Qualityworld
Shifting systems thinking
In the last 15 years, attitudes to the public sector have altered. John Seddon argues a change to systems thinking is now essential
In half a lifetime the way in which we treat the public sector in the UK has changed. Until the mid-1970s the public sector was a target for investment as an economic tool; infrastructure projects creating jobs, wealth and taxation. Public good was an embracing concept, placing value on both the long-term and short-term returns from investments, thinking about those returns in societal as well as economic terms. The switch to monetarism, which occurred as a result of the failure of the prevailing Keynesian consensus, was to lead to a seismic shift in thinking. Instead of investment in infrastructure, the public sector has been treated as a market; monetarist ideology having it that only the perfect market can lead to economic prosperity. And it is only that - an ideology - which has been played out by outsourcing, privatisation, market-making and - a new phrase for the lexicon - 'quasi-markets' for the public sector where the normal market mechanisms do not apply.
The monetarists claim that reform has not gone far enough and Tony Blair expressed the same sentiment, wishing he had been bolder. But the evidence shows that the experiment is in trouble, investment has not been matched with improvement, people's experience of public services remains poor and morale among public-sector workers is low. It is the regime - the whole system of government - which is to blame; in the name of reform the public sector has been sub-optimised, to use the polite phrase of W Edwards Deming, the master of quality management.
The current outlook
The regime does much more than issue targets (assumed by the ideology to be a surrogate market-maker when a natural market does not exist); it has built a massive specifications and inspection industry raining down directives on public-sector managers with the promise (read 'threat') that compliance will be ensured through inspection. It is a regime built on the presumptions that public-sector managers need to be told what to do and those doing the telling have the right answers.
Take, for example, housing benefits, a service provided to more than four million people. Hundreds of millions of pounds have been invested in obliging those who provide this service to follow the regime's prescription. In practical terms this as meant the creation of 'front offices', where people are seen or, more frequently, spoken to over the phone; and 'back offices' where the processing work is done. Both work to targets: the front office worrying about how quickly people are seen (or how quickly the phone is answered) and the back office worrying about how quickly work activities are processed.
It may seem logical (certainly it must to ministers, who have promulgated the same essential design across the public sector), but it doesn't work very well. Despite ostensibly meeting the regime's targets, housing benefits services typically involve the claimant in an onerous experience: repeated visits, confusing forms and, in truth, it takes anything up to 100 days or more for claimants to receive benefits to which they are entitled.
The design of housing benefits illustrates the wider mistakes made by the reform regime. These are the general features:
Factory thinking
In the front office, managers worry about how much work is coming in, how many people they have to do the work and how long the people take to do it. This is already a fundamental mistake: it is to ignore the nature of demand. It is not unusual to find as much as 80 per cent of the demand coming into local authorities is failure demand - demand caused by a failure to do something or do something right for the customer.
In the case of housing benefits, the consequence of this failure takes the form of progress-chasing, having to visit repeatedly, claimants being asked to bring in things they have brought in before, and so on. To exacerbate the problem, local authorities are expected to monitor how many of their transactions with citizens are resolved at the point of transaction. In doing so, most adopt an 'internal' operational definition: 'Can we do anything more with it?' rather than a user's view of the service: 'Did I get my problem resolved?' As a result, failure demand is counted as a contact that is 'resolved' when it ought to be a signal that something is wrong with the service; a contact that should not have happened. One 'beacon' council boasts 85 per cent of calls resolved at the point of transaction on this basis; when studied from the citizen's point of view, the reality was found to be less than 10 per cent.
Wrong thinking about customers
Ministers equate access with service, so they mandated the creation of local-authority call centres and other 'points of access'. But as most services don't work very well, this just moved the failure demand to another place, where workers couldn't do much other than pass information via the new IT systems to someone who might be able to do something about it. Waste has become institutionalised.
Despite the failure of customer relationship management (CRM) systems to deliver improvements in service in the private sector, they have been mandated as essential for service design in the public sector. CRM systems enable councils to know the history of contact between citizens and their councils. So they will indicate that a citizen has been progress-chasing their benefits payment and they may indicate that the same citizen repeatedly makes calls about, for example, pot-holes in the roads.
But they are completely unable to identify problems; how many people are having problems with benefits or the same potholes? In effect, CRM systems serve to identify citizens as trouble-makers; so it should come as no surprise that the regime puts out guidance on how to deal with 'persistent' complainers.
The factory processes customers
CRM is only the start of the problems. The regime's guidance has encouraged the use of electronic 'work-flow' systems; IT conveyors that turn work activities into electronic 'work objects'. The idea is that any piece of work can be routed electronically between those doing things towards its purpose, but very quickly managing activity takes over from managing the purpose.
Because housing-benefits services were mandated by the regime to present a dumbed-down front end to the customer, the front end causes the back end to have a fragmented input. Whatever information is gathered at each transaction is sent electronically to a back office which in turn becomes a repository of fragmented work. The 'back-office backlog' became a new phenomenon among local councils, which following the regime's advice was promptly outsourced to private-sector 'backlog-busters'.
As call centres have taken the place of face-to-face transactions with benefits claimants the service has now become open to fraud. Any perpetrator can learn how to give 'clean' information over the phone to the dumbed-down front end or to the back-office factory. Clean input means they can collect the money. The brain has been taken out of the process; only people are good at the things that computers often do today. Failing to recognise the error, the regime is now conducting trials of 'voice monitoring' software to detect potential fraudsters on the telephone. Having created a problem, it is now compounding the error.
'Varney believes in economies of scale. He wants to treat service work as factory "production", organised by function and controlled by managing activity and, thus, cost'
The current drive for more public-service factories, headed by Sir David Varney, unfortunately promises more of the same. Varney believes in economies of scale. He wants to treat service work as factory 'production', organised by function and controlled by managing activity and, thus, cost.
Varney's is a gloomy vision. His is a recipe for increasing costs and worsening service. Examples that ought to be a warning include Consumer Direct, a call-centre service responding to trading-standards issues, thought by the regime to be a vehicle for 'citizen empowerment'. Consumer Direct failed to attract the anticipated volume of calls but was nonetheless full of failure demand and disconnected trading-standards issues from the places where people worked to deal with them. Nobody involved with Consumer Direct is aware of the volume of demand created by poor service design. In one part of the country a private-sector supplier is reducing the handling time of calls in order to make the contract pay. What will be the impact on citizens seeking a service?
With housing benefits, the failure of the service to deliver what claimants want or need creates massive volumes of failure demand not only back into housing benefits but also into housing services (problems with paying rent), council tax, police services (domestic disputes due to lack of money) and legal services (problems with landlords). It represents hundreds of millions of pounds in cost which are entirely avoidable. When this is pointed out to ministers and senior players in the reform regime, they are incapable of taking any action. The evidence doesn't fit with their view of the world, and no one is able to take responsibility for things beyond their prescribed role.
The regime is the problem
The regime is not concerned with service improvement, it is concerned with cost reduction. Paradoxically, managing costs drives costs up. The true cost of service is end-to-end from the customers' point of view. If it takes many transactions to get a service, the cost of service provision will be high, while management's use of activity data ensures they are blind to their true costs.
As the regime continues to spread its mistaken prescriptions, public-sector managers engage their ingenuity in meeting targets. This is not the same as improving performance, in fact it is just the opposite.
Deming taught how managing with arbitrary measures always distorts systems; such distortions are now endemic and ubiquitous in the public sector. Public-sector managers abide by the regime's requirements, despite the lack of evidence of efficacy, since failure to comply will only result in a poor inspection report.
Enduring inspections is just the tip of the demoralisation iceberg. Vast resources are consumed in preparing for inspections, communicating with staff to ensure they say the right things to the inspector, documenting a self-assessment which is entirely unreliable (but meets the requirements given) and making presentations designed to convince inspectors the organisation is worthy of star ratings. It should come as no surprise that many of the top-rated councils spend vast resources on communicating their 'excellence'.
The regime has to go
The only solution is to remove the regime. It has created compliance, not innovation. Worse, in every public service I have studied, I find compliance with the regime's requirements has made services worse, driven up costs and demoralised public-sector workers.
Ministers and their agents imagine that giving up the regime will lead to a loss of control; they fail to realise that the current system is not achieving control - in Deming's terms public services have been subjected to tampering on a massive scale, making the system unstable and out of control at any speed.
Changing the locus of control
'We need to change the locus of control from the regime, which fosters compliance, to the public sector manager [which] will foster innovation'
To change the regime requires first a change in philosophy. Instead of compliance we need innovation, to foster innovation we need freedom. We have to make public-sector managers responsible, they have to be able to choose what to do, free from obligations to comply with faulty methods. We need to change the locus of control from the regime, which fosters compliance, to the public sector manager, the person who actually needs to change. It will foster innovation.
Inspection as one question
Inspection of performance should be concerned with asking only one question of public-sector managers: 'What measures are you using to help you understand and improve the work?
The choice of measures should be a matter for the manager responsible, the only requirement being that they are used to both understand and improve the work. The only reliable way to inspect will be to turn up where the work is done and ask about measures-in-use. This will show what is being learned from measurement, making inspection more reliable and valuable, and increasing all parties' focus on the validity of measurement - are we measuring the right things?
Performance beyond targets
In spite of the regime many local authorities are now rejecting managing with targets and instead use measures derived from the purpose of any service from the citizens' point of view. They are learning to take a systems approach, designing against citizen demands, and achieving results that put targets in the shade.
Such councils reliably pay housing-benefit claims within a week; decide planning applications in less than a month (including the 21-day notice period); re-let void properties in a day; and so on. The efficiency and service improvements are only surpassed by the consequences for morale.
Ministers should take another lesson from Deming: the most important costs are unknown and unknowable; the regime worsens service and raises cost but the unknowable costs are the demoralisation of public-sector workers and the disenfranchisement of the citizen
John Seddon's latest book, Systems Thinking in the Public Sector: the failure of the reform regime … and a Manifesto for a Better Way will be published by Triarchy Press in April. Visit www.triarchypress.co.uk
