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November 2018
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SPENDING REVIEW CUTS SET TO CAUSE CHAOS IF NOT ACCOMPANIED BY WHOLESALE CHANGE IN MANAGEMENT STYLE

Drastic cuts announced in October’s spending review, whilst achievable, could easily result in chaos to services if not managed appropriately. As the scale of the required savings in local government finally becomes clear, the reality is dawning that many authorities simply do not have the band-width or skills to deliver the budget reductions in any way other than through service cuts. Much of the opposition to the austerity package from both the public and unions is being driven by this fear.

In fact, our research and experience over many years shows that most councils could achieve the required savings through enhanced productivity, with service cuts being an absolute last resort. However, it is a fact that historically the sector has been poor at delivering such improvements and departments will never have been through anything like this before. Indeed, few will have the skills to deal with the kind of dramatic restructuring and behaviour change needed to drive necessary productivity increases in the order of 20-30%. Yet, if this were to be achieved it would satisfy the coalition’s requirements whilst also preventing frontline services from ending up as the fall-guy.

There is a real risk that officers will attempt to get there by taking a ‘top down’ approach where broad-brush mathematic percentage cuts are imposed on middle managers without any attempt to restructure, remove inefficiencies and take difficult decisions regarding performance management and accountability. In short, without fundamentally changing the way in which the departments operate. However, such fundamental change is precisely the approach which provides the solution to the problem.

Our work includes detailed shadowing and minute-by-minute recording of the activity of managers and other staff in the private and public sectors. We found that while junior management and staff in the private sector are on average productive for 44 per cent of the time, staff in the public sector were productive for only one third of their working day. To put this another way, approximately two-thirds of the working day of junior staff in the public sector was ‘lost’.

In simple terms, if utilisation rates in the public sector matched those of the private sector the same work could be done with a staff reduction of nearly one-third. Clearly there are differences between the two sectors and a direct comparison is overly simplistic. However, our analysis clearly identified the categories of lost time and found that typically one-half to two thirds of the lost time is in fact recoverable. This sort of dramatic increase in utilisation would help significantly in delivering the savings without cutting activity levels or service provision.

Of course, high levels of ‘lost’ time in the public sector do not indicate that staff are either lazy or incompetent. Our analysis shows that those people who come to work determined to do a good job, work hard and do their best often find a range of hindrances stacked against them.

So how can the public sector bring about a radical improvement in productivity? Our analysis together with over 24 years experience of implementing productivity improvement programmes, points quite clearly to the need for a significant cultural change, with a much more active management style, combined with better management control systems and more individual accountability for performance.

Yet, often in public sector departments, the systems are not in place to analyse staff utilisation levels in any detail nor to identify variances to plan early and prompt managerial correction. This means that amongst management there is often the view that their people are working at full capacity. This feeds the belief that greater efficiency can only be achieved through a dramatic external intervention, such as an expensive new IT system, or outsourcing. The evidence of our work shows quite clearly that this is not the case.

During Knox D’Arcy’s work for the public sector, we have also found that there is a huge disparity between the amount of time managers think they spend actively managing and the reality, indicating that getting managers to realise they also have to change is part of the challenge.

Many managers in the public sector are just not good enough at setting clear expectations, identifying and confronting off-schedule performance and other basic management activities. Indeed, often the culture of the public sector runs against this approach. Chief Executives must also recognise that simple exhortation will not rectify these weaknesses and that management needs help to get through this challenge.

Paul Weekes is Principal Consultant at Knox D’Arcy (www.knoxdarcy.com), a management consultancy.

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