Thursday, 31 December 2009

Unintended consequences go to waste

The Search for Leadership: An Organisational Perspective discusses some of the truths and traps that await powerful CEOs who don’t know what they don’t know. Lacking education in organisational behaviour, such leaders are vulnerable and may push for the wrong thing.

One such trap awaits those who decide to centralise services to save costs. It seems obvious to them that economies of scale are bound to deliver savings. Figures may show that this is so, provided that the boundary of the system being considered is defined in narrow terms. But if all types of cost are taken into account, including those passed onto others who are affected by the change – often inadvertently – then the net cost may increase. There is also the added cost of frustration, delays, more customer complaints and lowered staff morale.

Centralisation is a political game, sometimes with a small ‘p’ and sometimes large, as in the case of government ministers looking for departmental savings. This week the probation union Napo treated the public to a laughable tale of this tragi-comedy in practice. Harry Fletcher, Napo’s assistant general secretary explained that “five years ago the Home Office decided to centralise [on regions] and privatise the maintenance of the probation estate”. Previously, local probation services had sought local solutions to local problems.

The upshot was stories such as “Window cleaners travelling from Preston to Leicester and staying in a hotel overnight. An office with four staff receiving 5000 paper towels each month that had not been ordered. A three-hour drive by an electrician to change a lightbulb. A dishwasher arriving that was too large to fit the available space”. These result from a distant and impersonal service that relies on a written contract rather than a customer and a supplier who know each other. Centralisation damages relationships as much as the balance sheet. No wonder ‘motivational and inspirational consultants’ were then hired to address probation staff. Only they told them that there was no such thing as stress.

Unintended consequences of one form or another are predictable, even without knowing about the natural oscillation between centralisation and decentralisation. When the lesson of the increased cost of centralisation is ultimately learned, these leaders will rediscover the attraction of decentralisation, localism and ‘small is beautiful’. Jack Straw, Justice Secretary, has now ordered a review of the contract. It can also be predicted that apparent weaknesses in subsequent decentralisation will lead to some future leader insisting on centralisation.

The current political vogue is for centralisation, but the political rhetoric is about localism. This is another of those ‘tugs of war’ (see yesterday’s post) that challenge leaders – and these days is talked about as managing ‘polarities’.