HMRC in the news again

It has emerged that 1.4 million people have unwittingly paid too little tax through the PAYE system, while 4.5 million people have paid too much and another 17.9 million people may have paid the wrong amount, but HMRC is not sure. The problem has occurred over the last two years. The boss, Dave Hartnett, said he didn’t think he needed to apologise, arguing this was a ‘normal’ process. Oh right.

Just add it up: it amounts to 23.8 million people whose tax affairs have been screwed up by the taxman, this must be the majority of people who pay tax via PAYE. Dave must have been given a clip round the ear, for the very next day he was apologising profusely and later he said HMRC may write off much of the in unpaid tax.

Apparently the heart of the problem is that people on PAYE nowadays move jobs more often and many more people have two jobs. Cleary HMRC is experiencing an increase in variety. But what have Dave and Leslie Strathie (the other boss to whom I have written – newsletters passim) been doing to HMRC? Industrialising it, with ‘lean’ tool-head ideas (like standardising work), lots of back offices (specialising work), horrid wrong-headed activity measurements which have demoralised the workers, and they have spent an eye-watering £9 billion of our money on an IT system, which clearly doesn’t work yet and, as is usual when you buy IT that fails, the contract is being extended! Don’t you love that about big IT projects? They fail and the vendors get more work!

Morale is so bad that one HMRC employee has gone public: http://news.bbc.co.uk/today/hi/today/newsid_8982000/8982769.stm And there is now a web site capturing disaffection from staff and customers: http://hmrcisshite.blogspot.com/

HMRC should be a lesson to us all. Industrialised ‘lean’ services drive up costs and worsen service. A faux academic from Warwick claimed HMRC’s lean programme to be a success. Unbelievable. The ‘academic’, and anyone else who wants to know why lean is a dumb thing to do should read ‘Re-thinking lean service’ on the articles section of the web site.

Lean in government services

The same academic was featured at a major public-sector event on ‘lean’. As many correspondents who had to suffer the mindless ranting pointed out, the academic fails to appreciate how service differs from manufacturing and is even unaware of how ‘lean’ as promulgated fails even to reflect Ohno’s thinking about manufacturing. The amount of ‘lean’ going on in public services should make us worry.

Industrialisation of legal services

A reader writes to tell me of the tragedy going on in legal services. The Legal Service Commission is inviting tenders from legal services firms which favour larger firms. As he says:

‘[It is] a classic example of creating a rigged market to favour factory firms in the deluded belief that they will deliver costs savings through economies of scale. What I don’t understand is why so many government agencies persist with this damaging and expensive nonsense in the teeth of the empirical evidence!’

It is a triumph of prejudice and ideology over evidence.

The fallacy of scale

As the obsession with scale continues, I repeat here the essential arguments, and the flaws, in scale thinking: There are two arguments for economies of scale: The ‘less of a common resource’ argument and the ‘efficiency through industrialisation’ argument. The former is ‘obvious’: if we have fewer managers, IT systems, buildings etc; if we use less of some resource, it will reduce costs. While that is obviously true, it can at times be not so easy.

So to the second: efficiency through industrialisation. It assumes that efficiencies follow from specialisation and standardisation; manifest as ‘front’ and ‘back’ offices. The typical method is to simplify, standardise and then centralise, using an IT ‘solution’ as the means.

These designs create more (failure demand) because they fail to absorb the variety of customer demands. While reports of lower transaction costs are thought to be evidence of success, they mask the increase in the volumes of transactions (witness HMRC above). Economy of scale is a myth. Much greater and sustainable economics follow from flow.

So, for example, with regard to most services, we advise our clients to avoid scale designs and instead go for flow designs, where people are used as the key to absorbing variety. With regard to sharing services, we tell people to take three steps: Study the respective services as systems in situ; then, on the basis of knowledge, improve them in situ. Then ask can further economies be achieved through ‘sharing’. The improvement step achieves massive gains (typically 20 to 40% efficiencies and a massive improvement in service delivery) and makes the subsequent potential savings from sharing a common resource marginal by comparison.

What’s up with me doc?

A reader sent me this link to an article describing how the current system encourages our doctors to over-diagnose:


Contracting removes thermostat

A reader writes to lament how a contract for Meals on Wheels stops those who deliver the meals from taking any interest in how their customers (old people who need help) are getting along. Anyone who pops in to an old person should be a key person to spot problems; but the terms of the contract preclude them from providing any help beyond the contract and ensure they will be ‘very careful’ about what they say or do.

Removing the thermostat in the system by design – not very clever.

No idea still has no idea

In the wake of the new government’s abandonment of central targets and specifications the IDeA (which, I have to admit, has changed its name, but I love calling it ‘no idea’) fills the void by recommending that we do the same wrong thing. The boss argues we need to establish a series of targets and benchmark services on unit costs. To support his argument he cites an opinion survey amongst ‘performance managers’ and ‘policy officers’ in local government; what would you expect them to say?

I wrote an article for the public sector press about the nonsense of benchmarking unit costs. As it is published on a subscriber-only site, we have also posted it here:


Inspectors maintain the status quo

In much the same way police inspectors are re-creating the very thing ministers want to remove. While the Home Office is adamant that the
government will not give any sort of targets whatsoever, unfortunately, the guidance given – that police forces should be ‘accountable, open and honest’ – has been used as an excuse by the inspectorate to say that the only way that this can be measured is via the old performance framework.

They just don’t know what damage they cause.

Policing as processing

When you study policing as a system, you discover that it has become a recording, processing and inspecting bureaucracy. What is most disturbing is that much of the ‘crime’ being processed is not crime at all, but processed it will be. And so to this fantastically stupid example published in the Newcastle Chronicle:

‘In a scene likened to Romeo and Juliet, heartbroken Lee Kinson climbed up the drainpipe to his former girlfriend’s home in an attempt to win back her heart. But as he leaned over to knock on Sarah Davison’s bedroom window, the drainpipe snapped and he fell into her neighbour’s garden. Red-faced Kinson was arrested and later charged with criminal damage. At South Tyneside magistrates, where the lovestruck 30-year-old was found guilty of criminal damage, district judge Roger Elsey told him: ‘This was more like a scene from Mr Bean than that of a Shakespeare play.’ Embarrassed Sarah said: ‘I only involved the police because I needed a crime number for the council to fix the drainpipe.’

Lean loonies are doing it to their kids

Back to the lean lunatics: a lean tool-head wrote a blog about how he is applying lean to family life. Get this, he wrote that he has done:

‘Standardized Work: My house rules are written with consequences for each rule. That way it is not ambiguous. Good stands out and deviation from the norm is clear.

6S and Standardized work: Room cleanliness standardized work is posted on their bedroom doors. I grade their 6S status weekly. I have taught them 6S for Success. I have included Safety, that way they know that I will base my decisions with safety in mind, but especially they need to make their own decisions based on safety.

I have arranged some of the spices in the cabinet using standardized glass bottles. Each one is labeled. Each has a place based on usage. I have organized my garage with things in the same type of labeled bins as much as size will allow. When my kids were younger one of them would kick off her shoes anyplace in the house. A couple of times we were late because we had to find her shoes. I created a shadow box for them in her room. The rule was that her shoes had to be on her feet or in the shadow box.

7 Wastes: I have posted the Seven Wastes and the kids know to look at how we can eliminate waste. Inventory: I have a standard stocking list for groceries and once I consume an item it goes on the shopping list. We only minor exceptions we only buy what is on the list. We plan our meals and buy the ingredients for that week’s cooking.

Kanban and pull: I like this one the best. I keep gum in the car. Once a package is used it is given to me. I then re-stock from the warehouse (a
kitchen cabinet). I only keep enough in the warehouse for that week’s consumption. Once one is removed from the warehouse I put it on the shopping list. We only buy what we have consumed.’

Do you feel sorry for the kids?

The Leaders Summit

Later this week I shall be publishing the agenda for the Leaders Summit on the web site. It’s a great line up, all top leaders who have achieved outstanding results. It will be a great event for those of you who have bosses who need to get curious; they’d be more likely to listen to them than me.