• Jenny Shipley
Prime Minister

Plaza International Hotel,

State servants and politicians have a great deal in common.

Not because of the institution of Government, in which we both work, but because the people of New Zealand have expectations of us both that they want fulfilled.

New Zealanders see 32,000 people in the core public service, or 220,000 in the wider public sector, plus 120 politicians, having a huge influence over their lives. They see us as controlling and administrating $33 billion of their taxes and setting the rules through policy advice and legislation, that govern their lives.

The questions they want us to consider today and to answer are:

Do we value their interests and their income as if it was our own?

Do we work as they work for goals that are important?

Do we set priorities for spending in the same way as they must, achieving as much as possible in an efficient and effective manner?

Do we set the same hurdles and standards of performance and compliance for ourselves as New Zealanders perceive we impose on them?

Will we hold our own to account as they are held to account for their performance and the exercising of their responsibilities?
When asking the question what is the future of Public Management, the most fundamental thing we must understand is, it's not a question of the structure of the public sector, as if that is an end in itself.

People care about outcomes the public sector can deliver for New Zealanders in terms of quality and services they see and use in their real lives.

They want these services to be efficiently and effectively provided, so we all make the best use of their taxpayers funds.

The reforms of 1988 took a huge step toward providing some of the tools to achieve the new New Zealand.

Broadly speaking, they were designed to do four things:

they got the Government out of business that could be done better elsewhere;

they sought to make accountabilities very clear;

they attempted to expose the real costs of goods and services;

and they sought to create powerful incentives for all within the system to consistently make rational decisions, and to perform their duties to the highest possible standards.
To use the jargon, the outcomes were to provide a client-responsive, cost-efficient, dynamic and robust State sector.

The real question is do families and children feel the New Zealand education sector, for example, delivers a student-responsive, cost-efficient, dynamic and robust education system for all New Zealand children?

Do all New Zealanders feel that the New Zealand health sector delivers a patient-responsive, cost-efficient, dynamic and robust health system for all New Zealanders that is the best of what's available at reasonable cost?

Ask your neighbours or your family whether we've succeeded, or whether there is room for improvement.

It's refreshing, if not sobering, to remind ourselves that all this reform was to deliver a well-served and contented New Zealand society.

Today's challenge is to ask to what extent have we been successful and where to from here?

As many of you know I come to this task as Minister of State Services, having tip toed through the meadows and minefields of large and small Government departments and now a significant number of Crown companies and State Owned Enterprises.

My observations today have been collected on that journey and also include my overriding interest in trying to see that this wonderful little country of ours makes things happen, so stability and prosperity are ours well into next century.

The State sector has an important role to play.

As a starting point we need to embrace Professor Allen Schick's general conclusion that the reforms have largely fulfilled the lofty expectations that were held for them.

Though I note that this has, intriguingly, been overlooked by one or two who have commented publicly on his excellent study.

Equally as intriguingly, not overlooked by the same commentators, but indeed seized upon with transparent relish, were his more specific conclusions indicating the need, as he puts it, to work towards `debugging' elements that have not worked as well as intended.

Credit must go to all of you who have contributed to the remarkable productivity and efficiency improvements in the State sector.

The best of the Crown companies, the best of the Crown entities, and the best of the Public Service departments must surely rank amongst the top-performing State agencies anywhere in the world.

However, the gains that have been achieved would not have been possible had the State sector in New Zealand not been so well advanced and able to respond to reform as you were in 1988.

We had a strong platform from which to make change.

But, inevitably in an undertaking on the scale we have initiated in New Zealand, the pattern is really quite inconsistent.

We do have some organisations that have made only superficial transitions to the new world.

They exhibit the external trappings of the new but one does not have to scratch deeply to discover an old bureaucracy twitching within.

I'll leave those concerned to decide if the cap fits.

We have other organisations, whole sectors which I am all too familiar with, where enormous efforts have been made to embrace the structures, systems and culture of the new public management but where, for one reason or another, factors such as weak initial design work, lack of dynamism, leadership and fortitude in implementation, various forms of market resistance, or vested interest, or maybe a combination of all of these, has lead to patchy and sluggish progress with relief provided by all too few bright performers.

Naturally these areas, where the transition to the new world has in one way or another been difficult, tend to absorb the time, attention and energies of Ministers, their departments and the public alike.

Having said that, there is no case to go back but rather an imperative to build on what works and modify that which does not.

Sadly, however, all too easily, a bad experience can sour a Minister's, or indeed the public's, appreciation for the reforms as a whole.

But the point to be made now is that the successes illustrate quite vividly just what the capabilities of the reformed State sector model are.

And why we must renew our efforts to lift the rest of the State sector to the same high levels of performance and to look forward toward the next important phase of change and improvement.

As a cautionary note we must not become so intoxicated by the admiration and approval heaped on us on a weekly basis by international commentators to the point that we begin to believe that the task is as good as completed.

The task is far from ended.

Indeed I suspect it never will end.

The model to which we are working in New Zealand is extraordinarily seductive in theoretical terms but it does not automatically translate into a three-dimensional, live, smoothly-functioning system that can deliver to New Zealanders' expectations on an ongoing basis.

Having said that I believe we've got most of the tools.

We now have to bring them to life.

Having moved away from inputs to output purchasing and all that entails, the challenge now is to focus on the outcomes the community and Government of the day seeks to deliver.

In organisational management and in policy terms this is where the new effort and energy needs to go.

Professor Schick's study of New Zealand's State sector draws similar conclusions and I thank him for the work and the insight that he has provided.

When the State Services Commission and Treasury sought Professor Schick's assistance they particularly chose someone highly-regarded for independence and objectivity.

They knew there were second-generation issues and by and large had already identified them.

However, they wanted an external perspective both to ensure that all the important issues were exposed, and as a foundation for the next wave of development, the process we are building on and continuing here today.

The first key platform to achieve the outcomes that the public and Government expect, is for the State sector to dramatically improve their policy advice in a relevant and meaningful way.

Put bluntly, there needs to be a substantial improvement in the quality of policy advice available to Government.

New Zealand still has some depressingly severe problems in social cohesion for example.

Many, indeed, most New Zealanders, want us to have economic opportunities and social service programmes that provide prosperity, inclusion and social cohesion.

This is the most difficult of public policy areas, but that cannot be an excuse for accepting or defending the status quo.

Having said that, as we saw last week, some social commentators are reluctant to discuss possible ways to achieve outcomes in complex areas such as dependency and social cohesion.

Sadly some seem more comfortable describing the problem than accepting the challenge of coming up with workable solutions.

Outcomes must be clearly defined and policy solutions found for Government to consider.

The public expect it.

Government expects it.

The public service should expect it of themselves.

Risk taking and risk management are part of this process.

It is important for the State sector to remember that a major object, in separating policy functions from service delivery and in setting up specialist sectoral policy ministries, was to sharpen the focus, quality and impact of advisory work.

I would say, judging from what I have observed both at the Cabinet table and out in the front lines, that to date this has not yet been an overwhelming success.

Policy and outcomes are connected.

I leave that challenge with you.

The second platform to address this problem leads to the public sector human resource issues or requirements.

We may have under-estimated our human resource capability.

It was assumed, somehow, that the universities would turn out raw material and that graduates would learn how to become top-class policy analysts and advisers and operational managers within a few years simply by immersion in the work.

There is no doubt that it can be approached that way, given a strong base of expert advisers on which to build.

But with the exception of a very few departments we have not had that.

The result, some ten years on, is a policy advice body in which nowhere near enough people understand how to go about thorough, objective analysis, or know how to consult effectively, or are able to present a compelling argument and options for Ministers to consider which are consistent or relevant to the strategic results the Government has set for the country.

Further, from time to time the operational management and delivery of public programmes also fall short of the original public policy intention passed by the Parliament.

These gaps must be closed.

The third platform relates to the obstruction some departments cause as they put their territorial interests ahead of the collective interest.

This may offend you that I even mention this!

However, after seven years I feel I must convey to you the despair that Ministers feel when what is supposed to be an intelligent policy debate degenerates into a snarling-match between agencies.

Or worse, by omission or inaction, outcomes Government is seeking simply do not materialise.

Ministers believe they are seeking advice or solutions to problems that confront them.

While I concede that this is a minority situation I'm speaking of, it is very real as an experience.

The State sector must demonstrate that they can reflect and deliver on that same discipline that is required by the collective responsibility of Cabinet.

I appeal to you all to put renewed effort into this area.

Which bring me to the fourth platform.

While we have come a long way in the relationship between Ministers and Chief Executives of respective departments, the magic that eludes us is that which lies in the area of Chief Executives and their senior management teams owning and feeling committed to the Strategic Result Areas the Government has set.

That is using all their leadership, organisation, management ability, policy and operation expertise to see that the outcomes Government is seeking within and across departments are being achieved.

This has relevance in policy and in organisation management, that is the delivery of services.

In my opinion this is the area where the greatest gains can be made in the next phase of reform.

Technology will mean State services can be delivered in different ways and with improved experiences for the public.

New options will continue to become available.

If we are to deliver on this then inter-departmental warfare must give way to across department performance and delivery.

It's my personal view that Chief Executive performance and bonus arrangements should not be confined to the single department for which they are responsible but include their contribution to Strategic Result Areas which require across Government performance.

Let me illustrate.

To achieve break-throughs in social policy development, I believe, will require creativity, originality and daring, and a superb understanding of organisational management.

Further, it will require leadership and the efficient and effective use of public money.

Many Chief Executives and senior managers have the capacity to contribute in this most challenging area of policy and service delivery.

What's more it has everything to do with the Spirit of Reform and the achieving of excellence in future management.

Can I conclude on this point by appealing to you all not to allow your departments to become cautious, orthodox, or formula-ridden, pre-occupied only with fiscal accountability for outputs.

For while they are important, Government also wants and needs the State sector to contribute to the other values.

`Free, frank and fearless' advice means mobilising your organisations to achieve the outcomes New Zealanders strive for.

By the way, `free, frank and fearless' advice is not a licence for a Chief Executive or department to push its own agenda detached from Government Strategic Result Areas and Key Result Areas.

Which brings me to the fifth platform.

This week departments have been invited to comment on the Strategic Result Areas.

These are the big questions, the outcomes New Zealand must strive for it we are to be successful.

Nothing you do each year should be more important as you work with your Minister and other State service colleagues.

Perhaps it is timely, however, to remind you that the SRAs the Government sets out are not an opportunity for Chief Executives to justify all the outputs their department is currently delivering by describing them as KRAs, nor is it an opportunity to promote a pet hobby horse.

A Chief Executive and department's obligations have been fulfilled when they have seriously thought whether the SRAs include all the important matters that the State sector relates to and what they could contribute to achieve the stated outcomes.

It seems essential to me that this period provides a challenge and opportunity for Chief Executives, Senior Management and Ministers to review that which has always been done and consider whether programmes should continue or whether it could be delivered in a more efficient or effective manner by some other organisation or agency.

Perhaps most challenging, it provides a chance to the respective parts of the State sector and Ministers to stand back and ask how quickly and effectively could we achieve the Government's outcomes if things were done differently and what are the benefits and risks of such an approach.

I have to confess these moments are rare in my experience, however I live in hope that this will change.

We must not become so busy that we mistake the purpose of the exercise.

To those of you who have sought to lead in this regard and there are some of you, you are worthy of the utmost respect!

You stand above the rest.

What must be done provides the next platform for action.

It appears we need a new breed of manager.

They need to know much more, make many more weighty decisions and possess a wide range of new abilities, employer skills, contract management skills, how to cope with new technologies and with client responsiveness, financial management skills, how to cope with an uncertain future, and policy leadership skills.

They also must be able to oversee major project management tasks and ensure that operational decision-making is of high quality in delivery and accountability terms.

That is that the Crown's ownership interest is not compromised.

Sadly it is in this area Ministers most often have bad experiences.

Again, put bluntly, every single performance failure that winds up in the Executive Wing of Parliament Buildings peels away a layer of Ministers' collective confidence in the structures and systems of the State sector.

They also damage the public's confidence in our collective stewardship and accordingly the successes, however impressive and numerous they may be, tend to count for little when a Minister is facing a battery of cameras and microphones and a jostling throng of journalists who fancy they have caught a whiff of blood.

All too often these negative events confirm the traditional world-wide perception of bureaucrats as artful, pedantic, obstructive, and self-serving, images confirmed in the public mind by Sir Humphrey Appleby, and by Jim, Hugh, Raeleen and company in `Glide time' when in my experience this is not the case.

It is my view that here in New Zealand most State agencies have moved a very long way beyond the bureaucracies portrayed in those television programmes in fact, but this may not be true in the public mind.

You can argue this is unfair.

In fact our Inland Revenue and Customs operations, for example, are very highly rated internationally.

Equally, our corporatisation programme, management reforms and financial management systems have attracted enormous interest and admiration from public administrators in other countries.

Sadly the media and the public alike have a limited appetite for good news.

But as soon as something goes wrong all the old prejudices surface and are reconfirmed.

When these events occur the media and public appetite form a feeding frenzy.

Whether we like it or not the few events will cloud the many, many successes.

We must learn to avoid these risks on a day to day basis.

Small things count!

For example, taxpayers hate to feel their money is being wasted.

I don't think any taxpayer, anywhere in the world, at any time in history, has paid up willingly, whether at the point of a sword or at the point of an IR12.

It is understandable that they should be sensitive about how revenue is spent on their behalf.

They want and expect to see high quality schools, health services, public utilities, justice and public safety systems.

Put simply, they want their money spent wisely.

The public believe that the money that companies spend has been earned by them selling their wares against competition in the marketplace.

They also believe however, the money that State agencies spend has been extracted from citizens under the compulsion of the law.

A good test for all public servants and politicians alike when considering public expenditure is to reflect on whether you personally would be prepared to justify it under close public scrutiny.

It is a matter of accountability!

The next platform is the sensitive but important issue of State sector accountability.

Public reaction is razor sharp if they perceive that personal accountability is being avoided by public servants.

The accountability review and the associated Chief Executive remuneration issues are and must be considered together.

I know that many of you have taken an interest in this issue.

The public are also watching carefully to see that we have no lesser rules for the public sector than we are likely to see in private employment contracts or arrangements.

Further decisions will need to be taken in this area this year.

It is an issue that must be dealt with head on as a matter of public confidence.

As Minister of State Services I acknowledge it is a tall order for public servants to respond and meet all the public expectations that exist around their work.

You are asked to embrace two sets of values that seek to marry the best that the public and private sector has to offer.

One very compelling set of incentives are saying "you must perform much more like the private sector", while another are cautioning, "now, don't forget, you always remain public servants".

The work on the code of conduct, and on the principles, conventions and practice of public service, has been a very important stabilising and unifying influence in recent years.

The challenge now is to consider how to build on that.

We need a new, comprehensive and carefully thought-through culture of public service which includes an ability to develop people who have the highest levels of professionalism and who are committed to the long-term good government of New Zealand.

All of these issues are part of the State sector of tomorrow.

Which brings me to the final platform that must be actioned this year.

As all the issues I have raised become part of the frame within which the State sector will provide leadership performance, foresight in economic and social terms, the question of the role of the State Services Commission cannot be avoided.

Some argue that the 1988 changes allowed the managers to manage, thus leaving only a residual role for the State Services Commission as we knew it.

Some go further and argue the State Services Commission could be abolished.

The State Services Commission only deserves a place in the State sector of New Zealand if it adds to the overall effectiveness of the State sector's ability to deliver the outcomes New Zealanders seek through the Government of the day.

I thought it only fair that I make my opinion clear today.

I don't think it appropriate that the only truly effective control department should be Treasury.

I don't agree that the only values worth counting are financial ones.

Of course they are important, but the performance of the Government sector in terms of its ability to see that business can get on and do what it's good at is a wider State sector issue, just as the policy and service delivery options that will assist in contributing to greater social cohesion requires particular values and skills other than financial analysis.

The State Services Commission must get out of the engine room of the departments.

However it must manage the overall ownership interest and risk that the wider New Zealand public demands to have addressed on an ongoing basis.

Monitoring departments' contribution to the overall Government strategy as captured in the SRAs will become a major role.

Identifying significant ownership issues or risks which may impact on the overall business of good government is also their business.

I look forward to working with you all during this year as we solve this part of the puzzle.

The new State Services Commissioner, whoever he or she may be, will be pivotal in achieving all that I have referred to.

Many of you will also have a valuable contribution to make.

I trust that you will consider what I have said today as a challenge, not a threat.

Can I thank all who work in the State sector for the contribution you make.

Your work is appreciated.

Can I also take this opportunity to thank Don Hunn, who as State Services Commissioner, has led the New Zealand State sector through an important stage of reform.

We wish you well in your well-earned retirement.

You should leave in the knowledge that you have shepherded the State sector through some extraordinary times and from my observations have survived with the spirit intact.

I am a strong supporter of the State sector reforms.

I repeat what I said earlier, we have many of the tools.

Let's bring them to life.

In 1997 the new spirit of reform must stem from a desire to turn the potent collective force of the State sector on the contemporary economic and social issues of the day.

Some will say reformers dream of reform.

I would argue reformers in New Zealand today must dream about how families can achieve security, prosperity and enjoy the good things in life in an inclusive way.

Too hard?

No fear.

The State sector has been at the cutting edge of change in New Zealand in the past.

It will be so again.