The Efficiency Fallacy: Why finding savings in siloed services is fundamentally flawed

Andrew Laird argues that leaders must reject the short-termism of traditional approaches to achieving efficiency savings. Instead, they must be brave enough to reimagine public services – by challenging siloes, empowering frontline teams, supporting collaboration and co-designing with residents.

Looking for efficiencies within individual service areas may enable you to meet short-term financial targets.

However, it will do very little to reduce future service demand or redirect existing resources towards supporting people to solve their underlying challenges.

And so the pressure on local public services will continue to rise.

A lot of consultancies re-enforce this approach (either deliberately or through lack of imagination). Just keep doing what you are doing – but more efficiently.

The truth is they know they will be back in a few years solving the same (regrown) inefficiency problem, probably with a different set of executive leaders on the public service side… and of course they turn up with a great case study of how they have done it before!

Speaking as a Consultant, we owe it to the public services we support to avoid reaching for the “tried and tested” efficiency solution.  

There's a better way to do this.

The root cause of the problem

Over the past three decades, UK public services have been shaped by the legacy of New Public Management (NPM) — a reform agenda that introduced market principles, performance targets, and service specialisation in pursuit of efficiency and accountability. While this has delivered some benefits, it has also driven deep fragmentation across the system.

Today, public services are largely organised around siloed structures, each with their own thresholds, targets and budgets. This is an approach that no longer reflects how individuals and families interact with the state in real life. When individual needs increasingly span across multiple services, the system becomes inefficient, costly, and frustrating to navigate.

Mark Smith describes the pressure on public service staff to “create and maintain a defensible position”. The narrative is “I tried to help, followed the agreed pathway – it didn’t work - but I’m covered”. Data and dashboards can provide reassurance, but they cannot be the destination. Presenting metrics without acting on them (or having the freedom to act on them!) creates a reductive agenda that demotivates staff and drives away those who joined public services to make a real difference.

The way the Treasury has traditionally considered prevention and “invest to save” spending has not helped – but this is starting to improve, which is great to see.

We have also seen a drift away from supporting people to self-manage and retain their own agency and responsibility. Instinctively moving to remove a person’s agency creates a reliance on a system with diminishing resources and only creates further pressure. This is exacerbated by traditional siloed efficiency drives, which create an increasing scarcity of support.

There must be a better way to consider the challenges we face (spoiler – there is – and you all know it!).

The rising storm

The Office for Budget Responsibility (OBR) says that pressure from statutory demand-led services has “increased significantly, notably in adult social care, children’s social care, special educational needs and temporary accommodation.”[1] This will be no surprise to any of you. NAO analysis quoted by the OBR shows that in the last decade, there has been a 15% increase in requests for adult social care support, a 19% increase in looked after children, a 140% increase in EHCPs for young people and an 84% increase in households in temporary accommodation. Again, this will be no surprise – but the exact numbers did give me a bit of a shock!

This trend shows no signs of slowing.

Responding by simply trying to do what is currently being done more efficiently will do nothing to reverse the rise in demand.

Continuing to provide services which aim to address individual presenting issues and conditions rather than the underlying challenges will do nothing to reverse the rise in demand.

Assessments, handoffs, and referrals absorb a significant portion of professional time, often the majority of frontline and commissioning capacity. This leaves too little bandwidth to address the root causes of need. As demographic pressures intensify and complexity of need rises, we are seeing a sharp increase in spending at the point of crisis, when intervention is least effectiveand most expensive. If we continue to operate in this way, we risk the system being completely overwhelmed (rather than just in constant near death crisis).

You can read more about the savings which can be generated from challenging this here - Radical Place Leadership: The Public Money that Falls Between the Silos

Everyone seems to accept that in an ideal world there would be reduced spend on the “acute” part of the system (the bit where people are already in crisis). In our conversations, we get a real sense of agreement with the overarching principle - but often a reluctance to accept the practical application when it comes to specific services.

An overfocus on the short term

The financial challenge faced by local authorities in England has been reported exhaustively. Across the country, councils are being forced to focus their diminishing resources on acute statutory services. These are, of course, essential. When people are in crisis, they need immediate help.

But this narrow focus comes at a cost. As resources tighten and decisions are made around what the urgent spending need is, councils risk their role diminishing to being simply a provider of statutory, demand-led services.

Prof. Donna Hall and I have previously explored the impact this retreat is having on the relationship and trust between public services and the public – When Power Forgets the People

Genuine productivity gains come not from traditional efficiency drives but from collaboration, imagination and more time spent thinking about what support will actually make a person feel better and ultimately be a more fulfilled, contributing member of society.

Investing in prevention has always been a leap of faith. It’s hard to quantify and harder still to evidence in-year savings. I have previously mentioned the traditional, preferred Treasury approach - cost reductions from efficiency drives are easier to track. But this comes with limits. Raising thresholds and reducing supply may balance a financial spreadsheet, but if you don’t empower public-facing staff to actually help people and also support individuals themselves to build their own agency and capability to self-manage, the system will continue to collapse under the weight of demand.

The paradox is clear. Councils spend most where the system is under the most strain, but by the time a person is in crisis, the opportunity to help them earlier, and more effectively has already been missed.

Radical Place Leadership – a Neighbourhood Operating Model

There is a better way.

Better collaboration between services as close to people and families as you can get sits at the heart of the required response to the challenges set out above.

We are Lucky to be working with several councils and health and care systems to design a new model of Radical Place Leadership. This builds on the experience of designing and implementing the Wigan Deal and also from the Changing Futures programme (including the “Liberated Method”). Our focus is on how you create an enabling environment so that the type of properly integrated neighbourhood-level working becomes the local system, rather than having to fight against it. As we work with places such as NE Lincolnshire, Brent, South Ayrshire and Norfolk, the model is evolving and improving into a new Neighbourhood Operating Model approach, which reimagines how support is organised.

Some of the areas we are working with are using the opportunity presented by Local Government Reorganisation to kick-start reform. We are working with them to design Neighbourhood Area Committees (NACs – a requirement from MHCLG) and associated Integrated Neighbourhood Teams (INTs) to empower frontline teams, support collaborative working and reset relationships with residents.

Test, learn and be brave

A “test and learn” mindset is crucial. Experiment across both geographies and challenges. Understand the difference between genuine demand and “failure demand” i.e. the avoidable activity that results from the system not solving root causes. By building a defensible position based on evidence and experimentation, councils can show that reimagined services work, even before full system alignment (see below #GSD!).

Big change requires bravery. The sector needs leaders willing to step out from behind the dashboards, take the leap of faith into prevention, and champion an approach that restores people’s agency. A narrow efficiency focus can keep the lights on for now – but only reform and reimagining will keep the system alive for the future.

It’s not easy for Leaders who need to factor in three powerful perspectives:

• the past they are burdened with;

• the present they are enduring;

• and the future they are aiming to achieve.

Against this often conflicting set of pressures, many places will be running short-term efficiency programmes to meet present budget pressures. In parallel, a more radical programme of reform and transformation is needed if a positive vision for the future is to be achieved. Think about the colleagues you value and rely on. Will they really hang around in an environment of doom, gloom and managed decline…

If you need to make short-term savings (and a lot do sadly) then running this programme in parallel with a more strategic reform programme is a good way of ensuring the really good preventative work which is happening doesn’t get arbitrarily cut without proper consideration.

The opportunities to reject the traditional, reductive efficiency approach are there.

#GSD - Getting Sh#t Done!

Government at all levels, national, devolved nations and local is suffering from a kind of delivery paralysis…

To demonstrate the benefit and start gaining from better neighbourhood-level collaboration and working, you don’t have to wait for absolutely every player in your system to be aligned and in the same space. Councils (or other partners) can start to demonstrate this themselves. Many council departments operate as if they are separate organisations. Why not start by breaking down those silos and demonstrating the benefits to those you wish to join you.

You need not wait for perfect alignment or a grand, system-wide programme to get started.

So channel your inner Kevin Costner - “Build it and they will come”!

Speaking as a Consultant, we owe it to the public services we support to avoid reaching for the “tried and tested” efficiency solution. Like New Public Management, it feels like the time for that is at an end.

Andrew Laird, Chief Executive, Mutual Ventures

Please get in touch if you would like to chat about any of this - andrew@mutualventures.co.uk

[1] CP 1343 – Office for Budget Responsibility – Fiscal risks and sustainability