Posted by: mikepearsonnz | September 29, 2009

Improving public service back-office productivity

A Treasury vendor briefing on 25th September 2009 has started to generate some media interest and speculation in various popular blogs.  I attended the briefing and share my perspective as a former public servant experienced in running e-government vendor consultations.

I have broken it into three sections:

  1. About the forum;
  2. About the project under consideration
  3. The future

1. About the forum

The forum was for vendors interested in providing the Treasury with management and technology consulting services.

According to the advertised notice on the Government Electronic Tenders Service (GETS), its purpose was to indicate Treasury’s requirements in relation to benchmarking and the preparation of a business case to support a whole of government initiative.   It was run by the State Sector Productivity team of the Treasury.  The forum was poorly administered, with no RSVPs.  Consequently the room overflowed and there weren’t enough seats.  Treasury is running a second forum on 2nd October 2009, to cater for the overflow.

At the forum, the stated purpose was:

  • To brief vendors about the work and priorities of the (new) state sector productivity team
  • To indicate potential future requirements for vendor support for one project under consideration: Administrative and Support Services Optimisation
  • To request early vendor technical input – i.e. during their project definition stage

The team indicated they were at the EARLY STAGES of project definition.  The information they were providing was subject to change.  They were anticipating benefits to Treasury and vendors by sharing information early.

The dialogue at the forum created unnecessary “noise” for several reasons:

  1. Vendors were asked not to engage with their government clients about the presentation because the team was still engaging with other stakeholders.  This was a surprise to those attending – the GETS notice had no indication that it was a closed briefing, and there was no requirement to sign a non-disclosure agreement.
  2. The team suggested a preference for a single large provider, who could demonstrate a solution that had been implemented with another government.  This meant many New Zealand companies in the room felt excluded.  My impression was the team strongly resisted any feedback from participants that there might be another way – and suggested they go away and “partner up”.

My perspective:

Commentators should note that generally central agencies are not experienced in running vendor consultations — their main focus is government agencies.  I can remember when the e-government programme started at the State Services Commission, it took several years to build its consultation techniques and processes.   Most of that expertise has now been transferred to Department of Internal Affairs (DIA/GTS) or lost through restructuring.

The team appeared to have given no thought about how to engage/collaborate with stakeholders in an on-going basis.  I suspect that vendors have become accustomed to Government 2.0-style consultation, so were surprised by this.  In the mean time, someone from at the meeting has established a LinkedIn group, NZAS.

The team should be congratulated for consulting with industry early.  Hopefully over the next few weeks, there will be clarification of their intentions.  I hope that their proposed approach can be debated, because there are other options, perhaps more suitable for the New Zealand context.

I can only hope that this “noise” does not detract from the proposed Administrative and Support Services (ASS) Optimisation project, which I strongly support.

2. About the project

Administrative and Support Services are things such as:

  • Finance
  • Human Resources
  • Information Technology
  • Procurement / supply chain management
  • Executive and corporate services

The project is based on the overall assertion that “Significant productivity gains can be made through operational improvement”.   The private sector has seen productivity gains of upto 2%, mainly as a result of improving operations with new technologies.  In comparison public sector productivity is flat or down.  McKinsey & Company estimates potential public sector productivity gains of up to 15% in the next 10 years, by closing the private sector-public sector productivity gap.

According to the UK Cabinet Office: Experience from the private sector shows that typically corporate shared services can deliver efficiencies of between 20% and 50%.

The opportunities in New Zealand are probably as great, but we start from a position of  little knowledge.  The NZ State Sector Act gave Chief Executives greater control in managing their organisations.  The emphasis moved from “managing inputs” to “managing outputs”.   Therefore lack of external reporting of service costs and performance makes it difficult to draw precise quantitative conclusions re potential gains, i.e. we don’t have a common code of accounts, so we can’t compare back office costs in each department.

This proposed project is about more than shared services.    Read some of the UK public sector reports, such as Gershon (2004) and Varney (2006), to see how optimisation includes:

  • Sstandardised processes and common systems
  • Automation and self-service
  • Measurement, management, control and continuous improvement
  • Leveraging knowledge and service volumes through
    • business process outsourcing
    • shared services
    • centres of expertise

You can also view my GOVIS 2009 presentation, where I build on the UK ideas further.  (Note: This presentation was “ideas”, it was not official policy).

My perspective:

Get in behind it.  This project is a low-hanging opportunity to potentially save a lot of money.   NZ State Sector back office processes should be as good as the rest of New Zealand, if not the world.  Don’t bag the public service for not doing this already – how many NZ companies do this?

Based on my previous e-government experience; consider the New Zealand context.   If necessary, don’t be afraid to design unique solutions, such as we did with SEEMail (the government’s internal secure email system) and igovt (our award winning online identity verification system).   My most favourite example of this is the international e-government measure of “can your taxpayers file their tax return online?”.  In New Zealand for wage earners, we no longer have tax returns (we stopped the process).

3. The Future

Like any efficiency project, any savings are ongoing,  but further savings are unlikely unless new technology comes along.

We must remember not only to “save money with back-office government processes” but to  “increase the value of front-end government processes”.    I raised this point at the briefing, government plays a big part in many value chains.  The greatest potential value  lies in new investments in systems that enhance New Zealand value chains.  But that’s a future blog topic.  🙂



  1. […] Improving public service back-office productivity « Mike Pearson a few seconds ago from Gwibber […]

  2. I’d support it as well, as long as open standards are used for data. I have no problems with whatever proprietary or open source solutions being used, just as long as the solutions developed are interoperable via standards. This is part of the problem we’ve been looking at in the Emergency Management domain with Sahana. We want to interoperate with whatever systems are out there, and the internals of the systems are not required, as long as they conform to open data and communications standards.

    • Hi Gavin, it will be important that open data / standards are considered as part of benchmarking.

      This could increase the transparency of government spending / performance. Instead of reporting annually to Parliament, imagine if it was monthly, (or real-time)? We could have a financial reporting dashboard, that the public could drive, like

      Note that I said “could” 🙂

  3. Mike
    Thanks for this – much appreciated that you took the effort.
    I agree that people should keep an open mind, and as you say, ‘get behind ‘ – but there has to be a structure to the engagement, and as you yourself note, the Treasury people don’t seem to have that expertise to date.
    So let’s see what happens -.
    One that I do know – telling people in an open session not to speak about something is not a good start, especially if it means they compromise themselves with their current clients/relationships.

    • Hi Paul, I agree with you “telling people in an open session not to speak about something is not a good start” – certain to make the Treasury comms person happy (not). I was already twittering, flickring, gmailing and mindmeistering with my collaborators, so they appreciated it too. 🙂

  4. Hi Mike

    Thanks for posting this. There are definitely productivity gains to be had in a shared services model but we do need to be very clear about the objectives of the Treasury’s programme. What you probably won’t read in the Gershon or Varney reports is that when the UK government tried to “transform” and “share” and “make more efficient”, costs increased not decreased, their were real issues over corporate governance, who “owns” the data in a shared service? etc.

    In any programme like this, you need to have very clearly defined objectives, stakeholders and comms becomes so important. But you also need to understand what the problem is that you are trying to fix. All too often we run to technology to fix a problem that we havent yet defined and for me that is where the real savings and efficiencies will come from, not necessarily, in the purchase of a shiny box with cool buttons.

    So while I applaud the ethos behind the programme we do have to be very careful about what we are actually trying to achieve – and be honest about it. If we are trying to cut costs, say so and let the parties involved work towards that goal.

    Having been through this exercise in the UK I know how hard it is to setup this kind of environment properly, but also to manage the expectations of the stakeholders involved. And then there’s the delivery 🙂

  5. Hi Paula, thanks for your comment and insight of the UK experience. Several ex-UK people on the LinkedIn NZAS group, have said something similar – I wonder why there aren’t any positive statements?

    Australia has had similar experiences with shared services – 1 government department comes to mind, who outsourced their IT, but then ended up having to use Windows 3.1 up until 3-4 years ago.

    I agree that much of the change is not about technology at all. I emphasised this in my talk at GOVIS, you can watch the video online at the link in my blog, or see the slide deck here:

    Overall, the goal of 30%-90% cost savings is a worthy one, and we must all hope Treasury can suceed in overcoming “The Sisyphean Challenge of Shared Services in Government”

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