The job of government in developed countries is getting tougher. Demands from aging populations for better social services are on a collision course with budgetary constraints. Advances in information technology are forcing public agencies to go digital and offer a raft of new services. Governments are expected to do more, at precisely the same moment they are under pressure to tax less.
A common response has been to seek structural reforms and efficiency gains by turning to the private sector for ideas, assistance and capital. The results of this interaction have ranged from privatization to outsourcing and the private financing of state infrastructure.
After more than a decade of experimentation, this reform is entering a new phase. Outsourcing, for example, is becoming more innovative. Contracts are becoming bigger and more complex to manage. The private sector’s relationship with government is evolving from that of supplier to partner.
Despite remarkable progress, however, public-sector reform in many developed countries remains ad hoc. It is driven as much by immediate fiscal necessity as by longer-term thinking, and within the same country it can vary from agency to agency. Given the complex array of demands and choices facing governments, the time is right to put reform on a firmer foundation.
How Small?
To do that successfully, governments need both a vision — a clear sense of where they are going during the next decade — and a strategic plan that integrates the separate reform approaches of public agencies into a single coherent effort. Achieving both is not an easy task. However, those governments that do it will be in the strongest possible position to respond to increasing demands and manage new partnerships with the private sector.
Most governments in the industrialized world appear to be heading in roughly the same direction — toward a smaller and leaner organizational model. That is a key message of Vision 2010: Forging tomorrow’s public-private partnerships, a study published by the Economist Intelligence Unit in cooperation with Andersen Consulting.
Within this general framework, however, governments must still decide how small and how lean they wish to become. They need to think about how best to reach these goals from their respective starting positions. Not surprisingly, these positions vary greatly, with countries such as Canada, the United States, New Zealand and Australia much further along the reform continuum than France, Germany or Italy.
In developing a vision, the focus must be on citizens and their requirements. In this context, the central question becomes, to what extent should a government shed its services-delivery function?
Some services can be outsourced to the private sector, where they can often be done better and more cheaply. But a vision for public-sector reform should not be driven by a need for cost savings alone. First and foremost, it should be based upon a clear understanding of what constitutes “core government” — those functions that only a government can perform and must continue to perform.
The practical value of explicitly defining core government cannot be underestimated. For example, most public agencies in developed countries willingly outsource their information technology infrastructure, which they regard as non-core, but not their applications development, which they still consider sensitive and therefore a core function. Since decisions on hardware and software cannot, in fact, be easily separated, this approach is likely to prove to be a mistake over the long term. To cite one possible risk, if an agency is locked into a rigid five- or 10-year outsourcing contract for hardware only, it could find its information technology development options restricted.
The second prerequisite is that the vision for public-sector reform, if it is to be meaningful, must take into account government’s core competencies. Every government agency must manage debts, for example, and each agency dedicates resources to this function, which is effectively the same from one agency to another. Therefore, couldn’t one core group manage the debt collection of all agencies, from the tax office to the department of social services?
The third element in defining a vision is balance. Reform objectives inspired largely by the corporate world, such as improved efficiencies and customer focus, must be weighed against traditional public-sector values, such as accountability, probity, public service and fairness.
The fourth element is the interaction of horizontal, shared-services agencies with vertical, single-focused agencies. In the future, advances in communications, competency and knowledge management will lead to the proliferation of horizontal or “across government” initiatives.
Road Map
Creating a vision, therefore, is both a top-down and a bottom-up process. How do you implement it?
After the vision comes the strategic plan, a detailed road map for reaching the Government’s chosen destination. The key aim of this plan is to integrate the differing reform activities of public agencies.
Much public-sector reform today is fragmented because during the past 10 or 20 years, the traditional “central command” model of running government has given way to decentralization. Agency heads have been given more power to make procedural, spending and recruitment decisions. In return, they have assumed greater accountability for their actions.
Although this new model has produced individual successes at the agency level, it has also left the task of defining core government to those agencies, which have, in turn, decided which services to keep in-house and which to outsource. Even in countries where central initiatives are driving the outsourcing of information technology, most other outsourcing decisions are made by agencies. This lack of cohesion, if left unguided, could lead to:
• Agencies having no common goal, and public-sector reform emerging as an incomplete patchwork rather than a seamless fabric.
• Different levels of government in federal systems having no common goal.
• Knowledge not being shared effectively among agencies, with each operating in isolation, often reinventing the wheel.
• Government being redefined in an ad hoc, non-transparent, undemocratic manner.
A strategic plan would not seek to undo the successes of individual agencies, nor would it completely reverse the trend toward decentralized decision-making. Instead, it would aim to find the right balance between central guidance and agency autonomy.
Specifically, the plan would consider:
• The reform experiences of each agency and how these can best support, or be informed by, the broader vision.
• How to share information most efficiently on strategic issues such as recruiting and retaining skilled staff, risk management and financing strategies.
• How increasing demands on the public purse, both from outside government and within it, will affect agencies.
• How agencies should respond to technological changes, such as electronic commerce and the Internet.
Visions and strategic plans can easily lack credibility if they themselves are not given a firm foundation. Given decentralization, how can the political leadership produce a vision that is meaningful and able to be implemented, not just a public relations exercise?
One way of building credibility is to make certain that vision-making is grounded in reality. This means taking into account the practice of government and the actual conditions of each country, as well as advice from agencies (the bottom-up approach again). Objectives that are not achievable and lack support are worth little.
Another way is to recognize and applaud the achievements of individual agencies and initiatives. Visions and strategic plans should seek to build upon actual successes, not replace them. The point is to bring more coherence to public-sector reform, not start again from the beginning.
Agencies also need to be proactive in working with the government of the day to create a sustainable reform framework. The aim is not to produce a new vision each time a new government comes to power.
Forward Thinking
None of these obstacles will be easy to overcome. Doing so will require leadership, imagination and ingenuity. Perhaps the most persuasive argument in favour of this approach to public-sector reform is that it will bring significant benefits. Indeed, the beauty of this approach is that these benefits will be produced along the way, not merely at the end. Government, business and citizens all stand to gain.
Government. On a macro level, governments will be in a stronger position to respond to the increasing demands placed upon fiscal resources. A coherent vision and strategic plan would also give guidance to government agencies on how to use technology most effectively, how to retain their best people and how to cope with uncertainty. The best practices within individual agencies could be transferred to other agencies.
Moreover, public officials who manage partnerships with the private sector would benefit greatly from this approach. They are evolving from administrators and purchasers into strategic dealmakers. They are building alliances with private-sector providers and negotiating contracts that are increasingly complex, large and long-term. Their jobs would be easier if they had a clearer idea of what government expected of them.
Business. Business will contribute to, and benefit from, the vision/planning process in many ways, by participating in government advisory boards, through existing partnerships and by stimulating new ideas.
One of the most exciting of these ideas is the concept of value creation, developing innovative service models that redefine and genuinely improve government activities, rather than simply helping to make existing services more efficient. The business service center, a clearinghouse that handles communication between business and government, is one such idea. It could, for example, assist firms that are bidding for contracts by supplying them with basic background information and helping with the application process. It would also reduce transaction costs by being Internet-based, as well as through economies of scale.
Citizens. People, especially younger ones, want to be able to interact with public agencies efficiently through the Internet, not in person or over the telephone. A more responsive and proactive government will mean better information and improved services.
Governments that forge ahead without a vision over the next decade may well continue to perform quite adequately and achieve some successes. Yet the end result of their endeavours will be an uneven patchwork of policies and systems, and probably poor fiscal management. Agencies will share no common direction, while the concept of “government” will be defined on the run and largely behind closed doors. Technology will be applied haphazardly, with agencies repeating one another’s mistakes.
Good government demands, and citizens deserve, something better.
David Hunter is the global managing partner of the Andersen Consulting Government practice. He has worked with governments worldwide for more than 25 years. His wealth of experience gives him a unique understanding of how different models of government operate. Mr. Hunter is based in Sydney. This essay is excerpted from an article that originally appeared in Outlook, a publication of Andersen Consulting, and is reprinted by permission.
