Public service providers are facing a profound challenge. The public sector's share of GDP will fall by 2.5% in real terms between 2010-11 and 2013-14, according to the November Pre Budget Report (PBR). As a result, it is vital that efficiency remains at the top of Serco's agenda if we are to continue to deliver the quality and scale of services that the public need and expect.

Since the Gershon Efficiency Review we have achieved a great deal. However, this makes getting more for less harder now, because the problems that are visible and easy to fix have probably already been tackled. Those that remain are likely to be much harder to solve. So what are the challenges we need to overcome to get to the next level of efficiency? For more than 40 years Serco has been finding ways to improve the efficiency of our services to our customers - now in over 30 countries around the world. There are four issues that I have seen time and again that are essential to achieving better value for money:

• Clarity of objectives
• Freedom to innovate
• Consequences for failure
• Quality financial information

Real change and effi ciency savings can only come from a greater focus on, and clear objectives for, frontline managers. Policy and strategy are decided at a senior level but the real innovators in implementation are the front-line managers - the people who support the doctors, nurses or policemen. They are the people responsible for delivering high quality services within tight budgets.

The contractual shield
The private sector is often better at empowering these front-line managers because of what we call the 'contractual shield'. A contract provides the service manager with objectives, resources and a time frame within which to meet these objectives. With a contract in one hand, they are free and obliged to fi nd solutions with the other.

This is mostly not the experience of public service managers working within government. Policy-makers can be pulled into the managerial role and intervene in day-to-day decisions that should be delegated.

While this may happen with the best of intentions, it is dispiriting and confusing for managers and results in inertia and a lack of direction. To empower front-line managers, policy-makers need to make the decisions, stick to them, and allow managers the freedom to work out the best way forward within the policy framework.