Tuesday, April 29, 2008

A leaner public sector?

Today’s Global Business on BBC World Service was about applying the Toyota-style lean production methodology to service industries. (The podcast is avilable but only for a week or so.) Its worth noting that lean is particularly relevant to making public services more effective and customer-centred.

Lean production includes a range of tools including a focus on dealing with the seven wastes:

Defects in products
Overproduction ie the costs associated with the production or acquisition of items before they are required
Transportation of products
Inventory ie the capital costs of raw materials, Work-In-Progress (WIP) and Finished Goods
Motion of staff and equipment
Over-processing ie using a more expensive resource than is needed

The ideas of lean are already being applied in some public services such as the NHS and social housing. But much of the potential is being left untapped.

Sunday, April 27, 2008

The third sector and terrorism

The Institute of Chartered Accountants’ seminar on charities on Thursday included a thought-provoking session on charities, terrorism and fraud.

I must confess a degree of doubt over whether the WRVS would be targeted by Osama Bin Laden. Moreover, I think that the banks’ money-laundering regulations get in the way of civil society much more than criminals and terrorists who would merrily steal identities to circumvent the bureaucracy. Nevertheless, terrorism should be borne in mind when addressing fraud and other criminal threats as good risk management.

The Charity Commission’s operational guidance on Charities and Terrorism is useful and relevant in the public and third sectors beyond charities.

Thursday, April 24, 2008

Lies, damned lies and performance management

Last week’s Public Finance magazine carried an interesting article about performance management – yes, really. It included a disturbing statistic: over 70% of recipients in a recent survey admitted to fabricating performance data. (How many of the others didn’t like to admit it?)

We know about perverse incentives, erroneous errors and even issues with performance data to regulators and clients, but this is organisations telling themselves lies.

(Before I go on, I should stress that I am a sceptic when it comes to “targets” as reform and performance information as a panacea. But performance information is integral to good governance.)

What can be done? A mature attitude to performance information would be a start – seeing it as a means to an end rather than an end in itself; measuring what matters rather than what is easily measurable.

There is also value in assurance. Boards and managers should ensure that key information systems are reliable. How can they do their job if they are driving with a faulty dashboard?

Larger housing associations have to get certain operational performance information systems verified periodically. Other organisations could get internal auditors to check out performance information systems. Yet in most of the public sector and third sector performance information is just accepted at face value.

Wednesday, April 23, 2008

What’s the point of complaining: learning from mistakes

This month the Heathcare Commission has published its second report on NHS complaints systems. It suggested that the NHS should use complaints to learn from mistakes and promote improvement.

It’s not a new or radical idea. As Bill Gates commented: “Your most unhappy customers are your greatest source of learning."

Yet reporting on complaints is often seen as chore of governance rather than an opportunity for learning. Reports labour over who complains, what about and what happened (in terms of whether complaints “upheld” and remedial action) – with hardly a mention (probably no mention) of what lessons were drawn from upheld complaints (and, of course, even rejected complaints might indicate scope for improvement).

If public and third sector want to improve their complaints processes, there is help out there. The Housing Ombudsman published a guide some year ago which sets out key principles and best practice (pdf available).

Tuesday, April 22, 2008

Productivity and diversity of perspectives

This week’s Global Business on BBC World Service was about developing effective teams. (The podcast will only be available for a week or so.) Professor Lynda Gratton of the London Business School talked about the key ingredients – which don’t include mandatory team building!

Like James Surowiecki in his excellent book The Wisdom of Crowds, Professor Gratton argues that diversity of perspectives results in creative tension and from that great ideas. She suggested that productivity in the UK would improve if corporate boards had a better gender balance.

That logic applies to the public and third sectors – and other perspectives: culture, belief, disability ethnicity.

Saturday, April 12, 2008

Audit committees - some (late) new year's resolutions

I am not having a week of plugging the Audit Committee Institute (sponsored by KPMG). But I would recommend the ACI’s latest quarterly. It carries an article on Ten To-Do’s for Audit Committees in 2008.

A couple of the To-Dos are, in my opinion, less priorities for the audit committees of the public and third sectors. The rest are:

- Be a catalyst for improving risk management and oversight.

- Make sure the CFO (chief financial officer) and the finance team have what they need to succeed.

- Ensure there’s a shared vision for internal audit.

- Encourage (expect) frequent, informal communications with the audit engagement partner.

- Be prepared for a crisis.

- Make sure the full board is aware of the audit committee’s activities and needs.

- Assess the tone at the top and throughout the organisation.

- Take a hard look at the audit committee’s performance.

The article has some suggestions on all of these too.

As I’ve signposted before, there is plenty of useful guidance out there for audit committee members in all sectors.

Friday, April 11, 2008

How well will housing associations be able to digest the credit crunch?

Yesterday I went to an excellent seminar for housing association audit committee members run by KPMG’s Audit Committee Institute. One of sessions was delivered by the Housing Corporation’s head of financial regulation. He spoke about the financial health of housing associations. It was somewhat depressing hearing his summary of the sector's Global Accounts. He noted the pressure on association’s operating margins and their heavy reliance on profits on property sales.

It is rumoured that there are only two lenders in the housing finance market. (And, of course, the margins are higher and expressed over the inter-bank rate LIBOR.) This week Inside Housing is reporting the lenders' loss of appetite. This will hopefully change once the credit crunch passes - eventually. If housing associations struggle to sell shared ownership (and outright sale) new build, they may also lose interest development.

Housing associations (including their boards) need to watch this very closely although there scope for action is fairly limited.

Sunday, April 06, 2008

Housing repairs PIs, inspectors and targets

This week’s Inside Housing has a challenging article by John Seddon (the management guru who has popularised “lean thinking” in the UK). He writes on performance improvement in housing - and how, he suggests, targets and the Audit Commission inspection regime hinders it.

Sadly there is no copy of the article on Inside Housing website. However, there is an article making a similar case on John Seddon’s website, Systems Thinking. I have some sympathy with the case being made.

Inspectors (and politicians) often assume that everything can be fixed by targets (or higher targets if performance is not good enough). Sometimes “targets and terror” can work – but I would argue that such an approach cannot deliver sustainable improvement.

Housing associations and ALMOs should not give up all hope. They can do something. For a start, they should remember that the Housing Corporation has shifted the focus on repairs performance indicators from response times to resident satisfaction. It appears to be that few housing associations have re-thought their own repairs PIs and introduced a more holistic and sophisticated framework for repairs performance.

Saturday, April 05, 2008

Boardroom furniture – the role of the chair

The recent kerfuffle about Stuart Rose being an executive chairman at Marks and Spencer (ie combining the roles of chairman and chief executive) should be a useful reminder of the importance of the chair in acting as a balance to executive management.

A degree of tension between a chair and a chief executive can be creative. That is more difficult if the roles are combined. In the public and third sectors, we don’t get the roles combined although weakness in either party can result in a similar type of imbalance.

Perhaps relationships between chairs and chief executives are a bit like marriage. The National Council of Voluntary Organisations’ website has suggested prenuptial agreements as a way of avoiding relationship breakdowns.

There is a lot of truth in the old cliché: the chief executive manages the organisation, the chair manages the board. Unfortunately useful advice in applying that can be harder to find. I would signpost new (and not-so-new) chairs to the Governance Hub if they are looking for some guidance.

Thursday, April 03, 2008

Beyond decent homes - rooftop swimming pools for social housing?

We are fast approaching 2010 when the decent homes programme is meant to be (kind of) complete. It will have achieved a significant improvement in the long-neglected council housing sector as well as being used to promote reform and modernisation - not least with the successes of the Arms Length Management Organisation model of managing council homes. But what then?

Vienna's alt-erlaa social housing complex includes rooftop swimming pools. I don't think that will be on the agenda here. (I did not post this on April 1st!)

But local authorities, housing ALMOs and housing associations need to do some thinking about strategy - and some talking to residents. It should be remembered that decent homes is a narrow set of yardsticks and - as the name suggested - pretty limited to the basics of "decency". In the twenty first century I would suggest that having a shower fitted something that residents should be entitled to expect (and arguably it is an environmental prerequisite in water-hungry times).

Windfalls for departing bosses – robust arrangements for remuneration and performance management

There has been a lot of debate about the pay-off received by the Northern Rock chief executive, Adam Applegarth. These issues are relevant to the public sector too. Earlier this year we had the £75,000 payment to the chief executive of the “superbug scandal” Maidstone and Tunbridge Wells NHS Trust. Now the Yorkshire Post reports that Principal of Doncaster College has been given a compensation package of £163,000 after seven months doing the job and eight months being suspended.

Boards in the public and third sector must remember that hiring and firing chief executives is central to their role – so they need to have robust arrangements for remuneration and performance management.