It is a mistake to discuss eficiency without first asking, “Eficient at what?”

The Cult of Efficiency by Caroline Oliver

On 1964, a professor named Raymond Callahan published a book titled Education and the Cult of Efficiency, and since then the concept has worked its way into general organi- zational parlance. In Policy Governance terms, the “cult of eficiency” describes a danger- ous preoccupation with means withoutfirst identihingends. How can we know ifwe’re eficient if we don’tfirst understand what it is we’re trying to accomplish? The cult of efi- cienb is the subject of a recent lecture by a conflict management professor namedJanice Gross Stein, later published in book form. In this article, Caroline Oliver considers the ways in which Stein’s ideas about the cult of eficiency coincide with, and differfrom, the Policy Governance concepts of ends and means.

FFICIENCY IS A SIGNIFICANT concern for E every organization. Boards are ulti- mately accountable for their organiza- tions’ efficiency along with everything else. Policy Governance deals with effi- ciency-and there is no other way of saying this-efficiently. I hope to show you how.

My recent thinking on this subject has been triggered by a book by Janice Gross Stein called The Cult OfEficiency (House of Anansi Press, 2001), the sub- ject of the 2001 Canadian Broadcasting Corporation (CBC) Lecture Series. Stein, who is Harrowston Professor of Conflict Management in the Department of Political Science at the University of Toronto and the director of the univer- sity’s Munk Centre for International Studies, examines our conversations about efficiency as they relate to the delivery of public “goods,” particularly health care and education.

Her fundamental thrust is that effi- ciency is a dangerous concept when we don’t separate our purpose from the means of achieving that purpose. The problem, she points out, is that when we talk about efficiency “divorced from its larger purpose,” we can unwittingly defeat the larger purpose. If the value to us of the benefit we gain from an expenditure is greater than the value to us achieved by cutting the cost of it, cut- ting the cost will defeat our purpose. In other words, how can we talk about cut-

ting the costs of day care for children when we haven’t agreed what the pur- pose of day care for children is? How can we know that we aren’t destroying the value of such care to us when we aren’t clear what that value is and how impor- tant it is relative to other things?

When we talk about efficiency “divorced from its larger purpose,” we can unwittingly defeat the larger purpose.

The Policy Governance model deals with efficiency in two different ways. First, efficiency is built in to the definition of ends, specifically, in the “at what cost?” element of the ends equation (the other two elements are “what results?” and “for whom?”). The “at what cost?” aspect of ends is about deciding how many resources it is rea- sonable for the organization to con- sume in the production of desired results-what are those results worth to the world? Considering “at what cost?” involves the board in weighing its answer to this question not only in relation to other results to be produced

but also with respect to anything it wishes to say about the allocation of resources among different results.

In Policy Governance, efficiency is built in to the definition of ends, specifically, in the “at what cost?” element of the ends equation.

Through defining the “at what cost?” element of ends at its broadest level, the board is demanding a cer- tain level of efficiency. The board is saying, “Produce x amount of output (results) with y amount of resources.” Of course, the board may go into even greater detail in addressing the acceptable costs of subcomponents of the overall organizational result. So the ends concept, properly applied, addresses the most important form of the efficiency question: Does the organization produce as many of the right kinds of results for the right peo- ple as should be produced for the resources consumed?

The second way in which Policy Governance deals with efficiency relates to concerns about efficiencies that are not addressed so directly by looking at ends. Assuming that the board has set a reasonably rigorous efficiency standard in its ends policy, most major ineffi- ciencies-for example, in staff utiliza- tion, offce equipment, processing of client applications, or communica- tions-will show up as lack of perfor- mance in ends monitoring. However, it would still be possible to be inefficient in, say, paying bills on time or running equipment safety checks without hav- ing a deleterious impact on the produc- tion of ends, at least in the short term. So the Policy Governance board would also specify efficiency standards for

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these non-ends (means) activities. That is, the board would say in its executive limitations policies that certain prac- tices, ratios, inaccuracies, and so forth are not to be allowed in or by the orga- nization. Then, of course, the board would monitor those executive limita- tions policies.

Stein actually uses the terms ends and means in her discussion. Her attedpt to define ends comes very close to the Policy Governance ends concept-in fact, she identifies two of the three components. She says we must ask the questions “efficient at what?” (in the sense of “for what pur- pose?”) and “efficient for whom?” before we can sensibly talk about effi- ciency. But then she says, “Efficiency is not an end, but a means to achieve val- ued ends.” This is where Stein’s use of the term ends stops making sense from the Policy Governance perspective, for as we have just seen, in the model, effi- ciency is neither an end nor a means in itself but instead a vital dimension of both. If an organization is performing in accordance with the board’s ends and executive limitations policies, it can be said that the CEO is running the board’s definition of an organization that is both efficient and effective.

From the Policy Governance perspective, efficiency is neither an end nor a means in itself but instead a vital dimension of both.

Stein hits on some other topics that are pertinent to Policy Governance in the context of efficiency and public goods. She rightly identifies the issue of equity as an ends issue, saying that we are often told that we can’t have

equity and efficiency, but when it comes to public goods, equity is in fact part of what we want to be efficient at. In Policy Governance terms, equity is a consideration in the “for whom?” element of the ends equation. And cer- tainly when it comes to public goods, the Policy Governance ends equation is likely to reflect some measure of commitment to equity, inasmuch as public goods are generally public goods precisely because they cannot easily be divided between citizens, nor can citi- zens easily be excluded from their ben- efits. However, equity may also appear as a dimension of executive limitations for the board, as it may have an ethical interest in equity around means issues such as treatment of staff and accessi- bility of buildings regardless of the impact on ends.

Quality is an interesting topic that Stein discusses as an important dimen- sion of efficiency. In Policy Governance, the specification of ends automatically includes quality specification. If a board wants “housing” or “safe streets,” it may specify in its ends policies what is meant by “housing” or “safety.” In doing so, the board would be specifymg what amounts to quality standards. For example, “housing” might be defined as “a detached or semidetached building with two stories, three bedrooms, and central heating, built in compliance with a certain building code”; these are quality standards. Executive limita- tions policies also specify quality in relation to means. Statements like “The CEO shall not allow bill payment to be past the due date,” for example, is just one of the myriad of quality standards that typical executive limitations poli- cies contain. Consequently, whatever the board wants to say to the CEO about quality can be said very effectively in the Policy Governance framework. (It is important to avoid caregiver-focused definitions of quality. See John Carver’s “Beware the Quality Fetish” in Board Leadership issue 37, May-June 1998.)

Stein raises another topic at the heart of Policy Governance-the subject of ownership. The chain of accountability in the delivery of public goods is an arena that has been much

complicated in recent years, with gov- ernments withdrawing from direct service provisions in favor of various arrangements ranging from “contract- ing out” to voucher systems. Stein points out that citizens expect direct accountability from the suppliers of their most important public goods, but providers of public goods are for- mally accountable to the purchaser of their services-the government- rather than directly to the public.

Citizens expect direct account abi I i ty from the suppliers of public goods, but providers are formally accountable to the purchaser of their services-the government-rat her than to the public.

Think how much easier it would be for us as citizens to perform our role as owners if standards for the delivery of public goods were clear. Stein parallels the Policy Governance principle of monitoring when she remarks that to hold our educators, schools, hospitals, and other providers of public goods accountable, “agreed standards must logically precede any evaluation and judgment of perfor- mance. Quality first has to be trans- lated into standards of effectiveness and then used to evaluate.” With the Policy Governance approach, it would be clear that the government is accountable to the public as owners for setting the standards for providers and that the providers are accountable to the government for complying with those standards. The standards would be clear because they would be spelled

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Cult of Efficiency (continuedfrom page 7)

out in ends and executive limitations policies. (See the discussion in Board Leadership issue 59, Jan.-Feb. 2002, “FAQ: What Should Government Require of Nonprofit Governance?” by John Carver.)

read; this article has barely skimmed its surface. From a Policy Governance perspective, it is also an incredibly frustrating book. Stein raises very important topics, but it is a tragedy that they are discussed without the benefit of Policy Governance insights and technology. How much longer are we going to allow our governments, our communities, and our corporations to stumble around in the dark without realizing what’s available right under their noses?

Stein is, however, to be highly commended for her attempt to make sense of our confused public conver- sation about efficiency. She suggests that “we have arrived at a signal moment in history,” a moment when the demands of states and citizens seem to converge, at least in part, although for very different reasons. “The new post-industrial state needs transparency among providers, assur- ances of quality, and evaluations of the effectiveness of the public goods that are delivered. So do citizens.”

Policy Governance has so much to offer the state and its citizens: the ends concept that encompasses our primary efficiency concerns (the right benefit being produced for the right people at the right cost) and the tools for owners to assure themselves of efficiency and quality and account- ability. Policy Governance captures it all in a coherent framework. Now we all have the responsibility of making thisknown. 0

The Cult of Eficiency is a fascinating

Caroline Oliver is an author, speaker, and consultant on governance issues and current chair of the International Policy Governance Association. She can be contacted at (905) 337-9412 or by e-mail at coliver@carolineoliuer. corn.

FAQ (continuedfrom page 6)

And that means that the board asks itself this question as it considers the staff‘s means: What is not OK even if it works? We know that historically, boards slip into prescribing means at the drop of a hat. We all have a strong tendency to tell people how to do things. Yes, some prohibitions could be expressed positively instead of neg- atively (as in the humane treatment example). But the only way a board can be sure it will not slide inexorably into the trap of prescribing means is never to prescribe at all but always to proscribe. Negative wording is a strong test: if a board finds it impossible to state what it does notwant to happen, that is a strong case for leaving the matter alone. It tells the board that it isn’t dealing with a legitimate ethics or prudence restriction but one based on preference-how the board would do things if it were the staff.

The board needs only to have a keenly developed sense of ethics and prudence, along with the ability to define what would offend those values.

So the real reason for putting executive limitations in negative wording is as a safeguard against a natural, predictable, and accountability- destroying return to prescribing staff means. When used routinely, the pro- scriptive approach frees the board from needing to know the technology, techniques, and expertise of how to get a given job done. The board needs

BOARD LEADERSHIP P O L I C Y G O V E R N A N C E I N A C T I O N

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JOHN CARVER, PH.D.. is widely regarded as the world’s most provocative authority on the gov- erning board role. He has consulted on five conti- nents with a wide variety of organizations and has published more on governance than anyone else worldwide. Carver is creator of the Policy GovernancP model of board leadership, arguably the only conceptually coherent, universally applicable model of governance available. Policy Governance is not a set structure, but a paradigm of concepts and principles that enable account- ability, leadership. and productive relationships among boards, their constituencies, and their managements. Carver is author of Boards 7’hat Make a Differem (lossey-Bass, 19971, the audio program Empowering Boards for Leadership (lossey-Bass, 1992), the video program John Canner on Board Gouemanm Uossey-Bass, 19931, and with his wife, Miriam Carver, Reinventing YourBourd(Jossey-B, 1997).

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only to have a keenly developed sense of ethics and prudence, along with the ability to define what would offend those values. The board can better ful- fill its role, not as a superstaff but as the

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