Public Sector Reformation

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1 Public Sector Reformation

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3 Public Sector Reformation Values-driven Solutions to Fiscal Constraint Ian Chaston Centrum Catolica, Peru; Moustraining Ltd, UK

4 Ian Chaston 2012 Softcover reprint of the hardcover 1st edition All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6 10 Kirby Street, London EC1N 8TS. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act First published 2012 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number , of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan in the US is a division of St Martin s Press LLC, 175 Fifth Avenue, New York, NY Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave and Macmillan are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN ISBN (ebook) DOI / This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress

5 Contents List of Tables and Figures Preface vi vii 1 Towards the Inevitable 1 2 Societal Values and Expectations 22 3 Politicians 44 4 The Media 68 5 Leadership 89 6 Employees Organisational Values Vision, Mission and Strategy Values Gaps Values Congruency Translating Vision into Strategy Objectives, Plans and Implementation Failure Possible Futures 282 Index 303 v

6 List of Tables and Figures Tables 10.1 Comparative review of process 199 Figures 1.1 Organisational values and sources of influence Public Sector Service Gap Model System interactions Factors of influence on leadership style Stakeholder Strategy Matrix Conflicting values Linear Sequential Strategic Planning Model Vision-centred approach to public sector strategic planning Values gaps and values influencers Organisational value options Organisational and participant values Values development priorities The 4Ps of strategic management Strategic options Service provision space map Strategic service options Strategic fit assessment matrix Determining final objectives and plans Knowledge asset management 245 vi

7 Preface In the 1990s, in order to retain electoral support, many Western governments pursued strategies of increased public sector spending to grow the welfare state and to stimulate economic growth through bank deregulation and low interest rates. The inevitable outcome of the latter strategy in the USA and UK was an expansion in consumer lending by the banks, creating a housing bubble. To support expansion of their lending activities the banks created collateralised debt obligations (CDOs) as a mechanism for removing a significant proportion of mortgage debt from their balance sheets. Eventually these actions led to the collapse of the financial system when the sub-prime mortgage crisis erupted in America. In the UK, the government was forced to intervene to rescue financial institutions involved in profligate lending in the UK housing market. Governments and their financial regulators realised there existed a massive level of toxic debt within the financial services sector. This eventually resulted in bank failures and large-scale government intervention to avert a crisis similar to that which occurred during the 1930s Great Depression. The outcome of government intervention was a huge increase in the level of the public deficit in some Western democracies. Then, just when it seemed a global financial crisis had been averted, it emerged that some EU countries, especially those in the Mediterranean region, had used a period of low interest rates to dramatically increase their level of borrowing to sustain public sector spending, thereby adding further to their already excessive public sector deficits. The country most affected by this problem was Greece. In order to avoid a collapse of the entire eurozone region, the European Union (EU) and the International Monetary Fund (IMF) were forced to come to the rescue. This rescue involved making funds available to Greece on the understanding that the country s government would implement a period of severe austerity by reducing the scale of the country s public sector spending, accompanied by increased taxation. Other countries such as Ireland, Spain and Portugal are facing similar, but less spectacular, problems. These countries will also face a period of public sector austerity in order to rebuild their battered public sector finances. The consequence of these recent events is that governments in many Western democracies have been forced to significantly reduce public sector spending in order to reduce the size of their public sector deficits. vii

8 viii Preface For the foreseeable future, these nations electorates will face a period of austerity during which taxes will be higher and public sector services will decline. In theory, some degree of protection of public services could be achieved by public sector organisations (PSOs) implementing a new approach to service provision through restructuring, maximising the proportion of resources allocated to frontline services and exploiting innovation to evolve new services or delivery systems. This text posits that this should occur; however, there is a need for public sector reform. It is further posited that a critical antecedent to implementing reform is a need to alter the values which currently exist within many PSOs. This is because a fundamental change in organisational values is necessary to ensure there is a genuine commitment within these organisations to more effectively fulfil their defined social purpose. Proposed changes to values and actions include leaders being more interested in service provision than sustaining their own high salaries, unions putting service delivery ahead of protecting their members pensions and employees adopting an orientation of optimising performance by welcoming innovation and reducing bureaucracy. The text examines the issues associated with achieving a value shift within the public sector so that PSOs are able to optimise ongoing service provision in the face of financial constraints caused by cutbacks in government spending. Chapter 1 examines Western governments previous attempts to enhance public sector performance through the New Public Management (NPM) model. The proposition presents a need to focus on innovation in order to more effectively sustain service provision responsibilities in the face of financial constraint. Reliance on innovation to develop new services and effective internal operational processes cannot occur unless there is a value shift within PSOs. The required shift is to place greater emphasis on integrity and commitment in order to fulfil their social purpose. External factors influence the values which exist within PSOs. The behaviour of PSO staff is partially determined by their personal values. Chapter 2 examines how these values develop and are influenced by society in general. Ultimately, the behaviour of politicians will determine whether PSOs are persuaded that their governments are genuinely seeking to achieve long-term welfare state reform. Chapter 3 reviews the behaviour of politicians and how this influences perceptions and values within PSOs. In the electronic age, the media has a major impact on the values of societies and the behaviour of organisations within society. Chapter 4 assesses the influence of the media and implications in relation to causing value shifts within populations.

9 Preface ix The performance of any organisation depends on its guidance by an effective leader. Chapter 5 reviews the key role these individuals play and the managerial attributes which they should possess in order to achieve a value shift within a PSO. Employees in Western democracies tend to expect to be able to influence management thinking and have a desire to be involved in organisational decision making. Chapter 6 examines how this employee orientation can influence values and performance within PSOs. Ultimately, the quality of public sector services and the effectiveness of delivery is determined by the overall values exhibited by the organisation. Chapter 7 reviews the issue of organisational behaviour and the factors which influence an organisation s performance. The welfare state, especially in Europe, has evolved from a philosophy of social equality towards a desire to create systems which deliver services designed to combat social exclusion. Chapter 8 examines the processes associated with PSOs achieving value congruence in vision, mission and strategy. Managing organisational change through actions such as restructuring and revising internal operational processes is an extremely difficult task. Chapter 9 examines the nature of values gaps and the associated implications in relation to the performance of PSOs. Chapter 10 presents some of theories and their applicability in seeking to shift values within organisations to achieve greater congruence. Chapter 11 covers the issue of converting the defined organisational vision into a strategy through which to fulfil the stated mission of the organisation. Merely developing a vision, mission and strategy to exploit organisational values is no guarantee that desired service provision outcomes will be achieved. Chapter 12 examines the issues of effectively implementing a strategy based around achieving a value shift that will lead to the creation of more innovative PSOs. Rarely, however, is implementation of a new plan a totally problem-free process. Hence, Chapter 13 considers how barriers to achieving a values shift can arise within PSOs and how these can be avoided. Chapter 14 examines the nature of value shifts in society and the ability of politicians to deliver fundamental reform. A review of specific areas of service provision, such as defence, education and healthcare are examined. The final conclusion is that the limited capability of politicians to deliver reform means that the responsibility for achieving change rests within the PSOs themselves.