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Executive Summary -Saving money by doing the right thing: Why ‘local by default’ must replace ‘diseconomies of scale’

This report shows that the UK public sector is wasting millions of pounds on services that do not meet people’s needs. When people’s problems go unresolved, their needs remain the same or get worse, creating unnecessary demand and spiralling costs. The human cost is incalculable but can be felt by reading the true stories of Child A, Melvyn, Ruth and Jake in Part Ic.

The financial cost to the public sector can be measured empirically as the groundbreaking studies in this report show. By tracking multiple demands from individuals over time and across public services, it is possible to quantify the actual costs of a service from start to finish for each individual. Analysing hundreds of thousands of demands from many individuals makes it possible to confidently draw conclusions on where and how to reduce costs. If the experience in the few areas we have studied is typical, initial calculations suggest that potential cost savings for local authorities alone from a move to locality working could run to as much as £16 billion annually across England, with even further savings in other parts of the public sector.

This differs from previous studies of public sector resources because it starts from the service user and then counts every demand they make across organisational boundaries. The counting only stops when the original need has been met, crucially, as perceived by the individual, not by the organisation. It is also the first study of its kind to discriminate between artificial demand for public services, generated only as a result of an organisation not taking the right action, and the real demand experienced by the person who needs help. This artificial demand is called ‘failure demand’ (‘demand caused by a failure to do something or do something right for the customer’, John Seddon, 2003).

This report shows why public sector organisations fail to meet people’s needs and why demand is rising. The two main causes, discovered empirically in the studies, are the belief in ‘economies of scale’ and the belief in the standardisation of services. Together, these beliefs prevent organisations from understanding and meeting people’s needs.

Perhaps the most surprising finding, described in Part I, is that real demand for most public services is not rising. It is the artificial demand, created and amplified by organisations themselves which is rising. This finding marks a seminal moment in our understanding of demand for public sector services because it shows us exactly what to do. No further cuts or attempts to ‘manage’ demand by putting it online are required. We know how to reduce millions of pounds worth of unnecessary demand on public services; simply design services which are able to do the right thing for people in the first place. More effective services are more efficient, as people have their needs met more quickly rather than having to place numerous demands on the old unresponsive systems.

The effects of scale principles on the most disadvantaged and vulnerable people helped by local third sector organisations are described in Part Ib. The belief that ‘economies of scale’ are achieved by commissioning 

large public sector contracts has a number of damaging consequences with no increase in efficiency. One consequence is an increase in costly administrative burdens of tendering, compliance and monitoring, particularly troubling for third sector organisations, who strive to maximise resource allocation to the frontline and away from management and administration. More worrying is the impact on vulnerable people; they are provided with what has been commissioned rather than what they need.

Other unintended consequences of large scale contracts include:

• the creation of silos and disjointed services across all sectors

• a decrease in competition and diversity of supply

• a decrease in innovation and cooperation

• an increase in uncertainty

• a culture of fear

• the erosion of independence

Taken together, this evidence represents a staggering opportunity for the UK to reconfigure public sector resources, saving the economy many millions, if not billions of pounds. The Vanguard Method achieves this empirically, starting with one person at a time, understanding their needs in context and building up a true picture of demand locally. As illustrated in Part III, this enables all public sector organisations in a geography to work together to design a bespoke, multi-disciplinary, evidence-based system that meets local demand. This approach, unlike many other attempts to join up services, does not require additional funding or encouragement from Whitehall. It does however, depend on the willingness of public sector managers to abandon unhelpful beliefs about ‘economies of scale’ and standardisation.

The principles and practice of this counter strategy are outlined in Part II, together with two case studies, one from the UK and one from the Netherlands. The example from the UK highlights the importance of understanding people and families in their own contexts and in their own language, away from standardised forms, scripted telephone conversations and official interview rooms. This approach shows the profound impact of helping people previously labelled ‘troubled’ and ‘lost’ to find ways of solving problems themselves. Not only does this approach improve lives and communities, it dramatically reduces future demands placed on the system.

The example from the Netherlands shows that understanding demand in human terms and providing the means for self-help are universal principles for effective and low cost services.

Part III describes the implications for policy and regulation. The report does not advocate further privatisation, nor conclude that private is good and public is bad. The conclusion is simple; if the public sector is to provide services that meet people’s needs at reduced cost, scale principles must be abandoned.

The new principles for services that meet people’s needs:

• are ‘local by default’

• help people to help themselves

• ensure a focus on purpose, not outcomes

• manage value not cost

The report ends with a call to action. We know how to improve the lives of individuals and communities and the good news is that it doesn’t take any more resources to do it. But it does take courageous public sector 

leaders who are willing to follow evidence and abandon old beliefs. Only they can do it.

See the full report here