State Sector Standards Board - first report to the Minister of State Services

23 July 2002

Report to the Minister of State Services on a Draft Statement of Government Expectations of the State Sector, 9 January 2001.

LETTER OF TRANSMITTAL - STATE SECTOR STANDARDS BOARD FIRST REPORT:

9 January 2001

Hon. Trevor Mallard

Minister for State Services

Dear Minister,

 

Report to the Minister of State Services on a Draft Statement of Government Expectations of the State Sector, 9 January 2001.

LETTER OF TRANSMITTAL - STATE SECTOR STANDARDS BOARD FIRST REPORT:

9 January 2001

Hon. Trevor Mallard

Minister for State Services

Dear Minister,

I am pleased to give to you the Board's first report, on a draft statement of the Government's expectations of the State Sector, for the Government's consideration. This Statement is submitted in accordance with the Board's Terms of Reference.

As a result of the Board's deliberations we have also recommended, for the Government's consideration, a draft statement of commitment by the Government to the State Sector.

The Board's Terms of Reference also include giving advice to you on matters which may affect the effective implementation of the Government's standards. While it was envisaged that this would be an element in our annual report, the Board considered that these issues were of sufficient significance, in terms of the Government achieving its objectives, to warrant comment in this report.

While many of these items are not new, and some are under consideration in various ways, there is a need to deal with these issues in a timely and effective way, to improve the likelihood of the Government achieving its objectives.

We would be pleased to undertake any further work that you request on any aspect of this report, and look forward to discussing it with you.

Kerry McDonald

CHAIRMAN

STATE SECTOR STANDARDS BOARD REPORT TO THE MINISTER OF STATE SERVICES ON A DRAFT STATEMENT OF GOVERNMENT EXPECTATIONS OF THE STATE SECTOR

January 2001

1 INTRODUCTION

  • The State Sector Standards Board was established by the Minister of State Services on 19 November 2000. The members are: Kerry McDonald (Chairman), Angela Foulkes, John Martin, Rangimarie Parata Takurua, Elmar Toime and Jim Turner. The Board has been assisted by Christine Goodman (SSC).
  • This first report of the Board proposes a draft Statement of Government Expectations of the State Sector, for consideration by the Government. The Board also identifies some impediments to the effective implementation of these expectations.
  • Further reports will address other elements of the Board's Terms of Reference in due course.

2 TERMS OF REFERENCE

  • The Government wishes to assure an ethical, public serving State Sector and to this end will set out its expectations in a clear and concise statement of values. The State Sector Standards Board is to advise the Minister of State Services on the content of this statement by setting out appropriate expectations of standards for the State Sector.
  • The Board will provide an annual report with an "outside" view on the ethos of the State Sector, which will:
    • contribute to a profile of the State Sector over time;
    • assess whether the Government's expectations have been effectively implemented and had an impact;
    • suggest modifications to the expectations statement; and
    • advise about future trends and issues and how the Minister of State Services can be proactive on State Sector standards.
  • The Board will also consider any other matters that the Minister of State Services may refer to it.
  • The Board's advice is to be provided within the existing constitutional framework and on the basis of a politically neutral State Sector.

3 THE BOARD'S APPROACH

  • There is already a large amount of guidance about behaviour in the State Sector including:
    • statutes (including the State Sector Act 1988, the Public Finance Act 1989, the Ombudsmen Act 1975, the State-Owned Enterprises Act 1986, the Official Information Act 1982 and the Protected Disclosures Act 2000);
    • the code of conduct issued by the State Services Commissioner pursuant to s57 of the State Sector Act (currently under review);
    • Public Service Principles, Conventions and Practice (SSC, 1995);
    • the Cabinet Office Manual;
    • codes of conduct and value statements for individual departments and agencies.
  • The Board considered this material, previous reports on the New Zealand State Sector, and overseas studies and values statements. It requested and considered informal submissions from Ministers, State Sector employees, state agencies and other bodies. It invited presentations from a number of key people in the State Sector and had discussions with a range of others.
  • The views given to the Board reflected numerous concerns, some serious, about the organisation and operation of the State Sector. In part these arise from different and changing expectations of the State Sector. They also underline the important part that the State Sector plays in the lives of New Zealanders.
  • Ultimately the Board relied on its own experience, observations and judgements.
  • In addition to recommending a draft Statement of Expectations, the Board has also identified in this report a number of impediments, which it considers are adversely affecting the performance of the State Sector and the management of standards issues.
  • The Board envisages that, when adopted, the Government's Statement of Expectations would stand above and guide the development of codes, mission statements or statements of values of individual organisations within the State Sector.
  • Because of the crucial importance of the working relationship between the Government and those who work in the State Sector, the Board proposes for Government consideration a draft Statement of Commitment by the Government to the State Sector. The Board envisages that the two Statements would be dealt with together and jointly implemented.
  • The Board considers that, for the Statement of Expectations to lead change, a considered programme of support by Ministers, the State Services Commissioner and others in positions of influence in the State Sector is required.

4 THE CRITICAL ROLE OF THE STATE SECTOR

  • Historically, the State has played a critical role in the lives of New Zealanders. While the role of the State Sector has changed over time, it continues to be of vital importance, as the Sector:
    • manages State Sector assets;
    • provides a wide range of services;
    • undertakes significant commercial activities;
    • administers funding and contracts entered into by the Crown with bodies outside the state Sector;
    • manages expenditure and transfers of some 34 per cent of GDP;
    • is responsible for the collection of public revenue including taxes, charges and fees;
    • employs some 250,000 New Zealanders;
    • advises Ministers on the development of policy;
    • implements the policies and decisions of the Government;
    • administers the large number of statutes and regulations;
    • exercises powers (including regulatory authority) vested by law or by delegation; and
    • administers New Zealand's external relations.
  • The effectiveness, efficiency and overall quality of the State Sector's performance has a strong influence on living standards and the sense of well being in the New Zealand community. It also impacts on New Zealand's image and reputation overseas.

5 THE STATE SECTOR

  • The State Sector has been defined by the Government for the Board's work as:
    • Public Service departments and non-Public Service departments (Government Communications Security Bureau, NZ Defence Force, Office of the Clerk, Parliamentary Counsel Office, Parliamentary Service, Police and Security Intelligence Service)
    • Crown entities
    • Officers of Parliament (the Ombudsmen and the Parliamentary Commissioner for the Environment)
    • Reserve Bank of New Zealand
    • State-owned enterprises.

It does not include local government.

  • There are three main types of State Sector organisations. There are significant differences among them, including in the important areas of governance and accountability arrangements.
    • the Public Service: the 39 departments listed in the First Schedule to the State Sector Act which are largely funded by Parliamentary appropriation (ie Vote Education...), and are directly responsible to a Minister who is, in turn, responsible to the House of Representatives. The chief executives are employed by the State Services Commissioner who reviews their performance annually in the light of their agreements with Ministers.
    • Crown entities: This diverse group of agencies may be funded by moneys voted by Parliament, levies, revenue from commercial activities, or by a combination of these. They are often headed by a Government-appointed board and governed by their own individual statutes. There are some 2700 Crown entities of which the greatest number is school boards of trustees; they also include such advisory and regulatory bodies as the Law Commission and the Civil Aviation Authority and service providers such as the district health boards.
    • State-owned enterprises: these government-owned companies (which operate under the Companies Act 1993) are given the statutory objective of being a 'successful business', are headed by ministerially-appointed boards of directors, who appoint the chief executive, operate within statements of corporate intent agreed with the 'shareholding ministers' and are accountable to Parliament through arrangements set out in the State-Owned Enterprises Act 1986.
  • There are various interests which reasonably have expectations of standards of behaviour in the State Sector:
    • citizens who, as individuals or groups, will have a variety of relationships with the State over time e.g. as clients of individual agencies, consumers of their services, taxpayers, etc;
    • non-citizens, as potential or actual tourists, migrants, refugees, investors, etc;
    • employees in the State Sector;
    • the State Services Commissioner, boards and chief executives who have a leadership role in inculcating and maintaining appropriate standards in the State Sector;
    • Parliament which has the important task of scrutinising the performance of the State Sector; and
    • the Government of the day.
  • Deregulation and increased competition in private sector goods and services markets since the early 1980s have lifted people's expectations of performance standards, including in the State Sector.
  • The evolving relationship between Māori and the Crown, underpinned by the Treaty of Waitangi, is reflected in Māori expectations of the State Sector, to which State Sector organisations need to be responsive.
  • The State Sector functions, on an apolitical basis, within a complex framework of laws and conventions. Constitutional checks and balances underline the way in which the State Sector differs from the private sector. The agents of the State have coercive powers not available to private organisations. Citizens often have no choice but to deal with State institutions. Public organisations have statutory obligations in terms of access to services. These characteristics of the State Sector clearly differentiate important aspects of it from the private sector.
  • Ultimately the State Sector exists by the will of the citizens, expressed through the decisions of the government of the day. That is the essence of responsible government in a democracy.

6 DRAFT STATEMENT OF GOVERNMENT EXPECTATIONS OF THE STATE SECTOR

  • The draft Statement that we recommend for the Government's consideration is in two parts:

A - core values for individuals and agencies; and

B - principles that guide the application of those values in day-to-day work.

  • The draft Statement is preceded by a short introduction.
  • Because of the importance of the working relationship between Ministers and the agencies, employees and other individuals in the State Sector, we have also recommended, for the Government's consideration, a brief statement of the Government's commitment to the State Sector.

The Board recognises that there will, at times, be a need to prioritise among these values and principles, in their application to particular situations in the State Sector. Choices will have to be made and priorities assigned. Advising on and managing these choices and priorities is a key task and accountability of State Sector managers.

INTRODUCTION

This Government is committed to achieving better results and opportunities for all New Zealanders.

New Zealanders demonstrate excellence and innovation in many fields of public and personal endeavour, yet our performance as a nation over recent decades has been, in a number of key respects, well below its potential.

The State Sector has a vital role in improving New Zealand's performance. It has a proud record of service but now needs to build on this and, through the quality of its performance, make a very real and positive difference.

This Statement clearly sets out, within the framework of existing legislation, our expectations of the State Sector's standards, in terms of values and in terms of performance generally. It is about being more astute and responsive, about better use of systems, about better collaboration - doing it once, well, and sharing the improvement with other agencies. It's about maintaining the highest standards of service and behaviour, that leave a positive impression, not disappointment and resentment.

It is about accountability, based on effective systems and processes, so that good performance is fairly rewarded and poor performance is recognised and managed. It is about the training and development of State Sector employees and building capability and job satisfaction.

It's about best practice and improving areas of weakness, to match the high standards that the State Sector can clearly demonstrate.

Importantly, it is also about values in the State Sector and about standards of behaviour that are respected in the community.

In recognition of the close working relationship and mutual dependence between Government and the State Sector, this Government has also made a statement of commitment to the State Sector, which is attached.

Turning these expectations into results is the next step, for the State Sector and the Government.

  1. We expect the behaviour of all individuals and agencies of the State Sector to reflect the following values:

Integrity -

  • act honestly;
  • give free, frank and comprehensive advice;
  • be non-partisan and free from bias;
  • avoid and manage conflicts of interest;
  • serve the public interest.

Responsibility -

  • act with personal and professional responsibility;
  • have concern for the consequences of public actions.

Respect -

  • respect people, as citizens and clients;
  • respect the rule of law;
  • respect the institutions of democracy;
  • respect the Treaty of Waitangi.
  1. To give effect to these values in the day to day conduct of the Government's business, we expect the individuals and agencies of the State Sector to be guided by the following principles:

To be Responsive to the Community by

  • demonstrating a commitment to service;
  • recognising the legitimate interests of individuals and groups;
  • respecting the rights of citizens and others and advising them of their entitlements.

To be Performance-Oriented by

  • working effectively and efficiently to achieve objectives;
  • building the necessary capability in people, systems and processes;
  • being committed to ongoing improvement and innovation in organisations, people, systems and processes;
  • identifying and managing risk;
  • measuring and assessing results.

To be Accountable by

  • adhering to the spirit and letter of statutory accountability systems;
  • setting clear expectations of individuals and assessing performance against expectations;
  • recognising that contributing to team performance is an important accountability;
  • fairly rewarding (or sanctioning) individuals according to performance; and
  • addressing failures, faults and deficiencies.

To be a Good Employer by

  • ensuring a merit-based, professional employment regime;
  • having sound systems and processes for employee management, training and development and succession; and
  • recognising the employment requirements of particular groups in the community.

To Have a Whole-of-Government Commitment by

  • considering the implications of activities for other agencies and the whole of government; and
  • encouraging and participating fully in processes of consultation and collaboration within and beyond the Government.

To Serve the Government by

  • implementing its decisions effectively and with commitment;
  • providing free, frank and comprehensive advice;
  • keeping the Government advised of issues likely to impinge on its responsibilities; and
  • being aware of and reflecting the Government's priorities.

7 DRAFT STATEMENT OF COMMITMENT BY THE GOVERNMENT TO THE STATE SECTOR

  • The Government recognises that the performance of the State Sector will be substantially influenced by the actions and processes of Ministers, acting collectively and individually.
  • In its working relationship with the State Sector, the Government and its Ministers will :
    • acknowledge the importance of free, frank and comprehensive advice;
    • provide clear guidance about policy directions and outcome priorities;
    • participate effectively in accountability processes; and
    • treat people in the State Sector in a professional manner.

8 IMPEDIMENTS TO MEETING THE GOVERNMENT'S EXPECTATIONS FOR STANDARDS AND PERFORMANCE

  • Despite the wide-ranging reforms of the State Sector since the mid-1980s, there is still a broad consensus among politicians, State Sector employees and the community about the role and appropriate behaviour of the State Sector.
  • It is this consensus that leads to public outrage when departments and agencies behave, or are perceived to behave, in a manner that falls short of being effective, efficient and ethical.
  • The great majority of State Sector employees, who take pride in service to the public and Ministers, are also disappointed.
  • Yet failures in performance have been too frequent and are well-documented.
  • The Board believes that successful implementation of the Government's Expectations Statement requires that the impediments to effective implementation be effectively addressed.
  • Substantial improvement can be achieved through the State Sector leadership and by change within organisations, without major structural change.
  • The Board has identified six main areas requiring attention.

(1) The Role of the Centre

The Board considers that value would be gained by the Centre having a stronger role in areas such as:

  • minimum standards for some systems, processes and policies;
  • ongoing improvement, in organisation and systems generally and transfer of best practice;
  • developing and using performance management and improvement systems and measures;
  • developing leadership capability and employee development and training, especially at middle and senior levels;
  • setting common standards and protocols for IT systems and specific technologies;
  • improving procurement; and
  • whole-of-government (see 3, below).

A stronger Centre will be more important for departments and less so for SOEs and other companies in the Sector. It should be based on a collegial system, and not materially erode the authority of chief executives.

(2) Governance

There is wide variance in the quality of State Sector governance arrangements. In some cases this is reducing organisational effectiveness. It could be addressed by:

  • enacting the proposed clarification of governance arrangements in Crown entities;
  • strengthening guidance, support and performance management arrangements for departmental chief executives;
  • identifying other areas of weakness; and
  • clarifying the role of Ministers, individually and collectively, in the governance of agencies.

(3) Whole-of-Government

State Sector activity is remarkably fragmented and needs to be more strongly oriented to whole-of-government issues. This means:

  • explicit processes oriented to whole-of-government outcomes;
  • collegial team processes to lead and manage a whole-of-government approach to systems, procurement, and employee development and training, performance management, etc; and
  • a more proactive Centre on whole-of-government issues.

(4) Performance Management and Accountability

The public sees a lack of accountability in the State Sector.

An over-emphasis on economic efficiency as an outcome and in performance measure has distorted behaviours and undermined trust and support from the public and employees. It is necessary to:

  • emphasise a more balanced range of results;
  • refocus purchase agreements from a narrow outputs focus to include the quality and value of outcomes and the future capability and effectiveness of organisations; and
  • ensure organisations have, and use effectively, good performance management systems and processes that enable employees to be assessed and held accountable against agreed objectives.

(5) Employee Development and Morale

The capacity of the State Sector to deliver is questioned by both the public and Parliament. There is a need to consider:

  • including employee development in organisation accountabilities;
  • publicly affirming examples of positive performance and dealing effectively with the negatives; and
  • articulating a quality focus for State Sector organisations.

(6) The Relationship of the Government and Parliament to the State Sector

  • Effective working relationships require an agreed understanding of the roles of the participants at the centre of the governmental process, and mutual respect.

10 CONCLUSIONS AND RECOMMENDATION

  • In accordance with its Terms of Reference, the Board has prepared a draft Statement of Government Expectations of the State Sector. It is accompanied by a recommended draft Statement of Commitment by the Government to the State Sector.
  • The draft Statement of Expectations is appropriate for application across the whole of the State Sector.
  • There is considerable capability in the State Sector, in dedicated people and good systems, and a considerable amount of work is under way on improvement. However the Government's expectations in relation to State Sector standards and performance are unlikely to be achieved without change in the Sector, and a more systematic and integrated approach to improvement.
  • The Board has, on the basis of the material available to it and its own experiences and judgement, identified six areas in the performance of the State Sector where it perceives impediments to the achievement of standards.

It is recommended that:

  • Cabinet consider and adopt the attached Statement of Government Expectations of the State Sector and the accompanying Statement of Commitment by the Government to the State Sector; and
  • the identified impediments to the effective implementation of standards and expectations be the subject of further discussion between the Board and the Minister of State Services.