Keeping up with Jones

Attacks by the CBI boss on the public sector's performance are bizarre and insulting

by Richard Reeves, co-founder of Intelligence Agency, an ideas consultancy; e-mail:
Last Updated: 31 Aug 2010

Digby Jones has a thing about guts. More specifically, about busting them. Almost a year ago, the populist head of the CBI warned that businesses up and down the country were 'busting a gut to stay competitive', while the laggard public sector slouched around.

Unfortunately, nobody followed up the story - perhaps because his article was buried in the Society section of the Guardian.

Being a committed (perhaps even competitive) sort of guy, he tried again at the end of 2003. 'The private sector is busting a gut to be both productive and competitive,' he railed. 'Surely tax-payers - businesses and individuals - are entitled to see the public sector do the same?'

This time, Jones had statistics to support his gut-busting claims. Although the number of people employed in the public sector had risen by 181,000 over the past year, 'output per job' had fallen by 0.5%, according to the CBI.

Meanwhile, those heroes in the private sector lifted output per job by 1.8% in services and 4% in manufacturing.

And whereas those greedy state employees had grabbed a 5.1% wage rise, those outside the womb of Whitehall stoically made do with a 3% increase.

(Jones is strangely silent on the extraordinary restraint over remuneration shown recently by chief executives.)

This is the sort of fighting talk CBI members are after, especially after years of egghead musings from Adair Turner and Howard Davies. Nothing warms the cockles like a good kicking to the bloated bureaucracy of the state sector. But just because it is popular doesn't make it right. (Think of Pop Idol.)

It is outrageous to protest that public-sector workers are seeing a slightly faster rise in pay, given that over the past two decades the gap between the wage packets of the two sectors has widened dramatically in the private sector's favour. And it is bizarre at best and insulting at worst to bemoan a little more cash for nurses when chief executives draw vast salaries that have been shown to be utterly unrelated to their performance or that of the organisation they run.

But the more profound flaw in the private hero vs. public villain story is that the measures of productivity used by the CBI are inappropriate for much of the activity of the public sector. It is fairly straightforward to measure the output of a widget factory in Wolverhampton, and so to gauge productivity. But schools and hospitals are a different matter for two reasons.

First, 'output' can't easily be defined in private-sector terms. If the output is, for example, 'units of children taught', then falling class sizes reduce productivity. The way to make schools more 'productive' is to hold lessons for all 500 pupils in the hall with just one teacher. Similarly, falling crime makes police less 'productive'. On public transport, bus and train conductors are an obvious target under strict productivity criteria: why have two people when one will do? But it is also known that people - especially women - feel safer using public transport when there is a conductor around. Where does this loss show up in the productivity data?

There is a second problem. Much of the benefit flowing from public-sector work is by definition highly subjective, even intangible. Occupational psychologist Jon Stokes has pointed out that while the private sector transforms things, the public sector transforms people. And this transformation is harder to estimate to the nearest decimal point. The value of a particularly caring nurse on a chronic neurological ward, or of a social worker who gives a drug-addicted mother hope, or of a teacher holding extra-curricular chess clubs, does not register on the CBI's productivity monitor.

In the public sector, the quality of provision is as important as its quantity; indeed, often it is more so. Increasing the caseloads of social workers makes them more productive - but less effective.

The misapplication of productivity formulae to swathes of public work is part of a broader trend to inject private-sector disciplines into the state sector.

The setting of targets is another manifestation, often with similarly dire consequences. Whereas it is entirely sensible to set the Wolverhampton widget factory a quarterly target for the number of widgets made, the complexity and qualitative nature of the work in many areas of public life make targets a blunt instrument. Measuring police performance by clear-up rates for burglaries diverts them from more important tasks. Measuring social workers by caseload reduces the attention given to more difficult clients.

Of course, some aspects of business operations can usefully be adopted by state-funded institutions. But if anything, the lessons should be flowing in the opposite direction. Private-sector organisations, especially in the service sector, are struggling to retain customer loyalty. People are shopping around for the right consumption 'experience', and demand higher and higher levels of customer service. In short, consumers want to interact with businesses that care about them. Not surprisingly, firms are struggling to fit these demands into standard business models of output.

But there is plenty of expertise to draw on in the public sector, which contains millions of men and women who work very hard indeed to care.

Who could even be said, perhaps, to be busting a gut.

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