Systems Thinking in the Public Sector

1. The Public Sector Reform Regime: A Flawed Ideology

It is important to note that by command and control I do not mean being bossy, a common misinterpretation. Some of the best systems thinkers I know are bossy; they are bossy about the right things. When I use the term command and control I mean how we think about the design and management of work.

The current reform regime is based on flawed economic theories and management practices. It assumes that public services can be improved through quasi-markets, choice, and performance targets. This approach, however, fails to understand the unique nature of public services and often leads to unintended consequences.

Key problems with the current regime:

• Misapplication of private sector management techniques
• Over-reliance on targets and performance indicators
• Failure to understand the true nature of demand in public services
• Creation of bureaucratic waste and inefficiency
• Demoralization of public sector workers

The regime's focus on compliance and control, rather than understanding and improvement, has led to a system that is incapable of delivering real, sustainable improvements in public services.

2. The Pitfalls of Targets and Performance Indicators

Targets are the cause: they create poor quality service and high costs, something politicians (and many managers) find hard to comprehend.

Targets distort behavior and often lead to unintended consequences. While they may appear to drive improvement, they frequently result in gaming, cheating, and a focus on meeting arbitrary numbers rather than improving actual service quality.

Problems with targets:

• Encourage short-term thinking and quick fixes
• Lead to manipulation of data and gaming the system
• Ignore the complexity and variety of real-world demands
• Create a culture of fear and compliance rather than innovation
• Divert resources from genuine service improvement

Instead of relying on targets, public services should focus on understanding and measuring their performance against purpose from the customer's point of view.

3. Command-and-Control Thinking: A Misguided Approach

Managing people's activity is an incredible waste of management resource; worse, this style of management demoralises workers.

Command-and-control thinking assumes that workers need to be closely managed and controlled to perform well. This approach, rooted in outdated management theories, fails to recognize the complexity of public services and the intrinsic motivation of public sector workers.

Key issues with command-and-control:

• Treats workers as untrustworthy and in need of constant supervision
• Focuses on managing activity rather than improving outcomes
• Creates bureaucratic layers that hinder effective service delivery
• Ignores the expertise and knowledge of front-line workers
• Leads to demoralization and disengagement of staff

A more effective approach involves trusting workers, providing them with the necessary skills and information, and focusing on improving the system as a whole.

4. Systems Thinking: A Better Way to Improve Public Services

To take a systems view is to think about the organisation from the outside-in, to understand customer demand and to design a system that meets it.

Systems thinking offers a more effective approach to improving public services. It focuses on understanding the organization as a whole, including how different parts interact and how the system responds to customer demand.

Key principles of systems thinking:

• Start with understanding customer demand
• Design services from the outside-in
• Focus on flow and value work
• Measure performance against purpose
• Continuously improve based on learning

By adopting systems thinking, public services can achieve significant improvements in both efficiency and effectiveness, leading to better outcomes for citizens and lower costs for taxpayers.

5. The Importance of Understanding Demand in Service Design

Studying demand teaches us about the real nature of what citizens want from their local authorities and other public services.

Understanding demand is crucial for designing effective public services. This involves studying what citizens actually want and need, rather than making assumptions or relying on predetermined service categories.

Key aspects of understanding demand:

• Distinguish between value demand and failure demand
• Study patterns and predictability of demand
• Design services to meet the variety of citizen needs
• Use demand analysis to inform strategy and resource allocation

By truly understanding demand, public services can be redesigned to better meet citizen needs, reduce waste, and improve overall efficiency.

6. The Waste of Failure Demand and Its Impact on Public Services

Failure demand is demand caused by a failure to do something or do something right for the customer.

Failure demand represents a significant source of waste in public services. It occurs when services fail to meet citizens' needs, leading to additional, unnecessary demands on the system.

Impact of failure demand:

• Increases costs and reduces efficiency
• Frustrates citizens and damages trust in public services
• Diverts resources from value-adding activities
• Often hidden by traditional performance measures
• Can be eliminated through better service design

Identifying and addressing the causes of failure demand can lead to substantial improvements in service quality and efficiency.

7. The Need for a Radical Change in Public Sector Management

Changing the system (measure, roles and other 'system conditions') means removing the dysfunctional aspects of command-and-control thinking and replacing them with the requirements for managing the work as a system.

A fundamental shift is needed in how public services are managed and delivered. This involves moving away from top-down, target-driven approaches to a more systemic, learning-based approach.

Key elements of this change:

• Abandon arbitrary targets and performance indicators
• Focus on purpose and outcomes rather than activities
• Empower front-line workers to make decisions and improve services
• Use measures derived from the work to drive improvement
• Create a culture of continuous learning and innovation

This radical change requires a new mindset from politicians, managers, and workers, focusing on understanding and improving the system as a whole.

8. The Dangers of Outsourcing and Shared Services

In effect, it was paying someone to pick up its failure demand to meet service-level targets.

Outsourcing and shared services are often promoted as ways to reduce costs in public services. However, they frequently lead to higher costs, poorer service quality, and a loss of control and expertise.

Problems with outsourcing and shared services:

• Often based on flawed assumptions about economies of scale
• Can increase failure demand and overall system costs
• Lead to a loss of expertise and local knowledge
• Create contractual rigidities that hinder improvement
• Fail to address underlying system issues

Instead of pursuing outsourcing or shared services as cost-cutting measures, public services should focus on improving their own systems and processes.

9. The Misuse of Technology in Public Sector Reform

Despite the many well-publicised failures, the regime continues to put its faith in the value of IT.

Technology is often seen as a panacea for improving public services, but its implementation frequently leads to costly failures and increased complexity.

Issues with technology implementation:

• Often based on flawed understanding of work processes
• Tends to automate existing inefficient systems
• Can increase failure demand and system costs
• Often driven by IT vendors rather than service needs
• Fails to address underlying system issues

A better approach is to improve work processes first, then introduce technology to support the improved system, rather than using technology as a driver of change.

10. The Systemic Incapacity of the Current Regime to Improve

The regime: systemically incapable of doing the right thing.

The current public sector reform regime is fundamentally incapable of driving real improvement due to its underlying assumptions and structures.

Key reasons for this incapacity:

• Reliance on flawed ideologies and management theories
• Focus on compliance rather than learning and improvement
• Inability to act on evidence that contradicts prevailing beliefs
• Fragmentation of responsibility and accountability
• Persistence of dysfunctional practices despite evidence of failure

Overcoming this systemic incapacity requires a fundamental rethinking of how public services are designed, managed, and improved, moving towards a more learning-based, systems-thinking approach.

Last updated: August 10, 2024