Memorandum by Mr John Seddon, Vanguard
Education Ltd (PST 49)
Question 31 of your brief asks:
"If you believe the use of targets is a
bad or flawed idea, what alternative approach would you advocate
which would help bring about real and lasting public service improvements?"
This evidence argues that targets are inherently
flawed. I seek to demonstratewith case studiesthat
targets actually undermine achievement of purpose, which is improving
public sector performance. I shall also illustrate an alternative
approach, which is to make capability measurement the cornerstone
of public sector improvement. I shall describe what these measures
are, how they differ from targets and how they are used to understand
and improve performance in a sustainable way. The case studies
show significant performance improvement using capability measures
and I shall ask the reader to reflect on whether this level of
improvement could ever have been achieved within the current targets
The case studies are illustrative of the general
problems; the arguments that apply in these cases apply to every
public sector example I have knowledge of.
The evidence is presented in the following structure:
Comments on your evidence to date.
The future of the specifications
and inspection regime.
I am an occupational psychologist, consultant
and management thinker. I am managing director of Vanguard Consulting.
In the early Eighties I was researching the reasons for failures
of major change programmes. Based on what I learned I have developed
a more effective method of change for performance improvement.
My work is a combination of systems thinkinghow work worksand
intervention theoryhow to change it. I credit W. Edwards
Deming for teaching me what is wrong with conventional ("command
and control") management thinking and I credit Taiichi Ohno
(who built the Toyota Production System) with introducing me to
the practices and principles of systems thinking as applied to
operational performance. I have specialised in translating these
ideas for service organisations.
I have been a leading critic of management standards
and models, in particular ISO 9000; which is, quite simply, based
on bad theory. In my view it is management thinking that needs
to change. "Command and control" is a failing management
paradigm and I propose instead that managers learn to adopt a
systems perspective. It is a better way to design and manage work.
In the last two years I (with the Vanguard team)
have been invited to work in the public sector. I have learned
there is appalling waste and poor morale. Both are caused by the
specification and inspection regime whose purpose, paradoxically,
is to improve public sector performance; targets are the cornerstone
of this regime.
I have read the evidence you have received to
date. Much of the evidence might lead you conclude that targets
are of value because:
Without them there would be disorder.
While a target if expressed in general terms
may give clarity of direction, a numerical target is more likely
to increase disorder in the systemthe way the work works.
I shall illustrate this phenomenon with examples.
There has been general acknowledgement of the
risks associated with targets. To have too many, it is argued,
is counter-productive. But if it is true, as I maintain, that
the inherent nature of a target is flawed, to have less is not
an improvement. It is the nature of measurement that needs to
The general advice is that targets can be well
set. Nobody offers an unequivocal view of how to achieve that;
they cannot for there is no reliable method. Many offer the opinion
that the involvement of the recipient is of crucial value. While
this is an admirable sentiment, it is not a solution if the concept
of a target is flawed.
You have heard it said that it is normal for
one not to achieve all of one's targets. This sits uncomfortably
with another idea: stretch targets. In truth, targets are arbitrary
measures; hence both of the foregoing ideas might be valid and
the fact of that exposes the inherent problem. Targets are flawed;
they do not pass the test of a good measure:
Can this help us understand and improve performance?
There have been many observations on the value
and extent of the specification / inspection / assessment / monitoring
regime. In recent months I have noticed a softening of the intensity
with which inspection is administered. I have no doubt it reflects
a realisation that things are not working, but there has not been
sufficient questioning as to whether the regime itself is a cause
of the failure to improve public sector performance. Not only
does the regime employ flawed measures, it has created a massive
bureaucracy to feed its purpose. This constitutes an enormous
amount of waste. Rather than being enthused with a sense of contribution
to improvement, public sector personnel find themselves being
evaluated on measures that they often do not perceive to be relevant
to their task in hand and burdened by reporting and administrative
procedures that add no value to their work. The consequential
impact on morale amongst managers and workers alike is something
that should concern us deeply.
There has been general acknowledgement that
targets can drive the wrong behaviour. There is some disagreement
as to the extent of this problem. This is typical of the correspondence
"My wife has just spent part of the weekend
moving around some patients' appointment dates, to meet a target
of 21 weeks max wait. This creates extra work for the clerks and
the patients, for no benefit. Happening throughout the NHS."
The suggested response to the phenomenon has
been to "police" the "cheats". This is to
compound the problem, adding complexity and cost. Targets drive
the wrong behaviour in ways that are endemic, systemic and ubiquitous.
To deny this is either to be out of touch with where the work
is done or in fear of the consequences of being open about it.
I refer first to the housing repairs case discussed
in the articles that accompany this evidence. This organisation
was subject to BVPI targets and was achieving those targets. To
establish a capability measure one asks: what is the purpose in
customer terms? The answer is to make repairs and how long this
takesend-to-end timeis what matters to tenants.
Measuring end-to-end time revealed the following:
Capability measurement shows a picture that
cannot be "seen" with BVPI data. From the tenants' point
of view the average time it takes to complete a repair in March
2002 is 51 days. It could take as long as 146 days and as little
as one day. The capability measure tells us that both one and
146 days are just-as-probable results; the system is very unstable.
How then can this organisation be achieving its BVPIs?
Firstly, targets were being achieved through
"cheating". Jobs were closed and re-opened even though
they had not been completed, sometimes with "justification""if
tenants are out this should not count". Secondly, "cheating"
occurs with changing job classifications to meet timesis
this "an emergency", "urgent" and so on. You
may think these people should be held to account for their behaviour
but we have found this phenomenon in every case in our public
sector work. Thirdly, one repair from a customer's point of view
may be four jobs in this system. To repair a window may require
four trades, each would have a job sheet and each of these would
be subject to the BVPI regime. The purpose of the system is to
comply with targets, thus the modus operandi is "open and
close jobs" not repair properties. Peoples' ingenuity is
focused on the wrong things.
A capability measure invites one to question
the causes of variation. In the chart above variation increased
significantly on two occasions. In October 2001 a new management
structure was put in place. New supervisors, keen to be the best
in terms of achieving BVPIs, actually destabilised the system
(yet they were unaware).
In November 2001 a call centre was introduced, something mandated
by government policy. This caused further destabilisation. Again,
no one knew until the capability measure invited the question.
The capability measure tells us about the "what"
of performancehow well the system is achieving its purpose.
The next step in performance improvement is to find out "why",
to understand the causes of variation; the things, in this case,
that make time go longer. While we have identified the two major
causes, there are more.
Here is a system picture of the repairs organisation:
Some notes of explanation:
demands into the call centre were "failure demands"demands
caused by a failure to do something or do something right for
the customerfor example tenants progress-chasing their
repair or complaining that the repair had not been completed to
their satisfaction. The remainder were "value demands"people
requesting repairs to their properties. The failure demands clogged
the systemthe call centre workers would have to problem-solve
these and get back to the customer with an answer. It often took
time to locate tradesmen or supervisors to get an answer for the
The call centre worker is effectively responsible
for diagnosing the reported problem and determining its solutionthat
is to say determining the work to be done. This was given a specification
using what is called the Schedule of Rates; this in turn will
determine how the tradesman is paid. Tradesmen would dispute the
work specified on the Schedule of Rates most of the time (in fact
in excess of 90% of the time). Because of this an administrative
function, a "cottage industry", had been established
to deal with these matters. The administrators would take returned
works orders from the tradesmen upon which the tradesmen had altered
the Schedule of Rates code and pass the same to the tradesmen's
supervisors who would make a judgement as to what was correct.
Subsequent changes would need to be returned for further administration.
None of this adds any value to doing the workit is all
Arranging access is also done in the call centre.
Yet supervisors would allocate work according to value (earnings)
to the tradesmenand favouritism could play a part in allocating
work. Tradesmen would schedule their work to maximise their earnings.
As a consequence tradesmen often had problems with gaining access
and performing the repair. In addition the tradesmen would have
to wait for up to an hour each morning, queuing to get their materials.
All of these problems had been created by design.
Managers may believe that this organisation would work just fine
if everybody "did as they should". But such thinking
ignores the fact of variety. To "command and control"
service delivery is as much a problem for these managers as it
is for Government. To design a service that works one needs to
learn how to design against demand, to understand the nature and
extent of variety in demand and optimise the way the system works
in response to that.
Diagnosing a repair could never be satisfactorily
achieved by two partiesthe tenant and the call centre workerwho
know little about the expertise of the tradesmen. Turning this
diagnosis into a specification and linking that to pay are the
conditions that lie at the heart of the system's failure. The
waste in this system included: revisiting the properties, reworking
the Schedule of Rates paperwork, disputes with respect to pay,
doing more than was required in the repair hence wastage of materials
and labour, and so on.
Having gained knowledge about the "what
and why" of current performance, the people who did this
work redesigned it. The first step in redesign is to clarify the
value work. In this case it can be described as: diagnosis, access
and repair. The redesign was as follows:
The customer called the call centre who routed the call directly
to a tradesman who was working on the estate (they had learned
that demand was predictable by geography and thus had determined
where to be located). The tradesman would arrange to visit the
tenant by mutual agreement. The tradesman would then arrive and,
if possible, complete the repair (understanding demand had led
them to learn what materials to carry). If it were not possible
to complete the repair, for reasons of materials or trade skills,
the tradesman would arrange for a repair at an agreed date. Within
weeks the end-to-end time for repairs fell. All repairs were being
completed in eight days. As well as transforming performance,
the change transformed morale.
It would be wrong to assume the solution developed
in this case should be made a national prescription. It would
be a mistake to prescribe method. The prescription required is
higher level; it is simply to use measures that invite thoughtful
questioning about how the work works. We need to liberate method,
not constrain it.
The consequence of targets was an increase in
disorder in the system. This was in part because the targets drove
the wrong behaviour but also because the targets and their associated
activity bore no meaningful relation to the work.
By contrast, capability measures increase order
in the system by helping people understand and work on the causes
of variation. Capability measures drive more productive behaviour.
Capability measures are not arbitrarythey are actual; and
because they are derived from the work they provide value to those
who do the work. In short they pass the test of a good measure.
Before we move on from the housing sector, I
want to comment on the target that 70% of maintenance work should
be planned. The consequence is higher costs but those who set
the target are unaware of this. Often repairs have to wait to
be completed in the planned programme, causing distress and sometimes
further problems. Frequently serviceable items are replaced unnecessarily
because they are in the plan. Someone somewhere thinks a planned
world is better than a reactive world. If only this person knew
the costs of thinking this way.
The housing repairs case illustrates the impact
of numerical targets on the behaviour and performance of the system.
Government also promulgates targets that specify methodhow
work will be done. For example, the target to have "100%
of legally permissible services e-enabled by 2005" (BV 157)
should concern us all. It is a specification driven by opinion
not knowledge. The recent report showing a lack of interest in
and use of Government web sites should cause us to question our
assumptions about the nature of citizen demand. Much of the demand
into Local Government call centres is what I describe as "failure
demand"demand caused by a failure to do something
or do something right for the customer. The Government's strategy
will result in the institutionalisation of waste by moving failure
demand to a call centre and treating this as "normal"
work. The consequences will be high costs and poor services and
such a restructuring of work will create a barrier to future improvement
of the services. There is a better way to solve this problem that
improves service and reduces costs; the flaw remains that those
Authorities that take this route will fail to meet the Government
The e-enabled access target is a general specification
that will result in the purchase of information technology and
telephony equipment at a significant capital cost that may be
used in a variety of ways for good or ill. Government also uses
targets in the sense of detailed activity specifications. Benefits
processing is a good example of a detailed specification dictating
work methods. The Department of Work and Pensions has promulgated
manuals detailing the requirements to manage benefits. It may
be a well-intended intervention, but it is failing its purpose.
Gordon Brown insists on no investment without reform. He is investing
in excess of £200 million in implementing centrally specified
alterations to the way benefits processing is managed. I am confident
he will not get a return.
Benefits processing consists of a front office,
where claimants are dealt with, and a back office, where the benefits
are calculated and paid. The two are usually connected by electronic
meansa document image processordocuments are scanned
and held on a central database. As is the case with all specifications,
those who write them think of things they can measure which seem
consistent with doing things properly. While there are a host
of standards and targets in the DWP specification (all of which
need establishing and monitoring, creating a bureaucracy) here
are the essential few that, paradoxically, sub-optimise the system:
Front office: Time to see claimants, time to
respond to correspondence.
Back office: Time to determine the benefit and
I have little doubt the reader would be thinking
"why?" for these seem like quite reasonable things to
focus on. Yet as with the housing repairs example, these measures
actually create disorder, they destabilise the system.
When Local Authority personnel study benefits
processing as a system they learn that there is a high level of
failure demand in the front office, people progress-chasing and,
more importantly, people not coming in with everything that is
required to determine their claim. People in the front office
send what they have for scanning, to meet service requirements,
and ask the applicant to return with whatever else is required.
Document image processors"scanners"require
that work is sorted and batched into like work types. This means
applicants' information is separated and thus needs to be recollated
electronically. Inevitably documents are poorly scanned, duplicated,
lost or wrongly sorted; applicants are frequently asked to bring
in things they have already provided. In the back office the clock
for the performance measure only begins when all of the required
information is to hand. Achieving this is hampered by the way
work is designed and managed. It is relevant to note the DWP specification
encourages the use of document image processors.
Opening up these problems starts with looking
at the end-to-end time for processing benefits from the applicants'
point of view, establishing a measure of capability. Here is the
capability chart for one case:
The capability measures shows it can take anything
up to 134 days to process a benefit from the applicants' point
of view. Anything from one day to 134 days are just-as-probable
events. As with housing repairs the causes of variation are in
the way the work is designed and managed. In this case the underlying
cause is the DWP specification, it is creating disorder in benefits
The Local Authority whose data is reported above
has redesigned benefits payment processing using systems principles,
removing all major causes of variation. They currently process
all benefits in eight days. The national average, I am told, is
60 days. Nothing written in the DWP specification would have aided
these people in making this change; following the specification
Can a target can be well set? How could targets
for the examples above have been well set? Should we base a target
on current performance or national comparisons? Should targets
be set to encourage the same level of performance, better performance
or even "stretched" performance? How would we determine
the right number? Would we get the right answer if the recipient
were involved? Could anyone explain how a target might have been
set that would have predicted the improvement achieved in these
examples? If the DWP set a target to process all claims in eight
days people would protest and/or demand more resources. If social
landlords were told they are to repair all properties in eight
days, would people be motivated to achieve it or respond with
Targets are arbitrary, capability measures are
notthey are derived from the work, not plucked from the
air. Targets increase disorder in systems, capability measures
lead people to act in ways that increase order and control. Targets
focus people on the wrong things, they focus peoples' ingenuity
on survival not improvement. Capability measures encourage peoples'
ingenuity to be focused on how the work works. Targets have no
value in understanding and improving performance; capability measures
are of immense value in understanding and improving the work.
Targets demotivate, capability measures motivate, because they
put control and understanding in the right place.
Setting a target well boils down to one argument,
you need to have the appropriate experience. As the cases above
have shown experience would mislead, any targets based on experience
would almost certainly maintain the status quo. Deming would say:
don't rely on experience; it is no substitute for knowledge. When
you learn about the "what and why" of performance, beginning
with capability measurement, you discover how much sub-optimisation
or waste there is in the system. In the public sector it is significant.
Paradoxically the targets and specifications regime hides the
waste and adds to it both in terms of being a cause of waste,
and in the creation of a costly, irrelevant and misleading bureaucracy.
Because of the problems of measures being invalid
and unreliable, disputes about comparisons arise between organisations
and their inspectors. Every league table that is published consumes
time, increases stress, wastes energy and resources, and, most
importantly, does nothing to further our understanding about how
to improve. We should not treat these problems as signs that we
need to improve the way we set and compare targets; we should
see these arguments as symptoms of the problemtargets are
of no value in understanding and improving performance.
My recommendation is that all targets are removed
and that recent legislation associated with the current performance
management regime is suspended. We should have only one requirement
of public sector organisations: that they establish measures that,
in their view, help them understand and improve performance. If
and when they are inspected they would be required to demonstrate
how they have satisfied the requirement and to what effect.
The principal advantage of this approach is
that it places the locus of control where it needs to bewith
those who need to change. Therefore it will be more likely to
foster innovation than the current regime, which fosters compliance.
It will also remove the need to comply with requirements that
The savings associated with the dismantling
of the specification and inspection bureaucracies will be immense.
A smaller budget could be allocated to management education, guidance
and support, for it remains the case that public sector management
is poor. The current regime only exacerbates this problem, setting
targets cannot and does not magically educate managers about method.
Finally this change will provide a framework
of legitimacy for much of the current improvement work that goes
unrecognised in the current regime. I am astonished at the frequency
with which I come across good work being done that is not recognised
because it does not fit within the inspectors' scope. There are
people in the public sector who manage to improve things in spite
of the system, they need a system that encourages rather than
obviates improvement. That is the responsibility of Government.
5 You may like to reflect on the extent of this unintended
consequence of target setting. Back
In other cases failure demand has been found to run as high as
This is the solution adopted by this example. In other examples
of housing repairs other variations of this solution have been
developed. The important observation is that method can and should
vary according to local circumstances-design is against demand.
The thing that remains constant to all is measurement against