Because the easy way …
Every public entity revisits its goals and financial resources regularly. What should be a planning exercise often ends up limited to a ‘planing’ budgetary approach.
When cost savings are the priority task, we observe a strong temptation for clients to adopt a budgetary approach consisting of ‘planing’ their expenditure and headcount. In other words, public-sector managers tend to implement measures such as reducing the expenditure or the number of staff across the organization. We call this process ‘cheese-slicing’.
… proves to be risky and eventually a mistake …
These measures ‘punish the good and reward the dunce’. By threatening stakeholders, managers experience more resistance than progress.
… this article demonstrates why you should avoid ‘cheese-slicing’ and how you should introduce strategic reforms.
Why should you avoid ‘cheese-slicing’?
When public-sector organizations have less funding available, the temptation is to adopt a budgetary approach of ‘planing’ public expenditure and headcount. However, this strategy contains three mistakes:
- It focuses on resources and means, rather than objectives, outcomes, and results
- It applies the reduction to everyone, uniformly, independent of the added value, the level of risk, or the efforts already made
- It neglects contextual elements such as the fact that public-sector organizations are requested to deliver more (e.g. to achieve political objectives) whilst their staff budget is reduced
As a consequence, such an approach is ineffective as it leads to counterproductive behaviors and additional risks, as cheese-slicing measures often create new problems:
- Undifferentiated budget or personnel reduction is unfair: it punishes units that have already implemented optimization measures and it also ‘rewards’ units that have made no effort in the past. This does not incentivize managers to be proactive in reengineering their organizations.
- Efficiency does not mean effectiveness: reducing costs and staff do not guarantee that units will still be able to fulfill their duties effectively. Also, this focus on budget reduction incentivizes managers to consume all their allocated resources, rather than to stay focused on results.
- The general reduction of financial resources is regarded by every stakeholder as a threatening regression: managers consider any decrease in budget and staff as a decrease of power, members of staff consider any decrease as a threat to their careers, trade unions consider any decrease as a regression regarding the working conditions of their members. So, all stakeholders will oppose such cheese-slicing exercises.
Above all, cheese-slicing leads to a time bomb: public-sector managers face a situation where staff who retire are not replaced, and freelance consultants and temporary staff are not kept on. Managers face a scenario where they lose collective critical knowledge and skills, with an aging workforce that lacks motivation and flexibility.
In other words, to deliver more efficiency with fewer staff and a reduced budget requires strategic reform, not just budget cuts.
How should strategic reforms be conducted?
The challenge for public-sector managers embarked on strategic reform includes the following four factors:
- How can they stay focused on the right objectives whilst keeping short-term goals and meeting compliance criteria?
- How can they keep people, organizational structure, processes and tools aligned to deliver the expected value?
- How can they make processes more efficient whilst keeping internal control?
- How can they allow for the flexible allocation of resources whilst keeping a level of control over what people do?
Successful efficiency programmes require people to change their mindsets and to create two paradigm shifts: ‘from spending to generating value’; and ‘from the short-term to a sustainable future’.
To achieve these shifts, here are some of our recommended tools and techniques:
1. What gets measured, gets done’: Define and implement well-known tools such as balanced scorecards in order to measure your processes easily – in terms of volumes processed, results achieved and quality of service delivered – and to have a clear and measurable understanding of the areas where improvement is required.
Our study on dashboards for Chief Financial Officers highlights the importance given by top managers to their dashboards: they are regarded as fundamental tools for decision-making, both for non-financial and financial managers.
From our survey, we identify four main characteristics of balanced scorecards:
- They comprise SMART criteria
- They are user-friendly and adaptable
- They can be used for individual and collective managerial decision
- They allow financial managers to be ‘co-drivers’
For more information about our study, visit : https://www.bearingpoint.com/files/TAP-DFCG-2010.pdf
2. Revisit, stay focussed and innovate: In order to lead a strategic reform, revisit your aims and mission statements, focus on tasks with strong added-value for your citizens and then reengineer your processes:
- Revisit your mission statements by articulating the fundamental and causal relationships between your duties, your objectives, your tasks and your resources in order to identify your means. Consign your default, traditional processes to history: focus on your core activities, and accept that other people may do some of your non-core tasks better than you can.
The French State revisits the scope of its missions via RGPP: Launched in 2007, the General Revision of Public Policies (RGPP) started with an analysis of the aims and purposes of the French State. The RGPP aimed to differentiate clearly between missions linked to the sovereignty of the State and others that were simply operational. This analysis aimed to redefine the mission statements of each Department and then to align the resource requirements to these redefined statements.
In order to reduce expenditure, the French State also applied a new legal framework that supports a ‘zero-based budgeting policy’. So, budgets would no longer be calculated by adding ‘additional measures’ to the previous year’s budget: each line now has to be justified ‘from the first euro upwards’.
- Get fresh ideas: Use benchmarking to understand what is achievable and identify good practices from outside your organization.
There are several benchmarking platforms where public-sector organizations can meet their peers and learn from each other’s experience, such as the network of EU Agencies. BearingPoint France proposes cross-functional and cross-sector comparative studies for the functional departments – such as supply-chain, finance, etc. – of large and small public-sector organizations or private-sector companies. Our BearingPoint colleagues in Germany have organized and hosted the ‘MinisterialKongress’ for the last 20 years, to support the exchange of best practice and to present innovative projects to German, Swiss and Austrian ministers and their staff. This body of work and knowledge allows our clients to draw lessons from previous and similar experiences and to reorganize their models with innovating ideas that come from international experiences within similar/different sectors and/or similar/different functions.
- Invest in technologies: Technology and the use of digital tools provide plenty of opportunities for agile improvements. Digital workspace combines the latest workstation technologies – such as PCs, tablets and smartphones – with physical space planning to enable new, effective and collaborative working methods.
Agile government: case study from the Irish Department of Social Protection
In our BearingPoint Institute Report issue #2 we examined ten years of the service-delivery modernization programme at the Irish Department of Social Protection. In this article we examine the approach they took to make the transition to becoming a more agile agency. A large number of benefits can be highlighted. The agile approach gave them the ability to implement government policy quicker and more effectively at the macro level and to improve flexibility and efficiency in their day-to-day operations.
In adopting an agile approach, the Irish government could deliver more significant results before the end of a term in office
To read more about this case study, read the report from the BearingPoint Institute Report, issue #2: https://www.bearingpoint.com/en-gb/about-us/news-and-media/press-releases/why-agile-government-is-no-longer-a-contradiction-in-terms/
3. Focus on volumes, but also on skills and capabilities. The first imperative is to measure the volume of activities, and to check that workforce is proportionate to this volume.
Workload assessment methods have been developed over time to take into account the specific nature of governmental work in the public-sector area. In cooperation with the German Federal Office of Administration, a methodology was applied to many projects for public-sector clients and is now recommended by the German Federal Ministry of Finance and by Germany’s Supreme Audit Institution to initiate changes in staff practices.
Find the standards published by the German Federal Office of Administration at http://www.orghandbuch.de/OHB/DE/node.html
However, the issue is not only quantitative and immediate: you also have to plan for the future, in both quantitative and qualitative terms. Use Strategic Workforce Planning to reconcile the future needs of civil-servant positions with the potential future workforce. On one side, needs evolve in terms of volume or skills because of the evolution of policies -due to changing environment, regulations, reforms- and of efficiency gains from new technology and information systems. On the other side, you can anticipate the evolution of the civil-servant population, through age-pyramid and retirement analysis. This allows you to identify future gaps, and to design appropriate measures to bridge these gaps, such as recruitment plans, assessing mobility, and fulfilling training needs/
A comprehensive and long-term approach for the process of strategic workforce planning strongly supports public strategic reforms. Our consultants have been mandated by French Departments to:
- Document hypotheses for the evolution of full-time employment
- Design a forecasting model concerning retirement plans
- Produce a national strategic workforce plan and corresponding regional plans
- Create a road map to support the recruitment of staff for strategic tasks and the redeployment of identified members of staff through mobility and training
One key element of success relies on a detailed description of jobs and competencies at a local level. Therefore a strong capacity to model and to calculate is required. The BearingPoint SWP IT tool enables this level of detailed analysis, and allows our clients to re-conduct these analyses easily.
4. Onboard and empower middle management: Reform can never be imposed: it has to be implemented from the inside. Middle management is at the crossroads of two competing influences: the reform push, cascaded down from the top of the organization; and the resistance to such change at the grassroots level. Buy-in from middle management is not sufficient here: reform implementation requires them to take action.
At BearingPoint we have observed that managers spent most of their time engaged in activities that do not relate directly to the active management of their teams. By increasing active management time, we maximize the impact on teams. We have developed a methodology called Active Manager to empower middle management, and to embed change and improve processes and decision-making.
This methodology was designed initially for the private sector, but it has proved to match public-sector environments, too, where officers are often promoted to management positions based on their technical expertise, rather than on their specific managerial skills.
5. Give purpose to reforms to achieve their acceptance: Formulate a vision that steers and gives purpose to reforms, and share this widely within the team, using all layers of management as levers to motivate people towards this vision.
A sense of purpose can be given:
- from the outside; For example, citizens’ satisfaction is fundamental to public-sector operations and improvement in Canada:
In Canada public support is at the heart of the government reform
Service Canada is in charge of the centralization of citizens’ services for every national Department and is also responsible to improve the quality of services.
More precisely, Service Canada opened the Office for Client Satisfaction to find out what Canadians think of their services. The ‘voice of the client’ has created a positive pressure towards efficiency improvements that has led to many reforms.
Read more about Service Canada here: http://www.servicecanada.gc.ca/fra/accueil.shtml
- from the inside: as an example, it is possible to create pride and forward momentum by recognizing publicly staff members who have succeeded in implementing internal reforms.
Public Manager of the Year, helps to create ‘momentum’ in France
This annual event, created by the French Directorate General for State Reform – now named Secrétariat Général pour la Modernisation de l’Action Publique – and BearingPoint in 2009, aims at supporting and honoring managers who have demonstrated creativity, assertiveness, strong commitment, and leadership in implementing modernization and reforms measures in public services.
To read more about this initiative, read: http://www.bearingpoint.com/fr-fr/convictions/publications/les-nouvelles-frontieres-du-manager-public/?sid=8929&industry=41
Finally, make sure you orchestrate all organizational activities to a clear defined strategy
Set your priorities to develop a clear understanding of why, where and how your resources are used. Combine short-term improvements (required by efficiency programmes) with long-term restructuring, empowered by your middle management and staff, under clear guidance and direction from the top management.