McKinsey on Government as a business

On the MacKinsey Quarterly website there is a new lecture worth looking at. Ian Davis, the Managing Director on McKinsey, reflects on Government as a business. (Both the transcript and the podcast are available although you'll have to register.) Hopefully the title will not turn people off.

The lecture reviews a range of issues facing the public sector internationally including globalisation and demography. But the most insightful section is on the “productivity imperative” – what is known as the “efficiency agenda” in the UK.

Davis starts by pointing out:

People often use the term "productivity" interchangeably with "savings"—seeing the word as synonymous with cost cutting and layoffs. But that is not productivity. Productivity achieves two goals at once: productivity simultaneously improves performance while decreasing costs. The magic is that productivity integrates both results and costs, conceptually and in terms of measurement.

That isn’t a big revelation. It is common sense. And its in all the UK government’s guidance on efficiency. Yet sadly in the UK the word “efficiency” is being abused in all sorts of ways. (One housing association that I know didn’t spend a large chunk of its training budget – it claimed that as an efficiency in its returns to its regulator.) The UK “efficiency agenda” really does have to get back to the key related issues of raising productivity and doing more for less

Davis advocates stretching ambitions for improving performance but reminds us:

This can't be achieved by pressure alone—you need support as well. And you need training. In government reform efforts we have seen around the world, pressure without support simply leads to demoralization, while support without pressure leads to complacency.

That sounds rather familiar?

In terms of means, he notes:

Virtually all countries could benefit from adopting more of the approaches that have helped drive the productivity gains in the private sector over the past two decades—better transparency, improved performance management, better alignment of incentives, stronger accountability, better incorporation of technology, and, crucially, better attraction, deployment, and development of talent.

I fear that in the UK we’re see more top-down approaches to improving performing – linked (or confused) with a more bracing financial environment for public services. Nevertheless, leaders and managers in the public and not-for-profit sectors can still raise to the challenge for raising productivity from the bottom-up.