There may be different views about whether the recession is over, but there is no question that the public sector now faces a prolonged period of scarce resources. The test will be to deliver better services at a lower cost, rather than merely identify a series of cuts to existing services - and that provides public sector leaders with their biggest challenge in a generation. There is no formula for success, but there are some clear pointers as to how those in charge should meet the challenge.
Leaders need to build organisations that are less risk-averse and better able to innovate. This means that they need to engage better with the front line, manage risk effectively, value, recognise and promote the successful innovators, get rid of process-based targets that stifle people's creativity, and attack the things that sap energy, such as needless paper, reports and meetings.
Too often in the past, innovation has been regarded as a marginal extra - a 'nice to have' but not essential. The extent of the current fiscal challenge has changed that, and leaders are the single most important determinant of an organisation's capacity to innovate.
Leaders need to look beyond their organisation. Targets, inspections and rigorous performance management have tended to focus us all on 'the organisation'. As leaders, we tend to judge our success on whether the organisation passes the various tests that it is set. In future, public sector leaders need to see themselves more as contributing to the leadership of their 'place'. They need to develop genuine collaborations with partner organisations and measure the success of these by the outcomes achieved. This means leaders must put a premium on the skills needed to influence, negotiate, build trust and sustain coalitions.
At the moment, we are wasting huge sums of money because of our failure to work together effectively. Clients often receive unco-ordinated services from a wide range of local, regional and national providers - and that is not least because of the way government works in silos. The providers know little about each other or how their well-intentioned support fits with other provision.
In addition, our failure to co-operate means that savings that could be made via joint procurement, collaborative property and asset management and the sharing of back-office services are lost to the public purse. Leaders set the tone for an organisation - does it encourage trust, openness and collaboration, or suspicion and defensiveness?
Leaders must show that services are focused on clients and citizens. Inputs should be judged on whether or not they add value. We need to do more to understand clients by analysing how resources are currently spent on which customer groups. Does it represent the best use of our resources? Customer insight is not new but it remains sporadic. It is not uniformly applied and the consequent lack of insight and analysis costs us dearly.
In the past, we have also spent a great deal of time and effort redesigning the structures of our organisations, but relatively little redrawing the services themselves around the needs of the client. In a sector that spends so much of the budget on services, it is surprising - to say the least - that so little investment has been made in the design of those services. Leaders - and that includes political leaders - should be cautious about further restructuring that too often consumes energy and produces no perceptible im- provement for clients/citizens.
Scarce resources demand leadership rather than good management. And that means a greater emphasis on winning ownership for a clear sense of purpose, direction and values; it means consistency around the fundamentals and the development of real trust throughout the organisation.
When people are under pressure and feeling insecure, they need to be able to trust their leader and believe in their integrity. Where there is bad news, it needs to be communicated with empathy and openness, if for no other reason than that research shows that organisations that handle bad news well are more effective than those that do not.
Many of our current leaders have not experienced a serious downturn, when leadership is different. Most public servants want to add value and can be demotivated by the likelihood of cuts. Energy levels are more difficult to sustain when people fear for their jobs and yet clients' expectations remain high, so the pressure on the front line becomes more intense.
Leaders have to build a sense of optimism but also a sense of realism: they have to be personally resilient and take better care of their own wellbeing and personal support, and they need to show that they can themselves add value in tackling the challenge, rather than merely providing sympathy to staff.
Abundant resources can mask poor services and poor leadership. When resources are scarce, there is a premium on well-targeted, client-centred services - and outstanding leaders.
CV LORD BICHARD - who was made a peer last month - is executive director at the Institute for Government. He has been chief executive of Brent and Gloucestershire local authorities and in 1990 became chief executive of the Benefits Agency. In 1995, he was appointed permanent secretary of the Employment Department and then of the Department for Education and Employment. Bichard received a knighthood in the Queen's Birthday Honours 1999. In 2001, he left the civil service and was rector of The London Institute (which later became University of the Arts London) until his retirement in August 2008. He is also chair of the Design Council.