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Get onto the public sector platformOK, so it's no news that, from later this year, the UK public sector will have to outsource a great deal of work and there have already been dire warnings, some published on this website and in Outsource magazine, that service providers must tread very carefully when venturing into what has often proved a hazardous space. The delivery practices for public services will have to undergo some radical remodelling if they are to match the best process standards in the private sector and they must, because the country cannot afford the alternative. But what are the hazards, where are the opportunities for taking on public service delivery and what might service providers gain from the experience? The hazards are easy to summarise. Current public service delivery systems have evolved in a non competitive environment, where budget increases have tended to be covered rather than questioned. People are not subject to the same strictures that define workplace practices in the private sector and so notions such as flexible working and job sharing are more prevalent in the public sector. Unfunded, benefit related pensions and earlier retirement are the rule and constitute, possibly, the greatest fiscal threat to the whole system. Public sector bodies will seek to offload their problems to outsource service providers and that may include the difficult task of communicating to workers and trades unions that current ways of working and paying are unsustainable a term the sector loves to apply to others but rarely to itself. The other big risk is that providers, lured by the prospect of rich pickings, will rush into public service delivery but may then find themselves the target of criticism from those very organisations whose management inadequacies set the scene in the first place. But that is a worst case scenario; outsourcing from the public sector should be treated like drilling for oil in a hazardous environment; it's not a reason to give up but it is a reason to put in place, before pitches or negotiations begin, a robust audit and analysis system and pricing that takes account not only of the job to be done but of the task of dealing with the issues inherent in the organisation whose work is being taken on. Service providers might also consider how any HR department will cope if a large tranche of workers has to be absorbed who have not hitherto felt the bracing demands of shareholder value or the need for every promise to be costed and accounted for. While sectors such as education, health, defence, and tax and benefits should be able to see substantial parts of their operations outsourced, it is likely that, for political reasons, there will be acknowledged limits on what can be done. For instance, while there is no practical reason why hospitals should not be privatised with the state simply purchasing healthcare from the best provider, it is unlikely to happen: similarly, with schools, colleges and universities. But many back office functions will be outsourced and here, with service delivery being shared between the public and private sectors, service providers will need to learn how to work with a culture that is every bit as different from their own as if it were from another country; it's a challenge but one with which providers have long been familiar and for which they have evolved a number of good practices. Where outsource providers could well clean up is with the work of quangos. Only recently (4th February 2010), it was announced, without fanfare, that the annual cost of running quangos has risen from £37 billion to £46.5 billion (yes, you read that right) over the past three years while their staffing levels have increased from 92,500 to 110,000 in the same period. They are already an outsource sector inasmuch as they are arms' length agencies whose remit is to deliver defined outcomes for which they charge the organisation on whose behalf the work is undertaken, the UK Government. And there are values, other than the revenue generated, that service providers could gain from outsourcing work from the UK public sector. As the recovery gathers pace and populations around the world lose the fears that have gripped them for the past couple of years, people will expect the value of recovery in their pockets to increase faster than the need to service, let alone repay, the cost of dealing with the recession will allow. At that time, governments will seek to optimise their own operations and outsourcing will be one solution. Any Outsource service provider who has managed to structure and deliver a functioning operation for UK public service delivery will be in pole position to take on similar work in other economies. As with North Sea oil, for service providers seeking work from the UK public sector it may be necessary to drill deep, it may be necessary to build strong platforms and it may be necessary to develop robust and stable delivery infrastructures but all of that experience can then be leveraged to deliver profits in a range of similar environments around the world. |
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