Short term reforms

By Robert Hickson 09/04/2012

Len Cook, President of the New Zealand Institute of Public Administration, recently criticised the New Zealand fetish for haphazard structural change in the public service. He noted that it undermines the need for continual learning and a culture of continuous improvement. It’s not that change may not be necessary, but that structural change should follow good analysis (as seems to be the case in Australia with their Moran Review).

He also noted the substantial societal, economic and environmental changes underway, and the need for the public service to have the capabilities, mechanisms and people to help address these challenges and opportunities. This picks up on the themes explored in Victoria University’s Institute of Policy Studies’ Future State report released in 2010. Future State noted the increasing instability and diversity in the world and New Zealand, and the consequent rise in unpredictability. They identified four main challenges facing the Public Service:

  • Affordability;
  • Complicated problems involving many players;
  • A more diverse and differentiated population; and
  • A world of faster, less-predictable change.

The recent restructures (and those proposed) don’t seem to take much if any account of these issues. Most of the changes are about reducing costs and improving the efficiency of the public service. As Len Cook noted, there is usually no evaluation after the fact about whether these changes have saved money and resulted in greater efficiency. Colin James commented that what is lacking when this Government talks about public sector reform  is effectiveness — are we getter better services and policy advice from these changes? Effectiveness matters more than efficiency to the public.

Some Ministers seem keen on remodelling the public sector along private sector lines and introducing greater top down command and control. However, this is often a selective exercise. A KPMG international study [PDF] noted that the public sector devotes considerably less emphasis on staff development than the private sector. As KPMG note, politicians favour the short term quick fix approach and ignore the longer term strategic changes that are required.

Types of Public Sector Reforms. Source: KPMG (2009) "Tough choices ahead"
Types of Public Sector Reforms. Source: KPMG (2009) "Tough choices ahead"

As the Future State papers note, as problems become more complex, top down approaches are less likely to succeed.

Reducing staff is the quick and easy option for reducing costs, but it doesn’t always make the organization more profitable or effective. Bloomsberg Businessweek has noted that many firms have realised that they have cut too deep into their workforce and are now rehiring. Zeynip Ton, writing in the Harvard Business Review, notes that retailers need to invest more in their employees. Unsurprisingly, there is not an inverse relationship between staff payroll and profitability. Some firms that pay their staff more and employ more people generate substantially more profit than lower cost competitors. Zeynip also notes that the quality of the work not just the number of jobs within firms is critical to success. James Surowiecki picks up these ideas in the March 26 edition of the New Yorker.

While the public sector isn’t directly comparable to the private sector, some of the basics are the same. Sure more routine work can now be outsourced or undertaken by computers. But the competence and quality of staff matters as much within government departments as in firms, as the recent criticisms about proposed changes at MFAT illustrate. Sadly, other departments don’t seem to be able to make the same point as effectively.

Reform in the public sector is necessary to meet emerging challenges and opportunities, but the government is taking a short term view that means we will not have the public service that we need.