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Last updated: 4 July 2003

The Australian experience of public sector reform

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Chapter 9-Challenges

Public sector reform in Australia has been sustained for more than 20 years with constant extension and evolution, not only accepted, but often driven, by public sector managers.

The incremental reforms have mostly been bipartisan; successive governments building on the reforms introduced previously, resulting in a highly comprehensive, sustained package that has delivered substantial productivity gains and improvements in the effectiveness of government programs.

The public service, financial and employment legislation of the late 1990s has been groundbreaking. The culmination of more than a decade of change, it has created an environment in which flexibility can flourish while accountability is strengthened.

The challenge now is to ensure that Australia can take full advantage of these opportunities in how the public service manages itself and in how it delivers advice to governments and services to citizens. The momentum of reform needs to be maintained.

The changing structure of government

The shape and structure of Australian governments has changed substantially during the last two decades. There has been a reduction in government ownership at the federal level and in almost all Australia's state governments. Since the early 1990s in excess of A$90 billion dollars of publicly owned organisations have been sold into the private sector. The process has covered a wide range of government assets, including telecommunications, electricity and gas, rail, ports and airports, banks, hospitals, gambling and prisons.

The government has changed from being the owner and manager of these assets to becoming the standard setter and the regulator. The underlying objectives of government, such as ensuring the public good and protecting the disadvantaged remain, but the method of achieving the objectives has substantially shifted. While Australian telecommunications companies now operate within a competitive market they still have to meet demanding community service standards to ensure that those in isolated rural communities are not disadvantaged. Failures of the market to reflect community obligations adequately are now managed primarily through regulation of the industry rather than through ownership.

During the 1980s and 90s, as illustrated in earlier chapters, the remaining core government areas have been reformed to focus on performance. This has resulted in devolved administrative responsibility within agreed standards and enhanced accountability.

The reformed public service now undertakes business planning, emphasises flexibility and responsiveness-to the government and to citizens (now often seen as clients and customers)-welcomes the involvement of 'stakeholders' and seeks competition. Values-based management and improved cooperation and communication have replaced the centrally driven one-size-fits-all approaches of the past. The efficiencies created by a public service that is more flexible and performance orientated have contributed to Australia's increasing productivity and economic health.

There are now many areas where the government chooses to implement policy, or deliver a service, by drawing on the capability of non-government organisations. During the last decade, the federal government has increasingly involved other sectors in the delivery of government services and to implement policy through establishing contractual arrangements involving a wide range of providers.

Private sector funding to develop both physical and social infrastructure has allowed the government to use competition to drive efficiencies, while also reducing the level of government debt and the impact of public debt interest payments on the budget. Government has also been able to concentrate on setting out the standards of service that the contracted provider will deliver, without having direct responsibility for the employees delivering the service.

These 'public-private partnership' arrangements have been used for quite diverse projects, from the Sydney airport rail link to the delivery of social services, such as through Job Network, which provides almost 1 billion Australian dollars of services to the unemployed each year though partnerships with more than 100 private and community organisations.

By drawing on the capabilities of many providers, government can encourage greater experimentation and innovation in program implementation and service delivery where one solution is unlikely to successfully address the whole problem.

Even more recently, governments have been finding new ways of delivering services by encouraging business community partnerships in which companies and community organisations work together on projects to benefit the community.

The changing environment of policy making

These attempts to find new structures to best meet the demands of government illustrate the challenges that the policy developers and implementers continue to face in Australia. There is the constant two-part question: is government intervention required to ensure a service is provided, and if so, would a better result be achieved if the service were provided directly by government, or via competing non-government providers?

There are, of course, real difficulties in comprehending the future-particularly of understanding the emerging opportunities derived from new scientific developments and new technologies-and how these might be used to benefit public policy decisions.

Giving weight to the longer term is sometimes difficult for democratically elected governments, but the democratic process does allow the community to shift directions, and politicians and political parties to develop longer-term strategies and philosophies, as well as short-term policies, aimed to capture the mood of the public. The task of the public servant is not only to be responsive to the immediate agendas of the government and the community, but to look for emerging ideas that can benefit future society, and to ensure governments can, and do, address longer term issues in a well informed way.

As the rate of change accelerates and the interacting variables multiply, situations that demand the attention of government become less predictable. While consultation and the need for consensus across government becomes more important, situations being assessed often continue to change in unforseen ways, making planning decisions more difficult. There is a need for the public service to develop consultative policy mechanisms that are flexible enough to take action swiftly and respond to change, while also having the capacity to engage in longer-term developments.

Involving citizens

In policy development and policy implementation public services in Australia have begun to more systematically involve citizens and stakeholders in the planning processes. This recognises the expertise, and the differing values and perspectives, of community members and the increasing expectation of members of the public, clients, and industry members to influence the services they receive and the policies that affect them. Agencies and Ministers are using a range of techniques, including focus groups, consultative committees, open inquiries, ad hoc panels and even negotiation processes.

This involvement results in better policy and service delivery and better advice to Ministers about community perspectives. Good policy making is increasingly involving proactive communications, listening to community views, understanding the fears and sensitivities of those affected, providing feedback, and explaining government policy. The effectiveness of a program or policy initiative can be greatly influenced by the quality of the communications strategy.

The impact of international change

Globalisation poses more complex problems while often acting as a constraint on what governments can achieve.

Governments are having to regulate in new areas to deal with old problems taking on different guises. Globalisation and technology provide new ways for criminals and terrorists to achieve their aims. Governments have to find new ways of fighting stateless, decentralized networks that are able to operate freely across national borders for terrorist purposes, or to trade illegally in drugs, arms, intellectual property, people, and money.

It is increasingly important that public servants develop their understanding of these changes in society and an appreciation of the values and judgements that will inform their perception of policy alternatives. In Australia, considerable efforts are being made to enhance this appreciation by senior public servants through various learning initiatives and discussion with their colleagues, other leaders and academics, and through international linkages.

Australia's membership of, and participation in a number of international forums gives it access to the thinking of a wide range of public service leaders and the opportunity to exchange ideas, share experiences, and learn of alternative policy paths. These include the Public Management Committee of the Organisation for Economic Cooperation and Development, the Commonwealth Association for Public Administration and Management, and the Corporate Leadership Council, located in Washington, DC.

The Australian Public Service Commission also belongs to a number of international public administration institutes, such as the International Association of Schools and Institutes of Administration and the Eastern Regional Organisation for Public Administration, based in the Philippines, each of which contributes towards broadening its perspective of public sector change.

The new Australia and New Zealand School of Government (referred to in Chapter 5) has the potential to enhance shared leadership development for emerging public service leaders across jurisdictions, and to improve awareness and understanding of the forces driving international public sector developments and their potential impact on Australia. It is expected that the School will extend enrolments to include students from other countries in the region once it is firmly established.

Workforce capability

The changing structure of government and the changing policy environment has had a significant impact on both the public service workforce in Australia and on the range of skills it needs for the future.

Technology changes have reduced the number of unskilled and semi-skilled jobs, and led to declining employment of young people. The privatisations and outsourcing of the last two decades have added to this impact, resulting in a much smaller public service with a less occupationally diverse workforce. Overall, the public service workforce is also ageing significantly.

There has also been a growth in mobility in and out of the Service. The traditional path of entry at the bottom and steady progression upwards thereafter has been supplemented by lateral entry and exits at all levels. In 2002 one third of all new entrants to the Service came in at a middle management level, or above; 60 per cent of new entrants were aged 30 or more; and one third of all resignations were of people aged 30 or below.

Given Australia's demographic changes in which the size of the working population will decline in relation to the total population, the public sector will face increasing competition for new entrants and pressures to retain its skilled employees. It will need to be more active and systematic in planning its workforce, identifying its skill and capability needs, and using performance management, career planning, recruitment policies and structured learning and development initiatives to ensure these needs are met.

Despite adopting new governmental structures, Australia is unlikely to go down the path of 'hollow government', in which the public sector of the future will constitute only generalists and purchasers who turn to outside experts for any and every substantial input. It is much more likely that the demands of governments will increase and that in order to build and sustain high levels of productivity the public service will increasingly require skilled recruits and structured learning and development strategies for all employees.

The skills needed for coordinated and cooperative policy work and flexible policy implementation are very different from those required when public servants were the sole suppliers of advice to governments and administered service monopolies.

Critical to the success of policy delivery is the quality of leadership throughout the public service, not just in developing policies, in refining the policy setting, setting up performance systems and reporting, but in its capacity to build relationships, to address local problems and to be innovative within a framework of general values and understanding.

The leadership capability framework adopted for the APS encourages emerging leaders to develop a greater strategic focus, to develop a stronger capacity to inspire a sense of purpose and direction and to establish and maintain productive working relationships across and beyond government agencies.

Public servants also now require strong technical skills, especially in contract management, financial and risk management, information technology and communications. Technological change continues to drive societal and structural change and is reflected in community demands and expectations of improved access to governmental services through user friendly e-government and e-business.

When establishing and managing partnerships public servants require a high level of commercial skill, an ability to clearly specify the service or outcome sought, and an understanding of likely future developments in demand and other economic and social variables. Public servants must now manage relationships with contractors over the long term rather than managing the employees who deliver the infrastructure or service.

Improved communications skills will also be needed to respond to the greater expectations of citizens, customers, clients, and stakeholders and the ever crucial relationship with Ministers and their offices.

Agencies are beginning to build their organisational capability and to appreciate the importance of taking a longer-term view of shaping their workforces so that their workforce planning practices contribute significantly to the agency's performance.

They are increasingly matching their business needs with analysis of their demographic and workforce trends to identify and acquire the skills they need to meet their clients' expectations. They are also adapting their workplaces to take into account wishes for more flexible hours of work and working arrangements, changing career patterns, the trends to more lateral recruitment and the aging of the Australian workforce.

Performance and organisational capability

The management reform agenda-focusing on managing for results and devolution- has led to improved business and corporate planning, better performance management, increased use of competition, and better management of people as well as finances. More recently, agencies have turned their attention to finding ways to integrate and align their people management, business strategies and workforce planning to improve their organisational capability-to ensure that their agency has the knowledge and skills it needs to meet its objectives.

Performance management is increasingly seen as a tool to achieve this. The wide diversity of government agencies requires that each agency tailor its approach to ensure alignment with its culture, credibility in terms of fairness, rigour and transparency, and integration with its organisational objectives.

Agencies are now using their industrial relations agreements with their employees-their agency Certified Agreements and individual Australian Workplace Agreements-to support this alignment and to promote shared commitment to the success of their business aims.

In so doing, they are increasingly using performance management processes to balance a focus on outputs-what people do-with the behaviour exhibited by all employees, including managers, in achieving those outcomes-the how, the APS Values translated into everyday action.

Achieving the aim of a framework that aligns all elements of planning, people and performance management, to corporate goals, and then measures their contribution to organisational performance, will continue to be a key challenge for the Service in the years ahead.

Devolution and accountability

While most of the recent improvements in public administration have come from a closer focus on results rather than process, 'the way we do things around here' remains critical. The public service has particular responsibility for the public interest in upholding the law and ensuring due process-impartiality, fairness, and openness.

There are risks in shifting away from centrally set down prescriptive rules of process to legislated principles in an environment where responsibility is largely transferred to individual agencies. There are important limits to streamlining processes in order to achieve results if accountability is to be maintained. The risks must be manageable to the satisfaction of the Parliament and the public as well as to the government-of-the-day.

Increased flexibility will always require increased accountability, together with tougher aggregate financial controls. Over the next few years managers will need to more effectively exploit current flexibilities in managing their people and in delivering agency results.

Accountability is one of the foundation values of the APS. But the more contestable and commercial environment in which the Service now operates heightens the need for agency systems and behaviour to be grounded in, and consistent with, appropriate accountability mechanisms. The shift towards using third parties to provide services and support activities has been very substantial during the past quarter century. In many cases, these purchaser/provider splits have clarified program objectives and increased accountability in terms of outputs and outcomes. Yet there are challenges involved, and risks to be managed. The Auditor-General has recently raised questions about transparency and accountability for aspects of process as well as results.

While federal agencies can outsource functions they cannot outsource their responsibility or overall accountability. Parliament insists that they remain accountable for the delivery of services, even where the service delivery is provided by private and non-government sectors.

Administrative law has given members of the public direct access to public service decision-making, but their involvement in policy consultations and on community-based management boards, can lead to concerns about accountability. The expectations of responsiveness direct to the public and stakeholders have to be handled consistently with the public service's formal accountabilities to Ministers, the government and the Parliament. Decision-makers must have legal authority and be held accountable.

Whole-of government

Governments are searching for new ways to find solutions to problems that cross governments, cross jurisdictions and cross portfolios. Australia has achieved some successes in managing the 2000 Olympics in Sydney-involving many agencies at federal, state and local government levels-and the tremendous cross-government and cross-agency efforts to quell the bush fires in eastern Australia in 2002 and 2003 .

The challenge is to develop mechanisms, structures and cultures, which facilitate wholeof- government approaches that become a characteristic of the way governments work in Australia's accountable, federal democracy-not only in times of crisis. To meet this challenge, public sector leaders will need to implement one of their key Public Service Act responsibilities-to promote cooperation with other agencies-by managing across new types of structures.

'Joined-up government' is internationally a key focus of attention and in Australia the federal government is not alone in its search for solutions-the state governments also have initiatives aimed at better management of whole-of-government priorities.

A STATE GOVERNMENT PERSPECTIVE

Growing Victoria Together

Growing Victoria Together is a whole-of-government policy framework expressing the vision, policy priorities and key progress measures of the Victorian government to 2010. It was developed in 2000–01 to guide medium term policy choices, communicate directions to citizens and engage stakeholders to think collaboratively about the future.

Victorian government Ministers identified three specific challenges: to develop and articulate a sense of direction; to improve the capacity of government; and to draw on a broader base of knowledge, experience and expertise by involving and engaging citizens, communities and stakeholders in policy making and implementation.

There was an increasing recognition that new policy challenges extended across traditional organisational boundaries, and that the detailed output structure used in planning had clear limitations in terms of long term planning and in showing how government is making a positive difference to the lives of individuals and communities.

The strategy focuses on four outcomes to be achieved by 2010, with 11 key issues identified as those most important to Victorians. Initial priority actions and 32 specific progress measures, chosen after extensive consultation and supported by all Ministers, provide the ‘sharp end’ of Growing Victoria Together. An example:

Key Issue	Progress measure
Valuing and investing in lifelong education	The percentage of young people aged 15–19 in rural and regional Victorian engaged in education and training will rise by 6 per cent by 2005.

The policy framework is now used as a high level filter to guide resource allocation, and corporate and business plans. The 11 key issues were used as the framework for determining and communicating budget decisions in 2002.

Next steps include aligning the output and performance reporting systems of government with the Growing Victoria Together outcomes.

The federal government has already had some successes in managing whole-ofgovernment initiatives.

As already noted, Centrelink is a statutory agency established in 1997 that delivers government services to eligible customers on behalf of, and in partnership with, 25 federal and state agencies.

A more recent, long term initiative is the Indigenous Communities project aimed at advancing reconciliation and addressing Indigenous disadvantage, which is involving all three levels of governments along with community organisations and private employers. The Council of Australian Governments is taking a leading role with Ministers and federal departmental secretaries in partnership with a taskforce which acts as the 'broker' in each community and coordinates all levels of funding and service delivery.

The Management Advisory Committee has recently taken what it has called a 'federalist' approach to the management of information communication technology throughout federal government. This involves centrally set standards and cooperative development of cross-government initiatives, while allowing information technology investment and management to be mostly business-driven by each agency.

Early in 2003 the Committee established a project to work on whole-of-government issues. It will identify current impediments (structural or cultural or capability-related) to effective whole-of-government and integrated policies and services, and recommend measures to address them. It also plans to draw on lessons from experience to develop a very practical good practice guide.

In managing whole-of-government initiatives, Australia, like most countries, is seeking an effective balance between centrally driven imperatives and local autonomy. There is a risk that the very devolution that has helped to improve the performance of the public service over the current period might exacerbate the problems of coordination, just when community expectation of seamless services and whole-of-government coordination is soaring.

The Auditor-General has pointed out the risks to accountability in joined-up, or integrated, projects that inevitably involve more than one participant agency and frequently involve organisations that may not be directly accountable to government and not subject to parliamentary scrutiny. While departments and agencies will have their normal reporting responsibilities to Ministers, they will also need to ensure that their partners can live up to these reporting standards. Parliament may need to consider how it extends current notions of accountability to participants from other jurisdictions or sectors.

A unified public service defined by Values

In devolving responsibility from the centre to each government agency a set of principles to guide behaviour was established in the form of the Values and a code of conduct.

Since the passing of the 1999 Public Service Act, public servants are required 'at all times to behave in a way that upholds the APS Values and the integrity and good reputation of the APS'.

Agency heads are required, not only to uphold, but to promote, the Values in their organisations to all their employees, whether employed for short or long term. They must also apply relevant Values to outsourced service providers and partners, particularly those providing services to the public.

The Values and code of conduct are robust enough to govern the behaviour of all public servants, and provide real support as public servants carry out their policy advising and program management responsibilities.

Key words are impartial, professional, ethical, accountable, fair, effective, diligence, courteous, honesty, integrity, and compliance with the law. They are not just aspirational statements, but are gradually being embedded into agency systems and procedures through fraud control and risk management procedures, appropriate governance systems, performance management and training.

There remains room for improvement in the way the Values are promoted and reflected in agency systems and procedures, and in the behaviour of managers and employees. There are also public sector employees working in agencies not covered formally by the PS Act, or working for state and local government agencies not covered by similar Values requirements. How to promote appropriate behaviour and relationships in these agencies remains an important challenge for their management.

That said, the culture of Australian public sector employees is generally very strong in terms of honesty, integrity and impartiality, and the primary challenge is to maintain these high ethical standards in a more fluid environment.

Conclusion

It seems unlikely that there will be a fundamental change in the role of government in Australia. Government remains in the business of public good, protecting the disadvantaged, promoting economic growth and stability and protecting rights. What has happened, and seems likely to continue, is a change in the way that role is managed. So there is less direct service provision and more purchasing and partnering. There is a more careful analysis of natural monopolies and a greater use of competition. There are new approaches to regulation to protect consumers and to protect public safety at minimum reasonable cost to business and the community.

In terms of service delivery, there is likely to be more choice and variety in how customers receive services as technology facilitates individually crafted service packages, particularly through Internet connections. It is also likely that there will be more commercial approaches to service delivery, not necessarily through privatisation or contracting out, but client-focussed, competitive service provider arrangements offering choice.

In terms of policy advice and decisions, there is likely to be even more demands for wider involvement by stakeholders, clients and external experts. Consultation and engagement will be increasingly important.

The climate of change will continue, obviously with much uncertainty about specific directions, but the following general trends might be expected. Community expectations will continue to rise, commercial and financial disciplines will become ever more important and there will be an increasing focus on finding policy and service delivery solutions through greater government integration, across agencies, across jurisdictions and across nations.

The modern public sector environment will continue to give rise to challenges in meeting the high standards of performance and accountability expected of it. Public service leaders will continue to face the challenges of responding proactively to government and leading their organisations through the time of change ahead.

Further information:

Growing Victoria: http://www.growingvictoria.vic.gov.au

Council of Australian Governments http://www.dpmc.gov.au/docs/Coag_framework.cfm

Management Advisory 2002, Australian government use of information and communications technology, http://www.apsc.gov.au/mac