HMRC failing to achieve purpose

An astonishing revelation from the House of Commons Public Accounts Committee: HMRC is failing to collect £28 billion in owed taxes, more than 15% of the current budget deficit! More importantly, this failure to achieve the purpose has become worse, in fact twice as bad, over the last three years. So we must ask ourselves
what has HMRC been doing over these last three years? They have been doing ‘lean’, guided by tool-heads; it amounts to wrong-headed industrialisation. I can bet all their measures will be concerned with activity and cost, measures that always undermine achievement of purpose, and drive costs up. We know from their presentations about the ‘lean’ programme that they monitor workers’ activity and they have standardised the work, both of which will undermine achievement of purpose; and they have no idea of the volume of failure demand being caused (which will be very high and indicates the extent of failure to achieve purpose). Recent press interviews with the new chief at HMRC reveal that morale is low, but the chief has no idea why.

While I am on the subject, we reckon the costs of failure demand downstream of HMRC (people who have not got their problem solved who turn up at other services for help – see next piece) to be about £300 million.

Imagine the impact on public finances if HMRC were to work.

Systems thinkers get to grips with the downstream problem

The downstream failure of HMRC and DWP was published by Advice UK in 2008 (‘It’s the System Stupid! Radically Rethinking Advice’). Since then Advice UK has been
working with advice organisations and the local authority in Nottingham, with our help, to pilot a systems thinking design for advice services. Last September, they held what they described as a hugely successful stakeholder day to present the findings of the initial analysis of advice systems, and these have now been written up into an interim report, which you can access at http://www.adviceuk.org.uk/_uploads/documents/1MicrosoftWord-NottinghamSystemsThinkingPilot-InterimReport.pdf

The key learning from the review to date: Over 40% of advice agencies’ capacity is taken up addressing failures in the system, generated by public bodies’ failure to get it right for clients; System conditions, many of them the result of funders’ and external agencies’ requirements, have a significant impact on the service that is delivered to clients.

With this knowledge the Nottingham team is now making informed decisions to improve the system, and are currently experimenting with changes to the design of advice services. You can keep up to date through the BOLD pages of the Advice UK website: http://www.adviceuk.org.uk/projects-and-resources/projects/bold

Lean is mean in the car industry

Going back to the debacle that is ‘lean’, during the Christmas break I read a book all about how ‘lean’ has gone down (badly) with the workers in car manufacturing. It shows how ‘lean’ has been just another tool of management, used to control and exploit the workers. A complete tragedy, Ohno (the man who developed the Toyota Production System) would be shocked and appalled. In the 1950s Ohno secured a major transformation in industrial relations by committing to workers sharing the first fruits of success, putting them above customers and shareholders.

This blundering wrong-headed lean tools stuff has not only created antipathy among workers it has, more importantly, meant that manufacturers have failed to realise the benefits Ohno achieved.

The big mistakes in both the car industry and HMRC are to have kept control with management and the failure to see the organisation as a system. ‘Lean’, as applied, amounts to no more than a bit of process improvement in badly designed systems. The tool heads have a lot to answer for.

The book on the car industry is titled: ‘We sell our time no more, workers’ struggles against lean production in the British car industry’, Stewart et al, Pluto Press. I shall be recommending it to my students.

The economic consequences of Mr Brown

A reader sent a link to a presentation by Professor Stein Ringen. It is a compelling exposition of the failure of the Brown years as chancellor then prime minister. Massive investment in public service reform but no change; the central reason being Brown’s command and control approach. Apologists for New Labour argued in response that it could have been worse with another government and, in any event, waiting times targets worked. Entirely missed the point (and, by the way, waiting times targets did not work). See the presentation at:


Is Mr Brown ‘smart’?

Announcing his latest initiative for public-sector reform, Gordon Brown claimed that we are now entering the ‘third generation’ of public services. The first generation, he said, ensured everyone could have access to essential services that up until then had been provided patchily and inadequately (a snipe at the previous Conservative administration). His ‘second generation’ of public services which, he said, began when he came to power, in 1997, ‘transformed investment’ and coupled it with ‘tough performance management’. And so to the ‘third’ generation: ‘a radical shift of power to the users of public services’.

Of course this is all spin. A more honest summary would be ‘we invested massive amounts of taxpayers’ cash in the creation of a massive management factory sitting over public services that has coerced them to do dumb things. Now we are desperately looking for what to do next and, in particular, how we can cut costs’.

Instead of calling this initiative ‘Smarter Government’, as he does, he should have called it ‘more dumb stuff’. The most wrong-headed idea in his announcement was that all tax credits and benefits will, in the near future, be ‘exclusively on-line’. He thinks this will mean greater ‘personalisation’ of services. He couldn’t be more wrong. You can personalise your e-newspaper, your Amazon account and such-like because you do the personalisation. But tax credits and benefits have rules. The complexity of these rules is one of the causes of failure demand downstream of HMRC and DWP, the other main culprit being bad organisation design. If, as Brown intends, you put the rules into computer systems, you will fail toabsorb variety. I can confidently predict this latest initiative, driven by his desire to cut costs, will drive costs up and worsen the already dire service for those who are the most vulnerable.

The Tories are at it too

An announcement that is bewildering: the Tories have signed up Peter Gershon and Martin Read as advisors on public-sector efficiency. These two were New Labour advisers. It reminds me of the way munitions manufacturers, during the second world war, who were looking for a new detonator, copied one from a German bomb that had failed to go off! Gershon and Read believe in IT-led factory designs. The Tories too, it seems, are believers in economy of scale. It is to be wedded to an ideological view, in spite of the lack of evidence for success and plenty of evidence of failure.

I think I have to make a definitive text on the myth of economy of scale an urgent task for this New Year. We need to do all we can to halt this waste of public funds.

Rebellion in London boroughs

Wandsworth and Hammersmith & Fulham Councils have refused to spend ‘endless hours’ serving the Audit Commission’s new Comprehensive Area Assessment (CAA), which they (rightly) say has proved costly and ineffective. Each reckons to spend about £200,000 providing the Audit Commission with information. In addition, the Commission had the nerve to charge each council more than £100,000 for ‘audit costs’. The two councils say the costly and bureaucratic nature of complying with Audit Commission demands is not a good use of taxpayers’ money in an age when budgets are being squeezed. They argue that the oppressive and pointless CAA regime hinders councils’ ability to deliver better quality services.

Hats off to them! I’m sure this is just the beginning…

The Audit Commission doesn’t get it

A systems thinker sent me the following quote, following my piece in the last newsletter on my meeting with Steve Bundred, chief executive of the Audit Commission:

‘It is difficult to get someone to understand something when their salary depends upon them not understanding it’. Upton Sinclair: an American civil rights campaigner turned politician (1930s).

I recall listening to the Commission’s David Walker (with whom I had a spat last year) talking about the Audit Commission’s role on the radio. He claimed that audit reduced risk. A nonsense claim, for in fact the Audit Commission coerces people to do the wrong things, thus increasing risk. Knowledge is the antidote to risk; if Walker had just a smidgeon of knowledge about the dysfunctional things being driven by his outfit he would think twice. Walker also maintained that external inspection leads to accountability. It doesn’t. It leads to compliance. We have to move to a world where people feel responsible, not compliant.

But as Upton Sinclair points out, maybe Walker will never understand these things.

I’m feeling optimistic

Despite the continued madness of the regime in the public sector, I’m feeling very optimistic about systems thinking extending its reach. As well as people standing up to the likes of Bundred and Walker, there are more and more examples of systems thinking in practice and, at the end of the day, the results speak for themselves. The results are always significant, making process improvements look insignificant by comparison. The impact on morale is always fantastic, there could never be a book written against systems thinking as there is against ‘lean’; for systems thinking puts people in control – it is intrinsic motivation that is the engine. Indeed a book of case studies is to be published in a couple of months and all the authors explain how systems thinking has had a profoundly positive impact on morale.

In Wales systems thinkers have a great relationship with audit and central government, something that Westminster will notice as time goes on. Whoever wins the next election, we can expect a cull of the nonsense jobs in Westminster, the people who impose their stupid ideas on public-sector managers. All in all its good news for systems thinkers and I look forward to this year being one of more; more examples, more evidence, more leadership, more systems thinking.

Forthcoming events

Systems Thinking – introductory days
January 14th, Copenhagen; find out more at: http://www.vanguard-consult.dk/Arrangementer.htm.
February 4th, Bridgend (Wales); for bookings: info@vanguardconsult.co.uk

Open Fundamentals programmes
We are running two open programmes on Systems Thinking Fundamentals, one in Hull, the other in Bridgend (Wales). These are action-learning programmes where attendees are expected to do things in their organisations between the taught sessions. You get more time between sessions in Hull.

Hull dates: January 26th, March 5th, April 21st and May 26th.
Bridgend dates: February 9th, 16th, 23rd and March 2nd.
For bookings: info@vanguardconsult.co.uk