The new UK government’s decision to reduce the huge budget deficit by cutting £6.25bn of expenditure immediately, while tackling social problems such as long term unemployment, calls for radical thinking and action. The real challenge though is to figure out how to do this while improving the services delivered to tax payers.
While I may be expected to espouse the outsourcing of the UK government’s back office operations as part of the proposed solution to this challenge, I fundamentally believe that simple wage arbitrage will not deliver the long term results they need. Nor will it guarantee the provision of what citizens are demanding; effective government services that are delivered efficiently.
Doing more with less is a problem that the private sector has been familiar with for many years; but never more acutely than through the recent recession. In fact, the downturn forced businesses to rethink every element of their operations and take unprecedented steps such as organizational restructuring, process standardization & centralization and increased globalization to manage their financial health. Businesses that adopted such measures, with the CFO most often driving the charge, emerged stronger and leaner with more effective operations and enhanced business performance, while continuing to deliver higher customer satisfaction.
The Chancellor, like a CFO in the private sector, faces the same complex situation of cutting expenditure, increasing savings and reducing debt, as well as increasing efficiency of existing departments to deliver more effective services to the citizens, thereby meeting the Governments’ stated objectives.
This may sound like management school talk, but it is something best in class companies do achieve. In the process of analysing over 3000 business processes that we have managed for more than 400 clients since 1996, it has become clear that the only way to achieve true long term business outcomes is to make the leap from seeking ‘efficiency’ to seeking ‘effectiveness’. What I mean by this is changing the mindset to think about maximizing output and delivering superior quality by looking at a process end-to-end, fixing gaps and leakages and achieving a desired outcome such as decreasing cost, increasing revenue or improving customer satisfaction vs. simply maximizing output of a particular process.
This shift in thinking can deliver not just incremental savings but up to 5 times the value in terms of the defined outcome. For businesses this translates into millions of pounds worth of top-line or bottom-line impact for businesses. For a government it means money and resources saved. In public services for example ‘effectiveness’ could equate to cutting waiting time for diagnostics and treatment in the healthcare system , thus delivering better patient care and long term savings by reducing the need for more aggressive treatment later.
Let me take a few examples to better illustrate what I mean.
A real world example of how the NHS, with a budget of £94.5 billion, may be able to learn from best practice is the Miami Children’s Hospital (MCH) where a recent redesign of processes, achieved by working with the staff, enabled MCH to achieve a 4x return on investment through increasing utilisation of equipment and infrastructure, thus generating additional capacity and decreasing in-patient wait times by 18%.
Proving the transferability of the approach, this model has been replicated successfully in two Indian public sector hospitals, where the projects were aimed at enhancing patient access to the hospitals’ casualty departments. The process improvements led to a 30% increase in patient flow and a 20% increase in doctors’ capacity over a period of 12-14 weeks.
Procurement & supply chain functions across government departments can no doubt similarly benefit from consolidation and better processes. If you visualise the government as a group of large enterprises, business experience looks immediately relevant. When you consider how a $5 billion turnover manufacturing company, reduced its purchase spending by $50 million from $150 million over three years, applying this approach to even part of the £6.1 billion of spending on military equipment, or the £18.91 billion of NHS supplies, let alone the rest of the central and local government administration, it is clear optimising purchasing practice could significantly contribute to ongoing savings. Reducing waste helps meet environmental targets too.
Income as well as expenditure needs to be tackled with fresh thinking. As the taxation system is revamped, improving collection efficiency could cut both administrative and borrowing costs. Using the latest business analytics techniques to deploy citizen-specific collections strategies based on their payment behaviour could improve outstanding cash due rates by about 20%. Currently the treasury estimates that it is owed £15.8 billion in income tax and national insurance revenue, £8.9 Billion in corporation tax and £15 Billion in indirect taxation benefits (i.e. VAT, Diesel duties etc).
In every area of public services, there are private sector parallels where commercial pressures have led to the refinement of operations. Optimizing deeply entrenched ways of working is not as simple as it sounds in concept. It requires deep knowledge of the domain , focused technology solutions, targeted analytics ,pragmatic re-engineering and a clear roadmap to be able to attain the desired benefits. It also requires artful management of change. And most importantly an experienced partner who can not just identify the solutions, but help implement them.
The UK today faces an almost unprecedented challenge to cut fat, not muscle from its public services. However, with a new coalition approach to politics and recognition of the absolute imperative to reduce the deficit, there is a unique opportunity to reinvent its thinking and redesign its services. The government needs to think like a business that is facing tough times. There should be no lines in the sand; centralising & sharing functions such as human resources and payroll through all departments - mirroring the shared services model that several European business giants have so successfully deployed, unifying purchasing and deciding to stop providing some services at a national level, all need to be evaluated. Old style bureaucracies need to be challenged, staff empowered with knowledge through better systems and analytics, and given the authority to make decisions.
In my opinion, if the UK government can carry through its commitment to change by learning from the many new, innovative and tested lessons from the best companies in the world; it can emerge with a lean, effective public sector and achieve the herculean task of cutting the budget deficit down while keeping citizens happy. Is outsourcing the best answer? Only if that is the most effective way to achieve long term effectiveness in public services. If the UK government were to outsource just one thing, I believe it should be the re-design of its processes and services.
Pramod Bhasin is President and CEO of Genpact (formerly GE Capital International Services) which, under his leadership, pioneered the Business Process Outsourcing industry in India, China and Eastern Europe. The company is acknowledged as a global leader in business process and technology management. Mr. Bhasin also served as the Chairman of India's National Association of Software & Services Companies (NASSCOM) for the year 2009-10.