The ODPM’s new targets are fair enough, says Ross Fraser, but how are we going to measure them?

SO, the ODPM efficiency target of saving up to £1.5bn in social housing by 2007/8 will be cascaded down to the Housing Corporation, housing associations, arm’s-length management organisations and local authorities. But how is it going to be measured?

The chancellor has demanded that the proposals are measurable and amount to real efficiencies, rather than cuts in services or just transfer of responsibility, and deliver “recyclable”, or “cash-releasing”, savings – that is, money that can be re-invested in service delivery on the front line.

However, efficiency is not defined only in terms of cash savings. Indeed, Sir Peter Gershon, the Treasury’s guru on such matters, described efficiencies as “those reforms to delivery processes and resource utilisation that reduce numbers of inputs while maintaining the same level of service, or procure input resources at lower prices, or secure additional outputs for the same level of inputs or improve ratios of output per unit cost of input, or change the balance between different outputs to achieve a greater overall output for the same inputs.” If anyone understands the last of these definitions, please send the answer to Housing Today on a postcard.

In plain language – not Gershon’s forte – housing organisations can improve efficiency by increasing staff productivity, reducing procurement costs, or increasing the quality of the services delivered.

This still begs the question of how to measure efficiency. The ODPM is working on an efficiency technical note on the issue, to be finalised before the end of the year, and the Housing Corporation is developing an indicator that will measure the operating cost of each association and express the result as an optimum cost per unit.

The ODPM is hoping the Audit Commission will measure cost effectiveness through the inspection and CPA process, with the sector contributing through self-assessment. The corporation’s general efficiency indicator will rely on data from housing association accounts and regulatory returns. But the statutory or regulatory data sets won’t be able to capture the range of efficiencies defined by Gershon. Indeed, the corporation has acknowledged that its index of efficiency will not seek to measure quality. This is where the sector has a key role to play.

We too are concerned about efficiency and have no argument about the thrust of the Gershon proposals. However, there is no appetite for increased regulation and, moreover, we need to measure effectiveness too, which is equally as important as efficiency. We need to take the lead in measuring efficiency and effectiveness, or the Treasury may decide that we have failed (with consequences in future spending rounds).

Fortunately, the sector is already measuring itself through voluntary benchmarking – a key way of demonstrating that every organisation is acting to reduce costs without sacrificing quality.

Benchmarking also allows organisations to drill down into specific areas to see where efficiencies can be delivered. We can now measure direct costs against overheads; head counts, productivity and procurement costs by service or function; and resident satisfaction by service or function or geographical area and triangulate this data to measure both efficiency and effectiveness.

To meet the ODPM’s challenging targets the sector needs to see to it that they are accurately measured. Equally, the ODPM and the corporation need to engage with the sector if they are to meet the targets agreed with the Treasury.