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This chapter examines how change was managed in Centrelink. As the origins of Centrelink were in government decisions and legislation, there were high political expectations that the new agency would produce improved performance and administrative savings by combining the operations of the DSS and DEETYA. Centrelink was a risky experiment for the Commonwealth, with its separation of policy from ‘customer’ service and the introduction of purchaser–provider agreements to maintain accountability. Centrelink also faced many obstacles—external and internal. The transitional management challenges included ensuring the government’s policies and directions were complied with; effective coordination between stakeholders; developing a unified culture to progress the new agency based on staff from different agency cultures; gradual implementation to build on successes and minimise risks; and maintaining customer service (ANAO 1997b:11).
Managing major organisational change requires structures, processes and systems that are mutually supporting. There needs to be a clear strategic direction, alignment of organisational structure, reshaping of employment relations and changes to organisational culture (Spicer et al. 1996).
Leadership is highly significant in organisational change and performance and particularly in large-scale public sector change processes. During an organisation’s life and at different stages of development, different types of leadership are appropriate. Transformational change requires the attributes of transformational leadership, which involve interactions with the external environment and building management capacity through internal management systems. As Kotter (1996:25–6) observes, ‘Effective leadership is exhibited through actions that build and improve organisational abilities and management systems expressed through interactions with governmental capacity, represented by management systems.’ Successful transformation, it is argued, should be mostly about leadership (establishing direction, aligning people, motivating, and so on) and secondarily about management (planning, budgeting, organising, staffing, and so on).
Ultimately, successful change has to be registered at the level of culture. Cultural change ‘requires the mutual interaction of new symbols and definitions and of changed structures, expectations, and rewards. New attitudes need to be demonstrated in new behaviours and expectations’ (Spicer et al. 1996:180).
The watchdog of APS processes and performance, the ANAO, considered that an important factor in successful organisational transformation was ‘the employment of strategic leadership to provide the vision and drive for change’ (ANAO 1997b:6). This form of leadership was defined as ‘the ability to anticipate, envisage, [and] maintain flexibility and empower others to create strategic change as necessary’, which was exercised by determining strategic direction, exploiting and maintaining core competencies, developing human capital, sustaining an effective organisational culture, emphasising ethical practices and establishing balanced organisational controls (Hanson et al. 2002:427–36).
Strategic leadership has been particularly important in developing and transforming Centrelink. The board and the CEO exercised strong leadership to determine the changes in the organisation. As part of their responsibilities, they needed not only to manage organisational improvements and have stewardship of individual functions, they had to manage strategy by ‘defining and communicating the company’s unique position, making trade-offs and forging fit among activities’ (Porter 1996:77). This involved interacting with a range of strategic management elements, including organisational processes, people and control systems. The ultimate test of meeting these multidimensional requirements would be whether the organisation performed to internal and external performance standards and met its output and outcome objectives.
The Centrelink board appointed Vardon as the founding CEO of CSDA/Centrelink. The preference was for someone not associated with either the DSS or DEETYA. Vardon was headhunted from her position as chief executive of the South Australian Department of Correctional Services, where she had successfully implemented reforms to reduce costs, develop a new corporate culture and improve customer service.[1]
Vardon arrived at the DSS in February 1997 to prepare for the creation of Centrelink in July 1997. She was the single determining figure in change and overall direction. Other significant actors—in particular, ministers, the chairman of the Centrelink board and key staff—had roles and specific responsibilities, but none approached Vardon’s influence. The CEO needed to adopt distinctive roles, which were complemented by the different roles and functions of members of the most senior management group.
Vardon, like most CEOs, had never managed an organisation as large as Centrelink and was not familiar with the Canberra environment. In this regard, she was supported by her deputy, Ross Divett, who was able to offer astute strategic intelligence and advice to a new CEO versed in state government practices. Divett was also an experienced and effective public manager who had been a deputy secretary in the Department of Administrative Services during its commercialisation program. When he became deputy secretary of the DSS, he brought across many of those lessons and attitudes, particularly about marketing and business concepts, and introduced major planning and structural change in the department. In moving to Centrelink, he provided Vardon with this experience and a working knowledge of the history of the CSDA development concept and processes from his involvement under DSS secretary Blunn. Vardon worked very closely with her deputy, whom she regarded as her co-leader in the organisation, characterising their partnership as ‘a double-headed energy source’ (Interview).
She was also supported by her board, which endorsed her approach to quality service to customers through good staff management, as expressed by board member Don Fraser’s concern with the people who served the customer and all that went behind customer service, particularly leadership development and succession planning. The board developed an initial set of operational ground rules in consultation with the CEO and her deputy during the first crucial months of organisational transition.
As noted earlier, Vardon saw herself as an agent of strategic change and could be characterised as a leading public entrepreneur in her transforming efforts at Centrelink in terms of leadership, creativity and innovation, opportunism, risk taking and facilitating and synthesising (Forster et al. 1996:11), noting especially that her personal view of leadership was ‘a set of processes that creates organisations…and or adapts them to significantly changing circumstances’ (Vardon 1998c:2).
With many of the transitional management details being assigned to the deputy CEO and his team, Vardon saw her leadership role as giving the organisation ‘a shape, a face, a design, a style’ (Interview) and travelling around the network to sell the vision. In her view, the traditional DSS/DEETYA leadership patterns, expectations and mores in the new agency would not meet the challenges of successful top-down change.
Vardon found an organisation fraught with risk-averse managers, fiefdoms, traditional vertical communications and limited horizontal coordination and ownership of work (Vardon 1998c).
[1] Vardon had previously served in local government and in senior positions in the NSW Department of Youth and Community Service and the South Australian Department for Community Welfare. She had also been South Australian Commissioner for Public Sector Employment and head of the Office of Public Sector Reform. During this hiatus as a consultant to the DSS, she worked closely with the transition team to address marketing, legal, structural, procedural, accommodation and relationship issues. In 1995, she was named the Inaugural Telstra Business Woman of the Year.