Lunn on Public Sector Reform

Pete Lunn of the ESRI has an interesting article in today’s Times about public sector reform.  Pete is sceptical aout the effectiveness of rigorously enforced targets for public service organisations and performance management for individuals.  I think these arguments are worth discussing further.  (Certainly, Tony Blair’s attempt to impose performance targets on the NHS didn’t seem to be very effective.)

I would guess, however, that whatever the merits of explicit targets and serious performance monitoring, the govenment will probably do well to get the public sector unions to agree to what Pete notes are the “straightforwardly sensible” reforms such as “developing more online services, sharing resources across public organisations, allowing freer movement of staff and, perhaps especially, basing promotion solely on merit.”

One example of this type of rigidity that prevails in the public sector is that there is little room for well qualified economists to join the civil service in the middle-ranking jobs that would be appropriate for them.  More generally, the “generalist” philosophy of the civil service often doesn’t sit well with the employment of staff who want a career as a specialist in a particular technical area.

7 replies on “Lunn on Public Sector Reform”

I am sceptical about Pete’s scepticism, so to speak. I base this on my own albeit limited experience in both public and private sectors – including in two broadly equivalent occupations.

The public sector organisation for which I worked tried pretty much as hard as the private sector one did to measure particular outcomes for teams, individuals, etc., right down to an individual score assigned at the end of the year. The problem was that there was pratically no way to tie this directly to rewards for team/individual effort – unlike in the private sector, where that is precisely what this was used for.

More broadly speaking, the civil administration, health and education sectors could certainly learn from equivalently large private sector organisations which have to somehow gauge individual and team performance for tasks that do not lend themselves to ready measurement, at least not without imagination – e.g. corporate services, HR, upper management, accounts, IT.

My own opinion on this is that the large private sector organisations have been essentially revolutionized by technology in terms of how they work due to competitive forces they could not ignore. Public sector organisations lag hugely in this area, perhaps understandably because there are no competitive forces. But I guess the aim should be to set up the system so that there is an equivalent force to reward efficiencies and money-saving, rather than budget-guarding.

“Imposing targets” is something that should be done with very close care. Any target that is imposed on a group with better information can be met but through many different counteractions. For example, it is sometimes suggested that colleges use things like “numbers of firsts awarded” and failure rate as targets. The sheer brutal absurdity of targets like this should be obvious to anyone who thinks for a minute. Having said that, policies should have clear measureable objectives based on a detailed and public analysis of the need for them. Policies should be phased better to allow causal analysis of whether they are actually working. Also, policies should be informed more by multidisciplinary teams, people with expertise not just in economics but across the domains relevant. The way that many philantrophic agencies are funding projects subject to strong evaluation and with clear cut-offs is something that should be looked at by the public sector. Related to this, the culture of producing findings just to back up what was going to be done anyway needs to change.

If output or delivery cannot be managed by public service, it suggests that such services can only be provided competitively if privatised and citizens given the money directly to buy them.

The poor value for money for public services suggests something is seriously wrong.

A word of caution regarding the imposition of a private sector model on the public sector:

If the civil service is demoralised enough then it will open itself to systemic corrution within its lower and medium ranks.
Corruption is something that has been avoided in the Irish public service by and large when its compared alongside some countries.
The official secrets act and other measures preventing civil servants whistleblowing in the media and engaging openly in politics come at a premium.
If that premium is extracted in the drive to lower wages then loyalty (which always has some price attached) to the State will become fragile.

Another factor for consideration is that targets are fine when those purchasing the product are willing to pay the full market price .But thats not the case with anything the State produces.
The rich and the poor are entitled to the same service ,,even if its bad.
If targets are produced in accordance with so called free market conditions then the public will have to pay a higher price for the product and those with the wherewital will be prioritised.
This is the situation in the USA.
Its something we must consider when property taxes are introduced .
In the States local government use these taxes to fund schools, emergency and local services.Better services are a function of higher property taxes which are a function of wealthier neighborhoods.

There is a general drive for greater efficiency at lower cost in the public service which is a positive aspiration.However much that has been said in MSM so far is simplified stuff along the lines of Private sector good,Public sector bad.
Its possible we could get better efficiency and lower public sector costs but end up with a worse version of what we already have.

p.s. I have worked in both private and public sectors and I can attest to waste and inefficiency in both sectors.

More generally, the “generalist” philosophy of the civil service often doesn’t sit well with the employment of staff who want a career as a specialist in a particular technical area.

Couldn’t a lot of us with experience of this talk about it. The chiefest absurdity in recent years has been the introduction of what are tremed competency-based interviews – of course, the “competencies” are generalist-oriented, leading to a lottery as to whether the better professionals are the ones who actually get promoted…

If output or delivery cannot be managed by public service, it suggests that such services can only be provided competitively if privatised and citizens given the money directly to buy them.

Yes, because the magical freemarket fairy works out so well in the States.

Competitive interviews in the public service are open to corruption. For the appointment of a civil servant, canvassing will disqualify. That did not apply to certain low level initial positions generally for those who who not be taken by the private sector but who could fulfill the restricted duties required.
For promotion, coaching and having a rabbi has begun to creep into the service. The acquisition of educational degrees is often helpful. When a person who “fits” is found, they are often able to obtain admission to higher degrees, making them highly suitable for promotion to a post which may require just such a qualification. There have been many new degree courses at master level in Dublin in the last decade.
Crass corruption and whistle blowing do not occur. That said, I am aware of an officer who did not tell all the truth at an enquiry and who received the promotion he had hitherto been denied. Prior to his testimony he had spent most of three months with very senior people. Building confidence….

Appointing outsiders to such a sophisticated environment is therefore fraught. Loyalty is at the core of a flexible system. It was a massive struggle to allow accountants into Taxes. I worked with some and they were all very sceptical, but it was not about efficiency. Public sector reform is overdue. I strongly suggest that privatization be on the agenda for every department, to start small but with a view to awarding competitive contracts for nearly all functions. Intelligence, yes it exists, would have to be exempt. Perhaps two police forces, with services split up and provided by three year contracts.

New Zealand has done a very good job already in this area. There are many papers on this mainly successful process. But NZ has a good Transparency International rating …… No green jersey there?

Lunn misses one the great motivators in the non-protected part of the private sector … the hazard that if everyone slacks off, then the firm goes out of business.

This has a generally positive impact on individual work eithic, and more importantly feeds through in the organizational culture as peer pressure to acheive.

Contrast with the organizational culture in the public sector, where the peer pressure often acts in the opposite direction, dragging down high acheivers to avoid “showing the rest of us up”.

Similarly the lack of moral hazard emboldens the public sector unions to make all sorts of outrageous demands that would be a short route to coporate bankruptcy in the private sector.

So reform needn’t necessarily involve individual targets feeding into individual pay rises. Instead group targets could be set, with the carrot being a group-wide bonus and the stick being job losses in the under-performing group.

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