I recently delved into a report on UK policing to see what others are doing regarding identifying “Best Value”. This report comes HM Inspectorate of Constabulary (HMIC) and can be found at HMIC Value for Money Inspections. A summary of the report is as follows: “HMIC’s report, ‘Valuing the Police’ shows that only 11% of the police are visibly available to the public, despite year-on-year increases to budgets for the last 40 years. HMIC warns that with looming budget cuts, the availability of the police to the public will be even further reduced, unless there is a total redesign of the police.”
Thus conventional wisdom says a cut equals a reduction in front-line service (the 11% referred to above). With the incredible baseline of data that is available in this report (a mere 2,600 pages) I’m guessing there is a way to redesign the work such that the 89% is readjusted rather than the 11%. Hats off to someone for doing the groundwork that let’s someone challenge conventional wisdom if they choose to do so.
Challenging conventional budgeting wisdom – UK Policing
7-step benchmarking methodology
Gaining benchmarking insights requires quality of effort, not quantity. Let us explain a simple 7-step approach we employ to provide best value for local government:
STEP 1: DECIDE WHAT AREAS TO BENCHMARK
Public Sector organizations are incredibly complex. As an example, a local authority directorate probably has 50-60 departments. Here are some guidelines for determining areas to benchmark:
1) Size and complexity – the big departments are where the money is but complex ones (like street enforcement, education, housing) are where you might find starker contrasts and probably more insights due to the diversity of approach
2) Statutory services – what is required, and are you clear on what is “must have” versus “nice to have”
3) Those that are a bit less conventional and don’t get benchmarked much. They tend to fall into “all other” and may never have been benchmarking. Now may be the time.
STEP 2: PICK A COMPARATIVE GROUP
Be systematic and use factors that relate to the areas that you are benchmarking. Socioeconomic factors may be important, density of housing, public vs. privates, etc. Starting off with facts is always a good jumping off point. Chart 5 gives you an example of one we used for regulatory services.
Chart 5
Comparative Groups for Benchmarking
STEP 3: SET AN INPUT GOAL
We have found that 3-5 peers generate a raft of interesting insights. Make sure to enlist them in the process by offering to share the findings. After all, it is the implementation of the strategy than separates average from great. We have found that the participation rate is over 80% by using this approach.
STEP 4: BEFORE SPEAKING TO OTHERS, TEST THE APPROACH ON YOURSELF
Understand your own financials and key activity drivers before you start. There is a tendency here for clients to go into too much detail. If it is too detailed to collect from everyone or subject to interpretation, leave it aside. You will run into doubters who say that you can’t make “apples to apples” comparisons, but you can if you stick to the basics. You will be amazed at the insights that come at that level.
STEP 5: IN-PERSON INTERVIEWS
Conduct your interviews ONLY in person. It is this hour and hour and a half when you capture the right data, understand context and find out other paths to explore. Your respondents will look forward to your outputs and may suggest interesting approaches or interpretations. After all, it only costs them this one session plus any follow-up you might get later in order to get the same insights you are gathering or paying someone else to do on your behalf
STEP 6: ANALYSE THE DATA IN ORDER TO IDENTIFY THE INSIGHTFUL NUGGETS
Take stock and analyse the data. Charts 1-4 from my previous posting are examples of those nuggets. Here’s where the insights come out. Develop implications.
STEP 7: “DON’T DO NOTHING”
There is always the temptation to absorb the insights but not take the next step. Focus on the likeliest opportunities or the most interesting insights that also offer long-term value through further exploration. Some of the likely issues to be raised are:
- Do we have the right structure?
- Do we have the correct number and type of resource?
- If a ‘nice to have’, are we sure we need it?
- What does this tell me to help improve both efficiency and effectiveness – focus there?
It is only by taking action following this benchmarking that you can achieve best value in local government. The next step is rarely implementation. There is probably some further understanding of the competitive context or implications on your own operation, but don’t miss the opportunity to act.
And when you’ve done this last step, make sure to share with participants. They will thank you and set you up for a refresher when appropriate.
Conclusion
If you have been thinking about how to become more efficient and effective and are wondering if you’ve done everything you can to maximize the opportunity, consider if this “Best Value Benchmarking” approach might take you farther faster? What we know it will do is help to get this right the first time. Isn’t that worth the investment?
A better approach to local government benchmarking
The traditional benchmarking approach is a large group with 30 or more members who meet quarterly for a half-day to go over issues in common and keep the data current. It is financially and data intensive, and despite all the inputs it often doesn’t generate insight. This is “benchmarking by committee”.
As an example one local authority we met asked for a benchmark review of Parks and Open Spaces because their benchmarking data didn’t appear to make sense. Two things were immediately obvious. This particular benchmarking group was concentrating on less than 40% of total costs, and it missed key insights from the other 60%. Second, they weren’t focused on key performance drivers. In this area, total spend was dependent on the combination of total size and average park size and had little to do with spend per head of population – the metric they were using.
Talking in person to a a small group of comparable local authorities (3 to 5 using objective criteria is a good sample), the insights can be enormous. Let’s take two examples from previous work, one relating to Adult Education and the other Street Enforcement.
In the Adult Education example in Charts 1 & 2, we first see that there are 3 quite different models of Adult Education – direct provider, outsourced and a partnership model that falls in the middle. What underlies these models; how are they different; and does it make sense to adopt some of part of a particular model are all relevant issues in determining best value for local government.
Chart 2 shows how the different models impact the curriculum staffing requirement. Being a direct provider seems to require disproportionately more staff. We also found that local authorities are more likely to have to incur expense beyond funding for a direct provider than an outsourced service. It makes the leadership ask, “What type of service do we want to be and to pay for?”
Chart 1
Chart 2
Charts 3 & 4 walk through a similar story for Street Enforcement.
Again, the models are very different. Some are much more complicated than others. Is this complexity worth it? Chart 4 shows total Street Enforcement staff headcount, and we see that complexity again drives a disproportionate level of resource.
Chart 3
Chart 4
The theme in these two examples is the issue of “must have” or “nice to have”. With some relatively efficient analysis we are getting at the underlying drivers of best value for local government.
The case for benchmarking to achieve best value for local government
The UK’s Preliminary Budget plans a 25% reduction in local government spending over three years. 25% isn’t a figure that is easily or sensibly top-sliced. It requires a fundamental rethink of what activities are “nice to have” versus “must have”. Our experience suggests that there are new ways of benchmarking that can point out the roadmap of getting there from here and providing best value for local government.
The suggested economic model for England is Canada from 1994 to 1997. It is the proverbial benchmark we are shooting for. They used five tests to determine the utility of Public Sector activities:
1) Does the programme continue to serve a public interest?
2) Does government have a legitimate role at all?
3) Which level of government is the appropriate body?
4) What part of the programme could be transferred to the private and voluntary sectors?
5) Could it be more efficient?
Benchmarking helps address these “best value for local government” issues. The American President Thomas Jefferson coined the famous phrase in the “Declaration of Independence” that “All men are created equal”, but we have found with the UK Public Sector that “not all benchmarking is created equal”. Our work has found that a benchmarking investment of 7 days per Council department will drive key benchmarking insights in about half of areas reviewed. More importantly those insights help generate savings opportunities of £500,000 or more. Over my next few blogs, I am going to explain how we have been identifying these opportunities using benchmarking
