This is the second article in our series on Brexit: Governing through uncertainty. The first piece in the series was an introduction.
The public sector’s necessary focus on day-to-day policy, regulation and delivery can mean that we can pay insufficient attention to whether our government organisations are providing services in the most strategically aligned, effective, and efficient way.
Australia’s functional and efficiency review programme gave departments the opportunity to reflect on what they ought to be doing and how best to do it. Unlike other savings initiatives, it did not start with corporate efficiencies but instead invited a more fundamental consideration of the role of government, how it might be exercised, and what that meant for public expenditure as well as organisational capabilities. A similar programme would be timely for the UK government once the post-Brexit situation is clearer.
Public sector leaders must often deal with strategic shifts, most notably after an election during which the successful party has foreshadowed new priorities or major funding commitments. But the challenges leaders in the UK face in a post-Brexit scenario (especially if there is no deal) are significantly greater by several orders of magnitude.
We have taken a keen interest in the post-Brexit challenges that the UK government faces – not just the anticipated significant policy, regulatory and service delivery changes, but the strategic organisational and administrative challenges involved.
Brexit can catalyse a wider transformation
For us, a core question is: “How can leaders move beyond reactive change, into intentionally shaping the organisation that meets not only the roles and priorities emerging from Brexit, but also reflects future service delivery requirements?” Those leaders that use Brexit to catalyse much-needed wider transformation will see significant returns, ahead of those that merely keep the show on the road.
The analogy of building a plane while flying it is relevant. But in this particular case, we’re talking about building a bigger plane by incorporating parts that have yet to be developed and tested, writing the manual, figuring out exactly where you’re flying to, training pilots and trying to minimise costs involved – all at the same time.
Incremental adaptation may be appropriate in some parts of the UK Government, but other areas must simply start doing things that they have never done before. And they need to start doing them straight away.
Preparations are being made for the post-Brexit reality, that’s for sure. But it is almost inevitable that, given the necessary focus on immediate service delivery responses, the work on fully understanding context, direction, priorities and capabilities is relegated. We’re focusing on keeping the plane flying while visibility is somewhat limited.
Sooner or later it will be necessary to deal with some more strategic issues, challenges and opportunities at the departmental level, though this would be best done in an environment where there is a clear mandate and direction for the whole of government.
While clarity will elude us for some time – we do not know if there will be a last-minute deal or extension, an election or who will win – Whitehall should develop a methodology for systematic realignment and review across all departments.
The Australian Government confronted a related challenge when the centre-right Coalition government came to power in 2013 following six years of Labor governments that had steered Australia through the Global Financial Crisis and introduced ambitious social reforms.
The new government was keen to rationalise and focus government spending. The two typical responses to such a challenge are the ‘amputation’ approach and the ‘death by a thousand cuts’ approach. To its credit, the Australian Government instead issued a more strategic terms of reference for reviews of each ministerial portfolio, which highlighted an interest as much in effectiveness as in efficiency.
Nous conducted seven of these reviews and subsequently carried out two others using the same methodology. Five principles underpinned our approach to these reviews:
We drew on our expertise in organisational transformation, public policy, and the unique operating and authorising environments for government departments to refine and tailor our approach in line with these principles. This ensured that each review was comprehensive, insightful and collaborative and that they delivered truly valuable and actionable advice.
More than a strategic plan, we left agencies with a much clearer sense of their purpose and priorities, the rationale for their expenditure, the capability needed to deliver on desired system outcomes and the governance required to ensure improved efficiency and effectiveness.
This approach provides a consistent mechanism for prioritising and justifying government activities. It also provides a lens though which British departments can critically assess the need for both existing legacy programmes and programmes that have been delivered through European agencies. More detail on each of these stages is available below.
1. Start with first principles
The first, often overlooked, step is for each agency to be clear about the boundaries of the system that it is seeking to serve or influence. What is included in the system and how does it interface and overlap with other systems under government stewardship? How would we think of the customers or clients in the system? What are the different types of service providers other than government? For example, in the education system, we need to remember that the ‘clients’ are students (or in the case of smaller children, the parents/guardians) and employers. And providers can be categorised in various ways – comprehensives, academies, grammars, and independent schools, for example, or specialist and non-specialist schools.
The second step is to agree which outcomes the government wants the system to produce. We often articulate these as being the objectives of government, but it is important to ensure that the outcomes take account of non-government actors as well. What public value do we want to see collectively generated?
Role of government
At this point, questions typically arise about whether there is a market failure that necessitates government intervention. The simplistic view is that when there is a market failure, government should respond with policy, funding, regulation, or service delivery. Nous focuses instead on the range of levers that government can use at different times to support achievement of the agreed system outcomes. This enables a more proactive approach to improving system performance. It is important, for example, to think about the different ways that:
- desired behaviour in the system can be incentivised
- investment can be channelled and managed
- other actors can be engaged and leveraged
- innovation can be promoted within a clear frame of appropriate safeguards and accountabilities.
Role of the department
Next is thinking about how the department then employs those levers, and specifically how these levers translate into functions within the organisation, how these functions are defined, and what capabilities would they require. It is then important to check whether the department is, in fact, the best entity to be taking the lead. Should the government establish a separate body, should responsibility transition to a different agency or to local councils, or should the department either increase or decrease the level of private sector engagement with specific functions?
2. Clarify vision and priorities
With agreed outcomes, an understanding of role and functions, the next step is to articulate a future vision for the department. This should derive from the desired system outcomes but speak more directly to stated government objectives and translate these into prioritised, time-bound actions for the department specifically.
Determine success measures
Setting metrics for success is crucial at this stage. There should be a clear and agreed understanding of what a successful transition looks like and the specific benefits that are expected to be realised from a changed focus, from different approaches to fulfilling responsibilities and from new capabilities. If baseline data is not available, now is the time to collect it, for leaders need to understand the impact the department’s interventions are having as well as their own progress on related internal reforms.
3. Follow the money
Understand current expenditure
How many organisations set new priorities and KPIs but do not alter their business-as-usual activities? They may start doing new things but how often do they really de-prioritise other activities?
De-prioritisation is difficult in government. Ministers announce new programs and initiatives – even pilots that are explicitly intended as short-term experiments or programmes that clearly duplicate others – that build up constituencies (internally and externally) who resist any attempts to cease or decrease funding.
It was surprising to us just how many legacy programmes we found that were hangovers from a distant past. While they were reportedly making a positive contribution, it was not clear whether the programme was still necessary, and certainly it was doubtful that it required the level of overhead relative to the investment.
When it comes to finding efficiencies, Australian government departments often focus on their operating expenses rather than specific government programmes as they have more control over these general expenses. But that means the choices for finding ‘efficiencies’ are reduced to ‘back-office’ staff reductions (often dependent on expensive IT investments) or piecemeal reductions of the ‘do more with less’ variety.
A more strategic approach – one informed by well-considered priorities, agreed functions, an appreciation of the full range of government levers and of the other players who can contribute to system outcomes – delivers more substantial savings (in our experience) without the risk of incremental adjustments to claw back resources in areas that have been deprived for the purposes of meeting some short-term ‘efficiency dividend’.
Critically review current impact
Whole-of-agency review processes then enable us to make both relative and absolute judgements about departmental functions and programmes. How many programme evaluations have you read that conclude that “a positive difference is being made with clear progress towards outcomes, but improving x and y would likely deliver better results”? Unless there is a meta-review, you cannot have the information to judge whether investing more in one programme at the expense of another, might net you a much better result overall.
It may seem like an obvious point, but the review of expenditure should not simply consider whether there is an alignment to priorities, but what returns are being realised. It is not uncommon in the Australian system for programmes and services to run for years without being properly evaluated. Worse, there may be evaluations whose findings are not acted on, or plenty of anecdotal evidence to suggest the impact is marginal. Or alternatively the programme is successful on its own terms but these terms no longer align with departmental or government priorities.
Inertia and risk can be powerful obstacles to overcome. Assumptions are made (understandable in hierarchical structures) that others think we should keep things running as they are, and maybe the next layer up agrees. But what about from the perspective of the department head who may not even be aware of the programmes concerned? Someone needs to regularly ask the questions: “Is it still needed? Is it good value? Is there a better way?”
Armed with such information it is easier to realign resources around priority functions, services, and programmes. This should release savings that can either be redirected within the department to invest in new systems capability or support underfunded priorities or banked as a saving from a whole-of-government perspective.
4. Build capability and culture
Analyse skills demand and supply
People capability is a critical consideration in any transformation – particularly so in a post-Brexit scenario where civil servants will be required to take on tasks that have not been performed in Whitehall for a generation or more.
A workforce strategy is therefore necessary to ensure timely development and acquisition of the necessary skills. Importantly, such a strategy needs to take account of the broader shifts in the labour market. It is now possible to identify likely changes to organisational tasks and what this means for future labour force supply and demand at an organisational, regional, and national level and Nous has worked with organisations to develop the most appropriate strategies to respond to change at each of these levels.
The department needs to take responsibility for managing workforce transition while also empowering employees to grab opportunities to upskill or pursue a different, more sustainable career path.
Align culture to purpose and strategy
Strong cultural alignment is crucial for all of the above to deliver significant re-focusing and ongoing high performance. Nous has worked with staff and leaders from large organisations that have strong traditions and entrenched behaviours to develop new statements of cultural intent. Such a statement needs to reflect the organisation’s priorities and values and must provide the signals and incentives for the workforce to deliver on what can be expected of them in a new strategic and operating environment.
The hard work then starts to embed, reinforce, model, and recognise the values and behaviours necessary to drive high performance in and of the organisation. And this in turn realises the new organisational culture.
5. Watch and learn
Maintain effective governance
Any organisational transformation requires strong oversight and genuine buy-in from the leadership group, with decision-making informed by the success indicators and metrics identified earlier. Nous has seen too many organisations that, frankly, are inclined to believe their own spin or have loose accountabilities. This can lead to major budget blow-outs, integrity failures and (at minimum) difficult and embarrassing admissions to ministers about the inability to meet publicly-announced commitments.
The response should not be to introduce a punitive regime, but a culture of data-informed and timely decision-making, grounded in transparency and a sense of shared responsibility. Accountabilities held by individuals should be clear, but any performance framework and governance systems should ensure that sufficient support is provided for such individuals to achieve what they have been asked to do, and to share information about risks and opportunities in a collegiate way.
Learn and adapt
The days of rigid and detailed strategic plans are past; the world is changing too rapidly. Every organisation must be a learning organisation, bound to a clear sense of purpose and objectives, but able to flex and adapt as new developments occur or new information comes to hand. This approach can be hard for some leaders to adjust to – there are those who like the clear project plan and are wary of concepts such as ‘Agile’ or design thinking.
But these are not fads; they are the hallmark of modern and effective organisations, and as such should be features of any new departmental strategy post-Brexit – whatever shape it takes.
This approach, or tailored variations of it, provides departments with a thorough understanding of what they are currently doing, how effectively and efficiently they are doing it, what they ought to be doing given changed circumstances or priorities, and how they can re-orient and re-align to better meet government’s and the public’s expectations.
The Australian Government’s implementation of the recommendations of these reviews and their replication in other jurisdictions illustrates the significant value of this more comprehensive methodology would bring to the UK in this transitional era.
You can read our full series on lessons for the UK on governing through uncertainty.
Get in touch to discuss how Nous can help your organisation navigate a pathway forward.
Published on 13 November 2019.