Bigger is better for efficiency

Treasury’s report benchmarking administrative and support services shows that more than $236 million a year could be saved by efficiencies and that the quality of service could be improved.

Treasury Deputy Chief Executive Andrew Kibblewhite said: “Spending levels across agencies are quite variable, ranging from between 3 percent to 36 percent of total organisation running costs. Some variation is attributable to agency size as smaller agencies are more affected by fixed costs, and some variation is due to the nature of agency operations.  For example, some agencies are in the midst of some significant ICT investments to transform public services and make them more efficient.  If we are to use this information constructively, we must consider it in light of each agency’s operational context.”

The report concludes that making these services more efficient can save more than $236 million a year and that service quality can also improve. . .  

 Mr. Kibblewhite said “we don’t just want efficiency improvements. We also want to see these functions playing a more strategic role in their organisations.  In times like these, chief executives need CIOs, CFOs, and heads of procurement and HR helping them understand their business and make decisions that lift agency performance and reduce agency costs.”

Smaller agencies will always have a higher proportion of fixed costs than larger ones. The question then is: if bigger is better for efficiency do we need all the small agencies, can some be amalgamated or go altogether?

Finance Minister Bill English said the report shows there is room for more back office savings which could go into front line services.

“The Government is committed to moving resources from the back office to the frontline so we can deliver improved public services to taxpayers with little or no new money over the next few years,” Mr English says.

“The report shows that in many instances the cost of functions like property management, human resources, finance and ICT in New Zealand is higher than international benchmarks.

“For example, the average office space per person in our public service is about 21m2 compared with best practice in some New Zealand agencies of about 15m2. This is one of many areas where we believe there is room for improvement.

It’s difficult to argue with the goal of improving services and reducing costs and the benchmarking will be an annual exercise which should ensure the savings aren’t eroded over time.

For a bit of perspective on the size of the challenge we face in making savings have a look north and east. Obama is proposing $4 trillion of cuts to trim the USA’s deficit.

3 Responses to Bigger is better for efficiency

  1. Steve says:

    At a high level it’s very easy to say bigger is more efficient as one has no view of the detail or the goals of the body / organisation concerned. My experience has often been that when one descends from the mountain top into the forest of detail, the view can be radically different and it is often the case that things are being done as efficiently as they can be if they are to be done at all. I agree that last part is probably the most critical and the answer will often depend on values and priorities intermingling.


  2. homepaddock says:

    That’s a valid point – but it might be possible for smaller agencies to combine some functions (eg IT) to save money and still be just as effective.


  3. adam2314 says:

    Bring back the MOW..

    Bigger is better.. One main office..

    Extremely good for shovel sales..

    Shovels for learning..

    Shovels for Leaning..

    Shovels for cooking..

    Shovels for carrying..

    Shovels for loading…

    Shovels for unloading..

    Specialised shovels for WORKING..

    Drawn for use only after the appropriate paper work has been filled in..

    Shovels for digging NZ deeper and deeper into the proverbial..


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