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Abstract

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. LEAN IMPLEMENTATION AND HMRC
  5. RESEARCH APPROACH
  6. EFFICIENCIES, METRICS, AND PUBLIC SERVICE
  7. CONCLUSION
  8. REFERENCES

The prevailing economic and budgetary climate is intensifying the search for methods and practices aimed at generating efficiencies in public sector provision. This paper investigates the increasingly popular bundle of techniques operating under the generic descriptor of lean, which promises to improve operational quality processes while simultaneously reducing cost. It offers a critical appraisal of lean as a fashionable component of public sector reform and challenges the received wisdom that it unambiguously delivers ‘efficiencies’. Quantitative and qualitative research in HM Revenue and Customs (HMRC) centred on employees' experiences has indicated the extent to which work has been reorganized along lean principles. However, employees perceive that changes in organizational processes and working practices have unintentionally generated inefficiencies which have impacted on the quality of public service. These suggested outcomes raise wider concerns as lean working is adopted in other public sector organizations.


INTRODUCTION

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. LEAN IMPLEMENTATION AND HMRC
  5. RESEARCH APPROACH
  6. EFFICIENCIES, METRICS, AND PUBLIC SERVICE
  7. CONCLUSION
  8. REFERENCES

Over the last three decades the UK public sector has been subjected to continual reform, restructuring, and re-engineering. Financial constraints have long pressurized government to consider how best to ‘re-commodify non-productive’ public services (Kirkpatrick and Martinez Lucio 1995), a pressure that has intensified following the financial crisis and budgetary constraint. Government objectives have pushed for solutions that ostensibly increase efficiency, and productivity as well as delivering cost-effective quality provision (Diefenbach 2009; Pollitt and Bouckaert 2009). From the 1980s, efficiency has become pivotal to many reform initiatives (Ackroyd et al. 2007), to the extent that public administration scholars regard it as one of the most important dimensions of public service performance (Andrews and Entwistle 2010). Yet the conundrum of how government best achieves efficiency rationalization persists.

In this context, the paper investigates the ‘mechanics, policies, philosophies and technologies [that] are being used to create efficiency in public sector organizations' (Public Administration call for papers) through a study of the implementation of lean techniques in the UK civil service, specifically tax processing work in HM Revenue and Customs (HMRC). The appeal of lean is evident given that it offers techniques and philosophies that appear to deliver efficiency (Radnor et al. 2006). Moreover, it is suggested that ‘public benefits can be considerable’ (Radnor and Boaden 2008, p. 3). However, there is a critical lacuna in the debate on the applicability and efficacy of lean to public services. To date, studies have neglected the experiences of employees whose task performance has been reconfigured by lean. It is argued that the testimony of those working on the organization–public interface can provide an important complement or indeed corrective to claims of lean's value based upon limited empirical evidence.

The core of the paper aims to assess the extent to which the aspiration of improved efficiency arising from lean implementation has been achieved, according to the perceptions of frontline staff. This approach contributes to correcting a potential bias in existing academic studies, which concentrate on organizational, technological and processual features at the expense of agential experiences. By focusing on employees' first-hand encounters with lean, the paper suggests that the pursuit of measurable efficiencies through lean has simultaneously undermined the legacy of public service ethos, with potentially damaging results for public administration.

The study is fore-grounded by consideration of the political–economic context which stimulated the adoption of lean in the public sector generally and in HMRC specifically. This section is followed by an explication of the research methods employed and then by employee evidence. Mindful that the study has more than a parsimonious focus on lean and its consequences for HMRC alone, the discussion seeks to pursue the more general question of the very applicability of lean to the public sector. Arguably, service delivery is inextricably embedded with the intangible but invaluable ethos of public service, which the fragmentation of work proposed by this form of lean jeopardizes.

LEAN IMPLEMENTATION AND HMRC

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. LEAN IMPLEMENTATION AND HMRC
  5. RESEARCH APPROACH
  6. EFFICIENCIES, METRICS, AND PUBLIC SERVICE
  7. CONCLUSION
  8. REFERENCES

Historically lean has been closely identified with car manufacturing, notably the Toyota Production System, and is based on the central tenet that organizations will secure efficiency by eliminating wasteful processes, faults, and the need for rework (Womack et al. 1990). Central to lean philosophy is ‘flow’– the setting up of a continuous work process with no unnecessary steps, no interruptions, no batches, and no queues (Womack and Jones 2003, p. 52). To achieve continuous workflow, every worker must be ‘cross-skilled in every task’ (p. 60), and by transferring tasks and responsibilities to workers, quality is embedded within processes. The team becomes the basis for claims of multi-skilling, task enlargement, and worker participation in kaizen or ‘continuous incremental improvement' activities. Evidence of the success of lean production in global manufacturing remains questionable, with a number of studies providing evidence which challenges assumptions of employee engagement and efficiency outcomes (e.g. Lewchuk and Robertson 1997; Danford 1999). Notwithstanding such criticisms, Womack and Jones (2003) have maintained unequivocal support for lean and have emphasized its applicability for service environments.

Against the backdrop of rising public sector spending, policy makers have increasingly focused on diverse forms of process reengineering that recall Hammer and Champy (1993) in the hope of boosting efficiency while expanding services with limited resources. Lean provides a prominent example of a methodology that offers more productive and cost-effective ways of organizing. Advocates have emphasized the practicability of transposing ‘lean manufacturing’ techniques from the private sector to public services.

Lean is transferable to the public sector and can be used to develop more seamless processes, improve flow, reduce waste and develop an understanding of customer value. Lean is most suited to organizations with high volume, repeatable tasks that allow greater standardization and integration. (Radnor et al. 2006, p. 13)

Indeed, lean has been embraced by researchers and practitioners, who regard its implementation as beneficial for public services (see Public Money and Management 2008). The promise of enabling public sector organizations to ‘do more with less' and reducing bureaucratic inefficiencies has particular appeal in the context of budgetary cuts. Internationally, there is growing interest in the applicability of lean, particularly with regard to healthcare services, which is closely related to ongoing debates about reorganization (Waring and Bishop 2010). However, an outstanding concern with the reporting of lean adoption in the public sector is that ‘carefully selected case studies have been used to promote benefits in public services without a balanced view of the negative aspects or consideration of the influence of other factors' (Radnor and Boaden 2008, p. 4).

Civil service reform and HMRC

HMRC is a non-ministerial department responsible for the administration of taxes and customs duties, and is accountable to the Chancellor of the Exchequer. HMRC has been subject to numerous transformations, including job cuts and marketization. From 1997, New Labour attempted to coordinate fragmented parts of the public sector into ‘joined up government' (Pollitt 2003) in the belief that this would facilitate efficiency. Subsequent restructuring and departmental mergers included HM Customs being assimilated with the Inland Revenue in 2005. Efficiency and effectiveness arguments were used as justification for the merger and became central to policy as the political debate about public services shifted towards how well services were being run, producing the ‘battle of the efficiency reviews' (Talbot and Johnson 2007). Sir David Varney, previously a private sector executive, was appointed the first executive chair of the newly-merged HMRC and was tasked with generating £5m of efficiency gains and 16,000 job reductions by 2008.

The Gershon Review of 2004, whose eponymous report later became government policy, was commissioned to scrutinize how public sector resources could be better used to reduce operating costs (Shapps 2007). Following Gershon, 104,000 public sector jobs were cut, generating intended savings of £15bn a year. Efficiency proposals at HMRC were underpinned by assumptions that ICT initiatives could automate complex processes (e.g. online tax returns). Yet the National Audit Office cast doubt on the scale of the savings, suggesting that only around one-quarter had been attained (Shapps 2007). By autumn 2009 HMRC were reported to have saved £300m, with 63 per cent arising from headcount reductions (NAO 2010). While this seems to imply the success of efficiency initiatives, problems emerged, with HMRC experiencing a huge backlog of cases, raising serious concerns about the efficacy of tax collection (HMRC 2010b).

Despite these difficulties, the Government has continued to demand year-on-year efficiency gains, with the 2010 Spending Review (HM Spending Review 2010) indicating that gradual cuts of £3.5bn, focused largely on staffing costs and tax office closures, will be rolled out by 2015. HMRC lost 30 per cent between 2005 and 2010, with a further 25 per cent reduction forecast from 2010. Annual staffing costs amount to just over half of departmental costs (£4.8bn) (HMRC 2010a), but a further 25 per cent reduction over the next four years will equate to £3bn cuts. Official sources have already suggested that these cutbacks, in tandem with the work changes brought about by lean, have contributed to problems of staff morale (Treasury Select Committee 2011).

The demanding objectives of staffing cuts and efficiency savings led management to consider how working practices could be restructured. HMRC pioneered the introduction of lean into the public sector with a reform programme termed Pacesetter, which included the following challenges: to improve efficiency and customer service through a 30 per cent productivity increase; to reduce backlogs and the level of inconsistency across processing; and to ensure that HMRC became the UK Government's ‘Processor of Choice’ (Radnor and Bucci 2007). Lean, the core of Pacesetter, was described as follows:

In essence, Lean philosophy suggests that organizations can improve product or service quality for the same or less cost by continuously reviewing their processes from a customer perspective to remove waste by reducing duplication and inconsistency, and by identifying and resolving the root causes of operational problems. (HMRC 2011, p. 5)

The paper investigates the impact of lean working in HMRC in the context of claims that such a radical change in work organization would unambiguously deliver ‘efficiencies’ and improve the quality of service provision.

RESEARCH APPROACH

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. LEAN IMPLEMENTATION AND HMRC
  5. RESEARCH APPROACH
  6. EFFICIENCIES, METRICS, AND PUBLIC SERVICE
  7. CONCLUSION
  8. REFERENCES

The research, conducted in 2008–09, adopts a multi-method approach and aimed to examine the perceptions and experiences of employees following the implementation of lean at HMRC. Initial attempts were made to gain research access through the government department, but site management proved uncooperative. Given that a principal aim of the research was to investigate ‘frontline’ employees' experience of lean, the research team, composed of academics from six UK universities, sought access through national and branch/site officers of the Public and Commercial Services union (PCS). The PCS is the UK's largest civil service trade union, with 300,000 members overall and more than 70,000 in HMRC. Six sites (Lothians, East Kilbride, Newcastle, Salford, Cardiff, and Leicester), which were central to tax processing and subject to new lean procedures, were selected for study. Research began with interviews with union representatives at each of the sites, who then facilitated further interviews with employees across grades and functions. Within mainstream studies, management perspectives are often over-represented (Alvesson and Skoldberg 2000), and given that there was a report commissioned by HMRC that predominantly reflected managerial perspectives (see Radnor and Bucci 2007), the salience of worker accounts was crucial.

Interviews primarily took place with employees on the processing ‘frontline’, although supervisors from four locations were also included. All 36 interviews, lasting between one and three hours, took place with individuals or groups of employees; they were conducted on-site and were recorded and transcribed. The semi-structured nature of the interviews allowed employees to expand upon the issues they considered central to issues of efficiency and public service. Qualitative data from interviews was supplemented with an analysis of relevant documentation from HMRC, consultants, and PCS. HMRC policy documentation was drawn upon extensively to provide support and evidence for the evaluative conclusions.

Informed by qualitative analysis, an extensive questionnaire was constructed with the aim of collecting employee perceptions of working life before and after the implementation of lean. Questions were designed to avoid potential problems of bias in response. For example, questions eliciting agreement or disagreement with statements would include both positively and negatively worded statements. Questionnaires were distributed by PCS branch representatives to a random sample of approximately 15 per cent of the workforce at each site, and 840 (51 per cent) were returned. The sample population in each HMRC workplace reflected the relative size of establishments. Of the responses, 10 per cent were from Supervisory Officers (SO), 75 per cent from Administrative Officers (AO), and 15 per cent from Administrative Assistants (AA). Data was inputted into SPSS and qualitative comments fully transcribed.

Given that access was facilitated via PCS, we acknowledge that the account presented is not ‘objective’ and that a limitation of the dataset is that it could be construed as unbalanced. Participants in the qualitative and quantitative data collection comprised PCS members and non-members, with union members constituting the majority. However, it should be acknowledged that documenting the experiences of PCS members does not invalidate the study or make it excessively partisan, since employees were overwhelmingly union members in HMRC. Sites exhibited high levels of PCS membership: Cardiff 90 per cent; East Kilbride 95 per cent; Leicester 96 per cent; Lothians 97 per cent; Newcastle 89 per cent; Salford 86 per cent. Furthermore, insofar as triangulation was possible, the analysis revealed close correspondence in the data gathered from PCS representatives and other staff and managers, demonstrated in the cross-tabulated results of the survey. Around 10 per cent of the survey data comprises responses from frontline managers (SOs) which showed no marked statistical difference in findings on key aspects of lean working. The 840 survey responses were returned from a broad constituency of HMRC and the analysis underlined the findings of the interview data.

The project covered diverse issues including staff morale, job discretion, ill-health and sickness absence, team-working, and job satisfaction. An analysis of the lean labour process has been published elsewhere (Carter et al. 2011). This paper breaks new ground by focusing specifically on the impact of lean in respect of efficiency issues in the context of performance and the perceptions of employees of effective delivery of public service.

EFFICIENCIES, METRICS, AND PUBLIC SERVICE

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. LEAN IMPLEMENTATION AND HMRC
  5. RESEARCH APPROACH
  6. EFFICIENCIES, METRICS, AND PUBLIC SERVICE
  7. CONCLUSION
  8. REFERENCES

The following three sub-sections use qualitative and quantitative evidence from employees to consider efforts to create efficiencies, the utilization of performance indicators, and the impact of workplace change on the public service ethos.

Creating efficiencies

Given Pacesetter's objectives, restructuring work at HMRC through the adoption of lean is intrinsically linked to attempts to improve efficiency and service delivery. According to the Gershon Report (2004), public sector efficiency necessitates reforms that include reducing the number of inputs (people or assets), whilst maintaining the same level of service provision, and enhancing the outputs while using the same inputs or lowering the cost of the resources. These desired outcomes underscore a defining contradiction of work organization in the civil service: the conflict between efforts to increase the quantity and quality of service provision while containing spending (Fisher 2004).

Lean was introduced into a work setting in which most tax processing was organized around whole case working, whereby employees were allocated cases on a daily basis. Work involved tasks of varying complexity, such as interpreting and applying complex tax regulations, searching for discrepancies and inaccuracies (and potential fraud), as well as more straightforward administrative activities. In the desire to streamline processes, consultants (initially PA Consulting and McKinsey, followed by Unipart) were drafted in to advise on the redesign of workflow.

As interviewees explained, lean brought the re-engineering of working practices that were formerly based on professional independence and judgement. Re-modelling involved the breaking down of complex tasks into separate stages, a disaggregation which several employees referred to as emulating a ‘production line’ environment. The creation of standardized processes was coupled with the construction of individual and team performance figures as consultants undertook detailed time and motion observation. Metrics included the creation of hourly targets for each task, which could vary from six items per hour in the case of tax letters, to 80 items per hour for opening cases. In order to facilitate ‘flow’, desks were rearranged so that documents could seamlessly move between work stations. One employee remarked:

Lean changed everything. Quite simply they [the consultants] had to redesign how the groups were set out; they had to change the floor plan because they have to sit in a particular order so the flow is good. They have little buffers on desks and they have to be fed in a particular way. This is all theoretical of course, because it doesn't work so they ignore it, they play at it. (PCS Representative, Site A)

The staff survey revealed that 70 per cent believed that lean had reduced the skill content of jobs. Employees articulated experiences of reduced control, with a sense of being ‘no longer allowed to think for ourselves' and ‘apply common sense principles'. Data analysis identified how fragmenting whole case working into standardized components destroyed procedures that had previously worked well, as numerous tax officers now dealt with particular parts of a process: ‘you get more mistakes because you are not working the case cradle to grave’ (PCS Representative, Site D). An example was provided of the consequences of job fragmentation:

Lean was introduced to us as being the ‘big thing’ that would make everything better. Management seem to think that as long as we tick the appropriate boxes our quality has improved drastically. However, we now receive more complaints than ever. The idea is that you will know your part of the job really well. Unfortunately it just means no-one actually knows how to do the job. Each case is different and involves a person. We are not making nuts and bolts. (AO, Site B)

A key principle of lean is ‘value streaming’ (Womack and Jones 2003), whereby the value of each process is identified and the ‘wasted steps' are eliminated. Many participants reported on how deconstructing whole case working into discrete simplified tasks has meant that they lost sight of the holistic nature of tax processing:

[Pre-lean] we could all do telephone work, post, open case returns, now we can only do one little bit of that…we are losing skills…. In fact, lean has probably made things worse, because nobody is an expert on anything anymore. (PCS Representative, Site D)

The staff survey confirms the extent of changes in job content following lean (Table 1). Around three-quarters of respondents agreed that the job had become more monotonous, fragmented, and lacking in variety. This is of significance given that lean purports to create multi-skilling. Forth-two per cent of respondents believed that the backlog of tasks had increased ‘a great deal’. Further endorsement was provided by an interviewee who commented: ‘We have gone back in time and are operating a service which is so inefficient it is embarrassing to actually work here’ (AO, Site C).

Table 1. Perceived changes in job content after the introduction of lean
 A great deal (%)To some extent (%)A little (%)Not much (%)Not at all (%)Doesnot apply (%)
Monotony of job492316832
Not enough time between jobs/tasks442915813
Not given enough information to do job2734211341
Not enough breaks3426171364
Not enough time to talk to colleagues3427211152
Fragmented tasks4025181133
Lack of variety482513932
Continuous workflow4228131142
Backlog of tasks4229131132

Interviewees commented on how everyday pressure to meet prioritized targets sometimes meant that other important aspects of the work were neglected. An example was provided where legally prescribed deadlines for tax returns were being missed due to backlogs of work, with some cases simply wiped off the system because staff had been unable to deal with them. A further illustration was given regarding self-assessment:

People were taken out of self-assessment if they earned less than £100,000 and then they were issued with form P810 which is every 3 years. We haven't been doing work with P810s so we don't know what they are claiming, or what they are earning, so if we miss the 3 year deadline, we don't know what they are doing for another 6 years…. and we only keep records for 6 years. (PCS Representative, Site D)

Proving public sector efficiency is notoriously difficult and is often concentrated in areas that can be measured quantitatively and along technical dimensions (Diefenbach 2009). Hence, HMRC has been inclined to corroborate the success of specific areas by quantifiable activity. Yet staff are dismissive of these claimed successes, given their frontline experiences of backlogs, the increasing volume of complaints, and the neglect of what management now deems to be low priority work.

Management in here will now tell you that it's the great god lean that's delivered these efficiencies. Absolute shit. No one's got benchmarks to compare it with. We think productivity has gone down. We have more post on hand than we've ever had. The sheer volume of work that hasn't been touched…. There's more work across the network than there's ever been…. There are fewer people. And that's only the stuff that's counted. (PCS Representative, Site A)

Employee experiences indicate that applying lean techniques in order to maximize efficiencies at HMRC has proved problematic, given that qualitative judgements are essential to case working. The fragmentation and standardization of work has lead to duplication of effort and re-work, which in effect cancel out any potential productivity gains. Interviewees commented that the pressure to provide the required hourly throughput meant that their focus had shifted to getting work done quickly rather than thoroughly. In their reflections, many respondents noted how problems arising from the reduced application of their substantive knowledge were exacerbated by staff cutbacks. The following quote describes how backlogs of files, which are stored off-site and contravene data security regulations, cannot be addressed with current staffing levels:

We have all these files full of stuff off-site that doesn't match the data protection compliance; 40,000 files off-site, because we just don't have the staff to do it…. But they can't bring the files back into the office to work them because we haven't got the staff. (PCS Representative, Site D)

Performance monitoring

While systems of supervision and monitoring have always existed in the public sector, lean has introduced an additional bureaucratic mechanism in the form of performance measurement. This device has always had an ideological dimension (Diefenbach 2009) as it sustains the focus on fiscal concerns and efficient use of resources whilst amplifying the managerial discourse on competition (Clarke 2005). Under pressure to demonstrate efficiency gains, there were attempts to standardize complex operations and shift focus from ‘first-order performance objectives' to systems for defining and monitoring performance. The unambiguous assumption that goals could be clearly defined, along with the means to monitor and evaluate the results, is yet another element of private sector mimicry (Christensen 2006) as employees suffer from an ‘avalanche’ of formalized performance reporting (Talbot 2010).

Prior to lean at HMRC, line management supervision was based on a normative understanding that allowed staff to organize their own workload, enabling a degree of autonomy. Such discretion was replaced with performance data based on hourly targets, which renders more complete the link between labour time and the production of quantifiable outputs. The process of calculating hourly targets was described as ‘reverse engineering at its very worst' and numerous comments echoed the sentiment that ‘you can't time post'. The disregard for variability and complexity was a source of constant frustration:

With the nature of taxes, there's a lot of exceptions and that's the key thing with lean. If it takes over twenty minutes, it's an exception and there's a lot of exceptions that don't fit. And exceptions take as long as they take because they're exceptional. (PCS Representative, Site F)

Lean enhances managerial control through the utilization of visual techniques. Targets were displayed on whiteboards, as line managers used green (above target) and red (below target) pens to physically record hourly outputs. Interviewees explained how these metrics had a deleterious effect on workplace behaviour and undermined the respect they once had for managers:

HMRC has lost its direction. The most important management tool is the whiteboard, which most members of staff have no interest in, along with all the add-ons that are hanging from it. If managers were trained properly, then there would be no need for whiteboards. (AO, Site B)

Whiteboards were positioned in front of each team, alongside a summary whiteboard on which line mangers conduct a post-mortem on the previous day's figures. One employee commented on how the various hierarchical levels have become increasingly accountable: ‘they [supervisors] have to explain why they didn't hit the target and there's public humiliation for them as to what went wrong’ (PCS Representative, Site A). Statistics are centrally collated and a weekly teleconference for head office managers takes place to discuss whether targets have been achieved. The employee continued: ‘they get a collective kicking for not hitting their targets and then the kicking is passed back down the line’. The quantitative evaluation of work processes adds an additional bureaucratic layer, rather than simplifying operations and reducing duplication.

Narrow performance indicators encourage a ‘compliance culture’ (Lapsley 2009), as employees become adept at performing to target. In one regional office, in order to meet September targets, the May to August backlog was disregarded. Outstanding post was deemed non-urgent since only targeted cases were being worked. The sense of constant pressure to achieve targets was reported by both workers and managers, citing instances of collusion in doctoring the figures, which runs counter to the public service ethos. Complaints were also raised by frontline staff at other sites as they expressed their frustration at the disregard for hitherto important aspects of work. Despite the focus on performance metrics, the precision of the information is questioned, as 78 per cent of survey respondents agreed that management statistics were inaccurate. Such false reporting may corrode organizational trust and several instances were cited where targeted figures had been fudged in order to appear successful.

Basically if the way they count it doesn't give them the answer they want, they count it differently. So where senior management are saying that lean is improving things it's getting worse, there's more work on hand, there's less work being done, we're able to hit fewer and fewer of the targeted bits of work, because they've been replaced by complaints. (PCS Representative, Site F)

Fieldwork across multiple locations presented corroboration of reported instances of work being moved between sites in order to massage figures. As targets were being met in one particular area of processing, individual offices would then bid for work from elsewhere, even if other aspects of the work were being neglected:

So you have this magical rotation of work where Edinburgh is doing our tax returns because someone else is doing Edinburgh's post. Leicester's work has come in here… and it's a moving target. (PCS Representative, Site A)

Shipping work around different regions does not sit comfortably with the claims that lean is maximizing ‘flow’ and removing wasteful steps, given the additional effort required in terms of logistics, storage and retrieval. The negative effects of this on both staff and tax payers were noted:

We are so up to date on post and returns that we can actually bid for work now, yet we are actually sending work out to other areas – like work lists – because we can't do it. Can you imagine how confusing that is to a tax payer? You get a demand or a letter from one tax office telling them they have dealt with this piece of post, but your tax office is still in [Site D]. It makes absolutely no sense for us to be taking in work from somewhere else and then to be shipping out our work. (PCS Representative, Site D)

Several survey questions investigated the consequences of increased performance management (Table 2). The survey revealed enhanced pressure to meet individual and team targets, which was exacerbated by the use of whiteboards and from greater levels of supervisory monitoring. Increased pressure and stress in the working environment can have negative consequences on productivity (Green 2006), which runs counter to aspirations for efficiency enhancements.

Table 2. Performance management factors contributing to workplace pressures post-lean
 A great deal (%)To some extent (%)A little (%)Not much (%)Not at all (%)Does not apply (%)
Supervisory monitoring502811524
Meeting individual targets532910512
Meeting team targets453513412
Competing with other teams3234141163
Pressure from a supervisor2132231662
Use of whiteboards522310942
Quality checks482512753

Using detailed performance metrics has the potential to show changes in efficiency levels, but this masks operational problems. At HMRC, attempts to streamline processes and performance manage the staff has merely exacerbated backlogs (HMRC 2010a), while creating ‘false impressions' at the level of aggregated data. Rather than create efficiencies, enhanced monitoring, along with the managerial effort required to oversee the process, has generated inefficiencies. In the case of HMRC, performance management systems have contributed towards far-reaching negative consequences to public service provision. Ironically, while lean aims to strip out waste, what we are seeing is an increase in bureaucratic and inefficient practice.

Valuing the public service ethos

Pacesetter's predominant focus on delivering efficiency raises the question as to whether it is desirable to spotlight efficiency at the detriment of other elements of public administration. The focus on efficiency has been accompanied by a shift in strategy that sees the public sector primarily as a service provider, with other legitimate governmental roles, such as care for citizens and social justice, perceived as secondary. This one-dimensional focus towards market orientation neglects other considerations (Christensen 2006) and represents an ethical change from the provision of public welfare to more commercial concepts. Inefficiencies that are seen to characterize public administration cannot be removed at will to produce ‘fresher, cleaner, faster, shinier public sector management' (du Gay 2005, p. 54) since due process requires that government is constrained in its ability to act in a particular manner.

Many HMRC employees exhibit attachment to the public service ethos so that reframing the role of HMRC was widely resented:

A lot of managers and senior managers and pro-lean people will say ‘Wow, that's not a way to run a business is it?’ or ‘That's not very businesslike’. And we keep saying, ‘Well, we're not a business, we don't have customers, it's a public service’. (PCS Representative, Site F)

HMRC employees described how their work is centred on a ‘fair’ taxation system, but changes in working practices brought about by lean are impacting adversely on the delivery of equitable treatment. Employees at one site reported that of the 40,000 annual complex tax cases (high earners), only 5,000 were to be investigated in depth. One interviewee commented, ‘…there is an inbuilt inequality in this' (PCS Representative, Site D). Targets can create unintended effects for the public service that is being delivered (Hood 2007) and this can be seen with regard to the ongoing problems of evasion, avoidance, and non-collection of tax.

The role of Government is to act in a fair manner and consider the uniqueness of each individual case, while ensuring all tax payers receive impartial treatment. The breaching of these principles in the post-lean HMRC prompted many to express dissatisfaction at the way citizens are being treated.

We're public servants. We came into the job expecting to provide a good level of service to what our managers euphemistically describe as ‘customers’ and what we'd call tax payers. But we have an obligation under the tax payers' charter to treat them fairly, to treat them equitably, to do the very best we can to keep their tax affairs up to date. And then this process [lean] comes in which means that we don't look at annual coding lists. So we know that there's a problem with hundreds of thousands of tax codes in the country, but it's not one of the priorities, so we park it. So we've got years and years and years where tax payers were either entitled to repayments or should be getting underpayment notices, but we don't have time to do that because it's number eleven in a [priority] list and we can only do the first three or four. (PCS Representative, Site A)

While tax collection may be time-consuming and burdensome it need not imply inefficiency, especially if the consequence is the generation of additional government revenue. Reorienting the focus towards efficiency can lead to the neglect of other legitimate governmental considerations.

Womack and Jones (2003) state that a crucial starting point for lean is ‘value’ which is defined by fundamentally rethinking value from the perspective of the customer. This perspective complements the conceptual reframing from citizen to customer in public sector discourse, which is lodged in narratives about the transition to a consumer society that enlarges the reach of the market (Clarke and Newman 2005). According to HMRC (2007, p. 5), ‘successfully achieving a culture of efficiency in the long-term is through a focus on the customer’ yet evidence shows that the delivery of service to the public has declined to ‘unacceptable levels' (Treasury Select Committee 2011). Even if processes associated with lean were improving customer service, a potential contradiction arises given that equitable tax collection, which contributes towards broader public values, may in fact be incompatible with the needs of individual customers, particularly if – in the interests of fairness and equity – they are personally being scrutinized. It is assumed that increased consumer orientation will encourage improvements, but effectiveness may run counter to efficiency objectives. These incompatibilities were noted:

There's a big emphasis on customer service, although it's poor. There's an emphasis there rather than revenue gathering. You'd think the government would be more concerned about gathering money in. (PCS Representative, Site F)

Many HMRC employees were troubled by the facade of customer service given that there are more than 200 office closures, a reduction in opening hours, and a shift away from face-to-face contact towards call centres. Many employees commented that the reality was that of a deteriorating service and used terms such as ‘deplorable’, ‘inferior’, and ‘public disservice’. For one employee, citizens were becoming ‘a casualty of this obsession with figures, statistics and paperwork’ (AO, Site E). Even with HMRC's commitment to prioritize customers, one interviewee remarked that lean's achievement was ‘reducing quality to customers' (AA, Site D). Consequently, there has been a substantial increase in complaints.

The number two priority, interestingly enough, is complaints, and that's the other growth area. We've just taken on a full national complaints team, so it's growing exponentially because we're not doing the basic work. (PCS Representative, Site A)

The survey provided further details of how employees perceived the impact of lean on quality (Table 3). Despite HMRC's attempts to engender greater consumer reorientation, over 80 per cent of respondents believed that lean has sacrificed quality for quantity, distorting the priorities of HMRC. One employee remarked ‘There's no morale left, its pit face mentality now’ (PCS Representative, Site A).

Table 3. Employee perceptions of lean's impact on quality
 Strongly agree (%)Agree (%)Disagree (%)Strongly disagree (%)Undecided (%)
Quality of work has increased since lean41839309
Having to hit targets distorts my priorities and affects quality3749824
Lean has sacrificed quality for quantity46371016

CONCLUSION

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. LEAN IMPLEMENTATION AND HMRC
  5. RESEARCH APPROACH
  6. EFFICIENCIES, METRICS, AND PUBLIC SERVICE
  7. CONCLUSION
  8. REFERENCES

In times of austerity, governments seek out various means to pursue efficiencies and reduce the public sector deficit. Lean has attracted rising interest from policy-makers as it promises to ‘drive efficiency improvements' (Radnor et al. 2006, p. 10). Within the UK, HMRC was the first public sector department to adopt the large-scale implementation of lean as a central component of its Pacesetter programme. HMRC, as the flagship of public sector reform, has as its key priorities: maximizing revenues; reducing costs; and improving the customer experience (HMRC 2011). Lean is perceived as the primary vehicle for meeting these objectives by providing quality public service at less cost, by streamlining operational processes to eradicate waste and duplication, and by reviewing operational processes from a customer perspective. However, proving the success of this project is highly problematic, since efficiency is not a variable that can be easily isolated, with policies having a spectrum of effects, some of which may be unintended.

Going beyond the empirical findings reported here, evidence from policy documents casts serious doubt on whether lean has contributed positively to HMRC's strategic priorities. First, the difficulties of providing correlated support to prove that lean has generated efficiencies have been highlighted in a report on the value for money of Pacesetter: ‘…there are uncertainties over the full extent of the financial benefits from the programme and the extent of improvements in efficiency’ (HMRC 2011, p. 16). Undoubtedly, staff cutbacks and tax office closures are contributing significantly to deficit reduction. However, the full cost of any change programme is frequently obscured, with HMRC reporting that the total spend on Pacesetter between 2005–06 and 2010–11 is in the region of £55m to £115m, while acknowledging that the ‘wider costs' associated with implementing change have been excluded.

An ongoing dilemma for policy-makers concerns how to reduce costs while maximizing resources, and the latter is proving particularly problematic at HMRC. Efforts to recover the ‘missing billions' in taxation (Murphy 2008) are becoming exacerbated rather than reduced as lean has increased lead times (HMRC 2007). Consequently, governmental accounts show a substantial tax backlog, amounting to over 18m cases, the reduction of which is ‘a very significant challenge’ (HMRC 2010a). Furthermore, concerns have been raised about the appropriateness of Pacesetter to the area of tax collection and revenue generation. The Treasury Sub-Committee Inquiry (2010b, p. 2; 2011) stated: ‘HMRC generates income for the government, and must be treated differently to other government spending departments. Cutting tax-gathering budgets will not save money; it will cost money. Tax avoidance will increase; revenues will diminish.’ If the situation continues, then the effective retrieval of taxes to fund public services is likely to deteriorate further.

The contribution of lean to the streamlining of processes in order to achieve a 30 per cent productivity increase is also unproven. Despite substantive effort going into the collection of various metrics, quantitative evaluations of performance improvements are elusive: ‘the Department does not have clear information to show trends in service delivery, quality, workload, the time taken to process work or work awaiting processing. Where information is available it presents an inconclusive picture’ (HMRC 2011, p. 18).

Improving customer service has been a key objective of Pacesetter and HMRC continue to prioritize this. Nevertheless, a recent report shows widespread concern about service standards and the impact that this may have on individuals and businesses, with customer experience described as being ‘at an all time low’ (Treasury Select Committee 2011). Thus far, improvements in customer service are largely framed in operational terms regarding processing times. While this has been disappointing, one could equally argue that the ‘value’ of HMRC from a customer perspective is that UK citizens can assume that appropriate levels of tax collection will be made available to fund public services. This sentiment is one that is reflected in the mission statement displayed in HMRC offices: ‘We make sure that the money is available to fund the UK's public services'. Yet, lean implementation has failed to realize improvements in terms of both customer service and tax collection.

To summarize, lean was implemented in the hope of addressing key strategic priority areas, yet positive claims can only be made in terms of cost-cutting, much of which is attributable to headcount reduction and office closure rather than lean per se. Arguably, achieving cost savings comes at the expense of improving customer service and maximizing (tax) revenues. This raises questions as to whether these aspects of public administration should be sacrificed in times of austerity.

This wider body of evidence clearly points to the problematic of lean implementation and the dissonance between policy and tangible efficiencies and improvements. The micro-level research reported here, which was carried out in 2008–09, was speculatively prophetic given substantiation provided by recent policy documents. Reporting the insights and perceptions of the largely unionized workforce helps to illuminate how lean has been disseminated and shapes everyday experiences within tax processing, highlighting the disconnect between policy aspirations and the reality of lean implementation. Changes in working practices reveals that HMRC has undertaken an organizational transformation along factory lines, in the belief that lean would deliver improvements in keeping with strategic priorities. The study shows how moves to commodify the intangibility of labour-intensive public services have potentially damaging consequences. Rather than reducing inefficiencies and waste, lean has produced inefficiencies through the rupture of the holistic understanding of the work process by professional public servants. Employees experience an excess of performance measures, as games of compliance are constructed to meet artificial targets rather than tackle tax backlogs. In this respect, lean is failing to deal with the problems it was intended to remedy and is indeed exacerbating them. Furthermore, lean has sacrificed the intangible ethos of public service that underpinned the commitment of the workforce.

Lean is receiving much attention in the current economic climate, yet serious questions need to be raised about its application in a public sector environment. At HMRC, implementing lean during a period of severe budget cuts has compounded its own negative consequences. While it is difficult to decouple the effects of lean from those of cutbacks (HMRC 2011), part of its appeal is that it helps steer HMRC in the direction of a slimmed down service. This manifestation of lean dovetails with the ideology of New Public Management: explicit performance metrics which are output-driven can be seen with hourly monitoring of work activities; ‘hands-on’ management styles are evident with enhanced supervision; and the stress on greater labour discipline is apparent throughout.

At HMRC, lean was not implemented in pure textbook fashion, but as with any managerial philosophy, it is idealized in theory while being implemented according to local contingencies. In fact, HMRC's version of lean has been described as the ‘closest of any public service organization to date in implementing the complete lean philosophy’ (Radnor and Boaden 2008, p. 2). Some may suggest that the problems reported arise because lean is more applicable in a manufacturing environment, even though case-based evidence from this sector also shows negative consequences (Lewchuk and Robertson 1997; Danford 1999). Applying a manufacturing model to the office, in particular the public sector with its own unique ethos, in reality raises a number of contradictions and impracticalities. This triggers broader questions about the applicability of lean to a public sector environment.

Finally, while our findings are particularly stark, they align with other studies that reveal how organizational change programmes often lead to many public services suffering as a consequence (Foster and Hoggett 1999; Butterfield et al. 2005; Ackroyd et al. 2007). Further indictment is provided by the Treasury Select Committee (2011), whose cross-government staff survey ranked HMRC as the most unhappy workforce among public sector departments. We are witnessing long-term and sustained damage to HMRC services and its employees, which is likely to have baleful consequences in the current financial climate. These developments do not bode well for the future of the public sector, given plans for the continuing roll-out of lean across other government departments.

REFERENCES

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. LEAN IMPLEMENTATION AND HMRC
  5. RESEARCH APPROACH
  6. EFFICIENCIES, METRICS, AND PUBLIC SERVICE
  7. CONCLUSION
  8. REFERENCES
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