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Part 5: The department's response

Treasury welcomes the report of the Capability Review and the opportunity it presents to contribute to our ongoing organisational reform initiative.

The review concludes Treasury is a highly performing organisation with a strong track record and capabilities that are in high demand from the government of the day. The review also notes that the world is changing and this requires Treasury to reflect on our culture and capacity and make changes that will sustain our effectiveness over the years ahead.

The Capability Review has provided us with an opportunity to put the organisational reforms that we have initiated over the past couple of years under an independent external lens, as well as gain fresh insights into additional issues that need to be addressed to build a Treasury fit for the future.

The Capability Review identified many organisational strengths that Treasury should seek to retain and enhance. In particular, the review found that a major contributing factor to Treasury’s high performance is our strongly motivated and highly capable staff, with their commitment to rigorous analysis and quality outputs.

The review suggests that Treasury focuses its capability building in four areas – practices and approaches to drive efficiencies; collaboration and engagement; change management capability and adaptability; and systematic approaches to better managing organisational performance. I agree that these should be the priorities for the next phase of our organisational change program. To a significant extent, these areas had been identified in earlier reviews and we have already commenced a program of work to address them. Nevertheless, the findings of this review allow us to consider the progress we have made, to accelerate the implementation of initiatives, and to modify or supplement these existing initiatives as required. The process of preparing the review has assisted us in starting to do this. The review has also recommended we take action on new fronts and we will develop a plan to address these additional issues.

The constrained resourcing environment, together with the findings of the Strategic Review of the Treasury (December 2011), has been a catalyst for a number of improvements to our planning, resourcing and business processes. The Capability Review has suggested that further improvements are necessary to ensure that staff and funding are more closely aligned with priorities, and that communication from the Board on prioritisation and resourcing decisions is more effective. We agree with this finding and we are considering options for improving operational planning, including achieving greater consistency across the department in the approach to planning, ensuring the plans align with the Government’s priorities for Treasury, and making sure they drive behaviours on a day-to-day basis. We have also just rolled out a three year budgeting system with enhanced management tools. The intention is to provide managers with greater confidence about their glide path in a world of falling resources while giving the Executive greater flexibility to address emerging issues.

We have also commenced benchmarking all areas of the department to identify minimum capabilities we need to maintain in order to provide the flexibility to ramp-up our engagement as needed. This is being complemented by consideration of a revised approach to resource allocation—one option under consideration is that adopted by HM Treasury whereby 90 per cent of staff might be allocated to existing responsibilities with the distribution across the department reflecting the minimum capability requirements and the relative prioritisation of ongoing tasks, with remaining staff forming a pool that could be allocated on a temporary basis to key emerging issues.

We agree that Treasury needs to consider options that would allow us to take a more systematic approach to measuring organisational performance. Treasury currently has mechanisms in place to receive performance feedback from our key clients, our ministers. We regularly review key functions, for example the Review of Treasury Macroeconomic and Revenue Forecasting in 2012 and the Review of Revenue Group Operation and Organisation in 2012. However, we agree with the suggestion in the Report that we could benefit from a more systematic approach to managing and evaluating organisational performance. We have established a team to develop options that are appropriate for the organisation. The team is working on an approach that would clearly link the organisation’s key priorities with organisational outputs and outcomes. A key part of the approach would be an active feedback loop, including monitoring and measurement arrangements. We believe better, and more systematic evaluation of our activities, and the dissemination of the lessons learnt, needs to become part of our mainstream activities, so that improved ways of working are adopted more quickly than has traditionally been the case.

Treasury has made a considerable investment in improving stakeholder engagement, particularly nontransactional activity, following recommendations from the Strategic Review. Progress has been made, but more needs to be done to improve staff awareness of, and skills in, effective stakeholder engagement, broadening our engagement beyond the Treasury Executive Board, and for the insights gained from our stakeholder engagements to be shared more broadly within the department. To assist in achieving this, we are implementing a better tool to track and share information around engagement with individual stakeholders. We will complement this with an active effort to improve the receptivity of Treasury staff to external views. We are currently in discussion with key parts of the business community to enhance our existing program of secondments. We have also focused on greater recruitment from outside the public sector and around a fifth of Treasury’s senior staff now have significant non-government experience.

Changing behaviours and culture takes time and requires a combination of strong leadership and changes to systems and processes. This has become evident to us as we have sought to address the impediments to the advancement of women in Treasury through our Progressing Women initiative. The Report suggests that our ability to bring about organisational change and adapt to shifts in our operating environment requires the whole SES cohort to engage in, and drive, the process of change management. We agree that collective leadership of organisational issues needs to match the collective leadership displayed on policy and implementation, and will be considering how to further enhance our change management capability and adaptability to ensure these outcomes are delivered.

Finally, I would like to thank the Senior Review Team, Dr Michael Vertigan AC, Ms Frances Maguire and Ms Jennifer Taylor, the team from the Australian Public Service Commission and Treasury staff who supported the review, for the contribution they have made to Treasury’s organisational reform agenda. The process of the review is in some ways even more valuable than the final report and we have greatly appreciated the large personal contribution made by all involved. I am committed, as are all members of the Executive Board, to building on our considerable strengths and continuing the transformation commenced in recent years to build a stronger Treasury, one fit for whatever the future may hold.

Dr Martin Parkinson PSM
Secretary
The Treasury