The case for the v-word

In every corner of the world, governments are facing budget shortfalls. In most cases, they respond with the tried and true – economic stimulus packages, borrowing and budget cuts.

California Governor Arnold Schwarzenegger, for example, proposed US$1.9 billion worth of cuts in the current budget year and about the same amount for the 2004-2005 budget. Then he repealed a $4 billion car tax and proposed $15 billion bond.

Germany and France chose to exceed the borrowing limit of three per cent of GDP imposed by the European Union while struggling to find cuts to stem their tide of red ink.

In Canada, government spending is reported as “tight” following a year in which the economy faced new financial shocks from SARS, escalating health care costs, the Ontario electricity outage, mad cow disease, hurricanes and forest fires.

On the horizon, however, is an approach borrowed from the private sector that a few governments are adding to their traditional stimulus of borrowing and cutting.

In the private sector, high-performing businesses adapt quickly and effectively to changing conditions to preserve their financial performance. Legislative requirements and political dynamics make this rapid business response approach difficult in the public sector, but budget shortfalls are changing government’s way of thinking.

For example, information technology and business process outsourcing is now more common in the public sector, and new applications of IT are sweeping through agencies and departments as they did through corporations over the past decade. Government outsourcing is creating not only improved services for citizens but increased operational flexibility and savings of precious tax dollars. In the past couple of years, many countries, including Canada, have achieved good and quick results in implementing e-government solutions. E-government is a rather quick way for government to enhance:

Client relationships with constituents.

The efficiency of services.

The accessibility of services.

By implementing e-government, the operational efficiency of the machinery of government should be increased. But who is measuring the impact? By increasing automation, e-government should result in a reduction of the cost per transaction and a reduced human interaction for pure administrative tasks. The theory is that this human contribution can then be better used for service-intensive assignments. Long ago, competition in the marketplace drove businesses to this type of centralized, technology-based solution. Of course, governments lack real competition and have had no compelling impetus for the practical measurement of performance or incentive for service improvement through IT.

Until those recent budget declines, that is. Governments under budget pressures are more interested in measuring outcomes than outputs. If you put more police on the street, do crime rates show a statistically comparable decline? If you make filing tax returns easier for citizens, will compliance increase and enforcement costs decrease?

For example, many revenue and tax agencies around the world are facing the need for new efficiencies against a backdrop of globalization, workforce challenges, new citizen services and new technology demands. More importantly, revenue agencies are now expected to deliver what businesses deliver – a higher level of service. By taking a citizen-centric approach and creating performance metrics, revenue agencies around the world – including Australia and Ireland – are becoming high-performance government operations.

In using technology that corporations have widely adopted, governments move to improve the delivery of basic services while conserving valuable resources and tax dollars. As an added bonus to this transformation, they receive more complete and easily accessible data on citizens’ requests, which can help guide funding decisions for new services.

A crucial first step toward creating a system for real measurement of outcomes is the establishment of a Public Sector Value (PSV) model. This model allows citizens to see the performance of government the way shareholders gauge the performance of companies.

Budget deliberations will not be linked solely to “how many more of X do we need,” but rather will focus on “how much more improvement can we create in return on tax dollars.” The basic PSV model utilizes a classic “balance” of private sector service delivery – results vs. cost – and applies it to the public sector. Greater value is created by improving outcomes in a more cost-effective way.

This year, the U.S. federal government has taken a bold step toward this goal by establishing the Program Assessment Rating Tool (PART), a series of 25 questions that the Office of Management and Budget will use to evaluate programs and help guide funding decisions. But more is needed.

The capacity of the PSV model to measure an entire agency’s performance and evaluate its capability to create value for taxpayers makes it the next logical step for government. With a baseline for comparison, politicians and agency directors alike will be able to assess the performance of individual agencies and the impact of every proposed improvement on the road to becoming high-performance governments.

Government leaders must accelerate the movement toward greater efficiency while simultaneously creating efficient service delivery through the intelligent use of outsourcing and information technology and, most of all, the application of these new Public Sector Value measurement tools.

In an age of the declining tax revenues, tried and true has become a costly option for any government.

Graeme Gordon ([email protected]) is a partner in the Government Operating Group of Accenture, where he is responsible for the company’s e-government practice in Canada.

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