking in the Toyota production system, (Monden, 1983) but there has been considerable development of the concept over time. The Toyota Production System, which was developed in the 1950s after World War 2, was introduced as an alternative to mass production techniques in the Toyota factory and led to raise productivity and quality levels by allowing the flexibility of skilled production with the volume efficiencies of mass manufacturing. The term Lean was first adopted in the 1980s by Womack and Jones (1990) as it was claimed that the implementation of Lean practices in manufacturing resulted in using less of everything (e.g. raw materials, labour, time, etc) compared to mass production. There has been evidence of the transfer of Lean manufacturing concepts to the service sector with supermarkets adopting Lean techniques for improving the flow of customers for many years (Swank, 2003). The term itself has gone on to be used within many contexts including some writings focusing on the organisation (as in Lean Manufacturing or Lean Service), the supplier (Lean Supply) or customer end (Lean Consumption). Arguably all notions of Lean are rooted in the work and principles of Womack and Jones (1996) who developed five core principles to represent Lean or Lean Thinking which are: Specify the value desired by the customer Identify the value stream for each product providing that value and challenge all of the wasted steps Make the product flow continuously Introduce pull between all steps where continuous flow is impossible Manage toward perfection so that the number of steps and the amount of time and information needed to serve the customer continually falls. In the UK, there are examples of organisations who, have developed and introduced the principles and practices of Lean thinking in the public sector. A study by Kollberg and Dahlgaard in 2005 assessed the suitability of Lean Thinking in the UK health service by looking at how a performance measurement system called the flow model was designed to identify key performance indicators that measure changes towards Lean Thinking. Lean has been used to generate a process-based perspective within the NHS Emergency Services, where a collaborative programme produced substantial improvements to patient waiting times. Another recent study commissioned by ODPM (2005) on the use of Lean Thinking to improve Social Housing revealed 80% reductions in the time taken to process repairs, a 40% reduction in the time taken to collect first rental payments, a 50% reduction in the number of steps needed to re-house and a 50% reduction in void time. This was all achieved with both significant cost reduction and improvement to the customer experience. However, others (for example, (Hines et al., 2004) highlight a number of the key criticisms associated with the holistic lean philosophy especially in service settings including lack of contingency, human aspects, coping with variability and lack of strategic perspective. It is also widely agreed that there has been relatively little evidence of Lean being applied in the public sector so it has not be possible to state how and what aspects of Lean can work in the public sector. In 2005, the Scottish Executive decided to address the question of whether it should formally promote the adoption of the Lean within both centralised and local services in Scotland. As no records of the practice of Lean in either Scottish or the rest of the UK public services existed a detailed study was commissioned. The study (Radnor et al, 2006) included the generation and analysis of results from: A review of evidence on the use of lean in the public sector. Eight case studies of public sector organisations using Lean. 16 FMI JOURNAL VOLUME 18, NO. 1

19 LEAN MANUFACTURING IN THE PUBLIC SECTOR TABLE 1 Examples of Lean Programmes and Outcomes in Public Service Organisations Type of Organisation Programme Description Outcomes/Achievements Health Agency Large, high profile adoption of Lean Thinking with a 48% reduction in throughput time and necessary contact long-term (10 year) plan. time per patient. Rapid Improvement Events (RIE) involving 80% reduction in the number of steps in a process. staff delivering service were used to Death rate fell by 30% for single process. implement Lean practices. Patient hand-offs reduced from 23 to 13 as a consequence of the value-stream mapping exercise. Government Agency Consultants were engaged to conduct an RIE involving The outcome for the project was simply to be able to cope staff, focusing on topics such as: with the additional workload within existing resource increase in workload constraints. The Department achieved their on-going target of waste of staff time on admin tasks never failing to complete their part of the process within the seven day limit. Local Authority Consultants engaged for initially 6 months to launch The time taken for registration of a planning application was programme of Rapid Improvement Event (RIE) for reduced from an average of 5 days across the six areas to an process improvement. Ambitious programme with average of two. 12 processes dealt with in first year. Local Authority Business Change Process rooted in Lean thinking but The removal of abandoned vehicles service has moved from: focussed on changing culture rather than using a An average of 28 days to remove vehicle reduced to 3 days Lean toolkit. Average 1000 enquiries per annum increased to 2500 enquiries Average 250 cars removed per annum increased to 800 RAF Base A Lean programme - mainly tactically deployed, but Two Value Stream Analysis (VSA) events generated a 105 with aspirations to strategic Policy Deployment - using person reduction in manpower and 31m budget saving. three main techniques, Value stream analysis, A more recent estimate of the total savings for the production process preparation and RIE. programme to date was over 60m. A survey of public sector organisations using Lean. The findings from this study have begun to generate a model of what a Lean model within the public sector could consist of as well as generate evidence of the effect of Lean within various public service organisations (see Table 1). The study illustrated that as in manufacturing, Lean has been used in the public sector to reduce waste, improve flow, place more focus on the needs of customers and take a process view. However, many of the Lean tools often found in manufacturing were applied differently in the public sector. In manufacturing, a large set of improvement tools and techniques is used to standardise processes, whereas public services use a narrower range, including process and value stream mapping. How is Lean being implemented in the public sector? Two different approaches to the implementation of Lean were described within the study: full implementation of the philosophy and, rapid improvement event (RIE) or Kaizen Blitz. The full implementation model involved the embedding of Lean principles, broad use of Lean tools and alignment of improvement to strategy taking a whole systems perspective. However, the majority of case studies favoured the RIE approach, which used rapid improvement workshops to identify a range of improvement actions ranging from small, incremental quick wins to longer term policy or strategy changes. An RIE or Kaizen Blitz typically has three phases: a 2-3 week preparation period; a 5-day event to identify changes required; and a 3-4 week follow up implementation period. Public sector managers reported that the RIE appealed because its style of delivery could overcome slow responses by staff to change initiatives through providing some return for effort relatively quickly, prevalence making it more visible and, staff feeling engaged in the process. However, a disadvantage of the RIE is that quick wins may be difficult to sustain because they are not easily integrated into the overall strategic objectives of the organisation. A fuller implementation, taking a more longitudinal, developmental approach allows the establishment of a sustainable Lean capability. This is achievable through a programme that can include multiple RIEs, though it requires alignment with organisational strategy. What factors make organisations suitable for Lean? The study highlighted several organisational and cultural factors that influence the extent of adoption of Lean across the public sector. Organisations that integrated the idea as part of their improvement or capacity building strategy and had strong management buy-in, were more ready to embrace Lean improvements. Similarly, organisations with a history of managing change, that had previously tackled process change and that were able to build effective, multi-disciplinary teams across traditional organisational barriers had the greatest capacity for Lean improvement. It is also easiest to apply in high volume, repeatable processes, but this should not discourage other applications. In contrast, several factors inhibited change. These included; lack of resources to implement changes, resistance to change from staff and management, post RIE lack of ownership of the activity, lack of commitment to the change process and, the slow pace of change in the public sector. Many management consultants and policy officers are heralding Lean as a means to address the efficiency agenda, but is the notion of Lean as defined originally appropriate for the public sector? Lean can successfully focus attention on waste reduction through analysis of the AUTUMN 2006 FMI JOURNAL 17

20 LEAN MANUFACTURING IN THE PUBLIC SECTOR Flow: Kaizen: Kanban: Lead time: Pull: Standard work: Takt time: Throughout time: Value/ Valuable: Value stream: Value stream mapping: Waste: Glossary of Key Lean Terms The progressive completion of tasks along the value stream so that a product or service proceeds from design to launch, order to delivery, and raw materials into the hands of the customer with no stoppages, scrap or backflows. Continuous, incremental improvement of an activity to create more value with less waste. A signal, often a card attached to supplies or equipment that regulates pull by signalling upstream operation and delivery. The total time a customer must wait to receive a product or service after requesting the product or service. In service sectors, it is the time from the beginning of the process to the end (e.g. from when a patient arrives until he or she leaves the hospital). A system of cascading production and delivery instructions from downstream to upstream activities in which nothing is produced by the upstream supplier until the downstream customer signals a need; the opposite of push. A precise description of each work activity specifying cycle time, takt time, the work sequence of specific tasks for each team member, and the minimum inventory of parts on hand needed to conduct the activity. The available operations time divided by the rate of customer demand. Takt time sets the pace of the operations (or process) to match the rate of customer demand and becomes the heartbeat of any lean system. The time required for a product or service to proceed from concept to launch, order to delivery, or raw materials into hands of the customer. This includes both processing and queue time. A capability provided to the customer at the right time at an appropriate price, as defined in each case by the customer. The specific activities required to design, order, and provide a specific product (or service) from concept launch to order to delivery into the hands of the customer. The identification of all the specific activities occurring along a value stream for a product or product family (or service). Anything that does not add value to the final product or service, in the eyes of the customer; an activity the customer wouldn t want to pay for if they knew it was happening. The 7 manufacturing wastes are: The 7 service wastes are: Transport, Inventory, Motion, Waiting, Overproduction, Over-processing and Defects. Delay, Duplication, Unnecessary Movement, Unclear Communication, Incorrect Inventory, Opportunity Lost and Errors. A further waste that can be added to both manufacturing and service is not using the minds of the employees. process. At the same time, the methodology asks questions about what customers consider to be value-adding activities, increasing the understanding of customers needs. Organisations split into isolated departments are encouraged to think about joining up processes. Lean gives frontline staff an opportunity to tackle problems that give them hassle, which increases morale and motivation. Lean can also contribute to a culture of change. However, the evidence also suggests that Lean should be used as a means to achieve greater output, faster with higher quality with the same resource rather than a method of rapid unit cost reduction to release cash or to reduce headcount. The fourth example in table 1 illustrates the last point well. Here, a council were able to more than triple their levels of activity, to a higher service standard, without increasing costs. The case examples found by the study show there is little doubt that Lean can work in the public sector. In some cases, achievements were dramatic and, in all cases, critical in developing an improvement culture. This would indicate that the majority of public sector organisations can benefit from the concept. However, the public sector must not blindly adopt the model of Lean from manufacturing; they must adapt the approach to suit their needs. There are risks of failure if Lean is simply seen as a tactical toolkit developed from manufacturing. Lean has the potential to generate some outstanding savings and changes in mindsets within public services and the rapid adoption of the term reflects this potential. One quote from the study described the opportunity of process based improvement in the public sector as not low-hanging fruit but apples on the floor, suggesting that methodologies such as Lean could be readily used to identify efficiency gains. If government departments, management consultants and policy officers continue to use the term Lean and herald its impact as much as they are now by which to achieve efficiency savings then it is important that they and public service organisations consider the following criteria: The need to adapt, not adopt, Lean Thinking concepts. The need to consider Lean not as a quick fix but as a philosophy. The need to develop (or have) a mindset within the organisation of process and customer view. The need to ensure that there is strong leadership, commitment and some link with strategy in order to ensure longevity Therefore, if Lean is implemented cor- 18 FMI JOURNAL VOLUME 18, NO. 1