JOHN LOCKE defined a madman as someone ‘reasoning correctly from erroneous premises’. For Einstein, madness was repeatedly doing the same thing and hoping for a different result. The worst of modern management – and alas, that often seems most of it – manages to combine the two so well that it doesn’t just exclude incremental learning: it takes knowledge backward.
Consider the operational efficiency programme accompanying the budget last week. It identified a further pounds 15bn of public-sector savings on top of pounds 26.5bn already claimed, pounds 7bn to be made through obliging public-sector bodies to share back-office services such as finance and HR and buying better IT.
It’s not that there aren’t savings to be made – of course there are. Done properly, they would boost public-sector capacity beyond the wildest imaginings of the five expert advisers to the Treasury who wrote the report. The insanity is that savings can’t be got at by the cost-cutting methods they put forward, which on the contrary are guaranteed to drive overall costs higher. Not only that: by specifying the methods to be used, the government locks in far greater sys temic inefficiencies at the same time as it places the assumptions behind them off-limits to examination.
Part of the self-referencing madness is seeking assurance from experts who are so attached to current assumptions that they can’t see beyond them. As with recruiting Lord Laming, whose recommendations shaped the dysfunctional childcare system, to report on Baby P, getting the former chief executive of an IT services firm to advise on office efficiency is like asking McDonald’s to devise an obesity policy. Guess what, the answer is fast food! More standardised procedures, more streamlining of back offices, more shared services… in sum, more work for IT services companies.
The paradox of efficiency is that it can’t be addressed head on. It is a by-product that can only be defined in terms of its purpose. Without purpose, efficiency is meaningless. Cutting costs (the government’s purpose) only raises them for the citizen – but because the assumptions are out of bounds, the government can’t see it.
Look at the ‘cost savings’ made at the Department for Work and Pensions and HM Revenue & Customs. Both these flagships of public-sector reform have been subject to top-down makeovers along approved factory lines. Dumbed-down ‘front offices’ sort and feed incoming cases to specialised processing sections in the ‘back office’ in the belief that these mass-production techniques will cut the unit cost of transactions and harvest economies of scale.
Even in manufacturing, economies of scale lost their grail-like allure when the Japanese discovered how to make small quantities of different, high-quality goods cheaply. In services the case is at best unproven (banks, anyone?), and so far the successes in shared services are few and far between. But even if they do make transactions cheaper, that’s irrelevant if from the citizen’s point of view the service is worse, requiring more transactions to put right. And it takes no account of the disbenefits of the efficiency measures elsewhere in the system.
Thus the HMRC and DWP cost savings recorded in official figures reappear, with interest, in the workloads of harassed local councils, housing associations, police, courts and advice agencies. They have to pick up the pieces left by the failure of HMRC and DWP’s demoralised staff and fragmented processes to provide an acceptable (rather than cheap) tax and benefit service.
Much of the work of the UK’s voluntary advice organisations now consists of dealing with mistakes affecting the most vulnerable in society perpetrated by New Labour’s efficiency flagships. There is an opportunity here. By identifying problem areas and working with tax and benefit offices to remove them, these unsung pillars of civic society could be a powerful agent for improving service and reducing costs.
Except that the government has stamped on any such possibility. First, it has disallowed anything except immediately ‘cashable’ benefits to count as efficiency gains – so investment now to prevent costs in the future doesn’t qualify. And second, diabolically combining type 1 and type 2 madness in the same move, it is subjecting the voluntary sector to the same misguided ‘reforms’ as the service providers – putting large advice ‘contracts’ out to tender, forcing agencies to combine or wither, and paying them per transaction, thus removing any incentive to improve the system as a whole.
’In times of transformation, not only do new problems arise, old ways of looking at things become problems themselves.’ That’s the infinite regression the cost-saving programme being rammed through Whitehall locks us into. It is, perhaps, a third form of madness.