09 March 2016

Nehal Davison recently had the opportunity to get an insider’s view of New Zealand’s public service through a secondment to the Policy Project, a cross-agency team hosted by the Department of Prime Minister and Cabinet (DPMC), and as an international visitor in the Department of Internal Affairs (DIA). Being embedded both in the centre of government as well as in a large delivery department gave her a real feel for what cross-government initiatives can achieve, as well as the inevitable challenges they face along the way. Nehal explains why public service reform in New Zealand still has some way to go and what the UK can learn from this.

New Zealand’s public service often pops up as a success story in the UK and international media. The widely celebrated Better Public Services (BPS) reform agenda, formally launched by the New Zealand Government in 2012, is laudable in its aims. For the first time, the Government has published 10 priority outcomes (or ‘results’), in areas such as welfare dependence and vulnerable children, most of which require significant cross-agency collaboration. The ambition is to incentivise state services to act ‘less as a collection of individual agencies, in pursuit of their own objectives, and more as a system focused on priority outcomes’. In line with this, each result has a named minister and chief executive who are accountable for its achievement. Progress against performance targets are reported to the Cabinet and to the wider public on a regular basis. This introduces a level of transparency and scrutiny unheard of in many countries.

Alongside this, major efforts have been made to roll back some of the far-reaching changes introduced in the 1980s. New Zealand took New Public Management reforms further than any other country in the world. Performance of departments is measured by outputs and managed by a ’contract’ between minsters and chief executives (the equivalent of the UK’s Permanent Secretary grade); these reinforce strong vertical accountabilities for the delivery of agency-specific outcomes. This approach has clear benefits – efficiencies and high performance in clearly defined areas – but leaves few incentives for public servants to work together to address complex problems. The BPS reform agenda aims to correct this by pulling back some of the autonomy of individual departments and encouraging new collaborative cultures and ways of working across government. Recent innovations include:

  • Strengthening horizontal linkages between agencies. The BPS agenda formalised the role of functional leaders in property, procurement and IT and saw the establishment of heads of profession in legal, communications, policy, finance and human resources. It also laid the basis for a strengthened ‘corporate centre’ (consisting of the Treasury, State Services Commission (SSC) and DPMC) to lift the performance of the state sector as a whole.
  • Empowering chief executives to ‘steward’ the public service system. The State Sector Amendment Act in 2013 introduced a legislative requirement for chief executives to ‘steward’ the public service system, which means that they have a responsibility to not only respond to ministers’ immediate needs, but proactively identify and respond to the capability needs of future governments. This often requires putting departmental objectives to one side in favour of the long-term interests of the whole system.
  • Introducing new performance expectations. All chief executive performance agreements now include the expectation that they will pay greater attention to the ‘good of the system as a whole’ and are accountable for progress against these objectives at regular performance appraisals – a model the UK is keen to explore (see the Institute for Government’s report on supporting effective leadership in Whitehall).

Clearly, New Zealand has made significant strides in establishing the conditions for collaboration – some of which the UK currently lacks. It also has the distinct advantage of being much smaller. There are around 19,000 civil servants working in Wellington (compared to around 80,000 in London), which means that networks and relationships are much easier to build and maintain – ministers all sit in one building, known as the Beehive, and many civil servants have already worked together in some capacity. Issues can therefore often be resolved by a quick conversation or two, whether on the political or official side.

Despite this progress, New Zealand still has some way to go in embedding collaboration on a large scale. Fundamentally, the lead department model in which accountability for progress is transferred to a single minister and chief executive only really works in those areas that can be tackled by one agency alone, or in co-ordination with a few others (for example, the Better Public Services results around skills and employment). In areas that require the whole delivery system to transform their ways of working, the model can reduce the buy-in and commitment from other agencies (for example, BPS results around digital transformation). I heard time and again that ‘agency-first’ behaviours still prevail and genuine collaboration around public service outcomes often lies at the rhetorical level, rather than reality.

So what can the UK learn from New Zealand’s experience?

Get the incentives right at all levels of the system

Although significant progress has been made in aligning chief executives’ performance expectations and responsibilities to the BPS agenda, the sole focus at the top tier of government has yet to catalyse changes further down the chain. Deputy chief executives (the equivalent of director generals here) are still largely expected to deliver agency-specific outcomes, which means that those who do engage with cross-government activities do so because they are natural enthusiasts, rather than because they will be rewarded and recognised for this behaviour. As one colleague explained to me, “The translation mechanism isn’t working. High-level incentives are not translated into changes in incentives and ways of working at a more junior level”. This highlights the need to consider how to incentivise collaboration at all levels of hierarchy, instead of relying on a ‘trickle down’ effect that may not materialise.

Build in implementation from the start

In 2011, a BPS Advisory Group was established to take stock of the strengths and weaknesses of the New Zealand state sector and make recommendations for change, which were eventually taken up as part of the BPS reform agenda. However, after the programme was launched in 2012, the central team was disbanded and implementation was farmed out to the lead agencies responsible for each of the 10 results. Some agencies have created joint ministerial teams to ‘sit above’ a result, some have created joint policy teams and some have neither. In many cases, I heard that governance and implementation continues to be channelled through different silos. As the Institute has previously argued in a report on how to translate policy goals into action, implementation must be considered early in the process – including the support that individual departments may need in delivering reform objectives, while leaving enough room for adaptation.

Maintain a constant pressure for improvement

The belated realisation that some central capacity was needed to support the BPS programme led to the creation, in 2013, of the Performance Hub – a joint SSC and Treasury team – tasked with assessing the overall performance of the system and identifying areas where improvements were most needed. This was the most visible manifestation of the newly strengthened Corporate Centre and had the potential to maintain a constant pressure for improvement in departments. However, the team was prematurely disbanded a year later and many of the Performance Hub objectives are now pursued by separate teams in the SSC and Treasury. This means there is currently no single, cross-agency team supporting the BPS agenda. As the Institute has previously argued in a report on civil service-wide reform, some central capacity can often act as a much-needed spur for improvement, especially if all the incentives continually tug agencies back into their silos.

New Zealand has clearly made significant progress in tackling the complex public service challenges that bedevil governments around the world. The establishment of 10 challenging outcomes that cut across public service silos have certainly helped to focus minds on the ‘customer’, while the strengthening of functional leadership roles, the Corporate Centre and performance expectations all serve to tackle the competing incentives at play. The UK has much to learn from these innovations, but would benefit from a closer look behind the headlines to understand what has, and hasn’t, worked so well.

Further information

Nehal Davison has also produced a case study on the Policy Project, a cross-agency team tasked with “lifting the quality of policy advice across the public service”, where she was based during her time at the DPMC. This will be published on the IfG website soon.