Article

Reshaping public sector organisations

Evidence based decisions on people, processes and structures

The Coalition Government reduced spending in most areas of public services during the last Parliament, and even tougher decisions are expected for the 2015 Spending Round.

August 2015

This is due partly to the scale of the planned reductions and because most of the ‘easier’ savings have already been made, but also partly because of the cumulative loss of capability that will occur.

In most public services, people-related costs dominate spending, and savings must therefore come from re-organisation and re-deployment of staff. We find that in practice, many of the savings decisions are only loosely grounded on evidence, and that most public sector leaders struggle to apply quantified analysis to the key areas for decisions. In our view, a more evidence-based approach is needed to make sure that change is sustainable in the medium and longer term.

In this paper, we illustrate some of the most common issues and decision areas that are typically faced by chief executives, change programme leaders and HR directors across the public sector.

People and organisation: four key issues 

Based on assignments commissioned by our UK clients, we conclude that public sector leaders will need to make decisions around four key issues relating to their people and their organisations in the years ahead. They are:

  1. Fragmentation – what do people actually do?
  2. Scarce capabilities – are the right people deployed in the optimal way?
  3. Organisational efficiency – is the organisation structured for best effect?
  4. Fit for delivery – what capabilities do I need in my organisation, now and in the future?

Issue 1. Fragmentation – what do people actually do? 

The problem
In most organisations, people’s time is fragmented, even in the frontline of service provision. People are engaged in doing too many different things, and too many people are involved in the same ‘work product’. This is not just a consequence of reducing headcount. It is also the result of failing to reduce expected outputs, failing to restructure tasks and processes and the need for more checking and supervision as capability has been lost.

Evidence based analysis and possible action
Analyse the number of full time equivalent staff (FTEs) involved with each ‘work product’. Stop work or limit the work done on lower priority tasks.

Case example
In one organisation, we found that ‘customer management’ jobs showed a high degree of fragmentation, with only 18 per cent of people spending the majority of their time on customer management activities. Some 62 per cent of posts were ‘fragmented’, with individuals dividing their time excessively between activities associated with different functions.
 

Issue 2. Scarce capabilities – are the right people deployed in the optimal way? 

The problem
In many public sector organisations, the pressure on staff and the fragmentation of work across large numbers of staff, rather than clear individual accountabilities, means that tasks are often not performed by the most capable staff. Many people are working on tasks where they lack the relevant expertise, which has implications for quality, costs and outcomes. The usual response is ‘more assurance or checking’ which increases fragmentation.

Also, public service organisations are often structured to deliver a specific professional service, with a focus on providing public value within its boundaries. This functional delivery structure can prevent the coordination of efforts to improve efficiencies and the overall customer experience. In many cases, work should be organised around projects or customers rather than being organised around internally defined functions.

Evidence based analysis and possible action
Analyse the capabilities that are required and compare them with the capabilities actually deployed. Redesign key processes and allocate scarce resources accordingly.

Case example
In a public sector organisation that delivers technology based products, the largest and most delivery critical functions are project management and engineering, but they are not deployed effectively. Significant amounts of time are spent on activities associated with other functions, and job roles are highly fragmented. As a result, scarce skills are wasted, and people are doing work for which they are not skilled.
 

Issue 3. Organisational efficiency – is the organisation structured for best effect? 

The problem
Public sector organisations may lose their focus on efficiency as they reduce headcount, allowing narrow spans of control and excessive layers in the organisation structure. We view an organisation as having a narrow span of control when it has many managerial posts with only 1 2 direct reports, and excessive layers when it has 8 or more levels of management or grades of employees. Often, these problematic organisational structures evolve as an ineffective response to poorly designed remuneration policies whereby the organisation can only retain experts by promoting them into management posts.

Evidence based analysis and possible action
Assess spans of control and layers in the organisation hierarchy and manage change as required. In most organisations, we observe substantial areas of work that have grown on an unplanned basis, with senior people performing tasks that should be taken on by more junior people. Re design organisational structure and reward systems.

Case example
Historically, most organisations are ‘pyramids’ in their shape, with a larger number of junior staff and few very senior staff. But increasingly, organisations are more like ‘diamonds’, with most employees in middle grades. Diamond shaped organisations can suffer from very low spans of control, with weak career paths and development opportunities. In this example, high numbers of management roles had just one or two direct reports.

 

Issue 4. Fit for delivery – what capabilities do I need in my organisation, now and in the future? 

The problem
Organisations need to understand the ‘people impacts’ of new delivery models such as outsourcing, adopting more commercial structures, building new digital infrastructures, and flexible working models. It is critically important to identify the capabilities that the organisation will need in the future in order to align future recruitment plans, the talent pipeline and development programmes.

Evidence based analysis and possible action
Analysis of capability and capacity, especially focussing on new capabilities. Re design the organisation around outsourcing, digital transformation or flexible working models – with changes in recruitment, remuneration and linkages across the organisation.

Case example
In this public sector organisation, they had made the transition to a more commercial organisational model in order to become a more intelligent client to commercial contractors, to tap into talent that the public sector struggled to recruit and retain, and to exercise greater financial freedoms. One of their strategic goals was to become more customer focussed which included using digital channels as a primary means of providing service, gathering information and giving customers choices. New digital capabilities had to be nurtured in dedicated units, yet be accessible and connected across the organisation.
 

Conclusion

The need to make continued, dramatic spending reductions while continuing to deliver services to the public is about to place unprecedented demands on public sector organisations and their leaders. The next five years will almost certainly see shifts to new models of public service delivery, as well as progress in exploiting digital technology – not least because digital transformation can deliver savings without the same political cost that accompanies cuts in outputs and outcomes.

Designing more effective organisations and making better use of the capabilities of their people is one of the top priorities for public sector leaders – chief executives, change programme leaders and HR directors. Their judgments about the future size and shape of their organisations will be more successful when they demand specific evidence based answers from their people and their HR departments.

The challenges are:

  • To optimise the use of scarce capabilities. Analyse high value and low value work, and the impact of fragmentation; redesigning processes to use experts on tasks that only they can do. 
  • To create more efficient organisation structures. Analyse spans of control and management layers, to identify and remove inefficiencies. 
  • Prioritise capability building. Take a hard look at where money is being spent on capability building and focus more on building those capabilities which the organisation needs most for effectively delivery. These challenges do not just require judgement calls, and change is not an art form. Decisions about re sizing and re shaping organisations should make use of analytical and visualisation approaches in order to base them on actual evidence.
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