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Risk management approach is costly and ineffective

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Do we need fewer rather than more doctors? 

Well, not just doctors but nurses, social workers, teachers, planners, environmental health officers, and even lawyers and accountants? Or, more precisely, have we so over-designed our public service delivery systems that vast professional resources have been absorbed into managing the risk of failure, reducing productivity and raising costs? More seriously, are we now cutting services rather than tackling the redundant systems that we have put in place?

On 28 March 1979, the core of the nuclear power plant at Three Mile Island in Pennsylvania nearly had a catastrophic meltdown. Detailed analysis of what went wrong revealed a sequence of five individually trivial failures, none of which on their own compromised the operation of the plant at all but combined to produce the near disastrous consequence the designers had not foreseen. It is a stark example of an oft-played out drama whereby failure in systems is followed by forensic examination of the causes to find the culprit and make recommendations to ensure ‘this never happens again’.

I have deliberately chosen an example far away from public services in the here and now to raise questions in the abstract about the process we adopt in these cases, and some of the unintended consequences of that approach, rather than debate any topical issue. The core belief, revealed by our inquiry-based approach to failure in public service, is that it is possible to design a system that considers and mitigates for every risk. Each public inquiry produces another raft of detailed recommendations, many of which prescribe approved processes for managing complex situations. When considered together, what Three Mile Island and many other similar accidents teach is that modern systems are so complex that it is inevitable that they will interact in ways impossible to anticipate.

However, we persist in believing that matters can be fixed so that failures never happen again. This manifests itself in increasingly complex rules and regulations about how things must be done and by placing increasing reliance on the assurance of professionalism and qualifications. Local authorities have ended up with more than 1,500 specific duties, many of which are not about the outcomes they need to provide but the processes by which they need to provide them. There is a premium placed on control and recognised authority at the expense of the value of context and experience. Almost inevitably, the consequence is to create the next failure in the redesign that dealt with the last.

Instinctively, we know this is the case. There is a broad consensus that public service reform should empower those on the front line, promote co-production with communities and service users and enable collaboration between workers in different public agencies. Somehow, the systems and rules legislate against the trust needed to make this happen. The consequence is that we devalue the contribution of our many vastly experienced but unqualified staff and require their recommendations to be reviewed, re-examined and endorsed by layers of expensively trained and remunerated professionals. In the process of checking and double-checking the work of others, they are diverted from what they were trained to do and, for a significant part of their time, become part of the bureaucracy.

So, while I can’t quantify it, I’m convinced that our approach to risk management has added cost without significantly reducing the risk of failure. Risk is better managed through organisational culture and by proper accountability rather than over-design and rule-based prescription. There are two ways I think you can observe this effect. 

First, you can observe this from a historic context. Even after the severe cuts since 2010, public spending in absolute real terms is still significantly greater than it was, say, 30 or 40 years ago. Some can be explained by greater volume and scope, but not that much. It has mainly become a lot more expensive to provide largely the same services. The increase in doctors, nurses, social workers, teachers and other professionals has not significantly improved outcomes for people. One explanation has to be massive investment in risk management.

Second, look at what can be achieved with far fewer resources in other places. I always point to the work of New York University professor and Global Mental Health Programme co-ordinator Gary Belkin. Dr Belkin and his team are putting effective mental health systems in place in West Africa and Haiti by ensuring that the very few highly qualified personnel there did only the work that only they could do. There are other examples.

So, I am not necessarily advocating reducing numbers of doctors and nurses and the others, yet their productive potential is vastly under-used as a result of the way we have managed risk. We may cut them anyway as a response to the financial situation but, if we don’t change risk management systems, we will be cutting services instead of waste. 

Stephen Hughes, strategic adviser on local government, Chartered Institute for Public Finance & Accountancy, and former chief executive, Birmingham CityCouncil



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