Friday, 19 November 2010

Fiscal aggression or sound economics?

I was lucky enough to attend a seminar today at which Will Hutton (from the work Foundation) spoke. Drawing extensively on his recent book ("Them and Us" published by Little, Brown), I was struck by many of the points he made, but two in particular struck home:

The first was Hutton's emphatic view that the current round of public sector cuts, tuition fee increases and the rest are happening too fast: "Fiscal policy as aggressive as this in the wake of an economic crisis as profound as we've had is precisely what you should not do". Now I appreciate that there is nothing close to a consensus amongst economists, let alone 'lay' folks such as me about how far / how fast - but it was refreshing to hear a clear case made for doing things more slowly, primarily to allow compensating capability to adjust to accommodate the changes. On Hutton's estimates, the public sector job losses forecast plus the impact they will have on dependent private sector jobs (supply chain etc.) will require the creation of over 2 million jobs in the private sector over the next 5 years to compensate. That is well above what was achieved in the last upturn (some 1.2m private sector jobs created), particularly as 3 out of 4 of those jobs was in Financial services. Coupled with the points below, that seems like a very tall order.

The second point was the compelling picture he portrayed of the geographical inequalities of opportunity across the UK. Put simply - only a very few regions and cities (for example the South East, London and it's satellites) have the necessary capability (primarily in the knowledge economy) to be able to add economic value by creating the kinds of jobs needed. Elsewhere, there simply aren't the capabilities available.

The result is likely to be further geographic polarisation. As Hutton puts it - if 'brute bad luck' means you have been born in one of the low capability areas, your life chances are severely curtailed. I tend to agree.

Perhaps a gloomy prognosis . . . but I for one feel moved to buy the book to see what further remedies Hutton suggests. The path of the current cuts has been set, but I shall return to this theme in a later post, exploring possible options to address some of the issues raised.

Tuesday, 16 November 2010

Armchair auditors or ill-equipped cost cutters?

I've been intrigued by recent pronouncements by politicians about converting us into a nation of armchair auditors (see these thoughts from David Cameron and Eric Pickles).

Apart from a mild anxiety about us all becoming curtain-twitching nosey neighbours, I have a more fundamental concern. If we are to be auditors, we need the tools to do the job . . .

As a nation, as communities and as individuals, what should matter to us are the results that public services deliver, as well as what they cost. We can then make judgements about whether we believe those results to be 'value for money' (and each election, we exercise our democratic right to vote for the sets of results that most closely matches our views of the world).

Unfortunately, for a number of reasons that I will return to in a separate post, such results are not always well articulated and even less often measured in any meaningful way. In addition, results for building communities (for example 'the big society'), tackling obesity, reducing the fear of crime, improving social care or national security etc. all take time. So results measures, even when present, will lag behind cost and resource measures (examples of inputs used to achieve results).

My fear is, as armchair auditors, all we will have access to is the easy to report, readily available information about inputs, with little or no output measures - let alone the measurement of results. So we might be tempted into making judgements about how (for example) money is spent, without knowing why it was spent or whether it successfully achieved the desired results. As a result, particularly in times of austerity, everything will seem an expensive luxury; so we will want to spend less. And spending less is likely to achieve less - though we will only find that out much later. In the meantime we may have dismantled the very services that could deliver the results for which we voted.

This is not meant to be a dig at the 'Big Society'; whilst I would like to understand what that means in terms of results a little better, if it means strong, thriving communities, I'm very much in favour. I just fear creating an army of armchair auditors without the tools or information available to allow those people - us - to function properly.

Of course what that requires is clarity of thought over desired results and how to get there (direction-setting - or that hackneyed term 'strategy'). For more on how to achieve that clarity, why not visit here.

Monday, 15 November 2010

When is outsourcing NOT the answer?

Data from the outsourcing research specialist Everest Research Institute, suggests that nearly a quarter of outsourcing projects fail because clients have unclear expectations at the start of outsourcing contracts.

In my experience, the initial phases of any consideration of outsourcing as an option are the critical ones. There needs to be clarity over issues such as:
  • The results the organisation is trying to achieve
  • The drivers that have led to outsourcing being considered
  • The scope of the services under consideration
  • The status and maturity of the market for those services
  • The alternative approaches that might yield better results (such as in-house transformation or shares services).
All of these need to be answered in order to arrive at a Sourcing Strategy (the option) underpinned by a business case (the justification for the change) and stakeholder engagement (the mandate for the chosen approach). Taking a little time at the early stages can avoid substantial costs later; in the words of the old maxim - measure twice, cut once.

We can help you make the right decision about how best to achieve your objectives (for example to save money and improve services). That may mean outsourcing – but the decision should be made objectively, based on the evidence.

For more information please click here or email.

Tuesday, 9 November 2010

Why not just stick to the knitting?

I remember having a conversation with my boss during my time as Strategy Director at HMRC, which effectively amounted to him saying "I want to concentrate on day to day operations for now, perhaps we'll return to strategic issues around Easter" . . . in other words - let's stick to the knitting. In this case, as the conversation was in October, for at least six months, no longer term issues would be considered by the Board (the 'perhaps' and 'around Easter' gave me pause for thought too).

So - fine you might say. Sometimes you do have to concentrate on the knitting. Agreed; but if the Board aren't looking at the longer term or at the serious threats (or opportunities) that might affect the organisation - who else will? As BP discovered to it's cost over Deepwater Horizon, failing to understand the level of risk being carried could spell disaster (see some further thought on this issue here.)

As my conversation with my erstwhile boss suggests - often the problem is a lack of appetite at senior levels in organisations to think beyond day-to-day management issues. Whilst my experience was in the public sector, I have little doubt that the same is true in the private sector (and Ben Gilad's analysis in his book 'Early Warning' certainly suggests that is the case). I don't think there are any silver bullets here. I think the Board should make time for considering mission-critical potential threats and opportunities - whether from existing operations or from changes in the operational landscape. Six months is a long time to effectively ignore what might be happening outside an organisation.

I believe the answer is to have a clear separation between the Board and the day-to-day management. The former should be forward-looking, interested in the future operating environment and the higher risk aspects of operational delivery and open to robust, external challenge. The latter should be empowered to make decisions about the day-to-day operational business. That management team should provide a snapshot of delivery and - crucially but often lacking - lead indicators to the Board. The Board can then be a position to 'steer, rather than row' - helping the organisation to find it's way through the challenges, whilst exploiting the opportunities.

Lastly, to be effective, the Board must have access to analysis and evidence about the operational landscape and how it might be changing - robust, evidence based challenge. This comes in part from the strategy team or equivalent, but is also a key role for the non-Executive Directors. In mature organisations, the NEDs work closely with the strategy team, using the evidence and analysis provided to inform and support their challenge role.

Does this sound familiar?  Does your management board spend too much time focused on the present?  If you find yourself in this position and need support to deal with the issue then why not contact me at and fix the situation before it bites you.  Alternatively - stick to the knitting by all means, but don’t be surprised if your competitors use the opportunity to leapfrog you whilst you're staring at the ground.

Wednesday, 3 November 2010

Why is 'strategy' such a dirty word?

I've been working in and around the strategy arena for over five years now and I've noticed an increasingly common trend. Whenever the word 'strategy' is mentioned people tend to switch off. You can tell by the sudden glazing or rolling of the eyes - or a wrinkling of the nose as if some unpleasant smell has wafted over.

Why? Well - unfortunately the term itself has been so over-used as to become virtually meaningless. From job titles that include 'strategic' (a friend tells me he saw an advert from the London Borough of Ealing for a 'Strategic Involvement Officer', whatever that means) to documents that are given the tag 'strategy' or 'strategic' to somehow legitimise them. Like the infamous Iraq dossier, I'm afraid the term seems to be used to 'sex things up' . . .

So - do we need a new term or a new language for that which is 'strategic'? Perhaps - but who's to say that language won't in its turn be misused? I think it would be better to come back to what I believe strategy is all about - answering the 'why' for organisations, setting direction and purpose - not necessarily the detailed 'how'. So strategy is about outcomes, results or goals - the purposive changes that organisations set out to achieve.

So the next time someone glazes over or wrinkles their nose at the 'S' word, try talking instead about results - why are they taking their organisation in a particular direction? What outcomes are they hoping to achieve? And why those outcomes and not something else. In other words - where's the evidence to support their - and I use the term advisedly - Strategy?

Tuesday, 2 November 2010

UK Spending Cuts - a Damp Squib?

I have to say that I was heartily disappointed by the spending cuts announced last week. Not so much for what was said - though the asymmetric impact on the most vulnerable in our society is in itself disappointing. No; it was actually more for what was left unsaid.

What I see now is effectively 'target savings' that UK departments have to meet. That is - their budgets have been reduced going forward. But there is no detail saying how those savings will be delivered. So my fear is that we will have a non-strategic, 'salami-slicing' approach, where departments cut internal budgets by an arbitrary percentage across the board.

In my view, this is an opportunity missed. Times of pressure and challenge are precisely the times during which a more strategic approach is required, so that service provision can be prioritised around key outcomes - those things that can help make the UK a better place.

As highlighted in the recent report from the Public Administration Select Committee entitled 'Who does UK National Strategy' (click here for a link to the report), I suspect the problem lies in a lack of both appetite and capability in strategic thinking. Sadly, the report concludes that the problem is pervasive amongst both the UK Senior Civil Service and minsters - with some honourable exceptions in both camps. So there is often a lack of clarity about what the key strategic outcomes are for any given department. That makes it pretty difficult to prioritise sensibly.

I fear that the result will be further asymmetry in terms of impact - despite the conspicuous overuse of the word 'fair' during the announcement itself. That is - the most vulnerable citizens, businesses and communities in our society are often the hardest (and therefore the most expensive) to reach. My guess is that, as the cuts translate into operational reality, it will be precisely those services that are reduced or eliminated first.

Hopefully I am wrong and the key Department's of State do indeed have their Baldric-like cunning, strategic plans in place for safe-guarding outcomes and prioritising services. Time will tell.