Productivity and the Public Sector

In this article, Dick Evans explores how poorly thought through targets, linked to productivity are ironically proving to be the cause of continued decline rather than its salvation.

The debate on this country’s productivity continues at a pace. However, one has to be cautious about stating how productivity is measured. It is now widely acknowledged that this country’s productivity in a whole range of employment areas is well down the international league tables.

Many factors impinge on this complex factor. Clearly one major element of interest here is the need to create a highly qualified workforce and at the heart of this is the urgent need to invest heavily in appropriate and vocationally related qualifications and awards. Employers also need to be helped, through tax credits and other benefits, in order to invest more in workforce development and research and development. The series of articles on skills shortages highlighted the problems confronting schools, colleges and universities in recruiting suitably qualified teachers who will teach people who will ultimately enter the world of work. Skill shortages abound in key strategically important industries which further weaken this country’s ability to compete internationally.

However there are equally important factors that keep productivity gains in this country woefully low when compared with our international competitors.

The increasing tax burden on industry particularly for SMEs does not help companies who wish to invest in research and development and it reduces significantly their profits, which consequently reduces their ability to purchase up-to-date modern equipment, as well as investing in their workforce. It is reckoned that, over the past three or four years, the taxation burden on industry has increased by £28 billion.

However, in addition to these problems, there are another set of elements that weaken the ability of this country to increase its productivity level, namely the increasing level of bureaucracy and regulation that organisations are exposed to, and that includes not only the public sector, but also the private sector. For example the increasing level of employment legislation and the resulting increase in Industrial Tribunals (ITs) has an impact on companies both in terms of finance and the disruption they cause. Nothing wrong with valid claims by employees against unscrupulous employers but currently the pendulum seems to have swung too far. We live in an increasingly litigious society with many employees wishing to exercise their ‘rights’ before fully exhausting the company’s grievance procedures – it is an example of the ‘have a go’ culture that exists in this country. Over 60% of ITs involve employees who have not fully completed the company’s grievance procedures. The cost in resources in dealing with these cases is significant especially for small sized companies and it is important to note that over 50% of companies now employ less then fifty employees.in the future Small and Medium Enterprises will represent the major part of the employment scene.

Because of their size they often do not have the resources to cope with the additional cost and the impact can be considerable at a time when they are trying to survive and to improve productivity. Employment legislation is there to protect both parties and both have to accept their rights as well as the responsibilities and obligations that attach to these.

Companies are currently struggling to survive because of the dramatic downturn in the global economy accentuated by the awful events of the 11th September. In addition organisations are increasingly required to respond and react to numerous audits, inspections, reviews and requests for information and also to deal with the paperwork associated with increasing regulation of aspects of employment. All this diverts practitioners from their core business and again managers and employees have argued that they spend an increasing amount of their time engaged on activities that deflect them from their core work and their ability to improve productivity.

ACTION PLANS AND ACCOUNTABILITY.

Action plans abound with innumerable targets and performance indicators. Accountability is important, indeed essential, especially in areas associated with quality, performance improvement and value for money, particularly where tax payers’ money is involved.

All organisations accept the need for regulation and inspection review, but it has to be realistic and recognise and appreciate the consequences of such activities.

It has been reported that across the country over 50,000 targets have been set for public sector organisations such as the police, health trusts, schools, colleges, prison service, etc.

Overall, targets are fine but it is the quality and validity of the targets that are important and not necessarily the quantity. Targets like organisational strategic objectives have to be:

S > (Specific).

M > (Measurable).

A > (Achievable).

R > (Realistic).

T > (Time banded).

i.e. SMART. They should be unambiguous and be measurable within a given time period. They should be addressing aspects and activities of the organisation that will bring about improvements to quality and performance. If the targets are ambiguous then one can lose sight of what is being measured and monitored.

Too often organisations are required to create too many targets many of which undermine effectiveness in realising the strategically important ones and often comprise a confusing mix of qualitative and quantitative targets. A number of commentators argue that undue attention to a target culture can be dangerous and can deflect the organisation away from its primary purpose. Too often advocates of targets become fixated with the target and lose sight of what underpins them.

Also, many of the targets are meaningless in the sense that they are beyond the control of the employer. An example is a target set for the Fire Service. They are required to set a target to reduce the number of false alarms. But surely they are not able to achieve this as it is outside their control.

To deal with this unfortunate and dangerous occurrence other key groups need to be involved and these need to work together in complex partnerships to address more deep seated societal problems. It is unfair to expect the Fire Service to be given a target that has a wider set of complex causes and roots. Similar arguments can be made across targets set for the police, health and education.

Often regulatory bodies who are responsible for public sector organisations cite private companies as being the benchmark for targets. Successive governments have extolled the private sector over the public sector. It seems that the message is ‘private is good – public is bad’. The private sector operates a very different culture than the public which surely raises fundamental questions about transferring the concept of targets to it. Private companies are for profit organisations and their primary motivation is to make a profit and satisfy their shareholders. Obviously they have to provide quality services and products to their customers but there are significant differences in the way they operate to achieve this when compared with the public sector, not for profit organisations, which are very much focussed on services to each individual. The targets set for the public services have to recognise these differences and all the complexities that relate to society and individuals.

CONTINUATION OF SHORT TERM FIXES.

If this country is to improve its productivity in many of its organisations, whether public or private, it has to reduce the burden of bureaucracy and regulation and the attendant difficulties that it produces. It also has to urgently address the need to develop long term strategies in regard to skills shortages and not continue short term fixes which will fail. The series of articles on Skills Shortages over the past year or so in the Journal (l) have highlighted another set of issues that confront and challenge this country in its ability to improve its international competitive edge as well as the urgent need to improve ‘productivity’ of its industries.

TRAINED TEACHERS NOT TEACHING

The skill shortages continue in spite of the downturn in the global economy and the accelerating move into recession. Teacher shortages continue to be a major concern and in spite of a recent announcement that more teachers have been recruited to teacher training, the numbers are still eight per-cent below the target set for secondary school teachers. In addition, and perhaps more worrying, are the findings of a number of recent research papers. Almost a third of teachers in training do not take up a teaching appointment after qualifying in spite of bursaries and golden hellos and almost twenty per-cent of new teachers leave the profession within three years. Again, as I argued in earlier articles, if there are problems with the flow of new teachers into the profession then real problems will become manifest. A large number of teachers are taking early retirement or leaving the profession, both in schools and colleges, and as a result this is weakening the stock of teachers within schools and colleges. The recent research by the National Union of Teachers (NUT) has shown that the number of teachers leaving has doubled since 1998. The main reasons given are increased bureaucracy, regulation and pupil behaviour.

MATHS COULD CEASE TO BE CORE.

A recent article in the Times Educational Supplement (TES) stated that most mathematics teachers in schools are not qualified to a high level in that subject and that if nothing is done to address the issue, not only with the teacher supply and the declining level of qualification of teachers, then maths could cease to be a core subject. This is an indictment of successive government policies towards the teaching profession andparticularly the continued negative view of teachers in schools and colleges. Similar problems exist in colleges. It is increasingly proving difficult to recruit teachers into science, mathematics, engineering and construction. Where appointments are occurring they are invariably people who have retired from industry or education. The age profile of teachers in these subject areas continues to be skewed towards the older ages. Recruitment problems continue in areas such as information technology and basic skills. These are all strategically important subjects which quite rightly form part of the Government’s priorities in addressing the skills and knowledge needs of the future as well as the problems of the level of literacy and numeracy within society in general. Measures of productivity can precipitate such interesting and perplexing results especially when associated with international comparisons. We were informed by politicians that this country witnessed significant productivity gain in the manufacturing sector during the 1990s. Reports indicated that we were closing the productivity ‘gap’ with our main competitors. However further analysis of these figures now shows a very different picture. For example productivity in manufacturing in this country has mainly arisen from downsizing the workforce whilst output has remained static. In America the output per hour increased by over 25% between 1995 and 2000 whilst in Britain the figure was just over 10%. Observers who have been critical about its labour shedding mentality have often used such expressions as ‘you cannot save your way to prosperity’ or a more candid statement ‘organisational anorexia’. It has been a classic example of a short term approach – our competitors developed more quickly products and services that the world markets wanted and their market share increased with improved levels of efficiency. These statements highlight how statistical terms including productivity can be used by politicians to paint a rosier picture. In order to increase productivity it is important to fully understand what it means and how to effectively measure and monitor it in terms of realistic and meaningful targets and performance indices.

USING SEMTEX.

Discussion on productivity and hence efficiency gains must clearly define what these terms mean and differentiate their meaning and purpose for the public and private sectors. To impose a one size fit across all employment sectors is, as some commentators have said, like ‘taking Semtex to improve efficiency’ – a great deal of damage can be caused.

Reference:

(l) “Skill Shortages”, A series of articles focussed on key subjects. R.G. Evans, ‘t’ Magazine 2000-2001

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