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Since the publication of the Smarter Government report in November 2009, which released the results of benchmarking work for the back office functions within central government, interested observers having been waiting for the NHS to complete it’s own review. This work has been completed and with the publication of the QIPP Back Office Efficiency and Management Optimisation Report has been published along with the conclusions on how the NHS should take matters forward.

As well as following on from the Smarter Government review, this work follows themes already established by HM Treasury’s Operational Efficiency Review, published in July 2009 which outlined the potential benefits of efforts to improve back-office efficiency. HM Treasury concluded it would be sensible to deliver improvements through shared back-office functions and larger scale procurement.

The QIPP report reveals the NHS spends £2.8bn on back office functions and suggests it would be possible to make savings of around £616m (around 22% of current spend) by standardising and streamlining services through scaled solutions.

This seems a more credible target than the common over-optimistic claims (30-50%) which fail to take into account the proportions of current work that cannot or will not be effectively shared.

A potential saving of this magnitude is certainly worth exploring in more detail but taking into account £2.8bn represents only 2.6% of NHS operating expenditure, it’s vital to keep a sense of perspective about the scale of benefits. Delivering all the potential savings identified would deliver 0.6% savings overall and only 3.1% of the £20bn savings target established for the NHS by 2013. The financial pressures facing the NHS will not be addressed by streamlining the back office! thie require more substantial work on core clinical services.

Furthermore, establishing shared services will take time, investment and significant effort. Shared services projects starting now would be unlikely to yield savings within the timescale of the current national savings programme. This does not mean they are not worth pursuing …. just that they need approaching with realistic expectations and appropriate objectives. Organisations that enter into such project with unrealistic expectations are most likely to fail.

There are important messages and key issues identified in the report that are worthy of more exploration. What can we learn from it? Read the rest of this entry →

At the Efficiency and Reform conference held on 25th November 2010 at the Barbican in London, Attractor led a Masterclass for public sector managers. The discussion considered how to respond to the twin challenges of financial constraints arising from the recent Comprehensive Spending Review plus increasing localism within the Coalition Government’s Big Society agenda.

It was recognised there were inherent challenges of localism, including stresses arising from local political action and the potential for increasing variation and a “postcode lottery” in service provision. There were also complications, legal, financial and contractual in withdrawing from existing public services and “spinning out” services into new mutual or social enterprise organisations.

It is vital to recognise successful change programmes addressed change “in-depth”, tackling technology, processes and people, paying attention to all the technical issues, while also addressing issues in business process design (task value and sequencing) while working to engage people to build understanding and attitudes of people.

But how can this be done? Read the rest of this entry →

On the back of the Comprehensive Spending Review (CSR), government departments are challenged to make significant savings to their back office functions. The government has set an expectation of a 34% reduction in administrative costs across government with a savaing of £5.9bn per year.

The CSR plans for Department for Education, Ministry of Justice, Foreign Office, the Home Office, Cabinet Office and Department for Culture, Media and Sport have all set ambitious targets for administrative savings by 2014-15.

External commentators have commented that these targets will be hard to meet, Deloitte suggesting cutting costs by 20% was “extremely hard” and delivering more that 25% for private or public sector, would be “exceedingly difficult”.

It is clear the public sector will have to identify and implement new ways of working to deliver back office functions such as finance, human resources and IT services with substantially less resources. Read the rest of this entry →

At a time when public services are under pressure to save money, its not surprising more local authorities are considering the potential benefits of creating shared service solutions.

Members of Scotland’s Clyde Valley Community Planning Partnership (CVCPP) – West Dunbartonshire, East Dunbartonshire, Inverclyde, East Renfrewshire, Renfrewshire, Glasgow, North Lanarkshire and South Lanarkshire – are working together on a programme.

Similarly, the London boroughs of Westminster, Hammersmith and Fulham, and Kensington and Chelsea propose merging many of their front-line services. The three councils’ will receive a feasibility report on the possible merger in February 2011.

Statements reported in the press about the CVCPP scheme suggest the programme is looking at savings of arond 20% and the London boroughs have talked about savings of £100m though these both seem likely to be the kind of generalised modelling and targets discussed in the early stages of most shared services projects rather than a carefully worked-up figure using real data on proposed solutions.

In principle, the potential savings from shared front-line services ought to be significantly larger than shared back-office – simply because of the proportion of organisational expenditure in those areas (back-office functions typically costing a small percentage of  total revenue) but the delivery of savings is no more certain.

Read the rest of this entry →

With the Coalition Government revealing the outcomes of it’s Comprehensive Spending Review, the scale and pace of reorganisations across the public sector are becoming apparent.

The range and scale of reform envisaged in the CSR is immensely challenging and doubts are being expressed in mainstream media and new media alike. The balance of opinion suggests delivery will be all but impossible and failure in the attempt will have serious negative consequences.

There is no denying the ambition of the programme and the need for dramatic change is emphasised by the government’s statement that it is commencing “a radical programme of public service reform … [which] will change the way services are delivered by redistributing power away from central government and enabling sustainable, long term improvements in services.”

While spending in front line services such as health and schools are somewhat insulated from the financial pressures, the administrative budgets of central government departments are to see reductions of 34%. Taking anticipated changes in Council Tax into account, local government will see reductions of around 15% over the next four years with police and fire services experiencing reductions of 14% and 13% respectively.

That degree of saving will be spectacularly challenging and it’s clear the programme require more fundamental change than slicing small amounts of activity from many small programmes and budgets.

How should work proceed? Read the rest of this entry →

With the Comprehensive Spending Review (CSR) nearing completion, most public sector organisations are expecting major reduction in the operating costs and many are waiting to see if they have a future. For those organisations with a certain future, the need to identify efficiencies, remodel services and deliver savings will be a driving force over the next few years.

Until recently, the government had been a supporter of shared service solutions which allowed public sector organisations to save costs in corporate and back office functions. Many of the UK’s  local authorities and NHS organisations have been continuing with shared services projects while commentators have been expressing doubts about their value.

The reputation of shared services is at best, mixed. Many private sector organisations are extolling their virtues and making strong claims for improvements in service quality and cost.

Often however, informed professionals in IT, Finance, HR and facilities regularly express doubts about their track record, not all of which can be attributed to a lack of imagination or a reactionary desire to defend the status quo.

But where does the government stand on the matter? Is the tide coming in or going out? Read the rest of this entry →

The revised NHS Operating Framework was published on 21st June 2010 and most comment is likely to focus on the removal or reduction in national performance targets.

Alongside these changes however, the updated framework targets significant reductions in management costs in coming years.

It seems Strategic Health Authorities (SHA) and Primary Care Trusts (PCT) will face the greatest initial focus, though local management teams will determine how this is delivered.

The government is seeking to reduce NHS management costs by a total of £850m by 2013, a saving of 46% overall – the first £222m being planned for the coming year.

Andrew Lansley, Health Secretary said -

“Management costs in Primary Care Trusts and Strategic Health Authorities have increased by over £1bn since 2002/03, with over £220m of the increase taking place during 2009/10. Costs now stand at £1.85bn and it’s our intention that during 2010/11 we will remove all the management costs that have been additionally incurred during 2009/10, to get back to the level of 2008/09. Then in subsequent years, we will go beyond that, with a further £350m reduction in 2011/12.”So that’s £222m in 2010-11, £350m more by 2011-12, with the remaining 278m being saved by 2013-14. In the revised operating framework, SHAs are being encouraged to go further, ensuring “all possible efficiencies are realised”.

While recognising the controls implemented by the Efficiency and Reform Group at the Cabinet Office do not formally apply, the revised framework tell NHS organisations they should demonstrate “similar discipline” in relation to spending on consultancy, marketing and ICT spend, recruitment procurement for goods and services as they “progress their quality and productivity plans”.

The Kings Fund has reacted by highlighting the need to continue invest in leaders who can engage frontline clinical staff in improving quality and efficiency, stating -

” … improving NHS efficiency will not come primarily from cutting the waste of managerial overheads. Given the NHS faces a shortfall of up to £21 billion a year, improving productivity at the frontline will have the most impact …”

How will your organisation respond to the challenge of reducing management costs?

As a further sign pressure in the UK for the public sector to deliver savings is increasing, the Cabinet Office’s new Efficiency and Reform Group now has control of the the Office of Government Commerce (OGC) and Buying Solutions.

Including the authors of earlier efficiency reports – Sir Peter Gershon, and Dr Martin Read, the Group aims to deliver a significant programme of change.

Referring to the creation of the Efficiency and Reform Group, Francis Maude, Minister for the Cabinet Office was quoted as saying -

“We want a slim but strong centre that can drive down the cost of government, so protecting as best we can the crucial front line services on which our citizens depend”

The newly strengthened group will have the power to make sure departments work together to tackle waste in areas including ICT spend, procurement, advertising and marketing spend, and Civil Service expenses and recruitment.

There was speculation before the election that OGC would be brought closer into the government, in part to address criticisms that it lacked political clout. The move clearly reflects the points made at the Operational Efficiency Conference in November that it was far easier to address issues within the sphere of Whitehall departments than in the wider public sector.

The impact of the efficiency programme for local government and NHS organisations will probably take longer to materialise – and will probably reflect the “devolving” ambitions of the coalition government.

Attractor has already commented on the potential impact of a simplified approach to Civil Service terms and conditions and on the potential for outsourcing Whitehall’s back office functions and the calls to increase outsourcing and shared services. The actions of the Efficiency and Reform Group stretch to a far wider remit however. Read the rest of this entry →

The Management Consultancies Association wrote a pre-election report for all the political parties in April 2010. In  “We Can Cut the Deficit”, they suggested ways to save £25 billion each year from public sector expenditure.

Some might think consider the report more a marketing document for consultancy businesses than a far-sighted analysis of strategic options.

If that, uncharitable, view was accurate, the new government’s “moratorium” on consultancy spending suggests it hasn’t paid off – yet.

The report urged politicians to move public service jobs to countries like India to reduce employment costs.

It would be unwise to deny there are potential gains to be made from offshoring public sector jobs. Such a move could form part of a grander strategy but needs some careful consideration. It would be unfortunate, however, if the strategy contributed to a worsening spiral of economic decline.

At one level, the advocates of offshoring sometimes appear to treat lightly the operational effort, time and cost required to deliver this in the real world seem rather lightly considered. It’s not clear that moving service offshore could contribute savings in the timescales needed for the public sector in 2010.

William Benn, Partner and Head of Public Sector at Alsbridge suggesting -

“the top five spending departments should be able to save around £10 million each per year – that translates to £0.25 bn over a five year term.”

The recommendations in a section called “Send it Offshore and Save” further stated -

“the concern about jobs going overseas has to be set against the conern foe eye-watering public sector costs, and the immediate need for savings to preserve frontline services.”

Furthermore, in the same report, other ways to save money were identified and Jane Ludlow of Atos Origin highlighted that change in front line services would dwarf efficiencies in back office functions.

There are other reasons why offshoring jobs might not be the most attractive path. Read the rest of this entry →

In the past, UK organisation were stereotyped by their slashing of training budgets when finances were tight – and then suffering the skills shortages which followed.

A new stereotype might be organisations looking to make efficiencies and reduce expenditure in their back-office functions so they can protect front line services.

Across the public sector, this “mantra” is being widely and loosely used without being explained in detail.

Real dangers exist where the implications of change are poorly thought through.

In richer times, it is easy to make the case for investment in services which support staff delivering effective front-line services. When times are hard, this is more difficult and its vital then, more than ever, to demonstrate how corporate teams impact on the business.

When organisations are looking to reduce expenditure, it is common to look for reductions in “overheads” – costs which can be reduced with little impact on front line services. Corporate back-office functions look “vulnerable” in this climate.

Organisations should always strive to ensure they are working in the most effective way – the optimum value between expenditure and achieving required outcomes. Back-office functions should be scrutinized as closely as other areas though it’s vital to keep a focus on what will maximise value rather than simply “reduce expenditure”. Read the rest of this entry →