Is Gordon Ready to Be Brutal?

Organisational change rarely makes it from the management to the comment pages but Gordon Brown's comprehensive spending review has changed all that.

It's not just that the scale of the relocation of jobs out of London, the merger of the Inland Revenue and Customs and Excise and the transfer of jobs from back-office "transactional" services to front-line delivery together constitute the most significant restructuring of the public sector for a generation. It's that the chancellor's sums depend upon achieving the £21.5bn of cumulative savings. The government is staking its credibility, its promise not to raise taxes and its remaining social democratic credentials on its ability to deliver profound organisational change.

Such change is not impossible: BT's productivity nearly trebled in the decade after privatisation and there were similar transformations in electricity, gas and water. Brown's efficiency drive is small-scale in comparison. The issue is whether the great Whitehall departments and agencies, together with local government, can reproduce such performance when there is no shock to their ownership and organisational structures like those in the privatised industries that compelled managers to make brutal, unpleasant decisions.

Very little successful organisational change has ever been achieved without powerful and highly motivated leadership teams skilled in the business of reinventing an organisation's entire processes, first cutting jobs and then having the talent and inspiration to hire afresh to fill the smaller number of new jobs while picking up the shattered morale of those who are left. There are few enough individuals capable of doing this in the private sector. In the public sector, where part of the implicit employment contract is that change will be gradual, they are almost non-existent.

The Treasury may have a thorough grasp of the necessity for change but it still seems to think that the public sector's failings can be established by statistical analysis and remedied by diktat. The Treasury view, for example, that one way to save is simply to reduce public sector sick-leave to the private sector average - without recognising that much public-sector work (nurses, teachers etc) is disproportionately exposed to sickness - was a classic of the genre. But that's only the tip of the iceberg.

Less than one quarter of the savings are to come directly from job losses, the remainder from improved productivity from procurement and the re-engineering of "transactional services" through information technology.

Savings of this order are possible; but who is going to manage and lead them? The Office of Government Commerce has established that only one quarter of procurement staff in government departments and 15% in government agencies have proper procurement qualifications. Nor is the government alone in hoping that IT can produce efficiency savings; this is the holy grail that eludes many companies in the private sector.

Effective human resource management is essential to achieve anything, but investment in it is woeful. The Audit Commission last year established that only 58 out of 150 local authorities had effective people management policies. And a precondition for effective HR is robust channels of communication with the workforce - hard enough to achieve in these times of widespread cynicism about any manager's motives, but almost impossible at the same time as launching massive redundancy and relocation programmes.

In the Gershon Review, a recent paper by the Work Foundation, it was argued that the government could raise its chances of success fully pulling off massive organisational change if it began with a clear and unambiguous statement of belief in how and why public services create public value. Only thus will it have any kind of platform for winning the hearts and minds of public servants as they go through the excruciating uncertainties of change.

Managers must set targets that they own and must be able to deploy the full armoury of human resource management - from pay and hiring through to effective communication -to support those goals. A new relationship must be created with the trade unions, who in turn must recognise the strategic case for change. Public sector employees, above all, must feel they are valued.

It can be done. The chancellor has the capacity to talk the language of creating public value while urging change - but he needs to identify, hire, promote and enfranchise the managers and organisational leaders who can deliver what is wanted. In short, he needs to become part chancellor and part management champion - an unprecedented change in role and culture, but one on which the success of the government now depends.

· Will Hutton is chief executive of the Work Foundation