Outsourcing - jam today trumps potential stickiness tomorrow
24/06/2014
In an ideal world the private sector would run everything.
Managing within the private sector system is so much easier because of what it has - a single, simple measure of success - and what it does not have - the need to be democratically accountable. The private sector also has a more naturally embedded competitve environment which can drive innovation and better performance.
(n.b. as I outline in my book the public sector can and sometimes does create such an environment - and when it does so it can be considerably more effective because it is easier to share information)
However, not everything can be outsourced and so the challenge is knowing where to draw the line. No doubt the announcement today of the early successes in outsourcing elements of police work in Lincolnshire may prompt chief constables to redraw their own particular lines.
As they hover with their pencils it is worth considering how the decision which they, and other public sector managers are taking, is stacked in favour of outsourcing. The benefits of outsourcing are short term and tangible. The costs of outsourcing are long term and intangible. Who wouldn't be tempted to outsource in such circumstances, particularly in a time of austerity? And who is to say that to do so is the wrong decision?
The biggest benefit is of course likely to be cash. In the first year of its contract G4S claims to have saved £5m - savings of 18% - from the budget of Lincolnshire's police authority. In addition outsourcing a specific service can bring benefits in service improvement perhaps due to the focus the provider brings as well as the new ideas and energy. So in the case of Lincolnshire, Alan Hardwick, the county’s police and crime commissioner, can currently say: “If others want to deliver more for less, they should come to Lincolnshire. We have not only managed to reduce crime by over 14 per cent, better than most other forces, but we have done so while putting more officers on the beat, improving public confidence and delivering a better service to our communities.”
The costs of outsourcing are harder to define and measure:
1. Diluting democratic accountability; it is now that little bit harder for democratically elected representatives in Lincolnshire to respond to their constituents and make changes to police policy. To do so they would need to renegotiate contracts. The result is that citizens in Lincolnshire are less able to influence the delivery of the services for which they pay and may feel increasingly disenfranchised.
2. A less holistic approach; G4S will be focused on the aspects of policing for which they have been contracted. This focus is of course an advantage in some ways. But it will be harder to use policing to pursue the wider public good in the future, for example by collaborating with education bodies to deal with truancy or to offer extra capacity at short notice at the Olympics or to take part in national campaigns to promote community cohesion. Thus the ability of the public sector to behave in a co-ordinated and strategic way risks being reduced.
3. Less sharing of best practice; G4S will, quite reasonably, be less willing to share the techniques they are using to drive down costs and make improvements as these represent their competitive advantage. The ability to share data freely between organisations is a huge advantage for the public sector but one which is marginally eroded by every outsourcing deal.
I draw three conclusions from this cost-benefit analysis. First, that deciding whether or not to outsource is tricky and probably best taken on a case by case basis. Secondly, that if I were a public sector manager I would be very predisposed to take up the opportunity for short term savings. Thirdly, that as a citizen I am keen to ensure that the decision making around outsourcing does take account of the longer term issues - but I'm not quite clear how it can adequately do so.
Managing within the private sector system is so much easier because of what it has - a single, simple measure of success - and what it does not have - the need to be democratically accountable. The private sector also has a more naturally embedded competitve environment which can drive innovation and better performance.
(n.b. as I outline in my book the public sector can and sometimes does create such an environment - and when it does so it can be considerably more effective because it is easier to share information)
However, not everything can be outsourced and so the challenge is knowing where to draw the line. No doubt the announcement today of the early successes in outsourcing elements of police work in Lincolnshire may prompt chief constables to redraw their own particular lines.
As they hover with their pencils it is worth considering how the decision which they, and other public sector managers are taking, is stacked in favour of outsourcing. The benefits of outsourcing are short term and tangible. The costs of outsourcing are long term and intangible. Who wouldn't be tempted to outsource in such circumstances, particularly in a time of austerity? And who is to say that to do so is the wrong decision?
The biggest benefit is of course likely to be cash. In the first year of its contract G4S claims to have saved £5m - savings of 18% - from the budget of Lincolnshire's police authority. In addition outsourcing a specific service can bring benefits in service improvement perhaps due to the focus the provider brings as well as the new ideas and energy. So in the case of Lincolnshire, Alan Hardwick, the county’s police and crime commissioner, can currently say: “If others want to deliver more for less, they should come to Lincolnshire. We have not only managed to reduce crime by over 14 per cent, better than most other forces, but we have done so while putting more officers on the beat, improving public confidence and delivering a better service to our communities.”
The costs of outsourcing are harder to define and measure:
1. Diluting democratic accountability; it is now that little bit harder for democratically elected representatives in Lincolnshire to respond to their constituents and make changes to police policy. To do so they would need to renegotiate contracts. The result is that citizens in Lincolnshire are less able to influence the delivery of the services for which they pay and may feel increasingly disenfranchised.
2. A less holistic approach; G4S will be focused on the aspects of policing for which they have been contracted. This focus is of course an advantage in some ways. But it will be harder to use policing to pursue the wider public good in the future, for example by collaborating with education bodies to deal with truancy or to offer extra capacity at short notice at the Olympics or to take part in national campaigns to promote community cohesion. Thus the ability of the public sector to behave in a co-ordinated and strategic way risks being reduced.
3. Less sharing of best practice; G4S will, quite reasonably, be less willing to share the techniques they are using to drive down costs and make improvements as these represent their competitive advantage. The ability to share data freely between organisations is a huge advantage for the public sector but one which is marginally eroded by every outsourcing deal.
I draw three conclusions from this cost-benefit analysis. First, that deciding whether or not to outsource is tricky and probably best taken on a case by case basis. Secondly, that if I were a public sector manager I would be very predisposed to take up the opportunity for short term savings. Thirdly, that as a citizen I am keen to ensure that the decision making around outsourcing does take account of the longer term issues - but I'm not quite clear how it can adequately do so.