Tackling Conventional Wisdom: Delivering More for Less in the Public and Private Sector                                   ...
thinker Edward de Bono believes that this highly adversarial form of argument (first pioneered by theAncient Greeks) resul...
the alternative explanation – that the organisation of work into functional specialisms anddepartments actually “designs i...
4were answered . And this was all before the recent controversy over incorrect tax demands.Unfortunately the HMRC experien...
There are quite a few ideas in the systems thinking column that need further explanation. But oncethey have been explained...
DesignI have already mentioned the analytical thinker’s obsession with creating teams and departments – amodern day kind o...
7shown that this can account for up to 70% of the demand being placed on an organisation . This isanother good example of ...
they tend to shrug and say that they are not given any opportunity to decide on how to do the work ina better way.In many ...
Amazingly, no one (least of all the customer) was told that this cancellation had happened. Can youguess the result? Yes, ...
answer to this question may therefore enable performance improvement – for example by workingwith parts suppliers on a rev...
Maslow suggested that the lowest form of need that should be satisfied was the physiological (i.e.bodily) need for air, fo...
case, I can’t help wondering whether the vast amounts of money spent on “corporate” functions –finance, procurement, busin...
to scrutiny, because systems thinking (for example the Stroud case study I mentioned earlier) hasshown that up front spend...
challenged to provide any peer reviewed (i.e. objective) evidence to support the use of their pet toolsand processes, they...
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Llewellyn tackling conventional wisdom through systems thinking sept10


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A paper that was given to the UK pan-faith group "Mission in the Economy"; explaining how the principles of systems thinking can be used to challenge conventional wisdom and to deliver better public services for less money.

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Llewellyn tackling conventional wisdom through systems thinking sept10

  1. 1. Tackling Conventional Wisdom: Delivering More for Less in the Public and Private Sector thAddress to the Bishop’s Lunch, Warrington, Monday 20 September 2010James Llewellyn, Senior Managing Consultant, Atkins LimitedAuthor’s NoteThe opinions expressed in this paper are purely personal and do not necessarily represent the viewsof Atkins Limited, or any of its clients.If you would like me to come and work with your organisation to deliver better services for lessmoney through systems thinking, please contact me by any of the following methods:Telephone – 01597 850069Mobile – 07713 644798E-mail – james.llewellyn@atkinsglobal.comAddress - Rock House, Llanddewi, Llandrindod Wells, Powys, LD1 6SDIntroductionIn his 1962 classic book The Affluent Society, the American economist John Kenneth Galbraithbecame the first person to coin the term “conventional wisdom”.The underlying theme of the book is that since the start of the industrial revolution, economists ofvarious hues have believed that “progress” would best be served by the unfettered operation of freemarket. One of the most interesting sections of the book concerns the debate about “production”.Even back in the early 1960s Galbraith noted that whilst private sector production was always seenas inherently noble, the view of public sector production was rather different. Whilst the privatesector was wealth creating, the public sector was seen as a “burden”. Of course the fact that privatecompanies were (and still are) making massive profits from government (tax payer funded) contractswas conveniently glossed over.Conventional wisdom is certainly alive and well in the current debate about the future size and shapeof the UK public sector.The coalition government’s conventional wisdom is that the budget deficit is so large that only amassive cut in public expenditure can restore investor confidence and restore the golden age ofcheap credit. Cuts in services and hundreds of thousands of job losses are justified as a price worthpaying in order to appease the various credit rating agencies and therefore stimulate economicgrowth through foreign investment. Interestingly, the majority of the public seem to agree with thisapproach; although one must wonder whether they really understand the potential consequencesafter having things so good, for so long.Those who oppose the cuts – such as the Trades Union Congress – adopt another form ofconventional wisdom. They take the view that increasing employment levels (and the quality of jobs)will generate enough additional tax revenue to restore the public finances to some kind of order. Atthe very least this requires a public sector of similar size to what we currently have. This viewargues that the UK public sector should be a large employer in its own right and, through theservices and infrastructure it provides, additional jobs in the private sector will also be stimulated.Consultancies like Atkins – who rely very heavily on public sector investment – will no doubt agree.In the USA, president Obama has recently announced a large programme of public works as a 1means of reflating the economy through public works job creation . It is probably no coincidence thatmany UK consultants and contractors and looking to expand operations in the USA.What unites these two strands of conventional wisdom is a lack of understanding about howorganisations should be working in harmony with their customers; without whom they would notexists. The result is an adoption of entrenched positions by the anti and pro cuts lobbies - withworkers and service users stranded in no man’s land and caught in the cross fire! The management1 See for example: http://www.tfi-news.com/obama-announces-infrastructure-push-nilaunch/ 1
  2. 2. thinker Edward de Bono believes that this highly adversarial form of argument (first pioneered by theAncient Greeks) results in a failure to think creatively and to consider all sides of the problem. Ibelieve he is dead right.So if we are to move on from the Ancient Greek style of adversarial debate, we need something withwhich we can view problems from a variety of perspectives; as a means of designing a better way ofdoing things. This something is called systems thinking.Systems ThinkingIn his highly entertaining book Why Your Boss is Programmed to be a Dictator, Chetan Druveobserves that the word “system” is often used as a metaphorical black hole which we blame when 2something does not work in the way we would like . Systems are often equated with informationtechnology (IT). This role of IT in the psyche of the British public has been brilliantly parodied in thesketch show Little Britain where a plainly ignorant and unhelpful travel agent drones the phrase“computer says no” in response to every perfectly reasonable customer request that she receives.But let’s make one thing clear right now. Systems thinking has nothing whatsoever to do with IT.Indeed the phrase was first developed in 1936, long before the age of computers, by an Austrianbiologist called Ludwig von Bertanlaffy.Bertanlaffy was highly critical of “traditional” reductionist science which sought to use the results ofexperimentation with pairs of isolated variables to form general theories about how the world works.In response to Bertrand Russell’s claim that scientific progress had been made by “analysis andartificial isolation” Bertanlaffy stated:“You cannot sum up the behaviour of the whole from the isolated parts, and you have to take intoaccount the relations between the various subordinate systems which are super-ordinated to them in 3order to understand the behaviour of the parts.”Bertanlaffy believed this was especially true of the human body. In contrast to Newtonian thinkerswho believed that the body worked via mechanistic pulleys and levers, Bertanlaffy demonstrated howthe inter-dependence of all the various parts of the human body provided a result that could not beexplained by considering these parts in isolation. This result is the multitude of bodily functions thatwe take for granted.This inter-dependence should also be a feature of the modern day workplace; although all tofrequently is isn’t. Systems thinking states that for an organisation to function in the most efficientand effective way, the various parts need to be united by a common purpose and therefore work inharmony. This sounds somewhat idealistic, except for the fact that there is significant empiricalevidence that a systems approach actually delivers results that even the most hard-nosed seniormanager would consider to be impressive.The remainder of this paper will provide concrete examples of the power of systems thinking; but firstit is necessary to de-bunk some conventional wisdom – in particular the view that organisationalperformance can somehow be delivered using traditional analytical thinking.Analytical ThinkingIn contrast to the systems approach of Bertanlaffy, analytical thinking is yet another form ofconventional wisdom which, I would venture to suggest, is still the dominant form of work design inboth the UK public and private sectors- especially in the service sector.Analytical thinking suggests that in order to improve efficiency of both service planning and delivery,it is firstly necessary to chop up work into a number of constituent parts. The most obviousmanifestation of this is the creation of organisational hierarchies and functional departments intowhich work is organised. Pretty much every organisation that I know of has these; and conventionalwisdom suggests that they are necessary to create a “sense of order” and so that everyone knowstheir place. Of course we often hear complaints in these organisations about “silo working”; and weassume that it must be the fault of people who don’t talk to each other. We don’t perhaps consider2 See chapter 5 of: Druve, Chetan, Why Your Boss is Programmed to be a Dictator, London, MarshallCavendish, 20073 Quoted in: Weckowicz, Thaddus E (2000), Ludwig von Bertanlaffy (1901-1972): A Pioneer of GeneralSystems Theory, CSR Working Paprer No. 89-2, University of Alberta, Center for Systems Research 2
  3. 3. the alternative explanation – that the organisation of work into functional specialisms anddepartments actually “designs in” the silo mentality.Analytical thinkers then claim that each part of the organisation should be worked on to improve itsefficiency. And to assist in the efficiency drive, various management consultants have dreamed uptools which, it is claimed, can be used to “improve performance”. You may well be familiar withsome of these; they include: Quality Management systems – for example ISO9001; Project management tools – such as “Prince 2”; Performance management systems – which at their zenith were churning out reports on hundreds of targets that local authorities had to report to Whitehall; Performance Development Reviews – that is “staff appraisals” to you and me; Customer Relationship Management systems – using computers to store marketing information (rather like the Tesco club card); Front and back office systems – removing experts from customer facing roles and replacing them with generalists who are trained to read to pre-defined scripts; Sharing services between different organisations – for example processing of parking fines between different local authorities.And finally, when the tool-heads have done their work, analytical thinking suggests that the parts canbe stitched back together with the result that service improves and costs fall. This approach doesnot consider the possibility that it is the interaction between the various parts that is the key driver ofboth service improvement and lower costs.Analytical thinking requires an organisation to adopt a “command and control” managerial stylewhereby senior managers specify detailed policies and procedures which then have to beimplemented by workers who are further down the chain. This approach requires a very costlybureaucracy to service it, in particular Human Resources (HR) and “Quality Assurance” departments.In practice a new set of analytical methods and tools is often introduced only after something hasgone badly wrong with the previous set. A frenzy of activity and promises to introduce new policiesand procedures often accompany a serious customer complaint, a negative service audit or (in a fewcases) a tragic death. Therefore in one sense the change comes too late. The activity associatedwith introducing these tools, in practice very costly in financial terms, is assumed to be beneficial toservice provision. But is this really the case?In actual fact there is remarkably little evidence that analytical tools actually deliver better services atlower cost. In fact the years of the new Labour government were littered with services that wereintroduced along analytical thinking lines; and the results were frequently an unmitigated disaster.The merger of the Inland Revenue with the Customs and Excise departments back in 2005 wasaccompanied by an IT-based analytical service re-design on a grand scale. The benefits of themerger appeared to be almost too good to be true: More effective and joined-up customer service; Improving rates of collection; and Delivering efficiencies.In 2006 HMRC also introduced a “lean” transformation programme which included organising staffinto a large number of discrete units and getting each unit to focus on the same highly repetitive task.The programme also included performance targets set for processing work in the PAYE system.This approach to work design had all the trappings of an analytical approach.And of course it was all too good to be true. By March 2010 the House of Commons Treasury SelectCommittee was warning of plummeting staff morale, £7 billion of tax not collected and rocketingcustomer complaints after only 57% of calls to contact centres (a centre piece of analytical thinking) 3
  4. 4. 4were answered . And this was all before the recent controversy over incorrect tax demands.Unfortunately the HMRC experience is fairly typical of what happens when a service is designedalong analytical thinking lines.The Systems AlternativeSo how can the systems thinking of Ludwig von Bertanlaffy provide a fresh perspective on the crucial stquestion of how to deliver better public services for less money in the 21 Century? The answer has 5been provided by a man who does not mince words - Professor John Seddon .Seddon has written several books and numerous articles which have served to strike a dagger at theheart of the conventional wisdom of analytical thinking. And in doing so, he has achieved somethingthat has eluded analytical thinkers – by providing empirical evidence to demonstrate that systemsthinking drastically improves service and reduce costs in public sector service organisations.Seddon has adapted systems thinking that was used by Toyota after World War Two, to establishitself as the world’s most successful car manufacturer. Table 1 summarises systems thinking andcontrasts this with analytical thinking.Table 1 – A Summary of Systems Thinking Versus Analytical Thinking Analytical / Command and Control Systems Thinking (Conventional Wisdom) (Alternative) Top down hierarchy Perspective Outside-in from the customer point of view Functional specialisation by Design Customer demand, value, flow of the department work Separated from work and made by Decision Integrated with work and made by the the bosses making front line staff Budget, targets, standards, activity, Measurement Designed against purpose, productivity demonstrates variation in service quality Extrinsic using financial or other Motivation Intrinsic; based on the challenge of performance incentives helping people Manage activity (budgets and Management Act on the system based on people) ethos knowledge Contractual – levels of service Attitude to What matters? customers Contractual Attitude to Partnering and co-operation suppliersSeddon, John, Freedom from Command and Control; a better way to make the work work,Buckingham, Vanguard Press, 20054 See for example: what was promised http://www.publictechnology.net/content/2140 and what actuallyhappened http://www.guardian.co.uk/business/2010/mar/09/hmrc-revenue-customs-low-morale5 Seddon runs a couple of web sites: www.systemsthinking.co.uk and www.thesystemsthinkingreview.co.ukwhich are absolutely essential reading for anyone who wants to cut costs and improve service. I can’trecommend them highly enough. 4
  5. 5. There are quite a few ideas in the systems thinking column that need further explanation. But oncethey have been explained, I am confident you will have some practical ideas about how to changeyour service for the better and reduce costs. These ideas will be highlighted in bold.PerspectiveMany organisations – public and private sector – have something called a corporate plan which setsthe strategic objectives for the business. The objectives cascade down the hierarchy into serviceplans, departmental plans, team plans and even individual plans. I wonder if anyone has stopped tothink about how much these plans cost; and what value they really provide to customers?These plans are usually united by one factor – an absence of a perspective from the customer. Thisisn’t to say that customers are not mentioned or even valued by these documents. But what I amtalking about is something different – understanding.And to understand someone you have to walk in their shoes. This means removing oneself from theorganisation and looking inwards as a service user. Some organisations claim that “mysteryshopping” does this. This is utter nonsense – mystery shopping involves paying people to read froma script and rate service using a tick box approach. The exercise only tells you about compliance; asopposed to whether the service provided is any good or not. I used to work in an organisation wherethis technique was used – mystery shoppers could be spotted a mile off.My suggestion is different. Managers should go out and experience the existing service as acustomer. They should try applying for housing benefit; enquire about support for a small businessidea; apply for a planning consent; or whatever other service they are responsible for. Then theyshould observe what happens; in particular noting how long it takes the get the right result and tocount how many different people or departments are involved in the process. Observations willprobably show that staff are doing their very best to help each customer; but the system within whichthey work is often ill-suited to effective work design and customer service; because it has beenchopped up by analytical thinkers. Of course, front line staff will tell you this – because they arealready closest to the customer. But it never hurts to live the customer experience.I also have another practical suggestion for getting knowledge of the customer perspective. Dust offthose skills in statistical analysis and use charts to plot the capability of your organisation torespond to customer demand. Many organisations have target times for individual activities –such as answering the phone, responding to a letter, processing a service an application form,communicating a decision etc. Again note that this is analytical work design – chopped up andmeasured individually. The targets achieved for these individual activities would put a North Koreanelection to shame – they are almost always in excess of 95%. However, customer satisfactionsurveys (admittedly an imperfect measure) often show quite significant customer dissatisfaction.This is confirmed by the customer experience. How can this be?John Seddon’s work has shown that targets for individual activities mask a real problem with the“end to end” service. So whilst Edinburgh City Council had three day a target for attending areported pot hole, which was met 97% of the time, the actual time to repair the pothole took anythingup to 333 days! In fact some jobs required up to seven visits before the pot hole was permanentlyrepaired – and each one of these was recorded as achieving the three day attendance target. Ofcourse this situation led to large amounts of waste.Systems thinking was employed by John Seddon to study the work and design a better service. Theresult in only two months has been an end to end repair time down to a maximum of 39 days (withmost permanent repairs done much quicker). The average number of jobs per day has gone up from60 to 150. And the budget has not changed. By concentrating on the end to end pot hole repairprocess (which is what matters to the customer), systems thinking has delivered more than doublethe level of productivity with no increase in spend. The key has been to root out the waste in the old 6analytical work design which focussed on activity rather than outcome .6 For more detail see:http://www.thesystemsthinkingreview.co.uk/index.php?pg=18&backto=18&utwkstoryid=178&title=On+a+road+to+somewhere%3A+Edinburgh%27s+Systems+Thinking+Road+Service&ind=8 5
  6. 6. DesignI have already mentioned the analytical thinker’s obsession with creating teams and departments – amodern day kind of empire building but without the physical bloodshed. But what, I hear you ask, isthe alternative – some kind of utopian free for all where there is one single commune and whereeveryone tries to become an expert in everything?No, systems thinking has a far more practical suggestion. Armed with knowledge of customerdemand (which you can get from the exercise of becoming the customer and gainingknowledge of capability) work can be re-designed against value and flow of the work.Value and flow are two important systems thinking concepts.Once we have intimate knowledge of the nature and variation of demand, it is possible to re-design a service which allows customers to “pull value” from it – in simple terms to get whatthey want without any hassle.Unfortunately many existing services are designed so that customer demand is pushed from onedepartment to another. This is often done in the name of service efficiency – but the result isanything but efficient. I recently took the time to sit in my local Employment Service office inLlandrindod Wells; in order to observe how customers tried to get what they want, and whether theservice had the required capability. The result was pretty depressing. A significant number ofcustomers came in with various forms and supporting documentation only to be told they needed tocontact another department (in Wrexham – 70 miles away). However most of these people hadbeen told by the department in Wrexham that they needed to come into the Employment Service inLlandrindod Wells. The sense of frustration and despair was palpable; and these were people whothe system should be trying to help get back to work in order to reduce the level of social securitypayments. The whole work design leads to shocking levels of service to the people who need it themost.The importance of flow can best be described by a simple analogy. Water flows along a river frommountains down to the sea. If the flow of water gets blocked – say by an accumulation of naturaldebris and man-made structures such as bridges – then the result is a flood which can have verysevere social and economic costs. Similarly when a customer makes a request for a service, a pieceof work is generated. Good service at low cost will result if this work flows as quickly aspossible from beginning (request) to end (outcome); and there are no blockages along theway. This will allow customers to pull value as and when they need it. Therefore work shouldbe designed to optimise flow.Unfortunately analytical service design actually creates blockages by chopping up a piece of workand mandating handovers between various departments and even within departments. At the frontend many organisations have set up customer service centres whose sole purpose is to answer thephone and attempt (often mistakenly) to put the person through to the right service. And once in theactual work, the situation is still more fragmented; a good example being local authority planningapplications where the service is often highly reliant on bouncing pieces of work back and forthbetween other departments (e.g. highways and building control). I recently worked with a localauthority where we worked out there were 14 separate handovers between a pot hole being reportedand repaired. Can you guess what the customers thought of the resulting service?To overcome this problem I have another suggestion – abolish customer contact centres and putexperts at the front end of the service so that the customer has direct access to them. By nowyou may be beginning to wonder if I am the full ticket – but please bear with me.The invention of customer service centres came about because of the conventional wisdom thatexperts in a particular service (of which there are many) would be swamped by a mass of customerdemand. Actually much of this demand has subsequently been created because of the inability ofcustomer service centres to make the work flow. The result being costly blockages, dissatisfiedcustomers and significant failure demand, which is the result of an inability do something right firsttime. The generation of failure demand leads to a self fulfilling prophecy – yet more customerservice staff are needed to cope with the extra work brought about by failure demand. Studies have 6
  7. 7. 7shown that this can account for up to 70% of the demand being placed on an organisation . This isanother good example of how poor service “designs in” additional costs.Stroud District Council decided to take the step of putting their housing benefit experts right at thefirst point of customer contact. When someone asked to make a claim, the experts were there to talkthem through the process, ensuring that they had understood the form and could provide all thenecessary information. This would be anathema to analytical thinkers who would want to keep theexperts well out of the way of the customer. After all how difficult can it be to hand out a form?Of course Stroud knew what they were doing. Having spoken to an expert at the first point ofcontact, some of the potential claimants realised that they would not actually be eligible for housingbenefit and therefore did not apply. This instantly saved significant amounts of money by avoidingapplications (which take time and money to process) that had no hope of being successful. Stroundrealised that processing ineligible applications is simply waste.For the people who were eligible for housing benefit, service was radically improved because whenthey submitted their application it was right first time; whereas previously it was simply sent back tothe customer requesting more information (a significant blockage to the flow of work and takingconsiderable time). Processing one right first time application from the same person is significantlycheaper than five wrong ones. By putting the expert at the front end, flow was improved resulting inlower costs and better service.Despite a 12% increase in claims (as a result of the economic downturn) the introduction of systemsthinking has reduced the average time taken to process a claim from around 45 days to around aweek. About 20% of claims take only two days. The impact on staff morale has been significant witha 44% decrease in sickness absence. Customers sending complimentary letters about the service 8they have received have shot up in number .Decision MakingIf you are a senior manager reading this, you will probably think that one of the benefits of fightingyour way to the top of the pile is the responsibility for taking decisions. To be sure, not decisions onthings like the colour of the toilet paper; but really important strategic issues such as the design andfunding of services. And conventional wisdom says that this is exactly what senior managers shoulddo – they will lead and others further down the hierarchy will follow.The problem with this approach is that is places a completely unreasonable expectation on individualmanagers who – by virtue of their seniority – are often very remote from where the work actuallytakes place. Of course my previous suggestion of playing the role of the customer will provide someinsight, but the real knowledge of how things work (or more often don’t) resides with front line staff.Conventional wisdom has it that front line staff are the most important people; but in analyticalthinking they do not make the strategic decisions. The ancient philosopher Plato approved ofdecisions being taken by wise and very senior men; and nearly 2,500 years later very little has reallychanged.Therefore, to no great fanfare my suggestion is that senior managers should devolve strategicdecisions on design and funding of services down to front line staff (and not down to the nexttier of management; as often happens).This represents a pretty radical change in mindset. The men who work on highway maintenancegangs are not usually credited with great insight or intelligence. And yet by talking to them I havelearnt an awful lot about how flawed decisions imposed upon them result in sub-optimalperformance. They have told me, for example, that the work schedules and works instructionsresulted in significant amount of waste both in terms of driving to jobs and under-use of perishablematerials which then have to be disposed of. When I asked what they had done with this information7 For example see: http://www.systemsthinking.co.uk/6-12.asp which quotes failure demand for some Policeservices being as high as 70%; which suggests that this organisation could provide a better service with lessmoney if they could understand why their customers were calling them as a result of failure to do somethingright in the first place.8 See chapter 2 of Middleton, Peter (ed.), Delivering Public Services that Work, Axminster, Triarchy Press, 2010 7
  8. 8. they tend to shrug and say that they are not given any opportunity to decide on how to do the work ina better way.In many organisations within which I have worked, a common complaint is that senior managerssimply do not understand how the work, works. And yet they are the people who are makingdecisions about the work.The role of senior managers should actually be to improve the system within which their staffwork. In practice this means: Facilitating a process of change which is inclusive of all people in the work; Creation of a supportive environment to encourage individual decision making to deliver the purpose of the service Understanding the purpose of the work from the customer point of view – walking the system ; Committing to basing decisions on data and evidence; Removing blockages from the system and breaking down silos; and Acting on problems identified.In summary the role of senior management is to take action on the system in order to improve theway that the work, works. To do this they must be guided by knowledge – which can only come fromfront line staff and customers. I believe that this new role for senior managers requires both leadersand the led to escape from the prison that is analytical thinking. There is nothing stopping any seniormanager reading this to begin to change his or her role.MeasurementWithout doubt one of the most significant problems with the new Labour approach to public servicereform was its approach to measuring progress. The symptom of this problem was an explosion inthe number of “performance targets” that Whitehall expected local authorities and NHS Trusts tomeet.Again many of these targets only measured one part of the end to end process experience by thecustomer. For example the four hour target for admission to Accident and Emergency was often metby registering a patient and then dumping them on a trolley in a hospital corridor. Any treatment waspart of a separate target that was only measured when the doctor finally got round to seeing them,often many hours or even days later. The end to end patient experience (admission to successfuldischarge) was not measured by the targets.At one stage local authorities had to report on around 1,800 targets across their range of services.The Audit Commission became Whitehall’s enforcer and its audits required public sector bodies tospend hundreds of millions of pounds, and thousands of working hours, just on reporting progress up 9the governmental hierarchy .Analytical thinkers love to measure output based on activity – such as budget spent, number ofwidgets produced, number of hours spent on a job etc. But these measures frequently haveperverse consequences.I recently worked with a local highway authority who claimed that they could not afford to provide theservice that their residents expected. I worked with some of their front line staff to assess howreactive maintenance jobs were programmed. I discovered that the monthly budget for work couldnot be exceeded – in other words there was a cost and activity-based target. But the front line staff(highway inspectors) programmed the work that the customers were telling them was needed; andwhat they thought was necessary based on their own professional judgement. These jobs enteredthe works programming system. Once the programme manager realised that the monthly budgetwould be exceeded, a proportion of the jobs would be cancelled so that the target could be met.9 See for example Buxton, Paul, The Illusion of Control: How Government Targets and Standards DamageLocal Government Services, SOLACE, March 2009, where the costs of the Audit Commission, OFSTED and theCommission for Social Care Inspection cost £494 million (as revealed in the 2006/07 accounts). This figureexcludes any costs associated with badly designed services that were usually the result of the target-basedcompliance approach. It also excludes the costs of services having to prepare for these inspections. 8
  9. 9. Amazingly, no one (least of all the customer) was told that this cancellation had happened. Can youguess the result? Yes, the local authority was flooded with complaints from both residents aboutwork not being done; and front line staff were then forced to raise yet another job request which thenre-entered the works programming system. Sometimes, jobs were programmed and cancelled onseveral occasions. Complaints were made and sent up the chain of command. The result of thistarget drive approach was a huge amount of wasted effort – in other words failure demand. This wasthe real reason why the local authority could not afford the service that its residents wanted.So here is my next suggestion – abolish all activity-based targets and replace with capabilitymeasures. The issue of greatest concern to the customer is the capability of the service provider toundertake the work (from start to finish and with no need for re-work) when they say they will do it.This is completely different from measuring a target for each part of the work. As discussed above inrelation to the Edinburgh pot holes case study, the capability for doing the job (as the customerwould understand it) is often significantly in excess of the performance suggested by the targets foreach part of the job.If end to end job time is considered to be the most important measure of capability, then this can beplotted on a simple chart, as in Figure 1: Figure 1 – Simple Example of a Capability Chart Job NumberThe chart shows that for the 20 jobs undertaken, the end to end time taken to complete each onecan range from 1 to 7 days (the average is 3.7 days). Therefore for future jobs, based on existing 10capability the customer can expect the job to take between 1 and 7 days . If the 7 day limit isexceeded, then something has happened to change the capability which could be a one off (aparticularly challenging job) or the sign of the system coming under pressure (perhaps from failuredemand).Furthermore this chart will allow the service provider to question why there is such a variation in thetime taken to undertake a job. Is this based on legitimate factors (perhaps more complex jobs takelonger) or extraneous factors (such as inability to obtain the necessary parts for the job)? The10 The numbers in Figure 1 are made up. However the maximum time that a customer can have to wait can bemassive. A case study reported of Disabled Facilities Grant in Neath Port Talbot revealed a maximum waitingtime of over 1,400 days. Some customers (who were mainly elderly) died before the work was ever undertaken.Neath Port Talbot used systems thinking to get the maximum wait time down to just a few months. 9
  10. 10. answer to this question may therefore enable performance improvement – for example by workingwith parts suppliers on a revised supply system.The advantage of capability charts is that they allow workers and their managers to focus in on thecauses of performance variation. Targets, with their “all or nothing” approach, do not allow this andshould be abolished.MotivationThere are two broad schools of thought on how to motivate staff. On the one hand are people whosuggest that motivation, in the form of extrinsic financial incentives, is the primary means of gettingpeople to perform to the levels that are expected. Many large contracts for highway services nowlink the profits of the private sector service provider to performance (usually measured by servicelevel targets). The clear assumption is that people working in these organisations need to bethreatened with financial penalties (i.e. non payment of profit) in order to perform.This is a pretty grim view of human nature and can perhaps be traced back to the Englishphilosopher Herbert Spencer who was the person who coined the term “survival of the fittest”.Spencer approvingly saw human struggle as being about the accumulation of material wealth; and itwould be the strongest people who would survive and then prosper. The weaklings would go to thewall; with the beneficial result that future generations would be bred from the genes of the strongestpeople. If, by now, you are feeling distinctly uncomfortable I don’t blame you. The obsession withextrinsic financial motivations can lead to some pretty dark places. By the way the industry with thegreatest financial incentive system was (and still is) banking. I don’t think I really need to spell outthe fact that the current financial crisis was caused by manifestly excessive risk-taking by investmentbankers who stood to make enormous fortunes if their bets on highly complex packages of 11derivatives came to fruition .The other school of thought instead suggests that the most important motivations are intrinsic – thatis within the person themselves. Many theories have been advanced but perhaps the most famousis the hierarchy of needs developed by Abraham Maslow. At risk of over-simplification, Maslow setout a theory for human motivation which can be summarised as a triangle: Figure 2 – Maslow’s Hierarchy of Needs11 In a speech to the 2010 Trades Union Congress, governor of the Bank of England Mervyn King agreed thatthe roots of the econominc crisis laid in the banking bonus culture; and the expectation that the taxpayer wouldbail the finance system out if things went wrong. 10
  11. 11. Maslow suggested that the lowest form of need that should be satisfied was the physiological (i.e.bodily) need for air, food, water, sleep and (perhaps controversially) sex. Then came safety in theform of resources, health, employment, family and shelter. I would argue that in the modern world,safety includes a strong financial aspect as it is money that is enables the dream of owning your veryown shelter (or “house” as we call it). Then came the various intrinsic needs – love of a good womanor man; esteem amongst ones friends and colleagues; and right at the top, self-actualisation. InMaslow’s definition self-actualisation involves an individual doing what he or she is fitted for:“A musician must make music, an artist must paint, a poet must write, if he is to be ultimately happy. 12What a man can be, he must be.”I very much doubt that in many organisations this need for self-actualisation is really given theprominence that perhaps it deserves. Perhaps the exception is in the caring professions; but inservices like transport? I very much doubt it.Therefore my next suggestion is to that managers should consider the full range of humanneeds when trying to work out how to improve motivation. This does not mean an uncriticalacceptance of Maslow’s hierarchy or any other theory for that matter. But it does mean escapingfrom the mindset that financial incentives are the be all and end all. This much more open mindedapproach to motivation is entirely consistent with systems thinking – which points to evidence that95% of performance is down to the systems within which people work. This empirically establishedview points to a need to ditch one or two shibboleths – most notably the staff appraisal.Appraisals have a degree of plausibility – after all it is hard to argue that people should be heldaccountable to someone or other for their performance. However the all the evidence suggests thatperformance is largely the result of the system within which people work. W Edwards Deming, whostudied both American and Japanese styles of management concluded that as much as 95% of a 13person’s performance (good or bad) was as a result of the system within which they had to work .Therefore appraisals completely miss the point because they do not deal with causes ofperformance; only the symptoms.Management Ethos“Ethos” is based on a Greek word and denotes the guiding beliefs or ideals that characterise acommunity, a nation or an ideology – or a workplace of course. In the Idea of a Christian Society, TSEliot once wrote:“The general ethos of the people they have to govern determines the behaviour of politicians.”However in modern day workplaces it is arguably the ethos of senior managers (and also politiciansin the case of local authorities and government) that determines the behaviour of the people whowork there.The management ethos of the analytical approach is to manage things that are considered to beunder their control – in particular budgets, people and processes. A large number of IT-based toolshave been devised to monitor and manage budgets; and these require operation by vast armies ofpeople. Similarly with people, Human Resources (HR) departments have spawned a large numberof tools to manage people – including the appraisal, the team meeting and the one to one.Nowadays we also have whole departments dedicated to “procurement” – which (we are told) arenecessary so that the right service provider can be found. Perhaps the worst form of waste is themoney spent on “business improvement teams” (and supporting management consultants) who,because they are removed from the work, have no understanding of what really matters to 14customers .Has anyone ever stopped to wonder what value the management of budgets, people and processesadd to the needs of the end customer? Some people may argue that things like procurement andbusiness improvement are necessary to ensure sound corporate governance. Whilst this may be the12 Maslow, Abraham, A Theory of Human Motivation, Psychological Review, 50, 370-396, 194313 Deming, W Edwards, Out of the Crisis, Cambridge, MIT Press, 200014 Craig, David, Plundering the Public Sector, London, Constable, 2006. This is an absolutely frightening readwhich shows the extreme levels of public money (£70 billion) that have been spent on management consultantspromoting various IT-based tools. I would argue that proper management consultants should get to know thework and customers intimately before they dispense any advice. 11
  12. 12. case, I can’t help wondering whether the vast amounts of money spent on “corporate” functions –finance, procurement, business improvement and HR – are actually part of the problem; and thatthey have become the de facto purpose of both public and private sector organisations.My next suggestion is therefore to replace the management ethos of managing people, budgetsand processes with one which understands, and acts on, the purpose of the organisation as asystem.This sounds like a bit of a mouthful so let me explain. The plain fact is that any work-based system,that is a local authority or private sector organisation, would not exist and function if it were not for itscustomers. The capability of this system to meet customer needs therefore must be at the heart ofwork design – not budgets and certainly not HR tools. This change in thinking requires a shift in theethos to tackle questions that are frequently put in the “too difficult” pile; and these include: What do our customers really need from our service? How are we, as the provider, responding to this need? How do we need to re-design our work to better meet customer need? 15 How can we involve our customers in future service planning?Of course both customers and circumstances will change – and local authorities may receive orrelinquish different service responsibilities. Therefore asking and addressing these questions shoulda constant process of enquiry, learning and discovery. I can guarantee that this will make work morechallenging, energising and interesting. Instead of being taught to hide behind service standards,public servants can become agents of positive change. I have met enough good people in the publicsector to know that they can rise to the challenge; if the management ethos allows them.Attitude to CustomersConventional wisdom treats customers as people who pay for and receive a service; but who haveremarkably little control over how that service is designed and delivered. This relationship could bedescribed as “contractual” – even if the contract is an unwritten one.This form of conventional wisdom assumes that customers should be the passive recipients of aservice; as opposed to people who can help shape it. Again this is a sign of an analytical approachto service design.Even service users who have their own budgets (as in adult social care) may actually have a limitedchoice of options available; and they certainly don’t have a say in what services they are offered.The assumption is that the power of the market will increase both consumer choice and providerwillingness to tailor their services to individual need in order to get the business. I have to say I don’tsee any real evidence that this is working.The final question listed in the management ethos section (above) challenges this view of serviceusers as passive recipients. It is particularly interesting because some local authorities are currentlyconducting “virtual” budget setting exercises in order to involve the public in deciding where the axewill fall. The big problem with such initiatives is that they implicitly assume that there is no scope forre-design that will deliver better services with less money.Therefore my next suggestion is one of the most important and potentially controversial – allowfront line staff, stakeholders and service users to work together to plan and deliver services,free from the dead hand interference from senior management. The stakeholder (who could bea representative group) and the customer should be treated as an equal.I can immediately sense some horrified looks; conventional wisdom has it that neither front lineworkers nor the people they work for have the capability to undertake this kind of work. This needsto be done by very senior and clever people who earn lots of money.The naysayers will no doubt throw all sorts of objections in the way of giving the sweaty massesdirect involvement in the service that they receive. But none of these objections can really stand up15 The coalition government’s moves towards “localism” – getting communities more involved as activeparticipants in local service planning, design and delivery – is seen as a threat by old school managers. Incontrast I see it as an opportunity to deliver huge service improvements and savings; by reducing downstreamfailure demand. 12
  13. 13. to scrutiny, because systems thinking (for example the Stroud case study I mentioned earlier) hasshown that up front spending on getting the service tailored to customer demand saves masses ofmoney downstream. Analytical thinkers just can’t see this because they don’t appreciate thedynamics of a system where people rather than processes are in charge.Attitude to SuppliersAs someone who works for a consultant, I am frequently cast in the role of a supplier of my transportplanning and management consultancy services to local authorities. I think I have been remarkablylucky because pretty much everyone I have worked with in a local authority has treated me as aclose colleague and not a bloke who is bleeding them dry to the tune of £900 per day.But particularly when it comes to dealing with highway consultants and contractors, I often see localauthorities adopting a very contractual attitude to their suppliers. Of course when a contract is beinglet through competition, the rules of fair play (and of England) clearly mandate treating everyone thesame; and that is best done according to a set of rules. However this way of working often thenspills over into the operation of the service itself. After an all too brief honeymoon period, the client –supplier relationship frequently descends into a very complex and costly legal jousting tournament,where pretty much nothing can get done unless there is a signed agreement from both parties. Awhole new lexicon of phrases have been invented – we now have “change control” and (yes)“compensation events”. These processes come at a significant cost and are diverting time andmoney away from the service itself.I think this approach stems from a lack of mutual understanding on both sides. Local authorities arealways somewhat suspicious that consultants and contractors are simply out to screw them for everypenny possible. The service providers don’t help themselves by often insisting on a very rigidcontractual agreement with plenty of premium add-ons if the client wants something out of theordinary. I think things have improved over the years with more “partnering” type contracts and anincreasing blurring of the lines between client and contractor. But I still think a lot more can be done,especially as the customer does not care two hoots about who is providing the service.Therefore my next suggestion is for promotion of greater mutual understanding and respectbetween clients and their suppliers. This will actually save money by removing significantamounts of waste associated with a contractual type of relationship (where the only real winners arethe lawyers). I honestly think that the best way to promote this is through both client and suppliersimultaneously adopting systems thinking for planning and design of their work. Systems thinkingfocusses on a common enemy (waste) as well as a common cause (the public as a customer).Systems thinking brings out the very best in people and stops them reverting to an adversarialrelationship via the law.To give an example, in Portsmouth the directors of Comserv and EPS, two suppliers to the council’shousing repair service, had both the honesty and bravery to challenge their own assumptions thatthey were providing a good service. They discovered that the majority of calls they received were asa result of failure to do something or do it right – our old friend failure demand. But because thecouncil was also using systems thinking to improve its own work, the usual blame game (with all itsattendant costs) was avoided. Client and contractor had a common purpose – improving the service 16to their customers. And improve they did .ConclusionsThroughout this paper I have compared and contrasted the conventional wisdom of analyticalthinking with the very powerful and radical alternative of systems thinking. Given the success thatsystems thinking had had in delivering better services with much less money, it is surprising thatrelatively few organisations have seriously adopted it.One of the main reasons is because systems thinking is sometimes seen as counter-intuitive; inparticular it rejects much of the conventional wisdom that has grown up around the whole topic ofmanagement. I have made suggestions like ditching performance appraisals and targets before –and people look incredulous. They conclude that I must somehow be against good performance.This is intellectually sloppy and incredibly myopic. And when managers and HR departments are16 For more details on this really unique case study see: http://www.thesystemsthinkingreview.co.uk/index.php?pg=18&backto=18&utwkstoryid=163&title=Systems+ Thinking+repairs+contractor+heralds+Revolution+in+service+provision&ind=5 13
  14. 14. challenged to provide any peer reviewed (i.e. objective) evidence to support the use of their pet toolsand processes, they often can’t provide any. They certainly can’t tell you how much their tools costin terms of lost productivity and damaged staff morale.In fact I prefer to look at the current crisis as evidence that the current set of management tools thatwe have at our disposal are woefully inadequate for the challenges that we face. It is the equivalentof going into a Wild West shoot out armed with a water pistol.My research and work with clients over the last few years has confirmed my belief that systemsthinking as a powerful force for change. And the beauty of it is, the main resource needed is alreadyin place – the people who work for the organisation and the customers who depend on it.If you get just one thing out of this paper, I hope that you make a resolution to challenge yourexisting management beliefs and find a better way of doing things. I hope I have shown thatsystems thinking provides a vital road map that will help us steer away from the cliff edge. Manythanks for reading!James Llewellyn th20 September 2010References and Further ReadingAckhoff, Russell, Systems Thinking for Curious Managers, Axminster, Triarchy Press, 2010Buxton, Paul, The Illusion of Control: How Government Targets and Standards Damage LocalGovernment Services, Society of Local Authority Chief Executives, March 2009Buxton Paul, Learning to let go; letting go to learn, What government should put in place of theillusion of control, Society of Local Authority Chief Executives, 2010Craig, David, Plundering the Public Sector, London, Constable, 2006.Deming, W Edwards, Out of the Crisis, Cambridge, MIT Press, 2000Druve, Chetan, Why Your Boss is Programmed to be a Dictator, London, Marshall Cavendish, 2007Galbraith, John Kenneth, The Affluent Society, New York, Mentor Books, 1962Maslow, Abraham, A Theory of Human Motivation, Psychological Review, 50, 370-396, 1943Middleton, Peter (ed.), Delivering Public Services that Work, Axminster, Triarchy Press, 2010Seddon, John, Freedom from Command and Control; a better way to make the work work,Buckingham, Vanguard Press, 2005Seddon, John, Systems Thinking in the Public Sector, Axminster, Triarchy Press, 2008Wales Audit Office, Lean and Systems Thinking in the Public Sector in Wales, Lean EnterpriseResearch Centre, Cardiff University, January 2010Weckowicz, Thaddus E (2000), Ludwig von Bertanlaffy (1901-1972): A Pioneer of General SystemsTheory, CSR Working Paprer No. 89-2, University of Alberta, Center for Systems Research 14