Jeremy Cox, Vanguard Consulting

Public-sector organisations across the spectrum are faced with the apparently conflicting challenge of making efficiency savings while simultaneously delivering on a vision of building safer, healthier and more economically resilient communities. I want to deliver an optimistic but counterintuitive message: to improve efficiency, the last thing a leader should do is to focus on efficiency. Understanding this paradox is the first step to delivering great public services at the lowest possible cost.

The efficiency paradox

For managers at all levels, this goes completely against the grain. Surely it is the manager’s role to maximise the productivity of their unit or organisation? Yet when we study past efficiency-boosting attempts, we find that, notwithstanding the good intentions, they routinely have the opposite effect. Thus:

  • Call-handling has been centralised into a single point of contact, yet rising caseloads in the back office prevent costs from coming down
  • To protect expensive professional resource (planners, benefits assessors, social workers, clinical staff…) the process is functionalised and screening and admin tasks allocated to lower-grade staff; but constant backlogs mean there is little overall benefit
  • Managers in the highways department put pressure on repair crews to do more jobs per day, so how come the number of defects in the road network keeps rising and only the high priority jobs get done?

Why is the direct focus on efficiency counterproductive? Because efficiency is an effect, a by-product, not a cause. When we learn to see efficiency as an emergent effect of doing the right things right, rather than an objective to be achieved directly, the way forward becomes clear.

Neurology – from efficiency to effectiveness

The neurology department of an acute hospital had been trying for years to reduce length of stay for stroke patients – an effort straight out of the efficiency paradigm. Using the Vanguard Method, the department shifted its focus to purpose (swift recovery) and the smooth flow of value work (diagnosis, treatment and rehabilitation) through the end-to-end hospital system.

The shift in leadership thinking from efficiency (‘reduce costs by reducing length of stay’) to purpose and value led to dramatically reduced mortality rates, fewer admissions to non-specialist wards, freed-up bed capacity, and improved staff morale. And guess what happened to the problem they were trying and failing to solve in the first place? Length of stay shrank, turning a ‘loss’ per patient for the hospital into a surplus.

Cameron was in the efficiency trap

By contrast, here is David Cameron in a speech in September 2015:

…Businesses are always looking at ways to streamline their functions so they can become more effective. I would argue it’s an imperative – a moral imperative – for government to do the same. When money is tight, it’s simply unforgivable to waste taxpayers’ money.

But then he walked straight into the efficiency trap:

…Take our emergency services. Right now we have a situation where in most towns, the police, fire and ambulance services all have different premises, back offices, IT policies and systems, and procurement policies – despite all their work being closely related… Places like Hampshire have shown the way forward, where the emergency services have brought functions together to save millions of pounds a year. We need to see that sort of thinking in other places.

Nothing in the ‘shared services’ approach is about understanding or improving the system’s ability to do useful work or achieve purpose related to citizens. Sharing services is a crude attempt to gain efficiency through scale, under the mistaken assumption that all demand coming into the service and all the work done in response to it is of value. In fact these systems are full of failure demand (non-useful work), and their failure to deliver improved service is well documented.

I worked with a local authority which redeployed half of its HR capacity after designing for value in much the same way as the stroke service, completely transforming the service. If you knew you could drive efficiency from effectiveness in this way, would you try to make it more efficient by sharing?

Turning it around

Consider the knotty issue of how to deal with individuals and families who present repeatedly with demands that aren’t serious enough to be treated urgently. In studies across police, local authorities and healthcare, 40% of overall demand typically comes from people with a combination of issues (depression, alcohol, debt, housing, childcare, domestic violence) but who are consistently screened out, referred on or only given symptomatic help because they are ‘below threshold’ or ‘not our responsibility’.

For example, a family may have been referred by police to a domestic violence team but can’t get mental-health support until alcohol problems are dealt with; meanwhile school is applying pressure over class attendance, Job Centre+ has sanctioned benefits after a no-show, and the social landlord is pursuing arrears. Each agency attempts to make itself efficient by focusing rigorously on its own remit, but because the family situation is never addressed in the round, the demand just keeps coming.

The overall effect is that this ‘below-threshold’ group amplifies demand and cost across all agencies. Between half and three-quarters deteriorate over time, eventually triggering the need for ‘high-end’ services. Thus the efficiency focus costs everyone more in the long run, and it is no surprise that total demand into health and social care services is growing.

To turn this around requires a shift in focus from organisational efficiency to effectiveness from the citizen’s perspective. For the organisation, new assumptions for the design and management of work are key. Leaders have to set up and protect multi-agency intervention teams able to meet the various needs of ‘below-threshold’ individuals and families in their own context, and realign budgets, boundaries commissioning and governance accordingly. Where they do this, demand and costs fall, health and wellbeing improve, staff see greater value in their work and communities benefit.

It can be done – so do it

Ultimately this is an optimistic story, for two reasons. First, to make the difference we don’t need to replace all the managers or outsource services to the private sector. Everywhere I go I find dedicated, hard-working managers trying earnestly to build safer, more resilient communities and help individuals live better lives, who are hamstrung by conventional organisational thinking about efficiency and trapped in roles that require them to attend to the wrong things.

Second, designing and managing work from a different perspective is something that can be learned. The shift from managing efficiency to leading for effectiveness is what Vanguard is all about. Thus, a client in adult social care eliminated a persistent backlog and reduced the volume of wasteful casework in the system by 50% overnight by making just this shift, helping staff to redesign the work to focus on value, and constantly testing and learning using measures of what matters to service users.

In short, there is a way out of the efficiency paradox. When we learn to see that doing things right always makes things cheaper, and trying to improve efficiency always costs more, we deploy new methods for the design and management of work. So where will you start tomorrow?

Read similar articles in Edition Two of The Vanguard Periodical: The Vanguard Method in People Centred Services. Ask for your FREE hard copy or PDF.