doi: 10.1111/j.1467-9299.2012.02073.

TAXING TIMES: LEAN WORKING AND THE CREATION

OF (IN)EFFICIENCIES IN HM REVENUE AND CUSTOMS

BOB CARTER, ANDY DANFORD, DEBRA HOWCROFT, HELEN RICHARDSON,

ANDREW SMITH AND PHIL TAYLOR

The prevailing economic and budgetary climate is intensifying the search for methods and practices
aimed at generating efficiencies in public sector provision. This paper investigates the increasingly
popular bundle of techniques operating under the generic descriptor of lean, which promises
to improve operational quality processes while simultaneously reducing cost. It offers a critical
appraisal of lean as a fashionable component of public sector reform and challenges the received
wisdom that it unambiguously delivers ‘efficiencies’. Quantitative and qualitative research in HM
Revenue and Customs (HMRC) centred on employees’ experiences has indicated the extent to which
work has been reorganized along lean principles. However, employees perceive that changes in
organizational processes and working practices have unintentionally generated inefficiencies which
have impacted on the quality of public service. These suggested outcomes raise wider concerns as
lean working is adopted in other public sector organizations.

INTRODUCTION
Over the last three decades the UK public sector has been subjected to continual reform,
restructuring, and re-engineering. Financial constraints have long pressurized govern-
ment to consider how best to ‘re-commodify non-productive’ public services (Kirkpatrick
and Martinez Lucio 1995), a pressure that has intensified following the financial crisis and
budgetary constraint. Government objectives have pushed for solutions that ostensibly
increase efficiency, and productivity as well as delivering cost-effective quality provision
(Diefenbach 2009; Pollitt and Bouckaert 2009). From the 1980s, efficiency has become
pivotal to many reform initiatives (Ackroyd et al. 2007), to the extent that public admin-
istration scholars regard it as one of the most important dimensions of public service
performance (Andrews and Entwistle 2010). Yet the conundrum of how government best
achieves efficiency rationalization persists.
In this context, the paper investigates the ‘mechanics, policies, philosophies and tech-
nologies [that] are being used to create efficiency in public sector organizations’ (Public
Administration call for papers) through a study of the implementation of lean techniques
in the UK civil service, specifically tax processing work in HM Revenue and Customs
(HMRC). The appeal of lean is evident given that it offers techniques and philosophies
that appear to deliver efficiency (Radnor et al. 2006). Moreover, it is suggested that ‘pub-
lic benefits can be considerable’ (Radnor and Boaden 2008, p. 3). However, there is a
critical lacuna in the debate on the applicability and efficacy of lean to public services.
To date, studies have neglected the experiences of employees whose task performance
has been reconfigured by lean. It is argued that the testimony of those working on the
organization–public interface can provide an important complement or indeed corrective
to claims of lean’s value based upon limited empirical evidence.

Bob Carter is at Leicester Business School, De Montfort University, Leicester, UK. Andy Danford is at Bristol Business
School, University of the West of England, Bristol, UK. Debra Howcroft is at Manchester Business School, University
of Manchester, UK and Social Informatics, Luleå University of Technology, Sweden. Helen Richardson is at Salford
Business School, University of Salford, UK. Andrew Smith is at Bradford University School of Management, University
of Bradford, UK. Phil Taylor is at Strathclyde Business School, University of Strathclyde, Glasgow, UK.

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MA 02148, USA.
84 BOB CARTER ET AL.

The core of the paper aims to assess the extent to which the aspiration of improved effi-
ciency arising from lean implementation has been achieved, according to the perceptions
of frontline staff. This approach contributes to correcting a potential bias in existing aca-
demic studies, which concentrate on organizational, technological and processual features
at the expense of agential experiences. By focusing on employees’ first-hand encounters
with lean, the paper suggests that the pursuit of measurable efficiencies through lean has
simultaneously undermined the legacy of public service ethos, with potentially damaging
results for public administration.
The study is fore-grounded by consideration of the political–economic context which
stimulated the adoption of lean in the public sector generally and in HMRC specifically.
This section is followed by an explication of the research methods employed and then by
employee evidence. Mindful that the study has more than a parsimonious focus on lean
and its consequences for HMRC alone, the discussion seeks to pursue the more general
question of the very applicability of lean to the public sector. Arguably, service delivery is
inextricably embedded with the intangible but invaluable ethos of public service, which
the fragmentation of work proposed by this form of lean jeopardizes.

LEAN IMPLEMENTATION AND HMRC

Historically lean has been closely identified with car manufacturing, notably the Toyota
Production System, and is based on the central tenet that organizations will secure effi-
ciency by eliminating wasteful processes, faults, and the need for rework (Womack et al.
1990). Central to lean philosophy is ‘flow’ – the setting up of a continuous work process
with no unnecessary steps, no interruptions, no batches, and no queues (Womack and
Jones 2003, p. 52). To achieve continuous workflow, every worker must be ‘cross-skilled
in every task’ (p. 60), and by transferring tasks and responsibilities to workers, quality is
embedded within processes. The team becomes the basis for claims of multi-skilling, task
enlargement, and worker participation in kaizen or ‘continuous incremental improvement’
activities. Evidence of the success of lean production in global manufacturing remains
questionable, with a number of studies providing evidence which challenges assump-
tions of employee engagement and efficiency outcomes (e.g. Lewchuk and Robertson
1997; Danford 1999). Notwithstanding such criticisms, Womack and Jones (2003) have
maintained unequivocal support for lean and have emphasized its applicability for service
environments.
Against the backdrop of rising public sector spending, policy makers have increasingly
focused on diverse forms of process reengineering that recall Hammer and Champy (1993)
in the hope of boosting efficiency while expanding services with limited resources. Lean
provides a prominent example of a methodology that offers more productive and cost-
effective ways of organizing. Advocates have emphasized the practicability of transposing
‘lean manufacturing’ techniques from the private sector to public services.
Lean is transferable to the public sector and can be used to develop more seamless processes, improve flow,
reduce waste and develop an understanding of customer value. Lean is most suited to organizations with
high volume, repeatable tasks that allow greater standardization and integration. (Radnor et al. 2006, p. 13)

Indeed, lean has been embraced by researchers and practitioners, who regard its imple-
mentation as beneficial for public services (see Public Money and Management 2008). The
promise of enabling public sector organizations to ‘do more with less’ and reducing
bureaucratic inefficiencies has particular appeal in the context of budgetary cuts. Inter-
nationally, there is growing interest in the applicability of lean, particularly with regard

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to healthcare services, which is closely related to ongoing debates about reorganization

(Waring and Bishop 2010). However, an outstanding concern with the reporting of lean
adoption in the public sector is that ‘carefully selected case studies have been used to
promote benefits in public services without a balanced view of the negative aspects or
consideration of the influence of other factors’ (Radnor and Boaden 2008, p. 4).

Civil service reform and HMRC

HMRC is a non-ministerial department responsible for the administration of taxes and
customs duties, and is accountable to the Chancellor of the Exchequer. HMRC has been
subject to numerous transformations, including job cuts and marketization. From 1997,
New Labour attempted to coordinate fragmented parts of the public sector into ‘joined
up government’ (Pollitt 2003) in the belief that this would facilitate efficiency. Subsequent
restructuring and departmental mergers included HM Customs being assimilated with the
Inland Revenue in 2005. Efficiency and effectiveness arguments were used as justification
for the merger and became central to policy as the political debate about public services
shifted towards how well services were being run, producing the ‘battle of the efficiency
reviews’ (Talbot and Johnson 2007). Sir David Varney, previously a private sector
executive, was appointed the first executive chair of the newly-merged HMRC and was
tasked with generating £5m of efficiency gains and 16,000 job reductions by 2008.
The Gershon Review of 2004, whose eponymous report later became government
policy, was commissioned to scrutinize how public sector resources could be better used
to reduce operating costs (Shapps 2007). Following Gershon, 104,000 public sector jobs
were cut, generating intended savings of £15bn a year. Efficiency proposals at HMRC
were underpinned by assumptions that ICT initiatives could automate complex processes
(e.g. online tax returns). Yet the National Audit Office cast doubt on the scale of the
savings, suggesting that only around one-quarter had been attained (Shapps 2007). By
autumn 2009 HMRC were reported to have saved £300m, with 63 per cent arising from
headcount reductions (NAO 2010). While this seems to imply the success of efficiency
initiatives, problems emerged, with HMRC experiencing a huge backlog of cases, raising
serious concerns about the efficacy of tax collection (HMRC 2010b).
Despite these difficulties, the Government has continued to demand year-on-year
efficiency gains, with the 2010 Spending Review (HM Spending Review 2010) indicating
that gradual cuts of £3.5bn, focused largely on staffing costs and tax office closures, will
be rolled out by 2015. HMRC lost 30 per cent between 2005 and 2010, with a further 25
per cent reduction forecast from 2010. Annual staffing costs amount to just over half of
departmental costs (£4.8bn) (HMRC 2010a), but a further 25 per cent reduction over the
next four years will equate to £3bn cuts. Official sources have already suggested that these
cutbacks, in tandem with the work changes brought about by lean, have contributed to
problems of staff morale (Treasury Select Committee 2011).
The demanding objectives of staffing cuts and efficiency savings led management to
consider how working practices could be restructured. HMRC pioneered the introduction
of lean into the public sector with a reform programme termed Pacesetter, which included
the following challenges: to improve efficiency and customer service through a 30 per cent
productivity increase; to reduce backlogs and the level of inconsistency across processing;
and to ensure that HMRC became the UK Government’s ‘Processor of Choice’ (Radnor
and Bucci 2007). Lean, the core of Pacesetter, was described as follows:
In essence, Lean philosophy suggests that organizations can improve product or service quality for the
same or less cost by continuously reviewing their processes from a customer perspective to remove waste

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by reducing duplication and inconsistency, and by identifying and resolving the root causes of operational
problems. (HMRC 2011, p. 5)

The paper investigates the impact of lean working in HMRC in the context of claims that
such a radical change in work organization would unambiguously deliver ‘efficiencies’
and improve the quality of service provision.

RESEARCH APPROACH
The research, conducted in 2008–09, adopts a multi-method approach and aimed to
examine the perceptions and experiences of employees following the implementation
of lean at HMRC. Initial attempts were made to gain research access through the
government department, but site management proved uncooperative. Given that a
principal aim of the research was to investigate ‘frontline’ employees’ experience of
lean, the research team, composed of academics from six UK universities, sought access
through national and branch/site officers of the Public and Commercial Services union
(PCS). The PCS is the UK’s largest civil service trade union, with 300,000 members
overall and more than 70,000 in HMRC. Six sites (Lothians, East Kilbride, Newcastle,
Salford, Cardiff, and Leicester), which were central to tax processing and subject to
new lean procedures, were selected for study. Research began with interviews with
union representatives at each of the sites, who then facilitated further interviews with
employees across grades and functions. Within mainstream studies, management per-
spectives are often over-represented (Alvesson and Skoldberg 2000), and given that
there was a report commissioned by HMRC that predominantly reflected manage-
rial perspectives (see Radnor and Bucci 2007), the salience of worker accounts was
crucial.
Interviews primarily took place with employees on the processing ‘frontline’, although
supervisors from four locations were also included. All 36 interviews, lasting between
one and three hours, took place with individuals or groups of employees; they were
conducted on-site and were recorded and transcribed. The semi-structured nature of the
interviews allowed employees to expand upon the issues they considered central to issues
of efficiency and public service. Qualitative data from interviews was supplemented with
an analysis of relevant documentation from HMRC, consultants, and PCS. HMRC policy
documentation was drawn upon extensively to provide support and evidence for the
evaluative conclusions.
Informed by qualitative analysis, an extensive questionnaire was constructed with the
aim of collecting employee perceptions of working life before and after the implementation
of lean. Questions were designed to avoid potential problems of bias in response. For
example, questions eliciting agreement or disagreement with statements would include
both positively and negatively worded statements. Questionnaires were distributed by
PCS branch representatives to a random sample of approximately 15 per cent of the
workforce at each site, and 840 (51 per cent) were returned. The sample population in
each HMRC workplace reflected the relative size of establishments. Of the responses, 10
per cent were from Supervisory Officers (SO), 75 per cent from Administrative Officers
(AO), and 15 per cent from Administrative Assistants (AA). Data was inputted into SPSS
and qualitative comments fully transcribed.
Given that access was facilitated via PCS, we acknowledge that the account presented
is not ‘objective’ and that a limitation of the dataset is that it could be construed as
unbalanced. Participants in the qualitative and quantitative data collection comprised PCS

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members and non-members, with union members constituting the majority. However,
it should be acknowledged that documenting the experiences of PCS members does not
invalidate the study or make it excessively partisan, since employees were overwhelmingly
union members in HMRC. Sites exhibited high levels of PCS membership: Cardiff 90 per
cent; East Kilbride 95 per cent; Leicester 96 per cent; Lothians 97 per cent; Newcastle 89 per
cent; Salford 86 per cent. Furthermore, insofar as triangulation was possible, the analysis
revealed close correspondence in the data gathered from PCS representatives and other
staff and managers, demonstrated in the cross-tabulated results of the survey. Around
10 per cent of the survey data comprises responses from frontline managers (SOs) which
showed no marked statistical difference in findings on key aspects of lean working. The
840 survey responses were returned from a broad constituency of HMRC and the analysis
underlined the findings of the interview data.
The project covered diverse issues including staff morale, job discretion, ill-health
and sickness absence, team-working, and job satisfaction. An analysis of the lean labour
process has been published elsewhere (Carter et al. 2011). This paper breaks new ground
by focusing specifically on the impact of lean in respect of efficiency issues in the context
of performance and the perceptions of employees of effective delivery of public service.

EFFICIENCIES, METRICS, AND PUBLIC SERVICE

The following three sub-sections use qualitative and quantitative evidence from employees
to consider efforts to create efficiencies, the utilization of performance indicators, and the
impact of workplace change on the public service ethos.

Creating efficiencies
Given Pacesetter’s objectives, restructuring work at HMRC through the adoption of lean
is intrinsically linked to attempts to improve efficiency and service delivery. According
to the Gershon Report (2004), public sector efficiency necessitates reforms that include
reducing the number of inputs (people or assets), whilst maintaining the same level of
service provision, and enhancing the outputs while using the same inputs or lowering
the cost of the resources. These desired outcomes underscore a defining contradiction of
work organization in the civil service: the conflict between efforts to increase the quantity
and quality of service provision while containing spending (Fisher 2004).
Lean was introduced into a work setting in which most tax processing was organized
around whole case working, whereby employees were allocated cases on a daily basis.
Work involved tasks of varying complexity, such as interpreting and applying complex
tax regulations, searching for discrepancies and inaccuracies (and potential fraud), as well
as more straightforward administrative activities. In the desire to streamline processes,
consultants (initially PA Consulting and McKinsey, followed by Unipart) were drafted in
to advise on the redesign of workflow.
As interviewees explained, lean brought the re-engineering of working practices
that were formerly based on professional independence and judgement. Re-modelling
involved the breaking down of complex tasks into separate stages, a disaggregation which
several employees referred to as emulating a ‘production line’ environment. The creation
of standardized processes was coupled with the construction of individual and team per-
formance figures as consultants undertook detailed time and motion observation. Metrics
included the creation of hourly targets for each task, which could vary from six items per
hour in the case of tax letters, to 80 items per hour for opening cases. In order to facilitate

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‘flow’, desks were rearranged so that documents could seamlessly move between work
stations. One employee remarked:
Lean changed everything. Quite simply they [the consultants] had to redesign how the groups were set out;
they had to change the floor plan because they have to sit in a particular order so the flow is good. They have
little buffers on desks and they have to be fed in a particular way. This is all theoretical of course, because it
doesn’t work so they ignore it, they play at it. (PCS Representative, Site A)

The staff survey revealed that 70 per cent believed that lean had reduced the skill content
of jobs. Employees articulated experiences of reduced control, with a sense of being ‘no
longer allowed to think for ourselves’ and ‘apply common sense principles’. Data analysis
identified how fragmenting whole case working into standardized components destroyed
procedures that had previously worked well, as numerous tax officers now dealt with
particular parts of a process: ‘you get more mistakes because you are not working the
case cradle to grave’ (PCS Representative, Site D). An example was provided of the
consequences of job fragmentation:
Lean was introduced to us as being the ‘big thing’ that would make everything better. Management seem
to think that as long as we tick the appropriate boxes our quality has improved drastically. However, we
now receive more complaints than ever. The idea is that you will know your part of the job really well.
Unfortunately it just means no-one actually knows how to do the job. Each case is different and involves a
person. We are not making nuts and bolts. (AO, Site B)

A key principle of lean is ‘value streaming’ (Womack and Jones 2003), whereby the value
of each process is identified and the ‘wasted steps’ are eliminated. Many participants
reported on how deconstructing whole case working into discrete simplified tasks has
meant that they lost sight of the holistic nature of tax processing:
[Pre-lean] we could all do telephone work, post, open case returns, now we can only do one little bit of
that. . .we are losing skills. . . . In fact, lean has probably made things worse, because nobody is an expert on
anything anymore. (PCS Representative, Site D)

The staff survey confirms the extent of changes in job content following lean (Table 1).
Around three-quarters of respondents agreed that the job had become more monotonous,
fragmented, and lacking in variety. This is of significance given that lean purports to
create multi-skilling. Forth-two per cent of respondents believed that the backlog of tasks
had increased ‘a great deal’. Further endorsement was provided by an interviewee who
commented: ‘We have gone back in time and are operating a service which is so inefficient
it is embarrassing to actually work here’ (AO, Site C).
Interviewees commented on how everyday pressure to meet prioritized targets some-
times meant that other important aspects of the work were neglected. An example was
provided where legally prescribed deadlines for tax returns were being missed due to
backlogs of work, with some cases simply wiped off the system because staff had been
unable to deal with them. A further illustration was given regarding self-assessment:
People were taken out of self-assessment if they earned less than £100,000 and then they were issued with
form P810 which is every 3 years. We haven’t been doing work with P810s so we don’t know what they are
claiming, or what they are earning, so if we miss the 3 year deadline, we don’t know what they are doing for
another 6 years. . . . and we only keep records for 6 years. (PCS Representative, Site D)

Proving public sector efficiency is notoriously difficult and is often concentrated in

areas that can be measured quantitatively and along technical dimensions (Diefenbach
2009). Hence, HMRC has been inclined to corroborate the success of specific areas by
quantifiable activity. Yet staff are dismissive of these claimed successes, given their

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TABLE 1 Perceived changes in job content after the introduction of lean

A great To some A little Not Not at Does not

deal (%) extent (%) (%) much (%) all (%) apply (%)

Monotony of job 49 23 16 8 3 2
Not enough time 44 29 15 8 1 3
between jobs/tasks
Not given enough 27 34 21 13 4 1
information to do job
Not enough breaks 34 26 17 13 6 4
Not enough time to 34 27 21 11 5 2
talk to colleagues
Fragmented tasks 40 25 18 11 3 3
Lack of variety 48 25 13 9 3 2
Continuous workflow 42 28 13 11 4 2
Backlog of tasks 42 29 13 11 3 2

frontline experiences of backlogs, the increasing volume of complaints, and the neglect of
what management now deems to be low priority work.
Management in here will now tell you that it’s the great god lean that’s delivered these efficiencies. Absolute
shit. No one’s got benchmarks to compare it with. We think productivity has gone down. We have more
post on hand than we’ve ever had. The sheer volume of work that hasn’t been touched. . . . There’s more
work across the network than there’s ever been. . . . There are fewer people. And that’s only the stuff that’s
counted. (PCS Representative, Site A)

Employee experiences indicate that applying lean techniques in order to maximize effi-
ciencies at HMRC has proved problematic, given that qualitative judgements are essential
to case working. The fragmentation and standardization of work has lead to duplication
of effort and re-work, which in effect cancel out any potential productivity gains. Inter-
viewees commented that the pressure to provide the required hourly throughput meant
that their focus had shifted to getting work done quickly rather than thoroughly. In their
reflections, many respondents noted how problems arising from the reduced application
of their substantive knowledge were exacerbated by staff cutbacks. The following quote
describes how backlogs of files, which are stored off-site and contravene data security
regulations, cannot be addressed with current staffing levels:
We have all these files full of stuff off-site that doesn’t match the data protection compliance; 40,000 files
off-site, because we just don’t have the staff to do it. . . . But they can’t bring the files back into the office to
work them because we haven’t got the staff. (PCS Representative, Site D)

Performance monitoring
While systems of supervision and monitoring have always existed in the public sector,
lean has introduced an additional bureaucratic mechanism in the form of performance
measurement. This device has always had an ideological dimension (Diefenbach 2009) as
it sustains the focus on fiscal concerns and efficient use of resources whilst amplifying the
managerial discourse on competition (Clarke 2005). Under pressure to demonstrate effi-
ciency gains, there were attempts to standardize complex operations and shift focus from
‘first-order performance objectives’ to systems for defining and monitoring performance.
The unambiguous assumption that goals could be clearly defined, along with the means
to monitor and evaluate the results, is yet another element of private sector mimicry

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(Christensen 2006) as employees suffer from an ‘avalanche’ of formalized performance

reporting (Talbot 2010).
Prior to lean at HMRC, line management supervision was based on a normative
understanding that allowed staff to organize their own workload, enabling a degree
of autonomy. Such discretion was replaced with performance data based on hourly
targets, which renders more complete the link between labour time and the production of
quantifiable outputs. The process of calculating hourly targets was described as ‘reverse
engineering at its very worst’ and numerous comments echoed the sentiment that ‘you
can’t time post’. The disregard for variability and complexity was a source of constant
frustration:
With the nature of taxes, there’s a lot of exceptions and that’s the key thing with lean. If it takes over twenty
minutes, it’s an exception and there’s a lot of exceptions that don’t fit. And exceptions take as long as they
take because they’re exceptional. (PCS Representative, Site F)

Lean enhances managerial control through the utilization of visual techniques. Targets
were displayed on whiteboards, as line managers used green (above target) and red
(below target) pens to physically record hourly outputs. Interviewees explained how
these metrics had a deleterious effect on workplace behaviour and undermined the
respect they once had for managers:
HMRC has lost its direction. The most important management tool is the whiteboard, which most members
of staff have no interest in, along with all the add-ons that are hanging from it. If managers were trained
properly, then there would be no need for whiteboards. (AO, Site B)

Whiteboards were positioned in front of each team, alongside a summary whiteboard on

which line mangers conduct a post-mortem on the previous day’s figures. One employee
commented on how the various hierarchical levels have become increasingly accountable:
‘they [supervisors] have to explain why they didn’t hit the target and there’s public
humiliation for them as to what went wrong’ (PCS Representative, Site A). Statistics
are centrally collated and a weekly teleconference for head office managers takes place
to discuss whether targets have been achieved. The employee continued: ‘they get a
collective kicking for not hitting their targets and then the kicking is passed back down
the line’. The quantitative evaluation of work processes adds an additional bureaucratic
layer, rather than simplifying operations and reducing duplication.
Narrow performance indicators encourage a ‘compliance culture’ (Lapsley 2009),
as employees become adept at performing to target. In one regional office, in order
to meet September targets, the May to August backlog was disregarded. Outstand-
ing post was deemed non-urgent since only targeted cases were being worked. The
sense of constant pressure to achieve targets was reported by both workers and man-
agers, citing instances of collusion in doctoring the figures, which runs counter to
the public service ethos. Complaints were also raised by frontline staff at other sites
as they expressed their frustration at the disregard for hitherto important aspects
of work. Despite the focus on performance metrics, the precision of the informa-
tion is questioned, as 78 per cent of survey respondents agreed that management
statistics were inaccurate. Such false reporting may corrode organizational trust and
several instances were cited where targeted figures had been fudged in order to appear
successful.
Basically if the way they count it doesn’t give them the answer they want, they count it differently. So where
senior management are saying that lean is improving things it’s getting worse, there’s more work on hand,

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TABLE 2 Performance management factors contributing to workplace pressures post-lean

A great To some A little Not Not at Does not

deal (%) extent (%) (%) much (%) all (%) apply (%)

Supervisory monitoring 50 28 11 5 2 4
Meeting individual targets 53 29 10 5 1 2
Meeting team targets 45 35 13 4 1 2
Competing with other 32 34 14 11 6 3
teams
Pressure from a supervisor 21 32 23 16 6 2
Use of whiteboards 52 23 10 9 4 2
Quality checks 48 25 12 7 5 3

there’s less work being done, we’re able to hit fewer and fewer of the targeted bits of work, because they’ve
been replaced by complaints. (PCS Representative, Site F)

Fieldwork across multiple locations presented corroboration of reported instances of work

being moved between sites in order to massage figures. As targets were being met in one
particular area of processing, individual offices would then bid for work from elsewhere,
even if other aspects of the work were being neglected:
So you have this magical rotation of work where Edinburgh is doing our tax returns because someone else is
doing Edinburgh’s post. Leicester’s work has come in here. . . and it’s a moving target. (PCS Representative,
Site A)

Shipping work around different regions does not sit comfortably with the claims that lean
is maximizing ‘flow’ and removing wasteful steps, given the additional effort required in
terms of logistics, storage and retrieval. The negative effects of this on both staff and tax
payers were noted:
We are so up to date on post and returns that we can actually bid for work now, yet we are actually sending
work out to other areas – like work lists – because we can’t do it. Can you imagine how confusing that is
to a tax payer? You get a demand or a letter from one tax office telling them they have dealt with this piece
of post, but your tax office is still in [Site D]. It makes absolutely no sense for us to be taking in work from
somewhere else and then to be shipping out our work. (PCS Representative, Site D)

Several survey questions investigated the consequences of increased performance man-

agement (Table 2). The survey revealed enhanced pressure to meet individual and team
targets, which was exacerbated by the use of whiteboards and from greater levels of super-
visory monitoring. Increased pressure and stress in the working environment can have
negative consequences on productivity (Green 2006), which runs counter to aspirations
for efficiency enhancements.
Using detailed performance metrics has the potential to show changes in efficiency
levels, but this masks operational problems. At HMRC, attempts to streamline processes
and performance manage the staff has merely exacerbated backlogs (HMRC 2010a), while
creating ‘false impressions’ at the level of aggregated data. Rather than create efficiencies,
enhanced monitoring, along with the managerial effort required to oversee the process,
has generated inefficiencies. In the case of HMRC, performance management systems
have contributed towards far-reaching negative consequences to public service provision.
Ironically, while lean aims to strip out waste, what we are seeing is an increase in
bureaucratic and inefficient practice.

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Valuing the public service ethos

Pacesetter’s predominant focus on delivering efficiency raises the question as to whether
it is desirable to spotlight efficiency at the detriment of other elements of public adminis-
tration. The focus on efficiency has been accompanied by a shift in strategy that sees the
public sector primarily as a service provider, with other legitimate governmental roles,
such as care for citizens and social justice, perceived as secondary. This one-dimensional
focus towards market orientation neglects other considerations (Christensen 2006) and
represents an ethical change from the provision of public welfare to more commercial con-
cepts. Inefficiencies that are seen to characterize public administration cannot be removed
at will to produce ‘fresher, cleaner, faster, shinier public sector management’ (du Gay
2005, p. 54) since due process requires that government is constrained in its ability to act
in a particular manner.
Many HMRC employees exhibit attachment to the public service ethos so that reframing
the role of HMRC was widely resented:
A lot of managers and senior managers and pro-lean people will say ‘Wow, that’s not a way to run a business
is it?’ or ‘That’s not very businesslike’. And we keep saying, ‘Well, we’re not a business, we don’t have
customers, it’s a public service’. (PCS Representative, Site F)

HMRC employees described how their work is centred on a ‘fair’ taxation system, but
changes in working practices brought about by lean are impacting adversely on the
delivery of equitable treatment. Employees at one site reported that of the 40,000 annual
complex tax cases (high earners), only 5,000 were to be investigated in depth. One
interviewee commented, ‘. . .there is an inbuilt inequality in this’ (PCS Representative,
Site D). Targets can create unintended effects for the public service that is being delivered
(Hood 2007) and this can be seen with regard to the ongoing problems of evasion,
avoidance, and non-collection of tax.
The role of Government is to act in a fair manner and consider the uniqueness of each
individual case, while ensuring all tax payers receive impartial treatment. The breaching
of these principles in the post-lean HMRC prompted many to express dissatisfaction at
the way citizens are being treated.
We’re public servants. We came into the job expecting to provide a good level of service to what our
managers euphemistically describe as ‘customers’ and what we’d call tax payers. But we have an obligation
under the tax payers’ charter to treat them fairly, to treat them equitably, to do the very best we can to keep
their tax affairs up to date. And then this process [lean] comes in which means that we don’t look at annual
coding lists. So we know that there’s a problem with hundreds of thousands of tax codes in the country, but
it’s not one of the priorities, so we park it. So we’ve got years and years and years where tax payers were
either entitled to repayments or should be getting underpayment notices, but we don’t have time to do that
because it’s number eleven in a [priority] list and we can only do the first three or four. (PCS Representative,
Site A)

While tax collection may be time-consuming and burdensome it need not imply ineffi-
ciency, especially if the consequence is the generation of additional government revenue.
Reorienting the focus towards efficiency can lead to the neglect of other legitimate
governmental considerations.
Womack and Jones (2003) state that a crucial starting point for lean is ‘value’ which
is defined by fundamentally rethinking value from the perspective of the customer. This
perspective complements the conceptual reframing from citizen to customer in public
sector discourse, which is lodged in narratives about the transition to a consumer society
that enlarges the reach of the market (Clarke and Newman 2005). According to HMRC
(2007, p. 5), ‘successfully achieving a culture of efficiency in the long-term is through

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TABLE 3 Employee perceptions of lean’s impact on quality

Strongly Agree Disagree Strongly Undecided

agree (%) (%) (%) disagree (%) (%)

Quality of work has 4 18 39 30 9

increased since lean
Having to hit targets distorts 37 49 8 2 4
my priorities and affects
quality
Lean has sacrificed quality 46 37 10 1 6
for quantity

a focus on the customer’ yet evidence shows that the delivery of service to the public
has declined to ‘unacceptable levels’ (Treasury Select Committee 2011). Even if processes
associated with lean were improving customer service, a potential contradiction arises
given that equitable tax collection, which contributes towards broader public values, may
in fact be incompatible with the needs of individual customers, particularly if – in the
interests of fairness and equity – they are personally being scrutinized. It is assumed that
increased consumer orientation will encourage improvements, but effectiveness may run
counter to efficiency objectives. These incompatibilities were noted:
There’s a big emphasis on customer service, although it’s poor. There’s an emphasis there rather than
revenue gathering. You’d think the government would be more concerned about gathering money in. (PCS
Representative, Site F)

Many HMRC employees were troubled by the facade of customer service given that there
are more than 200 office closures, a reduction in opening hours, and a shift away from
face-to-face contact towards call centres. Many employees commented that the reality
was that of a deteriorating service and used terms such as ‘deplorable’, ‘inferior’, and
‘public disservice’. For one employee, citizens were becoming ‘a casualty of this obsession
with figures, statistics and paperwork’ (AO, Site E). Even with HMRC’s commitment to
prioritize customers, one interviewee remarked that lean’s achievement was ‘reducing
quality to customers’ (AA, Site D). Consequently, there has been a substantial increase in
complaints.
The number two priority, interestingly enough, is complaints, and that’s the other growth area. We’ve just
taken on a full national complaints team, so it’s growing exponentially because we’re not doing the basic
work. (PCS Representative, Site A)

The survey provided further details of how employees perceived the impact of lean on
quality (Table 3). Despite HMRC’s attempts to engender greater consumer reorientation,
over 80 per cent of respondents believed that lean has sacrificed quality for quantity,
distorting the priorities of HMRC. One employee remarked ‘There’s no morale left, its pit
face mentality now’ (PCS Representative, Site A).

CONCLUSION
In times of austerity, governments seek out various means to pursue efficiencies and
reduce the public sector deficit. Lean has attracted rising interest from policy-makers as
it promises to ‘drive efficiency improvements’ (Radnor et al. 2006, p. 10). Within the UK,
HMRC was the first public sector department to adopt the large-scale implementation

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94 BOB CARTER ET AL.

of lean as a central component of its Pacesetter programme. HMRC, as the flagship

of public sector reform, has as its key priorities: maximizing revenues; reducing costs;
and improving the customer experience (HMRC 2011). Lean is perceived as the pri-
mary vehicle for meeting these objectives by providing quality public service at less
cost, by streamlining operational processes to eradicate waste and duplication, and by
reviewing operational processes from a customer perspective. However, proving the
success of this project is highly problematic, since efficiency is not a variable that can
be easily isolated, with policies having a spectrum of effects, some of which may be
unintended.
Going beyond the empirical findings reported here, evidence from policy documents
casts serious doubt on whether lean has contributed positively to HMRC’s strategic
priorities. First, the difficulties of providing correlated support to prove that lean has
generated efficiencies have been highlighted in a report on the value for money of
Pacesetter: ‘. . .there are uncertainties over the full extent of the financial benefits from
the programme and the extent of improvements in efficiency’ (HMRC 2011, p. 16).
Undoubtedly, staff cutbacks and tax office closures are contributing significantly to deficit
reduction. However, the full cost of any change programme is frequently obscured, with
HMRC reporting that the total spend on Pacesetter between 2005–06 and 2010–11 is in
the region of £55m to £115m, while acknowledging that the ‘wider costs’ associated with
implementing change have been excluded.
An ongoing dilemma for policy-makers concerns how to reduce costs while maximizing
resources, and the latter is proving particularly problematic at HMRC. Efforts to recover
the ‘missing billions’ in taxation (Murphy 2008) are becoming exacerbated rather than
reduced as lean has increased lead times (HMRC 2007). Consequently, governmental
accounts show a substantial tax backlog, amounting to over 18m cases, the reduction
of which is ‘a very significant challenge’ (HMRC 2010a). Furthermore, concerns have
been raised about the appropriateness of Pacesetter to the area of tax collection and
revenue generation. The Treasury Sub-Committee Inquiry (2010b, p. 2; 2011) stated:
‘HMRC generates income for the government, and must be treated differently to other
government spending departments. Cutting tax-gathering budgets will not save money;
it will cost money. Tax avoidance will increase; revenues will diminish.’ If the situation
continues, then the effective retrieval of taxes to fund public services is likely to deteriorate
further.
The contribution of lean to the streamlining of processes in order to achieve a 30 per cent
productivity increase is also unproven. Despite substantive effort going into the collection
of various metrics, quantitative evaluations of performance improvements are elusive:
‘the Department does not have clear information to show trends in service delivery,
quality, workload, the time taken to process work or work awaiting processing. Where
information is available it presents an inconclusive picture’ (HMRC 2011, p. 18).
Improving customer service has been a key objective of Pacesetter and HMRC continue
to prioritize this. Nevertheless, a recent report shows widespread concern about service
standards and the impact that this may have on individuals and businesses, with customer
experience described as being ‘at an all time low’ (Treasury Select Committee 2011). Thus
far, improvements in customer service are largely framed in operational terms regarding
processing times. While this has been disappointing, one could equally argue that the
‘value’ of HMRC from a customer perspective is that UK citizens can assume that
appropriate levels of tax collection will be made available to fund public services. This
sentiment is one that is reflected in the mission statement displayed in HMRC offices:

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‘We make sure that the money is available to fund the UK’s public services’. Yet, lean
implementation has failed to realize improvements in terms of both customer service and
tax collection.
To summarize, lean was implemented in the hope of addressing key strategic pri-
ority areas, yet positive claims can only be made in terms of cost-cutting, much of
which is attributable to headcount reduction and office closure rather than lean per se.
Arguably, achieving cost savings comes at the expense of improving customer service
and maximizing (tax) revenues. This raises questions as to whether these aspects of public
administration should be sacrificed in times of austerity.
This wider body of evidence clearly points to the problematic of lean implementation
and the dissonance between policy and tangible efficiencies and improvements. The micro-
level research reported here, which was carried out in 2008–09, was speculatively prophetic
given substantiation provided by recent policy documents. Reporting the insights and
perceptions of the largely unionized workforce helps to illuminate how lean has been
disseminated and shapes everyday experiences within tax processing, highlighting the
disconnect between policy aspirations and the reality of lean implementation. Changes in
working practices reveals that HMRC has undertaken an organizational transformation
along factory lines, in the belief that lean would deliver improvements in keeping with
strategic priorities. The study shows how moves to commodify the intangibility of labour-
intensive public services have potentially damaging consequences. Rather than reducing
inefficiencies and waste, lean has produced inefficiencies through the rupture of the
holistic understanding of the work process by professional public servants. Employees
experience an excess of performance measures, as games of compliance are constructed
to meet artificial targets rather than tackle tax backlogs. In this respect, lean is failing
to deal with the problems it was intended to remedy and is indeed exacerbating them.
Furthermore, lean has sacrificed the intangible ethos of public service that underpinned
the commitment of the workforce.
Lean is receiving much attention in the current economic climate, yet serious questions
need to be raised about its application in a public sector environment. At HMRC,
implementing lean during a period of severe budget cuts has compounded its own
negative consequences. While it is difficult to decouple the effects of lean from those of
cutbacks (HMRC 2011), part of its appeal is that it helps steer HMRC in the direction of
a slimmed down service. This manifestation of lean dovetails with the ideology of New
Public Management: explicit performance metrics which are output-driven can be seen
with hourly monitoring of work activities; ‘hands-on’ management styles are evident with
enhanced supervision; and the stress on greater labour discipline is apparent throughout.
At HMRC, lean was not implemented in pure textbook fashion, but as with any
managerial philosophy, it is idealized in theory while being implemented according to
local contingencies. In fact, HMRC’s version of lean has been described as the ‘closest of
any public service organization to date in implementing the complete lean philosophy’
(Radnor and Boaden 2008, p. 2). Some may suggest that the problems reported arise
because lean is more applicable in a manufacturing environment, even though case-based
evidence from this sector also shows negative consequences (Lewchuk and Robertson
1997; Danford 1999). Applying a manufacturing model to the office, in particular the
public sector with its own unique ethos, in reality raises a number of contradictions and
impracticalities. This triggers broader questions about the applicability of lean to a public
sector environment.

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Finally, while our findings are particularly stark, they align with other studies that reveal
how organizational change programmes often lead to many public services suffering as
a consequence (Foster and Hoggett 1999; Butterfield et al. 2005; Ackroyd et al. 2007).
Further indictment is provided by the Treasury Select Committee (2011), whose cross-
government staff survey ranked HMRC as the most unhappy workforce among public
sector departments. We are witnessing long-term and sustained damage to HMRC services
and its employees, which is likely to have baleful consequences in the current financial
climate. These developments do not bode well for the future of the public sector, given
plans for the continuing roll-out of lean across other government departments.

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