Capability, capacity, reform

Transcription

1 Capability, capacity, reform Capability, capacity, reform Insights from public sector leaders on delivering transformational government

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3 Introduction Alan Edwards Government Industry Leader, IBM Global Business Services The huge agenda for reform in the UK government is placing intense pressure on public sector organisations. From the Gershon Review to the Transformational Government strategy, the government is continuing its drive to create more efficient and customer-centric public services. At the same time taxpayers, used to the customer care practices of private sector companies, have ever-increasing expectations of these services. The challenge facing today s public sector leaders is how to ensure their stretched teams can deliver on the reform agenda. How can they make sure their organisations have the capability and capacity they need to fulfil their objectives? How can they identify, obtain and deploy resources at the right time, in the right quantity? These are the questions that this publication IBM s third set of essays and insights on delivering change in the UK public sector seeks to answer. It features contributions from an array of public sector leaders and expert commentators from central and local government, the not-for-profit and voluntary sectors, and professional bodies. While each organisation is tackling the reform agenda according to its own particular needs, several recurrent themes emerge. Increasing professional standards among public sector employees is seen as essential to improve capability and enhance decision-making. A strategic review of organisational design is often necessary to empower employees and remove traditional hierarchies while strengthening accountability and improving co-operation with other government bodies and delivery organisations. Strong leadership is vital. And innovative approaches to the design and use of systems and processes from enabling customers to access government services online to creating shared services are helping to boost efficiency and liberate capacity. As the capability reviews of government departments being conducted by the Prime Minister s Delivery Unit illustrate, improving the skill base and strategic leadership capabilities in public sector organisations is a central part of ensuring they can meet the challenges of tomorrow. Citizens want efficient services based around their needs. We hope this collection of essays helps those who have the task of achieving that objective.

4 Contents Essay 1 Sir Michael Lyons argues that with expectations of public services increasing and the constraints on paying for them tightening, the public needs to understand what services cost and decide what they are willing to pay for. Page 4 Essay 2 Terry Moran explains how the Disability and Carers Service has focused on changing its culture in order to improve customer service and boost efficiency. Page 7 Essay 3 Francesca Okosi discusses the ambitious reforms being undertaken at the Department for Environment, Food and Rural Affairs, which is developing its capability and capacity to further its influence and increase its understanding of customers. Page 10 Essay 4 Clive Bennett reflects on the transformation programme at the Driver and Vehicle Licensing Agency, which is improving processes and infrastructure and giving staff greater ownership and accountability. Page 13 Essay 5 Steve Freer of the Chartered Institute of Public Finance and Accountancy believes that a fixation with budgets and insufficient accountability is impeding world-class financial management across the public sector. Page 18 Insight Bert Massie of the Disability Rights Commission says that the inequality faced by disabled people and those with long-term health conditions is preventing the government from achieving its ambitions for Britain. Page 16

5 Essay 6 John Codling reveals how the Department for Work and Pensions is transforming its finance function to achieve a step change in financial planning and performance management. Page 21 Essay 7 Owen Barder of the Center for Global Development argues that a service-oriented government IT architecture is the key to successful shared services. A flexible bazaar of loosely coupled modules is the best way of delivering efficient and customer-centric public services. Page 26 Essay 8 Patricia Greer of the Prime Minister s Strategy Unit observes that while improving government s strategic capabilities has become an important priority for the current administration, a number of challenges must still be overcome. Page 30 Essay 9 Roger Howard says that voluntary and not-for profit organisations such as Crime Concern can help reform public services. But this third sector must adopt a more commercial outlook while retaining its social mission. Page 35 Essay 10 A roundtable held by Guardian Public magazine and sponsored by IBM finds that the Cabinet Secretary s departmental capability reviews have the potential to produce real change but only if ministers lead from the front. Page 38 Insight David Ball discusses how a new agency has been created to provide a strategic, integrated HR service to the Ministry of Defence s 80,000 civilian staff, both online and through a call centre. Page 24 Insight David Kennedy explains how Bradford Council turned to its staff for answers when it received poor customer feedback. The subsequent turnaround has seen it make the top 20 of the Sunday Times Great Place to Work survey. Page 32

6 Essay 1 The search for efficiency Expectations of what public services should deliver continue to increase. The constraints on paying for these services are tightening. These pressures are not going to go away, so it is time for the public to understand far more clearly exactly what public services cost. Sir Michael Lyons, Independent Adviser to Government I have enjoyed extraordinary freedom to range across the public sector in each of the reviews on which I have worked and it is worth briefly revisiting three main areas of this work. First, relocation: moving 20,000 civil service posts out of London will save us 2bn over 15 years and, in my view, will also lead to better government. Government can demonstrate good practice in earlier relocations but there are further cost advantages to be achieved. The simple conclusion is that we need to move jobs rather than people. Far too frequently, debate gets bogged down in the emotional issues of moving individuals and their families. In a healthy labour market such as London, people will find new jobs, so there is rarely a reason to insist upon relocation unless people offer unique skills or experience. The good news is that progress is accelerating. Many of the schemes that appeared in the plans for (and might have seemed too far off to be credible) are beginning to come forward in time. We are beginning to see concern for relocation and the consequent cost savings become a mainstream issue for the management of public services. This has been usefully reinforced by a much tighter grip on new office leases in London. My second commission perhaps less well-known but, I suspect, more significant in the long run was on the better management of public assets. This emphasises that the efficiency drive in the public sector is not just about the flow of expenditure but also about how we use the stock of investment. Once again, progress is good: OGC figures show that 14bn-worth of public assets have been identified for disposal. If there is one recommendation in the report that I wish had been made more explicit, it would be the need to encourage the public sector to become less preoccupied with buildings in the design and delivery of services. In

7 this era of rapid advances in communications technology, it is extraordinary that we still harbour a Victorian view of public services, defined by the council house, the fire station, the police station or the school when in fact we know that the frontier of service development involves delivery to people in their homes and neighbourhoods, very often independent of the buildings in which the services are based. My latest project an examination of local government finance reviews how we might make council tax fairer and whether or not local government should have greater flexibility to raise more of its own money. There is a common purpose that runs through all this work: an interest in the public sector. It is only by developing our efficiencies as well as a stronger and more confident voice about how we use citizens money that we are going to rebuild trust and confidence in government as a whole. It is no small agenda. There is no doubt that this debate is live, not just in this country but virtually everywhere in the world, because of the twin pressures on government to respond to increasing expectations and the constraints on raising tax income to pay for them. The increasing expectations stem from higher educational standards, faster communication, greater diversity and the lessons learned from the cutting-edge of what the private sector is able to do in terms of customisation and flexibility. These generate and focus extraordinary pressures on public services. At the same time, the mobility of capital and skills makes it more difficult to raise the money to pay for improved services. These challenges preoccupy governments everywhere. The message from this is clear: preoccupation with efficiency is not a passing fancy. It is not a debate about whether or not there is a temporary hole in the public finances of this country; this is the world in which we live and the pressures are here for the forseeable future. We have made great progress in the UK, not least Preoccupation with efficiency is not a passing fancy... this is the world in which we live and the pressures are here forever because of an improved ability to learn and work across public/private boundaries. We have got better at helping organisations, councils and government departments to compare and benchmark themselves against others perhaps the most important of all our efforts to improve performance. We have also put together a wide range of government interventions that have made a difference. At the same time, we have made rather less progress in improving the accountability of government at both local and central levels. More importantly, perhaps, we have not adequately informed the public of the expensive nature of public services and how choices have to be made about what we can get for what we are willing to pay. Although they do not form a complete treatise, here are three thoughts about how this debate may go forward. We have to get better at looking at the whole system of local and central government. We need to see it as a single system with all the different agencies within it, including those parts of the private sector that are important suppliers, advisers and supporters of public services. If we do not, then we are doomed to continue to face many of the weaknesses that are currently in evidence. The Audit Commission and the National Audit Office are together trying to work out what happens from the setting of a central government objective all the way down to the multitude of points at which it is delivered. Their work is beginning to reveal that we sometimes set national objectives with only a very weak understanding about the pathway of delivery. Sometimes, we have people tasked with objectives but no relevant levers to pull, while others have the levers to pull but no idea that they were given the objective in

8 the first place. The need to give careful consideration to the whole system effect is clear. There is, inevitably, much interest in the wage-related costs of public services and the pressures that push up those costs. Here we have emerging evidence of the results of poorly co-ordinated action within the public sector. Wage rates in the NHS have been driven up as a result of the Agenda for Change with the result that scarce Social Services employees have been attracted away from local government. The result is pressure on local government to put up its wage rates as a counterbalance well intentioned actions, but not enough whole system thinking. Secondly, we need to tackle certain idiosyncratic behaviours that are sometimes exhibited in the public sector. Take a look at the former Office of the Deputy Prime Minister s report reviewing progress in improving procurement in local government: it is preoccupied with process issues rather than outcomes. The key questions addressed include: have authorities got a procurement champion; have we got a central procurement unit; and have we got a procurement strategy? These may be indicators of an interest in the issue but I doubt whether any of them are indicators of successful progress. Similarly, back-office unification has been an important part of looking for cost reductions in the public sector. Students of perverse behaviours can find much to absorb them, as managers huddle together to discuss how they might put together their back offices as new joint ventures. Ask anybody who has run a business whether a joint venture is a sensible response to this challenge. The risks and uncertainties say otherwise. The obvious solution if you do not do the job cost-effectively yourself is to find somebody who does. Whether it is your neighbouring authority or a private company is for you to choose. But the notion that two organisations not doing a job very efficiently at the moment are going to get together and overcome all the obstacles to put together a successful joint venture is, to say the least, ambitious. My last point is probably the most challenging. It is just possible that, with all the efficiency savings in the world, we are not going to be able to fund the growing expectations of public services in this country. We have to We need to be clearer about our priorities as a nation. This cannot be achieved just by politicians. A public debate is required get better at acknowledging that, in a complex society with a multitude of political objectives (and with many of those objectives being in tension), government and public service provision is inevitably an expensive system to run. It is a system that will undoubtedly involve very considerable uncertainties and, wherever you have uncertainty, you have extra cost and arguably less efficiency. We do not have a great track record in this country in deciding when to stop doing things. For example, if you have to close down an elderly persons home because it is no longer fit for modern needs, you can quickly win majority support at a public meeting by asking: how many of you wish to avoid living in this type of home when you are elderly? But the same citizens will still fight vociferously for retention of that home because they are not confident that it will be replaced by better provision (which should, rationally, be designed around support to the elderly in their own homes). There is a big challenge to develop clearer public understanding about what public services cost. Many people still sincerely believe that their council tax pays for most of the local services they currently enjoy, whereas in reality it pays for about 16 per cent. The danger is that people who believe that their council tax buys so much are likely to have unrealistic views about what could be achieved with an extra pound. Perhaps worse, they will continue to be disappointed with the pace of improvement. We need to be clearer as a nation about the priorities that we want to follow. This cannot be achieved by our politicians alone. It requires a public debate about what we are willing to pay for and how this matches our expectations. Then, linked with those changes, we have to get better at developing a performance management system that runs across the whole of the public sector at the same time. I sense that the result of that debate may mean leaving more things to local choice. Communities will have to make some difficult trade-offs between alternative services. This will only be possible if there is a much smaller set of nationally guaranteed or promised outcomes. This article is based upon a speech made by Sir Michael Lyons at Somerset House.

9 Building a new culture Essay 2 Faced with the need to improve efficiency while reducing staffing levels, the Disability and Carers Service is finding the answer in a greater focus on customer service. Terry Moran, Chief Executive, Disability and Carers Service When the Disability and Carers Service was established in November 2004 it faced a demanding challenge: to reduce staffing levels by 24 per cent within three years and improve its complex service to more than five million customers. My vision for achieving it was simple: we needed to improve the experience of disabled people and their carers who deal with the agency. Only through a better customer focus could we ensure that the new agency had the capacity and capability needed to succeed. It was clear to me that delivering the efficiency agenda was not just about re-engineering processes, but in making customer service much, much better. If we do not serve a customer well and they feel that their views are not being respected or listened to, there is a far greater chance of their writing a complaint letter or disputing a decision not to award one of the benefits we administer (Disability Living Allowance, Attendance Allowance and Carer s Allowance). Two years ago, around 30 per cent of all our decisions were disputed. Of cases that subsequently went to appeal, more than half were overturned. All this is an additional cost to us beyond the original decision, and puts more pressure on staff. More and more resources are devoted to delivering these services because the initial decision was not accepted by the customer, sometimes rightly. Better service reduces the amount of additional work we have to do and frees up precious resources. Yet the service within the Department for Work and Pensions that had historically fulfilled our remit regarded itself as a success, as it had largely met its targets. A customer satisfaction survey also found that 84 per cent of respondents were happy with the service they had received. But this picture was not reflected when we spoke with customers in more depth. Focus groups and customerrepresentative organisations gave us some stark feedback. It could be summarised in three words: faceless, soulless and heartless. It is hard to reconcile such seemingly contradictory views. I think perhaps the best explanation Four types of employee behaviour + This four-box model has helped me to ask all my middle and senior managers to consider how they see themselves and how their teams perceive them. Blockers (negative attitude and low energy) are resistant to progress and can be difficult to Spectators Players move. Spectators (positive attitude, low energy) typically do not cause difficulties but neither do they challenge poor performance or unacceptable behaviour. Cynics (negative attitude, high energy) can undermine anything but provide useful insights Attitude and challenge when needed, though not necessarily for constructive reasons. Our players (postive attitude, high energy) sometimes make mistakes and are challenging to lead but are the ones who make things happen and challenge the status quo. Blockers Cynics It is rare that people do not find themselves in any one of these quadrants at some point. The question is where they are most of the time. This is a powerful way of asking managers to understand their contribution and whether they merit their Energy + extra salary as a leader of people if they are not mostly a player.

10 is that people had quite low expectations and were pleased when these were exceeded. In any case, it was evident that many of our customers had real difficulties with the service. This was not the fault of staff, who were doing everything they were being asked to do. As a result we needed to look closely at the targets we were setting to ensure they reflected the importance of the customer experience looking at quality as well as speed of service. To that end we have developed a balanced scorecard that measures many more aspects of the service we deliver. This year I have also received ministerial backing not to change the clearance time target for Disability Living Allowance (DLA), for the third year in a row. While reducing clearance times sounds a good thing to do, DLA is our most difficult area. Sending out a message that more speed was required when we had not cracked the quality agenda would have been inconsistent with our cultural approach. Breaking down the barriers Ultimately achieving culture change in the organisation boils down to one question that I want everyone to ask themselves. If you were the customer, or if it was your grandparent, parent, child, brother or sister, would you be happy with the service you were delivering? Whether you are answering the phone, making a decision on a case or processing a document, if you lose sight of this question we cannot hope to serve our customers satisfactorily. Yet very few of our people have much personal contact with the public. While we have 600 staff in our contact centre who speak to customers, many employees are remotely based and have no interaction with customers beyond the papers in front of them. That can sometimes mean we lose sight of their very diverse needs. While a number of our staff are disabled or care for someone with a disability, many have no experience of the challenges faced every day by disabled people and their carers. I decided to change this. First we interviewed people from organisations representing our customers at several public events to ask them what they thought and showed the results to staff. We also developed an initiative called Community 500, which took place in September This involved staff spending at least a day volunteering for organisations that work with disabled people. Initially we had hoped that 500 people would volunteer, but in the end we got nearly 700 (10 per cent of the workforce). The overwhelming feedback was that it gave a real insight that helped people look at their job differently, particularly for decision-makers. No training in the world can give you this kind of direct experience. Somebody s circumstances may seem quite trivial in a document, but they can be very powerful when you see them in real life. Of course, it is only a snapshot but it is one way we have got people to start thinking differently about the customer. We are going to do it again this year, and hope to have 1,000 or more participants. Staff are asked to consider how their role in the everyday delivery of the business feeds into supporting our vision Insights and innovation My vision for the agency is about enabling independence by supporting the diverse needs of disabled people and carers. On a cultural level, this involves helping employees understand what this means for their everyday jobs. Recently we have also piloted a series of events where we get employees to answer this question. They are not hugely expensive to run they are day events followed up by telephone coaching. We say to staff: what do you think your role is in the everyday delivery of the business in relation to supporting our vision? To begin with they can sometimes see things very narrowly getting the payment right, the decision made. But by the end of the day, their view has developed and they realise how their work may contribute to a real lifestyle issue for someone with a disability or for a carer. We will be evaluating the pilot shortly, but on the evidence so far it has been a liberating experience, and employees have come forward with some great innovative ideas about serving the customer. I have tried hard to encourage staff to be open in their views and to challenge things. If they think something is not working or can be improved, I want them to speak up, complain and tell me so we can share good practice. However, many employees and managers still see the organisation as quite hierarchical, which makes some reluctant to put their head above the parapet. We are working hard to change this. I could have instructed everybody to take part in Community 500, for example. But this would have reinforced the traditional hierarchy of the organisation, which was the chief executive says, therefore I must do. Instead I wanted to provide tasters of different approaches. My experience suggests that doing it this way means the culture change will be more sustainable. People do it for themselves and are likely to learn more. I am keen to guard against creating a personality-led organisation. If the organisation achieves success but cannot continue it when the time comes for me to move on, I will regard that as a failure. So our systems and processes need to underpin what we are doing in terms of leadership style. Professionalising decision-making I believe that a vital element of this involves professionalising the people who make decisions on cases. We have around 1,800 decision-makers who get just six to eight weeks training, yet their decisions account for 14bn of taxpayers money. And theirs is a difficult job. They have to decide on the level of benefits that a disabled person should receive based entirely on the paperwork in front of them, such as doctors letters. It is necessarily a subjective process. Yet at the same time we need greater consistency of knowledge and its application so that we get a more consistent approach to decisionmaking. To achieve this we are working with the University of Chester to develop an accredita-

11 tion system that will involve external assessment of whether our decision-makers reach the standards we expect. It will look at both decisions on cases and the way in which decision-makers interact with customers and colleagues. It will not prevent a decision-maker from using their own discretion this is part of the policy intent. But at the moment we have variance of outcomes for people in similar circumstances, which, on the face of it, is inappropriate. We have made real progress in transforming the agency and freeing up resources through focusing on our customer and achieving a change in the culture. Over the last 18 months we have delivered better service while reducing staffi ng levels by nearly 700. The challenge now is to continue to increase staff engagement against a backdrop of further reductions in headcount planned for the department. I believe we have got the customer focus right 83 per cent of our staff believe the agency is committed to customer satisfaction. We need that level to increase still further as we strive to deliver further improvements.we still receive too many letters from MPs and individual customers telling us where we have got it wrong. Only when I no longer see those will I believe that we might just be getting it right. Terry Moran is Chief Executive of the Disability and Carers Service. We are working to develop an accreditation system that will provide external assessment of our decision-makers 9

12 Essay 3 Reaching for the skies Change is never easy, but for the Department for Environment, Food and Rural Affairs, it has been wide-reaching and ambitious and there is still work to be done. We examine a reform programme in progress. Francesca Okosi, Director of HR and Corporate Services, Department for Environment, Food and Rural Affairs We have come a long way at the Department for Environment, Food and Rural Affairs (Defra) in quite a short space of time. The department resulted from the merger of two other groups in 2001, taking over the responsibilities and resources of the former Ministry of Agriculture, Fisheries and Food (MAFF), and parts of the former Department of the Environment, Transport and the Regions. Initially, the merged department was not viewed particularly well by the rest of Whitehall and was not respected by stakeholders. It did not have a culture of high performance and was neither efficient nor effective. It was falling behind other departments before it had really had the chance to establish itself. A key part of the challenge we faced was cultural: MAFF was quite detached from Whitehall and had not been through the series of reforms that had been implemented by the previous government. In a sense, Defra needed to catch up and forge ahead. Achieving this forward momentum has tested the department s capacity and has led our development programme to focus on total system reform. From the start, Defra needed a change of leadership and an overarching strategy to group the department together the result being our focus on sustainable development. The first phase of the programme was dramatic and brought a renewed focus on improving delivery to the customer. Since then, we have been building capability both in terms of individual employees skills and in the infrastructure, and making our corporate 10

13 services more effective and efficient. To engage our staff, we developed Defra Moving Forward, a narrative to explain where we were going and what this meant for individual employees and the department as a whole. This has since evolved into an intranet site focused on explaining our strategy and change programme in the department. Although we have improved, we must continue to further our influence, both across government and at local, European and international levels. We are also working to become more customer-centric. I think this poses different challenges for us than for some other elements of public service. Local government or the NHS, for example, interact directly with the public at large all the time. There is a different sense of customer focus and it is at the heart of what they do. In the centre of government, we are slightly more removed. The customers that we deal with are the stakeholders delivering on our behalf regional and local government and ultimately the farmers. We understand our customers better now than five years ago. We are particularly proud of our Whole Farm Approach, which is improving our interface with farmers, our main customer group. The importance of this initiative has been recognised in the government s wider transformation agenda. But we must continue to develop our understanding of customers needs to ensure our policies are effective and We introduced an ongoing review of Defra s organisational design and business model to help us think more strategically benefit both farmers and the country as a whole. As part of our reform process, we introduced a complete, ongoing review of the organisational design and business model of Defra, to help us think more strategically about the whole process. When we reviewed the delivery organisations we work with, for example, we found we were paying people to do things that were not directly related to policy delivery. The process has been about looking at the delivery relationships and clarifying who is responsible for what. We are still on our transformational journey. We have invested in leadership development from the very top of the organisation to middle management level. We have got a clear understanding of what leadership means for us, at very senior levels. We have also improved our systems and processes and will continue to do so. We are simplifying what we do to ensure our policies can be implemented as efficiently as possible. As a result we believe the end customer s experience will be improved. But our development programme is not just about reforming the organisation for its own sake. It is a question of how we reform it for the citizen, the public, the customer and stakeholders. We have had a successful five years. We have reformed the department and we are in a far better position than we were, with improved financial and performance management. We are better respected by our stakeholders, we are receiving better feedback from our surveys 11

14 of customers than we did four years ago and our corporate services are demonstrably improved and more efficient. We are using management tools that you would find in any good organisation. For example, we have implemented a corporate balanced scorecard to ensure we achieve results that reflect our key priorities. Importantly this takes into account the views of stakeholders. Despite the excellent progress we have made, there is still much to do. As a department we want to punch above our weight and make a real difference to society. That is what our reform process is designed to achieve. flexible and are introducing new ways of working so that we can respond quickly to changing demands. These will also give staff opportunities to work on a wider range of issues. There has been a huge amount to be done in a short space of time and some elements of public service have struggled. At Defra, we have had to learn to run before we could walk. We have had to determine the best way to respond to the challenges we face on a constant and consistent basis. There has not been an opportunity to say to our people, We have climbed this mountain, we have reached the top and it is time for a period of consolidation so we can think about it again. It has been a non-stop journey of embracing change and improving delivery as we move towards the department s capability review in January We have achieved much from the success of the EU and G8 presidencies and keeping climate change high on the international agenda to securing reform of the EU sugar sector that brought a 36 per cent cut in the price of sugar. Run, don t walk Issues such as climate change, environmental sustainability and emergency preparedness will be Defra s focus for the next few years. In many of these areas we rely on other government bodies and organisations to deliver on our behalf. This means striving to ensure we have the resources, people and skills we need, in the right place, to deliver and make a difference to citizens, the public, stakeholders and customers. We are working to: Assess the skills that policy-makers require and how they should engage with and influence other departments or public bodies. Ensure they have the credibility they need to face up to industry. Change from a department traditionally focused on command and control, legislation and regulation to an organisation that uses other means to influence industry, as well as the public and citizens at large. Exert greater influence, not just at the domestic level, but across Europe and internationally, where issues like climate change are so pivotal. It is a question of building capability and capacity. The organisation must be able to deliver, and that means having the right skills in place and leaders who can influence others on our behalf. As part of the process of reform, we need to be realistic about what the department has as its core skills set and to examine the potential of partnerships. By going into a partnership, you can bring in a different perspective, such as a private-sector viewpoint, as well as different skill sets and the sort of delivery experience that we do not necessarily have to hand in the quantities we need. Things are not going to stand still for our organisation. So our capacity must be able to change, as and when we need it. We recognise that we need to be The organisation must be able to deliver, and that means having the right skills in place and leaders who can influence others Five-year plan In the next five years, I believe that Defra will be better able to deliver on its goals and that people will feel they are getting better and more accessible services, at a time that is most useful to them. I hope that we will be more efficient in our delivery of those services, and that we use technology to become much more citizen-focused. My ideal would be to see some of the boundaries between departments disappear, with a far more seamless, joined-up approach to policy-making than we currently have. Defra has gained significant respect, although more remains to be done. I am trying to find the win-win between what we want to deliver and what others need to deliver, so we can make greater inroads into things like climate change and sustainability, the environment and social justice. Recently some of our customers have told us that we have got better at delivering and working in partnership. Our aim is to continue to improve and for all our customers to tell us how they are benefiting from our improvements. Our remit is exciting: it touches the lives of everyone. Defra is increasingly becoming an employer of choice. We attract bright, dedicated people who are committed to delivering to the public. I am looking forward to seeing Defra become one of the very best departments in public services, to have the kind of influence we should and to ensure we make a difference to society. That is our aim and we have the right foundations in place to make it happen. Francesca Okosi is Director of HR and Corporate Services at the Department for Environment, Food and Rural Affairs. 12

15 Systems, processes, people Essay 4 Handling 150 million transactions and 20 million phone calls each year, the Driver and Vehicle Licensing Agency is following a two-pronged strategy to transform the effectiveness of its highly visible public service. Clive Bennett, Chief Executive, Driver and Vehicle Licensing Agency The Driver and Vehicle Licensing Agency s (DVLA) transformation programme has two main objectives, which we have been tackling simultaneously. The first is to improve its processes and infrastructure. When I arrived in 2000, for example, our systems were very much paper-dependent and the shift to IT-driven processes was in its infancy. We needed to create a digital business. The second is to create a fit-forpurpose organisation. While the agency was already relatively efficient in terms of its project management, we needed to move from a command-and-control environment to a less hierarchical structure and more closely align people s skills with the competencies the agency requires. Traditionally the DVLA was largely seen to be about processing driver and vehicle licences. Everything was measured on output how many licences you put through in an hour, how accurately they were put through. It did not take long for me to realise that in fact the business was fundamentally about data, and using it to deliver better outcomes. These are better road safety, reducing vehicle crime, improving the environment and enhancing the experience and choice of customers interacting with government (part of the whole digital agenda). Through working towards these outcomes, greater efficiency will result. Efficiency is not an end in itself it is about everything you do. So how did we move the organisation s focus from outputs to outcomes? The first thing we looked at was bringing in new expertise to the board. While we had some good people, there were gaps. We recruited a finance and strategy director and a local operations director with The agency needed to move to a less hierarchical structure and more closely align people s skills with required competencies private sector backgrounds. Then we agreed a set of five key values that we would operate by. This was critical. While it is difficult to embed these values fully in the business, the fact the whole board had signed up to them and was prepared to be measured against them set a cultural principle. I also wanted to have a clear vision of where we were going. To a large extent the DVLA had been a reactive organisation: strategy and planning had to become the norm. So I decided to list all the things I did not like about the agency, and got the board to do the same. Agency II is the opposite of all these things: the goal we are trying to aim for. So, for example, we do not like command-andcontrol, what s the alternative to that? If we do not like being a paper-based business, what do we need to do to change that? It was a very crude strategic goal, but was something we could use to communicate to our staff where we were and where we wanted to be. A holistic view of IT IT quickly became a major part of realising this vision. When I arrived at the agency there were plans to replace the IT supplier. But I did not want another supplier that would simply update our IT systems. Instead, we needed partners that could help us achieve a root-and-branch transformation of our organisation, looking 13

16 holistically at how our systems integrated with our people and processes. IT is hugely important but it is just another brick in the wall. I felt we needed an embedded partnership that brought private sector expertise into the heart of the public sector. So we established the PACT initiative to find partners who would be the first port of call for any IT-related project, taking projects from concept to delivery. At the same time, however, these partners would be held accountable to a number of value-for-money criteria, and if we felt that they were not delivering we would walk away. It is quite a strong partnership model from both partners perspectives. We selected IBM and Fujitsu as our partners and we have successfully worked together on a number of projects now. All our IT projects have looked at the existing process from end to end, and then assessed how the process should work in future, trying to make it as seamless as possible for the customer while improving the accuracy of our data. The first project was electronic vehicle licensing, one of the key government transactions that the Prime Minister had announced would be made available online. This had a very strong business case, from a customer, government and return-on-investment perspective. A powerful application, it automatically checks that a vehicle is insured and, if you have a digital MOT (available from every garage from February 2006), you can pay your vehicle excise duty in one electronic transaction, either over the Internet or by phone. The project was delivered on time in 2004 and we have reached around 30 per cent take-up, moving towards a target of 60 per cent by We have also done some work on the first-time registration of new vehicles, making this available not just on our mainframe but over the Internet for smaller dealers. That is now at around per cent take-up. We wanted partners that could help us look holistically at how our systems integrated with our people and processes Many of our transactions are not yet electronic, however, and a large proportion go over the Post Office counter. The Post Office used to process the transaction by sending off paperwork. It could take up to six weeks to update our records, meaning the police would often stop a driver for not having a taxed vehicle only to find it was taxed after all. As a result, we started BART (Barcoding and Relicensing Transactions) an IT project to streamline the processing of these manual transactions. At the counter a barcode on the paperwork is scanned and our record is updated overnight. Our product is data, and behind the scenes our computer systems are working to increase the accuracy of that data, and improve our processes. The current major IT-related system that we are implementing is electronic driver licensing. This is quite complex and involves a lot of strands, including direct links to the Identity and Passport Service for authentication, the upgrading of software and hardware, and the introduction of ten-year renewals on an increased security plastic licence. When we were looking for an IT partner, we wanted to develop our programme capability on a skills transfer basis. So IBM programme managers came in and trained up DVLA staff, and now we have much stronger expertise in this area. These IT initiatives have helped us to achieve significant efficiency benefits of 4 5 per cent a year. However, I think the efficiency agenda is always something that the agency has been strong at. When I arrived we had an efficiency group of employees that looked at processes and recommended how to improve them. We have now formalised this to create a recognised internal consultancy, made up of our civil servants and linked with the Institute of Consultants. They carry out what we call Better Quality Services Reviews, which focus on process improvement, benchmarking them against the open marketplace. This allows us to monitor constantly that what we do offers best value and efficiency. Achieving organisational change Looking at organisational design and change to ensure the agency functions in the most effective way possible has been one of my priorities. As well as developing the set of values that I mentioned earlier, an 14

17 early step was to establish a planning board as well as a review board for the executive. We also put directors in charge of particular programmes in addition to their functional responsibilities. So, for example, the finance and strategy director runs the drivers programme, while the operations director is responsible for our vehicles programme. In addition we have agreed a set of fully integrated SMART goals for the senior management team, significantly increasing accountability. In recent times we have intensified our focus on organisational change. This work is centred around a number of areas. First we are removing unnecessary layers of management where they do not add value, and reviewing spans of control. Where a manager does not have time to lead or develop their people because they have too many of them, we are reducing the number of staff in their team. Similarly if a manager has, say, just two people reporting to them, we are increasing their span of control. The second element is profiling our managers, both in terms of their people management and leadership abilities and their professional competencies. Over the years, civil servants have traditionally been placed into a grade loosely associated with the number of people in their team and the responsibility they have. As a result, you can have a manager in charge of substantial numbers of employees who, while being an excellent functional or professional specialist, does not have real capabilities to manage people. So in essence we are trying to sort people into three categories: leaders/managers, specialists and hybrid. Where possible we want to move people into jobs that they are competent to deliver, that they can add value to and that they actually want to do. We want to help people to understand where they want to be, develop their skills in that direction and achieve a better match between their skills and the competencies needed for the job they do. Fundamentally we want a healthier, better focused, more effective agency something that is closely aligned with the Cabinet Secretary s agenda for the professionalisation of government. I also want employees to be able to bring their skills to bear regardless of grade. It is a positive benefit if I can sit down with a colleague of the lowest civil service grade and solve a problem together. Grade is not the issue competence is. Teamwork is also very important. To that end, we have introduced non-territorial working. Almost everyone works in an open plan space, and nobody has the same desk two days running. It means they mix with different people in their teams, change their working environment and get to know their manager better. And we get a 20 per cent space saving, too. Training and development is, of course, an important factor in improving levels of professionalism within the agency. We made a business case for building our own dedicated training and development and innovation centre. Now that we have an in-house facility we can ramp up training initiatives without having to spend a fortune on external premises. Recently we completed a series of seminars with our leaders in the agency. We have made real progress on our transformation Joining up government An early challenge was to make more sense of what had been a loose association of transport agencies working together, including the DVLA, the Driving Standards Agency (DSA), the Vehicle and Operator Services Agency and the Vehicle Certification Agency. We shared common customers yet had been operating independently. A good example of a complex cross-agency transaction for customers was obtaining your driver s licence. Traditionally you would fill in a complicated form and pay a fee to the DVLA to get your provisional licence. Then you would have to queue up and book your test at the DSA. Once you had passed your test you got a pink slip that you sent back to the DVLA, with another fee, in order to get a full licence. This was four or five separate activities. So we decided to simplify this process. We changed the fee structure so you paid one fee only, when applying for your provisional licence. You can then apply online for your test. When you pass, the DSA informs the DVLA and you automatically receive your full licence. strategy over the last few years. Our work on IT systems and improving processes has not only further improved efficiency, it has also attracted new business to the agency as we have brought projects in on time. One of our current challenges, for example, is to create a shared service centre of around 300 people to deal with finance, payroll and HR for the whole of the Department for Transport. In terms of the development of the organisation, I believe we are giving people more ownership and accountability. This is starting to cascade through the organisation, and I hope it will be a noticeably different place in, say, two years time. In terms of our future challenges, we need to integrate our systems fully, enhance service quality and introduce new services. There is much still to be done. Clive Bennett is Chief Executive of the Driver and Vehicle Licensing Agency. 15

18 Insight Disability Rights Commission Raising expectations, empowering people A conversation with Bert Massie, Chairman, Disability Rights Commission The inequality experienced by disabled people and those with long-term health conditions affects us all and stands between the government and its ability to achieve its core ambitions for Britain, argues Bert Massie, Chairman of the Disability Rights Commission (DRC). A profound change in attitudes is required so that the contribution of disabled people can truly become a strength to the nation. The vast majority of us will be affected by disability at some point in our lives, says Massie, directly through personal experience, or indirectly through our families, friends and colleagues. So if someone asks you if you are disabled and assuming you are not the most honest answer you could give is not yet. What are the social and economic costs of disabled people not being able to play a full role in today s society? The Labour Force Survey in 2005 showed that four out of ten people out of work are disabled. The rate of income poverty among working age disabled adults is double the rate for non-disabled adults. Thirty per cent are living in poverty up three per cent in the last ten years. Disabled adults are poorer now than children or pensioners. Conversely, the incapacity benefit bill has grown to 12bn a year. And there is still too much stigma and denial. One MORI poll showed that one quarter of British workers would be afraid to ask their boss for support if they developed an impairment or health condition. People who qualify for protection under the Disability Discrimination Act go to work every day terrified to reveal aspects of their identity, for fear of being found out and losing their jobs. These fears lead people to be less productive than they could otherwise be. If we deny that impairments and health conditions are an ordinary aspect of human existence, we are directly contributing to social and economic exclusion the costs of which we all bear. Does the UK s public policy recognise this? Public policy makers have generally not thought about disability. It is something over there to do with wheelchairs and ramps. Now I don t knock ramps [Massie is a wheelchair user] but the majority of disabilities are related to conditions such as heart trouble, emphysema, arthritis, or reading or learning difficulties. The government has made progress in extending statutory duties to prohibit discrimination and to promote equality of opportunity for disabled people. But we have not yet seen progress in translating their approach across public policy. Let me give you an example. We are currently investigating the health inequalities experienced by people with 16

19 Insight Disability Rights Commission mental health problems or learning disabilities. International research shows these groups are more likely to die young and live with physical ill health than other citizens. But sometimes, these problems are made worse by inequalities in the healthcare they receive heightening their risk of exclusion from the labour market. More than 50 per cent said they had experienced difficulties when visiting their GP. People with learning difficulties have fewer routine tests, such as cervical screening and mammography, than other citizens. There are impressive examples of good practice and responsive primary care services, but they need to be widespread. These inequalities in healthcare must be tackled as part of the major reforms to primary care. By the end of 2006, there will be new positive duties on the public sector to actively eliminate discrimination and to promote equality for disabled people. What are the implications of this duty? These duties placed upon the public sector have the potential to change everything if things are done properly. At the moment, you have to expose discrimination before you can challenge it. A blind person, for example, has to sue a restaurant if they are refused a table because of their guide dog. But disabled people don t want to go to court. They have enough battles already. Wouldn t it be better if we prevented discrimination in the first place? This is not about creating another checklist for organisations to tick. The focus has to be on outcomes. The disability equality duty puts disability at the heart of everything that public agencies do, requiring them to involve disabled people in designing policies, services and practices. This will prove to be beneficial for everybody: citizens, government departments, and commercial organisations. Why? At present, the basic prejudice among employers is what can t you do? rather than what can you do? We need to turn this around. Disabled people are still not accepted as having the capacity to be equal. Local authorities and government agencies are massive employers that need to attract good people. So why, for example, does every doctor have to be physically fit? I know of a tetraplegic who wanted to train as a doctor. She was turned down because of her inability to perform artificial resuscitation but she wanted to be a pathologist. Currently there is a significant gap in employment rates between disabled and non-disabled people (51 per cent to 81 per cent respectively). This disparity must be reduced if the government is to achieve its higher economic activity rates and child poverty targets. A positive and constructive approach to incapacity benefit reform will be essential. The concept of incapacity for work as the basis for entitlement to benefits must be removed: at the moment people are reluctant to try out work for fear of being accused of benefit fraud. And greater support needs to be provided to help disabled people secure employment and carry out their roles. So you re saying that there is massive human capability that is not being fully harnessed? Only through disabled people playing an active part in society will attitudes and expectations shift. Once services and products are suitable for disabled people, the result is a system that is better for everybody. Buses designed for wheelchair access are highly popular for mothers with prams and buggies. The standard for train design features better access, clearer signage and improved colour contrasts. One-third of the DRC s staff are disabled, so our office doors are automatic, which is easier for everybody. There is not a problem that cannot be solved if you approach it from the right way. It means involving disabled people rather than just consulting them. Their expertise is required just as much as the expertise of accountants, engineers or technical designers. There are major productivity gains to be made. A non-disabled person will spend 50 per cent more time on a website that is inaccessible to disabled people than on one that is fully accessible. Widespread, fully accessible websites would be a massive plus to GNP. Yet we have found it difficult to make progress in this area, as there are incredible levels of ignorance. If technical site builders are unaware of the issues, then disabled people are being locked out and aspirations, involvement and expectations are lost. We are making progress on the physical environment. But the cyber-world is building unnecessary barriers. Is it so difficult to make things bigger on screen? The barriers that we face are people, buildings and websites. As far as the latter two are concerned, we have mis-designed them so we should have the wit to redesign them. Are you optimistic about the future? A lot of our prejudices today will appear absurd to future generations. The sort of transformational change we need will only come if we redress the ability of disabled people to participate fully in the civic and political life of our country. And maybe the UK government is getting real about disabled people. Does anybody really want a life where things once enjoyed become difficult? Why should we have to change our lifestyles, and get poorer and sicker, just because we become disabled? If we do not tackle these issues, we will certainly pay for them down the line. Bert Massie is Chairman of the Disability Rights Commission. 17

20 Essay 5 Government by numbers Good financial management has risen sharply up the reform agenda. But an obsession with budgeting and a half-hearted approach to accountability are impeding progress. Steve Freer, Chief Executive, Chartered Institute of Public Finance and Accountancy Good financial management is a fundamental prerequisite for any successful, high-performing organisation. But it is not always well understood. Often it is oversimplified: good financial management is about ensuring we make profits or making sure we don t overspend the budget. Often it is too tightly pigeon-holed: it s what the accountants do. Often it is described in negative, resentful terms: the financial hoops we have to jump through! The art of good financial management in the public services is improving. But what steps could be taken to shift performance up a few more gears? Let s start with a definition: Financial management is the system by which the financial aspects of a public body s business are directed and controlled to support the delivery of the organisation s goals. the financial aspects of a public body s business is clearly a very broad canvas. It touches all corners of the organisation and has implications for most, if not all, of the organisation s staff. It matters to citizens whose hard-earned taxes foot the bill for public services. And it has implications for and sometimes a significant impact on the lives of users of those services. Crucially for this last constituency, it ensures that resources are directed and controlled to support the delivery of the organisation s goals. So good financial management is right up there in terms of the attributes which differentiate outstanding organisations from their peers. It may not be the only ingredient required to make a great organisation, but it is certainly an essential component in the mix. In many ways, the power of financial management derives from its centrality. It plays a part in every key business process in an organisation. In particular, it steers the stewardship and accountability systems that ensure the organisation is conducting its business in an appropriate and ethical manner. It is critical that these foundations are firmly laid. So often they are the practical litmus test by which public confidence in the institution is either won or lost. It also provides the information, analysis and advice to enable the organisation s service managers to operate effectively. But this has to go way beyond the traditional preoccupation with budgets how much have we spent so 18

21 far, how much have we got left to spend? It is about helping the organisation to better understand its own performance. That means making the connections and understanding the relationships between given inputs the resources brought to bear and the outputs and outcomes they achieve. It is also about understanding and actively managing and mitigating the risks that the organisation faces. By improving decision-making, good financial management can help the public sector to change in a very positive way that delivers increased value for the taxpayer s investment. It can also help to incentivise progress and ensure reforms are sustainable and effective in the long term, by making sure that success is appropriately recognised in both the formal and informal reward systems of the organisation. But so much for the theory: what about the practice? Encouragingly, good financial management has risen sharply up the public sector reform agenda in recent times. There appears to be an increasing consensus about its importance, borne out by a cocktail of proactive initiatives from the Gershon agenda and the professional skills work within the civil service, to the performance assessment frameworks developed by the Audit Commission, among others with just a dash of knee-jerk reaction to financial crises that arise from time to time. Acknowledging this progress is important, but we also need to avoid complacency about financial management s new high profile. Rather than take it for granted, we need to provide whatever support we can muster to ensure it remains right at the top of the reform and modernisation agenda. To do that we need to embed good practice throughout all organisations. Excellence as standard has to be the long-term goal. Good financial management is about much more than the finance department, and we need to keep this message flashing in neon lights. The next level of performance will not be reached unless we win the argument that financial management includes the actions and decisions taken by non-finance people throughout the organisation. For good financial management to be a reality, we have to win hearts and minds and build up 19

22 stronger financial competence in general management. Most public bodies have made helpful progress in the challenge to make service managers more financially literate, competent and aware. But most would acknowledge that there is still a long way to go before we can claim that excellent financial management pervades the organisation s work. In my view, two key issues are impeding progress: an over-zealous approach to budgetsetting and a half-hearted attitude to accountability. The budget is just too big an issue in most public bodies. It consumes large amounts of management time and effort without adding equivalent value, and casts a shadow over other critical events in the organisation s financial cycle. Crucially, actual end-of-year financial results often pass relatively unobserved in a post-budget blur, especially if they are suitably nondescript (small underspendings preferred!). As a result, managers become absolutely fluent in the language of the budget word perfect on the myriad options considered and usually rejected but remain novices in the language of hard financial realities. Ask a senior service manager to explain his or her budget needs and you are likely to be overwhelmed by a snowstorm of financial statistics and arguments. Ask basic questions about last year s outturn or the fundamental unit costs of the business and you are more likely to be referred to the finance department. Budgets are exciting. Budgets are high profile. Battles are fought and spoils hotly contested. Mastery of the financial fundamentals and cost drivers of the business is, by contrast, the daily grind offering rewards that are far less vivid and much less racy. This tendency is compounded by the sector s approach to performance management. In fairness, this is another area where most organisations have made substantial progress over recent years. But in our haste to measure outcomes against sophisticated service targets, how often do we overlook the critical fundamentals of the business? For example, most managers would have an objective to operate within the approved budget; a smaller number would have a target which exhorted greater efficiency; very few would have a SMART objective that clearly identified the current unit costs of services and set explicit, measurable efficiency targets to reduce those costs. These are the kind of targets that put pressure on managers to really understand their businesses and the resources which support them. They help managers to manage better. They improve public services not necessarily in a transforming, headline-grabbing way but in an equally satisfying, good housekeeping, good value-for-money way. This should be the underpinning house style of all our public services. To make this leap we have to have real accountability. Managers have to know that their For good financial management to be a reality, we need to build up stronger financial competence in general management performance against targets will be measured, that they will be judged and held to account. Sadly these disciplines are not as securely or widely embedded as they should be. If the organisation as a whole is facing serious financial difficulties, accountability is of course assured. Any number of investigations may be commissioned by or simply visited upon the organisation and its managers. But if financial performance is broadly on track the position of 99 per cent of public bodies vital end-of-year review activity may be curtailed or carried out in a half-hearted, even self-congratulatory manner. Looking back and learning may take second place to today s and tomorrow s challenges. If we are to realise the benefits of good financial management in all public services, these disciplines of rigorous review and real accountability have to be taken more seriously and embedded. They must be there in feast and famine. Only then will managers really give priority to meeting all their carefully crafted targets which require good understanding and good management across the full range of their financial and service responsibilities. This will not happen without concerted action. And here I think we do come back to the accountants. They have to lead and take responsibility for both promoting this change of focus and designing the framework which delivers it in practice. These responsibilities must be a central part of the finance director s role, and the finance department s performance must be measured and managed against how it delivers them. And this measurement should be demanding. Counting the number of managers attending the training course will not do. Nor how many have managed within budgets. We need to find ways of measuring not only that the financial competencies of managers are improving, but also that these skills are actually being deployed. In this way we can ensure financial information is used effectively to help manage the business. The challenge to deliver world-class financial management across the public services is huge. But if we can make it happen, the benefits will be even greater. Steve Freer is Chief Executive of the Chartered Institute of Public Finance and Accountancy. 20

23 The future of finance Essay 6 A programme to transform its finance function is helping the Department for Work and Pensions achieve a step change in decision-making, financial planning, performance management and transaction processing. John Codling, Finance Director General, Department for Work and Pensions The Department for Work and Pensions (DWP) is a large and complex financial organisation by any standards. Every day we pay out 400m in benefits payments, totalling 700 million payments each year. On average, every member of staff oversees expenditure of 1m a year. Finance s responsibilities are broad. They include: Setting the governance, risk and financial management environment to support the department s decision-making, policy development and planning. Providing financial management advice. Managing planning resources. n Managing the department s debt stock. n Processing benefits payments. n Administering payroll and pensions for DWP s current and former staff. Major change required When the DWP was created in 2001, we faced some pressing challenges. We had to implement effective management structures and relationships between delivery businesses and the centre of the department. What is more, we had to achieve this change using tools that were far from ideal. We had, for example, inherited a mix of several systems with inconsistent processes. Financial systems and management information were not adequate. There was a lack of understanding of the cost base, which was partly down to the fact that the department was changing its product lines and business processes and we were not able to show the cost of operational management and policy choices. It was clear that the department Managers saw finance as focused on book-keeping and financial control but not as a support to decision-making needed a step change in financial planning and performance management. A huge change programme was going on but we did not have sufficient capability to develop and evaluate business cases and options and carry out suitable scenario planning. To a large extent there was a transactional approach to finance. Managers saw it as focused on book-keeping and financial control but not as a support to decision-making. To tackle these problems, we developed a strategy that set out what the finance function would look like in 2010 and the steps we needed to take to achieve this transformation. This strategy examined how we would meet the needs of our internal and external customers as customer expectations changed over time and our capability to deliver increased. We decided that we could draw the greatest benefits from: n Introducing new IT systems to provide users with reliable underlying data. n Implementing effective governance and decisionmaking arrangements in the department. n Putting in place finance and business models that were consistent and appropriately organised across the business. n Building capability in finance and procurement at all levels. n Driving efficiencies in our financial services. Improving decision-making The finance transformation programme is a large and complex programme of work that is tackling all these areas. A major priority when we started the programme back in 2004 was achieving high-level change to improve the department s 21

24 governance and decision-making. Usually each agency in a department has its own framework agreement. We decided to develop one departmental framework document for DWP, agreed by ministers and the Treasury, that set out the governance arrangements for the department as a whole and its relationship with agencies. To prevent strategic issues from getting bogged down, we have created a number of high-level decisionmaking committees. These include an investment committee, a change delivery committee, a planning, performance and risk committee, and a number of others. They have senior membership and specific terms of reference to either take decisions on the executive s behalf or to consider significant issues in detail so that recommendations to the executive and ministers are better debated, analysed and reviewed. Of course, boosting the quality of decision-making also means we need to improve our capabilities in this area. To this end we have joined up the former financial management and control directorate and the planning and performance management directorate, under one senior director. All the department s financial planning, performance management and risk issues are now in one forum. And it is a multi-skilled environment: policy people, planners, accountants, economists and statisticians all work together. In addition we have implemented a corporate planning system, Cognos, to support multi-year planning and scenario planning, and established finance directorates in each part of the business to ensure that the corporate planning and performance management cycle is led by appropriately skilled professionals. On the commercial side, we have drawn up a new commercial strategy, developed a strategic sourcing initiative and looked at demand management. Enhancing efficiency Generating greater efficiencies is a major objective of our transformation programme, and shared services is an essential element in this drive. We have been developing a shared services capability that incorporates the financial accounting and ledgers for the whole department and its agencies ten sets of accounts in all. We are progressively implementing the resource management system Oracle 11i across the department. So far we have introduced the finance and procurement modules, with HR and payroll to come. This system will help us drive efficiencies by creating one end-to-end business process for activities such as administrative payments, concentrating expertise. For example, shared services now controls the 400m in benefits payments that goes into the banking system daily, providing much better control. Its employee services business line provides HR transactions, payroll, You can change all the systems and processes you like ultimately any transformation initiative must focus on people superannuation administration and travel and subsistence to 130,000 staff around the department. And it also includes a new, rationalised debt management system that has brought significant efficiencies over the last year. From September 2006 our shared services capability will become a separate organisation within the department. To maximise the benefits from this move, we have agreed more arm s length governance arrangements with the shared services organisation. Shared services will be required to examine its cost base and make decisions on margins. Then the department must decide whether to continue to acquire services from the shared services organisation. Similarly, shared services will be able to consider whether providing services for other public bodies will make a contribution. Developing people While you can change all the systems and processes you like, ultimately any transformation initiative must focus on people, their skills and how they work together. I cannot imagine a day when this programme does not have a major people development strand. We have focused heavily on developing leadership in the finance function. In part, this ties in with the organisational design changes that we have made. So we now have a planning and performance management director, a commercial estates director, a shared services director, a risk and assurance director and a new people and professional capability director. We have also brought in new financial leaders to some of the department s businesses. Jobcentre Plus and the Child Support Agency both have new finance directors, and we have introduced a finance director into the IT function. Some of these recruits have come from private sector backgrounds, bringing different experiences to the table. A vital step was to create a finance director role in the department s two policy directorates. The pensions and strategy directorate and the work, welfare and equality group develop policy and legislation and also work with delivery organisations, whether these are agencies within the department or in the private or voluntary sectors. Yet a year or two ago, the finance function did not exist in these directorates. So we have brought in finance directors to ensure policy proposals undergo proper financial evaluation, conduct risk assessments and analyse the impact of proposals against the financial control framework for departments something that is often overlooked. They also help the policy directorates to evaluate the performance of delivery organisations. It is an absolutely key role in terms of the quality of decision-making in the department. To develop the capabilities of finance and procurement staff we have created a dedicated learning and development package. This identifies typical roles 22

25 from the top to the bottom of the finance function perhaps a finance director in a policy directorate or a financial manager in one of the businesses and then provides a roadmap that allows people to understand the competency and skill requirements of their role, match their own capability against them and draw up their own personal development plans. Development activities are provided in a range of ways from one-day courses to college-based learning or e-learning, for example. We have to be careful not to over-burden people, however. The major change that the department has undergone means a lot of competition for training time. But enhancing the DWP s capability in finance does not simply involve improving the skills of finance staff. I also have a responsibility for ensuring non-finance employees have the basic financial and procurement skills to help them make decisions and carry out their duties effectively. This has been a problem area in the past. Very junior members of staff may be making decisions that could potentially incur more expenditure, but they are not always aware of the consequences of those decisions. Middle managers may need to be more aware of the commercial environment when it comes to our contracts or their use of, say, the estate or IT resources. We are piloting a resource awareness model in the Disability and Carers Service to tackle this issue. As decision-making has got better and we have delivered on our promises, people s perception of finance has improved Transformation as the day job Gaining acceptance of some of these roles and indeed the role of finance as a whole has been an interesting challenge. In the policy areas in particular there was scepticism about why planning and performance management needed to be integrated. But as decision-making has got better over the last year and we have implemented new systems and are beginning to deliver on our promises, people s perception of finance has improved. We are still in the foothills of delivering the full benefits of transformation, however. Our business case suggests these will be between 2 2.5bn. At the moment we have probably realised a couple of hundred million of that. One priority for the next year will be working on learning and development modules to ensure that we maximise the benefits from our investment in high-quality financial leadership. We also want to implement successfully the HR and payroll aspects of the Oracle system and exploit the advantages of more structured financial information. In 2008 we are planning to introduce a central payment system for benefits that will improve our controls in this area. Beyond that, the major aspects of the transformation programme will involve people development issues and evaluating the fitness for purpose of the systems we implement. It will be important to continue to review what we have done further down the line. I still believe there may be room for improvement in our forward-planning and budgeting systems, for example. In a sense, there should be no end to this programme: transformation needs to become the day job. John Codling is Finance Director General of the Department for Work and Pensions. 23

26 Insight People, Pay and Pensions Agency Rethinking HR A conversation with David Ball, Chief Executive, People, Pay and Pensions Agency, Ministry of Defence The HR function plays a central role in ensuring that any public-sector organisation has the capability it requires to deliver. In April 2006 an ambitious transformation programme in the Ministry of Defence (MoD) saw the Pay and Personnel Agency, which dealt mainly with payroll and pensions processing, become the People, Pay and Pensions Agency (PPPA). The new business provides a full range of pay, pensions and other HR services to the MoD s 80,000 civilian staff, both online and through a call centre. The introduction of shared services alongside more strategic HR will bring substantial cost savings of up to 280m over ten years. But as PPPA Chief Executive David Ball explains, a major focus of the programme has been to create a high-quality, integrated HR service that fits the department s strategic aims. Why did you embark on a programme to transform HR in the MoD? When I joined the HR function in spring 2001, some parts of HR were being delivered by professional services organisations operating to deadlines, service agreements and cost controls. Yet others were carried out in a more ad hoc fashion by administrators and policy branches. We felt that HR services should be pulled together into their own, professional service delivery environment, presenting a single face to customers and clearly separated from HR policy functions. The other driver was a desire to tackle some of the strategic HR issues within the department. We wanted to focus on skills development in a different way, for example. The organisation needed people such as project managers and information managers. The problem was that employees who had worked for us for many years had not necessarily developed the skill sets required for our evolving environment. We had to make some high-level decisions. What was the corporate requirement for skills? Which competencies and accomplishments did we want to record on our systems? How do you decide which person should get a particular job, against which criteria? It was a question of creating a disciplined set of rules and requirements to provide standard ways of doing standard tasks. This required some rigorous policy thinking and the involvement of senior people. By rethinking what we actually wanted, say, our internal recruitment process to achieve rather than what it had always done, we could identify the simplest and most systematic way of setting it up. And the end result would be that our service would be more economical and more focused on the needs of our customers: business managers and employees across the department. What were the main challenges you came across? Testing the new rule sets and services was the hardest challenge. There are some things you cannot pilot: if you change the rules on bonuses, for example, you have to do it all at once or it would be unfair. And when you test things, you can bring in external people to do rigorous, end-to-end testing, but you still cannot help assuming things are easier than they are. When people use the service for real, unexpected complexities crop up. We are currently doing some remedial work to our internal recruitment service to tackle these types of question. But there is no easy answer: designing complex, customer-friendly HR services is always going to be hard. More generally, I think you need to recognise that you can never do everything first time round. We worked hard to 24

27 Insight People, Pay and Pensions Agency bring a common discipline to HR, creating a single organisation supported by what are essentially a standardised set of processes and systems. But once services are up and running, you spot more things you can do to refine them. A big difficulty is identifying to what extent current HR practice exists as informal knowledge rather than being formally codified. Even within a corporate policy framework, managers sometimes understand and apply policies differently. We had to tease these differences out and decide a) what were the positive elements of current practice that should be included in the new formal set of rules and b) how to prevent the negative aspects from reappearing. In an area such as internal recruitment, for example, managers may want to add additional criteria or restrictions to job advertisements or specifications. We have to ensure they stick to the standard process. This has involved creating one integrated set of rules, and updating it formally rather than issuing ad hoc notices or s. Managers can still exercise their judgement, but it has to be within the boundaries of the rule set. Codifying an employment framework into a new set of customer-facing rules that do not rely on HR branches for interpretation, and can underpin precise service requirements, is not easy. The HR function has not always found it as natural as some to adapt to the rigorous precision and configuration control needed in a shared service environment. Which elements of the programme have been particularly successful? There are three areas that I am particularly proud of. The first is the way we set out the shape, speed and direction of the programme. Senior management in HR and outside it have driven our vision from the top down. Back in 2002 we decided where we wanted to be in 2006 and We have pursued these goals systematically, incrementally but relentlessly. Even in difficult times we have not lost momentum. Perhaps our biggest success has been developing a customer-focused service architecture. There are a range of scenarios in which managers or staff need support from HR: when advertising a post or if someone is misbehaving, for example. So we devised an architecture based around approximately 500 tasks that explain what to do in a given situation and set out any related rules. Managers can self-serve online or access the tasks in hard-copy format. If, for example, you want the department to provide your salary details to your mortgage company, you can easily navigate to the task How to request release of payroll information. The service tells you the rule that you must give the department permission to reveal your salary and provides the form to fill in and the number to ring for help. It is a real customer-facing service. What we have also done well is to be bold in the development of online services. Take travel and subsistence expenses. Four years ago we radically simplified the rules. Employees can now submit their expenses claims online. They answer some simple factual questions: how much did you actually spend on X,Y,Z? How many miles did you drive from A to B? They are asked to confirm their claim is accurate and it is automatically fed into BACS the same evening. Managers no longer have to countersign at the time of claim trust, simple rules, stark personal accountability and subsequent targeted audits are more effective risk management measures. Each month 30,000 online claims are processed this way, transforming the experience for staff who travel on duty. What will the key challenges for HR services be in the future? When we started our programme back in it seemed nicely self-contained: we wanted to reshape a set of HR processes and systems. But now the future seems very different. There is a vision for shared back-office services cutting across government departments and agencies. Public-sector managers do not see back-office functions in terms of HR or finance they simply want a resource set that lets them do their jobs. The boundaries around both the services and the customer base are dissolving. There are likely to be fewer service centres across government, serving more functions and a wider group of customers. But how do we get there? There is no tidy prototype to follow. Customer requirements, service providers and underpinning systems are nowhere near the level of maturity and standardisation needed to support such a vision. When you buy an HR system, you get a database with extras you have to design and build your own policies, procedures, service architecture and rule sets. You can still see its origins as a back-office data system, rather than as an enabler of customer-facing self-service. Customer usability has not been the strongest point, and users expectations are conditioned by their experience of services such as online purchasing from Tesco or Amazon. The next generation of systems needs to support managers in a variety of different organisations in their day-today tasks. If this shift on both the supply and demand side is to happen, there needs to be a dialogue of a quality that we have not yet seen between policymakers, service delivery organisations and the IT system providers. Getting this dialogue to happen and produce results is probably our biggest challenge. David Ball is Chief Executive of the People, Pay and Pensions Agency in the Ministry of Defence. 25

28 Essay 7 Government cathedrals, government bazaars Vast data processing warehouses will not create more efficient and customer-oriented public services. Smaller and more flexible shared service modules based on a common, cross-government IT architecture are required instead. Owen Barder, Center for Global Development (US) New technologies have transformed consumers lives. Buying airline tickets, booking a hotel room, buying a book or CD, getting cash, renting a flat even finding a boyfriend or girlfriend have changed dramatically in the last decade. Many businesses have used technology to offer more convenient, personalised, joined-up and effective services, generally at lower cost. But if a time traveller from 20 years ago arrived in a job centre today or in a hospital or school, or applied for a passport or driving licence they would feel immediately at home. While some public services have made noticeable progress, many have hardly changed. The contrast with customer service in the private sector is beginning to look stark. One cause of this gap is that the government has been paralysed by fear of failure. Although most government IT systems work as intended, highprofile IT disasters have diminished the appetite of public service managers for anything seen as a risky investment in new technology. Public service incentives reinforce this risk aversion, as do parliamentary and public oversight. In addition, senior managers chosen on the basis of traditional civil service competencies are rarely well equipped to oversee complex business transformation programmes or manage IT-enabled change. Businesses that miss opportunities to provide better services at lower cost will rapidly lose out. In the public sector, there are fewer incentives to motivate change: managers who will bet their future on the successful implementation of a huge IT project are rare. The slow pace of change is perplexing because so much of what the UK government does is ripe for improvement, as the Transformational Government strategy acknowledges. Technology can cheaply transform how services are delivered, and in some cases their very nature. For example, NHS Direct, which did not exist just eight years ago, is now the world s largest provider of telephone healthcare advice. In the light of well-publicised IT failures, the government decided to tighten up the management of large procurements. The introduction of Gateway reviews in 2001 has reduced the risk of IT failures, but it may also have reinforced conservatism in IT-enabled change, because it emphasised the causes of failure and encouraged managers to avoid them by abandoning or never starting IT projects. Transformational Government sets out an ambitious vision of technology-enabled reform of government. Public services will be designed around the citizen, built on a culture of shared services, overseen by a new breed of IT professionals in government. These are the right objectives. The challenge is to find a way to implement this vision. Citizen-centred services Transformational Government promises a new approach to building citizen-centred services. There will be new standards for government consumer research, and customer directors for groups such as farmers and older people, to ask them what they want and to represent their interests. A new committee will issue guidelines and co-ordinate work across government. But this alone will not deliver citizen-centred services. 26

29 The public wants seamless government services oriented around their day-to-day experiences, not divided into bureaucratic silos of government. Estonia, for example, has had the advantage of building new government institutions from scratch. So when you register the birth of a baby in the population register, the government automatically starts to pay your child allowance entitlement into your bank account. There are no forms to complete. It saves you time, and the government work. Registering a birth also automatically adjusts your tax code and arranges visits from your local health worker (even though this is a service provided by a different tier of government). This works because Estonia has developed a common architecture linking all government services together. Ten years ago the UK government tried to set up a single service for citizens to notify a change of address by filling in a single web-based form. Every part of government would then respond appropriately, including the national and local tax authorities, vehicle licensing, and voter registration. But even this was beyond us, and remains so today. The constraints are not technical: they are failures of leadership and policy. Citizen-centred services will flow from the ability of government services to introduce processes that use information held elsewhere in government. A common architecture of shared security, data and message-reporting is required so that every service can use common data and shared processes efficiently and securely, within the constraints of privacy laws. Shared services in the 21st century Transformational Government calls on the public sector to standardise and share commodity services such as HR, finance and customer service call centres. The aim is to Citizen-centred services will flow from the ability to introduce processes that use data held elsewhere in government 27

30 reduce waste and avoid inefficiency by reusing and sharing technology investment. A new Pan-Government Shared Services Board has been established and nine separate sectors have each been asked to develop plans for shared services. With a bit of squeezing and a lot of pressure, it may be possible to impose arranged marriages of public sector corporate services, establishing joint data processing centres for functions such as HR and finance. This could bring efficiency savings for government agencies and mean that senior managers are less distracted from running their core business. But there is a significant risk that these functional silos will, in time, become new obstacles to the necessary service improvements. Once functions are embedded in these centres, the opportunities for designing new and flexible ways to deliver services will be reduced by the need to agree and make changes across all the organisations that share the service. The cost, complexity and risk of building citizen-oriented services will rise exponentially. For example, suppose that a government department that uses many consultants wants to build a citizen-centred service to facilitate bidding for contracts. This might enable contractors to register their interests and skills, to reduce bidding costs by enabling them to enter corporate information only once, and to bid for contracts online. The systems would be used by the department to manage a supplier database, track project implementation, make electronic payments and monitor and compare contractors results. This could streamline administration by linking online transactions to back-office systems for budgeting, authorising payments, performance management of projects and knowledge-sharing. Now consider what would happen if the department had joined its finance system with three other public service organisations. It would not control components of the financial system budgeting, accounts payable, expenses, overseas transfers to which it would link. Agreeing changes across functions within a single organisation is hard enough: it would be almost impossible to get agreement between organisations, especially if the benefits were limited to a single stakeholder. Few managers would take the risk of approving changes to a shared financial system on which several government departments depended, just so one department could build a portal for contractors. The goal of shared services is the right one. But instead of building grand new data processing cathedrals, the private sector is today increasingly concentrating on developing a more flexible bazaar of loosely coupled services. A shared architecture for government The priority for government should be an IT strategy that organises the individual functions in government applications into interoperable, standards-based services that can be shared, combined and reused quickly to meet business needs. For example, once the government has developed an authentication module, a procurement system or a payroll module, these should be used and adapted by other business units sharing the same information architecture. This would require a significant change in mindset: Public services would organise services to correspond to citizen experiences (starting a business, moving house) rather than the functions of government (tax, benefits, voter registration). The front-line service, not their IT departments, would design and create applications directly. Organisations would not bet their future on a single, long-term IT development instead they would implement change in smaller steps, using small, reusable, interlinked modules. Systems would be agile and designed to change to meet future needs rather than being tightly coupled to today s processes. Instead of settling on a single, homogeneous technology, the government would be able to adopt a variety of different technologies appropriate to the needs of the services, linked by shared standards and message-orientated processes. A common, government-wide architecture, based on components, applications and data that could be reused and shared, would reduce development time, cost and risk. Front-line services would control their processes, enabling them to respond flexibly to changing needs and develop increasingly customer-centric services. Take the example of the Treasury in Chile. It has implemented a taxpayer portal which allows the government to add new services continuously and reuse the infrastructure to serve multiple purposes. Building blocks include facilities for citizens to make payments by credit card or wire transfers and an identity-authentication module: these reusable components have since been shared repeatedly across other applications. The first phase of the project, enabling 28

31 citizens to pay property taxes, was completed in just 90 days. When tax credits for rural business development were added, processing time for citizens dropped from 60 days to just four. The system is now used for services as diverse as tracking election expenditure, customs payments and all types of licences, permits, registrations and fees. Thousands of private sector businesses are also adopting this approach to join up processes across the value chain from Virgin Mobile to BT Global, from Standard Life to Wachovia. Improvements in government services do not have to rely on huge, mission-critical IT projects, managed by an army of highly paid business process and IT consultants. Instead they can be designed and implemented on a smaller scale, reusing existing components and built on and contributing to the shared platform. There is no need for make-or-break investments, organisational upheavals or demanding change management programmes, all of which have been poorly managed in the public sector. The benefits of shared services described in Transformational Government can be achieved: integration costs across functions would be reduced, and there would be savings from the elimination of redundant data and processing. Software development costs would be reduced by shared, reusable modules. But this approach also builds a platform for responsive and adaptive, joined-up government services, designed and managed by the business. Strong leadership required A service-oriented architecture for the whole of government would require the central imposition of standards and infrastructure, and the establishment of a single message broker, data service layer and security layer. All new government systems would have to be based on open standards and a common infrastructure, and comply with transparent, centrally determined and audited security and privacy restrictions. Imaginative leadership from the centre of government is essential. Transformational Government nods in this direction and the government has established a Common Infrastructure Board to provide information and assistance on delivering best practice for common infrastructure in the public sector and identify opportunities for c o l l a b o r a t i v e w o r k i n g. B u t t h i s i s n o t sufficient. Ministers and senior officials need to understand and embrace the opportunity that a service-oriented architecture would bring, and then use political and perhaps legal authority to ensure change across the whole of central and local government. The imposition of information standards would doubtless be denounced by some agencies as an intolerable assault on their constitutional autonomy. But there are obvious precedents: nobody questions the right of the Treasury to impose financial management and accounting standards, while the Civil Service Commission imposes and monitors standards of fair and open selection and oversees standards of propriety in the civil service. Far from restricting the autonomy of government agencies, Protecting privacy Respecting privacy is an important challenge for citizen-centred services. There is little appetite for a system that gives all of government access to a citizen s personal information. A decentralised system, built on a common architecture, responds to that concern by storing data in separate systems and restricting (and auditing) the information that those systems share. While the user can see all information that relates to them, government employees would only have access to information relevant to their particular function. Combining separate systems with common standards enables parliament and the public to make case-by-case decisions on the right balance between the convenience and efficiency of joined-up government and the disadvantages to personal privacy of sharing data. In addition, the data and security layers of a decentralised architecture enable more effective ring-fencing of information to protect privacy than is possible in large-scale shared databases. the imposition of cross-government standards for the management of information would create a common framework, within which departments would be free to innovate, adapt, share and build genuinely transformative services. Only the centre of government the Cabinet Office and Treasury can manage this change. In the long run, the benefits of a shared infrastructure with common standards will far exceed any short-term gains from combining corporate services. In the absence of strong central leadership, some de facto standards may emerge naturally as government information systems evolve, and some co-operation and co-ordination will be put into effect from the bottom up. But rapid and substantial changes in government will not be possible unless steps are taken to put a unifying architecture in place. This would liberate government providers, enabling them to develop efficient services that meet the needs of citizens. Then we could let a thousand flowers bloom. Owen Barder is a former Director of Information at the Department for International Development. He is currently (May 2006) working in the US at the Center for Global Development in Washington DC and is a visiting scholar at the University of California, Berkeley. 29

32 Essay 8 Making government more strategic Enhancing government s strategic capabilities has become an important priority. But there are a number of challenges to be overcome. Patricia Greer, Deputy Director, Prime Minister s Strategy Unit Making government more strategic has become a priority for this administration, as the establishment of the Prime Minister s Strategy Unit (PMSU) shows. With a remit to carry out strategy reviews and provide strategic policy advice to the Prime Minister on the domestic policy agenda, the PMSU and its predecessor have now developed strategies for most key areas and cross-cutting issues in government. Strategy units, strategy teams or similar bodies have been established in all the main departments, while the Cabinet Secretary has launched a series of reviews to promote continued strengthening of departments capability, including strategic capability. But creating strategic government is not an easy task, and there are a number of key challenges to be tackled. Securing long-term buy-in The incentive for politicians in any democracy is to achieve short-term, popular change. But in some areas strategies are highly unlikely to succeed without continuity or sustained investment. Often this means looking beyond the period that any one political party might be expected to stay in office. It can mean making politically unpopular sacrifices in the short to medium term from tax or price increases to regulatory or behavioural changes to realise l o n g - t e r m benefits. While this is challenging, the social and economic outcomes that result will ultimately outweigh the costs for politicians and the country. Pensions are one area where longer-term strategic thinking is required. The more confidence and certainty that individuals, employers and financial service providers have about the longer-term policy framework, the better they will be able to plan. On transport, recent reviews have shown that radical and fundamental reform is needed to the UK s transport system. Achieving consensus can be helpful in securing buy-in to otherwise unpopular policy options. Efforts to build common ground have included the Turner Commission on pensions, the Lyons review on location of government functions and the Eddington review of transport. The PMSU publishes its analytical work where possible as a means of informing public debate. Overcoming obstacles in government The diverse functions of government are delivered at a number of levels from central and regional government to county, district and parish/neighbourhood councils, as well as through non-departmental government bodies (quangos) and the private and voluntary sectors. Creating more strategic government necessarily involves creating strategies that cut across departmental and other boundaries. But often the number of bodies involved can make developing, getting buy-in to and implementing strategies for cross-cutting issues difficult. Different departments may have a different focus on the 30

33 same issue, or give it a different priority. Strategies can be precisely defined and imposed topdown through organisational hierarchies or developed bottom-up through discussions, experiments and learning. Whatever the approach, good stakeholder and change management, with constant testing, feedback, learning and improvement, is vital. The best government strategies are developed with, and communicated effectively to, all those who have a stake in the strategy or are involved in its funding or implementation. Good strategies are also clear about relative priorities and the strategic choices and trade-offs (what is not being done, as well as what is). And they have mechanisms and incentives in place to ensure effective implementation by each of the parties involved. Setting priorities So how do we prioritise between the important functions that government performs? Is homeland security more important than macroeconomic management? Are education outcomes more important than health outcomes? Ultimately it is a political matter. However, the PMSU has performed two strategic audits to support politicians making such choices. These involved data analysis and benchmarking to assess the UK s performance on a range of indicators, compared with previous years and with other countries. The PMSU then used this information to assess to what extent existing work was on track to meet the government s priorities. Of course, priorities change over time and owing to events. For example, homeland security rose up the agenda after 9/11 and the more recent London bombings. As a result, a strategy for government needs to be adaptable, with quick feedback and effective information flows to respond to new information and changing circumstances. A further challenge lies in ensuring policy programmes are integrated with strategic priorities and departmental strategies rather than being developed on a scattergun basis to tackle immediate problems. Strategies should be developed with a realistic idea of how they might be implemented, while policies need to exist within a strategic framework that explains how they contribute to desired outcomes. This involves a major shift in the way government operates though the requirement for departments to draw up five-year plans before the 2005 election was a step in the right direction. Surrey County Council is currently centralising all its policy functions (involving more than 300 staff) with the aim of improving strategic focus around its priorities and making policy project-based. If this work is successful it may contain lessons for central government. Policies need to exist within a strategic framework that explains how they contribute to desired outcomes Improving strategic capability Building the ability to develop strategies and to maintain a strategic perspective in day-to-day operations is a major focus of this government. It requires ministers, permanent secretaries and senior officials to demand better strategy work and foster a culture of constructive bottom-up challenging that encourages strategic thinking. Organisational structures and processes that reinforce demand for a strategic approach, and a strong evidence base, must be developed. And government must ensure it has skilled and confident people with diverse experience and access to best practice resources. There are a number of initiatives in place to boost capability. Progress has been made but such a major shift will take time. Current measures include the introduction of the Professional Skills for Government, the new competency framework for all civil servants. Strategic thinking and leadership are two of the key competencies that must be developed by all senior civil servants. The National School for Government has been developing a number of training programmes to support the development of these new competencies. In addition, the PMSU is working to ensure strategy skills are transferred to departments through a variety of mechanisms.the UK is leading the way in developing a strategic approach to government. The PMSU s Survival Guide sets out its thinking and the lessons learned, and has been translated into at least seven languages. Many countries are following suit, with a number of them establishing central government strategy units along the same lines. Yet much work remains to be done to ensure that UK government improves its strategic focus. Patrica Greer is Deputy Director of the Prime Minister s Strategy Unit. More information on the Unit s work can be found at 31

34 Insight Bradford Council Turning local government on its head With consistently poor feedback from its regular customer satisfaction surveys, Bradford Council realised significant change was needed. And the transformation has been remarkable. David Kennedy, Chief Executive, Bradford Council Bradford Council is the first local authority to make it onto The Sunday Times Great Place To Work annual survey, coming in the top 20 in It is a notable accomplishment for any government body, especially one that has approximately 600,000 customer interactions each year (and rising), but especially so for Bradford Council. Just a few years ago, feedback from customer surveys was not looking good and there was little to suggest it was going to improve anytime soon. For David Kennedy, Chief Executive of Bradford Council, it was a clarion call: transformation was needed if the council was ever going to make progress. Why has transformation been so important to Bradford Council? We had very low customer satisfaction results in our surveys, so something needed to be done. Since front-line employees know their customers best, we turned to our staff to find out what they thought was the best course of action, how they thought we could improve things and make the council better. The result was a series of Vision and Values workshops early in 2005 over 600 staff, a representative slice from across the council, participated. Out of the workshops came a defined vision for the council: to become one of the best in the country within the next five years and to be recognised worldwide for the regeneration of the district. In addition, a set of five values was introduced, intended to guide everything the council did in the future: putting customers first; serving the whole district; acting with integrity; valuing people; and continuous improvement and innovation. Together, these set the course for our transformation programme. Fundamentally, we needed to serve the customers of the district better and the best way to do so was by transforming the council into a customer-oriented organisation and looking after our staff better. We knew that if we could make Bradford Council a great place to work and people really enjoyed working here, they would deliver better customer services. And that was the bottom line: better working practices, improved customer service and better services in the community. The council s approach to transformation resulted in a top 20 spot in The Sunday Times Great Place to Work list this year. Was this one of your goals? When we did the original workshops, I told the staff that my dream was to get into The Sunday Times Great Place to Work. They came up with all kinds of ideas about how we could make the council a great place to work. We then entered the competition and we got into the top 20, the first local authority ever to get on the list. Remember: the first stage of the entry process involves an anonymous survey of the staff unless they say it is a great place to work, you will not even get through the gates. It is more than just making it a great place to work, though. It is about devolving decision-making, empowering staff and encouraging entrepreneurship. 32

35 Insight Bradford Council Let me give you an example: at Easter, a vicar phoned one of my staff and asked why the cross hadn t been put up yet in town, as was the tradition. It turned out it had nothing to do with the council. This was a new vicar and he did not know that it was usually a local church that took care of the cross. Nonetheless, this member of staff phoned round the churches and found out where the cross was stored. She knew there was a street lighting team with a cherry-picker working in that part of town that day, so she rang them and asked them to put the cross up. They agreed and by the end of the day, the cross was up. That is just one example of a staff member taking the initiative and getting something done for a customer. She did not have to do a risk assessment or phone me for permission, because she knew it could be done. That kind of initiative makes the difference: not just serving customers, but delighting them. We also introduced job swaps at the request of our employees. They pointed out that, because the council is phenomenally diverse, in its people as well as in its functions, employees wanted to know how they could learn more about what other people do in the council. One of our staff suggested the job swap, so we did it. Any employee who wants to can call up and ask to participate. There was one guy who worked in the council s car park who phoned up and asked if he could spend the day working in the crematorium! So we made it happen. He apparently came away with a great experience, so it worked for him. In any case, more and more people across the council are being exposed to more and different jobs. online services. What are your hopes for the programme? We hope that one of the outcomes will be better customer relationship management (CRM). More people today want access to services 24/7 through the web. For example, there was a time when applying for planning permission was like disappearing into a black hole. Now, you can go onto the web and track the progress of your planning application. That is a great service for customers and can only be of benefit to users, as well as providing cost savings for us. Bradford Council has also held events and seminars for staff, featuring influential names such as John Seddon (author of the business management book Freedom from Command and Control). What part do these play in the transformation process? The key is to have stimulating events for staff. For John Seddon s planned appearance, we sent out an about it to staff and 500 people turned up. Following on from that seminar, we ve held a couple of supplementary events about business process improvement and how we can use some of the techniques Seddon talked about to improve the way we work. For example, we brought in the person who repairs the dustbin lorries, as well as the clerk and the supervisor, and taught them all about business process improvement and statistical process control. As a result, we now turn around the repairs for dustbin lorries more quickly. We have done the same thing with food inspections. I am the chief executive I do not know how food inspection processes work. Employees know how their jobs work and what they can do to make them more efficient and effective. Instead of bringing in experts to tell them how to improve their processes, we are teaching the people who do the jobs these techniques so they can go and improve the processes that they must deliver. Part of the Vision for Bradford was the introduction of improved 33

36 Insight Bradford Council It is about giving staff the tools they need to do their job and empowering them with the confidence to do the job better. How important is technology to the transformation agenda at Bradford? Technology is a tool in the toolkit for empowering people and improving customer service. I would like to see Bradford Council using technology to empower staff and enliven the workplace. For example, say someone calls our contact centre with a complaint. The person working in the contact centre should be able not only to apologise, but as a token of our apologies, to offer something more, to go beyond just the words. I would like the call centre employee to be able to bring up a menu of options on their computer, letting them know what they can offer in this situation some small reward by way of apology. That would empower the call centre operator to take the initiative, delight a customer and turn the situation around. Local councils would never do this kind of thing, because they would assume the staff would spend their time rewarding their friends. But 99 per cent would not fiddle the system, and that is important. Second, this would enliven the workplace. For example, we are hoping to add games to the council s intranet, as part of our attempt to change the view of employees use of their computers. Local government would never usually allow this but if you walk around the average office during lunchtime, you will find people playing solitaire or some other game on their computers, or shopping online and so on. I would like to strike some deals with other organisations so that, for example, staff can do their food shopping online, as part of a partnership that could bring them some additional benefits such as discounts. And as far as our customers are concerned, we take a high-tech, small town approach, combining technology with an intimate sense of communication and community. There has been some interesting research done in this area around the UK: most people today want to live in a village, whereas most people live in cities. And most people do not want to work in large anonymous organisations, much less have to deal with them. For Bradford, it is a question of bringing out the best aspects of a big council without losing that small town intimacy and care. As part of this process, we launched Bradford-i in 2005, a complete information and communications technology (ICT) programme for the Council. New systems will simplify processes and lessen the administrative burden, while providing a portal that affords access to an extensive knowledge base. It represents anticipated efficiency savings rising to 5m a year within three years. What are the main challenges facing local authorities today? The big challenge is addressing local issues effectively and efficiently. We have an increasing number of parish councils springing up in Bradford people want to set them up and run their own villages. At the same time, we are under pressure from the government to be more efficient and effective, which creates tension for us, between having massive contracts and delivering to your local neighbourhood. The secret is to go out for a big contract, say for ground maintenance, but allow the people in the local villages to dictate which parts of their village they want looked after and when. It is an interesting tension, between making cost savings through massive contracts and delivering on local people s needs. Is transformation a good thing? Absolutely. We are all far too risk-averse these days. One of my main messages is this: try it. If it does not work, try it another way. We need to get away from a blame culture and be willing to make mistakes. I am willing to stand up and tell people about things I have tried where I have fallen on my face. It is important for people to see that the chief executive and senior management are willing to try things that may not work, to find out if they do. I am trying to turn the local government world on its head and this is all part of the process. David Kennedy is Chief Executive of Bradford Council. 34

37 The third route to reform Essay 9 As taxpayers expect more from government services, voluntary, community, faith and not-for-profit organisations can help the public sector achieve reform. But this third sector must adopt a more commercial attitude while retaining its social mission. Roger Howard, Chief Executive, Crime Concern The second half of the 20th century saw public services growing exponentially. We have increasingly looked to the state to provide solutions to our problems be they childcare, the environment or crime and justice. Simultaneously, the notion of what we, the public, expect in terms of service has changed fundamentally, for various reasons. Private-sector services provision has developed and consumers increasingly read across from the private to public realm. Easier access to information has emboldened citizens who are demanding more. The public sector has also become fair game for politicians, who use it as a battleground, and for a media on the lookout for striking headlines. The goalposts have moved for public services and will continue to do so. 35

38 The state s role in crime and justice Official statistics tell us that crime has decreased in Britain by 25 per cent over the last ten years. The chances of being a victim of crime are at their lowest since records began. But the reality does not match public perception. Surveys also show that fear of crime remains stubbornly high. This is partly owing to the changing nature of crime. The proportion of violent gun and knife-related crime is increasing while volume crime such as burglary is decreasing. There is an ongoing concern over global security and the threat of terrorism. Demographics also play a part. More single women and elderly people live alone. In high-crime areas, fear is compounded by a marked absence of social capital the networks, norms and trust that enable all members of a community to work together effectively to pursue shared objectives. In addition, the media displays an insatiable appetite for crime stories. This rich mix of factors has resulted in significantly more police, prison and probation services. Sentence lengths have increased and we are sending more people to prison than ever. An objective analysis would suggest we have never been safer. However, that is not sufficient for most citizens. In response to society s concerns, the government has introduced around 500 extra offences in less than 12 years. The limits of behaviour that society accepts before demanding state intervention are constantly narrowing. As a society, we have increased the pressure by removing a layer of informal self-regulation and weakening social capital. We no longer see park keepers, train guards, bus conductors or teachers as able to exercise social control. The response by successive governments has been to reassure the citizen by massively increasing the profile of a uniformed presence. Strategically, the increasingly stateist approach to community safety has been accompanied by greater central control, characterised by nationally imposed targets. Of course, terrorism and organised crime need strong national systems. Yet local community safety and justice can be delivered without resorting to this centralist, unwieldy and partly ineffective enforcement and criminal justice system. Reform entails greater and more imaginative use of the third sector: voluntary, community, faith and not-for-profit organisations. The third sector s role From its roots in providing philanthropic support at a local level almshouses or hospices, for example today the role of the voluntary or third sector is diverse. It has been both a gap filler and provider of services of last resort. For example, families looking after a relative with schizophrenia, who are desperate for help, will turn to voluntary organisations such as SANE in the absence of assistance from local public services. In addition, the sector has been and continues to be a major innovator. Crime Concern has pioneered The third sector is increasingly good at helping the public sector achieve greater efficiency and better value for money ways of working with young people at risk of committing crime, through early interventions and a programme of focused activities and support. And, of course, the third sector is known for its campaigning work in areas such as civil liberties or the environment. The third sector is evolving and becoming good at helping the public sector to deliver more efficient services and greater value for money. Increasingly it is a question of delivering services that provide added value, rather than raising taxes to provide more services. The third sector by its nature adds value through its extensive use of volunteers and ability to build social capital. We are able to provide services that the public sector simply cannot. The investment in social capital, the intimacy with local communities and the trust established are unique to the third sector. We can often engage with marginalised communities or with young, vulnerable people who feel uncomfortable dealing with statutory services such as schools, social or youth services. We are not constrained by some statutory duties or boundaries (apart from common regulatory and compliance ones). This makes us immensely flexible. We can also cross more easily the silos of public service responsibility and delivery systems. Take the example of a criminal with a mental health problem, who has children and whose housing is inadequate. A third sector organisation is flexible enough (within reason) to focus on the needs of the individual and family rather than adopt a compartmentalised approach. Leaving commissioning of services in the public realm but making delivery a mixed economy where the public, private and third sectors work alongside each other to deliver public services at the best possible value is increasingly seen as part of the solution to the public sector s problems. The large-scale transfer of public housing to housing associations is a good example of this approach working. The transfer has delivered, by and large, greater tenant satisfaction, and has unlocked access to capital that the public sector was not able to provide. It introduced business disciplines that were difficult to achieve within a public-sector culture. It has been a clear win for tenants, the organisations involved and government. The potential for a mixed economy in crime prevention is growing and in some areas has already arrived. Today s probation service emerged from voluntary activity. Much of the treatment for drug and alcohol addiction, paid for by the public sector, is being delivered by the third sector. We already have prisons and tagging systems run by private companies. Much low-level policing or security is provided by non-police organisations, but with police service accreditation. The third sector in crime and community safety Crime Concern is enthused by the mixed economy. We have a diverse board of trustees, with strong commercial and public service experience a mix reflected in our 36

39 leadership team. We see our future as a social business, seeking to make a small profit to reinvest in making local communities safer. We have a niche professional advisory service on crime prevention, which helps public services bodies and increasingly sectors such as transport and retail. We also operate managed services for local and national public services. As a specialist crime reduction body operating across Britain, we are uniquely placed to offer service reliability together with economies of scale. Increasingly contracts have strong performance expectations, raising our accountability. And rightly so we are dealing with taxpayers money. That has meant stronger management of people s performance, a greater focus on workforce and professional development and more stringent accountability regimes. We are also looking to develop constructive partnerships with private sector organisations. One example is the successful Prudential 4 Youth Programme, supported by Prudential Property, which allows local businesses, young children, the police, schools and community safety practitioners to work together to tackle community safety issues that particularly affect shopping centres. This model has led to a 70 per cent reduction in reported youth nuisance and anti-social behaviour in the Washington Galleries shopping centre in Tyne and Wear. A more commercial attitude Despite the third sector s capability to play a prominent role in the mixed economy, fears still exist that it is inappropriate for the sector to adopt a more commercial attitude. Some believe that the values, beliefs and behaviours that drive the sector may be weakened by entering a competitive environment. One of the great challenges for me and other chief executives is retaining these values in a setting that requires a much more profound business discipline. The sector is not united in its attitude the way organisations respond is mainly determined by their leadership and the market in which they operate. There is not much scope, for example, for animal rights campaigners to be anything other than campaigners. Some argue that moving to a contracts culture, where managed services are provided by government and the state, will distort the very essence of the third sector s philanthropic and charitable nature. I strongly believe this does not have to be the case. Delivering practical, publicly commissioned services on the ground enables us to advise and influence policy-makers better, because we have firsthand experience of what works. Crime Concern provides consultancy and advisory services while also delivering managed, frontline youth crime prevention services. We blend our experience in these two areas to advise policy-makers on practical, sustainable solutions to further crime reduction. Take the Youth Action approach, an idea we pioneered that was then adopted by the Youth Justice Board through its Youth Inclusion Programme. The government has just increased funding in this area from 8m to 45m and the programme is delivering a 60 per cent reduction in arrests. Towards proper pricing One challenge facing the third sector is finding the funds to invest in the infrastructure a sustainable social business needs. We do not have a strong tradition of borrowing to invest or undertaking strong business risk analysis. But this is changing as the sector increasingly finds favour with politicians and the public as an alternative to public service monopolies and private gain. Another huge challenge is the proper pricing of services. The commercial sector automatically prices in the return it needs to invest in R&D or to take a product to market. How does the third sector move from being subsidised (having largely relied on government grants or private donations to fund investment) to full cost recovery (self-sustainability and full pricing)? This transition is necessary for the third sector to make sufficient investment in infrastructure, which in turn will enable it to demonstrate a decent return on investment from its provision of managed services. This is a longer-term recalibration of how we operate and poses a number of questions. What is the cost of volunteers? What benefit does the community get from volunteers or people on work programmes that are making the community safer? What is the real return? Among social enterprises there is talk of the triple bottom line but this is not easy to calculate, let alone convince public service buyers that expenditure is not all that counts. The challenge for the third sector and it is a large one lies in demonstrating the public value to the commissioner of the service, which runs parallel to shareholder value and profit in the commercial sphere. Our strong message to staff, volunteers and stakeholders is that our social mission to prevent crime and make communities safer can be achieved by efficient delivery of managed public services. We are a socially driven organisation with business imperatives. But we will also strive to build the missing social capital that must be at the heart of sustainable attempts to reduce crime. This is the missing ingredient that neither public nor private services can realistically deliver. Roger Howard is the Chief Executive of Crime Concern. 37

40 Essay 10 I can and will lead change How can the Cabinet Secretary s ongoing reviews of departmental capability produce real change across Whitehall? A roundtable held by Guardian Public magazine and sponsored by IBM looked for answers. The reviews of departmental capability instigated last year by the Cabinet Secretary, Sir Gus O Donnell, have the potential to succeed but only if certain conditions are met. They must go with the grain of Transformational Government (the paper written by Ian Watmore, head of the Prime Minister s Delivery Unit), budget planning, with efforts to remake Whitehall s professional skill base, to push towards customisation of public services, more sharing between departments and the drive to greater administrative efficiency. The reviews must not be another one-off, but secure pride of place in the larger scheme of reform. A phrase used more than once at the roundtable was coherent whole. Behaviour change The reviews are only a start. Will departments accept their conclusions and make the changes? Capability reviews are a tool, not an end in themselves. Much depends on how the instrument is wielded. Might central authority follow up the changes in behaviour and organisation predicated by these detailed examinations of Whitehall? There was some discussion of whether implementing the reviews needs an agency (the National Audit Office, the Prime Minister s Delivery Unit, a revamped Office for Government Commerce) to keep departments focused over the long haul. One school of thought says that the key is money, that is to say allocating or removing funds according to performance. The test of strategic leadership at the top of Whitehall is whether it can paint a picture of what the civil service will look like in, say, 15 years time. Its people will be different, deploying different skills in a different culture; could they retain today s ethos or the civil service s constitutional position? Some departmental teams are drawing up maps, listing the capabilities needed on the path ahead. Optimists point at the success of the OGC gateway reviews. They improved project management and service delivery. Enthusiasts also note that the same man Watmore is in charge both of the reviews and transformational government. The reviews dynamism may come from peer pressure. Permanent secretaries will struggle to avoid negative assessments and react with reformist zeal if they receive them. Look how the management boards in some departments have been cleaned out and rebuilt in double-quick time. Yet fear of criticism might lead permanent secretaries to try to tone down reviews, with the result that nobody much notices them. Roundtable participants differed. Would official amour propre allow peers officials from departments rated as good performers to come in and support failing departments as happens in local government under the auspices of the Improvement and Development Agency? Nowadays, the average tenure for a permanent secretary in a single department is down to four years allowing fairly swift turnover and managerial renewal, possibly with outsiders. That is change in the boardroom, the reviews emphasising strategic leadership. Does that embrace grades below the very top of departments, 38

41 perhaps even the entire senior civil service? Reviews must also consider how departments manage delivery chains and themselves deliver on the front line. If the UK has always been strong in its commitment to digital governance, IT skills are still lacking in the civil service. Chief information officers have, just about, arrived on departmental boards, but among the highest ranks IT skills are rare. Transforming government opens space for more collaboration and mutual learning between public and private sectors. Participants suggested examples to build on, such as the partnership between the Driver and Vehicle Licensing Agency and IBM that has led to electronic vehicle licensing and other innovations. Departments must retain the capacity to pull services back in-house or recontract later, implying that they retain a pool of skills. Shared working Capability reviews must encompass the opportunities for shared working between departments. Beware glib assumptions about, for example, two departments working together on the basis of ostensibly similar workloads and customers. Look at HM Revenue and Customs and the Department for Work and Pensions (DWP): why do they have separate call and enquiry centres? Getting the two cultures to come together is hard enough, before you even start to align their legacy IT systems. Are users of their services really the same? Yes, up to a point, one participant in the seminar replied, but we just do not know where that point is. Capability reviews ought, in principle, to push forward the revision of Whitehall s knowledge and expertise set in train by the former Cabinet Secretary Lord Turnbull. Professional Skills for Government was intended to establish new thresholds in the careers of civil servants. Capability reviews are likely to add to the conviction that Whitehall is light on skills in corporate finance, project and commercial Capability reviews must not be another one-off, but secure pride of place in the larger scheme of reform relationship management, procurement and negotiation and managing largescale information flows. But plotting skills change implies a road map. Working patterns will change. Some departments are already more flexible, finding new ways of handling peaks in demand. Policy should not be forgotten. In departments where policies are being rewritten, loss of staff in recent years may have diminished both capacity and corporate memory. Participants hoped the reviews would bring ministers to realise it is unacceptable to run down [policy] functions. How far can the reviews grapple with the relationship between departments and their satellites, the quangos and agencies for which ministers answer but which also have some claim to independence? Around them departments have a complex web of agencies and sub-deliverers. Some are strictly controlled, others wild and loose. Some services are delivered by firms. Such variety of business models makes comparison tricky. Why not compare departments not with each other but with equivalent organisations elsewhere? If the reviews do offer a benchmark for comparing performance across Whitehall, they will break new ground. It will be hard. The DTI, small and policyfocused, is a different animal from the DWP, with its network of job centres. Ideally, the reviews would examine performance against international markers. Meanwhile services and boundaries of departments themselves will be changing. Conclusion Reviews ought to be a device for performance improvement. But much depends on who deploys it. Once the Cabinet Office had more authority over the rest of Whitehall. The Treasury, for all its control over public spending, has no detailed grip. Capability change requires authority in the centre. Much also depends on politics. Ministers will have to take the media flak and still push for change. The recent reshuffle opened a window. Many ministers are new in post and can safely say: Look at what I inherited, I have clean hands and can and will lead change. This is an edited version of an article that originally appeared in the June 2006 edition of Guardian Public. Taking part in the roundtable were: Jacqui Warren and Alan Edwards, IBM; Bernadette Kenny, HM Revenue and Customs; Simon Webb, Department for Transport; Ian Jones, Department of Trade and Industry; Professor Patrick Dunleavy, London School of Economics; David Walker, editor of Guardian Public. 39