Achieving Excellence in Public Sector Performance

1. Achieving Excellence in Public Sector Performance David Osborne The Public Strategies Group David@psg.us www.psg.us

2. Two Waves of Reform 1. The challenge in the developing world: Creating a professional and honest public service, free of political manipulation and patronage hiring

3. Principal Elements of Reform in the Developing World • Establishing the rule of law • Creating an independent, honest judiciary • Prosecuting corruption • Establishing transparent budgeting, procurement, & contracting • Creating an effective audit system • Creating a professional, well-trained, adequately paid civil service • Barring civil servants from involvement in political campaigns

4. The Second Wave of Reform, in the Developed World • Improving service and access by…. • Transforming bureaucratic public services into flexible, innovative, Information Age organizations

5. Industrial-Era Governments • Centralized bureaucracies • Hierarchical management • Rules and regulations • Standardized services • Command-and-control methods • Public monopolies

6. Stable bureaucracies Traditional work processes Mediocre services “One size fits all” Slow-moving monopolies Ever-expanding budgets Rapid change Information technologies Public that expects quality Many choices Global competition Severe fiscal constraints Industrial-Era InformationBureaucracies Age Realities

7. The DNA of Public Organizations and Systems • Purpose • Incentives • Accountability • Power • Culture

8. Five Strategies to Reinvent Bureaucratic Government • Core • Consequences • Customer • Control • Culture

9. I: THE CORE STRATEGY: Clarity of Direction, Purpose, & Role Approaches: • Clarity of direction: Improving your aim • Clarity of purpose: Clearing the decks • Clarity of role: Uncoupling steering and rowing

10. Clarity of Direction:Improving Your Aim Tools: • Visioning • Outcome goals • Steering organizations • Strategy development • Mission statements • Long-term budget forecasting • Strategic evaluation • Budgeting for Outcomes

11. Budgeting for Outcomes Asks Four Basic Questions • How much revenue will we have: What price of government will we charge our citizens? • What outcomes matter most to our citizens? • How much should we spend to achieve each outcome? • How can we BEST deliver each outcome that citizens expect?

12. Delivering the Outcomes • Create Results Teams as “Buying Agents” • They use cause-and-effect analysis to determine the best paths to the result • They define basic purchasing strategies: What matters most?

13. CARE RISK FACTORS HEALTH ENVIRONMENT BEHAVIOR Sample Cause and Effect Map: Health - Washington State

14. Health Impact vs. Spending in U.S. National Health Expenditures $1.2 trillion Impact Source: Centers for Disease Control and Prevention, University of California at San Francisco, Institute for the Future

15. Possible Purchasing Strategies to Improve Health: Examples • Focus on changing lifestyle choices (smoking, drinking, diet, etc.). • Focus on the front end: pre-natal care, immunizations, educating new parents. • Stop high-cost, repetitive cycles of care in emergency rooms.

16. Results Teams Issue “Request for Results” An “RFR” defines: • The outcome desired • Three indicators by which progress will be measured • The purchasing strategies chosen to produce the result • How much money is allocated to the result and each purchasing strategy

17. “Sellers” Make Offers • Agencies and programs produce offers defining what they can do to contribute to the result desired. • You can also let outside agencies and companies make offers--to stimulate competition. • Offers include performance data and price.

18. Results Teams (“Buyers”) Rank Offers From Best to Worst • Start buying from the top • Draw a line when they run out of money • Send the rankings out and ask sellers to prepare better offers • Sellers make final offers • Results teams rank final offers and buy from top

19. The Bottom Line • Align spending with priorities • Buy results, not costs • Low-value spending is forced out of the budget • Important new investments go to the front of the queue • General interest trumps special interests • Performance accountability • Continuous reform/ improvement • “Common Sense” communications

20. II: THE CONSEQUENCES STRATEGY:Using Incentives to Create Consequences • Enterprise management • Managed competition • Performance management Approaches:

21. Three Keys to Effective Performance Management • Written performance agreements that lay out results expected, along with flexibilities granted and potential rewards • Direct, personal feedback on performance • Meaningful rewards and consequences for performance

22. Direct Feedback on Performance is Critical • New York’s Compstat, Baltimore’s Citistat, Maryland’s StateStat, Washigton’s GMAP: • Direct, immediate, personal feedback on performance. • Highly dependent on Information Technology.

23. Rewards and Sanctions Tools: • Performance scorecards • Performance awards • Psychic pay • Performance bonuses • Gainsharing • Shared savings • Sanctions

24. Performance Management: Some Lessons Learned • Apply incentives to groups more than individuals • Avoid arbitrary targets • Tie rewards to objective measures of performance, not subjective appraisals • Make bonuses big enough to get people’s attention • Don’t make reward formulas too complex • Create a culture of learning, not fear • Verify the accuracy of measurement

25. Quality Assurance III: THE CUSTOMER STRATEGY:Putting the Customer in the Driver’s Seat • Customer choice • Competitive choice • Customer quality assurance Approaches:

26. Who is the “Customer”? • Definition of the customer: the “principle intended beneficiary” of your work. • Examples: • Schools: Students and parents • Public transit: Users • Public printing office: Agency personnel • Police: The public at large

27. How Do We Give Customers Power? • Customer choice of service providers • Choice in a competitive market: even better • Asking what they care about and setting customer service standards, guarantees, redress policies, etc.

28. Competitive Customer Choice:For Example, in Public Education • Give parents choice of public schools. • Let the dollars follow the student to the district and school of their choice. • Encourage the creation of new public schools, so there are enough schools to create real consequences for those that lose too many students. • Studies in the U.S. show that districts and schools that lose 3-5% of their funds make changes.

29. Customer Quality Assurance • “311” telephone & web systems citizens can use to report problems and complaints • Customer service standards

30. The UK’s Citizen’s Charter (Now “Service First”) • Customer service standards • Customer redress • Customer complaint systems • Comparative performance tables for local services, hospitals, and schools • Chartermark awards

31. Customer Service Standards: Examples • Bromley (London borough): Will repair paving problems within 2 hours of notice. • U.S. Social Security Administration: 90% of calls to 800 number will be answered on the first call; 95% will be answered within 5 minutes. • Commuter rail service: 90 percent of trains should arrive within 10 minutes of the scheduled time.

32. Consequences and Publicity are Critical • Guarantees • Redress • Customer Ratings • Customer Service Agreements

33. Redress to Customers: Examples • Development permits in some U.S. cities and states: If deadline is not met, the permit fee is waived. • Some commuter rail lines issue vouchers for free round-trips or cash when trains arrive 30 minutes late or more.

34. IV: THE CONTROL STRATEGY:Shifting Control Away from the Top and Center • Organizational empowerment • Employee empowerment • Community empowerment Approaches:

35. Organizational Empowerment Tools: • Decentralizing administrative controls: budget, personnel, procurement • Mass organizational deregulation • Site-based management • Waiver policies • Reinvention laboratories • Executive or “Charter” agencies

36. Executive or “Charter” Agencies • Executive negotiates “Flexible Performance Agreements” with charter agency directors. • Agency agrees to produce specific results over 3-5 year time frame. • Agreement includes specific rewards and sanctions for performance. • Agreement specifies new flexibilities granted to charter agency.

37. UK Executive Agencies • UK organizes 75% of civil service this way. • Annual efficiency increases in early years: 2- 30 percent. • 1990-1996: 15 percent reduction in personnel, while improving performance. • 1994: Parliament called it “The single most successful civil service reform programme of recent decades.”

38. Potential Flexibilities Examples from Iowa (U.S.): • “Freedom from ceilings on the number of employees or other employment controls. • “Authority to waive personnel rules and do what makes sense. • “Authority to waive procurement rules and buy what makes sense. • “Authority to waive Information Technology rules and buy the computers and software you want.

39. Potential Flexibilities (2) • “Authority to keep half of this year’s unspent money and spend it next year. • “Authority to keep and spend proceeds from lease or sale of capital assets. • “Authority to reprogram money between accounts. • “Authority to waive administrative rules. • “Access to $3 million Transformation Grant Fund. • “Protection for two years from across the board cuts.”

40. Charter Agencies in Iowa (U.S.): Results • Saved Iowa taxpayers $20 million/year for first two years; $50 million for third. • Corrections Department: lowered 3-year recidivism rate from 46.7% to 35.4%. • Revenue Department: improved rate of income tax refunds issues within 45 days from 75% to 94%. • Human Services: increased children with access to health insurance by 34%. • Alcoholic Beverages Division: increased revenue by $35 million over 3 years.

41. V. THE CULTURE STRATEGY

42. V: THE CULTURE STRATEGY:Changing Habits, Hearts, and Minds • Changing habits: Creating new experiences • Touching hearts: Developing a new covenant • Winning minds: Developing new mental models Approaches:

43. Changing Habits • Meeting with customers • Walking in the customers’ shoes • Job rotations • Internships and externships • Contests

44. Five Strategies to Reinvent Bureaucratic Government • Core • Consequences • Customer • Control • Culture C x C x C x C x C= Transformation