Finland: Employee-driven productivity enhancement proves beneficial for municipalities

A two-year-long project developing and testing an employee-driven approach to productivity improvement in local government organisations in Finland has shown significant results. In the five municipalities that took part in the project, productivity improved by €2.7 million or almost €1,000 per employee, per year. In addition, the employee-driven approach simultaneously aimed to foster new practices that have benefited the quality of working life in the municipal organisations.

Background

The strained economic situation, with repeated cuts in central government transfers and diminishing tax revenues, demographic changes and diversifying needs of citizens, call for innovative solutions for increasing public administration efficiency. Productivity in service creation and enhanced effectiveness is an inevitable element in solving the so-called ‘sustainability gap’ in the public finances of municipalities. The sustainability gap refers to the additional financing needed to balance the finances in the long run, due to the ageing population.

Against this background, the publicly funded Finnish Innovation Fund Sitra initiated the 'Productivity from Quality of Work Life (LATU)' project in 2010 (see online article (in Finnish)). The aim of the project was to improve the quality of working life for employees, while simultaneously enhancing productivity and management in five municipalities in Finland. The participating municipalities were Hollola, Lieksa, Masku, Punkalaidun and Siikajoki. The project was co-funded by Sitra and the five municipalities, and implemented in cooperation with the tendered companies Dazzle Oy and Rondo Training in 2011 to 2013.

A broad-based approach

The five participating municipalities were selected on the basis that they represented the Finnish municipalities in their heterogenity. This way, the approach used in the project could be tested and developed so that it would ultimately be feasible to implement in all municipalities, despite differences in shapes and sizes. The project targeted all employees in the participating municipalities (therefore, over 3,100 employees). Since Finnish municipalities are responsible for providing their residents with a wide range of statutory basic services, such as social welfare and health, education, culture and technical infrastructure, each municipal organisation includes several workplaces and organisational structures. 

Accordingly, the specific development measures adopted at the local level also vary widely in their characteristics. For example, in Siikajoki, measures include small-scale changes such as providing cleaners with access to computers to ensure that they receive information in an efficient manner on events that might influence their work, as well as more substantial changes like modifications in the service framework in elderly care, which has reduced the need to move patients between different care facilities.

Improving quality of working life while enhancing productivity

Enhancing productivity and quality of working life are often considered opposite forces. There is often an assumption that developing productivity involves budget cuts that negatively affect the quality of working life. A starting point for the project, as for Sitra’s overall aim in their objective to develop public services, was a human-centred operating method.

The targets of the LATU project were to improve the measurable well-being of the employees, while simultaneously improving the yearly productivity in each municipality. The method used in the project builds on achieving development through employee-driven initiatives. A quantified target was set to obtain documented improvement ideas from 10% of all personnel. Each initiative was assessed in terms of economic impact, impact on working life of employees and impact on productivity and services for residents.

Since it is impossible to determine the exact economic impact of each initiative, the initiatives were clustered in four categories according to their estimated impact in euro (€1,000, €5,000, €15,000 or €50,000 per year). Furthermore, the effects of each initiative were analysed from an internal perspective, looking at the effects on the quality of working life of employees, as well as from an external perspective, looking at the effects on the service for residents. An overall quantified target was set to increase the yearly productivity in each municipality with a total sum corresponding to at least €500 per employee.

Bottom-up implementation to secure permanent change

Another aspect of the model was that 5% to 10% of the municipality employees received special training in order to function as ’internal innovators’ in their organisations. The role of the internal innovators was to work as productivity enhancers. They regularly arranged meetings among employees to discuss workplace development matters and they worked closely with management. Since the aim was to implement a permanent operating model, the development process was connected to the municipal strategies and management systems of the individual municipal organisations.

Results

Combining the development efforts with strategy and decision-making processes lead to permanent improvements beneficial both to staff and local finances. Both the targets related to well-being and to financial productivity were met in all municipalities. The project evaluation report, however, shows that the targets related to the well-being of the employees were only just met, while the economic productivity targets were clearly exceeded. In the evaluation report, this is explained by the external pressure put on the personnel that coincided with the implementation phase. The economic situation in public finances was increasingly strained, along with a preparation of a historical reorganisation of the municipal structure and functions in the country. Nonetheless, improvements in quality of working life were reported with regard to improved interaction with management and overall job satisfaction.

According to the evaluation, the bottom-up approach has led to a change in workplace cultures and attitudes, including better understanding among employees of how they in their individual roles can contribute to the productivity, working life quality and service capacity of the organisations. The participating organisations have been equipped with the skills and tools needed to continue to enhance productivity on their own after the end of the project.  

Disseminating the model with social partner support

Owing to the broad-based approach in the pilot project, the LATU project’s practices can easily be applied by any Finnish municipality. The tools developed within the project framework are available for all municipalities. The model used, as well as thorough guidelines on its implementation, have been compiled in a Finnish-language handbook (Lupa tehdä toisin – Henkilöstölähtöinen tuottavuuden kehittäminen (3 MB PDF)). The results of the project assessment are presented in the report Tuottavuutta laatua parantamalla? (361 KB PDF).

While the labour market institutions did not play an active role in the project, the employers’ association Local Government Employers is committed to further developing and spreading the project method to other municipalities. The bargaining agents from the employees’ side, the Public Sector Negotiating Commission (JUKO ry), the municipal sector organisation for trained care personnel (KoHo ry) and the Union of Local Government Employees (Kunta-alan unioni) are also committed to this process, together with Sitra. 

Commentary

In its Structural policy programme from 2013, the Finnish government outlined measures to close the country’s sustainability gap of about €9 billion. The document highlighted the importance of improving the productivity and effectiveness of public service provision, which municipalities are largely responsible for. It states that if growth in the productivity of public service provision were to be boosted by 0.5 percentage points, the additional financing (in relation to GDP) needed to balance the public sector finances in the long run would be reduced by 1.4 percentage points.

Real changes in organisational structures can only be achieved if the employees are committed. Simultaneously, increased workplace influence and autonomy has a positive influence on job satisfaction, in motivating and committing employees to their work. The approach in Sitra’s project hence seems to be the right way to tackle the challenge. With over 300 municipalities in Finland, a great effort is however needed in order to implement the method widely. The support and involvement of the social partners is crucial in this process. 

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