Vance on state sector reforms

March 3rd, 2012 at 9:03 am by David Farrar

A very interesting article from Andrea Vance at Stuff:

While Mr Key will front the reforms, they are being driven by Finance Minister Bill English – who is deeply committed to remodelling the sector. And no wonder – he pays the bills and it accounts for one third of New Zealand’s economy.

Essentially, in a drive that would send Sir Humphrey Appleby into apoplexies, the public service is about to become more flexible.

It’s a remarkably simple idea but one that strikes at the very heart of the modern-day civil service. At present individual departments and agencies work on their “outputs” – what they deliver. The social development ministry pays out benefits, Corrections builds more prisons. Annual incentives are set, targets are ticked off and budgets are (usually) met. They work in – excuse the jargon – silos.

By and large “outcomes” – the big picture stuff – are not catered for. …

Politically, “outcomes” are a lot more risky than easily measured “outputs”; it takes just one rogue NGO, or one mis-timed question from the Opposition about a taxpayer funded hip-hop scheme or a misappropriation of funds.

Moving the from being focused on outcomes outputs to outputs outcomes is a heroic endeavour, but worthwhile. As Andrea says, outputs are easily measured and easy to achieve. If one moves towards outcomes, then one has to accept there will be some failures. You can near guarantee outputs, but outcomes are far more complex.

In its purest form, we might see super-ministries, although National is shying away from this for the time being. Instead of merging Corrections, police and justice into one monster law and order department, they have established an umbrella board to oversee co-operation.

I tend to favour super-ministries, but sharing of back office functions and a joint board to over-see co-operation is a step in the right direction.

Which means we are also unlikely to see the logical conclusion of this shift: a much smaller executive.

A half-serious proposal for a seven minister Cabinet was recently floated – and hastily dismissed. National has instead opted for “cluster” ministers – Steven Joyce overseeing economic development, David Carter taking on primary industries.

The model I favour is a 12 member Cabinet with 12 full Ministers (for 12 super-ministries) and 12 Associate Ministers outside Cabinet who will be delegated responsibilities for particular agencies within a super-ministry.

Tags: ,

32 Responses to “Vance on state sector reforms”

  1. krazykiwi (9,186 comments) says:

    And no wonder – he pays the bills and it accounts for one third of New Zealand’s economy.

    And a while ago is was 30%, then before that 25% and back further to 20%. This despite other ‘reforms’. Anyone care to pick the government footprint in 10-20 years?

    Stealth communism advanced by intergenerational apathy.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  2. Mighty_Kites (84 comments) says:

    Hopefully it goes better than your latest “reforms”, 2500 jobs cut for only a $20 million saving. Bit short of that billion dollar target you were preaching about

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  3. Leaping Jimmy (16,290 comments) says:

    It’s interesting that this concept goes counter to the rogernomics argument of introducing “competition” which was always spurious in certain sectors such as the electricity sector. Which hasn’t worked, has it. In terms of power prices have not reduced and generation capacity has not increased because the shareholders want dividends, not long term capital investment.

    However in the govt sector it’s always been a no-brainer to use economies of scale in such things as payroll, procurement, accounts payable, accounts receivable, HR etc. It used to be that way up to the 80’s but it didn’t work then because the IT systems were not capable of dealing with the variations required. Now they are, it would work, if the attitude of the people in the civil service is correct. However, it isn’t. The management in govt depts consists mostly of lifers and as we all know, lifers are not particularly good at new thinking and that’s the thing which needs to be changed IF centralisation is to work: i.e. use the economies of scale PLUS be agile and accommodate flexible variations where necessary.

    Since politicians come and go and bureaucrats stay for life, I hold little confidence such will occur.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  4. Manolo (13,571 comments) says:

    Key’s Labour lite is just a watered down version of its sister in deeper red hue.

    Smile & Wave’s performance is disappointing for lacking the balls to tackle the important issues. Sadly, in a few years the socialists will regain power and the slide towards mediocrity will continue at an even faster pace.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  5. adze (2,105 comments) says:

    “Moving the state sector from being focused on outcomes to outputs is a heroic endeavour, but worthwhile. ”

    Doesn’t the article say they’re doing the opposite – going from output-driven to outcome-driven?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  6. orewa1 (410 comments) says:

    Yes to the 12-member cabinet.

    No to “Super Ministries.” Their sheer scale and scope would guarantee they would be headed by generic bureaucratic administrators instead of subject matter experts. The public service performed better when ministries were led (“led”, not “managed”) by people with long experience and credentials in their specific sector.

    The relentless drive to cut headcount, with the accompanying see-sawing between permanent staff and consultants, is a mindless cop-out. The real issue is effectiveness. Some of the world’s happiest and most settled countries are very highly taxed, but their governments really perform for the citizens and are trusted accordingly. Some things are better done by governments rather than by individuals, and people will happily pay if they are delivered well. Scandinavian countries are good examples.

    Sacking state staff for the sake of grandstanding and ideology, only to see them appear in dole queues while services decline, is a highway to ruin. We need better quality debate around the respective roles of the state and the individual in 21st century New Zealand.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  7. tvb (4,360 comments) says:

    An excessive formulaic approach to the organisation of government will bring its own problems. But breaking the state sector into small ministries and departments went too far. It was very expensive and the pool of corporate talent in nz is not that great. Weskness at the top of some departments eg corrections was plainly evident. The police was another defence is just rubbish and customs need one say anything except weep. So some cOnsolidation is required but 12??? I don’t know

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  8. Viking2 (11,412 comments) says:

    Reduce the size of Government is the way to go not rearranging the fucking armchairs which is all this.

    Leaping Jimmy (10,119) Says:
    March 3rd, 2012 at 9:42 am

    It’s interesting that this concept goes counter to the rogernomics argument of introducing “competition” which was always spurious in certain sectors such as the electricity sector. Which hasn’t worked, has it. In terms of power prices have not reduced and generation capacity has not increased because the shareholders want dividends, not long term capital investment.

    The problem for you is that it wasn’t Sir Roger who did that. That was National Cabinet Minister Max Bradford and his equally numb leader the Great National Helmsman.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  9. East Wellington Superhero (1,151 comments) says:

    “And one ring to, in the darkness, bind them…”

    ‘Super-ministries’ idea seems good, but as long as they’re reduced in size and transparency increases. The thought of a Labour minister in charge of police, corrections, and courts gives me the willies.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  10. Leaping Jimmy (16,290 comments) says:

    The problem for you is that it wasn’t Sir Roger who did that. That was National Cabinet Minister Max Bradford and his equally numb leader the Great National Helmsman.

    V2 I simply use rogernomics since more people understand that term than if I used Hayeckian economics which is what it is. And Hayeckian economics is applied all the time, regardless of who implements it, and Bradford’s unsuccessful reforms were an attempt to apply those.

    BTW, just because it wasn’t successful there, doesn’t mean I’m not a fan of it, as you would know, from my comments in my former name of reid, over the years. It’s just horses for courses that’s all, no point in being fanatical about it, which is what some people are with it.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  11. double d (225 comments) says:

    Manolo ………. Yawn
    I have seen that post on a daily basis ever since viewing this blog.
    We get it ..
    Smile and wave – check
    Labour lite – check
    National = socialists – check
    A new angle would be good – just saying …

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  12. Mark (1,479 comments) says:

    DFP Super ministries are not the answer. They will become tangled bureaucratic nightmares of inefficiency and waste. Efficient, focused and expert groups make much more sense but in this age of communication there needs to be an efficeint and effective interdepartmental communication process.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  13. mikenmild (11,247 comments) says:

    This is saying nothing new. Successive governments have talked about focusing on outcomes for over 20 years, to no discernable effect. Don’t expect anything to come from this latest piece of nonsense.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  14. Paulus (2,607 comments) says:

    Sureely it is not the number of public servants, but the production by them.

    I was taught many years ago that it was not the hours that a person put in, but what they did with those hours.

    We are told that by OECD that New Zealanders work long hours against other countries, but is the production increasingly proportunate to those longer hours ?

    I am not at all sure.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  15. Psycho Milt (2,410 comments) says:

    I was under the perhaps mistaken impression that we already had a bunch of people on the public payroll with responsibility for “outcomes,” these being the people with the fat salaries and free limos – otherwise known as Cabinet Ministers. If Bill English has a cunning plan to foist responsibility for outcomes onto unelected bureacrats with no autonomy to choose a course of action and no authority to decide how to fund their activities, it’s hard to envisage success for it. It also leaves us to wonder why, if it did succeed, we’d bother with such an expensive oversight group as Cabinet – just elect the heads of the public service and be done with it.

    Which means we are also unlikely to see the logical conclusion of this shift: a much smaller executive.

    The main reason we’re unlikely to see a shift to a smaller executive is political leaders’ requirement for a source of political patronage, and a large enough Cabinet to be able to use collective responsibility to control their caucus and therefore Parliament. But it’s nice of her to pretend that isn’t the reason.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  16. berend (1,704 comments) says:

    The bureaucracy, by its nature, is not amendable to change. So another big National plan that will fail.

    Just like their deficit targets.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  17. GJM (62 comments) says:

    The problem is that they won’t do the decent thing, and terminate some departments completely. Ministry of WomensAffairs, Childrens Commission, Families Commision, human rights commsion (AKA the Witchfinder General), and many more.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  18. elscorcho (154 comments) says:

    Have the right-wing NPMers already forgotten their core principles?

    Create ministries accountable for clear targets and give them managerial control. Use a variety of accountability levers to ensure performance…

    Moving to shared back office = less managerial control. I cannot be held accountable unless I have full control of my HR/finance/strategic planning/admin functions. Give me less and it’s “taxation without representation”

    Outcomes = really? As someone who has done substantial research into the output/outcome link, the question is: how do we know? We should always AIM for outcomes but we should be held accountable for outputs; as our research better identifies the output/outcome link we can adjust which outputs we deliver.

    Super ministries will be less, not more accountable, in the same way that smaller companies in a commercial environmental are more adaptable/flexible
    If we want good public services, it’s simple:
    1. Set the goals
    2. Identify the resource implications of the goals.
    3. Provide the resources (and stop micromanaging)
    4. If someone fails, sack them

    It’s not rocket science. It’s exactly what was suggested in the late 1980s and a trillion times better than the current stupidity put forward by people like Bill English with nil theoretical understanding (at least Roger Douglas, for all his idiocy, had some brains)

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  19. mikenmild (11,247 comments) says:

    That’s just the point – all the attempts since the 1980s to put that theory into practice have failed. Think something might be wrong with the theory?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  20. Leaping Jimmy (16,290 comments) says:

    Moving to shared back office = less managerial control. I cannot be held accountable unless I have full control of my HR/finance/strategic planning/admin functions.

    No that’s either fundamental ignorance or wilful disingenuity elscorcho. Take your pick. There isn’t a third alternative.

    Back office, dummy, does not include strategic planning functions and it doesn’t mean finance either. Duh. It doesn’t even mean those HR functions concerned with capacity planning, job sizing and structural organisational design. It does however mean administrative functions such as I mentioned above such as payroll, recruitment as well as functions like procurement, and accounts payable and receivable. There is absolutely no reason, provided one does it properly, for those functions not to be run by a centralised agency across all govt depts and SOEs for that matter, given the IT systems today which provide the flexibility and processing power necessary to efficiently accomplish such. Note the qualification: provided one does it properly. So long as that happens then combining all those functions would save hundreds of millions p.a.

    It’s not rocket science.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  21. mikenmild (11,247 comments) says:

    It certainly wasn’t rocket science when most of those functions were centralised, pre-1988. Worked pretty well actually. Bound to happen again one day, but dressed up as the latest theoretical insight.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  22. Leaping Jimmy (16,290 comments) says:

    Worked pretty well actually.

    No they didn’t mm. They were moribund, riddled with bureaucratic rules which weren’t based on anything and it took ages to get anything done. It was just like the Telecom processes where it took months to get a new phone. My point above is: this doesn’t need to happen provided one does it properly.

    Honestly mate taking a romantic view on the way it worked in the 80’s is like the way some Maori think the 1800’s was some fairy tale existence with pixies running through the forest.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  23. mikenmild (11,247 comments) says:

    I do tend to agree LJ, but the state sector ‘reforms’ over the last couple of decades have tended to throw the baby out with the bath water. For all their inefficiencies, I’m pretty sure the state services in the 80s did more, at less cost, than the equivalents today.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  24. elscorcho (154 comments) says:

    “No that’s either fundamental ignorance or wilful disingenuity elscorcho. Take your pick. There isn’t a third alternative.

    Back office, dummy, does not include strategic planning functions and it doesn’t mean finance either. Duh. It doesn’t even mean those HR functions concerned with capacity planning, job sizing and structural organisational design. It does however mean administrative functions such as I mentioned above such as payroll, recruitment as well as functions like procurement, and accounts payable and receivable. There is absolutely no reason, provided one does it properly, for those functions not to be run by a centralised agency across all govt depts and SOEs for that matter, given the IT systems today which provide the flexibility and processing power necessary to efficiently accomplish such. Note the qualification: provided one does it properly. So long as that happens then combining all those functions would save hundreds of millions p.a.”

    Now, from my own experience within a large public sector organisation, that is exactly what is happening

    The organisation currently sits as a theoretically beautiful M-form, with what I would call “profit and loss” centres given their own HR/planning/finance groups, and reliant on head office for only the overall employment agreement, financial rules, delegated authorities, all that sort of things.

    This would be perfect if the various people in charge were actually held accountable for what they get done. However, they aren’t, and in a mad move to somehow cut costs, they are turning this beautiful M-form into some horrific throwback to the 19th century with all planning/HR/finance done “from the centre” and the field groups merely responsible for spending that money. The end result is actually likely to be overspends as people are less unwilling to overspend if it’s “just Wellington’s money.”

    As for “, recruitment as well as functions like procurement”, bullshit. Recruitment is definitely something that cannot be given to the centre – I’d rather have control over recruitment than strategic planning – because people define how well the mission gets done. Recruitment needs to be delegated (given clear policies of course) as far down as possible, because I need to have absolute control over the people I hire if their performance is coming back to me.
    And procurement? For all the wonders about “national contracts”, why not – in a perfect M-form – allow for each P&L centre to negotiate its own? Some financial managers are better than others. One acquaintance of mine negotiated a cleaning contract 20% cheaper than that provided by Wellington under a “national contract”, proving those national efficiencies are bullshit

    I’m as left wing as they come, but I support the creation of competiton – allow public sector agencies to emulate the private sector, small, agile, flexible sub-components of larger groups, each with the FREEDOM TO MANAGE!!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  25. mikenmild (11,247 comments) says:

    All hail giving the managers freedom to manage! That was a catch-cry of the 1987 reforms but it, um, hasn’t worked.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  26. orewa1 (410 comments) says:

    All in favour of “giving managers freedom to manage” along with strong, clear accountabilities.

    But the authority should lie with the true leaders – not the backroomers in functions like procurement, HR and finance. These people have assumed excessive overlay authority. They stop the real managers from doing their job properly, while adding far more cost than benefit to the oucomes. Effectively the organisation chart has become inverted.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  27. mikenmild (11,247 comments) says:

    We have had over 20 years of attempts to improve accountability in the state sector. Any bets that the current royal commissions will find anyone in government to hold to account for failings at Pike River or in Christchurch?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  28. Leaping Jimmy (16,290 comments) says:

    elscorcho, re: recruitment, of course you have the people from the business unit in on the interview panel and who are the decision makers – der. But in terms of organising the ads, scheduling the interviews and all that admin stuff plus having someone from the centre in the interview who understands employment law, just like happens today when the organisation’s HR person attends, that’s what you outsource. Sorry, I thought that was completely obvious.

    Re: procurement, the objective is to use purchasing power. What sense does it make to source pencils and computer paper etc from a multitude of suppliers using only the purchasing power available from the budget from one dept? Imagine how much more power you get in terms of getting discounts, from a whole of govt contract for suchlike, and that extends to most things not just stationery. That’s the idea there.

    As for “One acquaintance of mine negotiated a cleaning contract 20% cheaper than that provided by Wellington under a “national contract”,”

    I thought I had made it obvious the corollary is “provided you do it properly.” This is now the third time I’ve said that, FFS. WTF about that, is hard to understand? If you “do it properly” then – duh – of course THINGS LIKE YOU MENTION DON’T HAPPEN BECAUSE IF THEY DO THEN BY DEFINITION YOU HAVEN’T DONE IT PROPERLY, HAVE YOU. Crikey.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  29. mikenmild (11,247 comments) says:

    A good example of combining purchasing power would be the government realising it needs a certain amount of core office accommodation in Wellington and buying and administering that space centrally. Brilliant, eh? Want to know why we stopped doing that in the 90s?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  30. elscorcho (154 comments) says:

    I’m amazed that a social democrat like myself is arguing against (presumedly rightwingers) on centralisation vs. decentralisation

    “Provided you do it properly”, socialism is more efficient than capitalism. But like we’ve seen, nobody ever does it properly. And it’s the same with all of you talking about what is a throwback to the 19th century in terms of bureaucracy.

    Negotiate that big central contract, and you’ll probably lose flexibility, you’ll be locked in for years, you may lack local knowledge. Buy office space centrally, and everyone’s condemned to the same space per square metre.

    You mention the HR process – why have someone from the “central office”? Why not have someone from my local area/region/district, whatever, standing on the panel as our HR representative? What is your hate of the M-form? You destroy any ability for some areas/regions/districts to do things differently, to develop a competitive advantage.

    The problem is we still have a mixed model. Field offices in all Government Departments are hamstrung. We get told off for departing from “nationally mandated approaches” but the fact is the national bureaucracy takes forever to move and adjust. And yes it’s better to have a thousand ways of doing something, if the job gets done. Often, efficiency is not directly equated with effectiveness, and to assume it is is stupid.

    Here’s what the perfect government department would look like:
    1. CEO + core planning, policy, and national procurement in Wellington (<100) staff
    2. A dozen or more semi-independent offices scattered around the country, each with its own policy/planning/local procurement/HR staff as well.

    Each office would, within the limited boundaries set by Wellington, have total freedom; if one wants to pay 100 staff 200k each, and another wants to pay 400 staff 50k, they can.

    The tyranny of Wellington needs to be destroyed

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  31. mikenmild (11,247 comments) says:

    Well, that would have the advantage of being something new and so could be sold as a ‘reform’, no matter how disastrous it would prove in practice

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  32. bhudson (4,738 comments) says:

    elscorcho,

    The tyranny of Wellington needs to be destroyed

    Actually, what is needed is for the size of government to be reduced. Centralised vs decentralised – deal with the most pressing issue first -> right size it, and then decide who will reside where.

    (As to your earlier point, there is simply no possible way that socialism can be more efficient than capitalism, if it is done right. That, however, is another argument)

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote

Leave a Reply

You must be logged in to post a comment.