The first deep cut

February 24th, 2012 at 2:03 pm by David Farrar

In my column at the I label the restructuring the first deep cut.

18 Responses to “The first deep cut”

  1. Manolo (21,988 comments) says:

    When will Labour lite cut loose the Human Rights, Race Relations and Families Commission quangos?
    There must sensible savings of a few million dollars in each.

    C’mon Mr Key, muster some courage and take action.

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  2. DJP6-25 (1,779 comments) says:

    I wonder when the Herald will catalog all its contribitors ‘political positions’? Or can we just assume that most of them would vote Labour if there was an election on Saturday?

    As for cuts. How about a 100% cut to ‘Womens Affairs’, and ‘Human Rights’?


    David Prosser

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  3. Nick R (941 comments) says:

    DPF – It’s a good post, but I think one part is wrong – neither MFAT nor the Govt has made a promise to have a 24/7 staffed hotline “back in NZ”. They haven’t ruled out putting the call centre overseas.

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  4. David Farrar (1,767 comments) says:

    Nick: Ta – I thought it was for in NZ. Do you have a copy of the actual restructuring paper? All I can find online is the Minister’s PR – nothing from John Allen.

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  5. RRM (12,553 comments) says:

    Again, as yesterday…

    The restructuring was expected to save $20-25m annually.

    That’s about a day’s worth of the borrowing English & Co have been running isn’t it?

    Looks like we’ll need to disband the Government of New Zealand altogether if we want to get back into surplus…

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  6. Bob R (1,826 comments) says:

    Before cutting NZ jobs how about cutting back on money we give away to people who don’t even live here and pay taxes? Apparently in 2009 the foreign aid budget was $407 million. This theft should be stopped or at least reduced in scale.

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  7. RRM (12,553 comments) says:

    Bob R –

    NZ Aid pays New Zealand builders to go to the islands and do little construction jobs e.g. schools & Doctor’s clinics there.
    NZ Aid also pays New Zealand engineers to go to the islands and design/supervise said work.

    It’s quite a good little scam, NZ looks good because we spend dollars on aid, but most of them stay in NZ…

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  8. Nick R (941 comments) says:

    @ DPF – John Allen told Checkpoint last night it was MFAT’s “expectation” that the call centre would be located in NZ. I suspect the only reason they are being a bit careful is that technically MFAT is still consulting its employees on the restructuring. It won’t be announcing a final decision until April. But I’d be surprised (to put it mildly) if the call centre ends up in Manilla or somewhere…

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  9. Chris2 (915 comments) says:

    I’ve visited (and worked) at a number of our foreign missions in my time.

    After the staff cuts are announced we can expect MFAT staff (and the PSA) to say that cutting back their specialist career diplomatic staff is very foolish as it is a wonderful resource and we can’t afford to loose just valuable people.

    Well, what I always found interesting in our non-English speaking overseas posts (Italy, Russia, Iran, Malaysia, China, and all of South America, etc) is that bugger-all of our diplomats could speak the local language. It would be a very lucky Mission that had two New Zealand diplomats who spoke the lingo with any fluency. They often had to take a local employed native speaker with them to meetings.

    Which begs the question: how effective are our “prized” diplomats in non-English speaking countries anyway?

    In contrast, the Australian Government has a language training school for its diplomats where they spend 6 months full-time learning the language of the country they are being posted to.

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  10. reid (21,412 comments) says:

    MFAT staff on overseas postings get massive allowances (free accomm, schooling, etc.). Which for those in receipt thereof make up around 60% of their remuneration.

    No wonder John Allen’s winding those back, but I daresay these unique skills will merely migrate to Australia, for many. Making it extremely difficult for us to close any more significant trade deals especially in the critical regions of the ASEAN and BRIC areas.

    Question is: bang for buck.

    Neither Allen nor McCully have in their careers displayed particularly good strategic skills, although both display remarkable skills in relationship building with people who count but unfortunately for those at the receiving end (i.e. us, the country), those skills don’t, at the end of the day, increase the rubber on the road. For example, Allen ran NZ Post for many years. NZ Post is an extremely large employer by NZ standards, with over 15,000 employees, many of them postal workers: posties, people who work in the post shops and in the mail processing centers. It also has a number of wholly owned subsidiaries and joint ventures such as Kiwibank, Datamail, CourierPost, a half share in Datacom, a JV in Australia with DHL and a few others. Allen designed what he called a “federalist” model whereby the subsidiaries charged each other full or near full commercial rates for joint projects. Each division had separate IT, HR, delivery models, etc etc etc. This of course resulted in the subsidiaries competing internally since the separate CEOs are rewarded for their “profits” regardless of whether or not they were earned by cannabilising them from the other division. Transfer pricing in other words. Pseudo-activity, in the real world.

    For example, in the first five or so years when it was getting started, Kiwibank was “given” (unannounced) seed capital from NZ Post’s Bill Payment Service generated by fees when people pay their phone, electricity bills etc at a post shop, which was run by a separate “federal” division called the Retail division.

    It is remarkable that from year one to about year five, the exact amount of Kiwibank’s reported “profit” amounted almost precisely to the amount of revenue received from NZ Post Group’s “injection” of that seed capital. Thus pleasing the political masters at the time (Anderton) and allowing him to claim the bank was “profitable” in the House. Wasn’t that convenient.

    Since Allen left his “federalist” model has been abandoned. What did it do, in terms of rubber on the road? Nothing.

    McCully’s career seems cut from a similar cloth as Allens. As-in, extremely capable on the surface. When you look at the results in terms of real outcomes and improvements generated, not much to show.

    I really hope this MFAT “adventure” proves to be different but unfortunately I can see both McCully’s and Allen’s paw prints all over it. Therefore I’m afraid, NZ has just started a long slow downhill run from which it may take decades to recover.

    At the same time, I’m sure Allen will be lauded within the ranks of the senior civil service for having “courage” and “foresight” just as McCully is no doubt lauded within Cabinet ranks as being “first off the rank” as DPF’s theme alludes. All well and good.

    However, it would be nice if once, just once, the media did its job properly and astutely researched Allen’s and McCully’s histories long term outcomes over their careers and put that before the people for their objective consideration, instead of what they will do, which is focus on a few emotive case studies of micro-human twagedy and then move onto the next day into the next twagedy in the news cycle.

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  11. peterwn (4,283 comments) says:

    Choosing MFAT is cunning in a way since most of its services do not impact on the public at large. So Labour / PSA are trying to highlight reduction in consular services to travelling Kiwis by trying to imply any alternative of these services would be second rate.

    I have a copule of long standing ‘beefs’ with MFAT especially the High Commission in London. There was a guy on the ‘local staff’ (ie a UK resident without any diplomatic status) who facilitated those wishing to immigrate to NZ. The former NZ Electricity Department hired immigrant engineers and this guy was the main ‘interation’ point for hiring. He needed to be able to explain the job and carry out a job interview on which a hiring decision was based and he was held in high regard. The Department wanted to bring him to NZ for a week or so he could get a better understanding of the nature of the jobs and the Department needs. There was resistance from MFAT people since it went against their internal protocols. Even more silly was that such local staff may be given a NZ trip just before retirement as a sort of ‘perk’ as NZ was not really going to benefit then. He did visit NZ after high level pressure but when one of the senior Department staff was in London and visited NZ House he got a real ear-ful over it. The utter cheek of the diplomats!

    The other occasion involved ordering stuff from an European supplier for an electrical substation to supply a think big’ project. We successfully pleaded with them for fadt delivery. When the stuff was ready to ship, they asked NZ House, London to arrange shipping as was normal practice. The NZ House bureaucrats took ages and ages to arrange shipping much to the Department’s embarassment. They just wanted to do things in their own sweet time and could not care less whether the Government (who paid their salaries) was promoting the Think Big projects.

    So NZ House provided crappy service to my employer on two occasions, and now the diplomats, Labour, PSA (where a paid official once threatened me) are trying to call on public support of the status quo. As far as I am concerned they can jump into the lake.

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  12. CryHavoc (52 comments) says:

    DPF – any chance for a royalty payment from your Herald column mate? Might need it soon!

    I can’t comment on the details of the restructuring and wouldn’t want to; wanted to comment yesterday in defence of my friends and colleagues who I know to be tremendously talented and dedicated, and don’t deserve to be called “rich pricks” and “troughers” by the people for whom they work so hard. Believe me or don’t believe me; I’m right, and I actually know them and their work. The process to get into MFAT is exceptionally demanding, and yes of course there is the odd dud – there are 1400 employees – but in general the people do have other options and often take significant pay cuts to join (as I did) on the promise of an exciting career, in service of their country.

    With respect to allowances, I just wanted to make the point that what looks hugely generous from NZ doesn’t often feel like it when your partner, who was employed in a job that paid a good salary back in Wellington, can’t work in your host country. And every time you get posted, he/she has to pack up their job and try to form a new professional network – if he/she is allowed to work at all. [Diplomatic visas often prohibit spouses from working.] Over time this results in a huge financial loss, and puts enormous pressure on relationships and families.

    Which brings me to schooling, which is mentioned above. In many posts, especially in the Asia-Pacific region, your options are either vastly expensive international school, or local school with dirt floors and unqualified teachers. Honestly how many people on here would pack up their kids for a job, if their choice was kids’ education suffers vs spend two thirds of salary on schooling? (That number is not made up.)

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  13. CryHavoc (52 comments) says:

    Oh yeah, and Chris2: your point about language ability is well taken. Maybe if the Ministry had more resources it could afford to have all its employees learn the host language. But that means taking those people out of the Ministry for a long period of time, perhaps to the extent of one year in every seven – allowing for a three year posting and three years in Wellington – and we don’t have the numbers.

    In this area, as in so many others, we suffer because we lack economies of scale. The relative cost in time and money (vs overall cost of having an Embassy in country x, and overall Ministry budget) for NZ diplomats to get fluent (assuming they start from scratch) is too high.

    Everyone would love to have a language school like the Aussies – but how much would everyone by crying “waste” if we did? One tutor to teach (in any given year) the one guy going to Tehran Farsi, another to teach the one or two people going to KL Malaysian, to Ha Noi Vietnamese etc… There are definitely some ways to make this work and I believe they’re being looked at now, and they might address some of the scale issues I describe.

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  14. reid (21,412 comments) says:

    Thanks for the clarifications CH – most appreciated and best wishes to you and colleagues. It’s a bloody awful feeling being on the end of it, isn’t it. I’ll watch with interest over the years to see whether I was wrong about Allen and McCully in my 7:25 but sadly for the nation, I don’t think this is going to end well.

    One thing I’ve sometimes thought about (normally whenever I’ve been restructured), is whether it should be part of employment law that if a manager restructures an organisation then unless they actually own that organisation, if there are any redundancies at all then it should be compulsory for that manager to be part of them. Seriously. That would have the dual purpose of focusing their minds on whether or not redundancies were really such a good idea after all plus would give those disestablished a slight morale boost as they listened to said manager blathering on about the “strategic imperatives” during the announcement.

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  15. mikenmild (23,551 comments) says:

    I enjoyed that bit of special pleading from CryHavoc. The only thing that counts is whether we will have better or worse service from MFAT overall. No one care how many staff they have. Obviously the CE has made a case that much less resources are needed to do the same job. All power to him.

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  16. reid (21,412 comments) says:

    Obviously the CE has made a case that much less resources are needed to do the same job.

    No they’re not going to be doing the same job mm, for example they’re not going to be doing visa processing through the consulates anymore which means Immigration needs to find some other way to do those, which is obviously going to transfer that cost to another dept but not eliminate it.

    Obviously Allen has convinced McCully and the Cabinet that the plan is viable, but that’s a completely different thing from it actually working out the way he says it will, several years down the track and no-one knows that yet. Not you, not me, not him, not McCully, not the Cabinet. I’m surprised I have to explain that to you. I thought you were more astute.

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  17. mikenmild (23,551 comments) says:

    Those are mostly valid points, but not necessarily reasons for retaining a business model that is unchanged in its essentials since the 1960s.

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  18. CryHavoc (52 comments) says:

    Not pleading MM, if I wanted a group hug I’d go over to the Standard. And I know, more or less, the audience here and don’t expect sympathy.

    Re the business model – to a certain extent it hasn’t changed because the practice of formal diplomacy worldwide hasn’t changed for hundreds of years; it’s built on hierarchy and protocols that look unnecessary from a modern perspective, but give countries in fractious relationships the comfort to sit round a table together, because they know there’ll be no surprises. That will continue.

    Of course there’s more to what MFAT does than formal meetings with other Governments, and nobody within MFAT would argue that the organisation shouldn’t change (and in fact it has been too rigid – DPF was right to say in his article that for a long time the newer staff have been agitating for change) to provide a better service in the 21st century. Time will tell whether this does it.

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