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Change Management in the Inland Revenue

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Change Management in the Inland Revenue NATIONAL AUDIT OFFICE REPORT BY THE COMPTROLLER AND AUDITOR GENERAL Change Management in the Inland Revenue ORDERED BY THE HOUSE OF COMMONS TO BE PRINTED 15 FEBRUARY 1996 1“ LONDON: HMSO HC 140 Session 1995-96 Published 21 February 1996 E1O.75 -, CUANGE WAGEMENT IN THE lNWD REVENUE This report has been prepared under Section 6 of the National Audit Act, 1983 for presentation to the House of Commons in accordance with Section 9 of the Act. John Bourn National Audit Office Comptroller and Auditor General 28 December 1995 The Comptroller and Auditor General is the head of the National Audit Ofice employing some 750 staff. He, and tbe NAO, are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authori@ to report to Parhament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources. CHANGE MANAGEMENT IN THE INWD REVENUE Contents Page Executive summary 1 Part 1: Introduction 8 Part 2: The Change Programme 14 Part 3: DeEvering the strategy 23 Part 4: Assessing the impact of the Change Programme 39 Appen&ces: 1: Good practices in managing change 58 2: Orgatisations contacted by the National Audit Office 59 for views on managing change 3: Illustrations of change initiatives undertaken by 60 other countries’ revenue departments 4: Management of change: critical success factors 64 5: Good practice in project management: examples from 67 National Audit Office and Committee of Public Accounts’ Reports CWNGE WNAGEMENT IN THE lNMND REVENUE Executive summary The Change Programme 1 In 1991 the Board of Inland Revenue commissioned two major reviews to take a fundamental look at the way the Department was organised and managed. It had brought under control the high levels of work arrears that had prevailed in the mid-1980’s. hticipating future change pressure for increased efficiency and other likely challenges facing government departments such as Next Steps, Competing for Quality and Market Testing - the Department concluded that radical change to the structure and processes of the Inland Revenue was required (paragraphs 1.4 and 1.5). In this respect the Board’s initiative exemplifies the wider process of fundamental change which is now under way in many other government departments. 2 In 1992 the detailed recommendations of these reviews were taken forward in a 10 year programme of change affecting every aspect of the Department’s work. The Change Programme seeks improvements in four key areas, known as the “Four Cs” (paragraph 1.8): . Customer service - togain a significant improvement in customer service by getting people’s tax affairs right first time; . Compliance to gain a steady improvement in comphance; to get the right amount of tax paid at the right time; . Cost efficiency - to gain a significant reduction in costs; to provide value for money in everything the Department does; . Caring for etaff -to recognise that people are the Department’s most important asset. 3 Focused on these key areas for improvement, the Department drew up a detailed programme of action based on four broad themes for change (paragraph 1.9): . reorganizing the office structure; . simphfying and streamlining work processes; . making better use of information technology; . changing the Department’s culture in the way people and work are managed. 1 CHANGE MANAGEMENT IN THE INWD REVENUE 4 The Change Programme is a substantial undertaking affecting au the Deparlmenl’s starf and many of the country’s taxpayers. By March 1995, over 20 major projects had been approved under tbe Change Programme at an estimated total cost of S753 million, with net yearly benefits of f104 mihon. The Department has forecast that by 2002 it will employ some 42,000 to 44,000 staff, a reduction of some 22,000 over the period of the Change Programme (paragraph 1.10]. 5 Through the Change Programme the Department has sought to assimilate and react to a succession of central government initiatives, such as the Citizen’s Charter and Competing for Quahty (paragraph 1.12). Implementing the Change Programme 6 Undertaking major change in any organisation, particularly one the size of the Inland Revenue, is a formidable challenge, Achieving significant long term benefits runs the risk of dislocating current business, worrying and remotivating staff and incurring significant short term costs, Successfti change must therefore be carefully designed and actively managed. Afthough there are no guarantees of success, the Inland Revenue, Eke any organisation making such changes, needs to make good use of certain key mechanisms to implement its Change Programme successfully. 7 The National Audit Office has used as benchmarks, a number of key factors that, in its view constitute good practice in the management of change (para~aph 1.18): . a clear vision of where the organisation is going; . a definition in the form of strate~c objectives of bow tbe vision will be achieved; . targets to allow the achievement of objectives to be monitored; 9 a coherent,centralprocesstoevaluateandmanagechangeprojects; . consultation and involvement of staff; . tie development of new skills; . reward and recognition for achievement . clear, regular and consistent communication, 8 Tbe Inland Revenue bas developed and is implementing a number of strategies and processes which incorporate these key factors. Ofparticular importance is the need for a coherent, central process to evaluate and manage change projects, To meet this, the Department has allocated responsibilities so that the most senior managers take ownership of strate~c issues concerning the Change . Programme. Progress is closely monitored by the Board and other senior managers, both at Departmental level and, where relevant through the key targets of Executive Offlcee,As far as possible, day to day management of individual projects is delegated to others in the Department (paragraphs 3.2 to 3.12). 9 Other good change management practices adopted by the Department include: . a 10 year development plan, issued at the launch of the Change Programme, to identify long term aims (paragraph 1.9); . a structured and open approach to identifying and facing up to problem areas (or risks) that pose a significant threat to the successful dehve~ of the Change Programme (para~aphs 3.37 to 3.39); . a human resource strategy to address issues such as skills development, reward, recognition and motivation (paragraph 3.5 1); . a radically different approach to internal communication of Change Programme activities, encouraging staff to discuss their opinions and concerns about the Programme and providing a formal channel for responding to those views (paragraph 3.50). 10 The Inland Revenue has created an infraskucture to support and enhance the management of projects based on a new project management methodology, The methodology sets out the principles and standards to be fo~owed, including the regular review of project performance, and how suitable skl~s shmdd be developed (para~aph 3.13). 11 The National Audit Officereviewed a sample of 12 projects. This found eight actively foUowing the methodology, two applying an earfier methodology and tie, run by relatively inexperienced project managers, not using any particdar formal guidance, although they comptied with the Departmental approvals process, as set out in the methodology (paragraph 3.15), 12 The Department’s methodology for managing projects folows recognised good practice and the National Audit Office recommends that this should continue to be used, with particular emphasis on: ● following defined financial monitoring and reporting arrangements (paragraphs 3.16,3.28 to 3.31, 3.34); . implementing risk and q]ality assessment methods (para~aphs 3.24 to 3.27); . learning from post implementation reviews of completed projects (paragraphs 3.32 and 3.33); . selecting and training project managers (paragraphs 3.35 and 3.36): 3 CWGE WAGEMENT IN THE INtAND REVENUE . identifying and resolving external project dependencies, partictiarly important for tie WOlarger projects self assessment and new office structure - which tiect many parts of the Department (paragraphs 3.41 and 3.42). Prowess to date and future plans 13 Some of the main projects which make up the Change Programme are stiU in their early stages, so it is not yet possible to arrive at conclusions on the overall outcome of the Programme. Nevertheless, by March 1995, three years into the Change Programme, the Department had made progress under all four themes for change: Reorganizing the office structure ● just over 20 per cent of local offices have been reorganised into a new o~ce structure. By April 1998 the Department expects to create a further 100 new style offices. By then, over half of all district offices will have been converted, at a cost of S80 million (excluding information technolo~ costs). In total, these changes should generate net staff savings of shout 1,900, e~ivalent to approximately S36 milhon a year, and estimated accommodation savings of shout El 2.5 milhon a year (para~aph 2.6); . in line with the Next Steps initiative, executive offices have been set up and considerable responsibility and accountability devolved to them. Of5ces set up so far cover all tbe Department’s regions and 20 per cent of its non-re@onal operations, including training, legal services and the Stamp Office (paragraphs 1.6 and 2.7); Simplifying and streamlining work processes . Corporation Tax pay and file was introduced in 1993, marking an important step in the simphfication of the tax system (paragraph 2.10); . a self assessment system for personal taxes is planned to be introduced in 1997,directlyaffectingupto 9millionindividualswhomaketaxreturns.The Finance Acts of 1994 and 1995 put the main legislative framework for seE assessment in place. A S25 million pubhcity campaign began in June 1995 to raise awareness of these changes. Staff training, education of tax agents and employers, testing of new forms and development of new computer systems are undemay.
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