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Mr Stephen Sedgwick AO,
Australian Public Service Commissioner 

Australian Government Leadership Network

Melbourne - 9 August 2012
Sydney - 6 September 2012

(Check against delivery)

Introduction

Acknowledge traditional owners and pay respects to any elders past or present.

 

Thank you for inviting me to speak today about ‘thinking outside the square - new approaches in tight times.’

Today I’m going to talk about the environment and some drivers of change that are relevant to the public sector and then the critical role that leaders need play in response, including their role in creating high performance agencies.

“Tight times”

Let me start with the notion of ‘tight times’.

The most obvious manifestation of ‘tight times’ is the one-off increase in the efficiency dividend of 2.5%, bringing the total dividend to 4% in 2012/13, which reduces the base appropriation of agencies permanently into the future.

In addition agencies are absorbing rising personnel and other costs (for example as a result of enterprise bargaining or external cost pressures) which will not be directly funded by government.

And some government programs have lapsed because there was not money available in the budget to continue them past their nominal expiry date; and some programs have been amended or discontinued because government priorities have changed or there is evidence to suggest that programs will be more effective if they are structured differently.

Managing the consequences of such shifts can present challenges for agency managers, especially if the agency has been engaged in a lot of change over recent years.

But if there is one point I’d like to get across today it’s that we should approach the current fiscal situation, not as an aberration, but as something that will be with us for the foreseeable future, irrespective of which party is in power.

Partly this is a function of the economic cycle – the fiscal stimulus injected to deal with the global financial crisis has to be unwound, which will take time, and revenue growth seems likely to remain sluggish for some time.

Partly, though, there is a more enduring set of influences at work.

Depending on decisions yet to be taken these could include how to accommodate a response to potentially significant spending programs such as those associated with the Gonsky review into schools funding and the National Disability Insurance Scheme.

But there are other longer term drivers our economy needs to progressively accommodate that will create enduring pressures to prioritise scarce public resources.

Let me illustrate with a demographic challenge.

Treasury’s Intergenerational Report says that the number of people working compared to those aged over 65 will almost halve from its current rate, about 5 people working today, to about 2.7 by 2050.

Even allowing for the likelihood that some over 65s will continue at least some work, that’s a big shift.

Australia is not alone of course.

Indeed other countries are facing large (arguably often larger) fiscal adjustments in the short term and similar long term challenges associated with population ageing.

I spent some time with colleagues in the UK late last year, who are managing a very substantial cut in resourcing, and found a strong spirit of reinvention of government – reflecting that necessity is often the mother of invention.

To some degree they have used the crisis they face to do things that needed to be done but were harder to get the necessary buy in for during better economic times.

We have the option to do something similar.

Who was it that said you should never waste a good crisis?

They may well have a point.

Let’s take this opportunity of tight times to ‘think outside the square’.

I’d argue that we have a proud history in the public service of undertaking necessary reform.

There are lots of examples.

One of my favourites, is the creation of Centrelink and the redesign of active labour market policies that led to the establishment of the Jobs Network in the late nineties.

Arguably this was a world first, leading edge reform than other countries are only now catching up to.

Roll forward 15 years and a more contemporary example is work being led by the Department of Human Services that takes that thinking further.

Under the banner of service delivery reform, DHS has identified three clear objectives in its work:

• make it easier for people to do business with government;
• give people better quality services; and
• give people better service from government.

The need for this work, including the integration of Centrelink and Medicare, was recognition that the current model for government service delivery had not kept pace with community expectations around convenient access, quality of services and advances in technology.

The services of the existing system were seen as fragmented and inhibiting existing programs from meeting the needs of individuals and the community.

And this service delivery reform is also driven by the trend towards greater integration and shared services and infrastructure to provide more efficient and lower cost services.

This is a really good example because it anticipates and responds to the external drivers and imperatives I outlined earlier.

My deeper point in choosing this example, though, is that it illustrates that reform is a continual process, not an event – in this case a process spanning 15+ years.

As an organisation, we have a history of being at the forefront of reform that generates more effective and less resource intensive services for the Australian community – of recognising and seizing opportunities that a tight fiscal situation presents, and not being consumed by the challenge.

Indeed, at the forefront of productive reform is exactly where we should be.

It’s important to remind ourselves every day that we are entrusted with the stewardship of the resources allocated to us on behalf of taxpayers.

We also, at times, exercise the coercive powers of the state, or impose regulatory and other burdens on members of the community.

We will best maintain public trust in the role of the public service (indeed in the legitimacy of taxation itself) if it is clear to political leaders and the public that we are focused on the needs of the community, collaborate effectively in meeting those needs in a “joined-up” way, and are able to reinvent ourselves as necessary to respond to their changing needs and expectations.

We should not assume we have a monopoly on the provision of advice or services to governments.

And ‘thinking outside the box’ should be seen as our day job.

It is the job of our leaders, at all levels really, to inculcate a pro-innovation, citizen centred and reform-minded culture that seeks to ensure that priorities are set and reset as needed (with resource allocation adjustment as necessary).

I’m not suggesting that agencies aren’t already doing this.

DEEWR, for example, recently undertook a disciplined and comprehensive approach to resource prioritisation.

Focusing on all business units they looked for opportunities where work practices could be improved, simplified or stopped.

I understand that they conducted more than 100 workshops in every branch and state office during February and March 2012.

Around 1,800 participants were engaged in a structured, facilitated process which generated more than 9000 ideas, many of which had common themes. These were rolled up into 12 overall improvement themes.

One key emerging theme was the identification of opportunities to rationalise and consolidate functions across the department; another was to improve delegations; and another was to develop a more agile, flexible and capable workforce.

The approach DEEWR adopted was a very practical way to respond effectively in tight times, which seems to have been effective and, I understand, was well received within the department.

But I have a larger point to make, which relates to the nature of good leadership itself.

We in the Commission have been paying renewed attention to the development of the leaders of the APS in the wake of the Blueprint for reform of the APS and the decision of the senior leadership of the APS to fund fresh thinking in this area.

And it is to that work that I wish now to turn.

Building the capability to respond: leadership and core skills

We could stand here all day and debate the definition of leadership, but the one I prefer to use is adapted from our capability review work:

“Leadership is the practice of using influence to bring about change. It is about establishing future direction, helping people to see the direction and work towards it, and developing people.”

In other words, leadership isn’t just about being the most senior person in the room.

Nor is it necessarily defined by one’s position or authority.

And if leadership is a practice rather than a position, per se, then it is something that leaders at all levels and in all roles can contribute to.

Leaders have influence, they are role models and they help to weave the rich fabric that makes up the APS culture.

Good leaders focus energy, inspire, bring people together in the spirit of collaboration, create an environment of honesty and accountability, and, to my earlier point, they encourage people to find more efficient and effective ways of doing things.

Good leaders bring out the best in their people and thereby help their organisations thrive.

In the past, good leadership was often seen as being an expert in your field and having the right answers.

That was no doubt the right model of leadership in many circumstances.

Today, though, we are looking for a broader range of leadership styles because the environment we work in is changing.

I spoke previously about one element of the complex challenges we face in the coming years, for example dealing with the implications of an ageing population.

These are multidisciplinary challenges that require diverse expertise, and often they have no easy or obvious answer.

These are what Ronald Heifetz from Harvard calls “adaptive challenges”.

Not every challenge facing the APS is an adaptive challenge.

In fact, the APS will always face many technical challenges. Unlike adaptive challenges, technical challenges can be resolved within existing know-how and by applying processes and procedures.

The challenge for leaders at all levels is to recognise whether the challenge they are facing is an adaptive challenge or a technical one, and to consciously choose the appropriate leadership style to respond.

An adaptive challenge, as we’ve noted, has no clear answers and no easy solutions.

Climate change or water allocations for example, are examples of adaptive challenges.

For these challenges, leaders need to take a very different approach.

They need to allow learning and experimentation.

They need to allow new ideas to bubble to the surface, and they need to accept failures on the path to success.

With adaptive challenges, leaders also need to expect and manage a degree of disturbance, or what Heifetz calls “disequilibrium”.

Just consider, these problems have no easy solution, so the longer the path to success, the more anxious and fearful people may become.

Stakeholders may splinter into factions, worried about the potential to experience losses, and as the heat rises, leaders may face pressure to treat the problem as a technical one and use their authority to impose a makeshift solution, or abandon the search for a solution entirely.

So in an environment where we face adaptive challenges, what does a leader need to be able to do?

Firstly, leaders need to understand themselves well enough to know which leadership styles work well for them and where they have weaknesses; and have the confidence to seek help when they need it.

For example, a decisive leader who likes driving towards outcomes will probably find the uncertainty of leading through an adaptive challenge difficult.

And, good leaders are able to recognise when they need help to try new ways of working and encourage new behaviours in their people.

And let me be very clear.

Leaders who ask for help when they need it are exactly the sort of leaders we want in the APS.

Leaders who seek out help are self aware.

They recognise their limits and have the confidence to reach out for support.

Interestingly our leaders will increasingly come to understand that, like innovation, the identification and/or solution to adaptive challenges is inherently anti‑hierarchical – and be quite comfortable with that.

In 2011, the APSC produced the Knowing, Doing, Being framework for leadership development.

The framework was developed in consultation with APS agencies, and reflects the findings of Harvard’s Nitin Nohria and Rakesh Khurana, who argue that leadership in the contemporary world requires a combination of knowledge, behaviours (or ‘doing’) and a sense of who you are as a leader (or ‘being’).

In the APS, ‘knowing’ means having knowledge about APS systems and processes.

It means paying attention to the health of those systems and processes, and intervening where necessary.

‘Doing’ means displaying the behaviours that are well described in the Integrated Leadership System.

And ‘being’ relates to awareness – awareness of yourself, awareness of others and awareness of the situation.

Leaders with strong ‘being’ capabilities are authentic leaders - their words and actions are aligned. They are resilient and they have the conviction to stand apart from the crowd and voice a different perspective when necessary.

In an environment of adaptive challenges, building being capabilities means building leaders who can strike a balance between letting people feel the urgency to change and experiment, but who also know when to draw back so that the discomfort doesn’t become disabling.

Developing leaders with capabilities across all three dimensions – knowing, doing and being - is particularly powerful for helping our organisations develop a culture of continuous improvement and innovation.

By focusing on all three dimensions, we have an opportunity to build leaders with organisational know-how (the ‘knowing’), and ensure that this knowledge intersects with the behaviour and self awareness that builds the underpinning organisational culture.

These qualities have enduring worth – they are especially valuable in tight times, though.

So how are we developing these capabilities?

At the moment, our focus is on developing the SES.

This is because the Knowing, Doing, Being framework, particularly the ‘Being’ component, is a significant cultural shift for the APS. So we felt that there was a case for initially focussing on the most senior leaders.

To that end, we are currently refreshing our SES leadership programs, and in July we launched a refreshed SES Orientation program.

The new programs build capability across the knowing, doing and being dimensions.

The programs have also been restructured to recognise that learning happens all the time, and they conform to what we call 70-20-10 rule.

That is, 70% of the learning is experiential, i.e. supported on-the-job learning, 20% of learning happens through networks and relationships, and 10% of learning happens in the classroom.

The 70-20-10 approach is important because we need to recognise that building leadership capability – particularly ‘being’ capability – happens over a period of time.

The new SES Orientation program, for example, takes place over six months.

We are hoping to make learning part of our daily work.

We don’t need to be in a classroom to be learning new things and trying new approaches.

Instead we are looking to develop learning leaders who will help our organisations institutionalise a culture where innovation and learning is as natural as breathing.

Finally, the APS is are also investing in talent development.

Let me be clear about what this means.

Participation in talent development isn’t a guarantee of promotion.

Nor is it a prerequisite.

Rather it is an option to help individuals accelerate the pace at which they become ready for advancement.

Promotion, as always, will depend on fields, the individual’s capabilities, the nature of available vacancies etc.

The intent is to enable the APS to mitigate the risk that it may in future have to rely excessively on the external market as the older generations retire.

The Secretaries Board has endorsed a pilot talent development program for high potential Band 2s.

The program occurs over 12 months, and is just past the mid-point.

It is a challenging program.

Participants are encouraged to experiment on the job, try new behaviours and shift dynamics.

So far, feedback is that the program is helping participants to step back and consider their leadership behaviours in the moment, and then draw on their toolkit to select the right leadership model for the situation.

The results to date are very encouraging.

As I say, we have started with the SES, but we expect to translate the lessons we are learning to other levels of the APS in the very near future.

But you don’t have to wait for us!

I encourage all of you to take the time to invest in yourselves and in your people as leaders.

Ask yourself what type of challenge are you facing?

Ask what leadership model will serve you best – do you need to use your authority or do you need to encourage people to adopt a new approach?

Identify your capability gaps and address them.

And carefully consider which styles you are less comfortable with, and reach out to people who can help you through situations that are less suited to you.

And lastly, make small experiments trying out different leadership approaches on the job and reflect and learn from experiences.

You might be surprised at what you learn!

Emerging issues including performance management

Before I close I want to spend a couple of minutes reflecting on some work now underway concerning performance management.

It links to the theme of this conference because good performance is critical to achieving our best at any time, but especially in tight times when people might become distracted.

 If leaders are doing their jobs there should be a clear organisation vision and strategies in place to deliver that are cascaded through to the front line.

Good leaders create a collective aspiration for high performance at all times to enhance quality, deliver value, and effectively manage financial resources.

They need to ensure that the organisational competencies and dynamic capabilities are in place to enable success.

This includes ensuring that expectations around high performance are articulated through performance discussions between managers and their reports at an individual level.

It starts at the top and cascades to people doing all levels of work.

But the evidence suggests that we still do not do this as well as we might.

When I last spoke to you capability reviews were still in the pilot stage.

Now it’s a program with significant momentum behind it.

Six reviews have been completed (or are close to completion), and several others are about to start.

Pleasingly, we’re getting good feedback from Secretaries who have experienced reviews - they say the results provide valuable insights that they can work on with their senior teams to improve the performance of their organisation.

It is still too early to draw systemic conclusions from just 6 reviews but our experience is suggestive that two issues may repay attention across the service.

One, which I’ve already talked about, is about recognising and acting on the need to prioritise resources.

The other is around how well our performance frameworks and systems are working.

This is consistent with a 2004 ANAO report, Performance Management in the Australian Public Service, which concluded that practices were variable across agencies.

And, moreover, that in many cases there was a lack of alignment between performance management processes and agency goals, with performance management sometimes more driven by industrial relations processes than being truly linked to business needs and outcomes sought by governments.

More recent State of the Service data also suggests that we have an issue in this area.

Between 2009 and 2011 the proportion of employees reporting that their most recent performance review will help to improve their performance declined by one percentage point a year.

By 2011 about half the respondents said their performance either made no difference or worse still could be contributing to creating disengagement.

We’ve also seen a similar decline in the proportion of people who thought that their agency dealt effectively with underperformance, which was a dismal 23% in 2011.

And this is despite the fact that 90% of agencies require all employees to have a formal employment agreement.

We’re conducting research in partnership with the University of Canberra, ANU, and UNSW, which aims to identify practical ways to improve governance, systems, practices and capabilities in this area – and we are working with colleagues in agencies to identify and disseminate good practice in performance management.

Through this work we’ve established the pre-conditions for a world class performance management model, including:

• performance management processes that allow organisations and individuals to anticipate, respond and adapt to changing circumstances;
• the recognition by both employees and managers that performance management is a mutual responsibility;
• clear articulation of performance and behavioural expectations
• the integration of resource allocation into the agreement; and
• just how critical the capability of both managers and employees is to an effective performance management system.

We’ll be working with agency colleagues to agree on the priorities in this area in a strategy we aim to complete by the end of the year and implement in 2013.

Closing

In closing I want to leave you with a four key messages.

First, we’ve dealt with “tight times’ well before and, I believe, have the skill to do so again and seize opportunities and reinvent ourselves as necessary.

Second, leadership is critical.

Leaders (at all levels) need to create the space, the authorising environment, that encourages and enables innovative ideas to surface and be developed to the point of valuable application. We should have worked-up policy options up our sleeves not wait until we are asked to develop them in a crisis.

Third, leaders must also ensure that the organisational culture is one that embraces high performance and that this is backed up with supporting frameworks, systems and processes.

Finally leaders need to ensure their organisations have the strategic and operational agility to change direction when necessary as circumstances dictate, including in current and future ‘tight times’.

And the reason that we are reinventing our leadership development model and practices is because we are determined to prepare our next generation of leaders so that they are well positioned to discharge their functions well.

Thank you.