PSP 08

2 August 2000

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INCREASES IN PUBLIC SPENDING MUST BE MATCHED WITH HIGHER PRODUCTIVITY

Ways of raising public sector productivity to get the best services for the extra resources invested are set out in a report published today by the Public Services Productivity Panel; a group of public and private sector top managers chaired by the Chief Secretary to the Treasury, Andrew Smith.

For every one percent public services improve their productivity, over £2 billion is generated to reinvest in better services. But in order to raise productivity, public services need to ensure effective performance management is embedded in their culture and values, and involves everyone in improving the service they deliver.

The report Public Services Productivity: Meeting the Challenge; also highlights the need for:

• Strengthened leadership to ensure clarity and focus on service improvement;
• Better techniques and strategies for tackling variations in performance;
• Measuring what matters, by prioritising and rationalising public sector targets;
• A sharper focus on customers, who rightly expect better public services;
• Improved rewards and reinforcements for public servants;

In addition to Meeting the Challenge, the Panel has published 12 other reports focusing on a wide range of strategies to tackle these issues. Recommendations of these studies which are being implemented include:

• New incentive schemes for staff in large government agencies;
• Improved performance management systems in the DTI and MoD;
• New techniques for comparing police performance;
• Better customer service in three government agencies (DVLA, DSA, HA);
• Increased revenue from the sale of surplus NHS assets.

Meeting the Challenge highlights the wider application of many of these specific issues, and recommends action for example to:

Build greater capacity in public services to deliver improved performance management;

• Set sharper incentives to outperform Public Service Agreements;
• Ensure targets are related to past performance, so the standards of the poorest as raised towards those of the best as quickly as possible.

Andrew Smith, Chief Secretary to the Treasury, endorsed the findings of the Panel:

"New resources for our public services must now be tied to results. I want to see this excellent settlement for our public services achieve real benefit for the public. This report tackles this challenge head on, and all public services should make good use of the Panel's advice in improving their organisational productivity. A productivity gain of just 3% could result in over £6 billion to reinvest in services - making performance improvement a critical issue as the Government's spending plans are implemented.

"But a revolution in the way public services are managed is needed. The Panel's study programme has highlighted the urgent need to reform performance management arrangements, which are generally not functioning effectively. In particular, stronger leadership and improved accountabilities and incentives for all public servants must be developed. I am determined to see our public service organisations motivate staff better and ensure they have proper ownership of their objectives. And I want all public servants to be clear about which government objectives they are delivering and why; so if they reach or outperform their targets, they get the praise and reward due."

Vice Chair of the Panel, Byron Grote, who co-ordinated the development of Meeting the Challenge, commented:

"UK public services can and should aspire to be world-class organisations, but to do so will need better performance management systems, the right structure, and critically, a performance oriented culture.

"Significant headway has already been made in developing new PSAs, but the performance oriented culture needs to cascade through the whole public sector.

Performance management is not an add-on extra. The best companies have performance systems at the heart of their business, affecting every activity. The same approach in the public sector can deliver much better services at lower cost"

Note to Editors

1. The Public Services Productivity Panel was established at the end of 1998 to help Departments deliver improvements in productivity, efficiency and the quality of services. In the March 2000 Budget the Panel's work was extended for a minimum of a further two years.

2. Members of the Panel are: Baroness Noakes, who is a partner with KPMG John Makinson, Group Finance Director of Pearson Plc; Andrew Foster, Controller of the Audit Commission; Clare Spottiswoode, formerly Associate Partner at the PA Consulting Group; John Mayo, Finance Director of Marconi Plc; John Dowdy of McKinsey and Byron Grote, Executive Vice President of BP Amoco, Lord Sainsbury of Turville, Minister of State at the DTI and Lord Simon of Highbury. Panel members contribute their time and expertise for free and are independent of the Government.

3. The 12 reports completed by the panel are available on this site. See links below:

Variations in Outpatient Performance (published: 25-Nov-99)

This report sets out a comprehensive strategy for improving waiting times for consultant appointments through a combination of improved management, long-term planning and new booking systems. The approach was developed by the Department of Health and the National Patients' Access team with advice from Panel member The Baroness Noakes, a partner in KPMG.

Customers in the Driving Seat? (published: 27-Jan-00)

Andrew Foster, Controller of the Audit Commission, has reviewed the quality of customer service in three of the large transport agencies. His report sets out a number of practical recommendations that would be of interest to all public sector organisations that want to improve their front-line services to customers.

Incentives for Change (published: 31-Jan-00)

John Makinson, Group Finance Director of the media company Pearson PLC, led a team examining performance incentives for the 150,000 front-line staff who work in the Benefits Agency, HM Customs & Excise, the Employment Service and the Inland Revenue. Although the specific proposals in his report are tailored to those four agencies, the basic principles are potentially capable of much wider application. The report also contains a wealth of comparative data on how performance is rewarded and incentivised across both the public and private sectors.

Targeting Improved Performance (published: 3-Apr-00)

John Dowdy, a Principal with McKinsey, has reviewed the performance management systems of the newly formed Defence Logistics Organisation against a model developed by the Productivity Panel. The report describes the particular challenges facing the DLO and the considerable progress it has made to date. It also describes in detail the integrated performance management model developed by the Panel and since adopted by the Civil Service Management Board for use throughout the Civil Service.

Improving Police Performance (published: 17-Apr-00)

Clare Spottiswoode, formerly Associate Partner of PA Consulting, has identified a new way to measure the efficiency of the police. She has identified a way of using information which is already collected by the police service to make a more meaningful analysis of which forces are doing the most to prevent, solve and reduce crime within available funding. More importantly, the report outlines a means by which police forces can better understand their relative strengths and weaknesses. This will help raise the level of performance of all police forces to the level of the best, within the framework of the Best Value initiative. The report makes an important contribution to the Government's crime reduction strategy and its approach has wide potential application across all public services.

Refocusing Performance Management (published: 17-May-00)

Byron Grote, Executive Vice President of BP Amoco, has worked with staff in the Energy Group of the DTI to refresh its performance management system by drawing on the system used by BP Amoco and the model developed by the Productivity Panel. The report shows how such a system can be applied in a complex public sector organisation. A practical description of how managers can tackle difficult issues is included.

Sold on Health (published: 26-May-00)

This report marks a step change in the way the NHS manages its estate. Developed with guidance from The Baroness Noakes, the report sets out a new national framework designed to root out more surplus estate, accelerate sales and cut red tape. Not only can the approach save and generate additional finance but through modernising the estate management process it can free up resources to increase the focus on patient care. It is hoped that the report will also provide useful ideas for other public services with large property portfolios.

Working in Partnership (published: 26-May-00)

Also prepared with guidance from The Baroness Noakes, this report tackles the difficult issue of achieving joined-up working at a local level, particularly when it comes to developing joint IT systems. The report has a strong practical edge, highlighting the key issues that organisations will need to tackle as they begin to plan across organisational boundaries. It includes a simple self-assessment tool which other public services might find valuable in helping them to develop local service partnerships.

Out in the Open (published: 9-Jun-00)

The Baroness Noakes guided the development of this report which proposes improvements to the commissioning of services for older people. Schemes in four local authority sites have been piloted, demonstrating how significant efficiency gains can be achieved by developing care services which move away from reliance on expensive (and often inappropriate) residential and nursing care. The report also highlights how direct intervention, rather than written guidance, can be a more helpful and effective role for central government.

Putting your House in Order (published: 29-Jun-00)

Productivity Panel member Andrew Foster, Controller of the Audit Commission, looked at particular ways of improving the quality of service provided to customers. This, his second report for the Panel, looks at how to get best value for tenants from the £4 billion invested each year in improvements to social housing stock. Based on detailed research carried out by tenants themselves, his report stresses the importance of involving tenants at every stage to ensure that public money is spent in ways that deliver real quality of life improvements.

Maximising Value for Money (published: 20-Jul-00)

For some time, major capital investment projects in the NHS have involved the development of Strategic Outline Cases (SOCs) at an early stage of developing plans for investments in new facilities, involving the various major stakeholders. This report - developed with guidance from The Baroness Noakes - examines the potential role of the SOC as an important element of planning for information systems and change management initiatives which involve a large number of stakeholders, are novel, risky and complex, or where the objectives and scope may be ill-defined.

Effective Reporting in Education (published: 28-Jul-00)

John Mayo, Finance Director of Marconi plc, has looked at how performance reporting arrangements in schools and further education colleges could be further developed to support the Government's radical agenda for raising standards in education and training. The report's recommendations for focusing performance reporting on the Government's key targets, for explicit reporting on planned improvement in those key areas and for cross-segmentation to identify patterns of good practice will be of interest to all organisations facing the challenge of delivering improving performance and value for money.