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Organisational governance

Governance policies, procedures and structures

Agency governance processes across the APS vary, reflecting differences in function, legislative background, size and structure. While there is no ‘one size fits all’ approach or model, some common themes are fundamental to successfully implementing better governance.

Employees generally report that they are satisfied with the way governance issues are handled in their agency. Employee satisfaction against the summary Governance factor that emerged from the factor analysis of questions related to employee engagement reported in Chapter 3 was 68%, the fourth highest result of the 12 employee engagement factors.

Despite the generally good results, satisfaction levels with the Governance factor ranged from 51% to 82% among agencies that receive individual agency-specific results. An employee’s classification was particularly significant—SES employees (87%) recorded much higher levels of satisfaction on the Governance factor than APS 1–6 employees (68%), while EL employees had the lowest satisfaction rates (65%).

The Commission’s guide, Building Better Governance, identifies seven basic building blocks when establishing or reviewing governance arrangements. These are: strong leadership, culture and communication; appropriate governance committee structures; clear accountability mechanisms; working effectively across organisational boundaries; comprehensive risk management, compliance and assurance systems; strategic planning, performance monitoring and evaluation; and flexible and evolving principles-based systems.

This section looks at issues relevant to governance in the APS against six of these building blocks. The seventh building block—working effectively across organisational boundaries— is examined in detail in Chapter 10.

Strong leadership, culture and communication

Effective leadership is critical to the development and maintenance of good governance processes. Senior managers can set the tone for effective governance within their organisations by modelling good governance behaviours and demonstrating a strong commitment to accountability. A healthy organisation is likely to be characterised by highly capable leaders who display a visible commitment to the Values, understand their roles, pay appropriate attention to all aspects of an agency’s operations, and look beyond immediate priorities and engage in forward planning. Good governance is also supported by strong and effective linkages between middle and senior managers, a commitment to managing poor performance, and by leaders who are open to dissenting views and support their staff to build judgement and confidence in making decisions.

The employee survey results suggest that there is still considerable room for improvement in employees’ perceptions of their senior leaders. These issues are discussed in more detail in Chapter 7.

An effective agency culture is also an essential underpinning for good governance. Agency culture is difficult to define, but can be said to be what people experience when they deal with an organisation or work in it. Agency culture relates to shared assumptions, beliefs, values, norms and actions. These collective beliefs shape behaviour.

There is no one culture that will suit all agencies’ circumstances. The culture in a regulatory and/or inspection agency, for example, will differ from the culture of an agency with a strong policy development focus. Nevertheless, there are a number of common elements associated with the culture of healthy, high-performing agencies. These include encouraging a performance culture with a focus on continual improvement, integrity, empowering staff, nurturing trust and encouraging appropriate interaction with other stakeholders.

Employee survey results suggest that there is considerable room for improvement in developing appropriate APS agency cultures. As part of the factor analysis of satisfaction with a range of issues related to employee engagement, an Agency Culture factor was identified that brought together a range of questions related to agency culture where employees had similar responses (see Table 9.1). The Agency Culture factor includes questions relating to employee views on the ethical behaviour of the agency, its overall performance, and how employees feel they are treated by their agency. It provides a summary of employees’ views about agency culture. The overall rate of agreement/satisfaction on the Agency Culture factor was 46%, the lowest of any of the employee engagement factors.

Table 9.1 sets out the individual results for the questions included in the employee survey that made up the Agency Culture factor. There was a considerable range in the responses to the questions, from a high of 73% of employees agreeing that their agency is a good place to work, to a low of 24% agreeing that their agency deals with underperformance effectively. Generally, the highest results were provided for issues of ethical behaviour and organisational performance. Areas of concern appear to be the management of change and underperformance, employees feeling valued for their contribution, and the level of involvement of employees in decision-making—these areas had relatively high rates of disagreement, as well as low rates of agreement. There is also room for improvement in the extent to which employees feel confident about the processes in place to resolve employee grievances, feel that they receive the support and assistance they need from other areas of the agency, and in their perceptions of public trust and engagement with the community.

Table 9.1: Agency Culture factor items, by level of agreement, 2006–07

Employee survey question	Agree (%)	Neither agree nor disagree (%)	Disagree (%)	Not sure (%)
My agency is a good place to work	73	16	10	0
My agency operates with a high level of integrity	70	18	10	2
In general, employees in my agency effectively manage conflicts of interest	63	22	8	8
In general, employees in my agency appropriately assess risk	62	23	9	6
My agency has achieved its stated objectives (e.g. objectives in corporate, business or strategic plans)	59	24	5	12
My agency has improved its performance	57	25	9	10
My agency encourages employees to examine what they do and find ways to do it better	54	25	19	2
My input is adequately sought and considered about decisions that directly affect me	54	24	21	N/A
My agency encourages the public to participate in shaping and administering policy (e.g. seeks and uses feedback, consults and engages communities on issues affecting them)	49	28	14	9
My agency has earned a high level of public trust	48	27	17	7
My work group receives the support and assistance it needs from other areas of the agency	46	29	24	2
I have confidence in the processes that my organisation uses to resolve employee grievances	46	33	21	N/A
I feel change is managed well in my agency	43	25	31	1
My agency involves employees in decisions about their work	42	29	27	2
Employees in my agency feel they are valued for their contribution	39	28	29	4
My agency deals with underperformance effectively	24	32	36	8
Source: Employee survey

Perceptions of agency culture vary considerably between different groups of employees. SES employees recorded much higher levels of satisfaction on the Agency Culture factor than both APS 1–6 level and EL employees. Women (50%) recorded higher levels of satisfaction than men (42%). Age and length of service in the APS were also related to satisfaction with the Agency Culture factor—employees under 35 years were more satisfied than those 35 years or over, and after five years of service, satisfaction with the Agency Culture factor decreases, falling sharply for those with 10 to less than 15 years of service, but rising slightly again for those with more than 15 years of service.

Agreement levels also varied widely between agencies, with satisfaction rates for the Agency Culture factor ranging from 30% to 74% for agencies that receive individual agency-specific results, and dissatisfaction rates ranging from 1% to 21%. This suggests that some APS agencies may have to address particular issues relating to their agency culture.

The last aspect of the first building block of effective governance is frequent and consistent communication with all employees about their objectives and responsibilities. This is part of the ongoing responsibility of all managers within an agency. Promoting effective communication within the agency was one of the key lessons for agencies identified by the Commonwealth Ombudsman in his reviews of immigration cases.¹⁶

Agencies report high levels of communication with employees on governance issues. In 2006–07, almost all agencies reported providing access to information on governance policies, making CEIs available, and keeping staff informed about updates, changes or revisions that relate to financial and other delegations (between 90% and 99%). The majority of employees also agreed that they had access to this information, although the results were lower than might be expected given the agency results. Specifically:

• 70% of employees reported that their agency provided them with information on changes to financial and other delegations
• 64% knew where to find their agency’s CEIs
• 55% reported that their agency provided information that clearly outlined decision-making processes
• 60% of employees reported that they understand how their agency’s decision-making processes operate.

In general, these results suggest that, while the majority of staff are aware of important governance issues, there is some scope to improve the effectiveness of agencies’ communication methods in this area. Broader issues of communication are discussed in more detail in Chapter 7.

Appropriate governance committee structures

The second building block of effective governance is the establishment of appropriate governance committee structures. All agencies use committees to support the agency head in decision-making and governance arrangements. Some committees are mandatory (such as those for audit and occupational health and safety) while others are discretionary and agency-specific, reflecting the particular governance needs of agencies. The appropriate committee structure for an agency depends on its size, type of function, the complexity of responsibilities, geographic dispersement and risk profile.

Responses to the agency survey showed that agencies had a number of different governance committees in place. Table 9.2 shows that almost all agencies utilise audit, occupational health and safety, and senior management committees as part of their governance systems while over two-thirds of agencies use workplace consultation/relations committees. Not surprisingly, the likelihood of using more specialised committees generally increased with agency size.

Table 9.2: Agency methods of selecting staff by type of governance committee, 2006–07

Type of committee	Agencies reporting committee in place (%)	Relevant agencies using method(s) of selection
		Staff election process (%)	Self-nomination (%)	Appointed by management (%)	Determined by position held in agency (%)
Senior management/executive committee	98	0	0	24	95
Occupational health and safety(a)	97	69	36	49	38
Audit(b)	93	0	6	82	51
Workplace consultation/relations	80	93	30	51	49
Information technology	67	5	8	64	76
Information or knowledge management	44	5	18	64	74
Personnel management/human resources	35	10	10	58	68
Finance	33	0	0	55	83
Remuneration	24	5	0	33	86
(a) It is not mandatory to have an occupational health and safety committee if the number of the employees in an agency is normally less than 50. (b) A small number of agencies included in the survey did not have an audit committee as they were not separate APS agencies as defined under the Act. Source: Agency survey

The report of the Defence Management Review discussed earlier provides some commonsense advice about committees and how to use them most effectively.¹⁷ The review recommends that the guiding principle for committees is to establish and retain only those that contribute to the effective and efficient running of the organisation, and also to reduce the pressure and workload on senior staff. Each committee must have a clear purpose and a clear sense of its strategic obligations. Where committees are established for specific purposes or projects, they should have a sunset clause at which time their existence should be reconsidered. Membership would generally be limited to those who are essential to reaching informed decisions, with others invited to participate on an ‘as needed’ basis.

The Commission’s work on governance has identified a number of best practice protocols relevant to establishing and operating committees regardless of the structure used.¹⁸ These include selecting the right members for the task—whether representative or related to expertise—equipping committee members with the skills and resources they need to play an active role in committee deliberations, and establishing clear terms of reference or charters.

The agency survey results indicate that agencies are generally taking a strategic approach to the membership of governance committees. In the majority of agencies which use a particular committee, some members are appointed directly by management, with others becoming members by virtue of their position within the agency or through staff election or self-nomination (see Table 9.2). There is a particularly strong representation of members appointed by management on audit committees. The committees within relevant agencies whose members were least likely to be appointed directly by management were remuneration committees and senior management/executive committees; here, the position held in the agency was the primary selection method.

On committees where members are largely appointed by management, or included because of the position they hold, very little training is provided, as agencies believe that training is not necessary as selection is based on skills set or professional expertise. For agencies with the relevant committee, this ranged from 89% for audit committees to 95% for ICT committees. Training was more likely to be provided for workplace relations and occupational health and safety committees, where there were larger numbers of members appointed through a staff election process or self-nomination. Formal training was used by 79% of agencies with occupational health and safety committees. Agencies with workplace relations committees were more likely to rely on informal training such as mentoring (56%).

Agencies had a much stronger focus on ensuring that committee members are clear about what their role on the committee involves. The most common process or procedure is to use the committee terms of reference or its charter. Between 75% and 96% of relevant agencies used this, with only senior management/executive committees (54%) and remuneration committees (58%) having a lower use. This is consistent with their positionally-based membership. Between half and around two-thirds of relevant agencies also used informal processes such as mentoring and committee discussion to assist committee members understand their role. Agencies made less use of induction briefing except when training audit committee members (35% of relevant agencies).

These results are encouraging. Nevertheless, it is important to remember that an understanding of the particular role is only the first step in being an effective member of a governance committee. Members need to be active and critical participants in the decision-making process. Dissenting or alternative views should be welcomed by the committee.

Clear accountability mechanisms

Clear and unambiguous lines of responsibility, accountability and reporting, both within the organisation and with its stakeholders, are critical to effective governance. Public servants are accountable to Ministers for their actions within the framework of ministerial responsibility to the Government, the Parliament and the Australian public (APS Values, s.10(1)(e)) and for their performance through agency management systems. There is a range of ways in which APS agencies are held accountable for their outcomes and outputs in practice, including through annual reports and Portfolio Budget Statements, parliamentary scrutiny, ANAO audits, review bodies such as the Commonwealth Ombudsman and the Administrative Appeals Tribunal (AAT), and the State of the Service report. In addition, there have been independent reviews such as the Palmer and Comrie reviews of immigration detention cases, or more recently, the inquiry announced into the outbreak of equine influenza in Australia in August 2007.

Accountability is supported when agencies have clearly defined their business objectives and are able to demonstrate their performance against them. ANAO’s audit of the outcomes and output framework found that the majority of agencies reported in their annual reports against all of their Portfolio Budget Statement outcome and output performance indicators.²⁰ Nevertheless, although the audit identified that the audited agencies had met many of the annual performance reporting requirements, each of the audited agencies had not complied with a number of mandatory reporting requirements. ANAO concluded that agencies should improve performance reporting, in particular, in relation to:

• the overall state of outcomes
• the effectiveness of agency and administered items in contributing to the achievement of outcomes
• the efficiency of outputs
• agency achievements rather than activities.

ANAO also concluded that particular attention should be given to including narrative discussion and analysis of agency performance in annual reports. Finance agreed with ANAO’s recommendations.

The importance of clarifying accountability and responsibility was a key theme of the Defence Management Review, which found that Defence had confused its accountabilities, and identified a lack of alignment between responsibility and accountability in key parts of the organisation. Establishing clear accountability mechanisms requires establishing an organisational structure where responsibility and accountability are clearly aligned, and where relationships with stakeholders, including the Minister, other portfolio entities and external stakeholders, are carefully managed. Case studies undertaken for the Commission’s Building Better Governance publication indicated that a number of agencies have recently reviewed and realigned their organisational structure in order to achieve this. Some agencies have also established a particular branch or unit charged with the overall strategic governance of the organisation.

Particular accountability issues arise in implementing whole of government approaches and in devolving the delivery of government services to non-government organisations (devolved government). In these situations lines of accountability become increasingly complex.

Vertical and horizontal responsibilities must be married and the right balance struck between proper levels of accountability and allowing some degree of flexibility and responsiveness to service users. These issues are discussed in more detail in Chapters 10 and 11.

Effective recordkeeping

Good recordkeeping is essential to accountability. Proper recordkeeping allows others to understand why a decision was made or an action taken, and can guide future decision makers. Agencies with ineffective information management systems and poor knowledge transfer can be at risk of poor performance. The need to maintain accurate, comprehensive and accessible records was a key lesson that the Commonwealth Ombudsman identified from his investigation of immigration detention cases.

Over the last few years, ANAO has undertaken a number of audit reports which have identified significant risks for inadequate recordkeeping in electronic environments, given the increasing scale and complexity of records. The most recent report, Recordkeeping including the Management of Electronic Records,²¹ raised a number of concerns about the effectiveness of the APS in managing records. In particular, ANAO found that managing electronic records continues to pose particular challenges in ensuring compliance with relevant recordkeeping requirements, especially in relation to the capture and retention of all relevant records created electronically, and the capacity to ensure the long-term access, integrity and functionality of these records.

In response to concerns about recordkeeping in the APS, MAC commissioned a report aimed at assisting the APS to develop recordkeeping capabilities to enhance overall efficiency and accountability. The report, Note for File: A Report on Recordkeeping in the Australian Public Service,²² was released in August 2007.

Note for File has a practical focus, providing clear advice to APS employees on what a record is. It emphasises that not all documents created in the APS are of high value or need to be managed corporately. Instead, the report suggests that agencies focus on the corporate management of ‘important or useful’ records that are of real importance to the APS’s business and accountability requirements. The report argues that recordkeeping is more likely to be done to the required standard if agencies actively recognise and encourage good recordkeeping and discourage poor recordkeeping. It also suggests that record management needs to be more effectively integrated with ICT, and records and ICT managers must remain up-to-date with developments in recordkeeping technologies, especially those which can automate the recordkeeping process.

In preparing its report, MAC identified that a barrier to effective recordkeeping in the APS was that the DIRKS (Designing and Implementing a Recordkeeping System) process developed by NAA to obtain a records authority has been relatively complex and resource intensive. NAA has acknowledged these issues and has developed an approach that will be much quicker and more practical for agencies. The new approach is a one-step process that will comply with the International and Australian Standard and which NAA believes will halve the net time it currently takes to obtain a records disposal authority. Agencies will also have greater flexibility to target their effort towards disposal of those records that provide the greatest concern. The implementation of the revised DIRKS will be monitored in future State of the Service reports.

This year’s agency survey explored the extent to which agencies have already adopted a range of measures to improve recordkeeping. The measures included in the survey were informed by the findings and recommendations of the most recent ANAO recordkeeping audit.

There is a strong emphasis on improving recordkeeping across the APS. In 2006–07, almost all agencies (97%) reported undertaking at least one measure to improve recordkeeping—88% of agencies used four or more measures.

Table 9.3 provides a summary of recordkeeping measures undertaken by agencies in 2006–07. Most progress has been made in providing information and training to employees, integrating recordkeeping with corporate planning, and dealing with disaster recovery and security issues. There has also been a significant amount of activity in relation to the management of electronic records.

Agencies were least likely to have identified a recordkeeping strategy that will meet the agency’s needs for the next three to five years. This is an area which agencies will now benefit from focusing on, given the framework established by MAC’s report, Note for File.²³ There is also potential for more agencies to focus on recordkeeping needs and risk analyses, a formal preservation strategy and the identification of vital records.

Table 9.3: Recordkeeping measures undertaken by agencies, 2006–07

Measures undertaken by agencies	Small agencies (%)	Medium agencies (%)	Large agencies (%)	All agencies (%)
Policies and/or guidance to assist employees understand the information that needs to be created, received and maintained in agency recordkeeping systems	60	82	91	75
Specific training to assist record creators and users to meet their recordkeeping responsibilities	60	82	83	73
Contingency arrangements aimed to ensure in a disaster that vital records are available to enable the agency to resume business	68	64	74	68
Commitment to recordkeeping has been included in agency’s high-level strategic documents (e.g. corporate plan)	60	54	83	64
Agency’s electronic recordkeeping practices reviewed to ensure they meet the requirements in the Protective Security Manual for classifying sensitive electronic information	57	68	61	61
Policies and/or guidance for the storage of electronic records	46	71	74	61
A strategy that addresses current agency-wide recordkeeping responsibilities	54	61	70	60
Compliance assessment(s) (i.e. audits)	43	64	57	53
Administrative arrangements that facilitate a collaborative approach between records and information management, information and communications technology and other related functions	41	61	57	51
A recordkeeping risk analysis	43	50	44	46
As part of business continuity planning process, identified vital records (electronic and paper)	38	43	48	42
A recordkeeping needs analysis	35	36	44	38
A formal preservation strategy aimed to ensure access, integrity and functionality of electronic records	35	43	26	35
Recordkeeping strategy identifies agency’s needs in next 3–5 years	24	21	48	30
Source: Agency survey

Table 9.3 shows substantial variation in the use of measures by agency size. In particular, small agencies were much less likely to have implemented most measures. This was particularly so in relation to policies and guidance on the storage of electronic records, possibly due to the high cost of electronic recordkeeping systems.

Given the concerns expressed by ANAO and others about the management of electronic records, agencies were also asked about the processes they used to store corporate emails that are useful or important records as the official corporate record in their agencies. Table 9.4 shows the types of paper-based and electronic systems agencies used to store corporate emails. There has been some growth in the number of agencies saving emails into electronic systems, in particular, email storage or email archiving systems and shared drives.

Table 9.4: Recordkeeping practices undertaken by agencies to store corporate emails, 2005–06 and 2006–07

Agency practice	2005–06 (%)	2006–07 (%)
Printed and filed into registered paper correspondence files	94	90
Saved into a corporate Electronic Document & Records Management system (EDRM)	35	40
Saved into shared drives	54	63
Saved into personal drives	37	34
Saved into personal email folders	66	59
Saved into an email storage or email archiving system	40	63
Source: Agency survey

The proportion of agencies identifying that corporate emails are saved into personal email folders has declined. It is of concern, however, that 59% of agencies still identify this as a process used in their agency.

Reflecting the high level of activity reported by agencies, the large majority of employees continue to report that their agencies considered good recordkeeping practices to be very important (86%) and agreed that recordkeeping is an important aspect of their jobs (80%). Most employees (69%) also agree that they received appropriate training and/or had access to information that enables them to meet their recordkeeping responsibilities, and that their agency provides adequate equipment, facilities, and/or storage to enable them to meet their recordkeeping responsibilities (73%). Consistent with these results, the large majority of employees (89%) believe that they understand their responsibilities in relation to creating and maintaining records.

Despite these generally good results, only 58% of employees report that, given their work demands, they have enough time to meet their recordkeeping responsibilities. This finding supports recent research cited in MAC’s Note for File report which shows that higher quality recordkeeping is achieved when the recordkeeping burden is lifted from general employees. MAC’s report recommends that agencies should concentrate on good systems design that can enable the automatic creation, capture and control of records. It also suggests that agencies can support good recordkeeping by making it as simple as possible for all APS employees to be good recordkeepers, and by rewarding good recordkeeping practices.

Also of concern, especially in light of the wide range of recordkeeping activity reported by agencies, is the relatively low proportion of employees (48%) who agreed that in the last 12 months recordkeeping practices in their agency have generally improved. This is slightly higher than last year’s result of 45%, but it still suggests that agency initiatives are not having as big an impact on the ground as might be hoped. It could be that employees’ views will improve further as agency initiatives become more firmly embedded. Agreement that there was improvement in agency recordkeeping practices varied widely from 21% to 73% across agencies with individual agency-specific results.

Employees’ views on recordkeeping also varied between groups. In particular, EL and SES employees tended to be much less positive than APS 1–6 employees. Employees located in the ACT were generally less positive than employees located outside the ACT.

Employees made a number of comments about improving recordkeeping which centred on some common themes. Ideas for improved recordkeeping were provided by a minority of employees but were generally consistent with the recommendations of Note for File. They include:

• better provision of administrative support and allowing time for recordkeeping
• improving training in procedures and processes, including classification and storage of documents
• developing systems with high levels of usability and reliability
• support for good recordkeeping from senior levels with ongoing reinforcement of the importance of knowledge management and recordkeeping within the agency.

Comprehensive risk management, compliance and assurance systems

A fourth building block of effective governance is comprehensive risk management, compliance and assurance systems that are flexible enough to allow for changes in leadership, objectives, direction, resources and risk.

Risk management

Conventional approaches to performance management in the APS have increasingly been supplemented by risk management approaches. Risk management encourages APS agencies to identify the risks that could potentially harm their business objectives, and provides the strategies, processes and tools to monitor, recognise and deal with these risks. Effective risk management requires strong leadership and recognition at all levels of decision-making. It is more than just a checklist of hazards to be avoided or insured against—it also takes into account opportunities.²⁴

The State of the Service surveys suggest that risk management is well-embedded in the APS. In 2006–07, almost all APS agencies (94%) had policies and procedures in place to ensure that appropriate assessments of risk are conducted and the remaining 6% were developing such policies—a slight increase on 2005–06. Consistent with these results, the majority of employees (70%) also agreed that their agency had policies and procedures in place to ensure that appropriate assessments of risk are conducted. Employees were, however, slightly less likely (62%) to believe that, in general, employees in their agency appropriately assess risk. When EL 2 and SES employees were asked to nominate the five most important actions that would assist their agency to achieve greater efficiency and/or effectiveness, 31% nominated a culture that supports greater levels of calculated risks being taken.

Compliance

Compliance measures are another important part of an effective governance framework. There are a number of tools that an agency can use to ensure compliance, particularly CEIs, which can help to ensure that an agency’s financial accountability and governance arrangements are aligned to its operational and legal needs. Other tools include policies and procedures on specific governance issues. To be effective, these need to be complemented by assurance mechanisms, including audit and other committee structures, management and internal control mechanisms integrated into the business planning process (e.g. risk and fraud control plans), and regular and systematic management reporting.

One issue of particular importance for the APS is the handling of conflict of interest. The Code requires APS employees to disclose, and to take reasonable steps to avoid, any conflict of interest (real or apparent) in connection with APS employment (s.13(7) of the Act).

Since 2003–04, there has been a general trend towards greater use of measures by agencies to ensure compliance with requirements to disclose and avoid conflict of interest (see Figure 9.1). In 2006–07, all agencies but one had at least one method in place and nearly three-quarters of agencies used four or more methods. The two most common methods were internal policies to manage the acceptance of gifts and benefits (including hospitality), and the requirement that the SES provide a written statement of their interests.

Consistent with these results, there is a generally high level of awareness among employees of the compliance mechanisms their agency uses in relation to conflict of interest. Seventy-three per cent of respondents to the employee survey agreed that their agency has policies and procedures in place that assist employees manage conflicts of interest.

Another important element of compliance that directly affects the reputation of the APS is ensuring that non-public servants who deliver services on behalf of the Government, provide in-house services to agencies, or who work as consultants on particular projects, behave consistently with the Values and the Code. These groups are not directly covered by the Act, so agencies need to look at other mechanisms to ensure their compliance with the relevant aspects of the Values and the Code. This issue is increasingly important as the Government makes greater use of non-government providers to deliver services on its behalf.

Since 2003–04, the proportion of agencies that define and communicate expectations to non-public servants to ensure that they behave in accordance with the relevant Values and the Code, has increased from 77% to 92%. All large and medium agencies have at least one of these policies in place. Of those agencies reporting policies or developing policies (97%), the most common method used is a general clause in a contract (80%), closely followed by information in tender documents (78%). Just over one-third of agencies (35%) use a specific clause in contracts regarding relevant aspects of the Values and the Code. Over the last four years, there has been a general decline from 31% to 17% in the proportion of agencies using non-contractual arrangements that are more difficult to enforce, such as information sheets, briefings and training. Other methods identified by agencies for promoting the Values and the Code include use of policy documents, kits, and orientation or induction sessions.

Strategic planning, performance monitoring and evaluation

A fifth building block for effective governance is strategic planning and performance monitoring and evaluation. Strategic planning and performance monitoring, reviews and evaluations are all essential tools for ensuring agencies regularly ‘reality check’ their governance systems and identify potential risks that could affect their ability to achieve outcomes.

Evaluating governance processes

Regular review of agency governance structures is important in ensuring continued effectiveness and relevance, given changing circumstances and the emergence of new challenges.

In 2006–07, nearly three-quarters of agencies (73%) reviewed their governance structures. Almost two-thirds of these agencies (64%) reported that the review was part of a regular review process—28% of agencies noted that it was a requirement following the outcomes of the Uhrig Review. Agencies had also conducted reviews aimed at improving the governance capability of employees (41%) and at responding more effectively to problems identified with the existing framework (17%). Other reasons cited by agencies included responses to legislative or machinery of government changes, a new agency head, or as part of broader management or other reviews.

Seventy-eight per cent of relevant agencies reported that they had made changes to their governance structures as a result of the review. Changes largely centred on:

• revision of committee structures
• updating of plans (e.g. fraud plan) and CEIs
• organisational restructures
• development of SOIs and SOEs arising from a Uhrig assessment
• clarification of leadership roles and enhanced executive decision-making arrangements
• improved reporting requirements.

Those agencies which reported not making any changes after the review cited that either existing arrangements were found to be satisfactory or that changes were still to be finalised.

Monitoring corporate health

A critical issue for agencies in evaluating their governance structures is to put a strong emphasis on monitoring their corporate health. Over the years, the APS has invested heavily in improving the performance of the public service and public institutions. From time to time, however, the APS has experienced serious agency performance lapses which have given rise to concerns about the quality of APS agencies, their ability to manage in a rapidly changing environment, and their effectiveness. A rigorous approach to monitoring corporate health is essential to allow agencies to take corrective action in dealing with problems before they develop into serious performance issues.

Corporate health is about the ability of APS organisations to deliver high-quality and timely outcomes. It includes issues such as how an organisation is managed, its corporate and other structures, its policies and strategies, and the way it deals with various stakeholders. High levels of corporate health are directly linked to high-performing agencies that are able to use available resources efficiently and effectively to achieve their goals, realise their mission and deliver the outcomes required by the Government.

Processes for monitoring corporate health are integral to an agency’s governance framework. Monitoring the health of an agency allows agencies to ‘take the pulse’ of their organisation, and to identify early warning signs that they may be at risk of poor performance.

In consultations with other agencies, and with jurisdictions across Australia and New Zealand, the Commission has identified six broad areas of corporate health that are central to the early identification of agencies at risk of poor performance. These areas, which cover the broad spectrum of governance issues, are: organisational direction; leadership; organisational capability; corporate governance processes; relationships and integrity; and organisational culture. There are also some issues specific to the public sector, such as the extent to which agencies anticipate and respond to emerging issues or priorities of government, support their staff in dealings with Ministers and/or Ministers’ offices, and are proactive about dealing with funding concerns.

Against each of these areas, the Commission has identified key indicators of corporate health associated with organisations that perform well, and with agencies at risk of poor performance. In an agency with high levels of corporate health, for example, there is likely to be an awareness of, and a focus on, core business throughout the organisation. Conversely, in an agency at risk of poor performance, there may be poor communication of organisational purpose, strategies and vision.

Given the results of the employee survey, a particular issue for many agencies will be monitoring the extent to which their agency is encouraging the development of an effective agency culture. Indicators of an effective agency culture include high levels of collegiality and confidence among the leadership group, strong support for employees, an understanding of differences in internal agency culture, an emphasis on whole-of-agency identity and approaches, and a focus on collaboration and engagement with other agencies and relevant stakeholders. Shortcomings in organisational culture are likely to include low levels of staff empowerment and trust, a culture of crisis and blame, conflicting internal cultures and directions, and a fiefdom mentality, or an ‘us against them’ culture.

In order to address these issues before they impact on agency performance, it is important for agencies to put processes in place to measure their corporate health. One of the 10 lessons that the Commonwealth Ombudsman identified in his review of immigration detention cases was the need to check for warning signs of bigger problems. The Ombudsman suggested that agencies ask themselves whether they monitor decisions and complaints to check for systemic problems in agency administration, whether they learn from the experience of other agencies that have encountered problems, and whether they encourage critical self-appraisal.

The Commission’s publication, Agency Health: Monitoring Agency Health and Improving Performance,²⁵ released as part of its Contemporary Government Challenges series, discusses these issues in detail and is an important resource for agencies in putting a greater emphasis on monitoring their corporate health.

The nature and extent of any problems identified by the monitoring process will determine the agency’s response. Sometimes, solutions may be clearly linked to problems, such as improved recordkeeping or enhanced information management processes. Solutions may also involve improving capability, establishing more effective governance processes, or replacing ineffective managers.

Flexible and evolving principles-based systems

A sixth building block of effective governance processes is ensuring that governance mechanisms are based on flexible and evolving principles-based systems.

Case studies undertaken during the preparation of Building Better Governance highlight the potential benefits of a stronger focus on a principles-based approach, leading to greater flexibility and responsiveness to the Government’s needs. This approach also increases senior management’s ability to apply a broader, future-oriented strategic approach, including to whole of government issues.

The need for a flexible approach to traditional governance arrangements is most clearly highlighted in dealing with what are sometimes called ‘wicked’ policy problems. These problems share a range of characteristics—they go beyond the capacity of any one agency to understand and respond to, and there is often disagreement about the causes of the problems and the best way to tackle them.

Very often, part of the solution to wicked problems involves achieving sustained behavioural change by some groups of citizens or by all citizens. There are numerous examples, including dealing with obesity, climate change, Indigenous disadvantage, or land degradation. For these problems, a traditional approach to governance which attempts to clearly identify specific outcomes and outputs, implementation plans and performance targets may lead to these types of wicked problems being handled too narrowly, or the emergence of unintended consequences.

Research and evaluation work undertaken by the Commission suggests that, for wicked problems 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. Performance measurement and evaluation needs to avoid a narrow ‘bean counting’ approach, and take into account the likely need for longer time frames for results to become apparent.

There are no easy answers regarding the best governance arrangements for dealing with wicked problems. It is important for agencies to look for a balance between achieving necessary levels of accountability and ensuring that governance arrangements do not stifle flexibility, innovation and collaboration. The Commission’s discussion paper, Tackling Wicked Problems: A Public Policy Perspective,²⁶ deals with the issue of wicked problems in more detail.

The importance of flexible approaches to governance arrangements reinforces the need for regular review of agency governance structures to ensure that they meet the agency’s current circumstances.

 

15 Commonwealth Ombudsman 2007, Lessons for Public Administration: Ombudsman Investigation of Referred Immigration Cases, Commonwealth of Australia, Canberra, <http://www.ombudsman.gov.au>

16 Commonwealth Ombudsman 2007, Lessons for Public Administration: Ombudsman Investigation of Referred Immigration Cases, Commonwealth of Australia, Canberra, <http://www.ombudsman.gov.au>

17 Department of Defence 2007, Report of the Defence Management Review, Commonwealth of Australia, Canberra, <http://www.defence.gov.au/dmr>. See Chapter 5.

18 Australian Public Service Commission 2007, Building Better Governance, Commonwealth of Australia, Canberra, <http://www.apsc.gov.au>

19 The full case study is included in Australian Public Service Commission 2007, Building Better Governance, Commonwealth of Australia, Canberra, <http://www.apsc.gov.au>

20 ANAO 2007, Application of the Outcomes and Outputs Framework, Performance Audit Report No. 23, 2006–07, Commonwealth of Australia, Canberra, <http://www.anao.gov.au>

21 ANAO 2006, Recordkeeping including the Management of Electronic Records, Performance Audit Report No. 6, 2006–07, Commonwealth of Australia, Canberra, <http://www.anao.gov.au>

22 Management Advisory Committee 2007, Note for File: A Report on Recordkeeping in the Australian Public Service, Commonwealth of Australia, Canberra, <http://www.apsc.gov.au/mac>

23 Management Advisory Committee 2007, Note for File: A Report on Recordkeeping in the Australian Public Service, Commonwealth of Australia, Canberra, <http://www.apsc.gov.au/mac>

24 I. McPhee (Auditor-General for Australia), ‘Engaging with Risk’ (Address to an Institute of Public Administration Australia (ACT Division) Breakfast Seminar, 24 March 2006), <http://www.anao.gov.au>

25 Australian Public Service Commission 2007, Agency Health: Monitoring Agency Health and Improving Performance, Commonwealth of Australia, Canberra, <http://www.apsc.gov.au>

26 Australian Public Service Commission 2007, Tackling Wicked Problems: A Public Policy Prospective, Commonwealth of Australia, Canberra, <http://www.apsc.gov.au>