10November

2016

2016 in Review – from measuring productivity and evaluating programs to ‘nudging’

APS Human Capital Matters: Nudging

October, 2016, Edition 9

Editor’s Note to Readers

Welcome to this edition of Human Capital Matters (HCM)—the digest for leaders and practitioners with an interest in human capital and organisational capability. Human Capital Matters seeks to provide Australian Public Service leaders and practitioners with easy access to the issues of contemporary importance in public and private sector human capital and organisational capability. It has been designed to provide interested readers with a guide to the national and international ideas that are shaping human capital thinking and practice. The inclusion of articles is aimed at stimulating creative and innovative thinking and does not in any way imply that the Australian Public Service Commission endorses service providers or policies. It is intended that the articles are accessible for the general reader, do not require subscriptions to specific sites and, where possible and appropriate, editions of HCM have been reviewed by topic specialists to provide range and currency on topical issues.

Additional hyperlinks/references for those with librarian support or access to specific, user-pays sites may also be provided.

Thank you to those who took the time to provide feedback on earlier editions of Human Capital Matters. Comments, suggestions or questions regarding this publication are always welcome and should be addressed to: humancapitalmatters@apsc.gov.au. Readers can also subscribe to the mailing list through this email address.

This edition reprises articles from throughout 2016.

The list of articles is:

HCM’s year started on the theme of productivity measures in the public sector . Pricewaterhouse Cooper (PwC) Australia addressed the complex issue of measuring productivity by noting that productivity is a recurring topic of debate complicated by various interpretations of what it means. Added to this was the perception from the authors that ‘the principles underlying a discussion about improving productivity in the public sector bear little relation to the way market focused sectors would think about the issue’.

The March HCM looked at program evaluation in an Australian context . This edition’s second article provides definitions of program evaluation jargon and guidance on how to conduct an evaluation to assist decision-making.

The third article is about ‘good work’ or supporting employee health and well-being . Peter Cotton reviews key trends in workplace psychological health and wellbeing. He identifies existing deficiencies and addresses key challenges for improving psychological health in the workplace.

Innovation in the public sector is the topic for the fourth article. The article is a discussion paper produced by the UK Cabinet Office and the Institute for Government on behavioural economics and

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how it might be implemented in the UK. MINDSPACE has been cited as an exemplar in innovation, drawing on academic research and applying behavioural theory across the public sector for practical effect on policy. This article represents a seminal piece of work on Innovation and links to similar efforts in behavioural economics in Australia and elsewhere are also provided. In November, HCM followed up with ‘nudging’ a derivative of work done on Innovation in the public sector.

Behavioural economics, also known as ‘nudging’, was described in HCM in November. The report on the Behavioural Economics Team of the Australian Government (BETA) has been reproduced here as a follow on from the Innovation piece.

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PwC (Australia) December 2013, Improving public sector productivity through prioritisation, measurement and alignment: new approaches for how the public sector improves productivity

Pricewaterhouse Coopers (PwC) report that productivity for the public sector is ‘unsolvable’ or at least only available to those public entities that have commercial interests. Also, productivity in the public sector cannot be defined in the same way as productivity in the private sector is defined.

The three drivers most often associated with productivity in the public sector are reduction in cost, modernisation—often the rationale behind machinery of government changes—and service delivery improvement. PwC report that these have been largely unsuccessful because of lack of prioritisation, immature productivity measures and an inability to align strategy to execution. Productivity in fact has become obstructed by risk-aversion and a reluctance to drive reform. In turn this has resulted in dissatisfaction at both the community and political level.

Initiatives for enhancing productivity that have been attempted in the Australian public sector are identified and described in terms of benefits and limitations. The following table provides several common examples of purported productivity measures in the Australian public sector:

Measure Benefit LimitationsPolicies of ‘zero new hires’ and not replacing staff who leave voluntarily

Stabilises the workforce cost base in the short term. Sends a message to the organisation to prioritise activities within available resources

Usually completely undirected, leading to capability gaps across the organisation regardless of whether activities performed by the role are ‘on strategy’ or not. Ongoing application can result in an organisation structure evolving with little relationship to what was originally intended, eg spans and layers that are too narrow or wide, inappropriate oversight of key functions, or top-heavy management

Application of ‘efficiency dividends’ across departments

Seeks to ameliorate the expectation of increased funding for the same activity year on year and attempts to inject a continuous improvement mindset into how activities are performed

Removes budget flexibility from senior decision-makers and weakens the role of the chief financial officer as departmental expense control is transferred to Treasury and Finance department officials. Diminished capacity to invest in improving internal

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Setting up back-office shared service centre

Outsourcing a government run service to a single commercial market provider

Heavy compliance requirements for suppliers of goods and services to government

Investment has the potential to achieve a step change in service costs for non-core services within the department

Removes the cost of a function from the salaries and wages line of the operating statement to the cost of goods and services line leading to the appearance of a leaner business model; savings may also result. Demonstrates that productivity can be achieved by engaging with market providers instead of internal cost cutting. Engenders commercial thinking in how services are procured, which can increase innovation

Sets a level playing field for the market by clearly establishing what is expected through a procurement process

operations, leading to ‘death of a thousand cuts’ and degradation in service quality

Often established without consideration to the scale required to adequately achieve an acceptable rate of return to departments Business cases often developed with erroneous assumptions about the outlay required to design and implement the new shared service. Usually scoped out with little consideration of what the department actually does, leading to compromises in the service catalogue and duplication in service provision

Can turn an inherent market failure into a monopoly. Arguably, stifles opportunities to enliven the market with more participants as barriers to entry are raised through the incumbency of a single service provider. Runs the risk of evolving into cost shifting rather than achieving internal transformation through true outsourcing

Drives away competitive tension in the market. Removes innovation as all tenderers are reduced to bidding to supply a commodity service when there is opportunity to achieve benefits by doing things differently. Creates a culture of risk aversion, which has the capacity to increase rather than reduce the risks in the procurement process

In considering the unintended negative consequences of productivity initiatives used to date, PwC proposes a new perspective on the issue of productivity addressing three focus areas:

Prioritisation—diverting resources to more socially valuable uses

Measurement—acknowledged as a significant barrier to progressing action on productivity though recognises that emphases on method, data quality, evidence, benchmarking and value to society, all within comparable and controllable time frames are key to this issue

Alignment—defining and agreeing priorities and risks and aligning them to performance drivers, leadership and behaviours, in an iterative rather than linear fashion.

Each of these is discussed in the report.

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Government of Western Australia. January, 2015 Program Evaluation: Evaluation guide.

The evaluation guide from WA outlines the role of evaluation as a key component in the policy cycle, the key principles of good evaluation practice, a strategic approach to evaluation, different types of evaluation and when they might be used, how to conduct an evaluation and the use of findings from an evaluation for better decision-making. A starting principle for the guide is the creation of an evaluation culture to ensure the best possible economic and social returns.

Evaluation is defined as ‘the systematic collection and analysis of information to enable judgements about a program’s effectiveness, appropriateness and efficiency’. ‘SMART’ results are used to determine describable and measurable change:

S pecific (criteria must be well-defined) M easurable (criteria is concrete and measurable so that progress can be demonstrated) A ttainable (‘is there a realistic path to achievement?’) R elevant (are results within the constraints of resources, knowledge and time) T ime-bound (include reporting time-lines to provide a sense of urgency).

The advantages of conducting evaluations are seen to be opportunities to evaluate performance, revise program structures and consequently, justify funding. The guide also outlines potential benefits to stakeholders, from efficient resource allocation through to transparent and accountable government. Evaluation is seen as a part of a continuous cycle as changes to policy are implemented. As the guide states:

The policy cycle is not intended to encourage a process driven approach to policy development and implementation but rather to underscore the need for a planned strategic approach to evaluation

Systematic and regular evaluation is seen as necessary to assist decision makers and should be built into program design. The guide offers guidance on ‘mega-level’, whole-of-Government programs (e.g., the Closing the Gap Indigenous Disadvantage Plan) as well as on macro- and micro-level programs.

The article reviews types of evaluation (formative/developmental, process, summative/impact) and devotes a significant number of pages to detailed descriptions and rationales for the five stages of an evaluation and their component activities. It provides an example program logic map and addresses the need to develop key evaluation questions at the outset.

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Cotton, P. (2014) Workplace psychological health and wellbeing: an overview of key trends. InPsych, Volume 36, Issue 6 Australian Psychological Society, December

Cotton begins by acknowledging the success of recent efforts to increase awareness about workplace psychological health and wellbeing. He acknowledges also that a good work environment—defined by high psychosocial work quality and positive organisational climate— provides protection for employees, moderating the effects of psychological and social (psychosocial) hazards.

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Cotton identifies gaps such as the following in current employer practices:

Inadequate focus on prevention Unrealised early intervention potential Avoidant responses by managers in responding to and managing at-risk employees Tendency to view workplace psychological health and wellbeing initiatives as extraneous to

core business A ‘hands off’ approach in return-to-work programs and treatment where psychological

health issues are involved, as compared with physical injuries Passive medical management and highly variable quality of psychological interventions

provided for work-related psychological health problems, ultimately contributing towards excessive levels of ‘medically unnecessary disability’ and adding to the national social welfare burden

While mental health problems are only one type of risk within a broad range of organisational people risks, they are becoming increasingly prominent within the APS. Cotton provides some insights.

Prevention

Prevention is enabled by enabling a workplace that does not emphasise performance at the expense of well-being. As well, prevention can be targeted at the organisational level, not just at the employee level. It is essential for organisations to build people management skills and to implement overarching frameworks that integrate well-being initiatives.

Early workplace intervention

Responding constructively to early warning signs is important. This includes managers providing timely feedback rather than waiting until a formal performance review and facilitating a well-being climate. This might include messaging in team meetings about the importance of wellbeing and encouraging early reporting, reminding staff about available support resources and appropriate role modelling.

Early intervention might also include repairing employee-management relationships before they go astray, for example by a process of conciliation. One example policy is to implement five informal conversations before a formal appraisal is enacted. Cost benefits of about 8:1 have been reported in examples like the Queensland Resolve at Work initiative. This initiative includes a multi-disciplinary panel of providers providing a range of prevention and wellbeing services. This was reported as reducing psychological injury costs and absenteeism and resulting in improved performance.

E-mental health is also recognised for the support it provides to those looking for information and advice in the first instance or even instead of traditional services.

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Management and treatment

Cotton splits management into two: secondary (post-claim) early intervention, and tertiary management. He notes that the secondary stage may sometimes be better served by human resources interventions such as vocational assessment and conflict resolution to deal with job disgruntlement, poor job fit and poor working relationships, reportedly the cause of at least a third of claims.

Once the process gets to a tertiary management stage, Cotton notes that employees with compensation claims have worse health and return-to-work outcomes despite similarities in other personal aspects. He reports that:

This is a vulnerable population, so the nature of treatment provided to injured employees needs to be of a very particular type and structure

Key to better outcomes for injured employees is the recognition of the therapeutic role of work and the need to integrate an expectation of returning to work into the treatment regime, where realistic. ‘Fit Certificates’, which require GPs to certify what an employee can do, were being trialled in WA, ACT and Victoria at the end of 2014.

Cotton concludes by noting the role of personality in treatment planning and notes that specialised interventions are sometimes required for some personalities.

Dr Peter Cotton, FAPS, private Practice and InsightSRC; Workplace Mental health Advisor with Superfriend and ComCare Centre for Excellence in Mental health and Wellbeing at Work; and member, beyondblue Expert Advisory Group on Mental Health at Work

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Dolan, P. Hallsworth, M., Halpern, D., & Vlaev, I., (2010) Mindspace: Influencing behaviour through public policy. Cabinet Office and Institute for Government. UK.

The key principles of the paper are that influencing behaviour is central to public policy and that policy-makers need help in applying behavioural insights.

The acronym MINDSPACE was developed to describe automatic behaviours that might be used by policy-makers:

M: Messenger. We are heavily influenced by who communicates information

I: Incentives. Our responses to incentives are shaped by predictable mental shortcuts such as avoiding loss

N: Norms. We are strongly influenced by what others do

D: Defaults. We ‘go with the flow’ of pre-set options

S: Salience. Our attention is drawn to what is novel and seems relevant to us

P: Priming. Our acts are often influenced by sub-conscious cues

A: Affect. Our emotional associations can powerfully shape our actions

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C: Commitments. We seek to be consistent with our public promises and reciprocate acts

E: Ego. We act in ways that make us feel better about ourselves.

The paper shows how MINDSPACE principles can help tackle challenges to policy. Case studies are used for example purposes.

Finally, the authors note that the MINDSPACE framework can complement traditional policy tools and help provide effective policy in a cost-efficient manner. The sustainability of changes however, is not known. Despite this uncertainty:

Whether reluctantly or enthusiastically, today’s policymakers are in the business of influencing behaviour, and therefore need to understand the various effects on behaviour their policies may be having. MINDSPACE helps them do so, and therefore has the potential to achieve better outcomes for individuals and society (p.10)1

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Behavioural Economics Team. Behavioural Economics. Department of Prime Minister and Cabinet [accessed 15 September, 2016].

The Behavioural Economics Team’s (BETA) mission is ‘to build behavioural economics capability across the public service and drive its use in policy design by testing what works, where and in what context.’

BETA defines behavioural economics as the application of psychological insights to explain and predict how people make decisions:

Experience has shown that inexpensive (policy) improvements based on a better understanding of human behaviour can increase efficiency within the public service and help people (in the community) put their good intentions into action. Initiatives like plain packaging of cigarettes, mysuper and pre-filled tax forms were designed with real human behaviour in mind

BETA advocates the use of randomised control trials (RCTs).

BETA’s guide to developing behavioural interventions for randomised controlled trials was published on 2 September, 2016. It provides nine guiding questions in two parts: Initial discovery questions and diagnosis questions.

Each of the nine question comes with a detailed guide.

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1 The application of behavioural insight to public policy has been taken up in Australia by a number of organisations including the NSW Government’s Behavioural Insights Unit. The ATO has applied behavioural insights to tax and debts.

‘Nudging’, a term applied to practices resulting from behavioural insights, has been reviewed extensively in the link from the University of Toronto in 2013: Nudging Around the World. This article gives guidance on choosing appropriate policy tools (p. 8) and provides a summary of behavioural economics initiatives from around the world (p. 13)

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