Innovations
March 24, 2014

The new normal: Creating a cost-conscious government culture

For government to fulfill its mandate of serving citizens, considerable spending is continually required to support and improve current programs and services and to introduce new programs or services.

With the ability to raise taxes and accumulate debt, governments have a safety net that is unavailable to private sector organizations, and this has created a culture that does not naturally inspire cost-conscious behaviours. This culture has been operationalized into government organizations, and is commonly composed of disincentives that deter leaders from driving sustainable cost savings out of the system.

Current economic conditions, however, are forcing governments to examine spend and consider extreme and disruptive cost reduction exercises to balance budgets and continue program delivery to citizens – and the savings realized from these exercises are not sustainable. The recent cost reduction upheaval in governments around the world has created an opportunity to organically transition to new cost management-focused practices. Accordingly, now is the time for sustainable change.

A behavioural and cultural shift will be required to successfully drive long-term, sustainable cost management change in government, and allow for continued delivery of a citizen-centric mandate. The macro-level safety net factor that defines the current culture will be difficult to overcome and will require a unified leadership team across program areas and internal services to demonstrate continued commitment to prioritizing this culture shift. Operational and structural issues that are reinforcing inefficient behaviours and ingraining a budget growth-oriented culture must also be addressed. Additionally, governments should consider less traditional approaches to engage those at all levels within the organization to be cost conscious and to foster an environment of cost management.

Specifically, to initiate the culture change required to drive sustainable improvement, the following levers should be considered:

• Visible sponsorship: leaders should actively prioritize, communicate, recognize, motivate and participate in cost-conscious change, and demonstrate that this initiative is not another disruptive event – savings are being re-invested to benefit both government and citizens;
• “Lean” cost management capabilities: managers should be equipped with the competencies required to recognize and cultivate sustainable efficiencies;
• Data analytics: existing government information assets should be leveraged to provide a clearer picture of budget allocation and performance to assist in making better, more informed budgeting and planning decisions;
• Performance management: existing government performance management systems may be re-enforcing undesirable behaviour. An adjustment of performance management systems should consider: alignment to cross-government strategies and priorities (including efficient cost management); a focus on reward/recognition for outcomes; an individual and team-based incentive pay structure; and, individual performance management down to the lowest level, including defined plans and measurable targets; and,
• Minnovations: empowering employees at all levels to share fresh ideas to generate sustainable cost savings.

Each of these levers is explored in Deloitte’s recent paper, The Path to Sustainability: Creating a cost-conscious government culture. The focus of this article is on the least traditional of the levers of cost-consciousness – but arguably the easiest to start implementing and driving change – minnovations.

Minnovations
There are many definitions for the term “innovation” and at the core of each are the themes of action, change, creativity and commitment to improvement. Minnovations are mini-innovations or small but effective improvements, driven from the bottom-up. These grassroots initiatives require organizational commitment to innovation as a priority, as well as the tools to cultivate cultural change.

In many high performing private sector organizations, processes and technologies exist to channel and share ideas, including structures to identify and align initiatives and to review and challenge this type of fresh thinking.

In the context of fostering a cost conscious culture, minnovations present tangible opportunities to generate sustainable cost savings and improve cost management practices. While pockets of innovation exist in many governments, oftentimes to address specific issues or problems, innovation has not typically been identified as a strategic priority with an enterprise-wide focus, and has not been presented with a cost management lens.

While creative thinking is at the core of innovation, it is enabled and brought to life through a combination of technology, process and culture. People need not only an opportunity to present sustainable cost improvement ideas, but also to be proactive and collaborative so that they can develop and provide input to ideas. This creativity can be harnessed through blogs, wikis, tags, peer-to-peer networking or other mechanisms through which people can build upon others’ ideas.

To encourage the minnovations agenda in government, the importance of follow-through cannot be overemphasized – if no one sees that some of the ideas being put forth (ideally those being noticed and voted for by employees) are being recognized and actioned, then engagement and motivation in the minnovations agenda will be lost. This requires formal mechanisms to review, prioritize and implement a portfolio of innovations.

Governments should consider instituting small, cross-functional, and ideally, cross-departmental, taskforces to initiate and drive the minnovations agenda, with a focus on cost management. Incentives, in the form of recognition or rewards, should be provided to kick-start the initiative. The taskforce can provide a forum for motivated people who want to challenge the status quo and can showcase the possibilities of ideas to others in the organization. The creation of these taskforces will provide visibility to the minnovations agenda, and can empower and motivate others to participate and work to sustain a positive environment for fostering new ideas.

A call to action
It is the collective responsibility of all tax-paying citizens, particularly those working within government, to action this change. Minnovations are a perfect example of how individuals can have a positive impact and cultivate sustainable cost management practices within a government organization – better enabling governments to deliver valuable programs to its citizens through re-invested savings.

 
The paper is available at http://bit.ly/1iJKmnj

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