Creating and Measuring Public Service Value

ETHOS Issue 04, Apr 2008

THE DILEMMA OF PUBLIC SERVICE

Governments around the world are putting pressure on their public managers to improve service quality and deliver efficiency at the same time: to do more, for less. After all, managers in the private sector face similar pressures and they are expected to deal with them as a matter of routine. Why should the same not be asked of their public sector counterparts? The reality, however, is that there are such significant differences between what private and public sector organisations produce that simplistic comparisons of this kind are very misleading. Private sector organisations exist to create value for their shareholders. For managers in the private sector, organisational performance is measured rather straightforwardly and objectively (but not exclusively) in terms of financial profit or loss.

Instead of profit or loss or shareholder value, however, public service organisations aim to generate public value: a direct and not always immediate benefit to service recipients and the wider community of citizens, businesses and taxpayers. That value—be it education, public safety, health and other aspects of the public good—can be difficult to identify and causally relate to service delivery.

Likewise, what constitutes value can be different and, at times, conflicting for different stakeholders. Public value measurement is not at all straightforward or objective. The question then becomes: For social security, health, education and many other government services that many of us depend on, how can we objectively measure performance, given that there are few objective metrics that everyone can agree on?

This is the heart of a dilemma that affects the work of a large community of politicians, policymakers and public managers.

THE SHIFT FROM OUTPUTS TO OUTCOMES

One can easily measure what goes into a system (inputs), what happens within the system (processes) and what comes out of the other end (outputs). For public service, however, the results that politicians, managers and citizens actually experience (such as changes in health or public safety for example) are more subjective and therefore less easy to measure by conventional methods.

In education, an output may be the number of children passing a particular examination. Yet most of us may be more inclined to focus on a broader set of outcomes, which could include the ability of children to go on to further education, their long-term employability and even some aspects of their well-being, expressed in terms of healthy behaviours and attitudes. Measuring these outcomes is a lot less simple than checking grades, but would give us a better sense of how successful children’s experience of education has been for them and, therefore, of the value that the education service is delivering to society and its taxpayers.

“Public value,” a concept invented by Harvard Professor Mark Moore in the 1990s, is the cost-effective application of public money to improve social outcomes.¹

A focus on the social outcomes (not to the extent that we lose sight or control of inputs, processes and outputs, but as the core of public service accountability) can have significant effects on public service delivery and on the creation of public value.

For example, a new management team in the Ontario Ministry of Health and Long Term Care, responsible for healthcare in Canada’s most populous province, recently found that they were measuring more than 2,000 performance indicators and still could not say whether the services for which they were responsible were sustainable and moving in the right direction. The mass of output measurements they routinely gathered, such as numbers of hospital admissions or numbers of surgical procedures for example, did not tell them what they needed to know concerning the health outcomes for individual patients and society as a whole.

As part of an innovative programme to focus on results, the team met with clinicians, managers, academics and health industry experts across the system to reduce what was being measured to less than 30 core indicators that were closely related to health outcomes. This enabled focused and accurate measurement, and provided the basis for a performance measurement system that is now organised under such key headings as health status, healthy behaviours and illness avoidance, patient-centeredness, ease of access and sustainability—all weighed against the effective use of resources. This approach has also enabled better decision-making, more effective planning and closer alignment between healthcare policy and the public value created for patients and citizens.

CHALLENGES AND OPPORTUNITIES IN CREATING PUBLIC VALUE

Accenture advocates defining and measuring public value as the fundamental basis for more effective public service management and high performance in government organisations. In doing so, however, it is recognised that there are a number of complex issues—beyond definition and measurement themselves—that need to be addressed. First, better public service performance is inevitably rooted in sound definitions of the outcomes to be achieved. While we may be able to agree on the general principle of measuring public services by the public value they create, we also need to be aware that people in society have different and sometimes conflicting ways of relating to these services. As a result, in any one public service organisation, there are multiple dimensions to the outcomes it produces, such as:

• the needs of the individual being served;
• the collective needs of society;
• the concerns of taxpayers; and
• the authorising directives of political leaders.

As consumers of healthcare, for example, people usually want no expense spared on the treatment they or their families receive. But as taxpayers, they are frequently reluctant to pay the price of the quality they demand. Politicians want to have a profound effect on the long-term well-being of their constituencies, yet short-term pressures often require them to demonstrate rapid progress on matters that may not be susceptible to quick fixes. This can emphasise producing short-term results rather than improvements in social outcomes, which take longer to materialise.

There is much scope for conflict, with individuals changing their viewpoint depending on their needs and concerns at the time.

In the US State of Arizona, for example, the Department of Revenue explicitly tried to reduce the administrative burden on taxpayers by introducing faster and more convenient customer services. Yet its emphasis on reducing taxpayer burden actually resulted in a reduction in revenue—in one of the fastest growing states in the US. While the State could hardly withdraw its improved customer service to taxpayers, it had an obligation to maximise voluntary compliance and revenue collection. A new Director used outcome measurement techniques—in this case, Accenture’s Public Service Value model—and found that the net result of current administrative and budget deployment was an erosion of public value. By rebalancing staff efforts and placing greater emphasis on compliance activities, while simultaneously retaining high levels of support to taxpayers, the Department was able to maintain good relations with taxpayers and increase tax receipts in line with the State’s economic expectations.

This example illustrates that the different needs of stakeholders mean that a great deal of detail must be taken into account when organisations define their intended outcomes. For example, improving health service performance should include not only action around improved access to healthcare, but also preventive care and education. In addition, the combined effects should be measured in longer-term improvements in the community’s health, such as reductions in the incidence of heart disease or diabetes.

Similarly, crime reduction could involve putting more officers on the street, but it should also include visible reassurance about the effectiveness and professionalism of the police, ensuring that people feel less threatened by crime, and, over the longer term, fostering closer trust and collaboration between police forces and the citizens they serve. This principle was put into practice very effectively in UK with the Police Community Support Officers (PCSOs) scheme (see box story on the next page). In this case, the focus on intended outcomes challenged conventional thinking about how best to deploy public safety resources. The solution transformed the policing workforce in UK to meet a wider set of duties and, as the data have shown, helped reduce fear and crime in the communities in which they serve.

Ultimately, organisational leaders need to agree, preferably in consultation with their stakeholders, on the right mix of outputs and outcomes and of shortterm and long-term objectives. They need to define an adequate and acceptable way of measuring and linking these goals and objectives to the productive capabilities of their organisations. They need to balance their organisation’s own efforts in an attempt to counter-balance the different and competing interests and timeframes of all of their stakeholders.

Rather than hiring more police officers, the leaders of some local police forces in England and Wales focused on the outcome that demanded more staff in the first place: reducing fear of crime.

UNDERSTANDING HOW TO CREATE PUBLIC VALUE

The concept of value creation is at the heart of what private sector executives do as a matter of course. They add value by combining labour and raw materials through manufacturing processes, for instance to produce cars, or by using skills and knowledge, say, to increase returns to pension funds or to design more appealing and functional buildings. The added value is the margin that businesses take from what we are willing to pay for their goods and services.

Creating value in the public sector is very different. Public value stems from a balance between the outcomes delivered by the service agencies and the public money spent to achieve them. Learning how to maximise that ratio—outcomes produced for tax money spent—lies at the heart of high-performance government. The tensions between consumers, citizens and taxpayers that we have discussed compound the issue. Furthermore, because the desired outcomes of different public service organisations can be so different, comparative learning between organisations can be difficult and sometimes inappropriate. Yet, these are the challenges that have to be tackled if we are to learn about how to create public value: how different stakeholders define value and how, through public management and service delivery, we can improve outcomes for them all costeffectively.

The challenges ahead remain enormous, but the clear focus on social outcomes and a mission of public value creation provide a new direction for public service agencies, for those that manage them and for the political leaders that authorise and support them. The potential payoff is high performance in government through dramatic improvements in public service delivery. Ultimately, what we gain is a better society for us all.

NOTES

1. Moore, Mark C., Creating Public Value: Strategic Management in Government (Cambridge, MA: Harvard University Press, 1995).