UK: PRIVATE LESSONS FOR PUBLIC SERVICE. - There has been much discussion in the UK and other countries about the adoption of private-sector business techniques in the public sector. There is genuine concern over whether they are appropriate. Do they need

by Michael Partridge.
Last Updated: 31 Aug 2010

There has been much discussion in the UK and other countries about the adoption of private-sector business techniques in the public sector. There is genuine concern over whether they are appropriate. Do they need adaptation? Is the public sector uniquely different? The challenge therefore for top management in the public sector is to find ways of addressing and overcoming these concerns in order to maintain the momentum that is already under way.

The Department of Social Security is leading one of the most ambitious programmes yet of management reform in the public sector, with executive agencies now covering more than 97% of the Department's activities. To put the Department into perspective in business terms, it is equivalent to a company that handles more money each year than the annual turnover of BP, ICI and BT put together, and operates a money transfer system on a scale larger than any of the clearing banks. More importantly, through National Insurance, pensions and the other benefits it provides, almost every man, woman and child is a customer of the organisation.

The main features of management reform will, of course, be familiar to many in the private sector. We are seeking to establish and maintain strategic control by the creation of a new Departmental Board in order to give greater top-down focus on what we and ministers want for Social Security during the first decade of the next century and beyond.

There has to be an emphasis on flexibility. Nobody can be sure what the policies and priorities will be 10-20 years from now, or even in the years between. That depends on the political process and the decisions made by ministers. Managers must therefore be flexible. We must be ready and equipped to do whatever ministers and Parliament decide. In this environment we must develop strategies that allow flexibility and understand the costs and benefits associated with this greater freedom.

The creation of executive agencies has helped us to understand that we are actually in more than one business and that we have a variety of different customers. Collecting contributions from employers is, for example, very different from paying benefits to the disabled, as is pursuing fraud or abuse.

Indeed we have more than one party to consider as customers: the taxpayer, ministers and Parliament all have an interest in and an influence on how we carry out our responsibilities - as increasingly do particular lobby groups.

The use of the word customer is perhaps a simple illustration of how the terminology needs to be adapted, but the techniques underpinning improved service to customers are valid and can be applied successfully.

There are at first sight unique differences between the public and private sector. Further examination, however, of what characterises these differences leads me to the view that individually they are not in fact unique but that they mirror the wide range of businesses that can be found outside the public sector. However, there are some factors at the extremes of the range of variabilities which will influence how we operate. What is unique is finding them all under one umbrella - that of national government.

The environment in which we operate is in many ways more challenging than that of the private sector. The timescales for policy change, for example, with its impact on expenditure and on the citizen, can be extremely lengthy, sometimes 20 years or even longer. The process for change is more consultative and therefore more complex and lengthy than in the private sector.

And government departments don't have the international profit/loss account or return on assets to act as an overall measure of efficiency. However there are examples in the private sector of businesses which face one or more of these issues and have had to address them.

The understanding gained from the move to agencies has highlighted that the different 'businesses' need to adopt practices which are the most appropriate to meet the needs of the people to whom they provide the service. This inevitably will lead to differences in operation rather than the commonality that had previously prevailed.

The challenge is how, given such complexity, we can run an interrelated but decentralised business maintaining minimal yet effective controls while all the time improving the necessary levels of co-operation, consultation and communication across the Department and Government as a whole; and how, at the same time, we can continually improve outcomes - with political accountability - while retaining the flexibility to do whatever ministers decide, at minimum cost to the taxpayer.

To meet this challenge we are developing a variety of solutions. Critical to this is the need to determine, with ministers, longer term strategic views. This will allow the development of services which can be delivered in a shorter time but which will still allow a degree of flexibility to enable us to respond to unforeseen changes in the future. By adapting some of the marketing techniques used in the private sector, we give the concept and the value of deliverable outcomes to the individual, to the group and to the other interested parties - ministers, Parliament and the taxpayer. If this is then related to the cost of provision of the service, the performance and effectiveness of both policy and its delivery can be demonstrated.

Without the clarity that comes from the influence of market forces, a bottom-line and return to shareholders, adopting private-sector management techniques is more challenging than most people would think. But application of the concepts can certainly achieve the result which we all seek - of giving greater value for money to our customers and to the taxpayer.

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