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Accenture research shows that managing for high performance in an uncertain economy means remaining focused on value creation.
In challenging fiscal times, finance executives are often compelled to direct resources away from organizational improvement projects until the economy stabilizes. However, even during times of economic uncertainty, managing for change is critical to the survival of both public and private sector organizations. The delivery of non-direct services in government operations presents a tremendous opportunity for cost savings that can help governments realize the cash flow they need to self-fund public service transformation. This Accenture Point of View introduces ways government organizations can innovatively finance vital public service transformation programs to improve performance and emerge stronger.
Governments today operate under increased pressure to do more with less, striving to provide service to constituents while also limiting administrative spending. The exercise of examining back-office operations, processes, and technologies for opportunities to improve performance and realize significant savings is vital to the public service transformation process.
While innovative financing arrangements can take many forms, the fundamental concept is the same: Hard dollar benefits attributable to a business improvement project can be leveraged to fund the project itself, thereby reducing or eliminating the need for the government organization to furnish a sizeable initial investment. In an environment where budgetary constraints are forcing a reluctance to make capital investments in large change programs, this “self-funding” approach can help the government organization achieve the public service transformation that it might otherwise be unable to finance.
Self-funding is an innovative way for public service organizations to finance the improvement projects they need to create smarter, leaner and better administrative operations. In the end, organizations that pursue public service transformation will be ready to take advantage of the next economic upturn.
Accenture believes governments seeking success in self-funding public service transformation need to:
In order for governments to realize the cash flow that they need to self-fund public service transformation, they must first recognize the opportunities that exist for cost savings in the delivery of non-direct services in government operations. On average, non-direct services – including back-office administration – account for one tenth of total annual government spend. In our experience of working with hundreds of public service organizations across the world, cost transformation initiatives can reduce administrative expenditures by 15 to 40 percent.
There are many innovative financing arrangements that can be used to start an improvement program that might be otherwise unaffordable. One way to initiate a change program is with value-based or performance-based contracting, allowing the program to get started with little or no initial funding required by the government entity. In this arrangement, a service provider might shoulder the risks associated with undertaking a business improvement project—for instance, implementing strategic procurement practices—and no fees are paid until agreed levels of savings are identified.
Another innovative way for a government organization to initiate a change program is to leverage a Public-Private-Partnership (PPP) in which the federal government, private organizations or philanthropic foundations provide seed funding for projects that are geared toward improving government efficiencies.
These are not the only ways that public service organizations can creatively tackle improvements to realize rewards with self-funding models. A transaction fee approach – where the user pays a service charge fee to the service provider who hosts a service on behalf of the government – can generate fees that may continue to fund an initiative in the longer term. Or another approach for governments to consider is shared use, where service providers contribute resources to not only subsidize the cost of any government asset but also share its use.
Accenture research shows that executives who manage for high performance in an uncertain economy understand the importance of remaining focused on value creation. Strong leaders shape economic downturns into significant opportunities for their organizations to thrive by cultivating financial flexibility, investing in resilient strategies and executing decisively based on key value drivers. Bottom line: Even in uncertain times, government executives should innovatively finance vital public service transformation programs to improve performance and emerge stronger.
October 11, 2012
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