You are challenged with improving efficiency and performance whilst reducing costs - are you really ready for this? If progress is to be made to your planned timetable, then the action must start now, and the first requirement is to put in place the fundamentals. This means getting the right team in place, having the right mandate, data, resources, authority and scope.

Many organisations find that although discontinuous change is required there is a doubtful ability to deliver despite the significant potential for cost reduction that exists and the rare opportunity to tackle 'Sacred Cows'.

How prepared are you? The table below highlights some key requirements on your cost reduction journey and provides a high level self-diagnostic.


Summary	Description
Discontinuous change is required...	The sought changes in public sector spending are of a major, discontinuous nature, beyond anything generally experienced by the managers of today. It is inevitable that departmental service scope and service levels will fundamentally change to achieve the goals. Greater efficiency, and 'business as usual' approaches in themselves cannot come close to generating the necessary savings.
Self-Diagnostic (scale 1-5) (1 Very poorly prepared – 5 In excellent shape)
Q1. Does your organisation recognise and understand that this is discontinuous change? Q2. Are service scope and service levels explicitly being challenged and reduced? Q3. Is a direct, top-down, rigourous programme approach being taken?

Summary	Description
...but there is a doubtful ability to deliver...	The ability to deliver the high level cost reduction goals is highly questionable for a wide variety of reasons (such as political self-interest, inertia, resistance to change, let alone the actual ability to decide and delivery major change programmes so quickly, and the myriad of opportunities to 'do the wrong things and do things wrong'). The lack of a successful peacetime historical precedent should worry us!
Self-Diagnostic (scale 1-5) (1 Very poorly prepared – 5 In excellent shape)
Q4. Is the organisational culture aligned to effective cost reduction? Q5. How much is organisational politics and individual self-interest, impacting the ability to deliver a timely, effective cost reduction programme? Q6. Does the organisation have an effective track record in delivering change/cost reduction programmes?

Summary	Description
...despite the significant potential for cost reduction that exists...	Our experience in many public sector organisations reinforces the view that there is very significant opportunity to save large amounts of operational and capital spend. It is not the lack of a theoretically possible saving that is the barrier.
Self-Diagnostic (scale 1-5) (1 Very poorly prepared – 5 In excellent shape)
Q7. Do you believe that there is the theoretical potential to meet the target cost reduction?

Summary	Description
... and the rare opportunity to tackle 'Sacred cows'.	This crisis, gives the rare opportunity (if not a duty) to address the many internal “sacred cows”, and dysfunctional elements of organisations. This exercise, done well, can lay the foundations for a stronger, more effective organisation, for many years to come.
Self-Diagnostic (scale 1-5) (1 Very poorly prepared – 5 In excellent shape)
Q8. Is your organisation genuinely reviewing all possible options and challenging the 'sacred cows'?

Summary	Description
A broad, integrated skill set is essential...	Such change can only be delivered through the use of a very wide range of skills and capabilities, underpinned by the application of rigorous programmatic approach. These include excellence in: a. 'Big picture' strategic clarity, coupled with agile, innovative thinking; b. Portfolio, Programme and Project Management as the key enabler of delivering effective change rapidly; c. Tough, fast, effective decision making, based on clear, broad, finessed dataset; and logical, structured, critical thinking; d. Internal communications and change management, ensuring aligned strategy, corporate culture, and individual mindset – very challenging in a time of significant cutbacks; e. Effective procurement is absolutely critical, through commissioning, outsourcing or category management. Procurement is often a key weakness in realising value for money, and delivery of major programmes in a timely fashion.
Self-Diagnostic (scale 1-5) (1 Very poorly prepared – 5 In excellent shape)
Q9. Is innovative, creative thinking genuinely encouraged and supported? Q10. Are the cost reduction interventions being considered in an integrated fashion with the overall enterprise initative Portfolio, and in respect of a clear and up-to-date organisational strategy? Q11. Is a central Cost Reduction Programme Team in place, with the right size and skill set? Q12. Is the financial and KPI data available, accurate and timely – one version of the truth? Q13. Does the central team, and main sponsor have the appropriate decision making authority and influence? Q14. Does the organisation have the necessary programme and project management skills to deliver individual interventions? Q15. Is decision making fast, effective, and based on logical, structured, critical thinking? Q16. Is there an effective communications and change management exercise in place, to maximise awareness, understanding and buy in. Q17. Is the procurement function an effective, constructive partner to the cost reduction programme?

Summary	Description
...and external support will always be appropriate in some form.	The above cannot be achieved without any external support, for reasons of capacity, capability and independence. Consulting and interim resource should be seen as part of the solution, not the problem ( the problem is the often poor procurement, management and leveraging of consultants, not their use per se). Effectively deployed they can provide a critical combination of independence, flexibility, focus, and shared expertise, not always available or even possible or appropriate internally.
Self-Diagnostic (scale 1-5) (1 Very poorly prepared – 5 In excellent shape)
Q18. Do you have the internal capacity, or external backfill available? Q19. Do you have the internal capability, or external expertise available? Q20. Are the people working on the cost reduction programme sufficiently independent to form unbiased opinions, and leverage best practice?

Scoring your self-diagnostic

A score of 75-100 implies a good foundation for delivery of the cost reduction programme, (or a case of rose-tinted glasses). A score of 50-75 implies some major gaps and issues in the foundation for delivery, but probably localised and redeemable at this stage. A score of 25-50 implies some fundamental problems that may make it impossible to deliver, certainly anywhere near the required targets. A score of 0-25: No hope. Complete rethink required.

Emergency Budget Review
Author: Nick Kennell, Manager

Bring on the Spending Review

From a public sector finance perspective, the Chancellor's Emergency Budget announcement contained relatively few surprises. Early ground work in announcing the size of in-year savings expected, and the 12 major programmes to be abolished prior to the Budget meant that most of the surprises (and subsequent headlines) came in the form of fiscal policy announcements which affect the taxpayer and welfare recipient more than Whitehall. However there are a few lessons the public sector can take from the budget which will prove key going forward into the Spending Review:

First, the importance of the Spending Review for Departments in setting their priorities. Department's must get the Spending Review right and will need to use capital investment as the vehicle for this.

Second, the scope to consider a wide range of options in delivering savings, including fundamentally challenging preconceptions about what the Department is there to do and the role of the private sector and local providers.

Third, the need for new approaches both in assessing options and delivering them.

Department's must get the Spending Review right

Following the flurry of pre-budget announcements, the Budget itself primarily confirmed the size of cuts for this year and over the 5 year rolling period to 2015-16 and the fact that the detail of this and exact Departmental Expenditure Limits for 2011-12 onwards would be established through the Spending Review. One area where cuts did not feature (or at least no further cuts) was in capital spending, with a recognition that investment is key to economic stability and a commitment to not cut capital budgets further.

This will fundamentally change the dynamic of subsequent cuts by forcing more of the load to be met by resource savings, and with health and overseas aid protected, and education and defence partially protected, the actual cuts in operational spending in some departments will have to far exceed 25%. This reinforces the fact that redundancies are inevitable, but that there is funding for projects that improve mid-term stability and ensure the public borrowing is genuinely borrowing to invest rather than borrowing to spend.

Departmental responses to the Spending Review must therefore identify viable mid-term investment proposals to secure funding, whilst also seeking ways to further drive down resource spending.

Scope for a wider range of options

The Spending Review guidance makes clear the criteria against which spending proposals will be judged by Treasury:

i. Is the activity essential to meet Government priorities?
ii. Does the Government need to fund this activity?
iii. Does the activity provide substantial economic value?
iv. Can the activity be targeted to those most in need?
v. How can the activity be provided at lower cost?
vi. How can the activity be provided more effectively?
vii. Can the activity be provided by a non-state provider or by citizens, wholly or in partnership?
viii. Can non-state providers be paid to carry out the activity according to the results they achieve?
ix. Can local bodies as opposed to central government provide the activity? Grouping these together, the following themes are evident:

• Private, voluntary and local sector involvement should be sought for all initiatives to both reduce costs and increase effectiveness.

• On all activities there is scope for departments to fundamentally challenge their assumptions to consider new options for achieving the same results but in different ways. This is almost a zero-based approach to budgeting looking at what is needed and adding it if and only if it meets that criteria, rather than assuming existing programmes roll-forward

• The importance of strong investment cases which focus on tangible, measurable impacts on target groups

Examples of this in the Budget include the outsourcing of HMRC debt collection, the sale of assets to generate revenue and the creation of local enterprise partnerships to replace RDAs.

New approaches

The Spending Review is not a new initiative, and Department's are used to updating and amending budget envelopes in light of the changing state of the public finances. However this Spending Review will not reflect this business as usual attitude. First, the timescales are very tight given the degree of work that is needed to fundamentally reassess individual line items on budgets totalling billions by 20th October. Second, the process itself will involve a greater emphasis on engagement with the public and understanding the real impacts on key client groups.

The result of this is that Departments will need to develop more effective methods for both analysing financial data in a way that captures the strategic and real-world impacts of decisions, and engaging with the public to understand the real world impacts of any proposals. These will both require finance departments adopting new approaches to budgets, including making greater use of other functions in the department that contain these skills (eg strategy units, communications and engagement teams, impact assessment teams)

From a Whitehall perspective therefore this Budget has reaffirmed the importance of being ready for the Spending Review and suggested some clues for what readiness might involve.