Governments across the world are under pressure to improve public sector performance and at the same time contain expenditure growth – pressure that has not relented since the economic crash of 2008.While factors such as ageing populations and increasing health care and pension costs add to budgetary pressures, citizens are demanding that governments be made more accountable for what they do with taxpayers’ money in the day-to-day delivery of services.
No Magic Bullet to improve efficiency
Anyone involved in the public sector will tell you that there is no blueprint for enhancing public sector efficiency; no magic bullet for squaring the challenge of doing more for less.
As a result, different countries have adopted different approaches to reforming key institutional arrangements. There is an endless list of some of the initiatives currently being rolled out globally, including increased devolution and decentralization; strengthening competitive pressures; transforming workforce structure, size, and other human resource arrangements; changing budget practices and procedures; and introducing results-oriented approaches to budgeting and management.
Improving efficiency goes beyond saving money
The argument for greater efficiency in the public sector at a time of spending reductions and increased pressure on services is obvious, but the importance of efficiency goes beyond saving money. At its heart, I would argue that this is about how a government – and its agencies – interact with its citizens at a time and a place that suits them.
Government spending makes up between 25% to over 50% of Gross Domestic Product depending on where you are in the world. The latest figures available illustrate this clearly with Germany, The Netherlands, The UK and Poland spending around 40-42% of GDP on the Public Sector, rising dramatically to over 50% in Italy, Greece and even Finland. The USA, Russia and Japan all spend under 40% by comparison.
Any effort to boost economy-wide productivity must therefore include the public sector and public services. However, productivity is only one aspect of efficiency.
Efficiency refers to the entire process of turning public money into positive outcomes for individuals and society. In other words, it’s not just about back-office savings. It means thinking about how government funds, designs and delivers frontline services.
Improving efficiency does not just mean reducing spend, it means delivering better outcomes and more effective government, while using public money in the smartest way possible.
Key trends to improve operational efficiency
There are five key trends in the minds of policy makers in the developed world when it comes to improving operational efficiency in the era of budget constraint:
- The use of markets and competition
- Service re-design and alternative delivery mechanisms
- Organization and workforce drivers
- The implementation of technology, data and targeting
- Hard budget constraints and spending flexibility
However, there doesn’t appear to be a single key driver or solution. That magic bullet is still elusive. Improving public sector performance relies on a number of levers being pulled simultaneously.
Technology is driving improvements in service provision
As populations soar and tax-funded budgets to provide vital services continue to shrink, public sector organizations will continue to find it increasingly difficult to satisfy the needs of their citizens.
If you think this is just a short-term challenge – as the direct result of the economic crash and its reverberations from a decade ago – the pressure will only grow as populations of older people, who typically pay fewer taxes while requiring more services, increase. In the UK for example – where core funding for local government has been cut by 40% over the past decade – the number of people over 85 is projected to double in the next 20 years.
One of the key drivers for delivering improvements in service delivery in the public sector is technology, which is fundamentally changing the way we live, work and interact with each other.
Shifts to digital technologies mean that citizen expectations for technology-enabled government services have risen significantly in recent years. This shift in expectations, coupled with the financial pressure on government to transform and do more with less, presents new opportunities to deliver better outcomes for citizens, businesses and public servants themselves.