We must manage value, not costs
Public services managers need to approach reform in a fundamentally different way, management consultant John Seddon tells David Blackman
To some John Seddon is a messiah, to others he is just a self-promoter. But about one thing there is no doubt: he stirs things up.
The south Londoner’s recent call to scrap the Audit Commission led to unprecedented traffic on LGC’s website.
The spat was just one part of Mr Seddon’s crusade to become the government’s public services tsar.
What he would do, if ever appointed to such a post, is outlined in his book Systems thinking in the public sector, published last year. The book is an attempt to demolish the ideas underpinning the government’s public service reform drive.
He claims that his mission to reform public service management is not inspired by money, saying his firm Vanguard Consulting has plenty of private work, especially in the financial services sector. Instead, Mr Seddon describes his motivation as rooting out public service waste resulting from poor management.
His ideas are based on those of engineer Taiichi Ohno, who helped develop the Toyota production system in postwar Japan. Mr Seddon has applied this ‘lean manufacturing’ or ‘systems’ thinking to the UK service sector.
“If you want to change behaviour in organisations, change the systems. Don’t change the culture, it’s a waste of time,” he says, name-checking W.E. Deming, US author of the 1980s book Out of the crisis, which Mr Seddon describes as a “scathing attack on Western management assumptions”.
However, he was “massively disappointed” by the so-called Lean Movement. “These were the people who said these are a set of tools, they will make you lean. I know that was a load of bollocks. What Ohno was doing was to say ‘don’t codify methods, don’t use tools, it’s how you think’.”
Value, not costs
Mr Seddon says the starting point is for top management to clear their diaries and look at the work.
The analysis of what needs to change is based on the picture managers build up of the work their organisation does. This should be based on the work process as a whole rather than breaking it into individual bits, focusing on what is driving demand for services, he says. “Clients think that activity is cost and we have to teach them that that is not true. We have to teach them to look at the demand for their services.”
By looking at the range rather than the average length of time it takes to get something done, it is possible to identify logjams. For example, it might look inefficient to spend a lot of time on benefit claims, but by getting the job right, a lot of time and effort can be saved later.
“You have to teach people that the cost is in flow and not in activity. If you understand flow you can cut costs.
“Whenever managers are going after cost reduction, it just makes the system worse. If you manage costs, costs go up. If you learn to manage value, costs go down.
“I can take you to places where they do five times as many pot holes with the same number of people. If you redesign services you can get massive results.”
A systems-based approach brings other, less tangible benefits, Mr Seddon says. “This not only gives you massive improvement in performance – you can expect many hundreds of per cent – but most importantly it transforms morale.”
He is even critical of the Total Place efficiency programme, local government’s flavour of the month, on the grounds that it is underpinned by cost analysis. “There’s a better way to do this. If you study demand, you might find there’s demand for which we have no services and services for which we have no demand.”
Shared service savings?
Equally unfashionably, he is sceptical about the assumption that shared services deliver cost savings. “If you redesign something like HR you can create massive improvements, but if you do what the government says and start sharing it, from day one you have bad systems everywhere… There’s an ideological commitment to the concept of scale in Whitehall – shared services is just one example of it.”
But he acknowledges that there are issues with applying these ideas to the public sector. “One of the differences is that you don’t have the profit rod, another is you have members and officers and there’s an awful lot of conflicts. And the third is you have this massive compliance and specification industry.
“You have some of these problems in the private sector – the Financial Services Agency is a massive pain in the arse, but when you go to the FSA with evidence and say you want to do something better, they will say OK.”
He accuses the Audit Commission of being prey to “archaic”, “command and control” thinking. But he says that in Wales, where he is a visiting professor at Cardiff University’s Lean Enterprise Research Centre, attitudes are more open-minded. “The whole of the audit function is concerned about what works.”
Poorly designed services have wider ramifications, he insists. “What’s worrying is that the regime may be well intended but what it’s actually doing is creating more alienation in society and more disenfranchisement.”
But Mr Seddon is optimistic that the public sector is coming round to his thinking. “The mood has changed, there’s more sense of constructive rebellion – people asking ‘what is the end of this?’”
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Readers' comments (13)
geoff elliott | 18-Sep-2009 12:10 pm
An interesting point of view. However one of the central themes of Toyota and TPS is to manage against target costs; Additionally Toyota make use of 100 or so quality tools and industrial engineering methods. The originator of TPS was an industrial engineer.
Finally people are the system. Toyota is a socio economic technological open system. It is not a closed deterministic series of machines where people are independent in partial observers. People are the system. To state it is the fault of the system and to use methods like run and control to an open system to make judgements about process capabilities is simplistic. What about people capability,know hows and experience to make take decisions based on a rule set which is outside of the systems boundaries? Noting these rules sets cannot be ignored
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Laurence Barrett | 18-Sep-2009 7:38 pm
It may well be the central point of the TPS but Seddon (as you well know Geoff) has used TPS & Deming learning to create a methodology that works in a service environment.
People are part of the system but who controls who? it is when managers design the system that the people are a part of but do not give them the freedom from the command & control management to make the judgements necessary to do whats right in provideing the customer the service they are trying to pull from the organisation.
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Anonymous | 18-Sep-2009 8:19 pm
I couldn't agree more Laurence.
Seddon has invented a tried and tested method that reduces cost by improving service in the service environment.
No wonder it is generating so much interest with politicians and the media.
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alec fraher | 21-Sep-2009 9:46 pm
The insights being drawn out here have more commonality with The Celestine Prophey than solid operational research. And if, as would seem, that past learning is being cleared away and the here and now flow engaged, lets not forget two incomfortable truths (i) redistributive wealth and health has not been yet been realised and (ii) there is no concensus about which values are being valued. What ethic and culture emerges from this requires fore thought. It is afterall a wicked messy problem and it is incumbent on all political parties to show there understanding of this - two attributes standout as in need of attention and questions asked about how (i) a largely non-unionised, unprotected low paid workforce can offer a sustainable arrangement for looking after the very vulnerbale and (ii) a head in sand mentality when facing up to the impact of competitive rivalry and competive positioning will have on the alrtuistic purpose of voluntary action. Viable Systems Modelling and, perhaps, a SOSM will emerge, so let skeep all options open - and this is, afterall the dialouge, what Geoff is saying - To what end and by what means?
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Bruce Levitan | 23-Sep-2009 9:19 am
I'm afraid I haven't a clue what Alec is on about. All I know is that John Seddon's approach does work and the evidence, time after time, is proof of that. But there's still a long way to go, I'm afraid. I recently wrote to my MP about John's approach, and here are some quotes from his reply:
"I see targets as tools to help achieve an end, not an end in themselves. Of course some targets, and the way some people apply them, can have perverse effects; but no one would argue that the target of reducing hospital waiting times for operations from 18 months as standard to 18 weeks as maximum was either misguided or inappropriate - and it worked. Many of the targets set for public services in the last ten years have now been relaxed: for example, the police now only have one target, to reduce fear of crime by improving public confidence in policing." He goes on to write "I therefore find Mr Seddon's view, that there is no place for targets, to be just as misplaced as those who say that targets should be the be all and end all of public service reform (not that I have heard anyone say that!). He assumes that every participant in delivering a particular service is equally committed to a well defined common goal and strategy. Whilst laudable, this assumption is completely unrealistic." There you, go: my MP says targets are good!
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geoff elliott | 23-Sep-2009 11:59 am
I don't have an issue with targets. I agree with Bruce above the selected use of targets can be a good thing. What I have an issue with, is calling something "systems thinking" when it is clearly an adaptation of Deming, TPS and Lean thinking. Whilst lean thinking can lead to cost and process improvement and managing against target costs (targets again) this type of Newtonian / reductionist thinking will NOT address all the issues facing the public and private sectors. People who think they are using "systems thinking" by applying the Vanguard model are misleading themselves.
There is an excellent paper published in the US in 1995 which accurately describes the the vanguard method/model, the use of run and control charts and application of the Shewart Cycle (PDCA). The paper also points out the limitations of this type of approach. The use of run and controls charts are not applicable in a non transactional environments or where there is variable work content but great for making widgets
My real challenge is the group think which associated with the vanguard method/model and the confusion being shown in Government publications where six sigma and lean methods are listed as being different to the vanguard method/model.
There are no systems thinking ideas or concepts in lean methods which allow one to address real world wicked /messy problems.
Why do we think we can apply closed systems methods , ie lean methods, to an open systems problem? Isn't about time we have a proper debated about the role "lean" methods and the CONTEXT in which they can best be used and at the same time understand what systems thinking really is.
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Anonymous | 23-Sep-2009 12:44 pm
"I agree with Bruce above the selected use of targets can be a good thing"
Geoff - read Bruce's post properly. He is quoting from his MP so you are agreeing with his MP, not with him.
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Mike Clark | 28-Sep-2009 4:16 pm
I have worked for local authorities for many years and the difficulty for Seddon is that he tells it as he sees it from a systems perspective. He tells the facts as he sees them not in a sycophantic way, but in a way that adults should be able to do. With openness and honesty.
The problem is that the Audit Commission and other inspection bodies and ministers don't want to listen because it challenges what they have done over the last decade. They would quite happily keep the public sector mute and feeding out of its hand.
Other consultancies (those working in a command and control fashion) tell politicians what they want to hear and what will make them more money. These are the IT consultancies who are liable to make lots of money from things like shared services, and outsourcing. Seddon's ideas have transformed the lives of staff at all levels and their customers.
Walker and Bundred don't like Seddon because he speaks to them like an adult pointing out problems in an adult fashion. To them it is useful to fashion him as a 'maverick'. The problem for them, of course, is that he is correct.
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Anonymous | 28-Sep-2009 5:44 pm
I agree with you Mike - well articulated. People also describe Seddon as 'negative'. But when something is wrong, there are only so many ways to say it.
It suits 'ambitious' sychophants to dismiss his thinking. They can then fashion themselves as 'positive' (sychophantic) in response.
I worked in local government for 9 years (in various 'non' jobs like performance and policy) and it struck me that systems thinkers have more self belief and integrity than traditional thinkers. I guess you have to be fairly secure as an individual first before you can change the way you think - either financially or emotionally.
It would be really interesting to find out from other systems thinkers why and how they changed their mind. Was it a light bulb moment or was it a gradual shift?
For me, as I became less ambitious (in the traditional fashion) I became more open minded. And gradually I realised that I could no longer spend 8 hours a day doing the wrong thing wronger and wronger.
So, if you are insecure in yourself or in your job - don't touch systems thinking. Having said that, your mind will probably flush it out to protect you.
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Dave Gaster | 30-Sep-2009 6:46 am
It is well known and proven that 'Systems Thinking' as a generic description of a scientific approach to service improvement is phenomenally successful, creating service delivery achievements and cost savings which conventional 'Audit Commission' governed systems will never aspire to.
I have had a great deal of contact with Government Office staff and audit commission staff of late. During this time I have demonstrated that they are receiving all the documents and information that they are requesting, almost always to an excellent standard as per their measures.
The problem is that when we talk to our customers, they see loads of terms and discussions which add no value to them, and are very confusing. The documents are too long and complex. The organisations involved in service delivery are too many and too complex.
The prime customer of many Councils is the Audit Commission. We do what they request and we get well rated, and like any pet that does what we're told, we get loads of little rewards for good behaviour.
Looking forward to a situation where simple joined up services are from single providers, where the real customer is king!
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Anonymous | 24-Nov-2009 4:25 pm
"We must manage value, not costs" is just trying to blind people with science, especially as the two are intrinsically linked. You can maximise customer benefit, bend over backwards to do everything that a customer desires, yet still go out of business as the costs of doing so spiral out of control. It is a balance between both, i.e. can we do what the customer wants, AND can we do it in a way that won't put us out of business.
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Blair mcpherson | 27-Nov-2009 3:11 pm
I am unimpressed by yet another lesion from the Private sector. The sector that brought us star ratings, league tables, performance pay, out sourcing and no frill services. The private sector is driven by competition and profit. The public sector has multiple objects which can only be achieved through co operation and is driven by the need to make a difference, to be effective. We need to pay less attention to what works in the private sector and more attention to what makes a difference to the lives of people we serve.
Blair
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Anonymous | 30-Nov-2009 11:08 am
Blair, Seddon is not arguing for the incongruous imposition of some private sector technique onto the public sector. Seddon's methods deliver services that work at lower cost in either public or private sector. However, in the public sector, there is less freedom to innovate and experiment with how services are delivered because there are centrally set service specifications/targets and an inspection regime to ensure compliance to these specifications. Seddon says that managing value is about doing what's right for the recipient of a service and can only be done when you've first studied how the service works. When value is managed properly, costs fall anyway. Managing cost (the mistake of Total Place) ignores the impact on the end user of a service and could therefore well have the unintended consequence of making costs rise in another part of the public sector.
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