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Public Management in New Zealand Lessons and Challenges

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Public Management in New Zealand Lessons and Challenges PUBLIC MANAGEMENT IN NEW ZEALAND LESSONS AND CHALLENGES GRAHAM SCOTT NEW ZEALAND BUSINESS ROUNDTABLE First published in 2001 by the New Zealand Business Roundtable, PO Box 10–147, The Terrace, Wellington, New Zealand http://www.nzbr.org.nz © 2001 edition: New Zealand Business Roundtable © Text: Graham Scott ISBN 1–877148–67–9 Production by Daphne Brasell Associates Ltd Typeset by Chris Judd, Auckland Printed by Astra Print Ltd, Wellington Cover photograph: Photosource/John Doogan Dedication To my father Alex Scott CONTENTS List of Figures ix List of Tables x List of abbreviations xi Acknowledgements xiii Foreword xv Preface xix 1 Launching the Revolution to the State Sector in 1987 1 The views of the minister of state services 3 Advice by officials 4 Timing of the initiative 5 Historical background 6 2 The Reforms – Contents and an Analytical Perspective 11 Introduction 11 The State Sector Act 1988 11 The Public Finance Act 1989 and Fiscal Responsibility Act 1994 16 The performance management and accountability framework 19 Restructuring and changing the role of government 21 Setting strategic objectives 23 Codifying principles and expectations of behaviour 23 Crown entities 24 Analytical framework and economic principles underlying the reforms 25 The influence of theory on practice 34 3 Setting an Agenda for Assessing the Reforms 37 Introduction 37 Critique of contracts and management 37 Reviews of the system 42 Reactions of politicians to the reforms 63 Reforms from an international perspective 67 Agendas of issues in public management 69 vi Public Management in New Zealand: Lessons and Challenges 4 Roles and Relationships; Management Freedom and Accountability 75 Introduction 75 Politics, policy advice and management: the roles of ministers and public servants 76 Roles, responsibilities and accountabilities 81 The effects of restructuring on roles and responsibilities 85 Biculturalism and the Treaty of Waitangi 92 Summary and conclusions 93 5 Enhancing the Role and Contribution of Ministers 95 Introduction 95 Role of the prime minister 96 Challenges for minority governments and coalitions 102 Views on the performance of ministers 107 Roles of ministers 109 Setting performance expectations 109 Lifting the performance of ministers 112 Assistance from advisory boards 115 Conclusion 121 6 The Hard Edges of Accountability: Some Principles and Cases 123 Introduction 123 Concepts of responsibility and accountability 123 Strong disapproval by a minister of a chief executive’s decision 128 Consultation on personnel decisions 130 Fundamental breakdowns in relationships 131 Cave Creek: implications for accountability principles 136 Some points of comparison with the private sector 148 Two cases of private sector accountability 151 The increasing demands for accountability 154 Accountability through the chief executive’s employment contract 158 The SSC review of chief executive accountabilities and responsibilities – the ‘standards report’ 159 Concluding comment 165 7 Setting and Monitoring Performance Specifications: Outputs and Outcomes 169 Introduction 169 About outputs 170 The place of outcomes in performance specification 189 Contents vii Conclusions 201 Appendix : Example of an output for land titles 204 8 Ownership Interests: Performance Expectations for Enhanced Organisational Capability 205 Introduction 205 A conceptual note about ownership 205 Accounting for human and intellectual capital 207 Monitoring ownership performance 211 Managing for quality 221 Managing risks 223 Benchmarking against the private sector 224 Performance agreements 226 Conclusions 227 9 Top Personnel Management 229 Introduction 229 Demanding but fulfilling jobs 229 Chief executives in the 1990s 231 The competencies that chief executives require 233 The appointment system 234 Remuneration issues 240 Performance management 247 The development of future chief executives 257 Conclusion: an integrated approach to top personnel 260 Appendix: Summary of chief executive competency model 262 10 Crown Entities 269 Introduction 269 Analysing Crown entities 269 The legislative and general administrative provisions for Crown entities 271 The independence of Crown entities 275 Mixing commercial and non-commercial objectives 283 Financial freedoms 285 Quality of management and personnel 286 Using Crown entities for political entrenchment of a service 287 Crown entities as responses to particular issues 289 Relationships of ministers and boards 289 Refinement of the Crown entity framework 295 viii Public Management in New Zealand: Lessons and Challenges Conclusions 311 Appendix A: List of Crown entities 1999 313 Appendix B: Ten years of developments in the Crown entity framework 314 11 Strategic Management for the Whole of Government 317 Introduction 317 Strategic management 317 Strategic alignment and policy coherence: the case of the Inland Revenue Department 326 Strategic thinking in government 330 Setting strategic goals 339 Linking strategic goals with outcomes, other interventions, outputs and business plans 346 Reorganising government to enhance strategic effectiveness 350 Cross-departmental co-ordination 356 Conclusion 359 12 Moving Forward 363 Introduction 363 Roles of ministers 371 Central agencies 373 Strategic capability and co-ordination 374 Capability and the government’s ownership interest in departments and entities 375 Public sector ethics 377 Crown entities 379 Change 380 Moving forwards 382 References 385 Index 393 LIST O IGURES Figure 11.1 The financial management process 319 Figure 11.2 Strategy in action 322 Figure 11.3 Linking high-level political and policy goals with output specifications in the strategic management process 344 ix LIST O TABLES Table 2.1 Management framework surrounding chief executives 19–20 Table 5.1 Changes to the number of cabinet committees and their assignments; 1997–1998 99 Table 5.2 Cabinet committees as at 26 March 2001 102 Table 5.3 Views of a sample of senior managers about the response of ministers and politicians to the management reforms 108 Table 7.1 30 June 1997 Estimates of Appropriation 191–192 Tables 7.2 and 7.3 Extracts from the United States Department of Labor Occupational Safety and Health Administration Strategic Plan FY 1997–2002 198–200 Table 11.1 Extract from the Prime Minister’s foreword 340 Table 11.2 Eight strategic result areas 341 Table 11.3 Preface from The Next Three Years Towards 2001 341 x LIST O ABBREVIATIONS ACC Accident Compensation Corporation APEC Asia Pacific Economic Co-operation CCMAU Crown Company Monitoring and Advisory Unit CHE Crown Health Enterprise CPI Consumers Price Index DPMC Department of Prime Minister and Cabinet FMR Financial Management Reform GAAP Generally Accepted Accounting Principles GATT General Agreement on Tariffs and Trade GDP Gross Domestic Product GPRA [US] Government Performance and Results Act 1993 HFA Health Funding Authority HR Human Resources HSC Higher Salaries Commission IRD Inland Revenue Department IT Information Technology KRAs Key Result Areas MMP Mixed Member Proportional electoral system MP Member of Parliament NGO Non-governmental Organisation OECD Organisation for Economic Cooperation and Development PSA Public Service Association RHA Regional Health Authority SES Senior Executive Service SOE State-owned Enterprise SRAs Strategic Result Areas SSC State Services Commission TDB New Zealand Tourism Board TQM Total Quality Management WINZ Department of Work and Income New Zealand WTO World Trade Organisation xi ACKNOWLEDGEMENTS Many people have helped me with this book and some very considerably. The project began with an invitation from Roger Kerr to write a short article for the New Zealand Business Roundtable giving my views on the state of management in government. I came to the conclusion that an article seeking to assess this vast terrain would inevitably be superficial, so I set out instead to write a book. I very much appreciate Roger’s patience over the long period that I have taken in doing this and his continued encouragement and support to keep going. I am grateful to the Business Roundtable for its financial support for the project. Roger, Bryce Wilkinson, Greg Dwyer, Peter Bushnell and Catherine Judd provided valuable comments on drafts. I would like to thank Allen Schick for his comments on the draft and for his willingness to write a preface. Valerie Stewart’s skilful copy editing and her insights about strategic management helped to keep the project moving at critical points. John Roseveare helped me plan the early work and contributed material especially in chapters two, three, four and nine. Stephen Franks and Rt Hon Geoffrey Palmer provided very helpful ideas on the issue of the accountability of senior public servants that is covered in chapter three. Ian Ball helped me with chapter seven and I have also benefited from discussions with him over many years on the topics covered in the book. John Mendzela assisted me in trying to close the gap we both perceived between the way the government was trying to bring strategic concepts into the top end of the management accountability system and the practical thinking in the private sector on the same subject. Some of these ideas appear in chapter ten. Murray Horn, Simon Murdoch and Alex Matheson shared their views on the strategic management processes, which was also very helpful to me. I am also grateful to David Osborne for his comments on chapter eleven. Peter Bushnell, Geoff Dangerfield, others in the Treasury and senior staff in the Crown Company Monitoring Advisory Unit,
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