David Cameron believes the public sector has much to learn from Tesco. In a bid to increase customer satisfaction while facing savage budget cuts - more for less, according to George Osborne - public sector organisations might observe the way supermarkets have cut costs while sustaining, and even improving, customer service levels.
He may have a tendency to go for the headline-grabbing sound bite, but Cameron has hit the nail on the head. Experts have been expounding for years that the public sector should take inspiration from the private. But little progress has been made on effecting serious change in the complex public services arena.
While examples of good practice in public services are on the rise, too often public sector organisations suffer from lack of awareness of customer needs, cautious management and a widespread resistance to change. New initiatives are announced but allowed to stall, falling victim to organisational inertia. Critically, there is limited consequence for failure to implement these projects.
The same criticisms could hardly be levied at many quarters of the private sector, particularly the retail segment. Many retailers focus on identifying and pre-empting customer needs, adapting their practices to meet them.
Customer satisfaction is delivered while maximising efficiencies.
Supermarkets especially excel at squeezing more out of their organisations while leaving extra pounds in their and the customers' purse. Tesco has driven through continual customer improvements while scoring a significant increase to its bottom line, and Morrisons has achieved a remarkable turnaround in its fortunes. These organisations focus ruthlessly on implementing continuous improvements.
Tesco's strategy is dedicated to listening and responding to the consumer. It collects extensive data about customer preferences, which guides managers in making decisions on stock, display and pricing. It allows shoppers to feedback on their shopping experience by text, phone or email, with personalised responses forthcoming almost immediately.
Indeed, such an approach has its echo in the public sector. The NHS runs "national patient surveys" and local initiatives where patients may give instant feedback on their experiences and provide suggestions for improvement.
David McCartney
Tesco's senior managers may spend a week working in stores, but we recently met an NHS Mental Health Trust human resources director who had just finished working an early shift on one of the wards, seeing first hand the challenges facing frontline staff.
But these are two of the few examples of deep engagement with the customer experience in the public sector, which often struggles to progress innovations similar to its private counterparts.
There may be no shortage of teams and individuals gunning for and designing operational change. But, institutionally, there are barriers to that change, with the consequence that its execution is poor.
At Alvarez & Marsal, working with the corporate and public sectors, we see change programmes that would take weeks or months to implement in the corporate world take months or years in the public arena.
Faced with imminent and far-reaching budget cuts, the public sector must change its way of changing. Organisations need leaders who will dismantle the numerous institutional and cultural barriers that stand in the way of change. Small steps will transform their organisations into responsive institutions focused on efficiency and customer satisfaction.
Anticipating tougher financial conditions is critical. This year, many retailers have cut costs by a pessimistic 10 percent.
Malcom McKenzie
Monitor, the regulator of NHS Foundation Trusts, says that Trusts expect real increases of 3 to 4 percent a year, when the reality is more likely to be near zero.
The public sector needs to be realistic about the revenue picture.
Public service providers should learn from retailers that monitoring habits and interaction with its services will help identify the most effective methods for meeting the public's needs. All of this needs to be underpinned by measurement. While the public sector is increasingly evaluated from top to bottom, there is less focus on measurement and amendment of everyday activities.
The challenge is great. But, by scrutinising their private sector cousins' successful operational practices, public sector organisations could improve service levels while operating at lower cost.
Malcolm McKenzie is a managing director and David McCartney a senior director in the Performance Improvement practice of Alvarez & Marsal
