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Part 3: Summary assessment

Treasury’s mission is ‘to improve the wellbeing of the Australian people by providing sound and timely advice to the government, based on objective and thorough analysis of options, and by assisting the Treasury Ministers in the administration of their responsibilities and the implementation of Government decisions’. Treasury seeks to achieve this by striving to formulate policy advice that incorporates the full range of economic issues and a broad wellbeing framework.
 
Treasury is a high performing department with a strong track record and with capabilities in high demand from the government of the day. However, the world is changing and Treasury must change too if it is to be as influential into the future. The department has a number of strengths that should be retained, but also some clear areas where it should aim to improve if it wants to build a Treasury fit for the future.

A motivated and capable workforce as a strong foundation

Treasury has a strong track record of delivering to government, and ministerial feedback provided to the review was positive. Treasury’s strong performance is further evidenced by the fact that successive governments have requested it to take a lead role on a broad range of issues, some of which are arguably beyond the traditional remit of a national treasury. Treasury’s advice to government is valued, with non-Treasury ministers seeking Treasury advice (through the relevant Treasury Portfolio Minister).
 
Treasury’s staff are its greatest asset—in effect, the department’s staff and its reputation make up the institution that is ‘The Treasury’. Treasury’s staff are strongly motivated and capable, with a high level of commitment to quality outputs. This is a major contributing factor to Treasury’s high performance.
 
The level of commitment of staff at all levels is exemplary. Treasury is proud to call itself a ‘can-do’ department and has been widely acknowledged both internally and externally for its ability to deliver against significant challenges. Survey data highlights that Treasury staff were attracted to their role by the nature of the work, and that levels of motivation and pride in their roles were significantly above the APS average. In the 2013 State of the Service census, 86 per cent of Treasury respondents said they were proud to work in Treasury and 86 per cent also said they enjoyed their current job.
 
The capability and motivation of Treasury staff is a testament to the investment the department makes in its staff. Treasury recruits talented and motivated people and then makes a significant investment in their ongoing professional development, providing monetary and non-monetary support and assistance to staff for development. For example, currently approximately 10 per cent of staff are receiving studies support for further tertiary education. Treasury also provides for staff without an economics or law background to attend a semester-long course that provides an introduction to economics or law, respectively. On the job, staff are stretched and empowered, which in turn builds their capability and motivation.
 
Treasury is characterised by its strong and dominant culture. The challenge for the department is to identify the aspects of its culture that are essential for future success and which must therefore be embraced and maintained. These aspects are likely to include their commitment to rigour and quality and the devolved model which is Treasury’s basis for staff empowerment.
 
At the same time, Treasury should identify the elements of its culture, such as responding to additional demands by working harder and longer, which need to be modified to enable it to affect future transformation.
 
The work Treasury has undertaken in its Progressing Women initiative is a positive example of the department identifying and responding to the need for cultural shifts. Through this initiative, Treasury recognises that shifts are needed in its culture to enhance its capability, through better harnessing talents of women and men at all levels in the department. Making cultural changes where a strong culture exists is challenging, however, this initiative shows a willingness to tackle these types of issues, which will be important for Treasury’s future capability.

The need for more effective ways of working for the future

Treasury’s reputation is a cornerstone on which its ongoing influence is founded. It is imperative to protect this for the department to remain sufficiently influential and achieve its mission to contribute to the wellbeing of the Australian people. Treasury is a high-performing organisation with a strong track record of delivering against its commitments. However, with the world changing around Treasury, other organisations are continually improving and, in an environment of contestability, Treasury needs to adapt to remain at the forefront of policy advising. There is a widespread view among stakeholders and line agencies that Treasury is closed to external experience and expertise and that practical implications are not always given sufficient consideration in forming policy advice. This widely held perception has the potential to undermine Treasury’s reputation and so will be important to address further to protect the department’s reputation and influence.
 
Treasury’s strong performance has, to date, been driven by the commitment of its staff. The challenge for Treasury is to continue to perform in the face of increased complexity, fluidity and constrained resources. To sustain delivery at a high standard, there is a need for Treasury to continue to invest in its capability and reputation, identify improved ways of working and drive efficiencies and prioritisation. A stronger reliance on systems and processes will be needed. This will require a level of transformation and reengineering which extends well beyond marginal adjustments in response to conventional reviews. While this transformation will be essential to respond to the environment of increasingly constrained resources, it should be seen as a much broader response. There is evidence that some aspects of Treasury culture and work practices have limited its ability to respond effectively to existing workplace pressures, for example, loyalty to the department contributing to change resistance, and reluctance to accept external input.
 
Similar to other APS agencies, Treasury is facing constrained resourcing, with reductions projected over the next four years. This makes the re-engineering of how Treasury undertakes its business all the more urgent. To continue to be a high-performing department, it is imperative that Treasury does not risk the inevitable drop in quality and consequent risk to its reputation that can be expected if it continues to respond to all existing demands using its traditional methods and spread its resources too thinly. Government and other stakeholders will continue to demand much from Treasury, and to meet these demands in a sustainable way will require Treasury to embrace change. Even without the planned resource reductions, the department is facing a significant challenge to become future fit. This will require thoughtful and planned management.
 
There are, however, significant opportunities for Treasury to improve how it undertakes its work—to drive efficiency and effectiveness. The review team considers that the priority areas for Treasury to address in positioning itself for the future are:
  1. developing and implementing practices and approaches to drive efficiency
  2. further building on the investment made in improving collaboration and engagement
  3. building its organisational change management capability and adaptability
  4. taking a more systematic approach to managing organisational performance.
These priority areas are explained in more detail below.
 

1. Driving efficiency

It is clear from the evidence collected that Treasury is under pressure from demands that have increased over the last number of years both in scope and in depth. To date, Treasury has managed to respond to demands through its dedicated, high-quality staff increasing their effort by working harder and longer. However, this has crowded out the space for the department to devote to working smarter. This arrangement is not sustainable, particularly as resources become more constrained, and will require changes to increase its economic efficiency—dynamic, allocative and technical—to push out its production possibilities frontier. Treasury has the immediate task of carefully prioritising its resource allocation across the department in line with the outputs it is expected to deliver over the next few years. The opportunity cost of Treasury not prioritising or not prioritising effectively is significant, and has the potential to lead to a loss of credibility.

Maintaining the existing approach to delivery will not enable Treasury to meet its mission into the future. Accordingly, Treasury would benefit from initiatives to drive efficiency and effectiveness, such as a more effective whole-of-department prioritisation and resource allocation strategy, improved knowledge and information management processes, routine evaluation to identify process improvements and better accessing the expertise of line agencies and business. Taken together these initiatives will involve a significant reengineering of the way Treasury conducts business.
 
Resourcing and prioritisation

As one of Australia’s most pre-eminent and sought after policy institutions, Treasury faces the significant challenge of having to prioritise the use of its scarce resources. Treasury may wish to consider improving allocative efficiency—its ability to best allocate its resources overall so that its inputs yield the best possible outcomes in line with its mission.

Treasury may benefit from a more systematic approach to planning and increasing staff awareness of plans. There would be benefit in building a greater understanding among staff of the relevance of plans to achieving strategic departmental goals. It may be beneficial to build on the overarching directions set out in the department’s Strategic Framework. This may involve the introduction of a more comprehensive and formal set of operational plans, which could be used to drive performance and resourcing. While it is recognised that the types of planning frameworks used in delivery agencies would not be fit-for-purpose for Treasury, there would be benefit in operational plans that stipulate more than high-level goals and cover key operational deliverables or priorities for the year. There would also be merit in including clearer measures that cascade through divisions and units to the individual level.
 
There is a need for a more effective prioritisation and resource allocation strategy driven by the Executive Board to enable tough decisions on priorities and resources to be made. While the Executive Board has initiated a process to consider how the upcoming resource reductions will be managed, to date the focus has been primarily on adaptations that can be made within each group.
 
There is some evidence of decisions made by the Executive Board to redistribute resources across groups over the past three years, in response to priorities. For example, over the last three years while working towards overall staff reductions, there have been some differential resource allocations across groups to reflect changes in priorities. Given the further reductions the department is facing over the next four years, there will again be a need for the Executive Board to actively consider the priorities of Treasury as a whole, and any corresponding shifts in resourcing levels across groups, to adequately resource the highest priority areas. It is worth noting that data from the 2013 State of the Service census indicate one-quarter of Treasury staff considered they were underutilised and could take on additional work. However, around 50 per cent of staff disagree that they have extra capacity—15 per cent strongly—so the core issue may be around poor work distribution. This would suggest that a more sophisticated resource allocation model is necessary.
 
There is evidence that the boundaries of Treasury’s role have expanded to such a degree over the past decade that the understanding of its role has become blurred. It is recognised that the Government establishes the scope of Treasury’s core business. While priorities are essentially set by the Government, Treasury would benefit from considering where it best adds value and the limits of its capacity, and informing resourcing decisions accordingly through risk-based assessment.
 
Improving business processes: Identifying efficiencies
There is scope to improve a number of Treasury’s work practices to increase both efficiency and effectiveness. For example, Treasury has a biannual transfer round through which staff regularly move within the department, as an integral part of staff development. While this process is an important and effective mechanism that builds well-rounded Treasury officers, there would be benefit in implementing systems and processes to improve information and knowledge management, and hand over processes, to more adequately support staff in taking up new roles. Staff indicated that the absence of these systems and processes have a negative impact on their depth of knowledge, particularly where a significant number of staff move from an area at the same time. Stakeholders repeatedly expressed the view that the current process has had a negative impact on Treasury’s effectiveness and its relationships with them during the time taken to rebuild expertise. This challenge of maintaining external relationships in the face of changing staff is not unique to Treasury. It is a challenge faced by the APS more broadly. Treasury has initiated new ways of dealing with this challenge and related issues, such as using SharePoint to maintain corporate knowledge. Implementation needs to be prioritised and fully supported. A greater team based approach would also assist to ensure that key information and knowledge is shared among team members.
 
Treasury’s strong pride in quality delivery results in what has been described as a ‘culture of perfectionism’. Although it is imperative that Treasury’s advice remains beyond reproach, it seems to deal with every task equally rather than identifying those where a lighter touch may be appropriate. There are some instances where a less fulsome product might be appropriate or even preferred. For example, a shorter, more targeted and timely brief for a minister covering off on key issues may be more effective and influential than a longer, more detailed briefing. It would be consistent with Treasury’s devolved culture to support officers to develop greater critical judgement on the appropriate approach in each circumstance. It is important to address this challenge, as the need to direct effort through effective prioritisation becomes critical in the face of constrained resources, increasing complexity and uncertainty.
 
These are but two examples of where Treasury may adjust business practices to realise efficiencies. There would be benefit in Treasury undertaking a comprehensive and ongoing program of work to identify and realise improvements to business practices across the department, with a view to improving both effectiveness and efficiency. This would ensure Treasury resources are applied where they best add value. Given the calibre and enthusiasm of staff, there would be merit in undertaking a process that enables staff to brainstorm and contribute ideas that would assist Treasury to address one of its greatest emerging challenges.
 
Evaluation
While Treasury invests in large-scale reviews, it does not, as a general rule, undertake evaluation as a routine part of its work. This is, in part, due to a sense of urgency to move on to the next deliverable. However, investing in evaluation as a routine process has the potential to identify improvements and efficiencies for the future. Accordingly, Treasury would benefit from making room to invest in evaluation as part of business-as-usual processes.
 
Further, a systematic approach to knowledge management would assist with sharing lessons learned and feeding them back into process improvement. This would contribute to a corporate knowledge bank and may assist others in the department to quickly gain subject knowledge and avoid repeating inefficient practices and processes.
 
Accessing and using external expertise
Stakeholders have indicated that Treasury does not always fully appreciate the expertise that other departments and business can contribute to its consideration of policy advice. Treasury needs to build its capability to distinguish between valuable policy information and inputs based on stakeholder commitment to advocacy. In other words, Treasury needs to recognise, respect and value external expertise. For example, stakeholders described a behaviour among Treasury officers of dismissing the expertise of line agencies or business and, instead, reverting to first principles to build an understanding of issues from scratch. If Treasury was more accepting of the expertise others bring, it may be able to leverage that expertise and work with stakeholders to build a higher level understanding of issues together. There are some positive examples, where Treasury respects and values the expertise of external professionals, although it has been suggested that this is concentrated in areas where the input has been provided by those with similar skill backgrounds to Treasury staff. Embracing and harnessing expertise from external groups more broadly and then working with stakeholders to build a higher level understanding would yield significant efficiencies and improvements to the end product. For example, policy advice may be improved as it could be founded on an enhanced understanding of the practical implications arising from it.
 

2. Improving collaboration and engagement

Following the Strategic Review of the Treasury commissioned by Treasury in 2011 to consider how the department can continue to deliver on its mission over the short to medium term, Treasury has made a significant investment in improving engagement with stakeholders. At the most senior levels there are positive relationships with other departments and external stakeholders. However, this needs to be developed more broadly across Treasury. The department has acknowledged that it has not always been prepared to recognise the contribution that others in the Australian Government and more broadly in the community can bring to policy development, with adverse consequences for its effectiveness. Further investment in addressing this issue is needed as a number of stakeholders from across the APS and business reported that Treasury staff below the most senior levels are perceived as arrogant and closed to external views and expertise. This is characterised by more junior levels placing greater reliance on internally developed positions and being less willing to recognise the value of other viewpoints. This issue does not seem to be as prevalent among line agencies and external stakeholders whose workforce is founded on similar disciplines to those of Treasury. Line agencies and external stakeholders with significant expertise outside of the fields more familiar to Treasury officers can feel that their expertise is undervalued. Therefore, Treasury may wish to consider approaches to couple the value of its knowledge and expertise with the knowledge and expertise of other fields.
 
Treasury has a valuable secondment program that provides its staff with an opportunity to gain experience in other government agencies and private sector organisations. There is an opportunity to increase the benefits of this program by undertaking a greater number of secondments and better harnessing the expertise of returned secondees.
 

3. Building organisational change management capability

Treasury’s strong culture and pride in its work are both a strength and a challenge. Some of the changes the department will need to embrace to continue to perform well do not naturally sit well with its existing culture. For example, the need to recognise when it may be appropriate to expend less effort on a product goes against an ingrained culture of perfectionism. Managers indicated that even where they provide guidance to more junior staff on where to prioritise the level of effort for a given output, the junior staff struggle to accept this. Treasury identified that some staff find the organisational change that began following recent reviews unsettling, and their concerns are exacerbated by an ongoing heavy workload. The challenge before Treasury is significant. It is imperative for the department’s success into the future that it considers aspects of its culture that will hold it back from achieving and that it puts its full weight behind driving change.
 
Treasury’s SES work well as a team in relation to policy matters. The challenge for its SES is to build on this to become a strong organisational leadership team that can take staff on the journey of the changes needed. They must be charged with progressing strategic directions, including cultural shifts. It is their role to drive the changes needed to the way Treasury undertakes its work to ensure it will continue to be a high-performing central policy agency. The Executive Board will need to hold the SES group accountable for its leadership role, by setting clear expectations, and measuring and assessing their performance against those expectations.
 

4. Managing organisational performance

Although Treasury has a very high-calibre output and performs well, this is more because of the dedication of its staff and culture of commitment to high quality, rather than systematic approaches in place to manage organisational performance. Treasury has invested heavily to implement systems and processes that deliver its high-quality workforce, through the recruitment of high-calibre staff and a commitment to their ongoing professional development. However, it will be increasingly important that the department builds on this to implement systems and processes to better harness and target the high performance of its staff and maximise its performance as a whole. In a resource-constrained environment, this becomes all the more critical.
 
The review team has considered approaches taken by national treasuries in other jurisdictions and considers that a more systematic approach to setting goals and tracking and reporting performance against those goals would be beneficial. The advantage to the Executive Board in regularly reviewing information about how Treasury is delivering against its goals is that it enables informed decisions about the shifts needed to ensure continued high performance. The review team appreciates that the type of performance monitoring systems suited to delivery agencies would not be fit-for-purpose for Treasury, but considers it worthwhile for the department to implement a meaningful organisational performance framework. The framework recently implemented for the New Zealand Treasury provides a useful example of how this type of approach may be applied in a national treasury in a beneficial way. Further, the management practices of professional services firms are also a useful guide for Treasury in developing a system to manage its performance.
 

The way forward

Treasury is a high-performing department which has been able to rise to any challenge presented to it through the sheer commitment and effort of its capable and professional workforce. Its reputation is a strong foundation on which Treasury relies, and it is imperative for the department’s continuing success that this high standing be maintained. There is a need for Treasury to turn its mind to alternative means to deal with the demands on it, to sustain its pre-eminent role in providing policy advice. As noted earlier, the review team considers these following four areas to be a priority for Treasury to consider in determining its way forward:
  1. developing and implementing practices and approaches to drive efficiency
  2. further building on the investment made in improving collaboration and engagement
  3. building its organisational change management capability and adaptability
  4. taking a more systematic approach to managing organisational performance.