1. Mobilising for Value Creation in the Public Sector
Overcoming the Forces of Inertia

2. CONTENTS
1. Value Creation in the Public Sector 1
2. The Public Sector Performance Dilemma 1
3. The Public Sector Performance Challenge 1
4. The Context for Value Creation in the Public Sector 2
5. Dealing with the Inertia Treadmill 3
6. Igniting a ‘Value Creation Revolution’ in a Public Sector Organisation 4
7. Concluding Remarks 5
APPENDIX
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3. Never doubt that a small group of thoughtful, committed people can change the world. Indeed it
is the only thing that ever has.
Winston Churchill
1. Value Creation in the Public Sector
The purpose of this paper is to begin to stimulate new thinking and debate about how value
creation can be achieved in the public sector and to support leaders in public sector
organisations who are committed to delivering value. A key objective is also to offer practical
support to public sector managers who are involved in preparing for their Comprehensive
Spending Reviews.
Our premise is that it is possible to transform public sector organisations into centres of
excellence in terms of the effectiveness and efficiency with which they deliver public services.
(i.e. centres of value creation). However, achieving this goal requires concerted and systematic
action by progressive leaders who are committed to overcoming the forces of institutional inertia
described below. It will take time and patience but not necessarily additional significant cost –
more a change of mindset.
The importance and urgency of value creation in the public sector has also been elevated even
more recently, by the requirements of the ‘Comprehensive Spending Review’. Public sector
organisations, competing for finite public funds must be able to convince The Treasury that they
are capable of and committed to setting and achieving challenging, yet realistic goals in terms of
service delivery and that they have a clear ‘value creation agenda’ and plan.
2. The Public Sector Performance Dilemma
Much has been said and written about the challenging issue of how to improve service delivery
and cost effectiveness of public sector organisations. (i.e. how to create value). Indeed, at any
point in time, numerous improvement initiatives and programmes are undertaken in the NHS,
The Department of Transport, The Department of Work & Pensions and numerous other public
sector organisations, both at a national and at regional and local levels. Government, intent on
showing that they are indeed serious about ‘making a difference’, invest ever increasing
amounts of public money in a quest to improve public services.
The motives behind all this work and investment in ‘modernising’ and ‘streamlining’ the public
sector are laudable and well intentioned. Unfortunately however, it is often the case that despite
the best efforts of all those involved, many change initiatives founder on the rocks of internal
politics, intransigence, indifference, complexity and unpredictable changes in government policy.
The consequence of this is frequently chronic organisational inertia and a failure to achieve the
original goals of the increased investment or change programme. The only constant is change.
No Government minister achieves greatness by maintaining the status quo, so there is an inbred
need to constantly change. This creates a vicious circle, feeding the institutional inertia,
something that some who work in the public sector thrive upon, whilst others fear it and as a
result swiftly move on, leaving the organisation in it’s perpetual motion of apathy.
So what is to be done about this situation? Should progressive leaders in the public sector
simply avoid the stress and hassle involved in trying to change things and make the most of an
unsatisfactory situation, year after year? Such a defeatist attitude in the face of perceived
insurmountable obstacles to change is one that we have heard verbalised on many occasions in
our discussions with managers and advisors in public sector organisations.
3. The Public Sector Performance Challenge
In all public sector organisations there are talented committed people who are driven by a desire
to improve the wellbeing of society through the effective delivery of essential public services.
Often, what differentiates these people from many in the private sector is a personal value
system which places societal benefits above narrow personal financial interests. These deeply
held beliefs have been fundamental to the success of public service organisations throughout
their histories and will continue to be the basis for success in the future.
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4. However, the challenge facing leaders in the public sector in today’s world is how to deliver the
maximum benefit to society within the many and varied constraints placed upon them i.e. how to
deliver ‘value’. In many cases, public sector managers face significantly more complex
management challenges than their private sector counterparts, given the often competing
interests of the various stakeholders to whom they are accountable and the unpredictability of
changes in public policy and the impact that this can have on their management agendas (see
Appendix).
4. The Context for Value Creation in the Public Sector
Mobilising to deliver value should be a fundamental objective for any public sector organisation.
In order to achieve this goal, it is essential that there is a clear understanding within the
organisation about what the term ‘value’ actually means and how to achieve it in practice. It is
also necessary that people within public sector organisations are engaged and empowered to
think and act in ways that will deliver value and that obstacles to achieving it are identified and
eliminated.
Delivering value in the public sector means creating significant, measurable improvements in
perceived levels of utility and efficiency for users and consumers of public services within a set
of policy, financial and other constraints set by government.
Utility is the degree of satisfaction experienced by the end users of public services
o
and is driven by:
- availability of the service
- timeliness with which the service is delivered
- quality of the service
Efficiency is a measure of cost/investment required to deliver a specified or
o
desired level of utility and is driven by the:
- mindset within the public sector organisation, particularly of senior
management
- degree to which key drivers of the cost of delivering the service are
properly understood
- ability/latitude of management of the public sector organisation to
influence the key drivers of cost
- level of ‘political’ intervention
- level of organisational complexity
- ability to identify and then override/eliminate internal political and other
obstacles which prevent the optimising of key drivers of cost.
- Successful delivery of value requires the following:
- reaching absolute clarity at leadership level about what value creation
means and a strong commitment to permeate a ‘value creation mindset’
in a proactive way throughout the organisation.
- having a clear understanding of the key levers (drivers) which the
organisation needs to influence and manage in order to maximise utility
and efficiency in the delivery of public services.
- ensuring that the organisation’s people, other resources, strategies and
key business processes are mobilised around these value creation
drivers.
- continuously and effectively communicating the key drivers to all key
managers and staff within the organisation and ensuring that people
understand their specific role in terms of managing these and that they
are engaged, equipped and energised to be able to do so.
- eliminating or neutralising to as great an extent as is possible, all the
major obstacles to efforts aimed at managing the key drivers of value
creation in the organisation.
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5. 5. Dealing with the Inertia Treadmill
A common theme in our research is that whilst there is constant pressure for value creation,
there are equally powerful counter forces which effectively stifle any significant attempts to
change peoples’ behaviour in a way that is consistent with achieving value creation. The result is
inertia and under-performance.
Forces driving the need for the delivery of value include the following:
- Customer expectations/demands
- Continuous pressure from Government for improvements in utility and
efficiency in terms of public service delivery
- Government policies, objectives and targets
- Resource constraints/budgets and competition for funding.
Potential obstacles to value creation, leading to inertia and value destruction include:
- Mindset
- Inappropriate or ‘misaligned’ reward/bonus schemes
- Aversion to risk taking
- Resistance to unfamiliar initiatives (‘Not invented here’)
- Organisational complexity
- Societal expectation/ pressures
- Bureaucracy
reaucracy
- Government interventions/ constraints
- Internal political turf wars
- Capability gaps
Figure 1. The Inertia Treadmill
Potential Barriers
Beliefs and
perceptions
Political agendas
Complexity
Bureaucracy
Quest for value creation Underachievement
Capability
Indifference
Pressure for change
The key challenge facing progressive leaders and managers in today’s public sector
organisations is how to break out of this ‘inertia treadmill’.
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6. 6. Igniting a ‘Value Creation Revolution’ in a Public Sector Organisation
I began a revolution with 82 men. If I had to do it again, I'd do it with 10 or 15 and
absolute faith. It does not matter how small you are if you have faith and a plan of
action.
Fidel Castro
Challenging orthodoxy and creating change demands energy and vigour. Throughout history
there have been numerous examples of charismatic individuals imbued with courage, conviction
and determination who have succeeded in overcoming huge odds and changing the world they
inhabited.
A key premise of this paper is that the goal of transforming public sector organisations into
centres of effective value creation is a cause worth fighting for, since this is the basis for meeting
society’s requirements for effective and efficient public services. So how can this transformation
be achieved?
It may be helpful to use the analogy of a revolution in thinking about this issue. The key
ingredients for a successful revolution are:
- Visionary, charismatic and brave leaders with simple but powerful ideas
- The willingness to challenge the status quo, even if this involves
substantial personal and other risks
- The ability to win others over to the leader’s way of thinking and to
energise and motivate people to join the ‘revolutionary forces’
- A clear plan of action for spreading the revolution and marginalising the
opposition (i.e. reactionary forces)
We believe that the best way to transform a public sector organisation into a value creation
focused operation is to adopt and adapt the revolutionary model described above. Figure 2
highlights the basic steps required to ignite a ‘value creation revolution’ in the public sector.
Figure 2. Blue Print for Public Sector Value Creation Revolution
Inspire Agitate for Exploit Small Spread the
Revolutionaries Change Victories Revolution
Firstly, it is absolutely essential to identify and target leaders within the organisation who can
make a difference. There is no point in trying to inspire people who have no real influence to
change anything! The attitudes of these key individuals may range from initially being very
supportive, to being very cynical. The fact that someone might be initially cynical and resistant to
‘yet another initiative’ is perfectly understandable and it should not preclude that person from
being targeted. In our experience, it is often those who have initially been sceptical, who can
become the most powerful ‘revolutionaries’, once they have witnessed the power and the real
benefits of what is being proposed.
Having identified and approached the potential ‘revolutionaries’, it is essential to ‘inspire’ them,
by sharing with them a powerful vision of what could be achieved by transforming the
organisation and overcoming the forces of inertia. It is obviously fundamental to also outline in
broad terms how this vision could be realised and to make them aware of the potential role they
could play and the importance of their active support in achieving success.
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7. Once their support for the vision is obtained and they have committed themselves to moving
forward towards the vision in a proactive way, it is important to engage them with the other
revolutionaries who have also been recruited to the cause. It is both likely and desirable that a
charismatic leader will emerge from within the ranks of the small revolutionary group. Once this
occurs, then the foundation for change has been laid.
The Second step on the road to revolution is for the small cadre of revolutionaries to start
agitating for change. It is almost always the case that people will be quick to nominate issues in
the organisation which are in urgent need of attention. It is important initially, not to take on
issues which are too complex or challenging. The goal here is essentially to create a sense of
‘restlessness for value creation focused change’ within the organisation and to initiate a co-
ordinated push for transformation in one small area or in respect of one or two manageable
issues. Examples of potential issues might be a bureaucratic procedure which is inconsistent
with effective value creation behaviour or a compensation scheme which rewards
ineffectiveness.
Some of the agitation for change may need to occur beyond the boundaries of the organisation.
For example, it may be that a key reason for inertia and poor performance lies in policies or
other constraints placed on the organisation by central government or by some other
government agencies. The goal should be to agitate for change at the source of the problem,
wherever that may be. This stage requires gaining control of the ‘radio station’ and making
effective use of the full range of communication channels to transmit clear messages and also to
‘listen’ to reactions from within the organisation, for and against change.
Thirdly, it is important to ensure that the agents of change are given the necessary support and
facilitation to ensure that innovative, workable, commercially sound solutions which add value
are identified and deployed. It is then important that successes and ‘small victories’ are widely
communicated to the rest of the organisation and beyond e.g. to government ministers. This is a
key way in which the reactionary forces of inertia within the organisation can be challenged. The
more successes which can be achieved, the easier it will become to build momentum for further
more radical changes and to win more hearts and minds over to the vision of the future being
articulated by the ‘revolutionaries’.
The Fourth phase of the ‘value creation revolution’ is where the biggest transformation
challenges facing the organisation are addressed and where some possibly ‘brutal’ actions to
root out the forces of inertia and reaction are launched. By now, the momentum for change has
gathered pace and has attracted the active support of most other progressive managers within
the organisation. The aim is to isolate and nullify the remaining reactionaries who continue to
hold out against changes that are necessary to deliver value creation. The growing strength of
the ‘revolutionary forces’ backed up by the power of value creation rationale and hard evidence
of successes already achieved is key to success in this final phase.
The success of the revolutionary cause must of course be measured in terms of the impact
which the changes which are implemented actually deliver in terms of value creation as defined
above. In order to ensure that the organisation does not eventually slip back to old ways, the
final act of the revolution must be to ensure that the leadership of the organisation is firmly in the
hands of those who have a commitment to maintaining the benefits of the revolution and to
entrenching a progressive value creation focused mindset and culture.
7. Concluding Remarks
It is a matter of legitimate public concern that public sector organisations are seen to be pro-
active in terms of enhancing the effectiveness and efficiency with which they spend public
money and deliver public services.
We believe that the best way for public sector organisations to meet societal goals and to create
value is for progressive leaders within such organisations to embark on concerted action to
transform mindsets that are inimical to value creation and to build organisations that are aligned
with the goal of value creation.
In striving for success, the leaders of public sector organisations need to be actively supported
in systematically identifying and managing the key drivers of value creation within their particular
part of the organisation and in developing and deploying innovative solutions to often complex
and challenging issues.
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8. - APPENDIX –
What does it mean to deliver value creation in a public sector organisation? It is not simply a
question of grafting in some private sector management ideas and concepts and hoping that
they ‘catch on’. It is essential to understand the specific environment within which public sector
organisations have to operate and how this differs from that in which private sector organisations
operate.
Private Sector versus Public Sector
Figure 1 depicts the private sector world. Private companies compete in markets and are subject
to certain regulatory and professional constraints. They are accountable to customers and to
shareholders. Their governing objective in most cases is to maximise wealth or value for the
owners or shareholders of the business.
Figure 3. The Private Enterprise World
Accountable to: Governing Objective
Corporate Environment
Customers
Legal Environment
Maximise Shareholder
Private
Wealth/Value
Sector
Enterprise
Industry & professional
Shareholders
requirements/standards
Figure 2 shows the public sector world. Public companies face a corporate environment which is
heavily influenced by the political policies being pursued by the government of the day and by a
host of legal and other regulatory requirements. In contrast to the private sector, it is often the
case that agendas within public sector organisations can be set, influenced or substantially
changed by direct government intervention.
Public sector organisations are accountable to two main stakeholder groups, tax payers and the
government. Their governing objective is (or should be) to deliver effective public services in a
timely and efficient manner. In addition they are also accountable for delivering government
policy objectives and targets.
Figure 4. The Public Enterprise World
Accountable to: Governing Objectives
Corporate Environment
End users of
Public Services
Government policy
(Customers &
Legal Environment
Tax payers) • Maximise Utility &
Public Efficiency of Delivery
Sector • Attain Government
Enterprise Policy Objectives & Targets
Professional requirements
Government
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