Competition as a means to an end: human services supply chain needs a brain

PART TWO: Nicholas Gruen and Chris Vanstone’s concluding piece explores both why and how a government supply chain to deliver human services must understand and optimise its own impact.

In part one, Nicholas Gruen and Chris Vanstone explored how it’s government’s reputation on the line as human services are increasingly delivered by a corporate supply chain, drawing on lessons from Toyota.

A supply chain needs a brain

About two years after the fall of the Berlin Wall, a delegation of Russian bureaucrats visited London and one famously asked Paul Seabright, a leading economist who met with them, “who is in charge of the supply of bread to the population of London?” Counterintuitive though it may be, in a market, no one’s in charge. That’s not true of a corporate supply chain. It will make use of markets in myriad ways, but, like a body, it will have a nervous system providing it continual feedback about the performance of its various parts, and a brain capable of aggregating that information and strategising improvement.

This is what we were getting at in the Australian Centre for Social Innovation’submission to the Productivity Commission’s Human Services inquiry:

“A ‘brain’ works out what creates outcomes and what doesn’t. A ‘brain’ would know how the system is currently performing and how to improve and grow services when they are working. . . . In many of the sectors in which we work, though the initial system rarely performed as we would like, increased outsourcing has, in fact, reduced expertise as to what works. The risk is that government has become an expert in contract management, and service providers have become experts in ‘contract delivery’. ‘Brains’ have atrophied on both sides. We’d like to see the Commission reverse this trend and enable both to be experts in ‘outcome creation for vulnerable groups’. We work with some of the most progressive government departments and service providers and they often struggle to keep their ‘brains’ intact because of the larger forces operating around them.”

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  • Geoff Edwards

    Thanks, Nicholas Gruen for this Part 2 of your essay (and for your feedback attached to Part 1).

    It is not difficult to find much within your two posts to endorse, but I can’t quite see a coherent conceptual framework. For example, I agree that we need to loosen the grip of self-interested professionals on system design and heed more the experience of clients at the coalface; but on the other hand, the essay argues that we need to engage professional experts (a different class, monitors and evaluators, presumably including economists) to build feedback into the system.

    To take another example: we need an intelligent brain at the centre in order to coordinate the complex supply chains; but the essay argues that we should remove responsibility for performance evaluation from the public service centre and assign it to the Auditor-General or similar. In other words, we want to impose a cadre of checkers with a rationalist approach (and most likely a content-free generalist approach) to look over the shoulders of the portfolio staff who are supposed to hold deep technical expertise. I can’t reconcile the two exhortations. This mechanistic process by itself wouldn’t add intelligence to the centre as the checkers would lie outside the team. The caseworkers then adjust their practice to satisfy the checkers rather than the clients.

    Let me give a case study to illustrate my point. In 2008, the federal Auditor-General published a report evaluating the federal natural resource management (NRM) program. The report concluded that the program had not been able to demonstrate its success. True. Not surprising, since it was endeavouring to improve management practices across cycles of drought, fire, flood and irruptions of kangaroos that take decades to play themselves out. Also, it was endeavouring to build the capacity of the rural community to manage these challenges – a human services task that amounts to building infrastructure, requiring years and years to build trust. The end result was catastrophic for the sector: the Commonwealth cut funding, increased the uncertainty of funding, moved further towards short-term project funding and piled on monitoring obligations.

    The fundamental message that I can extract from your essay is one I fully endorse. It is that any solution to a complex task like human services or NRM requires multidisciplinary insight. The understandings of a field held collectively by clients, street level bureaucrats, middle managers, theoreticians from numerous disciplines and yes, rationalist evaluators – etc – need to be integrated through a transparent process of concurrent facilitation and empowerment. This is why bodies like the Productivity Commission are leading government into the wilderness. Although it may be consulting widely with experts and practitioners, the insights are assessed sequentially not concurrently. At its core it still seems to stick to a one-dimensional rationalist model of society and seeks to impose that model on every wicked problem in sight. For example, its 2014 report on public infrastructure scarcely even mentioned climate change and peak oil, yet it purports to present a model for transport planning. Some subjects are simply beyond its worldview.

    Regardless of its worldview, and paying respect to your own distinguished history with the PC, I think the Commission’s enquiry procedure is not conducive to the empowerment that you are seeking. It follows a sequential process: Terms of reference / internal research / consultation / draft report / final report, with various forms of limitation built-in at each stage. To build the insights of all participants in these complex multilateral problems, a concurrent process is required where learning and insight sharing can be iterative and mutually encouraging.

  • Geoff Edwards

    Thanks, Nicholas.Mostly, fine. I do think however that the modern enthusiasm for monitoring and evaluation is overdone. It is a feature of administration by contract rather than by trust. Given that your model of delivery of community services is built on intensive dialogue with frontline clients and street level bureaucrats, then the model should be fairly self-correcting without a cohort of clipboards armed with “blue forms” checking up to discipline the operatives if they fall out of line. (The “Yes Minister” episode on this comes to mind).

    Anyway putting that aside, I was really intrigued by your observations on the Productivity Commission. Given your familiarity with this advocate for competition, discoordination and fragmentation, there would hardly be anyone around in a better position to write a scholarly, sober and fair-minded critique of the organisation and whether it has any useful future role. If you have already previously written such an essay, I would be pleased to know the citation.

    • Nicholas Gruen

      Thanks Geoff,

      You first paragraph indicates that you won’t think about the possibility of evaluation working the way I’ve suggested it can. Of course if you’re right that the institutional imperatives will drive the thing toward ‘blue forms’ then the point I’m making is moot – academic. In that case, because I’m less pessimistic than you on that score I’m happy to debate it with you, but only in terms of what I’ve suggested, not some caricature of it.

      Further you appear to have a fairly binary idea in your mind in which “intensive dialogue with frontline clients and street level bureaucrats” is one pole – which is good and those at the top of the hierarchy are not like that and they’re bad. The idea in my head is that each need the other and that they’re not connecting properly at the moment and that this is a huge structural, cultural issue. I tried to sum some of this up in this post There are plenty of operations in which there’s “intensive dialogue with frontline clients and street level bureaucrats” that nevertheless don’t shackle themselves to the discipline of trying to figure out what works and why. They’re just delivering the service as best they can.
      On the PC, you’ll find plenty of critiques of mine of the PC if you search the group blog I contribute to – ClubTroppo. In case you’re interested, here’s the draft of a history of automotive industry policy forthcoming in an academic journal soon. However a critique of an organisation isn’t necessarily an endorsement of others. I despair at the inability of the Commission to really apply its mind to really understand and integrate perspectives on the world that are not its own, but then I don’t see much of that about anywhere. As for the PC’s future role, the bad news is that, for all its flaws, it’s probably one of our better public sector institutions. And it has been known to produce some great reports.