This article was jointly written by NAO’s Max Tse and Yvonne Gallagher.
Evolution or revolution? Inventing new services or transforming old systems and processes? Transformation programmes are complex, ever-changing and face numerous barriers; so what does it take to be one of the minority of transformation projects that succeed? How can organisations’ Boards improve the chance of success? And what does transformation have to do with wagon trains?
Transformation was the subject of a recent joint Public Chairs Forum – NAO event for the Chairs of public bodies, at which the NAO launched our new Transformation guidance for Audit Committees.
Over-ambition, poor coordination, diverted resources, unsubstantiated business cases, lack of data and evidence, ignored implementation barriers, uncertain benefits for providers … the reasons for failed transformation programmes are many and varied. With 70% of private sector transformation programmes failing, it’s not surprising that government organisations find them challenging.
The NAO’s new guidance and the Public Chairs Forum–NAO event highlighted ways to understand and avoid some of the pitfalls. We were particularly lucky to get a 360 degree view of Boards’ roles in transformation with opening presentations by:
‘Transformation’ is radical. It is a fundamental re-design of the way a government organisation delivers its service and in the way it operates, according to the Government Transformation Strategy and agreed in our recent discussion. It involves ambitious, innovative steps into the unknown, frequently based on new technology, requiring new skills and complex interactions across organisations and their divisions.
This is where Christopher Rodrigues made an excellent analogy with the wagon trains crossing America to the west. At the start of the trip they needed people with the idea and planning skills to organise them and set them off. Half way through their journey they needed people who could fight and shoot to keep them safe. And when they got to the west they needed the skills to settle and start their new life. If they only had gunslingers they would never have got started nor succeeded in settling in the west!
Most transformation programmes are enabled by changes in technology, so they are often labelled as a digital transformation. But beware; the term ‘digital’ can also be applied to non-transformative changes to online services.
Indeed, in discussion the Chairs agreed that there is no ‘digital transformation’, only business transformation, supported by technology. As Christopher put it, “digital transformation is not about digitising today’s operations, it’s about re-imagining your customer offer, built around your new core competencies in a digital world.”
All IT projects fail, according to Charles Ewen, from his experience as Chief Information Officer. He explained, if major projects are dubbed ‘IT projects’ and left to the IT department without the requisite people and process changes alongside, they are statistically so likely to fail that it is good enough to say that they will fail!
Government transformation programmes are arguably even more difficult than those in the private sector as public sector organisations can’t, for example, exclude ‘difficult’ groups of consumers. The public sector also faces greater challenges in its financing and budgeting processes. So it’s not surprising that our reports have highlighted outcomes such as 86% of the NHS transformation fund in 2016-17 being diverted to plugging short-term funding gaps (see Health and social care integration). Coordinating transformation across the public sector is another major challenge. For example, we found that the government’s property Hubs programme, which is intended to transform the way departments work, is not in sync with departments’ own transformation or workforce plans (see Progress on the government estate strategy).
As outlined in our new guidance, other particular challenges of transformation programmes include their evolution and change over time and the difficulty of measuring and evidencing the real impact of transformation and knowing when a programme has succeeded or when it should close. So how can organisations and their Boards improve the likelihood of success?
As the meeting discussed, organisations must be clear about whether they are inventing new business approaches or transforming old ones. Inventing is, in many ways, the easier approach as it means no legacy operating system or behavioural change needed. By comparison, transforming old approaches means addressing major barriers, such as siloed operations and the need to change behaviours. Transformation is often a difficult subject for Boards because it crosses between strategy, technology and execution, but it is essential the Board takes on the responsibility because otherwise the ambitions of the organisation might be too low.
Realistic ambition is key to transformation, and, it is equally crucial to balance this by remaining focused on the vision, being clear about what is achievable in the political context and avoiding scope creep. “Scope down mercilessly!” Oliver advised the meeting. He also noted that it is the role of the executive team to ensure that projects are separated into manageable components.
At the same time, as our guidance says, new ways of looking at governance is crucial. How many organisations, Oliver asked, immediately adjusted their strategies after the Brexit vote? A truly fast paced organisation would be geared up to do so – in a manner that involved all parts of the organisation, from finance to human resources. But, as noted by both the presenters and our guidance: beware of rationalising changes after the event due to initial over-optimism or programme slippage.
Ensuring only essential changes are made and that those changes are rigorously integrated into each remaining stage of the programme.
Also discussed was the need to have specialist sub-committees to deal with specific issues. Given that Boards meet infrequently, sub-committees allow them to make decisions at the pace demanded by fast-moving programmes, management and governance.
Transformation programmes often lack clearly defined end dates and assume continuing improvement and refinement of services. This can make it difficult to establish when to close programmes and transfer responsibilities to live-running, and to set clear baselines for realising benefits.
In discussion, it was agreed that Boards must review progress against milestones, attach a financial value to risk, and be prepared to recognise failure and terminate projects when appropriate. It was also agreed that it can be difficult to quantify the level of risk involved in a project and, therefore, the appropriate level of investment; meaning that Boards need to be prepared to make decisions on projects that may not have a clear value-for-money case. Boards should articulate a clear process to the executives to escalate risk.
Finally, a frequently missing piece of the jigsaw is data. As our guidance details, data play a central role in determining what is possible when reshaping ways of working and developing new services. But the nature and role of data across organisations are often poorly understood. Boards need to have access to key data, take the leadership, set the vision, create the dialogue with the specialist engineers and regularly review whether the plan is progressive for the organisation. Although all organisations have IT specialists, all individuals must to some extent engage with technology; Boards and Chairs shouldn’t be intimidated by it and, if something is unclear, they should push for clarity and simplicity.
In a briefing in 2015 we set out 11 Lessons for major service transformation (PDF), drawn from our report Welfare reform – lessons learned. However, there is still considerable uncertainty about transformation progammes and about how audit and risk committees can best exercise their responsibilities in this area.
Our new Transformation guidance for audit committees sets out a range of questions that can help committees consider the issues and structure their discussions with management – and which managers may also find useful.
This article was originally published here.