There have been many benefits from devolution, particularly in allowing more emphasis on achieving each agency’s business objectives. They were, however, somewhat oversold, in my view, particularly in industrial relations.
Devolution at its height: Andrew Podger launching the Department of Health and Aged Care logo in 1998 (photo by kind permission of the Department of Health and Ageing)
At the time, I accepted the responsibilities and invested heavily in exploiting the flexibility I had to promote the business objectives of the agencies I managed. This included using performance pay to reward individual performance, to allow some pay flexibility for attraction and retention and to engage directly with staff on business improvement and so on. This was all well intentioned, but I now question the value of the overall investment in industrial relations, which was not only of senior management’s time but, in the Health department, meant considerable disruption throughout the organisation. I now note that some colleagues gave mainly lip-service to the then government’s policies and continued to use essentially traditional industrial relations processes of negotiation exclusively with the unions, and their outcomes were essentially the same as those the rest of us achieved. Some others very enthusiastically adopted the government’s policies, sometimes with disastrous effects on their agencies’ performance and staff morale.
That said, some flexibility in pay had significant advantages, including the attraction and retention of specialist staff. I signed the first AWA in the APS in 1997 with a new chief medical officer; I could not have recruited her or anyone else of her calibre under the old system.
A broader issue is whether the increased management responsibilities have contributed to a weakening of policy advising. As discussed in Chapter 3, I suspect it has to some extent. I sadly doubt, for example, that the current system would ever appoint an Ian Castles to be a secretary. And I know the time I devoted to management did reduce my capacity to contribute personally to policy development. I do not advocate, however, relieving agency heads of these management responsibilities, which, if handled well, should support strong policy advising capacity within the organisation.
One aspect of this issue is how best to balance the size and role of a central policy unit in a department with the policy responsibilities of the program areas. Linking policy and administration is essential for realistic policy advising. The program areas, however, are inevitably drawn into immediate management problems and shorter-term policy fixes. I tried to address this weakness through policy forums and through strengthening the central policy unit (particularly in the Health department) with some capacity for longer-term policy research. The program areas generally did not welcome the latter moves but, with hindsight, I feel I should have invested even more in the central policy unit. Certainly, one of the key lessons from my experience in the Development Division in the Department of Social Security in the 1970s was the value of a strong, central policy unit with its own research and statistical capacity.
One of the strengths of the reforms of the Hawke/Keating Governments was the more systematic gathering of performance information and evaluation of programs. Cabinet submissions were required to identify research and evaluation evidence in support of policy proposals and to set out how the proposed new policy would be evaluated. In a short-sighted attempt to reduce the size of submissions, the requirement was dropped in the late 1990s, and evaluation was no longer a mandated requirement. While performance reporting continues to contribute to ‘evidence-based’ policy advising, the loss of internal capacity and systematic evaluation, and the increasing reliance on chosen external consultants, has affected the capacity of departments to offer high-quality policy advice.
Strategic planning, like many other modern management initiatives, can be formulaic, adding little, if any, value. Plans that end up sitting on shelves without influencing resource allocation, priorities and behaviours reinforce cynicism. Critical to making the planning process work are the quality of the information and analysis used in the process, the openness of the discussions involved and the willingness to engage widely within and beyond the organisation. All of these present risks.
Table 6.6 Tea cosies
The retreat to develop the first strategic plan for the Department of Health and Family Services in 1996 (Table 6.1) was one of the most difficult management meetings I ever led.
There was unease about the new government, particularly after the dismissal of a number of secretaries (including the husband of one of my division heads), the culture among senior executives was more akin to that of robber barons than united leadership and there was unease about me as the new secretary.
I engaged one of the best facilitators in Canberra, Lynette Glendinning, to assist me. She has told me often in the years since that it was the toughest assignment she ever faced.
One division head sat in the centre, arms folded and legs outstretched, making it abundantly clear he was there under sufferance. An enormously talented and knowledgeable officer, he was nonetheless closed to new management ideas and determined to protect his particular empire. Our state offices, for example, were merely creatures of history in his strongly stated view and should be strictly limited to working on community services programs and have no role under any circumstances in health programs.
Two other division heads sat to one side, crocheting a tea cosy. The completed cosy, presented to me a week or so later, remains one of my prized memorabilia. I like to think, perhaps fancifully, that its presentation to me was a sign of reconciliation: that its two creators accepted in the end the value of the exercise, recognising my genuine determination for open discussion and wide engagement, leading to a plan that would indeed help to shape the future direction of the organisation.
Performance management is well entrenched in the Australian system of budgeting and reporting, with considerable benefits in the past 25 years in terms of improved focus on effectiveness and efficiency. It is, however, easy to be sucked into unrealistic ‘outcomes’ approaches with meaningless outcomes statements and limited connections between the program activities and the claimed outcomes. A degree of scepticism is required along with a practical outlook, using a mixture of input controls and output measures, with regular evaluations of impacts; and a broad appreciation of the usefulness of the program or project taking into account the multiple objectives often involved.
Individual performance management remains one of the most vexed issues for any CEO. The most common complaint from staff about their senior managers is the failure to address under-performance; yet, ensuring robust staff appraisal and introducing rewards for performance always face opposition from staff.
Allan Hawke, Secretary of the Defence department (1999–2002), always opposed any formal process of calibration to ensure consistency, suggesting instead the system should focus purely on individuals and how they were improving (or not) each year. My unease about this approach is that it can lead to ignoring poor performance and focusing entirely on pats on the head (or, as Tony Ayers used to complain about such systems, that ‘everyone walks on water’). On the other hand, it is also true that most people respond better to acknowledgment of achievements than to the highlighting of their weaknesses.
The other aspect of this issue is the role of performance pay. Despite years of hard work to get a system to work, I now accept that it is just not worth the effort. My support for it was never based on potential incentives to improve performance, but on the discipline it imposed on the process, requiring supervisors to establish performance agreements with all the staff concerned in line with our strategic directions and to provide feedback at least once a year. I have seen too many appraisal systems disappear into the sand as staff and supervisors put off preparing agreements or giving feedback because they think there is more important work to do; I have also seen too many supervisors unwilling to give any critical feedback, particularly when the system does not demand some differentiation in assessments. Despite these risks, I now look back and accept that the disadvantages of performance pay outweighed the advantages. I might have imposed a robust appraisal and feedback system successfully without the pain of the continuing controversy and staff unhappiness with the performance bonuses.
Table 6.7 Making performance assessment work
When I first came into the Health department in 1996, the department had a performance-pay system for the SES (which at that time was mandatory in all agencies). The system was a complete mess and had no credibility with staff. How bad it was became clear to me when I insisted, in the first round under my secretaryship, that division heads advise me of the proposed performance ratings of their branch heads before telling them. Very quickly, I could see there was no consistency from division to division.
I therefore called a meeting of all division heads and, armed with a whiteboard, I asked each in turn to name each of their branch heads and the performance rating they proposed. As each division head finished, I asked the others for any comments. There were none. The lack of any corporate management structure at the time had led the division heads to behave independently, jealously guarding their own territory and not commenting on another’s decisions for fear of, in time, losing their own authority to the centre.
As the names and proposed ratings appeared on my whiteboard, however, it was becoming increasingly clear that the standards being applied were hugely different. This could not be ignored when one division head listed his five branch heads and said he proposed that every one be given an ‘A’ (outstanding) rating. Again, I asked for comment from the others and, initially, there was silence. Then a few said that, while they could not comment on the branch heads from another division, they now wanted to revisit the ratings they had proposed for their own staff. Finally, one said that, while he did not have as much knowledge of the individuals as the relevant division head, he did think from his (quite close) dealings with them, two were not as strong performers as the other three. There were nods around the table. At last, we had the beginnings of a process to get more consistency in the system.
I chose not to press the matter too hard in this first round, but did ask the division head claiming his five branch heads were all outstanding to review his proposed ratings in light of the discussion and come back to me. He did, proposing three ‘As’ and two ‘Bs’. I decided to concur.
Next, I had two angry branch heads contacting me demanding to know how I could have downgraded the rating by the supervisor with whom they worked most closely when I did not personally know of their performance. I met with each of the branch heads, telling them frankly of my determination to get consistency of standards in the appraisal process throughout the department and reassuring them that a ‘B’ rating was indeed very high against the overall distribution across branch heads.
In time, we established clearer performance agreements that covered program and management responsibilities and targets, with personal development action also identified; and we systematised the processes involving supervisors’ supervisors to ensure consistency of standards. Even then, however, I could not say the system was universally supported.
Most importantly, I became increasingly aware in the APS Commission of the research evidence that organisational performance was enhanced, not by performance pay no matter how well designed and managed, but by timely, positive and fair feedback together with clear alignment of individual work requirements with organisational goals and by management effectively removing obstacles to good performance (including getting rid of under-performers). I hasten to add for those critics who have always opposed performance pay, performance assessment and feedback is never an easy or uncontroversial management issue and in some ways removing it from pay decisions makes it harder, not easier.
Another difficult issue in management is building a winning team, moving on the people who do not fit while winning the loyalty and enthusiasm of the others. The division heads I inherited in the Health department were, individually, highly talented and hard working. They knew their areas of responsibility and were generally very good policy advisers. Together, however, they operated as robber barons and it was my job to change that, to build a cohesive team. Sadly, that required encouraging one of the very best to leave. As a colleague told me at the time, you can have a really top rower in your crew, but if he insists on sitting backwards, at some time you have to tip him out. It was not an easy time and I lost some other excellent officers who preferred not to stay and support the changes I was instituting (management change was not the only concern — there was also apprehension about the government's policies towards the public service). A conclusion for me was that good performance required far more than technical expertise, or even good management of a division or branch: it also required collegiality and good corporate behaviour. My own personal behaviour—being as open and honest as possible and listening carefully to everyone before deciding—has also always been essential to building team spirit.
Another issue is the minister’s involvement in senior appointments. Secretaries are responsible for all employment decisions in the department and ministers are prohibited under the Public Service Act from giving directions on such decisions, which must be based on merit. I took the view, nonetheless, that I should inform the minister before making senior appointments (that is, deputy secretary and, sometimes, division heads), while emphasising the decisions were mine and that the Public Service Commissioner had to certify that the process was properly managed. In the case of deputies, who from time to time act as secretary, I believe there must be a level of ‘comfort’ about the people appointed.
Table 6.8 Selecting deputies: there’s more than one way (for the minister) to skin a cat
In 1994, I was establishing the new Department of Housing and Regional Development and filling the deputy position. In those days, the Public Service Commissioner had final responsibility for SES appointments (subsequently, the role was reduced to certifying the process of appointment). The selection process identified the preferred candidate on merit and I advised the minister that I would be recommending him to the commissioner. The minister, Brian Howe, favoured another candidate and pressed his case with me on a number of occasions. I stood my ground, emphasising the importance of the merit principle and why the preferred candidate was superior, noting nonetheless that his favoured candidate was second on the merit list. I also noted that the final decision was not his, or even mine, but the commissioner’s.
At that time, the Minister for Finance determined SES numbers and levels and I had been negotiating with the Secretary of the Finance department, Steve Sedgwick, the SES establishment for the new small department. We were nearing settlement when I told Sedgwick that my minister might be proposing to Beazley something different: a second deputy secretary.
To Sedgwick’s displeasure and my bemusement, that is what happened. Beazley understandably deferred to the Deputy Prime Minister, I gained an extra deputy and two people were appointed entirely on merit. And the team worked extremely well together.