Quote of the day:
. . . all organisations, public or otherwise, are dealing with a number of what are now permanent changes.
The first that I would pick out is debt reduction in the developed world which is a generation long project. We have really no idea of what the on-going dynamics of large-scale debt reduction are because we’ve never had such high levels of debt before and no one else has quite done it under the circumstances that the developed world faces.
So that makes constraint permanent.
Finance Minister Bill English said this in a speech to the Australia New Zealand School of Government annual conference.
If the private members’ bills from the Opposition and their continued refusal to support any measure the government makes to reduce public spending and reduce debt it is a point which they have yet to grasp.
There is a lot more worth reading in the speech including:
In a sense we are trying to create sufficient stability so that we can get more change. Let me explain that. It’s hard to make change in large sophisticated organisations with very sensitive customers very sensitive to service levels when you’re on a short term budget process. People focus more on the annual process of bidding and savings than on what you’re trying to achieve.
So we’ve taken the opportunity over the last few years to make a number of changes. I call it the responsibility model.
You and your organisations are responsible for making change and delivering services within fiscal constraints – not the Treasury, not the Minister of Finance, not the central agencies.
You are responsible because you know what you’re doing in your service. Politicians, central agencies often actually don’t know. And their culture tends to be watching and monitoring what’s happening as opposed to the people who actually have to do it.
So the responsibility is in your hands. You have all these pressures and it’s essentially up to you to deal with them.
So there is a number of tools that we have put in place to try and create the sense of stability and responsibility which we believe leads to better long term decision making.
The first is taking a long-term focus. We have avoided the temptation to rush in and grab the savings in an irrational and random manner. That has been the long-term habit of Treasuries driven by the requirement to meet a target for the next budget so they just go in and grab the money.
And that preoccupies everybody about their short term survival and decision making and prevents them from thinking about the longer term and the real fiscal drivers. So that’s the first one – focusing on the longer term fiscal costs.
The Government has accepted deficits in the short term with the view that if we think very hard about what we’re doing, two, three or five years down the track we can be spitting out hundreds of millions of spare cash, not just the 20 million that’s preoccupying us now.
And the long term focus works best when we know what we’re trying to achieve. . .
A couple of critical aspects of those results: one is that we are trying to get the strengths of targets without weaknesses. The second is that they are results focused on communities and populations not government departments.
People don’t live in government departments; they don’t measure success of the public service by the success of the government department. They measure it by looking around in their street, in their suburb, and their particular public service that they just used yesterday.
And that is absolutely critical about these results. They relate to where the people are, not where we are.
Our services are too often defined by the parliamentary accountability system which is all about tracking the dollar, not about whether it works. We have to blend parliamentary accountability with the real world. . .
Leadership in the public service, in the end, should be about judgement not primarily about going through all the right processes. As we move into a more adaptive environment we don’t have time for all the processes.
We need people who are willing and able to take a position and make a judgement.
For instance, if a department’s capabilities are stretched you need to do something about it, decide that something’s not working so it should stop, rather than waiting around for the next budget cycle.
So those changes that we’ve put in place are starting to have some effect. We are unashamedly taking a longer view than the electorate cycle and a longer view than the life of the Government.
Ideally most government departments don’t take part in the budget cycle because they’ve got their four-year revenue track and plan, and they go off and do it.
We keep an eye on them, which will free up a significant proportion of the senior managers’ time.
So that’s what we’re doing to create stability. . .
. . . usual political boundaries don’t apply any more, in New Zealand anyway and I suspect across the world. . .
The public now are much less susceptible to lobby groups and self-interested pleading.
The public are now much more interested in politicians just getting on with it. They’re not as concerned about whether they were consulted and not as concerned with the political sacred cows of the years up to 2008.
They just want you to get on with it and ensure it is working. The self-censoring risk management built into public service from the years of plenty is now outdated.
We politicians are finding the constraints are our processes, not public opinion. The public are not marching in the streets against change, because they know change is necessary.
They’ve been making change in their homes and businesses. Central government is just catching up with them and they know local government is another two years behind.
The public are focussed on the economy. They want their public services to work well. They want us to show respect for the hard earned taxes they pay.
Political tragics often make the mistake of thinking other people are as interested in politics as they are. Most aren’t, they are far more concerned about the results than the philosophy behind it.
They also want their public service focused on economic growth. As we write our regulations and our policies, we need to know that the people, who actually pay for us, have as their top priority job security. They want a job for their teenager and a bit more income so they can increase their savings and pay off their debt.
Everything else comes after that and we’ve got quite some way to go to for that strong focus on economic opportunity to filter into every corner of the public service.
The whole world is headed in this direction. I was part of discussions last year with countries like Canada and Japan, who for generations have been opposed to free trade.
They now have leaders, regardless of their political colour, out there advocating free trade. Why? Because there’s not much else around the economy that’s working, so they cling to something that might make a difference to jobs and incomes. . .
The Green Party and New Zealand First haven’t grasped this either.
. . . What matters now is not the ability to think about a new policy. What matters is a detailed understanding of how it applies here and how to make it work.
I think our public services have got some way to go to ask themselves a new set of questions. For any given policy, the question is what incentives are there on public servants to make it work, how do they tell whether it’s working? And if they found out its not working, would they or could they do anything about it?
Too often the answer to the last question is no, so we find another idea and put it on top of the one that’s not working. And if that doesn’t work, then we go and find another one.
And over 30 years, we accumulate a pile of expensive failure. Well if we’re going to fail, let’s do it at low cost.
Public services need to be built around the institutional arrangements that are going to make policy work. The public aren’t going to tolerate us spending money on stuff that doesn’t work. They used to, but now they don’t.
I’m not sure the public has ever tolerated wasting money on stuff that doesn’t work, but I agree there is absolutely no tolerance for it now.
International lenders aren’t going to lend New Zealand money for stuff that doesn’t work. So if we want to maintain service levels for the public, we must flush out what doesn’t work.
That needs change in institutional incentives and our understanding of institutional economics. What incentives do people face? What price signals are there? Because all funding is a price.
What signals are out in our public service market that tells people how to behave?
We need to better understand the institutional arrangements that make success more likely. That’s where the results focus that the New Zealand Government is putting in place will provide a big test for public services.
I can feel change already. Since the Prime Minister announced what the Government is seriously committed to achieve, public service conversations are more focussed.
There is less time to write strategies and more time to work out whether the 35 per cent of GDP we spend in government actually achieves what we think it should achieve.
The third thing we are going to change is accepting that other people can help us.
We’ve had a period in New Zealand, and to some extent in Australia, where the political third rail was privatisation. In New Zealand, in the decade until 2008, the Government put a strong emphasis on public provision of services and excluding private sector provision and ideas.
Their view was the public service were the only ones who cared and anyone outside the public service was going to rip the public off, make excessive profits and didn’t care.
So they cut themselves off from the skills required now – how to manage financial and operational risk within constraints.
In the public service in the last 20 years, risk management meant managing media stories. In the next 20years, it will mean whether you can manage the operational and financial risk of limited operating expenditure and capital expenditure. We don’t have those skills.
It’s obvious in the low quality of our large asset base.
Governments are terrible at managing assets. There are businesses outside the public sector that spend billions building up investments in intellectual property and managing assets. Why don’t we use some of their knowledge instead of relying on our own limited capacity and insisting on owning everything we can?
When was the last time a politician was honest enough to admit that governments are terrible at managing assets?
Nor do we know much about our social programmes’ impact on communities. We don’t actually know if what we do undermines the natural collectivism of the non-government community.
We should go and work with those who do understand. Let’s find the people who know a lot about the places where our customers live and how the dynamics of those communities work. We need to see these communities as partners.
We’ve had a fantastic experiment with this recently called the social sector trials.
We decided to go to six small towns with problems with youth, find anyone who might have a go and tell them that they control government spending relating to services supporting youth. They would make the decisions.
Just twelve months after this experiment began we had presentations to a Cabinet committee from people from small provincial towns with populations of less than 10,000 telling us what they had achieved in 12 months.
It was fantastic. We heard from people from small provincial towns, who had a fully-blended grip of all the public policy issues associated with the financing, delivery and effectiveness of services for quite a difficult part of the community. They were exemplary in their presentation and description of what they were doing.
Why isn’t success like this in the headlines?
That capacity is everywhere. Public services have to learn how to use it, because most of our stuff doesn’t work when we ignore that capacity in communities and families. Other people can help us.
Unless you are working with other people, you’ve probably got it wrong. If you’re working in a bubble where the public service cares and we know what we’re doing and other people don’t know, you are wrong.
I haven’t come across a single example in the last three and a half years where that is the correct diagnosis of the situation. I have come across many examples where reaching out and recognising that other people know stuff that we don’t know, has allowed us to make huge advances in quality and efficiency of our services.
And all those things lead to a different kind of leadership. Our existing skill sets come from a time of plenty.
Knowing how to get into the minister’s door, how to crank cash out of politicians, how to manoeuvre the strategy out there so your patch is bit bigger and the other guy’s is a bit smaller – they all redundant skills now.
Now the kind of leadership we need is leadership that allows disruptive talent to emerge.
In an environment where we have all these changes and pressures, we need people who see these things differently, who have a fresh analysis, who think a bit laterally, who have a different set of relationships. The question is, can these people succeed in your organisation?
Can they succeed?
If the answer is no, then you are headed for trouble. Too much of an incremental response to dropping baselines, changing technology and increasing public demand is going to squeeze your capacity and make your staff anxious, stressed and ineffective. In the end someone else is going to have to come in and do the job.
We must have room for disruptive talent.
We think that most of the talent we need for a shift to an adaptive culture is in our public service.
We need to give that talent a clear sense of direction, and we need to work on the culture that allows different sort of talent to come to the fore.
I will end with a good example, around the Christchurch earthquakes.
Immediately after those earthquakes, I got to see New Zealand’s public service adapt to a high stress situation that demanded rapid action across a number of complex issues that they’d never had to deal with before.
A small group of magnificent people were the drivers in those early stages, and that level of excellence has been maintained.
We are fortunate in New Zealand to have our own radical experiment: What will you do in a place where you can break all the rules?
A lot of the stuff I’ve talked about today is lessons from what you do when you are allowed to break all the rules.
We hope to harvest the product of that experiment and spread it across our public service, because we think that’s the only way we’ll be able to achieve better public services when we’ve got no more resources to do it with.
The government aims to be back in surplus in a couple of years but that won’t be a licence to increase spending or reverse the progress made in making public services more efficient.
If we want the next good times to be maximised and be well prepared for the next bad times constraint must be permanent.