Tag Archives: public service

Practising What We Preach

The current academic literature on public administration is full of research on collaborative governance, integrated services and community participation. This research reflects a reality where boundaries between public, private and Third Sectors are increasingly blurred and where services are being redesigned to better meet rising public expectations at the same time as facing the challenges of austerity and Brexit. These themes are all discussed in modules such as ‘International Trends in Public Administration’ on our MPA programme.

From the earliest discussions in developing the MPA programme I knew that I wanted to include the ACOSVO Leadership Exchange programme as part of our postgraduate degree. There were some important reasons for this: 1) I knew that ACOSVO was an excellent organisation that reflected many of our values; 2) I felt it was important that a public services degree has a strong link with the Third Sector; and 3) I wanted to ensure that the MPA had an appropriate blend of theoretical content and practical application.

All of this was in line with the aims of our MPA programme to enable learners to:

  • Build on their professional experience by engaging critically with, and reflecting on, themes and issues in public administration in order to better shape the public service landscape of tomorrow.
  • Critically evaluate the theories and practice of public administration as a tool for public service improvement.
  • Be critically reflective leaders who contribute to the social and economic sustainability of the communities they serve.

Having been through the first year of this programme I am delighted with the results. Firstly, it has been a pleasure to work with ACOSVO. As part of the development of the programme I went on a leadership exchange myself and found the experience invaluable. Some of my colleagues have since done the same and have reported similar valuable learning experiences.

What has been most rewarding about the experience has been the feedback I have received from students. This has been overwhelmingly positive. It has proven difficult for some to find exchange partners, particularly given that our students are conducting the Leadership Exchange as part of the MPA. However, everyone has been matched and all have really enjoyed working with their exchange partners.

Comments I have received include from one student who noted that she was reassured to see just how much the theory of our programme related to practice in different organisational contexts. Having seen public administration from both the theoretical and practical perspectives gave her a new found appreciation of the subject and the value of her learning on the programme. For another student the experience in working with his exchange partner had also proven just how much the challenges facing our public services cut across organisational boundaries. He planned to continue the exchange process beyond his studies and has set up a number of ongoing meetings with his exchange partner to continue the learning. Finally, another student had noted that he had been partnered with a senior manager within a Third Sector organisation. Coming from the public sector he had little prior experience of the Third Sector and admitted that he had previously held views of Third Sector organisations that proved to be out of step with reality. He was now open to the idea of a future career in the Third Sector thanks to his experience in the exchange programme.

My overall view is that our MPA programme could not achieve it’s aim ‘to enable students to critically evaluate the theories and practice of public administration’ without the strong industry links that have been facilitated through our partnership with ACOSVO. And so much current public administration research and practice involves collaboration – it would be a nonsense if we didn’t practise what we preach!

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Interview with Stuart Duncan, Public Services Management Graduate

NB: This was previously published on the QMU website: http://www.qmu.ac.uk/marketing/press_releases/Interview-with-QMU-graduate-Stuart-Duncan-Executive-Masters-Public-Services-Management.htm

Stuart Duncan is from Bo’ness and is married with two children. He graduated with Executive Masters in Public Services Management (now Master of Public Administration – MPA ) from QMU in 2010.

Stuart was working full-time when studying at QMU and was fortunate to have his studies funded by his employer. He has over 15 years senior management and leadership experience and has a strong track record for leading change and delivering policy by building and maintaining collaborative relationships within and outside the Scottish Government.

Before enrolling on the Executive Masters in Public Services Management at QMU, Stuart was leading the creation and establishment of one of Scotland’s largest public service partnerships.

In 2009, Stuart moved to Scottish Government to work in the Justice department and led a number of major summary justice reform programmes.

In 2014, Stuart was appointed a Programme Director at the Scottish Government and authored the Digital Strategy for Justice in Scotland. He has since been leading an implementation programme to deliver the objectives set-out in the strategy; transforming administrative, civil and criminal Justice in Scotland.

In January 2017, Stuart joined the Leading Improvement Team in the Scottish Government to help departments and organisations across the public sector shape their change and improvement work.

Why did you choose to study Executive Masters in Public Services Management at QMU?

“Despite having two degrees already, I knew I wanted to continue my learning and reading in the area of public services management. I was lucky enough to have a supportive employer who was keen to support me. Scottish Court Service was offering a place on the first cohort. I applied for the opportunity and was fortunate enough to secure a place, studying part-time.

“My professional career is grounded in a technical background and I wanted to develop and grow in the area of general management, with a focus on leading change and improvement.”

How did you find the workload?

“I did my undergraduate and first postgraduate courses part-time, so I knew what I was letting myself in for. I was fortunate to have a support network in place that made studying part-time easier, but it was equally important for me to have a structure in place to manage the workload.”

What obstacles did you encounter during your studies and how did you overcome them?

“I had a full time job when I did my postgrad and also had a young family. The biggest challenge for me was to create the time and space to study. For me, it was important to put a proper structure in place and give myself the best environment to learn and reflect.”

How do you think your QMU degree has equipped you with the skills and knowledge to development your career?

“The Executive Masters in Public Services Management helped me better understand the evolution of government in the UK and devolved administration here in Scotland. The knowledge which I acquired certainly made me more inquisitive. Even now, I constantly question policy and look for evidence to verify decisions.”

Top tips for future students?

“Always be prepared to question and challenge convention. As Henry Ford said: “If you always do what you’ve always done, you’ll always get what you’ve always got”, so be prepared to critically evaluate why things are done a certain way.”

Life after graduation?

“At the time of completing my postgrad, I was creating one of the largest public sector partnerships in Scotland. Once this was established, I moved to Scottish Government to lead policy implementation of major reforms to summary criminal justice.”

Where are you now? Do you have any further future plans?

“I authored The Digital Strategy for Justice in Scotland which was published in August 2014. Since then, I’ve been directing a programme of work across public services with the purpose to use digital technology to deliver simple, fast and effective justice at best cost. In 2017, I’m joining the Leading Improvement Team in Scottish Government to help implement continuous improvement across the public sector.”

Anything that you might have done differently?

“Reflecting on my professional career to date, I’ve always looked for the perfect time to move jobs and found that there really isn’t one. I’ve stayed in posts for too long. Going forward, I want to find a better balance between fulfilling responsibilities and developing my career.”

Master of Public Administration (MPA)

For more information on Master of Public Administration (MPA) at QMU visit: www.qmu.ac.uk/courses/PGCourse.cfm?c_id=277

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Why do a PhD?

I have supervised three PhD students to completion and am currently supervising three others at various stages. Many people have spoken to me in the past about thinking about doing a PhD. Here I want to consolidate some of my thoughts on why anyone would do a PhD.

Being a PhD researcher is a great opportunity. But it’s also a significant burden. It’s important that anyone considering applying for a PhD gives it some serious thought. As a minimum it is a three year, full time, commitment. Much more so than undergraduate or other postgraduate study it is all consuming. So it can feel, though doesn’t have to be the case, that you’re life is put on hold for at least three years. At the end you may graduate with a PhD or indeed you may not. It may lead to an academic career or it may not. OK – but it’s not all bad! DON’T STOP READING YET!

So why would anyone choose to do a PhD? I think there are three things to consider: the PhD as an academic apprenticeship; choosing a research topic; and choosing a supervisor.

An academic apprenticeship

The PhD, along with the Professional Doctorate, is the highest award of degree. Unlike the Professional Doctorate (such as the DPA) the PhD is seen to a significant degree as a route towards an academic career.

Alongside your research you may also have the opportunity, or even be required, to teach. You may also have a dedicated desk or office alongside academic staff, you may be invited to take part in other aspects of university administration, you will be expected to present at academic conferences and even publish research papers. It is, typically, more than the individual dedicated study of a research topic as a lone researcher.

The end result of a PhD is that you are recognised as a peer amongst fellow academics. You are “one of us”. As such it is seen as a way to developing an academic career. At the same time you may be perceived by others as over qualified or “too academic” for other jobs. So you have to enjoy academic life and want to develop a career in academia in order to consider applying.

A research topic

The next stage in choosing to do a PhD is to consider the research topic. It has to be something that grabs your interest and sparks your intellectual curiosity. This is a topic that you will be immersed in for at least three years so you have to be really interested in the topic.

Other things to consider here are the nature of the topic. Is it located within a clearly defined subject area or discipline. Is it multi- or inter-disciplinary? Do you see yourself developing a career in that area (back to my first point). Also what links are there between the university / Director of Studies and the discipline? For example, out university is an institutional member of the UK society for public administration – the JUC Public Administration Committee. This brings with it many networking and development opportunities (again back to point one).

It’s also worth considering how any topic has been framed. Naturally most PhD students want to make a topic their own so you may want to ensure that it is not too narrowly defined and that there is scope to put your own mark on it. That is really important as again you may want to consider the type of career you want to have and ensure that the PhD topic will take you in that direction. For example my own PhD included some economics, some strategy and some public administration (and I have taught all three since). In the PhD topic I currently have advertised (see here for details) I have deliberately crafted the topic (on Leading Change in a Public Service Context) fairly broad so that any prospective student can make it their own.

A supervisor

Not only are you choosing a research topic but also a supervisor. It’s vitally important that students and supervisors have a positive relationship. So, as a student, it’s important to do your research!

I remember on my first day as a PhD student all the other students (who were already at least one year through their research) saying how lucky I was to have Prof Stephen J. Bailey as my supervisor.

In many respects the choice of supervisor is much more significant than the institution within which you conduct your research. Just because someone is based in a so-called ‘good’ university does not make them a ‘good’ supervisor! You should find out a little bit about their approach to teaching and research. Their views on students. Their perspective on the nature of the PhD. How many non-completions they have had – and why. Their links to industry and throughout academia. Ultimately upon meeting a prospective supervisor you’ll be able to make a judgement as to whether this is someone you want to work with for the next three years or not! All of these factors may have an impact on both your progress and even your potential career prospects.

Conclusion

I can only speak from my own experience – every PhD is different. I never expected to do a PhD (or even go to university for that matter). But I was fortunate to be given the opportunity of a bursary at Glasgow Caledonian. I was given a desk in a PhD office with some really amazing PhD students who I learned a huge amount from and many of whom are still close friends. I had a fantastic, challenging and yet supportive, supervisor. The PhD was really tough – and got tougher as time went on – but I learnt a huge amount from it that has underpinned my approach to teaching and research ever since. Since completing the PhD I’ve been fortunate to establish an academic career and I love what I do.

So, if you’re thinking of doing a PhD – and you’ve managed to get to the end of this blog post – GO FOR IT!

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Interview with David Crighton, Master of Public Administration (MPA) student

NB: This was previously published on the QMU Website: http://www.qmu.ac.uk/marketing/press_releases/Interview-with-QMU-postgraduate-student-David-Crighton-MPA.htm

David Crighton from Glasgow is currently studying the Master of Public Administration (MPA) part-time over two years.

David has worked within local government for more than 30 years. He started his career as a landscape gardener with Cumbernauld Development Corporation (CDC) in the early 1980s. On completing his apprenticeship, David undertook a series of roles within the CDC before moving to Stirling Council in the mid 90s. In that time, he fulfilled several roles, including Cemeteries Officer and Land Services Team Leader. He gained his first service manager post with Falkirk Council in 2013 before returning to Stirling Council in 2015 and taking on his current role of Roads & Land services manager.

David has always enjoyed working in the public service especially within an operational capacity. He works towards improving and enhancing the public spaces that are so important to people for health and wellbeing, as well as recreational use and leisure activities. He has a high degree of job satisfaction in the services he manages and the impact they have in improving the quality of life for those that live, work or visit Stirling and its communities.

Why did you choose to study Master of Public Administration (MPA) at QMU?

“After undertaking various work based learning and training programmes, I started to develop an interest in management and leadership, preparing for my future career aspirations. I undertook a HNC in Management before moving on to a Diploma in Leadership & Management.

“The next natural step was to progress to a MBA and had identified this aspiration within my personal development plan. However, I was provided with information on the Master of Public Administration by my employer, Stirling Council, and noticed it aligned more directly to my work in the public sector.

“I’ve been very fortunate that my employer is very supportive of my learning and has assisted me in gaining a place on QMU’s MPA programme.”

How do you think the MPA will help you develop your career?

“Through the MPA, I’m looking to gain a greater knowledge of public administration and to be challenged academically. I’m working full-time and attend the course on a part-time basis, so I do find it difficult at times to manage my work and learning commitments along with my family life.

“However, there is support amongst my cohort and there are also academic support classes provided at the outset of the course. This has been invaluable to myself have never attended university previously. I think the MPA will help continue my own personal development and ultimate goal of obtaining a postgraduate level degree.”

Top Tips

“I would advise any prospective students to be aware of the time commitments especially if you are in full-time employment. It is important to try and build up a support network with library staff, tutors, course leaders and fellow students. This can be important to share your experiences and understand you are not alone.”

For more information on the Master of Public Administration (MPA) at QMU, visit www.qmu.ac.uk/courses/PGCourse.cfm?c_id=277 and watch our film

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The Future of Public Administration

Brexit, Trump, Syria, ISIS, Climate Change, Poverty, Immigration, Austerity*, EVERYONE is talking about politics. But when it comes to action it is public service professionals, in central and local government, who are responsible. It is these public officials who have to translate politics into practice and are at the front-line of public service delivery in communities across the UK. That’s why there’s never been a better time to study public administration.

I’m really excited to have been elected as the new Chair of the JUC Public Administration Committee (PAC). PAC is the UK learned society for education and research in public administration. It’s origins can be traced back to the establishment of the Joint University Council in 1918. For a full history see here: http://journals.sagepub.com/doi/pdf/10.1177/0952076707071500

The history of the JUC highlights the importance of links with professional bodies, of informing education and training and of representing our institutional members at a national level. As is explained in the above journal article:

the purpose of the PAC is the promotion, development and coordination of the work of higher education institutions in the pursuit of education, training and research in public administration. (Chapman, 2007: 18)

As the newly elected Chair of PAC my thoughts are to the future. There is already a huge amount of work coordinated by PAC including, a two-day FREE doctoral conference, funding of seminars and workshops, the annual conference and publication of two outstanding journals: Public Policy and Administration (more here) and Teaching Public Administration (more here). There is also a lot of work in progress on the planning of the JUC Centenary Event. So a large part of my role as Chair will be to support the continuation of all this great work (thanks at this point must go to the former Chair, Professor Howell, and to the continuing Vice-Chairs Janice McMillan, Pete Murphy and Rory Shand as well as the Editors of PPA and TPA).

In looking to the future I believe we must also grow our membership, diversify our membership and strengthen our links with professional bodies. The critical link with education and training is likely to continue, and indeed may strengthen with the introduction of TEF, but this will always go alongside world-leading research. In short, I believe that PAC can reassert itself as the learned society for public administration in the UK.

In order to do that I need YOUR help. Are you interested in Public Administration – either as a professional or as an academic? Do you currently run undergraduate or postgraduate programmes in public administration or public management? Are you conducting research in areas related to public administration? If so, click here for more information: http://www.juc.ac.uk/pac/ or email the JUC Secretary: sandraodelljuc at yahoo.co.uk

And watch this space for future updates!

References

Chapman, R.A. 2007. “The Origins of the Joint University Council and the Background to Public Policy and Administration: An Interpretation”. Public Policy and Administration. Vol. 22, No. 1, pp. 7-26.

 

*listed in no particular order.

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Public Services Governance Graduates 2014

On Monday I was in Cardiff for a celebratory lunch, hosted by Academi Wales, to recognise the achievement of graduates from the PgCert Public Services Governance programme. Below is a copy of my talk:

 

Public Services Governance – Graduation

Thank you to Academi Wales for inviting me to give this short talk. It’s great to be in Cardiff again and once again the sun is shining. And what a terrific venue for this celebratory lunch. It really is wonderful to see you all again. You should be really proud of what you have all achieved – seriously, well done!

I have been asked to give a short talk on how the partnership was established, how students progressed through the programme and then finish by discussing what happens next.

When I started to think about this talk and what I would say one thing came to my mind immediately – that the more things change the more they stay the same.

On 19th September it looks increasingly likely that the UK Government will be entering into negotiations with the Scottish Government about the progress of establishing an independent Scotland. This may seem like a revolutionary moment. Yet many things will remain the same. The EU will still exist, the UN, the World Bank and the global money markets. And the Scottish Government and rest of UK Government will continue to operate within this global context.

But of course there will be some change. And it is at times of change that I believe the need for good governance becomes even more critical.

I feel that Academi Wales have shown great foresight, and indeed courage, in investing in public service workers from across Wales to undertake this programme. And you are very fortunate to have had that opportunity.

It was back in July 2012 that I got the first call from Academi Wales that they were interested in sponsoring some students on the programme. Following that a value for money exercise was conducted from which we were, I believe, 3rd out of a possible 90 suppliers. But more than that, Academi Wales felt that our programme, the first of its kind in the UK, was the most contemporary and relevant to public services workers in Wales.

So in December that year I came to Cardiff to the Welsh Government offices where we, along with Prof Catherine Farrell from the then University of Glamorgan, jointly discussed and agreed the detailed structure and content of the programme. This was to include four modules: public services governance themes and issues, public finance, leading change and internal communications. These were seen to be most relevant to those working in a post-Williams Review Wales.

Then, in April 2013, I came to deliver the two days of module delivery on the first module. On meeting the students I was immediately struck by their enthusiasm and commitment to the programme. That said I can’t say I was surprised, as we’ve always had excellent students on our public services programmes. This is, more than anything, what makes my job so worthwhile. Sharing ideas and practice with experienced and skilled public service workers. It really is an absolute joy.

Since then the university have established a new masters level programme in public services leadership. This programme draws on many of the aspects of governance within the PgCert but with a focus on coaching as a form of leadership. It is a collaborative programme with City of Edinburgh Council, Dundee City Council and Orkney Islands Council and we currently have over 50 students on this programme. Unfortunately Academi Wales are no longer in a position to support any bursaries, due to budget cuts, but students should continue to nurture the relationships that were established in this programme and build new relationships with students and graduates from all of our public services programmes.

I would like to thank Paula James and Jo Carruthers from Academi Wales, Prof Catherine Farrell from University of South Wales, and my colleagues from QMU for having made this programme work. But most of all I would like to thank you, the former students, for having made this such a positive and fulfilling experience for me.

Much of the nature of education is about change. It’s about personal change. About challenging your own assumptions and values. About challenging your practice. You may indeed feel that at the end of this programme you’re a different person. Now you are entering a new beginning. Having successfully completed the programme it is now up to you to implement what you have learned and apply those critical thinking skills to inform your practice: to deliver better governance and delivery of public services in Wales.

But I would also like to remind you that some things won’t change. First and foremost you will always be part of the QMU family. This doesn’t just mean that you’ll get mail from time to time asking you to donate to the university. But you will also get mail from me asking for your views on governance and public services. Your views still matter. At the same time I will still be there. I and the other academics from the public services programmes will always be available to continue sharing ideas and learning. That does not stop just because you have graduated. The learning continues.

I would encourage you all to maintain and continue to build the relationships that have been built as a result of this programme. Continue to share ideas and learn from each other. Whatever changes the future brings the need for good governance remains constant. As a graduate of this programme you are ideally suited to meet those challenges. I will continue to provide any support I can and will continue to work with Academi Wales and Prof Catherine Farrell as they see fit. I wish you all the very best.

Thank you.

 

Graduates and staff

Graduates and staff

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Lean Public Services

I was recently asked by a student on our PgCert Public Services Governance course to provide a brief account of the advantages and disadvantages of applying lean management systems in the delivery of public services. This is my quick attempt at a brief answer!

First of all, what is Lean Management? This is actually a rather difficult question as terms such as continuous flow manufacture; stockless production; lean manufacturing; Lean thinking; Toyota production system and systems thinking have all become associated to a greater or lesser extent with ‘Lean Management’. However, for me, this short advert for Honda (a key proponent of lean management) encapsulates the essence of lean management:

Key points from this clip:
  • there is no waste;
  • every part of the process has a purpose;
  • everything happens in a fluid sequence;
  • everything happens ‘just-in-time’;
  • everything ‘adds value’ to the process.

First of all I think there is a lot to be said for a Lean Management way of thinking. Within public services perhaps the key text in this area is John Seddon’s Systems Thinking in the Public Sector. Now, there are probably some who would automatically switch off at the very mention of Lean Management. It could be dismissed as ‘just another management fad’. But actually there is something to it and it is worth considering the positive aspects of Lean.

In my view, Lean is predominately about creating a learning organisation with empowered and autonomous workers. This is encapsulated in Mr Ohno, the Toyota executive who has been credited with the development of lean management, refused to have any of the lean management approach written down as then it would become crystallised and difficult to change – and would then stifle innovation. For Mr Ohno it was important that lean management continuously change and development. Consequently one should always be wary of any text or consultant who claims to be prescribing a lean approach (NB: that’s not to say that some books or consultants may have interesting things to say on the subject).

Nonetheless, there are some basic principles which can help with understanding a lean management way of thinking. The main focus of lean is on finding efficiencies in production through the elimination of all waste. Importantly the definition of waste is very broad in this area and has nothing to do with bins or recycling. Waste, in a lean management perspective, is any activity that does not directly contribute to satisfying customer needs. That is a quite radical way of thinking. Take a moment to consider the tasks you perform in an average week and ask yourself how many directly contribute to the satisfaction of your ‘customers’?

This is a useful way of thinking. So, for example, how is attendance at any one particular meeting going to directly enhance your customer’s satisfaction? Also, how does your organisation reward attendance at meetings vs delivery at the front line? However, this line of thinking when applied indiscriminately can be completely inappropriate; for example, empty hospital beds could be viewed as waste under this approach. Overall though there are undoubtedly many things that all businesses and organisations do that do not directly serve the needs of customers. As such this is a valuable mind-set to have.

It is workers at the front line of operations who are best placed to identify areas of waste and so the Toyota approach to lean management was to empower workers to identify areas of waste and to take responsibility for the inspection and quality control of their own work. A key argument being that failure, in the form of defective goods, represents a form of waste. Therefore a lean approach requires a commitment to ‘zero defects’.

In the public services John Seddon argues for the abolition of the Audit Commission, stating,

People’s work should not be inspected; people should be their own inspector.

Seddon (2008: 63-64).

However, this seems like a rather unrealistic goal within public services, even where the current UK Government may be working towards abolishing the Audit Commission there will always be a need for auditing and scrutiny of public services – hence the development of a new auditing regime. This is due to the demand (what John Seddon would describe as ‘failure demand’ for accountability in public services when things go wrong). This is heightened by the extent to which public services are often dealing with life-or-death situations with highly vulnerable groups. As the case of Mid-Staffordshire NHS Trust shows, where failure does occur in public services it is important that lessons are learned and there is some accountability for the mistakes that have happened.

At this point it would be wrong to conclude that Lean is something that can only work within a manufacturing setting. As this article from the Harvard Business Review illustrates there is some relevance to the service sector. However, public services, which have their own distinct challenges, have particular characteristics that make a lean approach more difficult to achieve.

To some extent a lean management way of thinking is important in public services today. Public services are increasingly expected to be responsive to ‘customer’ needs and continuous improvement (and efficiency savings) have become an accepted part of how we plan and deliver our public services. However,  we are still accountable to the public and therefore good governance mechanisms are key. To an extent, when things go wrong in public services, we (the public) tend to fall back on bureaucracy – what policies and procedures were in place?; how was the service audited and inspected?; where does accountability lie?

There are in fact some positive aspects of bureaucracy which are important not to forget. As the former Cabinet Secretary, Sir Gus O’Donnell, has put it,

In this country you can renew your car tax if you can prove you own the vehicle, it is roadworthy and it is insured. In other parts of the world all it takes is knowing which palms to grease. Bureaucratic systems are colour-blind, gender-neutral and they don’t care what you sound like. That brings fairness in a way more discretionary systems can never match.

Sir Gus O’Donnell, ‘There is no shame in being a bureaucrat’, Financial Times, 2013.

Finally, what I have found in speaking to those who have experienced the ‘implementation’ of lean management in public services is that there is a fairly piecemeal approach. Those aspects that are seen to deliver cost savings are pushed through with some gusto whilst aspects of empowering and developing staff (where investment may be required) are quietly forgotten. Yet the successful delivery of a lean management approach is totally dependent on a committed and empowered workforce. It is, in many respects (as highlighted by John Seddon) the very opposite of a traditional command and control form of management. So as soon as someone tells you to implement lean management – and dictates how it is to be done – you should consider what they are actually meaning.

There is lots more I could say on this topic but I was trying to keep this short so I’ll leave it for now. If you have any further questions please use the comments box below.

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The ‘publicness’ of banks

Wake up to the latest Rhianna single playing on your iPod through a Bose docking station. Go to the bathroom and brush your teeth with a Phillips Sonic Rechargeable toothbrush. Have a shower using Molton Brown Shower wash. Moisturise. Then go to your kitchen and have some Rice Krispies Multi-Grain Shapes with B Vitamins and Iron. Open The Guardian app on your iPad and think, “isn’t it terrible that banks have sold products to people that they don’t actually need”.

Why do we expect banks to operate in a moral way for the public good? Since when was making a profit for shareholders not enough? Anyone who has ever worked in sales or marketing will know the emphasis that is placed on ‘upselling’ – selling extra products or services to people that they don’t actually need. As Milton Friedman said,

…there is one and only one social responsibility of business – to use resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competitions, without deception or fraud.

(Friedman and Friedman, 1962, p. 133)

Of course, management thought has moved on somewhat since the 1960’s and I am not advocating a Friedman style of capitalism. It also cannot be ignored that action must be taken when businesses commit fraud or other illegal acts. But the question for me is what has led to such moral outrage?

And why is it, at a time when public services are being expected to operate more like businesses, politicians seem to be expecting businesses to act more like public services?

In 1986, the brilliant economist, Susan Strange highlighted the many flaws in the global financial system and in many ways predicted the financial crash of 2008. Strange also noted that it is governments and policy-makers, often misled by neo-liberal theory, who set the framework which enables such behaviours to take place. Anyone who has read either Casino Capitalism or the follow-up Mad Money would not be surprised at the behaviour of bankers at Barclays, RBS or any other bank. What is surprising is the extent to which politicians, who have allowed such behaviour to continue unchecked for so long, appear so shocked and outraged by the whole affair.

What seems to be going on here, at least in part, is that banks are becoming, in effect, a public service. In 1953 Paul Samuelson set out what he described as a collective consumption good. These are now refered to within economics as ‘public goods’ and consist of two characteristics: 1) Non-excludable; 2) Non-rivalry in use.

1) Non-excludable

According to the Collins English Dictionary a bank is,

an institution offering certain financial services, such as the safekeeping of money, conversion of domestic into and from foreign currencies, lending of money at interest, and acceptance of bills of exchange

It would be right to point out that access to banking services is a choice that consumers make. You are not compelled to have a bank account and banks are there to serve the interests of customers and shareholders. They do not serve a public purpose in the same way as national defence or national vaccination programmes.

But today to be included in society increasingly you need a bank account. State pensions and benefits are paid into bank accounts, mortgages are paid from bank accounts, wages and salaries are paid into bank accounts. To stop someone having a bank account is increasingly to exclude them from society. Of course, it is possible to exclude people from having a bank account. And people may choose themselves not to have a bank account (what is known as the power of exit). As such banking services are not a pure public good.

However, the importance of access to financial services was highlighted by the former UN Secretary-General, Kofi Annan, in launching the 2005 International Year of Microcredit when he said,

The stark reality is that most poor people in the world still lack access to sustainable financial services, whether it is savings, credit or insurance. The great challenge before us is to address the constraints that exclude people from full participation in the financial sector. The International Year of Microcredit offers a pivotal opportunity for the international community to engage in a shared commitment to meet this challenge.  Together, we can and must build inclusive financial sectors that help people improve their lives.

What is more, is that the effects of a banking collapse, such as witnessed in 2008, are non-excludable. A banking failure does not just impact on shareholder and customers – it impacts on the entire economy. Banks are now such an important part of the economy, in a way they were never designed to be, that they are too big to fail.

2) Non-rivalry in use

The second key feature of a public good is non-rivalry in use. In other words one persons use of the good does not detract from another persons use. Compare, for example, a private good like a Mars bar, with a public good like street lighting. There is no rivalry in the use of street lighting, similarly my use of a bank account or mortgage does not detract from the benefit you may received from having a  bank account of mortgage. And such is the interdependency within the whole bank system, if my bank fails the impact of that is not just going to affect me but it is likely to cut across all banks.
Of course it is important to note that not all public services are public goods. Many are ‘merit goods’; where it is seen that there are significant benefits from public ownership of the product or service, or significant risk from private ownership, for example the UK National Health Service.
So we come back to the purpose of banks. If they are there to provide a return on investment to shareholders we should not be surprised or condemnatory when they use underhand tactics (which are legal) to meet that purpose. If the government are so concerned about ethics then why not speak out about the general rise of unethical business practices? And if we are coming to expect higher ethical standards from the private sector perhaps we should start with the arms industry? Or oil industry, food industry, alcohol industry, cosmetics industry…….
If, however, we recognise that banks are in fact delivering a valuable public service this raises much more fundamental questions about the organisation, ownership and delivery of banking services. An interesting perspective here might be taken from Bozeman’s (1987) book “All Organizations Are Public“. In relation to the banking sector perhaps the German system is worthy of some serious consideration as alluded to by Vince Cable. Moving beyond the current chatter about legislation and inquiries these structural issues are, I think, much more interesting.
References:

Bozeman, B. (1987) All Organizations Are Public: Comparing Public and Private Organizations. Jossey-Bass, San Francisco.

Friedman, M. and R. Friedman (1962) Capitalism and Freedom. University of Chicago Press, Chicago.

Samuelson, P.A. (1953) ‘The Pure Theory of Public Expenditure’, The Review of Economics and Statistics, Vol. 36, No. 4, pp. 387-389.

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