My commentary on the December 2013 Foundation debate on ‘Why human organisations are what we need but not what we want’ is here
Read my article on ‘How regulators became part of the problem’ (FT Business Education, 1 December 2013) here
See my article ‘Let’s reinvent the human side of management’ on the British Library’s Management and Business Studies Portal (who knew?) here
An extraordinary story is emerging from the public sector. The bad news is that a colossal amount of the money spent on public services is wasted (nothing new there, then). But the good news is that while there is certainly a huge effectiveness issue, despite the endless narratives of doom there is no resource problem. We don’t need to spend more money on the NHS, social care or the elderly, or possibly even housing. In fact, more money may be the last thing the public sector needs.
Getting to this point has been a long learning journey shared by a consultancy, Vanguard, and a number of councils, services and other organisations curious (and brave) enough to attempt something different from the standard industrialised, commodified public service models of today.
The starting point a number of years ago was Vanguard’s use of systems principles to devise a method for improving individual services. The results of creating joined-up services were startling – benefits paid in days rather than weeks, housing repairs done at the time and date specified by the tenant, moving a hospital’s stroke performance from worst to near best, dramatically lowering local crime rates, to name just a few.
But in each case solving the apparent problem revealed bigger ones lurking behind, often outside the individual service’s control. Dealing with people quickly and efficiently in A&E is good, but less so if they shouldn’t be there in the first place. Likewise with petty offenders if they turn up drunk and disorderly again as soon as they exit custody.
In other words, the presenting problem was typically the symptom of another. So services started working with others to tackle the next layer of issues. Learning from housing repairs and benefits helped other separate sub-departments to overhaul housing as a whole. Teams from social services, GPs, physios and others wrought wonders in adult social care, transforming lives with the simplest (and cheapest) of means (better lighting, walk-in baths and showers). And so on.
In all these initiatives, although cost wasn’t the priority and the amount was impossible to predict in advance, overall costs fell as a consequence of providing a service that met people’s needs. The (counterintuitive) lesson is that bad service is much more expensive than good, because of the huge cost of rectifying mistakes and failure. To rephrase the learning (even more counterintuitively): managing cost pushes cost up, while managing value does the opposite.
Why should this be? Like the original NHS, public services were set up to ‘fix’ something: mend a broken leg, pay a benefit. But in a more complex world with ageing populations, the nature of the problems faced has changed. They are no long ‘fix-it’ but ‘help-me’: the need to manage long-term illness or mental health issues, or cope with family break-up, difficult children, poverty and unemployment, for instance.
Using ‘fix-it’ means to solve ‘help-me’ problems is at the heart of the supposed public-service ‘crisis’. Instead of giving people the means to get unstable lives back in order (so they can join the stable majority that makes minimal claim on public services), ‘fix-it’ methods (fragmented, unjoined-up, episodic, delivering centrally specified packages of care) keep them living their instability in an unending loop of public service dependency which never solves their problem. This is the dark secret of public-service waste: the vast quantity of of resource (maybe 50 per cent) that is consumed by the 5 per cent of the population that presents over and over again, often to multiple service doors.
That is a giant step forward in understanding. And it has led to an equally important step in the journey – ‘the most important work we have done in the public sector’, according to Vanguard chairman John Seddon. At a conference in Stoke in October, two councils – Stoke and Bromsgrove & Redditch – outlined a radical ‘whole systems’ approach to public service reform which seeks to use these learnings to guide services not just within traditional sectors but across a whole geography. Bringing together partners including fire, police, health, housing and social services, among others, it aims to understand individuals and families in need in order to fulfill a simple purpose: ‘help me to resolve the problems (that prevent me from living a good life)’.
It’s early days, but operating to purpose and principles, switching off targets, departmental procedures and top-down management structures to do just what is necessary to meet the purpose, pilots in both councils are producing profound results. According to the council chief executives, ‘Citizens previously labelled as “lost” are living good lives, demand on services are going down, and the size of the opportunity to reduce cost is staggering.’ In one pilot in housing (admittedly based on very small numbers), rent arrears, evictions, antisocial behaviour, demands on the NHS, police and justice system were all down compared with control groups; and while the cost to the council increased, overall costs across all the agencies fell. On the basis of the fully costed cases, the overall saving to the public purse in one council would amount to £81.5m over two years.
Just as the failure to solve problems multiplies apparent demand (‘problem families’ are typically well known to police, the NHS, schools and fire as well as social and other council services), the reverse is true: when people get their lives back on track, demand evaporates across all services, including in tantalisingly unexpected areas: stable people are more likely to tackle obesity, smoking and alcohol issues, for example.
Conventional wisdom as incorporated in current service design holds that knowing and understanding individuals can’t be afforded; the lesson of Stoke and Bromsgrove is that knowing and understanding people is the only way that good services can be afforded. As Seddon sums up the learnings so far: ‘Demand is stable (not rising), demands are simple (not complex), we have plenty of capacity (no financial Armageddon), we have an effectiveness problem (not an efficiency problem), and when we provide services that meet needs, we improve. Costs fall dramatically and, most remarkably of all, demand falls. Yes, fewer problems in families and communities – isn’t that what public service ought to be about?’
My review of Malcolm Gladwell’s David and Goliath (Management Today, November 2013) here
Read my article in FT Business Education 20 October 2013 here
Read my commentary on the September Foundation Forum here
Read my Management Today article on the price of privacy here
Read my article in FT Business Education 15 September 2013 here
How are the mighty fallen. Once high-flying Nokia has sold its mobile handset operation to Microsoft. Computer maker Hewlett-Packard, a venerable Silicon Valley pioneer, has crashed out of the Dow Jones Industrial Index. It seems to be true, as a recent post on MIT Technology Review notes, that ‘the lifespan of great corporations is getting shorter and shorter’. Back in the 1950s, when a company made it on to the S&P 500, a roll-call of the corporate great and good, it could expect to stay there for 60 years. These days, on average it won’t get out of its teens. But why?
‘Technological disruption could be one big reason’, opines the author – and it’s a view common to the point of cliche. Thus, Kodak’s demise is always attributed to its being overtaken by the switch to digital; Palm, RIM and Nokia were leapfrogged by the iPhone and have never managed to catch up.
Yet let’s think for a minute. With a few exceptions – technology really has disrupted newspapers – blaming technology is no kind of explanation. It simply restates the problem. A more convincing, and down-to-earth, interpretation is that these companies failed to respond to changing markets because something in their internal organisation and culture didn’t let them.
One ex-Nokia manager cites a Finnish newspaper which points the finger squarely at the company’s stock option scheme for top and senior managers. In this narrative the options progressively corroded the culture from within, setting up debilitating competition between groups, people and platforms. Competition exacerbated divisions created when former chairman Jorma Ollila restructured Nokia’s business in 2003 into three separate groups, each with its own budgets and targets. The snag was that market/customer demand had to go through each of these divisions. By 2006 it was apparent that lack of trust and bad blood had caused a breakdown of cooperation between people and divisions that was directly affecting the company’s markets. But by then it was already too late.
In his biography of Steve Jobs, Walter Isaacson describes a strikingly similar situation at Sony in the run-up to the launch of Apple’s iPod and iTunes. By rights, that market should have been wrapped up by Sony, which unlike Apple already had both the technology and the content to make it its own. It failed to act because it was paralysed by rivalries between divisions, something that Jobs had expressly legislated against by insisting on a single balance sheet and P&L. As one Nokia manager described the result: ‘Everyone had two personal targets per year (defined by the hierarchy, top-down); [the result was] you only did your own things that enabled personal bonuses even when the business environment changed dramatically’.
Moreover, says the insider, at operating level Nokia’s work design faithfully mirrored the traditional reductionist thinking evident in remuneration. Complex tasks were systematically broken down into multiple simpler subtasks. ‘But knowledge work is very different from assembly line work… There was no flow in the work because every small decision had be escalated to multiple steering groups (or steering groups of steering groups of steering groups), and decision making wasn’t integrated with work. There could be weeks of waiting for the decision and for the time being, some other work had to be done to keep the “worker utilized”. Obviously, resource planning became a very complex task for the organisation’.
Another side-effect of this way of working became apparent when Nokia’s fortunes changed and it began laying people off. Highly reputed as it was, Nokia’s high-specialisation work design meant that engineers with 10 years of programming experience focused on, say, specific Bluetooth drivers in certain operating systems, and only used to following the specifications they were given, were not easily employable elsewhere.
In this light, the ‘technological disruption’ story looks like a lazy oversimplification. The real moral is more sobering. While rapid technological change means that more companies can ride the wave to the top, it also flatters managers (banking their huge option awards as they do so) into believing it was their own managerial genius that deserves the credit rather than the good fortune of being in the right place at the right time. The receding tide separates the firms that got the more boring but lasting things like reward and work design right from those that didn’t. In other words, the turning technology cycle just reveals how many companies simply weren’t that great, after all.