Financial Management Reform in UK Government: Putting Finance at the Heart of Decision Making
Solid management information can help governments manage resources and make decisions that deliver value for money. However, historically there has been little demand for management information from government decision makers, as highlighted in the 2012 report Improving Decision Making in Whitehall from the Chartered Institute of Management Accountants (CIMA) and the Institute for Government. This presents a challenge for the finance function: even the most accurate, timely, and consistent management information loses relevance if it is not used by leaders to support better decision making.
In order to address this issue and “put finance at the heart of decision making,” the UK’s Financial Management Reform (FMR) program was launched by Her Majesty’s Treasury in 2014, following consultation with CIMA and other accountancy institutes. Finance leaders and those tasked with delivering the reforms consider the cross-departmental program a success. But in a world where electioneering politicians appear to have no grasp of what their policy promises will actually cost, or indeed how they will be paid for, have the changes really made a difference?
Working with our partners at the Institute for Government think tank, CIMA has published Getting to the Heart of Decision Making, a review of the FMR two years after its launch. Our aim is to better understand the reforms’ impact, and help finance functions in other complex organizational settings learn from our findings. We talked to FMR leaders, departmental finance directors, and civil servants from a range of government departments. We also held workshops with the staff responsible for delivering three key reform initiatives: value maps, costing projects, and management information.
From our research, we identified that the FMR has delivered many positive outcomes in a relatively short period of time. A committed, ambitious, and collaborative senior leadership team was instrumental in driving and championing change. As a result, the sense of community across the government finance profession has been strengthened. In addition, new activities focusing on better understanding and reporting of departmental spend have had significant impact.
As part of these reform activities, government departments were asked to produce value maps—high-level, visual summaries of spending categorized by program area or objective and rated red, amber, or green according to level of understanding and scope for efficiencies. Value maps helped identify knowledge gaps and, in some cases, became part of the wider business plan. The map creation process also highlighted the benefits of working collaboratively, stimulating conversations, and forging stronger links between finance and policy staff.
A new Costing Unit, set up in 2015, manages 6-8 week costing projects, enabling deep dives and detailed analysis of complex multi-organizational areas of higher spending, such as border controls. These projects greatly increased understanding around inputs, outputs, and outcomes. Additionally, embedding departmental staff in the costing teams helped build financial capability.
Management information has been a key focus of the reforms. Data collection and collation processes have been developed and streamlined in order to improve quality, availability, comparability, and usefulness for decision making. In late 2015, a joint Treasury and Cabinet Office team was set up to review and rationalize management information across central government. Activities have included short “data sprints,” looking at data around complex issues, and the joining up of systems to reduce duplication and support data-driven decision making. Formal and informal networks have improved cross-governmental collaboration, with departmental teams sharing ideas, themes, and best practice. The FMR is underpinned by a focus on people, developing capacity, and capability while addressing the recurring issue of staff retention.
We are beginning to see more mobility and managed moves across departments and a new Government Finance Academy has been set up to facilitate staff training and development at all levels.
While it is clear that the reforms have been a success so far, momentum must be maintained in the longer term if government is to consolidate, embed, and build upon change.
We identified five critical success factors.
- Clarity around idea and purpose helps to garner wide support for and engagement with change. Shared analysis and reassessment of problems and challenges is crucial.
- A committed senior leader sends a signal that the change is important. But as reforms mature, ownership needs to broaden to a wider group of civil servants.
- Connecting reforms with government and departmental objectives helps overcome the divided nature of the center of Whitehall and improve the quality of the function.
- Understanding the wider context in which reforms take place ensures they support, rather than constrain, departmental objectives.
- Dedicated resources to drive the vision and model helps to maintain momentum and demonstrates active involvement from the center.
Whitehall’s finance professionals consider the FMR program to be successful so far. However, they feel that longer term success depends upon the reforms moving out of the finance function to connect with the wider leadership. Demonstrating how improvements in management information helps departments manage resources and deliver their core objectives is seen as a crucial element in building wider engagement and creating demand.