Achieving Excellence in Public Sector Performance

David OsborneThe Public Strategies Group

David@psg.us

www.psg.us

Two Waves of Reform

1. The challenge in the developing world:

Creating a professional and honest public Creating a professional and honest public

service, free of political manipulation service, free of political manipulation

and patronage hiringand patronage hiring

Principal Elements of Reform in the Developing World

Establishing the rule of law

Creating an independent, honest judiciary

Prosecuting corruption

Establishing transparent budgeting, procurement, & contracting

Creating an effective audit system

Creating a professional, well-trained, adequately paid civil service

Barring civil servants from involvement in political campaigns

The Second Wave of Reform, in the Developed World

Improving service and access by….

Transforming bureaucratic public services into flexible, innovative, Information Age organizations

Industrial-Era Governments

Centralized bureaucracies Hierarchical management Rules and regulations Standardized services Command-and-control methods Public monopolies

Industrial-Era InformationBureaucracies Age Realities

Stable bureaucracies

Traditional work processes

Mediocre services

“One size fits all”

Slow-moving monopolies

Ever-expanding budgets

Rapid change

Information technologies

Public that expects quality

Many choices

Global competition

Severe fiscal constraints

The DNA of Public Organizations and Systems

Purpose Incentives Accountability Power Culture

Five Strategies to Reinvent Bureaucratic Government

Core Consequences Customer Control Culture

I: THE CORE STRATEGY: Clarity of Direction, Purpose, & Role

Approaches: Clarity of direction: Improving your aim Clarity of purpose: Clearing the decks Clarity of role: Uncoupling steering and

rowing

Clarity of Direction:Improving Your Aim

Visioning Outcome goals Steering organizations Strategy development Mission statements Long-term budget forecasting Strategic evaluation Budgeting for Outcomes

Tools:Tools:

Budgeting for Outcomes Asks Four Basic Questions

1. How much revenue will we have: What price of government will we charge our citizens?

2. What outcomes matter most to our citizens?

3. How much should we spend to achieve each outcome?

4. How can we BEST deliver each outcome that citizens expect?

Delivering the Outcomes

Create Results Teams as “Buying Agents”

They use cause-and-effect analysis to determine the best paths to the result

They define basic purchasing strategies: What matters most?

ENVIRONMENT

HEALTHHEALTH

RISKFACTORS

CARE

BEHAVIOR

Sample Cause and Effect Map: Health - Washington State

ImpactNational Health Expenditures

$1.2 trillion

Source: Centers for Disease Control and Prevention, University of California at San Francisco, Institute for the Future

Health Impact vs. Spending in U.S.

Possible Purchasing Strategies to Improve Health: Examples

Focus on changing lifestyle choices (smoking, drinking, diet, etc.).

Focus on the front end: pre-natal care, immunizations, educating new parents.

Stop high-cost, repetitive cycles of care in emergency rooms.

Results Teams Issue “Request for Results”

An “RFR” defines:

The outcome desired

Three indicators by which progress will be measured

The purchasing strategies chosen to produce the result

How much money is allocated to the result and each purchasing strategy

“Sellers” Make Offers

Agencies and programs produce offers defining what they can do to contribute to the result desired.

You can also let outside agencies and companies make offers--to stimulate competition.

Offers include performance data and price.

Results Teams (“Buyers”) Rank Offers From Best to Worst

Start buying from the top

Draw a line when they run out of money

Send the rankings out and ask sellers to prepare better offers

Sellers make final offers

Results teams rank final offers and buy from top

The Bottom Line Align spending with priorities

Buy results, not costs

Low-value spending is forced out of the budget

Important new investments go to the front of the queue

General interest trumps special interests

Performance accountability

Continuous reform/ improvement

“Common Sense” communications

Approaches:Approaches:

II: THE CONSEQUENCES STRATEGY:Using Incentives to Create

Consequences

Enterprise management

Managed competition

Performance management

Three Keys to Effective Performance Management

Three Keys to Effective Performance Management

Written performance agreements that lay out results expected, along with flexibilities granted and potential rewards

Direct, personal feedback on performance

Meaningful rewards and consequences for performance

Direct Feedback on Performance is Critical

Direct Feedback on Performance is Critical

New York’s Compstat, Baltimore’s Citistat, Maryland’s StateStat, Washigton’s GMAP:

Direct, immediate, personal feedback on performance.

Highly dependent on Information Technology.

Rewards and SanctionsRewards and Sanctions

Performance scorecards

Performance awards

Psychic pay

Performance bonuses

Gainsharing

Shared savings

Sanctions

Tools:Tools:

Performance Management: Some Lessons Learned

Performance Management: Some Lessons Learned

Apply incentives to groups more than individuals

Avoid arbitrary targets

Tie rewards to objective measures of performance, not subjective appraisals

Make bonuses big enough to get people’s attention

Don’t make reward formulas too complex

Create a culture of learning, not fear

Verify the accuracy of measurement

Approaches:Approaches:

Quality Assurance

III: THE CUSTOMER STRATEGY:Putting the Customer in the Driver’s

Seat

Customer choice

Competitive choice

Customer quality assurance

Who is the “Customer”?

Definition of the customer: the “principle intended beneficiary” of your work.

Examples: Schools: Students and parentsSchools: Students and parents Public transit: UsersPublic transit: Users Public printing office: Agency personnelPublic printing office: Agency personnel Police: The public at largePolice: The public at large

How Do We Give Customers Power?

Customer choice of service providers

Choice in a competitive market: even better

Asking what they care about and setting customer service standards, guarantees, redress policies, etc.

Competitive Customer Choice: For Example, in Public Education

Competitive Customer Choice: For Example, in Public Education

Give parents choice of public schools.

Let the dollars follow the student to the district and school of their choice.

Encourage the creation of new public schools, so there are enough schools to create real consequences for those that lose too many students.

Studies in the U.S. show that districts and schools that lose 3-5% of their funds make changes.

Customer Quality Assurance

Customer Quality Assurance

“311” telephone & web systems citizens can use to report problems and complaints

Customer service standards

The UK’s Citizen’s Charter (Now “Service First”)

Customer service standards Customer redress Customer complaint systems Comparative performance tables for

local services, hospitals, and schools

Chartermark awards

Customer Service Standards: Examples

Customer Service Standards: Examples

Bromley (London borough): Will repair paving problems within 2 hours of notice.

U.S. Social Security Administration: 90% of calls to 800 number will be answered on the first call; 95% will be answered within 5 minutes.

Commuter rail service: 90 percent of trains should arrive within 10 minutes of the scheduled time.

Consequences and Publicity are Critical

Guarantees

Redress

Customer Ratings

Customer Service Agreements

Redress to Customers: Examples

Redress to Customers: Examples

Development permits in some U.S. cities and states: If deadline is not met, the permit fee is waived.

Some commuter rail lines issue vouchers for free round-trips or cash when trains arrive 30 minutes late or more.

Approaches:Approaches:

IV: THE CONTROL STRATEGY:Shifting Control Away from the

Top and Center

Organizational empowerment

Employee empowerment

Community empowerment

Tools:Tools:

Organizational Empowerment

Decentralizing administrative controls: budget, personnel, procurement

Mass organizational deregulation Site-based management Waiver policies Reinvention laboratories Executive or “Charter” agencies

Executive or “Charter” Agencies

Executive negotiates “Flexible Performance Agreements” with charter agency directors.

Agency agrees to produce specific results over 3-5 year time frame.

Agreement includes specific rewards and sanctions for performance.

Agreement specifies new flexibilities granted to charter agency.

UK Executive Agencies

UK organizes 75% of civil service this way.

Annual efficiency increases in early years: 2- 30 percent.

1990-1996: 15 percent reduction in personnel, while improving performance.

1994: Parliament called it “The single most successful civil service reform programme of recent decades.”

Potential Flexibilities

Examples from Iowa (U.S.):

“Freedom from ceilings on the number of employees or other employment controls.

“Authority to waive personnel rules and do what makes sense.

“Authority to waive procurement rules and buy what makes sense.

“Authority to waive Information Technology rules and buy the computers and software you want.

Potential Flexibilities (2)

“Authority to keep half of this year’s unspent money and spend it next year.

“Authority to keep and spend proceeds from lease or sale of capital assets.

“Authority to reprogram money between accounts.

“Authority to waive administrative rules.

“Access to $3 million Transformation Grant Fund.

“Protection for two years from across the board cuts.”

• Saved Iowa taxpayers $20 million/year for first two years; $50 million for third.

• Corrections Department: lowered 3-year recidivism rate from 46.7% to 35.4%.

• Revenue Department: improved rate of income tax refunds issues within 45 days from 75% to 94%.

• Human Services: increased children with access to health insurance by 34%.

• Alcoholic Beverages Division: increased revenue by $35 million over 3 years.

Charter Agencies in Iowa (U.S.): ResultsCharter Agencies in Iowa (U.S.): Results

V. THE CULTURE STRATEGY

Approaches:Approaches:

V: THE CULTURE STRATEGY:Changing Habits, Hearts, and Minds

Changing habits: Creating new experiences

Touching hearts: Developing a new covenant

Winning minds: Developing new mental models

Changing Habits

Meeting with customers

Walking in the customers’ shoes

Job rotations

Internships and externships

Contests

Five Strategies to Reinvent Bureaucratic Government

Core Consequences Customer Control Culture

C x C x C x C x C = Transformation