Organisational governance

Key chapter findings

There has been a continuing emphasis on improving the effectiveness of governance in the APS in 2006–07. The finalisation of the Uhrig assessment process has raised the profile of governance issues and led to fundamental changes in the way governance is approached in Commonwealth Government entities. There has been a strong focus on improving the way the APS approaches internal and external regulation. Attention has also been paid to improved identification of better practice governance principles that can assist agencies in improving their governance processes.

There is a range of evidence that agencies are taking the challenge of improving their governance processes seriously. The high proportion of agencies that have reviewed their governance structures this year and implemented changes, suggests that agencies are systematically evaluating the effectiveness of their governance structures. Agencies are also taking a strategic approach to the membership of governance committees and are putting a strong focus on ensuring that committee members are clear about their role.

Almost all agencies have procedures in place to provide their employees with information about governance policies, although employee survey results suggest that the effectiveness of these communication processes could be improved. Both agency and employee survey results indicate that risk management is becoming firmly embedded within APS agencies. Agencies have also placed a strong emphasis on ensuring compliance with aspects of the Values and the Code.

There is also a high level of activity in relation to recordkeeping, with some evidence of improvements in managing electronic records, although there are continuing concerns about the storage of corporate emails. Employees continue to believe that their agencies consider recordkeeping to be important, and that they have access to appropriate training and equipment. However, they are still not reporting improvements in their agency’s recordkeeping practices. It may be that the initiatives being implemented by agencies need time to become more firmly embedded and to show results. Nevertheless, given research showing that higher quality recordkeeping is achieved when the recordkeeping burden is lifted from general employees, these findings reinforce the suggestion in MAC’s Note for File report that agencies should concentrate on good systems design that makes it as simple as possible for all APS employees to be good recordkeepers.

Reflecting the overall high level of activity in relation to governance, the majority of APS employees express satisfaction with the way their agency handles governance. There are some areas, however, which would benefit from greater attention.

APS agencies take their accountability responsibilities seriously, and ANAO has found a high level of reporting in annual reports against agencies’ Portfolio Budget Statement outcome and output performance indicators. ANAO, however, identified areas where performance reporting needs to improve, including through a stronger focus on the reporting of agency achievements, rather than activities.

Despite relatively high levels of overall employee satisfaction with governance issues, there continues to be significant variation in views about governance in different agencies and among different groups of employees. EL employees continue to have lower satisfaction levels than other groups, as do those working in the ACT. Agencies may want to look at engaging ELs more directly in the governance of their agency, particularly as strong and effective linkages between middle and senior managers are associated with organisations that perform well.

The implementation of new ways of working in a range of areas in the APS, including whole of government approaches and the delivery of services through non-government providers, presents a number of governance challenges for the APS. In particular, they raise issues of accountability, both through the requirement to marry vertical and horizontal responsibilities, and the requirement to balance accountability with the need to allow some degree of flexibility and responsiveness. In this regard, almost one-third of EL 2 and SES employees believe that their agency could achieve greater efficiency and/or effectiveness if it developed a culture that supports greater levels of calculated risk. These issues are discussed further in Chapters 10 and 11

Governance arrangements are also challenged by the growing pressures to deal with more complex or ‘wicked’ policy problems, such as environmental protection and public health issues. For these issues to be handled successfully, governance structures need to support holistic approaches, focus accountability on the whole of government outcomes the Government is seeking, and allow for the engagement of stakeholders and citizens. Developing governance processes and policies based on flexible and evolving principles-based systems will be an important part of addressing these challenges. Governance rules are necessary, but an organisation that is strictly bound by rules may be unable to respond appropriately to unusual, complex or new circumstances. An understanding of the policies and objectives behind the rules allows for sound decision-making.

Establishing an effective agency culture which encourages a focus on performance, continuous improvement, empowerment of employees and trust is a critical component of an effective governance framework, and an important contributor to an agency’s overall corporate health. The employee survey results suggest that creating such a culture is a challenge for the APS. There were relatively low rates of employee satisfaction with issues related to agency culture, and some agencies recorded particularly low rates of satisfaction. The results suggest that there is room for improvement in a range of areas related to agency culture, particularly the management of change and underperformance, the extent to which employees feel valued for their contribution, and their level of involvement in decision-making.

Monitoring the effectiveness of an agency’s culture is an important part of an agency’s overall strategy for monitoring its corporate health. The occasional lapses in performance among APS agencies highlight the importance of each agency monitoring its corporate health to detect any signs of failing health. A rigorous approach to monitoring corporate health will allow agencies to take corrective action to deal with problems before they develop into serious performance issues.

In assessing corporate health there is a place for external reviews such as the Defence Management Review. It is critically important, however, for APS agencies to put in place an institutionalised practice of continuous improvement in corporate health across their organisations.