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Part 3: Summary Assessment


Thirty years ago the era of productivity and structural reform which characterised the Australian economic landscape of the 1980s and 1990s was only just beginning.

Beyond the established services sector, the labour of Australians was typically directed towards manufacturing, building, agriculture, mining and energy with 34% of all employed people working in such goods-producing industries.[1] Tariff and quota protection, along with other forms of industry support, were prevalent. The focus of business was on domestic markets; with few raising their heads to look at the potential of global
trade or interested in learning from foreign competitors.

The reforms of the era—particularly the removal of tariff walls, the floating of the Australian dollar and deregulation of the banking sector—meant Australian businesses were progressively exposed to direct competition with overseas rivals. Generous but temporary restructuring plans were
adopted for the automotive industry, textile industry, clothing and footwear sector, as well as the heavy engineering, steel and shipbuilding industries.

Fifteen years ago, while the reform pathways for these mature Australian industries had been laid down and were for the most part being followed, the economic implications of the Internet and the potential of enabling and emerging industries were still unclear. While the growth of the service sector
had been evident to most for some time, its trajectory into new fields was predicted by few and not many spoke publicly of an Asian Century to come.

Nevertheless, in response to these forces, policy again was slowly but inexorably shifting from an industry-specific and 'defensive' stance, towards a more forward-looking approach appropriate to these emerging sectors and focused on ensuring the right climate was being created to build exports, technological
capacity and innovation.

The Secretary's vision of DIICCSRTE reflects this policy direction but envisages not just government and business, but also the scientific, research and tertiary education sectors and the broader community, working to drive productivity improvements and help transform the Australian economy.

First articulated in its 2012 Strategic Plan the vision states that the department was established to:
… work with business, the research sector, the tertiary sectors, the community and other governments to discover, to promote and drive new ways of achieving economic and social benefits that will work to keep our economy and society strong for today and into the future.

This message has been progressively refined and spoken about in terms of 'driving economic transformation' and was most recently formally reiterated in the July 2013 release of a new draft strategic plan which notes the importance of this transforming agenda in a period of intense structural change
for the country.

At the heart of this vision of economic transformation lies the cultivation and deployment of 21st Century skills and research into 21st Century businesses and industries that respond to the current and emerging needs of society at large. The MoG changes made to the department over the last six years
are consistent with such a vision and, irrespective of what may happen in the future, acknowledge that the development of human capital through the education system and dealing with the impacts of climate change are, at their core, issues of economic transformation.

In the opinion of the senior review team, the department has many strengths including, for example, a collegiate and respectful culture, a cohesive senior leadership team, professional and committed staff and a capacity to consistently deliver programs, many of which carry significant financial and
delivery risks. The learning and development opportunities provided by the department are universally seen as effective, and its approach to performance management is considered to be strong.

Likewise, through a period of significant change, the department has demonstrated impressive resilience. Rising to the challenge, it has continued to effectively and efficiently deliver to a consistent high standard, while coping with the considerable administrative demands flowing from MoG changes
and ministerial reshuffles.

Yet it is fair to say that the department's capabilities are yet to be fully mobilised towards achieving the vision of economic transformation. Just as Australian business and industry faces a number of critical challenges and is being asked to build its capabilities, so too is the department.


The economic challenge: transforming Australian business and industry


If the Australian economy is to continue to transform into a highly innovative and productive force, Australian business and industry, along with researchers and the tertiary education sector, will need to collaborate and plan together for the future.

A focus on building human capital and deploying it effectively into the economy is equally required across all parts of DIICCSRTE. While avoiding 'capture' by industry, all parts of the department need to be attuned to the challenges of transforming the economy and the needs of business and industry;
including established and emerging industries.

At present, however, there appears to be a lack of ownership and little sense of urgency within the leadership below the Executive Board for the transforming mission. Understanding of the mission is patchy across the department, with only pockets appreciating its implications conceptually. Even areas
that understand the mission have yet to operationalise it and translate it in a practical sense for staff.

The successive MoG changes of the last six years, and particularly the last 21 months, along with multiple changes in senior and junior ministers, have demanded an enormous amount of effort and attention from the leadership and dominated the daily operations of the corporate areas of the department.
Nevertheless while addressing these immediate challenges, the lack of time and space to think more broadly has stifled progress on several fronts, most particularly being communicating and operationalising the economic transformation agenda. Indeed, while staff have maintained a clear commitment to their
respective roles and worked well in this regard, their commitment to the department's transforming mission is less strong.

The reality is that more change is likely and the department needs to exploit this as an opportunity to align its structure and aims and kick-start broader understanding and enthusiasm for its mission. This will require staff within the department to (i) transform the way they work across established
divisions and programs, and (ii) find new ways of engaging and working with stakeholders.

In respect of the former, individual parts of the department need to be better 'keyed' to the top-level departmental outcome, in the interests of reducing wasted effort and energy. This may involve any number of reforms including possible structural realignment. In regard to the latter, the department
needs to push its established relationships in accord with its strategic intent; for example by ensuring that the higher education sector and research efforts are better aligned with the needs of the economy or that its models of partnering in delivery with the private sector are pursued when it comes
to economic and industry policy development.


The policy challenge: Skills and knowledge


Just as it is necessary for Australian business and industry to try and shape domestic and global markets, it is necessary for the department to move from being a policy taker to becoming a policy influencer.

DIICCSRTE must look to actively contribute to the wider economic policy debate. It should equally aim to win its place as the primary source of advice on the economic life of Australian business and industry and start to shape the terrain of the debate.

Indeed, it is important to recognise and value the fact that the department can contribute to the policy discussion as an informed and impartial advisor, whereas advocates and individual industry sectors may often come to the table with incomplete understanding and vested interests.

The success of parts of the department, notably in shaping tertiary education and skills policies, and its work in the highly contested field of climate change policy, is testimony to what can be done.

The department has recently made some important appointments and started to build its capacity as a source of economic policy strength. Much more is required, however, such as targeted recruitment and strategically moving existing resources internally to spread policy development capability more evenly
whenever this is feasible and can be done with minimal disruption.

When internal rotation is not possible for practical reasons, the department could consider aggressively pursuing other ways to share knowledge and expertise.

External stakeholders generally value their relationship with the department. Some, however, feel it is less receptive to new ideas and more focused on being responsive rather than proactive in seeking out and engaging on what truly matters for stakeholders; whether well-established or newly formed.

Equally, different parts of the department hold a plethora of data. While the potential use of this data in policy development is understood, at present there seems to be little movement to overcome the issues currently stopping this data from being fully and properly used, despite considerable attention
having been given to this matter over the last few years.

In short, the department should consider systems that bring data together, as well as leadership in the field of knowledge management that understands the value of the data, the importance of having established capability within the department to analyse the data and a culture that is willing to share
and bring that data to bear in support of evidence-based policy and departmental operations.


The workforce challenge: Building for the future


The highly skilled and agile workforce required for a transformed Australian economy will not eventuate without deliberate actions by government, employers, universities, vocational trainers and schools.

Just as Australian industry must transform itself to constantly changing circumstances, the department must ensure that its own workforce is evolving to meet future requirements.

It is evident to the senior review team that the department's work has changed a great deal and will continue to change. However, as DIICCSRTE is required to continue to administer policies seen as dated and as products of its history, there is an issue with how the department as a whole is perceived.
This, in turn, often influences how staff view themselves and influences the pool of potential new employees.

The review found that staff have a strong commitment and sense of divisional or branch identity which can be reinforced by building a similar connection to the department, with many in this context commenting on the length of the departmental title. As such, there is little sense of a unifying organisational
culture, although at the core of all parts of the department there is a highly collegiate, professional and ethical set of values. These could be used as the base for constructing a broader, high-performing organisational culture.

Creating a sense of common purpose and building a greater level of dynamism and energy within the workforce as part of such a high-performing department is a key responsibility of the leadership and of middle management.

Equally, the workforce planning and succession management that is being carried out is from the perspective of divisional and branch interests whereas a departmental view is needed. Such work would be best carried forward by senior leadership and middle management in cooperation with the corporate
area.


The innovation challenge: Leading by example


As Australian industry and business needs to be innovative to improve its productivity, so too DIICCSRTE needs to be innovative in its way of working and thinking.

Indeed, the department needs to be seen as credible by the private sector if it is to effectively advocate for greater levels of innovation within business and industry. Staff will benefit from adopting a mind-set that supports innovation and recognises its fundamental value. In doing so, the department
will almost by default become the exemplar for innovation across the public service.

At present there are many examples of how the department is supporting innovation in the private sector through its initiatives and programs and there are some examples of innovation within the department itself. Examples include the adoption of a No Wrong Door policy (which is making pathways into
the department easier for clients), the deployment of cloud-based program delivery and a new, open approach to the use of social media by staff.

While there are discrete elements encouraging innovative thinking, overall the department is challenged by cultural and systemic issues, such as failing to encourage and support new ideas from staff and building systems to allow these ideas to be integrated into core business when proven worthwhile.
Equally, throughout the recent MoG changes, opportunities to adopt better practices from agencies joining the department have not been taken up.

Indeed, in this respect the senior review team have often heard that parts of the department are overly focused on input controls to the detriment of an innovative spirit, just as a high level of risk aversion is believed to be stifling the willingness of staff to try new ways of working.

However an innovative culture alone is not enough. Systemic issues exist when it comes to translating ideas into improved outcomes and the department should consider increasing its investment of resources to support internal innovation along with ongoing monitoring and reporting.

It is clear, therefore, that the department's leadership needs to create a climate that makes innovation imperative. Innovation is core to shaping the economy. Taking advantage of the opportunities provided by uniting major functions within the department will assist the department to maximise its
impact and enhance its reputation.


The system challenge: Modern, agile and enabling


The department is regarded as a 'safe pair of hands' for delivering programs that often carry high levels of risk and strong internal processes are in place to ensure accountability and compliance for public monies. Management is devolved and divisions are given a high degree of autonomy in how they
run their business. However, in the opinion of the senior review team, the systems and processes that support the department have not kept pace with its rapid growth. For example, multiple ICT platforms are now operating across the department when there needs to be a cohesive system facilitating good
access to information. Recognising that action on this front is complex and costly and cannot be carried forward in the short term, it nevertheless appears that existing governance arrangements are not helping to resolve these ICT issues.

Indeed, in thinking about governance more broadly, there are few fora where organisational or policy issues are genuinely debated and Band 1 and Band 2 Senior Executive Service officers (SES) are engaged in decision-making processes. Also, there does not appear to be any outwardly apparent reasoning
behind what corporate matters are controlled centrally or are decentralised, with arrangements more a consequence of history and ad hoc decision making.

The department has a strong focus on monitoring and evaluating the delivery of programs. However, evaluating programs for whether they are helping achieve the department's outcomes and its strategic mission requires greater rigour.

Equally, there is much corporate reporting but performance information appears to be minimal and is not being brought together into a coherent picture of how the department is delivering its strategic priorities and outcomes.

In this respect there should be clear measureable indicators at departmental, divisional and branch level, consistent with the principle of 'keeping it simple'. Indeed, the department has acknowledged that its '… delivery framework would benefit from greater feedback and more timely analysis
of data and performance metrics, which could be drawn from department wide sources.'

In short, like any business, the department cannot afford to be bound up by unnecessary red tape or be hampered by poor internal processes. These internal operations should be enabling divisions and branches to focus on their work, whether policy or program related. The systems for reporting on this
work then need to allow effort to be constantly appraised to see whether it is focused on what matters.

In doing so the department is reliant upon its systems and processes to help it see and adjust. At present these systems require further work in order to support a complex department of close to 4000 employees.

In 1928, when the first 'department of industry' was established in Australia as an administrative unit of the Attorney-General's Department[2] neither the government of the day nor Australian industry, employers or workers foresaw the challenges they would soon face in the form of the Great Depression.

The response saw a major increase, under Prime Minister Scullin, in already comparatively high tariffs, substituted after World War II by quotas and quantitative controls which bureaucrats and economists only began to question in the mid-60s with the Vernon Committee Economic Enquiry.[3]

It is problematic, if not foolhardy, to predict what challenges and opportunities will present themselves in 15 years' time upon the centenary of the department's establishment. It is not unreasonable to predict, however, that the economic landscape will be vastly different from that of today. The
imperative for the department, therefore, is to help position the Australian economy, and its many and varied businesses and industries, in the best possible way to maximise the returns to Australian society; whatever that economic landscape may look like.

In the opinion of the senior review team, the leadership of DIICCSRTE can best do this by acknowledging that the department of the future will look vastly different to today's department and start immediately to build its capabilities in the areas outlined throughout this report. In particular, DIICCSRTE
should be:

  • creating a unified department and culture focused on economic transformation

  • building economic policy capability and influence in support of its strategic mission

  • managing and evaluating its programs to ensure consistency with its strategic mission

  • becoming the experts within government on what is happening in business and industry

  • improving corporate operations to match the department's size and scope

  • becoming a leader in encouraging innovation.

[1] Taken from an article first published in the January 2005 issue of the Australian Bureau of Statistics' Australian Labour Market Statistics, cat. no. 6105.0. Goods-producing industries are defined as construction; agriculture,
forestry and fishing; manufacturing; mining; and electricity, gas and water. 1985 is the earliest whole year for which Australian Bureau of Statistics' data is available for the current industry classification.

[2] The original 'industry' department was responsible for industrial matters only. It was not until the Department of Trade and Industry was established in 1963 that 'the development and protection of Australian industry'
was tied to the 'industry' department.

[3] Report of the Committee of Economic Enquiry. Tabled in the House of Representatives on 21 September 1965. Chaired by Sir James Vernon.