As published in The Mandarin, 26 February 2024 by Kiah MD John Glenn

The public and private sectors are different, and not everything translates well, but some things do if adapted. We know – we do a lot of work at the intersection of the two and many of us have worked inside both public and private sectors.

Fundamentally, the challenge is perspective – if you see the world from one perspective, one set of experiences, your view is myopic – tunnel vision. You lose the opportunity to learn and adapt, to accept there might be other ways of doing business that would improve yours. You have to be open to the possibility that different might be better.

Sometimes it’s more than just the way we view things, though, sometimes it’s actually adopting different ways of doing business. This is one of those.

Businesses measure everything – well, successful ones do. They can’t afford not to. The elementary rule of business is you must make more than you cost. It isn’t rocket science, but just hard to do in practice.

Businesses learn quickly they can’t afford to do too many things that cost them money, at least not for long.

The public sector is less demanding, more forgiving, than the private sector in this regard. Public sector organisations don’t have to make money to survive. Owning a Profit and Loss (P&L) changes your DNA. The responsibility, accountability, and consequence are very personal if you get it wrong.

Efficiency matters. Is the value chain for a product or service efficient? Where do the costs go? What eats the time? What can be done to drive the cost down and the output up? Where to put the investment for the most effect? Did it have an effect? Are we on target, on budget and what’s the burn rate? When does the “investment” turn into revenue? These are the everyday questions of a business leader.

The public sector has more flexibility. If there is an over-run in a project, then the outcome is delayed. If the process is more costly than anticipated, then the service level is modified. There is a flexibility afforded to the public sector that is just not available to the private sector, but that should be considered a privilege because the public is still paying. It creates an obligation and responsibility to use this freedom wisely and scarcely. There is plenty of evidence that this is not always the case.

How do we encourage that responsibility and awareness?

It is unarguable that competition drives efficiency and cost-effectiveness. It is a public sector mantra of procurement. The same logic must also surely apply internally. In well-funded bureaucracies, which are also monopolies, the tension of competition simply doesn’t exist.

While there is growing insight into the measurement of policy outcomes, one does have to focus on big strategic issues. There is value at the tactical level, the execution, and it is here that we can take lessons from industry. Little research is needed.

We had a public sector client running an equipment maintenance process who, when asked, couldn’t state the mean time to repair. That’s a fundamental performance issue, and it’s more than the contractor’s delivery time once a work order was approved. With a bit of work we uncovered that the average equipment downtime was over 70 days. The comparable industry benchmark was around 6 days. They also didn’t know the average workorder cost ($90% under $800), or that those work orders were touched by 16 people before approval. If you don’t know these things, you aren’t running a business process. Being aware of the numbers is the essence of management, and the foundation of commercial acumen.

It seems easy to make service delivery the responsibility of a contractor, but you can’t. You can put measures into a contract, but that contractor is part of your value chain, and you need to measure the entire value chain. Service management through contracting unlocks the value, not contract administration masquerading as contract management.

Work out your value chain, and the points of measurement. Then make those measures visible.

It does take a bit to get them right, and there is the potential to measure at points that make the service look good.  One organisation does make its performance publicly visible, and performs pretty well, until you realise they measure delivery time from when they opened an application not when it is received. There is a game being played there, and it does little to build trust and credibility.

We worked on re-building another service delivery where the contracted performance measure was “percentage fulfilment of orders”. The process was a Request was put to the company, they responded with what they could deliver, and the order was placed. Guess where the measure was taken? Performance at the fulfilment of orders on which they quoted, which I would have thought should have been 100%!

The user at the end of the value chain, buyer and supplier combined, was getting about 65% of their needs filled, but the contract performance and contract manager looked good!

Contractors form part of the service delivery value chain – and the outcomes of the value chain sit squarely with the buyer.

It’s not just commercial-like activities that we need to measure, we should be measuring process in process-based organisations. If we don’t know how long it takes from “concept to contract” in a procurement cell, how can we assess if it’s getting better or worse? If we don’t know how long it takes to process a request for an IT service, to write a paper, to sign off a security request – then we can’t possibly claim efficiency or effectiveness.

Contracts don’t sit in isolation; they are part of an organisations value chain. So too are the processes that fill governments.  Understand your value chain, find the measure, and make them visible.

You don’t need a big stick to make this work. People want to come to work to do good work. Leverage that behaviour.

In the maintenance program we talked about above, we agreed a goal of 30 days with the team. Less than half of what they were achieving, amidst the laughter of naysayers that such a significant change wasn’t possible. The performance of each element of the value chain was reported and displayed on a wall, regularly. Within months of us leaving (which is what a good consultant should do) the client rang to exclaim, “we just hit 15 days, I can’t believe it”.

We often talk about needing more commercial acumen in the public sector. There are commercial skills needed, but commercial acumen is as much about attitude and a way of thinking. It doesn’t come naturally to the public service. This is what we tackle in our Commercial Acumen for the Public Sector program, through immersive, experiential learning,

Have a look here for that, and other capability uplift programs designed specifically in the public service context.

We both have to be value for money.