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9. Conclusions

The scope of the problem

The recent rapid growth in the SES and the growth in the number of senior SES staff has led to questions about whether this has in part emerged from competition between departments for key personnel and whether tighter controls on SES numbers and classification levels would help constrain costs and maintain equity at little damage to the public good.

The size of the SES remained relatively steady from its inception in 1984 to 2003. The rapid growth of the SES since 2004 has occurred during a period over which real spending has increased strongly, and the Australian Government has faced a range of challenges – in national security, on its borders, in the economy and in the environment – and community expectations that it will take an expanded role over Indigenous disadvantage, health, education, sustainable population growth, infrastructure and communications. The Australian Government has also taken an increasingly direct role in delivering services to citizens over this period.

There is evidence of a relationship between the strong growth in the SES over the last decade and the number of programs administered by the APS, as well as growth in regulation, the number of cabinet meetings, the scope and complexity of international meetings including the development of the G20 and the COAG reform agenda. New policy, new legislation and new programs require higher levels of oversight by senior staff.

Other contributing factors for which evidence exists – albeit much of it anecdotal – are the growth in complexity and political risk associated with the administration of programs,significantly greater demands for interaction with and responsiveness to stakeholders, including Ministers and their offices and the impact of advances in ICT and the emerging 24/7 media cycle on expected response times for the provision of advice.

Pressure on the time of Secretaries has increased significantly – and this may have increased demand for senior SES support.

Relative growth in the SES equivalent grades in the United Kingdom and Canadian civil services has been similar, suggesting that some of the factors relating to the growth in programs, complexity and the accelerating policy cycle may be common.

The flexible deployment of SES resources, including the creation (and abolition) of roles in line with policy and operational priorities is a necessary part of an efficient and effective APS. However, evidence from the audit of SES roles suggests that in a devolved setting, agencies may have created SES roles, or maintained existing SES roles, that operate at a level below the range of recognised work level standards for their SES classification, particularly at SES Band 3. This is perhaps not surprising in the light of the findings of APSC surveys, and the Review that:

  • few agencies use documented work level standards to inform classification of new SES roles or to test existing classifications
  • there is no detailed common guidance, or independent audit or review of classification decisions and
  • for two thirds of agencies, “remuneration required to attract or retain occupant” is a factor in classification decisions.

Getting better value from SES roles

The Review has found that most SES roles in the APS deal with a level of complexity and risk, exercise a degree of independence and have the involvement and impact expected at their classification level and that many do so in excess of these expectations. However, there is evidence from the audit of SES roles that the work value of some existing roles has been diluted and some newly created roles do not meet the work level standards for their classification. Overall the APS could obtain better value from all of its SES by giving greater attention to ensuring the “size” of SES roles matches their classification levels.

Better sizing of SES roles to get better value for the APS does not mean increasing the volume of work undertaken by roles, but may in some cases mean shedding lower value tasks and accountabilities and replacing them with higher value tasks and accountabilities in order that roles better reflect the relevant work level standards.

While the potential budget savings are not large – the Review has estimated them to be in the order of $6 million pa – if significant action is not taken it can confidently be expected that these costs will increase over time.

Limiting the size of the SES

Evidence that some newly created SES roles do not meet the work level standards for their classification and the very strong growth of the SES over the past decade suggests that until stronger arrangements for applying work level standards are in place it would be prudent to retain some central control over the size of the SES.

Downsizing the SES

There may be scope for some reduction in the number of SES roles to occur. Various States have implemented cuts in their SES equivalents and, apart from the symbolic value of such exercises, they may serve to raise cost consciousness across the senior levels of the public service. The potential for savings to the budget is not large. The direct savings in the cost of SES remuneration from a 10 per cent cut in the SES would be in the order of $65m per annum – not counting the cost of any offsetting redundancy benefits and the likely increase in the number of EL2 roles.

However, over the period of significant growth in SES numbers, the APS has been damaged by some significant failures in program delivery – failures that have in substantial part been attributed by the Australian National Audit Office and other inquiries to insufficient senior management oversight and control.

Recommendation 9: Agency SES caps should continue to apply for five years while strengthened classification management arrangements are put place for the SES and any reductions in the SES flowing from agency classification reviews and program and fiscal consolidation are implemented.

Recommendation 10: Oversight of agency caps on SES numbers and assessment of agency claims should continue to be undertaken by the Commissioner with agency bids and the Commissioner’s decisions being based on the work level standards.

Previous Commonwealth experience suggests that effective and sustainable downsizing occurs when it is driven by expenditure reductions identified as part of the Government’s fiscal consolidation strategy. A potentially fruitful area of administrative expenditure reduction that would not substantially reduce benefits to the community would be through consolidating the plethora of small Commonwealth grants programs. Often small programs cost more to administer than they deliver in benefits, and yet involve significant political and fraud risk. Similarly, consolidation of back office support for small agencies could garner savings and reduce corporate SES overheads.

To protect the quality of the SES and the capacity of agencies to deliver key government priorities, any across the board downsizing should be management initiated and not rely on purely voluntary separations or natural wastage. A targeted approach to SES reductions would involve linking reductions to program reviews and specific savings measures. This would help ensure that SES roles could be created where needed but that where savings are achieved by scaling back or abolishing programs, SES roles are reduced commensurately.

Against this background the Review is reluctant to recommend an across the board cut to SES numbers.

Recommendation 11: Any program for overall reduction in SES numbers be linked with fiscal and/or program consolidation and be managed actively to ensure that the right people remain and the capacity of the APS is not compromised.

Recommendation 12: Savings measures or program rationalisation initiatives that result in a reduction in an agency’s SES numbers be reported to the APS Commission to allow a downward adjustment to the agency’s SES cap.

Recommendation 13: All agency heads report to the Commissioner each year following the Budget but before 30 June on the adjustments to agency caps necessary to reflect the impact of Budget measures and similarly following the announcement of measures outside the Budget context that affect the agency’s SES numbers.

Recommendation 14: The APS Commission be resourced to implement the strengthened classification management arrangements.