Next Generation Government Transformations How to Improve

Perspective
Hugo Trépant
Robin Schofield
Anna Brown
Homy Dayani-Fard
Next Generation
Government
Transformations
How to Improve
Customer Service and
Reduce Operating Costs
Without Investing
£500 million in New IT
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CONTACT INFORMATION
Hugo Trépant is a partner with Booz & Company’s
government practice in the United Kingdom and
specialises in strategic business transformation,
especially for large complex change programmes and
Booz & Company’s role as strategic integrator.
He can be reached at +44-20-7393-3230 or
[email protected]
Robin Schofield is a principal with
Booz & Company’s Global IT practice. Robin primarily
serves civil government clients in the United Kingdom.
Robin also has experience in IT strategy and IT
effectiveness for banking, insurance, and energy
clients. Robin can be reached at +44-20-7393-3597 or
[email protected]
Anna Brown is an associate with Booz & Company’s
London office. Anna serves civil government clients in
the United Kingdom, and has particular expertise in
chanage management. She can be reached at
+44-20-7393-3733 or [email protected]
Homayoun (Homy) Dayani-Fard is an associate
with Booz & Company’s London office. Homy has
advised clients in the public sector and financial
services on strategic transformation programmes,
with a particular focus on IT innovation and IT
performance improvement. Homy can be reached at
+44-20-7393-3509 or [email protected]
Colin Brash, Jo Miles, and Charlie Taylor also contributed to this article.
Originally published as:
Next Generation Government Transformations: How to Improve Customer Service and Reduce Operating Costs Without Investing
£500 million in New IT, by Hugo Trépant, Robin Schofield, Anna Brown, and Homy Dayani-Fard, Booz Allen Hamilton, 2008
Next Generation Government
Transformations
How to Improve Customer Service and Reduce Operating Costs
Without Investing £500 Million in New IT
Appetite is diminishing among senior civil
servants for using large Information Technology
(IT) investment as a means to transform
government services. Booz Allen Hamilton
research shows that government departments can
improve customer service and reduce operating
costs without always investing in costly, and often
risky, IT-led business change. Departments can
do this by taking bold steps to transform their
businesses without making IT changes and, where
investment in IT is necessary, by changing the way
they approach and manage IT projects. In Booz
Allen’s experience, this new kind of transformation
can often be even more successful than its ITenabled counterpart.
Changing Needs
Booz Allen research indicates that the UK government
has invested as much as £17 billion in new IT
projects since the government’s 1999 “Modernising
Government” white paper was published (see
sidebar).
Among these new IT projects, the National Health
Service’s Connecting for Health, the Ministry of
Defence’s Defence Information Infrastructure, and
Modernising Government
The “Modernising Government” white paper of
March 1999 launched a long-term programme
to improve Britain’s public services. The
programme’s three objectives were to ensure
that:
n
n
n
Policy-making is more joined up and
strategic;
Public services focus on their users, not their
providers;
The government delivers high-quality public
services.
the Court Service’s Libra programmes are landmark
initiatives.
However, business users have criticised some of
these investments, for reported cost overruns and
delays have dogged successful implementation.
Additionally, the availability of further investment
funds has been reduced (see Exhibit 1) as public
sector spending has swelled, according to government
figures, to more than 42.3 percent of Britain’s Gross
Domestic Product. HM Treasury has had to scale back
its forecasts for economic growth.
Faced with a tight Comprehensive Spending Review
2007, senior civil servants are now asking: How can
I achieve my modernisation goals on tighter budgets
while simultaneously avoiding many risks of IT-led
business change?
Booz Allen’s Point-of-view
Our research shows that government departments
can do more to improve customer service and reduce
operating costs without spending so much on IT (see
Exhibit 2).
These improvements and cost reductions can be
accomplished in two ways:
n
n
By taking bold steps to transform their businesses
independent of IT system changes;
By changing the way projects IT is implemented.
Bolder Steps to Transform
The IT-dependent life cycle of business change
has become the standard for recent government
transformations.
This life cycle starts with a strategy for change. The
cycle proceeds with development of a revised operating
model, organisational structure, and business
processes. Next comes a lengthy process of building
IT to support the desired new way of working. Finally,
if successful, the government department rolls out the
replacement system to users along with some change
management and training.
Our research reveals that stripping IT-dependency out
of this sequence can reduce the cost of transformation
by as much as 60 percent. But the question remains,
what results can government departments achieve
without new IT?
Booz Allen believes that breaking dependency on
IT actually helps government departments focus on
important non-IT changes needed to transform their
Exhibit 1
UK Government Spending on IT-enabled Change Diminishes Sharply
Between 2004-2005 and 2005-2006 (source: National Audit Office
2007)
Spend (£ million)
1,000
800
600
400
200
2003-04
2004-05
2005-06
institution. Results can be dramatic and subsequent IT
changes are based on a more solid foundation.
Examples of bold non-IT changes that government
departments can make to affect transformation
include:
1. Reorganisation to tackle long-standing business
issues;
2. Better performance management of middle
managers and staff;
3. Management of workforce capabilities to meet
changing needs.
We describe these changes in more detail below.
1. Reorganisation to Tackle Long-standing Business
Issues
Mentions of “reorganisation” often yield a fatigued
response from staff members, or cynicism that in
time, “everything will go back to the way it was.”
Good reorganisation, however, tackles long-standing
business issues that matter, issues that hold
people back from properly doing their jobs. Handled
properly, reorganisation can have a dramatic impact
by: clarifying organisational goals and objectives;
rationalising a portfolio of activities; simplifying
products offered; streamlining interactions with
customers; and reducing a costly office footprint
– all with few IT dependencies.
In all these activities, government departments
benefit from accepting that the best way to serve
the whole population is by dealing with more
complex cases as exceptions rather than trying to
develop processes to deal with every customer’s
circumstances.
This kind of successful business transformation has
been implemented before:
The Home Office, which in May 2007 split into two
separate departments for security and for justice,
readjusted after struggling with an expanding
departmental remit and conflicts of interest between
its former constituent parts.
n
sign paper forms, standardising benefit rules, and
using risk-based verification to reduce the number
of times The Pension Service asks customers to
supply evidence.
2. Better Performance Management of Middle
Managers and Staff
The British Government has certainly held its senior
civil servants accountable for recent performance by
rewarding the success of some and holding others
heavily responsible for failures in their departments.
In Booz Allen’s experience, however, pressure
to perform at the top does not always translate
into improved middle management nor does it
necessarily equate to increased productivity among
rank-and-file staff members.
To provide huge potential for customer service
improvement and waste reduction, it is best to
target better performance management at the
The Pension Service successfully worked with
ministers between 2003 and 2007 to simplify State
Pension claims and Pension Credit applications
by removing the requirement for customers to
n
Exhibit 2
Comparison of common IT-enabled transformation model and recommended next generation alternative
Common IT-enabled Transformation Model
Recommended Next Generation Alternative
Business
IT
Business
IT
People
People
Reduced overall cost
Same level of impact
grades of administrative assistant through to grade
6 (or their equivalents).
Management information provided by IT systems
can certainly help. However, more important actions
are needed to recognise high performance and
tackle deficiencies.
For example, government departments must
encourage managers to hold regular staff meetings
to provide feedback and discuss progress on
development needs.
Similarly, managers must differentiate between
their staff members, offering incentives to
good performers and using their department’s
consequence process to address poor work. Where
incentives are inadequate, Human Resources (HR)
should make implementation of better tools a top
priority.
These kinds of measures help create an
organisational culture where performance is talked
about openly and taken seriously, with managers at
all levels taking action.
Unfortunately, there are few examples of UK
government departments that have extended
performance management to all levels of the
organisation.
However, Britain’s retail banks – once notorious for
poor customer service and lack of competitiveness
– made good use of such staff incentives as the
cornerstone of their transformations in the 1990s,
with considerable success.
3. Management of Workforce Capabilities to Meet
Changing Needs
Government departments recognise that they
compete for skilled employees, especially
people who can readily adapt to different work
methodologies and new IT.
However, government departments face significant
challenges in addressing many issues related to
workforce capability. For example: recruitment
policies and processes may not be fit-for-purpose;
remuneration may be inadequate to attract external
hires for key positions; or, training may be out-ofdate with respect to current business needs.
Private companies have taken seriously the process
of identifying and addressing capability gaps in their
workforces. The private companies have made HR
directors strategic business partners tasked with
worrying about this issue; they have set up centres
of excellence for recruiting, payroll, and training;
they have recruited new entrants to meet specific
skills profiles; and they have changed HR processes
so that HR managers work with business units
to meet capability needs and not just deal with
“problem cases.”
Instituting these private sector measures can be an
important transformation enabler to a government
department.
For example, a section of the Department for Work
and Pensions (DWP) is using simulated customer
calls to test candidates applying for customer
advisor positions. As well as improving the quality
of new hires, this allows candidates to better
understand what the job entails, thus improving
retention upon completion of staff member training.
Only when HR planning, recruitment, and reward
measures are pieced together into a comprehensive
workforce capability strategy can government
departments realise the same benefits as private
companies.
Changing the Way IT is Implemented
Although we have discussed how government
transformations can occur without IT spending,
avoiding it entirely is not always possible. Inadequate
IT may hamper business change. Or, new IT may be
needed to support revised business processes or
performance management systems.
Nevertheless, there is much that government
departments can do to reduce IT costs. Three such
effective actions are:
1.Make best use of existing systems rather than
building new;
2.Where a replacement system is required, change
business processes to allow commercial products
to be used “as-is,” rather than be customised;
3.Use application sharing, offshoring, and pay-for-use
arrangements to reduce capital expenditures and
transfer risk.
We describe these actions in more detail below.
1. Make Best Use of Existing Systems Rather Than
Building New
Government department managers often see
existing systems as hindering change. Systems
integrators and product vendors may encourage this
view.
More often, however, existing systems – whether
mainframes or UNIX client-server – should be
seen as functionally rich and reliable platforms,
with limitations that government departments can
overcome.
For example, government departments can extend
existing systems to provide the missing functionality
needed for business change. Although it is
unfashionable to use legacy programming languages
and skills, government departments often have those
capabilities in-house, or they can be bought on the
contract market. One example of this practice is
from the DWP, which is successfully building its new
Employment and Support Allowance benefit on top of
existing systems.
Alternately, when existing systems do not integrate
with newer ones, cannot scale to serve enough
users, or cannot offer online services, government
departments can use “wrapping” technologies such
as Web services and message queuing to overcome
limitations.
In these instances, Web services can act as
plumbing between different systems (and potentially
different departments), enabling them to work
together in lieu of having to replace older systems
with ones compatible with newer technology.
Message queuing allows for execution of transactions
without receiving systems necessarily being available,
thus saving money as it is costly to make existing
systems available online 24 hours-a-day. HM Revenue
and Customs uses this type of wrapping to provide
online interfaces to its National Insurance Recording
System (NIRS2).
2. Where A Replacement System Is Required, Change
Business Processes to Allow Commercial Products
to be Used “As-is,” Rather Than Be Customised
Government departments cannot always extend or
wrap existing systems; instead replacements may
be required.
In such cases, most government departments
already look for Commercial-off-the-Shelf (COTS)
products to meet their needs.
However, the cost of customising a COTS product
to meet detailed business requirements is high and
its use locks the department into higher application
maintenance costs when vendors produce new
versions of their products, which are often
incompatible with the department’s customisations.
Instead, government departments should change
their business processes to match functionality
provided by the best-fitting, available, and reputable
COTS products.
This approach is contrary to most IT system
development methods and it involves some hard
trade-offs.
Nevertheless, if executives challenge their business
analysts, they often discover that departmental
processes can change. Sometimes departments
find that the business processes offered by a
mature Enterprise Resource Planning (ERP) or
Customer Relationship Management (CRM) package
are even more advanced than their own.
Most importantly, departments can save as much as
70 percent on implementation costs while avoiding
the situation of one government department that so
extensively customised an electronic document and
records management package that later upgrades
proved almost as expensive as the original
implementation.
3.Use Application Sharing, Offshoring, and Pay-ForUse Arrangements to Reduce Capital Expenditures
and Transfer Risk
There are situations in which government
departments cannot make use of existing systems
or implement “as-is” COTS products.
In such a situation, a COTS customisation or
custom-build is required. However, government
departments can still implement new IT at a lower
cost than that to which they are accustomed.
One of the most cost-effective methods is to share
applications across more than one government
department. Back office systems such as
Human Resources, procurement, supply chain
management, and finance are particularly suited for
this treatment. Similarly, departments that share
similar functions can use common IT components
to manage relationships and make payments to
customers. Finally, all local authorities have the
same statutory responsibilities, thus enabling them
to define common business processes among them
that can potentially share the same supporting IT.
Government departments can also reduce costs
of IT development by as much as 30 percent by
using offshore providers, according to Booz Allen
research. Offshoring has previously been viewed
as problematic for government entities because of
British jobs and customer data moving to foreign
countries. However, many systems integrators
have evolved into businesses with requirements,
analysis, and design capabilities in home countries
like the UK, supported by build and technical testing
capabilities in lower-cost countries such as India.
This structure allows government departments to
contract with a UK public limited company, while
much of the IT development takes place offshore.
Outsourced providers are sometimes willing to build
new systems at their own expense in return for a
pay-for-use scheme that adequately compensates
for this risk. Government departments need to
evaluate these schemes carefully for value-formoney, as government borrowing is cheaper than
the private sector’s cost-of-capital. Government
departments must also take care to ensure that
pay-for-use costs do not become fixed improperly,
and that outsourced providers do not charge
punitively for lower or higher-than-forecast business
volumes. Despite these management concerns,
government departments should evaluate the
benefits of transferring IT development risks to third
parties through sound contracts that are robustly
managed.
These methods of cost containment are all the
more powerful when government departments
can combine elements of the above strategies,
for example, pay-for-use of back office shared
services from a UK-based third party with offshore
development capabilities. Savings in such an
instance can represent a significant reduction from
more standard approaches.
Conclusion
Government departments clearly have less funding
for modernisation under the 2007 Comprehensive
Spending Review. However, this should not hold back
executive teams from improving customer service and
reducing operating costs.
Breaking dependency on new IT for transformations
can radically reduce the costs of change. Through
removal of IT change as an easy option, managers are
encouraged to thoughtfully address business issues
and improve performance through realistic means.
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