Go to top of page

Increased public sector productivity continues to be a priority

Broadly, productivity can be understood as the efficiency with which an organisation converts inputs to outputs. However, in a predominately service-based organisation that does not sell its outputs in a market, such as the APS, there is no difference between the cost of inputs and the value assigned to the outputs produced. Consequently, there is no single all-encompassing measure of APS productivity equivalent to that available for the market economy. Moreover, the effectiveness of government activities in improving outcomes for citizens is often a function of agencies working collaboratively. No single agency is responsible for the ultimate outcome—their individual contributions are partial. As such, measuring productivity in the public sector is at best partial.

However, this does not release the APS from the imperative to contribute to improving the living standards of Australians through raising the effectiveness and/or reducing the cost of public sector activities—whether service delivery or regulation or policy design and implementation. In general terms, there are three key areas for improving APS productivity: capitalising on new opportunities to improve the efficiency of administration, including ‘back office’ functions and reducing the compliance burdens faced by businesses and individuals; improving the effectiveness of program management and delivery; and maximising the public value that comes from combining people, technology and processes through good organisational design.

Efficiency

A range of techniques are available to reduce the costs of government—conceived broadly to include both the administrative costs incurred by agencies and the compliance costs borneby citizens.

In terms of compliance costs, the new government has committed to reducing red and green tape. Among other things it is proposing to change the remuneration arrangements of senior officials to increase the incentives in favour of deregulation. Examples of recent initiatives intended to reduce compliance costs for citizens (or improve the customer experience) include:

  • Standard Business Reporting—standard business reporting is a quicker and simpler way to prepare and lodge reports directly from business software and is being used by the Australian Taxation Office (ATO) to facilitate greater efficiency in reporting, reduce errors and provide greater certainty to customers. A range of ATO forms can be lodged via standard business reporting including activity statements, payroll tax and Pay As You Go payment summaries.10
  • MyGov—MyGov is a new web-based facility that allows citizens to access a range of government services in one secure location. These services include Centrelink, Medicare and Child Support.11

In terms of ‘back office’ efficiency, the APS has long sought to exploit changing opportunities to achieve economies of scale through whole-of-government purchasing arrangements when market opportunities emerge. Recent years have seen an expansion in the willingness of agencies to ‘build once and use many times’ so as to exploit economies of scale and standardisation to reduce costs and improve productivity. For example, this approach hasbeen successfully applied in delivering the APS employee census that informs this report. In this small example, the Australian Public Service Commission (the Commission) delivers a whole-of-APS employee survey that a large majority of agencies now rely on for information about the attitudes of their workforce. It is estimated that this approach saves about $4 million annually by reducing the need for each agency to conduct its own survey. Other examples are emerging on learning and development through pilot testing of a collaborative APS-wide approach for designing foundation, core and management skills programs.12 This work is delivering learning resources that can be applied on a whole-of-government basis, whether by an agency's internal trainers or through a quality assured external provider. The intellectual property is retained by the Australian Government and is ‘built once applied many times’. The potential savings if the benefits of the pilots are generalisable are quite large.

There are other examples where the APS is using specialist capabilities to improve overall productivity. Examples include introducing the parliamentary workflow system (developed by the Department of Education, Employment and Workplace Relations on behalf of the APS as a whole), recruiting graduates, administering grants and progressing the APS diversity agenda. The benefits of this approach are improved knowledge transfer across the APS, improved opportunities for innovation and persistent management focus on a specific activity for the benefit of all. Similar, but larger-scale applications of this principle could include a move to fewer human resource and financial management information systems used across the APS or the adoption of a common platform for recruiting or other shared services arrangements, if the initial investment is justified by long-term savings.

There is growing willingness among agency heads to collaborate, share resources and work together to exploit economies of scale. While there is considerable scope for greater efficiency through standardisation and more common approaches, the evidence is that the execution of these approaches needs to be well managed. There are plenty of examples (particularly in shared services) where a good idea that is not well implemented leads to increased costs and/or poorer service standards.

Program effectiveness

A second area for improving the broadly defined productivity of the APS is to get better results from government programs. The foundation of good program outcomes is good, creative program design. Evidence is the foundation of sound problem analysis and program design.13 The range of analytical tools and data sources available to policy analysts these days is very wide, and there is growing recognition of the value of bringing many perspectives and disciplines to bear in framing and understanding problems. Some of this awareness stems from concerns about the complexity of the issues facing government. Some relates to relatively recent work that blends approaches from different academic disciplines to deliver new techniques to assist in making policy choices. Many APS agencies are actively exploring a broader range of techniques and collaborating with each other and with external experts to share experiences. Both DHS and the ATO, for example, have applied techniques from behavioural economics to elements of their work. The Department of the Treasury has entered into a joint venture with the University of Melbourne and the Victorian Treasury to establish a centre to design, test and implement tailor made economic policy solutions.14

A second line of attack in seeking good program outcomes is the use made of performance metrics and formal evaluation of program effectiveness. The Public Governance, Performance and Accountability Act 2013 (PGPA Act) was passed by Parliament on 28 June 2013 replacing both the Financial Management and Accountability Act 1997 (FMA Act) and the Commonwealth Authorities and Companies Act 1997 (CAC) from 1 July 2014.15 Among other improvements, these changes require agencies to develop and use information that informs judgments about the effectiveness of programs. In particular, the development of more formal approaches to program performance indicators such as SMART performance indicators16 and professional approaches to program evaluation are components of this approach.

The Department of Finance is leading the implementation of the PGPA Act but the successful application of the tools it provides will require leadership and workplace culture that supports a professional approach to evaluation, accepts dispassionately the results of program evaluation even when inconvenient to their own interests, supports innovation and manages change effectively. This is a key responsibility of senior leaders. The PGPA Act is intended to signal to senior leaders their responsibilities in this matter. That message will be more readily acted upon when a dispassionate approach to program evaluation is also supported by the ministers to whom public servants are accountable. Even in the absence of that support, however, the responsibility of senior leaders to pursue approaches that maximise the effectiveness of programs remains, and may require courage and relationship management skills to discharge properly.

Organisational effectiveness

Organisational capability arises from the way in which an agency's culture, structures, systems and processes combine to deliver productive outcomes. It includes consideration of: the quality of leadership; the way in which systemic capability is built and sustained; the way the performance of individuals and teams is managed to contribute to achieving highest priority goals; the way in which risk is understood and managed to enable innovation rather than stifle it; and the way that work is allocated, decisions are made and accountabilities managed. The capability of an organisation is built on the skills and abilities of its people, but it is alsoa function of the system in which those skills are applied to ensure the priorities of the government are maximised, and the workplace culture in which this occurs.

One recent example serves to illustrate the hidden importance of the relationship between culture, structures, systems and productivity. This year saw serious allegations of criminal conspiracy involving members of the Australian Customs and Border Protection Service (ACBPS) leading to the arrest of four ACBPS employees between August 2012 and February 2013. If the allegations are correct, the effectiveness of ACBPS in delivering outcomes for the community has been diminished, at least in those locations. ACBPS has responded with a significant program of reform that is supported by legislative changes to strengthen its integrity culture, people capability, law enforcement capacity and business operations. Importantly, this commendable response goes to the heart of ACBPS culture, structures, systems and processes.

The lessons of the events in ACBPS are explored further in Chapter 3. However, it is worth reinforcing an observation from the ACBPS capability review17:

Close-knit cultures, combined with poor leadership in some regions, have also led to inadequate understanding of the role and expectations of leaders (including supervisors and team leaders), resulting in poor discipline and lack of reinforcement of expected behaviours. This type of culture can present significant risks in terms of potential opportunities for fraud, misconduct and corruption.

This observation reminds us that all leaders are responsible for constantly safeguarding and nurturing the culture of the APS—in particular its ethical boundaries—and that failure to do so can undermine the effectiveness of the organisation.18 When leaders tolerate what might seem to be on the surface small indiscretions, it gives permission for others to do the same.19 The new APS Values and Employment Principles provide an opportunity for agencies to reinforce a culture of ethical awareness and integrity across the APS.

Several complementary strands of activity are under way across the APS that seek to improve the organisational effectiveness of the service.

Capability reviews

Capability reviews continue to provide agencies with independent, forward-looking assessments of their capability across the dimensions of leadership, strategy and delivery. Seventeen reviews have been completed and two are in progress. Four reviews remain to be completed in 2014.

The reviews have confirmed that the APS has real strengths. But they also highlight opportunities for improvement, which are captured in an action plan developed for each agency and detailing how that agency will address the findings of its capability review. This plan is agreed between the agency head and the Australian Public Service Commissioner. Agencies report quarterly to the Commission on their progress against their plan. To date,12 agencies have completed action plans, and another five are under development. Finally, a ‘health check’ is conducted after the agency has had time to implement measures in response to its initial review to assess the extent capability has been lifted. The first health check commenced in July 2013. A discussion of systemic findings to date appears in Chapter 10.

Building capability

A foundational element of assuring organisational capability is having a forward-looking view of capability requirements, resulting in proactive approaches to build capability in advance of predictable need and resilience to cope with the unexpected. Agencies wish, generally, to significantly improve their workforce planning capability. Workforce planning is a foundation tool for agencies seeking to systematically address capability issues proactively. Only 14% of agencies believe their current capability is appropriate—more than one-third aspire to a maturity level one higher than their current one, another one-third seek to advance two levels and 13% plan to advance three levels. This result exceeds, by a considerable margin, those recorded across the remaining seven key organisational capabilities assessed this year. Intriguingly, similar results were recorded in 2011 when agencies were asked to self-assess their maturity across a comparable range of capabilities. More systematic approaches to talent management, especially at the most senior levels, have been adopted, including in collaboration with the Centre for Leadership and Learning. However, a number of critical skill shortages persist (see Chapter 6 for a longer discussion) and, in a couple of instances, succession issues are emerging which need to be addressed in coming years.

Achieving high performance

Increased attention is being paid to performance management as an important tool in building a high-performance organisation. Work undertaken by the Commission in 2012, confirmed that in many instances, capability reviews show that even agencies with well documented, high-quality policies in respect of performance management, opportunities abound to improve current practices.

Too often performance management is characterised by a focus on improving the ability to deal with the few employees who are performing poorly. Underperformance should be addressed—we do not have resources to carry those who deliberately do not pull their weight. But there is far more to be gained by also ensuring that the efforts of the vast majority of APS employees who are well motivated and skilled are well directed. The efforts of these employees will be more effective when there is clarity about what is required of them and at what standard; and when continuous and purposeful feedback allows continual corrections to ensure that priorities are met without misdirection of resources.

Much of this can be achieved by lifting the foundation, core and management skills in structuring work, monitoring individual, team and organisational performance, providing performance feedback that is actionable, and developing capability at all levels. The evidence20 shows considerable scope for improvement. Even within agencies that on paper have good systems in place, there is scope to raise skill levels, awareness and manager commitment to employ better techniques and more consistent approaches to maximising alignment with the government's highest priority outcomes. This is particularly true during a period like the next few years in which expression is given to the priorities of a new government and agencies that are downsizing.

New tools to support the achievement of high performance

An array of new tools has been developed to enable agencies to improve their high-performance capabilities, including diagnostic tools, revised work-level standards (see next section) and whole-of-APS learning materials.21

The diagnostic process has been designed to: gauge the extent to which an agency's practices and people capabilities align with those that have been demonstrated to positively impact performance; assist APS agencies to assess their baseline condition, identify areas of strength and weakness, and the required actions to achieve more consistent and better practice; and use quantitative and qualitative inputs to identify key areas requiring improvement and provide suggestions for action. In implementing the performance management diagnostic, specific emphasis is placed on uncovering how and why practices are effective or ineffective. This will allow targeted actions to be developed that will enhance an already effective practice or address an ineffective practice. In this way agencies will be better positioned to focus on the factors that truly drive performance rather than merely the effects or surface-level symptoms of these issues. In 2014, we plan to report on the implementation and benefits of this approach.

Better assignment of work within agencies

There is evidence, including from capability reviews, that in many agencies work is being elevated to too high a level, slowing decision making, raising costs and delaying the development of decision-making skills among the young. At times this has been justified as a risk management technique. But if it is, the benefits are short term; persisting with this approach arguably may decrease the capacity of the workforce more generally, including future leaders, to exercise judgement and make sound decisions.

Work-level standards are an important tool to ensure consistency in the classification and management of work value within agencies and across the APS. The APS Classification Review was completed by the Commission in 2013. One recommendation was to establish a common set of principles for classification management across the APS.22 The Commission, in consultation with agencies, has developed and released new work-level standards for APS 1–6 and Executive Level (EL) 1–2, and supporting material such as a draft role evaluation tool and a comprehensive classification guide.

A number of agencies are actively pursuing policies to push work down to more appropriate operational levels. For example, as part of strategies to manage the efficiency dividend, some agencies examined their classification profiles to ensure work was undertaken at appropriate levels. Efforts to flatten structures and push decision making down within organisations will need to be complemented by work to revise each agency's approach to risk management. At the Department of Health significant work has been undertaken to improve the ratio of APS 1–6 to EL staff. This model is designed to ensure that non-specialist EL employees have staff management responsibilities. To achieve this the department has undertaken a range of activities including a focus on APS 1–6 level recruitment, job sizing new roles against APS work level standards, targeted voluntary redundancy programs aimed at EL staff and ensuring new departmental structures, such as the newly created Grants Service Division, reflect this organisational design focus.

Investment in human capital

There is an old adage along the lines ‘what gets measured gets done’. Similarly, investments tend to be made where there is quantitative evidence to show a return on investment is available. In the private sector, a growing body of research is establishing the links between investing in human capital (in particular, learning and development) and future profitability.23 Research has also found a 50% difference in the business outcomes of a top-performing leader compared with an average leader, and organisations with the highest quality leaders are 13 times more likely to outperform their competitors across a range of metrics.24 Broad measures of public sector productivity are difficult to construct and the link to investment in APS human capital is more difficult to justify than, say, investment in new systems that reap efficiency savings.

The bulk of the productivity improvements available for organisational effectiveness essentially relate to people and how skilled, motivated, well managed and led they are. With benefits difficult to quantify, there is a risk of underinvestment in human capital, especially at times when resources are strained. Work is in hand, under the auspices of the Commission's Centre for Leadership and Learning, to more systematically capture the benefits realised from implementation of its programs. However, this work is still embryonic.

Nonetheless, we now capture remuneration data for each public servant25 that can help throw some light on this issue. For example, we know the opportunity cost of one-third of EL 2 employees spending three days to complete a recently developed training module on performance management would amount to about $7.5 million per annum. There would also be additional costs of a few million dollars to deliver the course and associated products. But if this investment raised the productivity of the APS by just 1%, the benefit would be valued in the order of $130 million per annum, a very substantial return on investment. It is hoped that agencies will continue to prioritise worthwhile investments in their people even as resources tighten in the years ahead. Indeed, more effective performance management techniques could well assist an agency to ensure that its resources are applied to the highest priorities (which will change over time) to maximise its effectiveness even as employee numbers shrink.

The role of human resource professionals within the APS

Any organisation concerned about long-term success and sustainability will routinely assess whether it has the leadership and workforce capability needed to execute its business strategy now and into the future. It will also ensure this strategy is effectively cascaded through business plans and ultimately to the work of individuals. When change is required it must be expertly managed. A focus on day-to-day performance discussions between employees who value the way in which work is done, as much as what is achieved, is critical to supporting a culture of high performance. These are all areas where appropriately skilled human resource (HR) practitioners should play a critical role as contributors to the business strategy itself, the design of supporting frameworks and systems and high-quality advice. Yet, it often seems the skills most highly sought after from our HR practitioners are transactional and compliance oriented rather than strategic.

There is a case for more comprehensively reviewing the contribution of HR professionals in the APS and defining their technical and other capability requirements. Unlike accountants, psychologists, engineers or those in IT professions, for example, there are no APS-wide accreditation requirements for those advising managers on people-related issues.

Some departments26 have commenced efforts to clarify technical and other HR requirements, and are freely sharing these with others. Collaborative progress has also been made in some areas, notably with workforce planning and performance management. An annual APS HR summit was organised for the first time last year by members of the HR profession with the express intent of hearing from Secretaries and others about what they need from HR, what would most assist them and how best to build the capabilities necessary to do this.

But some key questions remain, which have already been answered in the best private sector firms, including:

  • What contribution should HR make in assisting to address current and emerging business issues in the APS?
  • Should standards be set for the technical skills and other capabilities needed to competently practice the strategic components of HR in the APS?
  • How should HR resources be structured to maximise efficiency and effectiveness at agency and APS-wide level?
  • How best to organise enabling HR systems to ensure they represent good value for money and provide the business intelligence needed to support leaders to make decisions?

The first three are essentially workforce planning questions for the APS HR profession and should be pursued. The fourth, related question is being considered as part of a broader shared system review.

Public comment by public servants

This issue was addressed in the overview to last year's State of the Service report, and the points made there will not be repeated. However, a number of examples this year, including some in the public domain, illustrate that APS employees commenting publicly online on work-related matters continues to be an area of some uncertainty for agencies and employees. In one recent case, which attracted media attention, misconduct action was taken against an employee who commented online about public policy issues where the agency considered the comments were inconsistent with the employee's duties. These comments were seen to pose a reputational risk for the agency as well as for the employee. In this particular case, the comments were posted using a pseudonym, illustrating a point made in the Commission's guidance material that anonymity cannot be guaranteed on the web (and in any event does not give an employee the right to engage in behaviour that is inconsistent with the APS Code of Conduct). Cases such as this demonstrate that the APS leadership has a continuing need to engage with employees to ensure they understand the behaviours expected of public servants, and for agencies to deploy sophisticated training material that develops good judgement using scenarios that are relevant to employees in the range of circumstances in which they may wish to comment online. It also reflects the need to reinforce the application of the APS Values in the context of evolving technologies and social norms.


Footnotes

10 See: http://www.ato.gov.au.

11 See: http://www.humanservices.gov.au.

12 This work is discussed in detail in Chapter 2.

13 Productivity Commission, Annual Report 2012–13, Commonwealth of Australia, Canberra, (2013).

14 Design and innovation in the APS is discussed in more detail in Chapter 10. This chapter highlights the Australian Centre for Excellence in Public Sector Design (DesignGov). DesignGov was established collaboratively through the APS Innovation Action Plan and Secretaries Board and work on successor arrangements is underway.

15 More information on the PGPA Act is available from: http://www.cfar.finance.gov.au/.

16 SMART is one of a number of methodologies that can be used to determine if the group of selected indicators contain a range of characteristics that allow for the identification of effective delivery of a program objective. Australian National Audit Office, Development and Implementation of Key Performance Indicators to Support the Outcomes and Programs Framework, Performance Audit Report No. 5, 2011–12, Commonwealth of Australia, Canberra, (2011), p. 45.

17 Australian Public Service Commission, Capability Review: Australian Customs and Border Protection Service, Commonwealth of Australia, Canberra, (2013), p. 25.

18 As Chief of Army, Lieutenant General David Morrison, AO, has said in a different context: ‘The standard that you walk past is the standard that you accept’.

19 As noted by the Australian Commission for Law Enforcement and Integrity in its interim report into the same matter, misplaced loyalty and compromise, poor standards and a breakdown in supervision ‘… led to a lack of confidence amongst staff that wrongdoing would be noted or punished, so poor standards of conduct became acceptable, and even became the norm [in some cases] …’ Australian Commission for Law Enforcement Integrity: Investigation Report: Operation Heritage—a joint investigation of alleged corrupt conduct among officers of the Australian Customs and Border Protection Service at Sydney International Airport (Interim Report), Commonwealth of Australia, Canberra, (2013).

20 D Blackman, F Buick, M O'Donnell, J O'Flynn and D West, Strengthening the Performance Framework: Towards a High Performing Australian Public Service, Australian Public Service Commission, Commonwealth of Australia, Canberra, (2013).

21 To date four core skills learning programs have been developed by the Commission: Structuring work; APS ethics and Values; Performance management; and Coaching and developing others. Throughout 2014–15 there will be a rolling release of 10 suites of core skills programs, subject to endorsement by the Secretaries Board.

22 Australian Public Service Commission, APS Classification Review, Commonwealth of Australia, Canberra, (2012), http://www.apsc.gov.au.

23 L Bassi, P Harrison, J Ludwig and D McMurrer, The Impact of US Firms' Investments in Human Capital on Stock Prices, McBassi & Company, (2004); L Bassi, Human Capital Management Predicts Stock Prices, McBassi & Company, (2010).

24 J Boatman and RS Wellins, Time for a Leadership Revolution: Global Leadership Forecast 2011, Data Documentation Initiative, (2011).

25 This data is obtained through a complete enumeration of individual remuneration. Previously remuneration data was captured through a survey conducted by Mercer. This work is supported by a memorandum of understanding between the Commission and APS agencies and provides a wider range of information to agencies to inform decision making.

26 For example, the Department of Education, Employment and Workplace Relations developed and conducted an in-house HR knowledge and critical skills. Similarly, DHS is undertaking work to identify current skills, qualifications and skills gaps. Strategies to address any identified shortfalls will focus on both core skills and specialist/technical skills.