Building a productivity plan that delivers financial resilience

Local authorities are under pressure. They have been asked to demonstrate productivity when still overwhelmingly reliant on legacy IT systems. Mark Gibbison, VP global public sector & higher education at Unit4 argues for less reliance on customisations to enable the public sector to better use the data within their IT systems, and allow more detailed understanding of user needs.

Posted 12 March 2024 by Christine Horton

The message from Government is that Local Authorities (LAs) must be more productive. In response, I imagine most chief executives across England would simply be saying: “How?”

2024 could easily become the Year of Section 114s as a growing number of councils raise concerns about their ability to balance the books. According to the Institute of Government analysis last year, almost every 114 was as a result of poor financial management. Why has it become so hard to balance the books?

There is a case for arguing that change fatigue is a significant factor for public bodies. The expectation from the Levelling Up Department that LAs will deliver productivity plans by July this year is just another example of the constant flow of demands on leadership teams. However, this requirement could be an opportunity to reset how the public sector goes about improving services, streamlining back-office functions, and supporting its workforce.

What is absolutely clear, is that we cannot keep going with the cycle of budget cuts in an attempt to drive efficiencies but still continue to rely on out-dated legacy manual processes. Cllr Chapman-Allen, chair of the District Councils’ Network, has warned that despite planning to deliver further cuts and savings this year, many of his members will struggle with large holes in their budgets.

Establishing resilience in back-office applications

To date, a lot of the discussion about public sector modernisation has focused on transforming the front office, adding digital capabilities to make it easier for citizens to engage with services. This makes sense to a certain extent, but when so many in the public sector are struggling to balance the books, then surely there needs to be equal focus on building resilience in core back-office applications?

In his recent speech, Gareth Davies, CEO, the National Audit Office could not have been clearer: “out-of-date IT systems slow the modernisation of many public services and they interfere with the efficient working of government, as well as increasing the risks of successful cyberattacks – which we have seen recently – and maladministration.”

The key challenge for LAs, is to do with information being siloed across different applications so that those in charge of finance do not have a clear picture of the balance sheets. Add to this the reliance on customised applications, and the public sector has created a web of complexity that is difficult to extract itself from.

Modernising back-office applications needs to be a central part of the plan to achieve the overall ambition, so that stakeholders can have confidence that public finances are being well spent. This can be enabled through agility in back-office processes, which will lead to a transformation in service quality for citizens, as well as greater productivity. The starting point for this shift must be moving away from customisations in back-office applications, so that information can be shared in a more standardised way across the entire organisation.

In the past, public sector institutions may have been reluctant to move because the replacement technology might not have offered the same level of functionality, but today there is much more capability built into these back-office applications that can keep up with changing reporting and regulatory requirements such as IFRS 16. This enables organisations to adopt applications off-the-shelf and see a faster return on their investments. Using the latest open APIs and lowcode development models, it is also possible to configure functionality in core applications.

Achieving intelligent standardisation and mass personalisation

The goal for public sector organisations should be to achieve intelligent standardisation and mass personalisation. This should underpin the productivity plans that Local Authorities need to submit in July 2024, because it will help to take innovation in the public sector to a new level. Intelligent standardisation removes the complexity of siloed information and customisations to make back-office applications more efficient. More importantly, though, it enables IT teams to layer intelligence on top. This could take the form of automation or artificial intelligence (AI) tools, which can be trained on all the information in an organisation to help speed up decision making and reduce the cost of prediction. Working with open APIs and lowcode models, combined with AI, enables mass personalisation. Organisations will then have the flexibility to add the functionality they need and use AI to target information to the specific needs of an individual user.

Ultimately, the goal should be to enable the finance team to accurately and rapidly assess the financial performance of an organisation, predict potential risks, and respond quickly to changing regulatory and reporting needs. Having this holistic picture of core business functions will enable finance teams to support senior leaders who urgently need to understand how they can dynamically re-assign resources to deal with the major pressure points around fluctuating demand for services in social care. If the finance team can play this role, UK public services will be able to deliver much more effective – and productive – public services.