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Performance management and a more productive public service

April 2008

Over the next 20 years, governments in developed countries will face a cash squeeze.

Growing retiree numbers—rising to 20 percent of the U.S. population and 30 in Europe and Japan—will empty the coffers faster than a reduced workforce can refill them.¹

Simply because of demographics, pension payout will outstrip tax collection.

How governments will make up the difference is a matter of politics.

Will they raise taxes or starve programs and services? Or will they resort to cutting benefit amounts?

Voters are bound to take umbrage to any of these choices.

The only other possible answer comes from the bureaucracy itself, in the form of improved government productivity.

According to The McKinsey Quarterly: “Of all the options available to government to deal with fiscal challenges, public-sector productivity is, perhaps surprisingly, the most politically palatable.”²

Distrust within the ranks

But what is palatable to the voting public may be less so to public-sector employees.

To the ranks, “improving productivity” has the ring of job loss. When organizations “find efficiencies, ” it is often a euphemism for layoffs.

Despite the tarnish on these terms, many government agencies and departments have decided to include them in their plans.

Since layoffs often bring about a drop in productivity, smart agencies are instead planning for an overall shift to a performance management culture.

Such a culture analyzes processes and measures outcomes to boost productivity.

In this context, increased efficiency and better productivity hasn’t shown to mean job cuts or high stress from doing more with less.

By finding smarter ways to work, people in these agencies find themselves both doing more interesting jobs and providing better service to the public.

Cutting process fat

Much ink has been spilled on how government should operate more like business: streamline, incent, outsource services, do the most with the least.

But can government streamline processes like manufacturers do? Should it?

As economist William Baumol remarked in 1967, “... it will always take the same amount of time for a teacher to read a story, for instance, or for a nurse to give a shot.” ³

While this statement remains true today, the service industry has shown to be fertile ground for process improvements. How else has McDonald’s reduced meal preparation to 60 seconds?

The public service is no different.

A government agency can be a license issuing business, a landscape business, a healthcare business.

Any such service can analyze its own processes, find unnecessary steps, and eliminate inefficiencies.

“Over the past decade, a handful of public-sector organizations around the world—schools, public-welfare agencies, health care systems, postal and transit systems, and militaries—have improved their performance by 5 to 30 percent or more.”⁴

Taking a hard look

How have they done this?

The first step lies in knowing your current productivity: understanding how your agency operates (process) and at what level (metrics).

On the process side, it pays to look at ways in which your organizational structure or workflow inhibit efficiency.

Does work slow down when processes cross organizational boundaries? Do clerks process files one by one or in batches? Must they handle individual files three times instead of just once? Why does it take so long for a posted expense to appear on the budget?

A good consultant can bring a critical outside eye to the processes your agency takes for granted.

As for knowing your productivity level, performance management software can help you gather together agency data into one place, evaluate your current situation, and find areas calling out for reform.

Then it’s a matter of prioritization.

Where do you lose the most time and effort for the least gain? Choose the quickest fix or the most burning need.

Analyzing process for lean production

Great savings can arise from simple observation.

At Park Nicollet, a hospital in Minneapolis, officials performing a ‘waste walk’ found unacceptable amounts of budget wasted in the simple act of waiting: patients waiting for doctors, nurses waiting for patients, and so on.

Careful observation of the movement of patients and staff helped them realize why: batch processing of patients, long distances between related services, and many other examples of bad flow.

Using Toyota techniques, Park Nicollet cut patient waiting times to the point that the centre's new ambulatory clinic has no waiting rooms.

Now, instead of being scheduled in batches of five, patients are ‘feathered in’ in 10-minute intervals.

The nurse, followed by the doctor, and then perhaps by the lab technician, sees each patient in order so that the services they provide come to the patient in a steady, even “flow”.⁵

And data for all

For many agencies, efficiency has not meant tools replacing people.

“In the most effective cases, these [performance] tools were part of a broader program of cultural change that transformed the organization's performance and measured it rigorously.” ⁶

When people in all roles have the information they need to do a better job, productivity jumps.

The static nature of government staff can lead to skills deficits over the years.

Where increased productivity has meant fewer people doing a job, agencies have been able to offer training for new positions.

Performance and skills analysis can uncover the areas where training can empower your long-faithful employees for new directions.

In tight times, freeing up employees for new projects (because there are always new projects) can help you counter requests for more staff and resources.

Metrics matrix

Government complexity is often cited as a major stumbling block to efficient government. Too many goals, all of them unclear, no one accountable.

As McKinsey points out: “Deciding whether an increase in non-violent crimes should be tolerated if violent ones fell significantly, for instance, is far more difficult than aiming to increase shareholder returns by 10 percent.” ⁷

Certainly, outcomes are not as simple to measure as profits.

But 3,000 metrics that ill define your mandate will do you no favors. Metrics are by definition a simplification of your activity.

A few simple metrics that clearly tell your story are great horn-tooters, or at the very least will justify your existence.

Scorecards unite an executive divided

Complexity is sometimes a symptom of a disunited executive.

Too often in government, top management ends up competing for resources and influence. In these cases, only fire drills unite agencies in a common purpose.

To experience any productivity surge, the executive must find common cause.

Only the top team has oversight of the many different components of a larger issue.

Working from a high-level scorecard that aligns with individual department missions makes goals clear and rallies your people around them.

Conclusion

While technology can help you over the many hurdles to increased productivity, a change in culture must accompany the introduction of any performance management system.

To foster a performance management culture:

• Set simple goals
• Track against goals with simple metrics
• Trim the fat in your processes
• Offer performance information to everyone
• Empower employees and encourage movement
• Align your executive through a scorecard

It’s true that government cannot be runlike business for many reasons.

It is a monopoly provider, insulated from free market forces.

It lacks profit incentive. Many of its customers cannot pay. It’s exposed to public scrutiny. Its budgets ebb and flow with elections and taxpayer strength.

But there remain some areas where business practices can come to bear on public services and bring great improvements.

 “Virtually all countries could benefit from adopting more of the approaches that have helped drive the productivity gains in the private sector over the past two decades—better transparency, improved performance management, better alignment of incentives, stronger accountability, better incorporation of technology, and, crucially, better attraction, deployment, and development of talent.”⁸

Find Out More Download the white paper: Scorecarding for the Public Sector Cognos Solutions for Government

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Sources

¹ Thomas Dohrmann and Lenny T. Mendonca, Boosting government productivity, The McKinsey Quarterly, November 2004.

² Ian Davis, Government as a business, The McKinsey Quarterly, October 2007.

³ Dohrmann and Mendonca, Boosting government productivity, The McKinsey Quarterly, November 2004.

⁴ Ibid.

⁵ Michael McCarthy, Can car manufacturing techniques reform health care? The Lancet, Volume 367, Number 9507, 28 January 2006.

⁶ Dohrmann and Mendonca, Boosting government productivity, The McKinsey Quarterly, November 2004.

⁷ Keith Leslie and Catherine Tilley, Organizing for effectiveness in the public sector, The McKinsey Quarterly, November 2004.

⁸ Ian Davis, Government as a business, The McKinsey Quarterly, October 2007.