Craig Bentley looks at how public sector organisations can reduce costs without impacting on services.

The public sector has suffered as much as any during the era of austerity introduced by the last coalition government. As recent events in Greece have shown, such measures, though sometimes necessary, are rarely popular – for obvious reasons.

As someone who works extensively with public sector organisations, you might expect me to be automatically critical of spending cuts – the assumption is that cutting funding inevitably leads to a reduction in quality of services. However, reducing operating costs doesn’t have result in reduced quality – if carried out correctly. Furthermore, it’s difficult to deny that there are areas within the public sector that vary widely in how they manage costs and which are ripe for review. For example, according to the NHS Procurement Atlas of Variation, one NHS trust spent 66.72p per toilet roll, while another bought toilet rolls for just 34.14p. A small variation when talking about domestic usage, but apply this to a large NHS trust and the discrepancy becomes significant. Whilst this is just one frivolous example, the underlying message – that it’s vital to take control of cost within the public sector – is a serious one.

The impact of the Comprehensive Spending Review
With the government currently laying the groundwork for its next Comprehensive Spending Review (CSR), many in the public sector are justifiably apprehensive. The last CSR in 2010 saw government department budgets cut by 20 per cent, whilst half a million public sector jobs were lost, and the education maintenance allowance was abolished alongside general cuts to the welfare budget.

The CSR also acts as a timely reminder that every public sector organisation should aim to review its operating practices from time to time. This is fundamental to working efficiently and providing value for money – both key drivers for any organisation, whether working in the public or private sector.

Many of those working in healthcare or education, for example, may well have worked in that sector all their careers. The upside of this is that it makes them experts with valuable experience. However, this can also hinder objectivity, which is why the public sector often turns to external organisations to carry out reviews or audits.

Having worked with organisations across different parts of the public sector, there are certain principles and strategies that I have found work well, as the success of this six month project with a Further Education organisation in the West Midlands demonstrates.

Warwickshire College Group case study

The Warwickshire College Group is comprised of six FE colleges across Warwickshire and Worcestershire. The group has over 15,000 students and 1,500 staff, with a turnover in excess of £47 million. Having identified a number of key areas for review, the Group’s directors decided to bring us in as an external consultancy to ensure the necessary neutrality
The overall objectives were to reduce costs and grow external revenue, and so the project comprised two programmes:
• A College Efficiency Programme
• A Business Review Programme. This looked into areas such as transport and travel expenditure, sports facilities, exam and invigilation fees, marketing, procurement, IT licensing, and utilities spend.

The programmes had three key objectives, designed to ensure the introduction of a new, sustainable way of working.
1. To provide programme management, governance, reporting and communication structure to the priority areas.
2. To ensure a financial saving, as well as identifying ongoing annual cost savings.
3. To coach the leadership team as needed and identify managers to be trained in project management, business improvement, and lean principles.

The first steps

In any improvement project it’s important to differentiate between long and short term goals. It’s also crucial to get this initial phase right as it is the foundation of everything that follows.

In the case of the Warwickshire College Group, the first step was establishing clear objectives for each of the 17 agreed work streams alongside programme governance. The initial phase also involved coaching for the leadership team on their approach and responsibilities, as well as establishing the 6 Sigma DMAIC methodology (Define, Measure, Analyse, Improve and Control) which would help to structure and manage the programme.

Setting clear expectations
Charters were then created for each programme; one which related to efficiency or cost saving, and one which related to growth or review of commercial operations. These charters set specific expectations of a minimum 5% cost reduction / profit growth for each project.

As good communication is an essential part of effective change management, an intranet based platform was also set up to communicate the programme objectives and progress to all 1,500 college staff, so everyone was kept informed of what was happening and why.

Once the project was formally launched, there was a six month deadline to achieve all the objectives that had been set. These were all successfully delivered and included:
• The achievement of necessary cost savings
• The introduction of new ways of working
• The development of the skills of the college leadership and management teams
• The identification and training of a group of people to take forward the next 25 projects
• The review and distillation of the 25 projects into 8 priorities for launch by a newly established Business Improvement Team.

The resulting savings amounted to more than £1m per year with further cost savings anticipated as a result of improved processes, renegotiated supplier agreements, increased budget accountability, and behavioural changes related to purchasing, travel, expenses, and energy usage.

As with any project, there were challenges. Some staff had been cautious about the programme at the outset, but this was resolved by providing more one-to-one coaching to individual sponsors and project leaders ahead of the launch, helping to ensure early buy-in and engagement.

Endorsing the success of the project, Sue Georgious (who was Interim Principal/ CEO of the Warwickshire College Group at the time of the project but has since moved on) explains its impact. “The project has made a significant difference at Warwickshire College, leading a business efficiency programme which has helped to not only make real cost savings but also to change the way in which we undertake our business. Key to success was the way in which our programme manager integrated into the college, understanding the culture and how it shapes people’s approach.”

Many public sectors have been forced by budgetary cuts to look at new and more efficient ways of working. I would argue that as long as services are maintained, this is actually a very positive process – and eminently achievable.

About the author:
As MD of Bentley Management & Consulting, Craig Bentley brings almost 20 years of industry experience to the company’s work with a range of public and private sector organisations.