Ministry of Social Development

Questioning everything and assuming nothing has resulted in savings, efficiency gains, and national recognition for the Ministry of Social Development’s Value for Money programme.

Thought leadership clears way for efficiency gains

Ministry of Social Development logoQuestioning everything and assuming nothing, has resulted in savings, efficiency gains, and national recognition for the Ministry of Social Development’s Value for Money Programme.

The programme began some six years ago in the Chief Executive’s Office. Since then, it has been run by a dedicated stand-alone unit and overseen by an independent Advisory Board.

The Ministry pioneered the value for money approach and chose to begin the Value for Money Programme before the global economic crisis to find better ways of working. This meant that the Ministry was well placed to respond to the Government’s call to cut costs and return funds to the Crown. James Poskitt, Value for Money Programme Unit Director, says that the Leadership Team was determined to find a way of reducing duplication of cost and effort throughout the Ministry and making it business as usual as quickly as possible. But they also wanted to do it slowly and incrementally to ensure that the benefits would be sustainable.

One of the ways they did this was by first identifying who could help or hinder the change process. As responsibility for all operating budgets and resources at the Ministry lie with tier-three general managers, they were engaged early. “We redid the problem definition from their perspective,” says Mr Poskitt.

This involved strategic planning, investment logic mapping, and policy-busting sessions with a group of managers and staff selected for their capability rather than just for their role. Their mission was to challenge how the Ministry’s nine business groups delivered its services to some 1.1 million New Zealanders from 200 locations.

As the programme has developed, a recent outcome has been a series of Ministry-wide initiatives that have identified opportunities to deliver a fully integrated, end-to-end service to customers. The exercise highlighted that the product-based service delivery model the Ministry had been using resulted in duplication of cost and effort. “We were doing many similar activities across the Ministry so were competing internally for resources,” says Mr Poskitt. “It became very clear how our capital was being divided.”

The exercise also revealed how accountability lines and funding arrangements within the Ministry needed to be realigned. “Because of the way in which many public sector organisations have been established, they don’t have governance arrangements set up for multiple owners,” says Mr Poskitt. “And with shared accountability, everyone is supportive until they have to give something up.”

Effective means getting the best results. Efficiency means getting the best value from the resources you have. I see efficiency as being the enabler for effectiveness.

With this knowledge, “we could take [our people] down the path so the decision to make changes becomes unavoidable,” says Mr Poskitt. “But it gives them time and space to see where we are heading. It’s an organic process. It could be seen as a slower, more error prone approach, but it is more sustainable,” says Mr Poskitt. “It’s evolving and some work is still needed to develop the ideas.”

The Ministry has had the Value for Money Programme in place since 2007, in order to manage its departmental cost pressures through productivity and efficiency gains of 2% to 3% each year while improving the quality of services to clients. The Ministry has carried out four-year planning cycles since that time and, as a result of the programme, met identified departmental cost pressures of $255 million, and returned additional savings to the Crown (over the period 2008/09 -2011/12). It was also the winner of the Project Initiative of the Year (Finance) in the Fairfax Media 2011 CFO Awards.

Deputy Chief Executive, Marc Warner, attributes the success of the Value for Money Programme to three main factors: a single plan to provide a co-ordinated view of pressures and initiatives in the Ministry’s disparate business units; a dedicated unit to drive, co-ordinate, monitor, and influence the plan; and an independent Board with an external Chair to scrutinise and challenge the thinking and activity behind the plan. Mr Warner also notes that the critical advice provided to him by the Board has been invaluable, and the programme has provided stakeholders, particularly the Minister and Leadership Team, with confidence in the Ministry’s fiscal sustainability and strategic approach.

Mr Poskitt has four pieces of advice for any organisation considering doing the same: don’t start any organisational transformation with a structural change because it can be limiting and destabilising; start small with achievable goals; don’t make it all about IT, because it is the policy and process that needs to change; and stay connected with your stakeholders in the outside world to ensure that you have their confidence.

Based on an interview with James Poskitt, Value for Money Programme Unit Director, on 26 June 2012.

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