David Yip
The recent National Audit Office report, Reorganising Central Government, revealed an estimated 51 government reorganisations had cost more than £780m, with technology being one of most significant expenses alongside people and property. The conclusion: little evidence of 'value for money' returned on the investment.
UK politics' addiction to change is generally based on positive motives. Driving greater public sector efficiency should win public support. However, high profile failures dampen public appetites and, as the NAO report clearly illustrates, further failures are inevitable without strong business cases and clear objectives.
Whatever 6th May's outcome, the incoming government is unlikely to be able to kick the restructuring habit. To gain real savings, the technology, people and property elements need careful structuring.
The NAO paper prompted Xantus to commission Sourceforconsulting.com to write a report, Public Sector M&A?, which is based on interviews with independent restructuring experts. It indicates that the public sector can learn key lessons from private sector mergers. I should add that research shows only 30% of private sector mergers actually succeed, while there is also clear evidence that not every public sector restructure fails.
Ofcom is a prime example from the public sector. In fact, in 2006, the NAO praised the process that formed Ofcom from five independent regulators. The whole approach of creating a new entity from scratch was, in my view, critical to the project's success. Had the merger followed the traditional path and fused five pre-existing bodies into an amorphous mass, the outcome may have been very different.
There are also lessons from less successful mergers. HMRC, for one, was recently subjected to a Cabinet Office Review after seven years of underperformance following the merger between the Inland Revenue and Customs and Excise.
So, what are the lessons?
Technology is often the catalyst for restructure success or failure. Here, private sector lessons are invaluable: due diligence at the outset; fearless decision-making; and rapid execution of the agreed plan even if it requires unpalatable job losses at all levels.
Due diligence must be the starting point of any merger decision. Private sector projects have clearly stood or fallen by the research, or lack of it, undertaken in advance. Assessing the capability and compatibility of departmental IT is as essential as evaluating the whole organisation.
Public sector departments are protective of their ways of working. This extends to the IT and database systems they run, the governance and processes that run them and often the external suppliers involved in providing and supporting the infrastructure.
As well as establishing whether genuine efficiencies can be made, due diligence will also determine which systems need to be retained or removed. An early understanding of the complexities of information management will ensure a vital system is not switched off only to emerge as pivotal to new organisation. Equally, if overall costs appear greater than long-term savings, then why restructure?
Next comes fearless leadership. Change is never easy and half the people involved aren't going to like the decisions made! There is little place for public sector diplomacy or 'silo mentalities' in driving effective change, with many experts even suggesting a more dictatorial approach is needed once the merger decision has been taken.
This fearless approach needs to extend to smarter working with suppliers. Often long-term IT service contracts and technologies are securely embedded. Clear assessment of need, long-term goals, and an ultimately ruthless approach to systems selection is essential in avoiding headlines trumpeting another public sector IT integration disaster.
Finally, decisions should be just that – decisive. Decide which IT systems to use; decide what departmental structures are needed; and decide the cost savings to target. Planning must be careful but acted on quickly, decisively and fearlessly. Politics has no place in successful restructures and faint hearts never win.
David Yip is director of Xantus Consulting
From Bubb's Blog
From Whitehall Watch
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