Monday, June 23, 2008

Modern Australia's problems with delegation and control

In My post Is Mr Rudd being New South Walesed? I said in part:

This is a world in which the combination of theories drawn from private sector management (KPIs, performance agreements, contracts, strategic planning, governance) and economics (contestability among others) has combined with theories drawn from public administration (program budgeting, input/output
models) to create a slow unworking system.

In saying this, I was making a management, not political, judgement. In this post I want to outline a few of my reasons for my judgement. The comments apply not just to NSW, nor just to public sector organisations. I have found similar problems in the private sector.

Anybody who has been involved in management knows that both decision making and communication becomes more difficult as the links in the chain increase. They will also know that the more people you have to consult, the slower the process.

To illustrate first with a private sector example.

A number of years ago I faciliated the development of the first AT&T country plan for Australia. AT&T had moved from the country based structure that had been traditional among global companies to a global business unit structure. It had also introduced a measure of internal competition for support activities under which things happened only if business units agreed to put up money.

The country plan aimed to create a framework for cooperative action among the various business units, including information sharing and combined marketing. While the resulting plan was useful, it did not (and could not) fully achieve its objectives.

From memory, five business units were represented in Australia. With one exception, all were very small in local terms. In theory, people sitting at adjoining desks from different business units communicated through Singapore to a VP based in Hong Kong and then back down a similar chain.

Proposals for collaborative action followed this complex route. Internal business unit approvals had to be obtained and then submitted up and down the chain.

AT&T Australia itself was no more than a corporate shell. Resources to fund the activity, including my fees and the salary and costs of the full time AT&T staffer involved, had to be obtained from the business units. So there was a constant battle to gain both agreement and funding.

In all this, both business units and staff had to meet key business performance indicators based on immediate market targets. This made it difficult to manage longer term issues.

Both business units and staff also had to cope with head-office games and strategies dictated by central corporate objectives and needs, including the need to maintain share prices. This led, among other things, to periodic action to reduce costs by global head-count reductions that then cascaded down. Within three years, the old AT&T was to break up in an attempt to create greater stock market value.

The point of the AT&T example is that, as I see it, it bears a striking resemblance to modern public administration in Australia. The effects pervade our systems at every level.

At executive level, the power of ministers has been reduced. More has to go to Cabinet, more requires approval by PM or Premier before it can be actioned even if Cabinet approval itself is not required.

As part of this, the power of the central coordinating agencies has increased. In New South Wales, as an example, Treasury and Premiers exert control across most aspects of policy and administration.

Across Australia, the levels of real delegation in most agencies appear to have declined. As a branch head in the Federal system, I could sign pieces of paper to the minister. Yes, copies of all minutes to the minister were circulated among the SES, but it was my responsibility to decide what consultation should be done. Then, if I got it wrong, it was clearly my responsibility.

Recently I had lunch with a former senior colleague who left the Federal system later than me. He left the Department to head a major inquiry into a government agency. When he came back, he found that while he could still sign minutes to the minister, now the division head had to counter sign. This may sound a small thing, but it represented a a major reduction in the real authority of the branch head.

The current position in NSW appears to be far worse.

Memos to the minister (they call them memos rather than minutes in NSW) from the branch head in one large NSW agency have to be signed off not just be the division head, but by the agency head. Nobody sees this as strange, yet the reality is that it has a number of adverse effects.

To begin with, its slows things down in that every person in the signing chain has to check the memo before signature. This takes time. Then it limits the range of advice that the minister actually gets because everything has to fit and be tested.

As a senior public servant, I was a change agent, trying to put alternative views, to stimulate ideas. My superiors may sometimes have shuddered a bit, but so long as I did not stuff-up I could proceed.

I could not have done this in NSW. Here the need to get multi-level clearance means that new ideas must actually be developed and approved before they can proceed.

But what happens if you are just testing the water, trying new ideas out? You don't want a developed concept, supported by a project plan. Your aim is discussion. This is no longer easy.

Things get worse from here.

Today we live in a world of cascading performance agreements.

This all sounds so reasonable. The agency head agrees his objectives with the minister and Government. This is then broken down into performance agreements at the next level, and then so on down to the lowest operative. The problem is that not only does it not work, but has adverse consequences.

Things change all the time. In theory, you adjust the agreements. In practice, this is very hard. If you are being measured on x, you do x.

The processes involved in setting new targets are very hard because you are locked into linked agreements that may extend up the chain. You cannot alter your agreement without getting others to alter theirs, and this may involve multiple changes. So in the end you give up.

Things continue to worsen.

In some of my earlier discussions on this issue, I spoke about the emergence of departmental executives. Now we may have executives at departmental and divisional or business unit level.

Designed to improve coordination, they operate in a formal way. So many matters have to be considered by the divisional and then the departmental executive. Again this sounds fine, but these executives add another chain in the decision processes, while also further constraining independent advice.

Then, finally, we have the communications units now found in many agencies. Their role is in part to ensure the presentation of a consistent message. They also act to protect the agency and Government. Inevitably, official external communications need their approval.

Let's pull all this together.

Assume, for the moment, that you are a bright junior officer with a new idea.

If it was one of my officers when I was a branch head, I could go straight to the minister. I might float it as an idea for discussion, or make a recommendation. If I thought that it was necessary, I might organise internal consulations first or following advice to the minister.

Today, for that idea to survive in NSW, it has to go up each step in the chain to the head of the agency for approval. As part of this, it may need to be considered by various executive bodies. It may also need to considered by the communications unit.

Each step involves preparation of formal briefing material. Each piece of briefing material involves formal checks to get it right. Each person signing off must be satisfied. Multiple drafts are common, as are workshops and meetings to fine tune.

Something that might have taken a week when I was branch head, can now in our modern Governmental system take months if it proceeds at all.

To finish, all this makes the AT&T example I gave earlier look like a model of efficiency and transparency!


Thinking about this overnight, one of the key difficulties with modern structures lies not so much with individual elements in the system, but in the way those elements have become so formalised and then interact with each other.

There is no easy answer to all this. Reform requires change across a number of dimensions including, and this is a really hard part, changes to underlying ideas and concepts that have underpinned the development of the systems themselves.


Lexcen said...

When bureaucracy was first implemented it was a system that worked to reign in chaos and it was very successful. These days with lightning fast communication and the need for quick decisions, bureaucracy has outlived its usefulness. It's time for a new management model.

Jim Belshaw said...

My apologies for the slow response, Lexcen. It's been a bit of a week. I agree that there is a need for a new model, although I think that I disagree about your quick decisions point. I will pick this up in a post.