Proposals to make the public sector more efficient (part II)

By: Ignacio Barros

The four perspectives that need to be developed in the public sector

a. Customer focus:

In the first part of this article I mentioned that in the public sector, just like in the private sector, institutions have internal and external clients. Internal employees are all those employees who are part of the work chain and who collaborate with each other following an internal client-information provider or product-in-progress relationship until reaching the final deliverable that will be delivered to the external client, who is “the one who pays the invoice”, so to speak. In the public sector in general, and in the Latin American sector in particular, there has historically been no recognition of who the internal customer is or of its importance and, on the other hand, external customers have been served late, badly and never, largely due to the scarcity of resources and management elements that have characterized the state sector. Of course, there are honorable exceptions in each country, but they are just that: exceptions. The starting point for a positive transformation of the efficiency of the public sector goes through the identification of internal and external clients and the implementation of SLAs (service level agreements) or service level agreements. These numbers must be defined internally in the institution as objectives to be aimed at, using benchmarks taken as an example from the private sector or from efficient state institutions from other parts of the world. Once the objective has been set, a diagnosis of the internal processes, the organizational structure, the use of technology and the inter-area communication bridges must be generated. The analysis of the current situation of these dimensions will show the institution the size of the gap between the current situation and the desired objective. After that, we proceed to design and implement solutions to close the gaps found through reengineering work. At the end of this improvement project, which could take several months depending on the size of the institution, four key elements will be defined:

  • Recognition by the entire public institution of who its internal and external clients are, and the importance of both groups
  • An agreement of service levels to be given to both groups
  • The indicators to monitor these SLAs
  • The processes and organizational structure that ensure that SLAs are sustainable over time

b. End-to-end processes:

It is very common to show in state institutions the phenomenon of “islands of power”, that is, organizational areas that function as fiefdoms with little communication with the rest of the institution. The heads of these areas defend their territory and are usually confronted with the heads of other areas, in a kind of struggle to see who has more power. This struggle generates obvious frictions in the internal processes and hinders them, and since the processes of generating value in a company are always transversal, the injured party ends up being the client who is waiting at the end of the “production line” for the end of the the fight between these gentlemen to deliver your product or service. This caricature seems dramatic but it is not very far from reality in some government institutions. The solution to this problem must be given through the designation of process owners. As long as a process continues to be a flowchart or a set of “little boxes”, each one with a work team that does its own things and does not care about what happens next, the problem described in the lines above will continue. But if the owner of each little box is assigned an SLA for which he must respond (here we link this section (b) with the previous (a)) and if, in addition, a general owner of the process is designated, who has no interference hierarchical over the different area heads but it does have a consolidated indicator by which to report, a positive effect is generated on the entire chain. The general owner of the process has an indicator that represents the consolidation of the SLAs of the entire chain, and can know in which link the process is stuck, therefore he knows which owner of the box to confront. This point is also linked to section (d) below, in which we will see that part of the remuneration of the area managers should be given for compliance with the SLAs, thus also generating an economic incentive. Finally, a fundamental complement to this whole scheme is to have a fortnightly meeting of the heads with the general owner of the process, to review the indicators, unblock the problems and renew the common understanding of the process and its internal customer-supplier relationships.

c. State and solve problems:

According to McKinsey, a key characteristic of a lean organization is its ability to constantly improve by bringing problems to the surface and solving them. At this point the public sector often finds itself in a weak starting position due to the low professional level of some of its main actors and also deep-rooted retrograde mentalities. In a lean system, these surface and resolution dynamics work in the same way that low water levels expose sandbanks in the sea. For ships to navigate without running aground, the sandbanks must be dredged and this cycle repeated continuously. The same happens in a public or private company. But this point has a flat and is that, to avoid “running aground”, many public institutions are tempted to invest excessively in rescue elements, whether they are human resources or technology. The problem is that many of these investments are not justified and only make the institution bigger, taking away margin and speed of response to the user. In our experience, the best solution to this problem is to design and implement a good system of management thermometers and a forum to review said information and make decisions. The challenge is that these meetings are effective and the main elements that must be considered for this to happen are:

  • A day, a time and a place previously established
  • A maximum duration (suggestion: no more than one hour)
  • A meeting leader, empowered by senior management or the board
  • A typical agenda that the leader monitors, with topics and times
  • Exhibitors, each with a time and an indicator to present
  • A minute of commitments that is distributed to everyone after the meeting

d. Develop a meritocratic culture:

One of the main problems of the public sector in all the countries in which we have carried out research in this regard is that all jobs, without exception, have a fixed remuneration without bonuses, and also have immunity, that is, the legislation does not allow dismissal of the person except for very serious faults. The result is that the employee becomes stuck in his job and has no real incentive to be better every day except the desire for self-improvement, which few public employees seem to have. The best way to break this trap is by introducing a meritocratic element based on economic growth resulting from the achievement of certain numerical goals measured by indicators, which in turn are audited by external companies with no interest in the public institution. In Sweden, Norway and Finland there are very interesting examples of this; there are also in Estonia, considered today the Silicon Valley of Eastern Europe. Achieving this will not be easy, since the current legislation of the vast majority of Latin American countries prevents variable remuneration for public sector employees, but we believe that the potential benefit more than justifies all the time and effort that must be invested to modify said statutes. .

We are aware that applying the four concepts outlined in this article is difficult in a private company; with much more reason it is in a public institution. Successful transformations should aim to close the skills gap as soon as possible in the process, so that managers and staff can transition to a new way of working. Our experience shows us that closing this gap in the public sector involves hiring leaders from the private sector to seed transformation and build new internal capabilities.

Analysis and courage are required to uncover and attack deep-seated organizational problems, and legislation must empower senior public management with the power to decide on staff reductions and variable meritocratic compensation schemes. Without these two tools, little can be done.