MANAGEMENT & LEADERSHIP
Learning from the recession How the public sector can benefit from private sector experience
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David Pardey is head of research & policy, Institute of Leadership & Management
The Institute of Leadership & Management is Europe’s largest provider of vocational and professional qualifications in leadership and management. Copies of the reports referred to in this article can be found on the ILM website at www.i-l
m.com/research- and-comment/
378.aspx
he public sector has been bedevilled with advice on ‘how to learn
from the private sector’ for the last three decades.
This would make sense if public sector leaders and managers didn’t have any experience of the private sector but research by ILM earlier this year (Leading change in the public sector) showed that some two-thirds of public sector managers had worked in the private sector at some stage, half of them as managers. So let’s not pretend that the public and private sectors exist in parallel universes.
Nor should anyone make the mistake of assuming private sector organisations have some great advantage over the public sector in terms of leadership and management. Just look at the indigenous British car industry - look hard, it’s tiny - or the British banking industry if you want to learn how not to do it!
trust is critical to efficient working - organisations with high levels of trust have lower staff turnover, lower absenteeism, lower stress levels and lower transaction costs
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What’s more, public and private sector organisations have different priorities, different market contexts, different measures of success and different patterns of accountability, all of which make leading and managing them also very different, so lessons from one sector are hard to translate to another.
Having said that, there is one area in which the public sector may be able to learn something of value from the private sector and that’s how best to respond to the upcoming public sector recession.
Many public sector organisations have already started to feel the
pinch but most have not really experienced the scale of cuts that they are going to face when the government’s spending review is complete. And when those cuts do come, they will make the 2009 experiences of many private sector organisations pale into insignificance.
However, the recession last year showed up some significant differences in leadership and management behaviour in the private sector compared to previous recessions and it’s a valuable opportunity to review these and see how they might inform public sector leaders and managers in 2010.
The first and most remarkable feature of this recession has been the way many businesses tried to hold onto people. Unemployment rose but not as fast or as high as was predicted. Short time working and extra holidays were used to cut stocks without cutting staff. Flexible and part-time working were encouraged – some 0.33m more part time workers are now employed compared to 2008 whilst FT jobs have fallen by 0.91m. (These changes have particularly affected men, who have traditionally been far less likely to work part time, compared to women.)
Anecdotal reports suggest that many organisations found that someone working three days instead of five cost 40% less but produces only 20% less. Job share arrangements with two people working 50% each is the same as employing 1.2 people. These are real productivity improvements which companies are now looking hard at retaining.
Recent research by ILM (The Index of Leadership Trust 2010), has revealed that CEOs who were creative in their responses to the recession, seeking ways to avoid redundancies and plant closures, enjoyed much higher levels of trust than those who didn’t. Why does this matter? Because trust is critical to efficient working – organisations with high levels of trust have lower staff turnover, lower absenteeism, lower stress levels and lower transaction costs.
This latter is particularly significant. Close monitoring of people and processes not only costs money - it also demonstrates a low trust environment. High trust environments don’t have to monitor so closely and benefit economically as a result.
What we have also seen is an increasing use of Lean production techniques. Of course, these aren’t new to the public sector – there has been widespread interest in Lean production for some time now in the NHS, in central and in local government.
What the recession did was to focus minds on fundamental questions about which activities add value. In some cases this has led to outsourcing, but equally it has also meant not doing something at all.
Organisations have been squeezing out unnecessary costs in lots of different ways. This includes little things like unstaffed reception areas, and more significant strategies like switching on a large scale from office- to home-based working.
Nov/Dec 10
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