The International Monetary Fund recently downgraded its 2023 UK growth forecast, predicting our GDP will shrink by 0.6%. That’s a greater fall than any other G7 nation. When you consider that government expenditure accounts for around 40% of GDP (reaching over 50% during the pandemic), it’s clear how vital it is to improve public sector productivity - to relieve pressure from government finances and help reverse the downward trend.
Despite good intentions, achieving this is proving to be a difficult and complex challenge to overcome. It’s a problem that the public sector has been grappling with for decades. To explore the reasons for this, we published a research report with The Productivity Institute which found that there’s no one clear answer, but instead three important drivers of productivity that need to be addressed:
- Adaptive business design
- Digital transformation
- Building an agile workforce
Focusing on adaptive business design
Organisation design is at the core of any high-productivity organisation - by mapping the service delivery chain, organisations can determine how to turn their resources into inputs, outputs and outcomes. This then helps to identify key constraints for improving budget efficiency, productivity and effectiveness.
However, no organisation or service delivery chain is completely static. In the public sector, organisations will always face rapidly changing external forces, including policy changes such as the levelling up agenda, and global issues such as the war in Ukraine and cost of living crisis. Internally, many parts of the public sector are also facing huge recruitment challenges and legacy technology that are hampering progress.
To continue serving citizens effectively in the face of these issues, public sector organisations need to operate with flexibility built in, so they can adapt quickly. To achieve this, organisations must find a better balance between hard budget constraints and spending flexibility, and between scaling up the delivery of public services while also tailoring to specific customer segments.
Using extra capacity to build stronger resilience
Managing spare capacity and having the resilience to relocate resources quickly can have a greater impact on productivity than solely focusing on budget efficiency.
During the coronavirus pandemic we formed a unique partnership with the Department of Health and Social Care’s Test and Trace programme to rapidly upskill the public, so that lateral flow asymptomatic testing could be carried out at scale. The organisation design was adapted to plug in the additional capacity, which enabled tests to be delivered to over 500,000 people. In this case, speed was key and operations could adapt.
Flexibility can also enable greater innovation, which in turn can lead to productivity gains. We are seeing this in the defence sector and across government as a flexible approach to help deliver large, complex projects. WithYouWithMe (WYWM), a social impact company founded by ex-military professionals, uses the military’s method of testing and training to build high performing individuals and teams. Together, we created a ‘super team’ comprising senior Capita managers and trained WYWM developers and technologists. By providing additional capacity and skills we’ve been able to develop sustainable technology solutions, while allowing the in-house teams to continue to focus on serving citizens.
Both examples required the organisations to take an adaptive approach and focus on speed and continuous improvement. They made use of additional capability and provided space to innovate to achieve better outcomes.
Of course, improving productivity also relies on people, which is why the two drivers of adaptive business design and an agile workforce go hand in hand. By focusing on bottlenecks in the delivery chain and being allowed the space to experiment, overall productivity can improve.
We’ve helped many organisations adapt their operations to improve productivity. Find out how we can help you