Transformation through demand management


Lisa Forster, CIPFA Consultant

Austerity measures have meant the public sector has had to take a long hard look at what it does, and ask itself ‘how can I deliver services in a way that matches my decreasing funding envelope’.

Many organisations talk about wholesale transformation, meaning the establishment of alternative delivery arrangements, specifically setting up collaborative arrangements or trading companies. These can undeniably be ‘transformational’ and deliver economies of scale, streamlined processes, new sources of revenue and improved working and behaviour styles. However transformation can also mean redesign of your existing services to make them ‘fit for purpose’. This involves a fundamental review of whether what you are providing actually meets the needs of the electorate. This requires a clear understanding of what drives demand and how to respond to that demand – in a way that means you meet that demand quickly and effectively to the satisfaction of all parties. This is not about rationalising the service to reduce entry to it, it is about rethinking the circumstances and behaviours that drive customers to you, and seeing the service from their view point. It is a critical fact that you can only implement effective solutions once you understand the drivers.

Publications and methods

There are a number of publications and methods that already focus on examining behaviours, processes and solutions – to a lesser or greater degree. The depth of this analysis covers a wide spectrum and includes behavioural science from the ‘nudge team’ (once part of the Cabinet office, now a successful spin out company), the Vanguard method, iMPOWERS demand management strategy, the principles of LEAN, as well as a number of bespoke strategies covering areas such as early intervention and prevention and social value demand transformation.

The proof of the pudding is in their effectiveness – how well do they enhance the organisation's performance and the customer experience and do they also generate financial savings?

Customer experience of local authority services

The customer experience of local authority services can be a traumatic one. Services can be complex to navigate and fragmented across a range of ‘doors’. There is therefore a real danger of the organisation not identifying needs and targeting resources as fully as it could if services were more integrated and collaborative. This is clearly seen in evidence from the government's troubled families scheme. The report  on the pilot authorities states “an average of £26,200 per troubled family was spent in the 12 months before families started receiving support as part of the Troubled Families Programme and an average of over £44,000 per family was spent on a sub-group of these families who warranted the most intensive forms of family intervention. All of this money was spent purely reacting to their problems – not solving them or addressing their underlying causes.”

It should be noted that the troubled families scheme is essentially a payments by result (PbR) programme. This methodology is often criticised as being too finance or target focused rather than involving real cultural change. Many authorities have been forced to rethink their provision, and identify the bottlenecks and reasons for failure to move towards a more efficient and holistic service.

The report then highlights the post-intervention benefits of a system that is holistic and geared towards supporting individuals. It cites “on average across the ‘exemplar’ areas, fiscal benefits totalling £11,200 per family were identified in the 12 months after receiving support. This means families across these areas were committing less crime, experiencing less domestic violence, using fewer emergency health services, and needed less supervision and support from social workers”.

Failure demand

Failure demand ("demand caused by a failure to do something or do something right for the customer", John Seddon 2003) as identified in the troubled families example above is deemed artificial demand under the Vanguard method. It argues that millions of pounds of unnecessary demand on public services could be reduced if we simply design services which are able to do the right thing for people in the first place.

The Local Government Association publication on ‘managing customer demand’ argues the same point, and cites three timeframes to shape the process:

  • short term ‘quick wins’ – removing avoidable demand
  • medium term – redesigning services around customers
  • long term – proactively removing the causes of customer demand.

Similarly the RSA paper Beyond Nudge to Demand Management highlights five types of demand (excess, avoidable, failure, preventable and co-dependent) which can be managed effectively through customer insight, early intervention and behaviour change. All of the above advocate the necessity of ‘enabling or re-abling’ the customer. This is about moving them from dependence or ‘learned helplessness’ to independence and is a critical element in stopping the vicious circle and capacity draining impact of repeat demand.

Vanguard method

One interesting point to note is the belief in how helpful targets can be. Fareham Borough Council which has successfully used the Vanguard method for a number of services started with the premise of not being bound by standard targets ie processing benefit claims within x days. Instead its focus was on a customer orientated system which dealt with queries on a personal, often one to one basis, end to end and with a minimum number of touch points. The result is that queries are dealt with by specialists, requiring in many instances only a single visit by the customer. This has driven out waste and ensured the service provides what really matters to the customer. (An LGA account and case study of Fareham Borough Council’s work using the Vanguard method can be found here.)

The Vanguard method states it is not about delivering financial savings, however the authorities who have implemented this methodology have found that savings ‘fall’ out of the system as they are eliminating waste and failure demand.

The positive financial effects of applying behavioural science to demand are also highlighted by the ‘Behavioural Insights’ team. The team, when under the Cabinet Office, had to deliver a tenfold return on the cost of the unit in two years, otherwise it would be shut down (unless the prime minister and cabinet secretary decided otherwise). The unit met this financial target, identifying savings of at least £300m over five years, including some interesting ways to boost tax yields for the government, and its thinking is now ‘almost’ mainstream in Whitehall. The financial aspect is however, like Vanguard, secondary to the purpose, and under the terms of its spinout, the team will only undertake work that has a social benefit, precluding most commercial work.

This may all sound quite straightforward, however this methodology is not just about ‘permission’ and commitment; it also requires cultural change, and this is often the most difficult ingredient as some groups are resistant to any change and may for a number of reasons have a vested interest in maintaining the status quo. The investment required in cultural change should not be underestimated. This starts with the organisation clearly defining the culture they wish to build and the change needed to achieve this state. It must be ‘real’ and ‘lasting’ and supported by time and effort from the top down to ensure that reverting to ‘type’ does not occur once the initial flurry and adrenaline of new change has passed.

Demand management is not a new phenomenon, nor are the principles difficult to grasp, however the move from a centralised, process driven operation and culture to one that focuses on understanding, building relationships and bespoke solutions is a seismic change for many organisations. The positives (as evidenced by the many case studies in publications from such as the Behavioural Insight team, the LGA, Vanguard and iMPOWER) however prove that this is a high powered tool in the need for ‘transformation’.

Behavioural insight team “Applying behavioural insights to reduce fraud, error and debt”  Trial 1 advanced £160m of tax debts to the Exchequer over the six-week period of the trial. The two behavioural letters in Trial 2 brought in over £1m from doctors in additional yield to HM Revenue and Customs, while Trial 6 saved Manchester City Council up to £240,000 in council tax discounts.