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Mobilising For Value Creation In The Public Sector
Mobilising For Value Creation In The Public Sector
Mobilising For Value Creation In The Public Sector
Mobilising For Value Creation In The Public Sector
Mobilising For Value Creation In The Public Sector
Mobilising For Value Creation In The Public Sector
Mobilising For Value Creation In The Public Sector
Mobilising For Value Creation In The Public Sector
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Mobilising For Value Creation In The Public Sector

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  • 1. Mobilising for Value Creation in the Public Sector Overcoming the Forces of Inertia
  • 2. CONTENTS 1. Value Creation in the Public Sector 1 2. The Public Sector Performance Dilemma 1 3. The Public Sector Performance Challenge 1 4. The Context for Value Creation in the Public Sector 2 5. Dealing with the Inertia Treadmill 3 6. Igniting a ‘Value Creation Revolution’ in a Public Sector Organisation 4 7. Concluding Remarks 5 APPENDIX 313-7 March 2006 © 2005/6 VBM Consulting Limited All Rights Reserved
  • 3. Never doubt that a small group of thoughtful, committed people can change the world. Indeed it is the only thing that ever has. Winston Churchill 1. Value Creation in the Public Sector The purpose of this paper is to begin to stimulate new thinking and debate about how value creation can be achieved in the public sector and to support leaders in public sector organisations who are committed to delivering value. A key objective is also to offer practical support to public sector managers who are involved in preparing for their Comprehensive Spending Reviews. Our premise is that it is possible to transform public sector organisations into centres of excellence in terms of the effectiveness and efficiency with which they deliver public services. (i.e. centres of value creation). However, achieving this goal requires concerted and systematic action by progressive leaders who are committed to overcoming the forces of institutional inertia described below. It will take time and patience but not necessarily additional significant cost – more a change of mindset. The importance and urgency of value creation in the public sector has also been elevated even more recently, by the requirements of the ‘Comprehensive Spending Review’. Public sector organisations, competing for finite public funds must be able to convince The Treasury that they are capable of and committed to setting and achieving challenging, yet realistic goals in terms of service delivery and that they have a clear ‘value creation agenda’ and plan. 2. The Public Sector Performance Dilemma Much has been said and written about the challenging issue of how to improve service delivery and cost effectiveness of public sector organisations. (i.e. how to create value). Indeed, at any point in time, numerous improvement initiatives and programmes are undertaken in the NHS, The Department of Transport, The Department of Work & Pensions and numerous other public sector organisations, both at a national and at regional and local levels. Government, intent on showing that they are indeed serious about ‘making a difference’, invest ever increasing amounts of public money in a quest to improve public services. The motives behind all this work and investment in ‘modernising’ and ‘streamlining’ the public sector are laudable and well intentioned. Unfortunately however, it is often the case that despite the best efforts of all those involved, many change initiatives founder on the rocks of internal politics, intransigence, indifference, complexity and unpredictable changes in government policy. The consequence of this is frequently chronic organisational inertia and a failure to achieve the original goals of the increased investment or change programme. The only constant is change. No Government minister achieves greatness by maintaining the status quo, so there is an inbred need to constantly change. This creates a vicious circle, feeding the institutional inertia, something that some who work in the public sector thrive upon, whilst others fear it and as a result swiftly move on, leaving the organisation in it’s perpetual motion of apathy. So what is to be done about this situation? Should progressive leaders in the public sector simply avoid the stress and hassle involved in trying to change things and make the most of an unsatisfactory situation, year after year? Such a defeatist attitude in the face of perceived insurmountable obstacles to change is one that we have heard verbalised on many occasions in our discussions with managers and advisors in public sector organisations. 3. The Public Sector Performance Challenge In all public sector organisations there are talented committed people who are driven by a desire to improve the wellbeing of society through the effective delivery of essential public services. Often, what differentiates these people from many in the private sector is a personal value system which places societal benefits above narrow personal financial interests. These deeply held beliefs have been fundamental to the success of public service organisations throughout their histories and will continue to be the basis for success in the future. 1 313-7 March 2006 © 2005/6 VBM Consulting Limited All Rights Reserved
  • 4. However, the challenge facing leaders in the public sector in today’s world is how to deliver the maximum benefit to society within the many and varied constraints placed upon them i.e. how to deliver ‘value’. In many cases, public sector managers face significantly more complex management challenges than their private sector counterparts, given the often competing interests of the various stakeholders to whom they are accountable and the unpredictability of changes in public policy and the impact that this can have on their management agendas (see Appendix). 4. The Context for Value Creation in the Public Sector Mobilising to deliver value should be a fundamental objective for any public sector organisation. In order to achieve this goal, it is essential that there is a clear understanding within the organisation about what the term ‘value’ actually means and how to achieve it in practice. It is also necessary that people within public sector organisations are engaged and empowered to think and act in ways that will deliver value and that obstacles to achieving it are identified and eliminated. Delivering value in the public sector means creating significant, measurable improvements in perceived levels of utility and efficiency for users and consumers of public services within a set of policy, financial and other constraints set by government. Utility is the degree of satisfaction experienced by the end users of public services o and is driven by: - availability of the service - timeliness with which the service is delivered - quality of the service Efficiency is a measure of cost/investment required to deliver a specified or o desired level of utility and is driven by the: - mindset within the public sector organisation, particularly of senior management - degree to which key drivers of the cost of delivering the service are properly understood - ability/latitude of management of the public sector organisation to influence the key drivers of cost - level of ‘political’ intervention - level of organisational complexity - ability to identify and then override/eliminate internal political and other obstacles which prevent the optimising of key drivers of cost. - Successful delivery of value requires the following: - reaching absolute clarity at leadership level about what value creation means and a strong commitment to permeate a ‘value creation mindset’ in a proactive way throughout the organisation. - having a clear understanding of the key levers (drivers) which the organisation needs to influence and manage in order to maximise utility and efficiency in the delivery of public services. - ensuring that the organisation’s people, other resources, strategies and key business processes are mobilised around these value creation drivers. - continuously and effectively communicating the key drivers to all key managers and staff within the organisation and ensuring that people understand their specific role in terms of managing these and that they are engaged, equipped and energised to be able to do so. - eliminating or neutralising to as great an extent as is possible, all the major obstacles to efforts aimed at managing the key drivers of value creation in the organisation. 2 313-7 March 2006 © 2005/6 VBM Consulting Limited All Rights Reserved
  • 5. 5. Dealing with the Inertia Treadmill A common theme in our research is that whilst there is constant pressure for value creation, there are equally powerful counter forces which effectively stifle any significant attempts to change peoples’ behaviour in a way that is consistent with achieving value creation. The result is inertia and under-performance. Forces driving the need for the delivery of value include the following: - Customer expectations/demands - Continuous pressure from Government for improvements in utility and efficiency in terms of public service delivery - Government policies, objectives and targets - Resource constraints/budgets and competition for funding. Potential obstacles to value creation, leading to inertia and value destruction include: - Mindset - Inappropriate or ‘misaligned’ reward/bonus schemes - Aversion to risk taking - Resistance to unfamiliar initiatives (‘Not invented here’) - Organisational complexity - Societal expectation/ pressures - Bureaucracy reaucracy - Government interventions/ constraints - Internal political turf wars - Capability gaps Figure 1. The Inertia Treadmill Potential Barriers Beliefs and perceptions Political agendas Complexity Bureaucracy Quest for value creation Underachievement Capability Indifference Pressure for change The key challenge facing progressive leaders and managers in today’s public sector organisations is how to break out of this ‘inertia treadmill’. 3 313-7 March 2006 © 2005/6 VBM Consulting Limited All Rights Reserved
  • 6. 6. Igniting a ‘Value Creation Revolution’ in a Public Sector Organisation I began a revolution with 82 men. If I had to do it again, I'd do it with 10 or 15 and absolute faith. It does not matter how small you are if you have faith and a plan of action. Fidel Castro Challenging orthodoxy and creating change demands energy and vigour. Throughout history there have been numerous examples of charismatic individuals imbued with courage, conviction and determination who have succeeded in overcoming huge odds and changing the world they inhabited. A key premise of this paper is that the goal of transforming public sector organisations into centres of effective value creation is a cause worth fighting for, since this is the basis for meeting society’s requirements for effective and efficient public services. So how can this transformation be achieved? It may be helpful to use the analogy of a revolution in thinking about this issue. The key ingredients for a successful revolution are: - Visionary, charismatic and brave leaders with simple but powerful ideas - The willingness to challenge the status quo, even if this involves substantial personal and other risks - The ability to win others over to the leader’s way of thinking and to energise and motivate people to join the ‘revolutionary forces’ - A clear plan of action for spreading the revolution and marginalising the opposition (i.e. reactionary forces) We believe that the best way to transform a public sector organisation into a value creation focused operation is to adopt and adapt the revolutionary model described above. Figure 2 highlights the basic steps required to ignite a ‘value creation revolution’ in the public sector. Figure 2. Blue Print for Public Sector Value Creation Revolution Inspire Agitate for Exploit Small Spread the Revolutionaries Change Victories Revolution Firstly, it is absolutely essential to identify and target leaders within the organisation who can make a difference. There is no point in trying to inspire people who have no real influence to change anything! The attitudes of these key individuals may range from initially being very supportive, to being very cynical. The fact that someone might be initially cynical and resistant to ‘yet another initiative’ is perfectly understandable and it should not preclude that person from being targeted. In our experience, it is often those who have initially been sceptical, who can become the most powerful ‘revolutionaries’, once they have witnessed the power and the real benefits of what is being proposed. Having identified and approached the potential ‘revolutionaries’, it is essential to ‘inspire’ them, by sharing with them a powerful vision of what could be achieved by transforming the organisation and overcoming the forces of inertia. It is obviously fundamental to also outline in broad terms how this vision could be realised and to make them aware of the potential role they could play and the importance of their active support in achieving success. 4 313-7 March 2006 © 2005/6 VBM Consulting Limited All Rights Reserved
  • 7. Once their support for the vision is obtained and they have committed themselves to moving forward towards the vision in a proactive way, it is important to engage them with the other revolutionaries who have also been recruited to the cause. It is both likely and desirable that a charismatic leader will emerge from within the ranks of the small revolutionary group. Once this occurs, then the foundation for change has been laid. The Second step on the road to revolution is for the small cadre of revolutionaries to start agitating for change. It is almost always the case that people will be quick to nominate issues in the organisation which are in urgent need of attention. It is important initially, not to take on issues which are too complex or challenging. The goal here is essentially to create a sense of ‘restlessness for value creation focused change’ within the organisation and to initiate a co- ordinated push for transformation in one small area or in respect of one or two manageable issues. Examples of potential issues might be a bureaucratic procedure which is inconsistent with effective value creation behaviour or a compensation scheme which rewards ineffectiveness. Some of the agitation for change may need to occur beyond the boundaries of the organisation. For example, it may be that a key reason for inertia and poor performance lies in policies or other constraints placed on the organisation by central government or by some other government agencies. The goal should be to agitate for change at the source of the problem, wherever that may be. This stage requires gaining control of the ‘radio station’ and making effective use of the full range of communication channels to transmit clear messages and also to ‘listen’ to reactions from within the organisation, for and against change. Thirdly, it is important to ensure that the agents of change are given the necessary support and facilitation to ensure that innovative, workable, commercially sound solutions which add value are identified and deployed. It is then important that successes and ‘small victories’ are widely communicated to the rest of the organisation and beyond e.g. to government ministers. This is a key way in which the reactionary forces of inertia within the organisation can be challenged. The more successes which can be achieved, the easier it will become to build momentum for further more radical changes and to win more hearts and minds over to the vision of the future being articulated by the ‘revolutionaries’. The Fourth phase of the ‘value creation revolution’ is where the biggest transformation challenges facing the organisation are addressed and where some possibly ‘brutal’ actions to root out the forces of inertia and reaction are launched. By now, the momentum for change has gathered pace and has attracted the active support of most other progressive managers within the organisation. The aim is to isolate and nullify the remaining reactionaries who continue to hold out against changes that are necessary to deliver value creation. The growing strength of the ‘revolutionary forces’ backed up by the power of value creation rationale and hard evidence of successes already achieved is key to success in this final phase. The success of the revolutionary cause must of course be measured in terms of the impact which the changes which are implemented actually deliver in terms of value creation as defined above. In order to ensure that the organisation does not eventually slip back to old ways, the final act of the revolution must be to ensure that the leadership of the organisation is firmly in the hands of those who have a commitment to maintaining the benefits of the revolution and to entrenching a progressive value creation focused mindset and culture. 7. Concluding Remarks It is a matter of legitimate public concern that public sector organisations are seen to be pro- active in terms of enhancing the effectiveness and efficiency with which they spend public money and deliver public services. We believe that the best way for public sector organisations to meet societal goals and to create value is for progressive leaders within such organisations to embark on concerted action to transform mindsets that are inimical to value creation and to build organisations that are aligned with the goal of value creation. In striving for success, the leaders of public sector organisations need to be actively supported in systematically identifying and managing the key drivers of value creation within their particular part of the organisation and in developing and deploying innovative solutions to often complex and challenging issues. 5 313-7 March 2006 © 2005/6 VBM Consulting Limited All Rights Reserved
  • 8. - APPENDIX – What does it mean to deliver value creation in a public sector organisation? It is not simply a question of grafting in some private sector management ideas and concepts and hoping that they ‘catch on’. It is essential to understand the specific environment within which public sector organisations have to operate and how this differs from that in which private sector organisations operate. Private Sector versus Public Sector Figure 1 depicts the private sector world. Private companies compete in markets and are subject to certain regulatory and professional constraints. They are accountable to customers and to shareholders. Their governing objective in most cases is to maximise wealth or value for the owners or shareholders of the business. Figure 3. The Private Enterprise World Accountable to: Governing Objective Corporate Environment Customers Legal Environment Maximise Shareholder Private Wealth/Value Sector Enterprise Industry & professional Shareholders requirements/standards Figure 2 shows the public sector world. Public companies face a corporate environment which is heavily influenced by the political policies being pursued by the government of the day and by a host of legal and other regulatory requirements. In contrast to the private sector, it is often the case that agendas within public sector organisations can be set, influenced or substantially changed by direct government intervention. Public sector organisations are accountable to two main stakeholder groups, tax payers and the government. Their governing objective is (or should be) to deliver effective public services in a timely and efficient manner. In addition they are also accountable for delivering government policy objectives and targets. Figure 4. The Public Enterprise World Accountable to: Governing Objectives Corporate Environment End users of Public Services Government policy (Customers & Legal Environment Tax payers) • Maximise Utility & Public Efficiency of Delivery Sector • Attain Government Enterprise Policy Objectives & Targets Professional requirements Government 6 313-7 March 2006 © 2005/6 VBM Consulting Limited All Rights Reserved

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