There have been two principal phases in the development of the board. In the formative period—with a new organisation, the CEO and board chair—considerable time was spent establishing roles and relationships. After about 12 months, the rivalry between Centrelink and its client departments and the clash of personalities between the CEO and the chair created a dysfunctional situation and eventually the chair resigned. He was replaced by John Pascoe, whose style was less confrontational and was more about persuading people to work together (in contrast with his predecessor, who tried ‘to bang heads’).

In the evolution of the relationship between a new board and a new agency, Centrelink had to ‘work out what did the new people control—what did [Centrelink] control, and what did the board control? And it took us a while to build up a board agenda.’ It was necessary, a senior Centrelink official continued,

In the Pascoe era, the board’s role ‘evolved towards supporting the management team at Centrelink…Under John’s leadership, the current board will stand their ground and support the Centrelink management’ (Board member). This period was also important in moving towards better relationships with client departments because there was

Pascoe introduced the concept of an alliance and insisted that it become the basis of key relationships. The result was ‘unquestionably a strong partnership that has grown up between Centrelink and FaCS. As a result of the deliberate relationship between us, we have become very tightly interlinked’ (Senior Centrelink official).

The board of management set the overall objectives, gave strategic direction and set broad business rules for the organisation (CSDA 1997a).^[3] The board was responsible for Centrelink’s goals, practices and priorities and focused initially on balancing the need for accountability, risk management and auditing with the demands to achieve best practice in service delivery and reduced costs (Blunn 2000) in order to meet the government’s efficiency expectations and to remain competitive in what might become a more commercial environment.

The board’s conception of its roles covered a high level of strategic input across a broad canvas (IT, future directions, and so on), ensuring the right financial controls were in place, delivering on budgeted outcomes and management support. What was outstanding was the view that the board’s key role was assisting Centrelink’s management in setting strategic direction. Another role, according to a Centrelink board member, was

Two equally important roles for the board were to assist the ‘day-to-day management team with their strategic view [and] to provide support for the organisation in dealing with issues with the government of the day—because the four of us are outsiders’ (Centrelink board member).

Two examples of the board’s behaviour indicated how it operated in handling financial and performance aspects. The balanced scorecard became the board’s main means of monitoring performance, the ‘primary tool used to inform the board on the organisation’s performance’ (Centrelink 2001c). Significant intervention followed a recommendation from the CEO, when the board commissioned a report by BCG because it ‘wanted a better understanding of Centrelink’s cost efficiency performance, partly in response to questions raised about Centrelink’s costs by its client agencies and other stakeholders’ (BCG 2002:9).

Mediating the relationship with client departments emerged as another role. It was felt that there was a need

The board’s roles of strategic direction, mediation with the minister, consensus development and legitimisation reflected smart practices in designing and operating steering processes (Bardach 1998:210).

The board established several committees to help it do its job:

Private sector members each chaired one of the committees. One member of the board with a very strong financial background chaired the Audit Committee (initially John Thame, then Elizabeth Montano). Another board member with a strong IT background chaired the Information and Technology Committee (Christina Gillies). A third board member (Don Fraser, who resigned in December 2004), who had spent a lifetime in retail, chaired the Quality Committee and was described by another board member as having ‘an enormous understanding for drivers around customer satisfaction’.

The board saw committees as important because of the opportunities provided

For the chairman, the relationship with the CEO was very important because the

Much of the chair’s role is ‘around promoting harmony and making sure that the board is working together all the time’ (Board member). Because the relationship between the CEO, the chairman and the board is crucial, it is ‘very important that everybody feels totally confident with one another. And that the CEO understands that he or she is supported by his or her colleagues on the board, and…everybody operates in an environment of openness, and complete honesty’ (Board member). The chair sought to encourage ‘full and open communication between the senior management of Centrelink, and the client departments’ (Board member).

Over the years, the board experienced a changing membership but the preference for ‘strong commercial credentials’ (Board member) was maintained. Of the seven members of the board, four were usually private industry representatives who brought with them a wide experience of commercial business practices. For example, Pascoe (chairman and non-executive member, 2000–04) came from retailing and was CEO of George Weston Foods; Gillies (non-executive member) came from management positions in banks; Fraser’s background was in retailing, supermarkets and customer relations; and Thame came from banking. Their expertise in the retail industry gave them ‘bone deep understanding of customer service [and] customer satisfaction’ (Board member). Of the other appointments, Susan Rapley was a businesswoman and the last chair, Montano, was a lawyer and consultant with private sector and government experience. In addition, there were initially two departmental secretaries from the main client departments as non-voting members (after 2002, only one, the secretary of DFaCS) and the CEO of Centrelink, Sue Vardon.^[4]

The core of the board’s skills and expertise, therefore, was based on business sector knowledge and experience and service delivery/network experience. Business thinking lent itself to an organisation aspiring to be entrepreneurial and cutting edge. The ‘huge challenge facing Centrelink is around information technology…Centrelink has got to be world’s best practice, in the IT area, and my feeling is that we’re already at the cutting edge’ (Board member). The connection with a private sector-oriented government also meant ‘ministers knowing that they have some private enterprise people guiding this organisation [who] will help them’ (Board member).

The support of the board was relevant to the evolution of the customer service model because it helped drive the building of a customer-centred culture. The business perspectives of private sector board members helped guide the organisation to a competitive and commercial footing. In a commercial and contestable environment, they helped refine the strategic edge needed to offer improved services at reduced costs and to beat potential competition, particularly in the call centre area.

The philosophy during Pascoe’s time as chairman illuminated how businesspeople could relate to a social policy organisation. It was hard nosed but sympathetic:

While not a requirement of the act, the practice until 2002 was for the secretaries of the two principal purchasing agencies, DFaCS and DEWRSB, to be appointed as non-voting members of the board. The DEWRSB secretary’s membership was discontinued in 2002 due to perceptions of a conflict of interest.

There was widespread criticism of the practice of appointing board members from the purchasing agencies. The position essentially was that you could not be on the board if you were also representing a purchasing agency requiring an independent, arm’s-length relationship. ‘At the moment the Centrelink board is not a separate commercially oriented board, it’s a public service board’ (Senior DoFA official). A senior Centrelink official appreciated the secretaries’ roles during the transition period for the new agency when there needed ‘to be an assurance in both resource management and a program deliverer and therefore a political sense that this major structural change wasn’t going to just blow up in the government’s face. So you can see an element of security…in having the secretaries represented.’

By the early 2000s, it was thought that Centrelink had reached a stage at which it was appropriate to question continuing this practice. One of the arguments was that having the secretaries as board members limited what Centrelink could say to the board because, for some purposes, there was seen to be a conflict of interest in having the purchaser on the provider’s board. At the same time, departmental secretaries were regarded as playing distinctive and valuable roles because they

Centrelink’s major job was ‘to educate our client departments on what are the major drivers in customer satisfaction. That is, what the customers are saying, as opposed to what the other departments perceive. Now to do that without the two secretaries on the board would be that much more difficult’ (Board member).

There was also a mediation role, according to the DFaCS secretary, until 2002:

There was a dilemma in acting in Centrelink’s interests across departments compared with the special interests of DFaCS.

In one prominent case, the board’s advice challenged the government’s official position. The government had a policy of outsourcing IT services. The board members agreed that the proposed approach was a serious threat to the security of Centrelink’s operations and therefore to social security program delivery. According to a board member, ‘[T]he IT outsourcing issue is a pretty good example of where the board empathised, and agreed where Centrelink was coming from…John Pascoe in particular put in a case very strongly with the support of all of us’. ‘Eventually, and close to the denouement, the government began to listen to the voices of the external directors—the public officials were not trusted to act in other than their own interests—and the Humphry inquiry was set up’ (Rosalky 2002:4).^[5] ‘[We] wouldn’t let go of [the] board for all the tea in China, because they came to the fore when, over IT outsourcing…they took a stand when the public service people couldn’t’ (Senior Centrelink official).

The Humphry report (2000) concluded that, while it was the ‘prerogative of the government to set overall direction, the introduction of the FMA and CAC [Commonwealth Authorities and Companies] Acts places responsibility for implementation of policies with chief executives and boards. Accordingly future responsibility for implementing the Initiative should be fully devolved to agency chief executives or boards.’ The government agreed (Halligan 2001). On Centrelink, the report (Humphry 2000) concluded: ‘The outsourcing process for Centrelink should not proceed until the Centrelink board is satisfied that the transition and implementation risks can be effectively managed.’ Again, the government agreed, which, in effect, was a face-saving way of allowing Centrelink to proceed by outsourcing only what its board wished to outsource.

The great value of the external representation on the board to the governance systems was most apparent during this outsourcing debate.

The primary relationship for the board and Centrelink must be with the minister. The minister and the government more generally play a determining role in strategic directions in accordance with policy preferences and management objectives. Almost all governments modified and amended social welfare and employment policies during their lifetime, so a degree of policy change was anticipated—but not the radical changes that occurred soon after Centrelink’s inception. The government undertook a wholesale review of social welfare and the policy decisions taken in 2001 flowing on from that review substantially changed how Centrelink operated and significantly extended its core business.

There was a perceived problem with DFaCS when it initiated policy without discussing delivery with Centrelink (Board member). A Centrelink view was that ‘it would like a place at the policy table’. A board member advanced the view that

As chairman of the board, Pascoe had a close relationship with the government.

The chair had financial responsibilities under the act. He would report to the minister on board proceedings after each meeting and periodically meet with the minister to discuss Centrelink issues. It was initially more regular and routine, but as they got to know each other, it became on the basis of need. The board, according to Rosalky (2002:8), was concerned largely with ‘navigating the course that it interprets government has ordained for it’.

It was also understood that the CEO would keep the minister well informed. ‘We’re all working together as a board in making sure that the minister is properly informed, and [are] really very happy for Sue to keep the minister up to date’ (Board member).

The CEO reported to the minister once a week about what was happening and, as a consequence, was depicted as being ‘much more intimately connected to the decisions of Centrelink’ than the board (Senior Centrelink official).

The agency is subject to the legislative requirement that it performs any function directed by the ministers in writing to the chairman of the board (with details to be provided in the annual report for the agency for that year), and providing it has consulted with the board before issuing directions (CSDA 1997a: s. 8–9). The minister’s directions to the board can cover the ‘performance of its functions, the exercise of its powers or the conduct of its meetings, or in relation to the terms and conditions of appointment of the chief executive officer’ (CSDA 1997a: s. 13).

While ministers have the power under Centrelink’s legislation to intervene directly in Centrelink’s affairs, such occurrences have been rare. Two examples come to mind. The first was in July 2000, when the minister notified the board of the government’s policy in relation to IT outsourcing. The second was in January 2001, when there was a change in approach and the minister notified the board of their power to make decisions to outsource IT infrastructure in accordance with the government’s new policy approach (Centrelink 2001a:25).

The secretary of DFaCS for much of Centrelink’s existence provided insights into a different relationship: the relationship between the minister and the department responsible for purchasing services from Centrelink. Several types of ministerial intervention were indicated: ‘Cost-reducing management strategies…have been overruled by the minister as a potential political threat…The minister required close oversighting [sic] by the portfolio secretary of politically sensitive decisions within the prerogative of the Centrelink management’ (Rosalky 2002:10).

There is evidence from the original design and subsequent practice that ministerial accountability could continue to operate as under the former DSS. Ministers routinely accepted public responsibility for Centrelink’s activities: the agency’s performance was defended and new services announced by the minister. Ministerial correspondence in relation to Centrelink was handled as if staff were dealing with a department. Less politically attractive decisions, however, such as retrenchments, were matters for Centrelink management (Mulgan 2002:52–4). Mulgan’s (2002:54–5) overall conclusion about ministerial responsibility was that there were

The significance of ‘oversight mechanisms’, political and executive, in supporting large-scale change is well established (Nutt 2004). An important role of the Centrelink board was to contribute to the steering function and to act as a buffer and an intermediary between the public service agency and politicians. With the life-events case (see Chapter 5), it was about affirming the extension of a service delivery role that had major policy implications. The secretaries of the two main client departments were members of the board at that time and could be expected to be supportive of life events within that arena. Securing the support of the board was tantamount to tying in key departments as well as the government’s business sector appointees who had access to the minister.

On the political side, there was a close symbiotic relationship between the ministers and Centrelink and, in particular, the CEO. There was a need to be highly responsive to new political requirements, particularly those with public implications, and to reflect more generally government priorities. In these respects, Centrelink was poised to respond like a department of state and this could be problematic when it was confronting the primary department within the same portfolio. More significant was the role in which the purchaser and the provider were involved. The close relationship between Centrelink and the minister did mean, in the view of a former secretary of DFaCS, that the department at times was seemingly either marginalised or at least out manoeuvred: ‘The minister intervened directly with Centrelink regularly in a direct one-to-one link with the CEO, overriding the roles of the secretary and the board’ (Rosalky 2002:10).

Given that Centrelink had responsibilities for one of the largest components of the budget, with programs that could be highly sensitive, this forging of a direct relationship with its minister was not unexpected. Ministers accepted responsibility for Centrelink. There are also expectations and pressures to respond to government agendas and public crises with regular use made of Centrelink’s capacity to deliver assistance to people (for example, support for those affected by drought, economic structural reforms and the Bali bombings). A difficulty arises, however, in relation to other imperatives that also drive Centrelink. Since Centrelink was part of the Family and Community Services portfolio, the responsible ministers regarded it as a department of state rather than a separate service delivery agency that was operating at arm’s length.

Reconciling general and specific agendas was also problematic. Major cutbacks in staff (mandated by government expectations of efficiencies) coincided with the demands of major policy change. According to the former secretary of DFaCS, ministerial priorities produced frequent changes in outputs that could not be captured in the purchaser–provider relationship and ‘undermined the terms of business agreements between the two organisations’ (Rosalky 2002:10). The department’s attempts at oversight were frustrated by such departures.

The situation, as represented by a senior Centrelink official, was more complex: