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What Canada can learn from Developing Countries on Public Financial Management sustainability, [Part 3]


June 7, 2012

Part 3: Capacity Building

Demographic changes means need to build civil service capacity in Canada

Doug Hadden, VP Products

This is Part 3 of 6 parts detailing the content in my Financial Management Institute of Canada lunch presentation What can we learn about Sustainability from Developing Nation Governments?

Civil service capacity and public financial management sustainability

The lack of civil service “capacity” or the need to improve “capacity” is a consistent theme when diagnosing public financial management problems in developing countries. In a recent post on the International Monetary Fund PFM Blog, Capacity Building and Why Reforms Fail, David Gentry opens with: “Rarely can you find a technical assistance related document that does not refer to the need for capacity building.” Civil servants need the proper skills to implement government programs.

Developing nations are modernizing PFM processes rapidly. Sustainability, in this context, extends beyond implementing and maintaining PFM policies competently. Civil service skills need to improve as more sophisticated processes are introduced.  In 2009, Sailendra Pattanayak, in the IMF PFM Blog, describes the Sustainability in PFM Capacity-Building in Post-Conflict Countries challenges including “general shortage of appropriate financial management and accounting skills” and the over-reliance on advisors. Peter Murphy in 2011, also in the IMF PFM Blog, in Who is “driving” the IFMIS?, describes the “classic public sector problems of retaining specialist ICT staff” and the problems associated with contracting critical Information and Communications Technology (ICT) support. This problem is particularly acute in developing nations with limited human capacity.

Civil service PFM capacity: a problem in Canada?

Canada has a high human development index. The Conference Board of Canada has found that Canadian education is effective. The OECD ranked Canadian education as one of the best in the world. Universitas 21 ranked Canada third in world colleges and universities. Legatum ranks Canada 10th in the world for education. Where is the civil service capacity problem?

Demographics and the long-term results of public policy.

The baby boom in Canada means that there significant numbers of public servants approaching retirement. This “exodus” from the public service has created a knowledge “brain drain”. And, budget cuts are eliminating more jobs. This creates uncertainty among civil servants who seek out private sector positions. And, it means that the public service is no longer an attractive option for university graduates. Yet Public Financial Management is becoming more complex in Canada including initiatives such as:

  • Accrual accounting
  • Management for results
  • Performance management frameworks
  • Risk management approaches
  • Balanced scorecard
  • Increased transparency
  • Spending reviews

Cloud computing may be part of the solution

It can be argued that IT capacity in government inhibits automation and innovation. Governments can become stuck with legacy technology, often called “rust”. In 2010, the Auditor General of Canada identified the dangers of “aging information systems”. That’s why the call for cloud computing by former US Government CIO, Vivek Kundra, seemed so attractive: eliminate rust and reduce the IT maintenance footprint.

Governments are reluctant to farm out many back-office functions to the cloud because of privacy and security concerns. So, governments attempt to achieve cloud computing economies of scale through “private clouds” or “shared services.”

Shared services has had mixed results especially in reducing the need for highly skilled personnel.

The capacity to manage an “elastic” fault-tolerant infrastructure requires significant capacity. And, the governance of shared services requires orders of magnitude more capacity than departmental systems. The Gartner Group concluding that “shared services” is on the descent to the trough of disillusionment.

Some governments leverage Enterprise Resource Planning (ERP) software for private clouds. ERP software is complex to use and manage. Code customization is frequently required to achieve government requirements. And, this software was not designed for a cloud deployment. Some economies of scale in IT capacity can be achieved relative to numerous on-premises implementations. However, this approach does not make the ERP software easy to use. And, the customization requirement often means retaining or contracting for expensive staff. The software bloat described in the previous post also adds to complexity: more features to learn and more IT infrastructure to management than is necessary.

IT capacity building

Capacity building is a fundamental to sustainability – the Total Cost of Ownership (TCO).That’s why there is significant attention to capacity building in turnkey Government Resource Planning (GRP) requests for proposal. The intent is to achieve government self-sufficiency regardless of the method for deployment which, in developing nations, is typically a shared service.

Turnkey PFM requirements, described in the last post, for developing nations include the following:

  • Implementation of on-site help desk with government personnel that are familiar with the IT systems and the processes in use by the government
  • Large training programs designed to keep a cadre of experts even in situations where there is a high turnover in the public service
  • Expansion of training programs beyond the software to core PFM and IT training
  • Change management focus to ensure that capacity building precedes reform
  • Mentoring programs including making knowledge transfer from contractors a condition of employment
  • Use of knowledge management, e-learning and adaptable help systems that include all policy manual and courseware information

Capacity in human resource systems

Developing country governments are beginning to use human resource management, or civil service management, software. The key objective for using software for civil service reform is to improve government capacity. Skills are identified and talent management queries are used to discover civil servants poised for career advancement. This can be accomplished across the entire public service. Training programs with schedules are published to self-service portals. This affords “technology leapfrog” opportunities to leverage critical advanced talent management software functions.

FreeBalance approach to capacity building

Many will argue that the software vendor has no place in capacity building. Software vendors build software. Consultants implement these solutions and are responsible for building capacity. Our business methods have been adapted to the PFM domain.

FreeBalance moved from a product-centric to customer centric company. Or, more accurately, continues the customer centric journey. The motivation came from realizing that there was an unmet need in making GRP software sustainable. The disjointed nature of what software vendors, systems integrators and training companies deliver meant there was a sustainability gap. New processes were required to overcome this gap. As a for profit social enterprise, we realized that someone had to be responsible for customer sustainability. No one else seemed to accepting the challenge. This “thinking outside the box” or traditional business methods is part of the maturing of Corporate Social Responsibility (CSR) where CSR is the core company mandate.

My sense is that governments in more developed countries can also make use of the capacity-building product features such as adaptable help and talent management. And, the training and mentoring that is part of our Integrated, Iterative, Implementation and Quality Methodology (i3+qM).

Capacity and self-reliance

It may be curious that FreeBalance measures self-reliance as part of our balanced scorecard. In other way of looking at this, we count score our ability to reduce our long term services revenue opportunity from customers. Some of the measurements we use are:

  • Customer satisfaction rating includes important questions on whether customer thinks implementation is sustainable – it doesn’t matter how happy a customer is with FreeBalance, if the implementation isn’t sustainable, we’re not happy
  • Number of Customer Exchange members, an invitation-only social network, to enable interaction among customers
  • Targeted percent of services work by local or regional staff rather than from other regions. The need to bring in FreeBalance consultants from different regions means that we are not building FreeBalance capacity close to our customers.
  • Number of FreeBalance SWAT teams required to overcome customer mistakes with our software. SWAT teams are formed whenever there is a significant customer problem. The team is cross-functional and includes executives to ensure the highest priority. Sometimes the problem is generated by improper knowledge of the software or underlying IT infrastructure. If so, we’re not building customer capacity.
  • Targeted number of training days per country. This measure is to ensure that capacity is maintained in governments because there can be high civil service turnover.


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Doug Hadden

Doug Hadden

Executive Vice President, Innovation at FreeBalance
Doug is responsible for identifying new global markets, new technologies and trends, and new and enhanced internal processes. Doug leads a cross-functional international team that is responsible for developing product prototypes and innovative go-to-market strategies.

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