€¦ · Notes On Public Sector Reform and Performance Management —International Themes 1...

International Themes of Public Sector Reform

and Performance Management

Notes On Public Sector Reform and Performance Management—International Themes

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Table of Contents

International Themes 1

1. Conceptual Framework 2 2. Common Themes 3

2.1. Main Drivers 4 2.2. Legislative Commitment 6 2.3. Leadership 7 2.4. Clear Objectives and Measures 9 2.5. Performance-Based Budgeting 12 2.6. Performance-Based Human Resource Management 13 2.7. Performance Reporting and Reviewing 16 2.8. Building Performance Culture 18

3. Summary 20 4. Reference 22


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International Themes of Public Sector Reform and Performance Management

Performance management has been a key aspect of public sector reforms in many

countries all over the world. Performance management systems have been developed in many fields of public administration, including financial and budgetary systems, human resource management, policy-making processes, service delivery, etc.

Based on research of public sector reforms and practices in four countries —

Australia, New Zealand, the United Kingdom, and the United States of America,— this section will discuss the international themes emerging from these reforms. Conceptual Framework

In many countries there has been ideological and technical discussions about the legitimacy of government in society. Democratic “deficits” arose and gaps between the state and its citizens became obvious to politicians and the general public alike.

In his book, The Legitimation of Power, Beetham presents a framework of legitimate governance1:

• Firstly, there is legality, which means that there is a correspondence between decisions and rules according to the principle of the rule of law.

• Second, there is a legitimacy of law, requiring that legislative and legal power and the laws and regulations themselves must be legitimate.

• Third, there is legitimate use of power, meaning that the state and its use of power are oriented toward the general interest.

• Fourth, government must have the approval of citizens, including sometimes citizens disagreeing with those responsible for public policy and public management.

The “general interest” in the third element is prominent in the discussion of

challenges that governments are facing, which can be explained as the dissatisfaction with the fiscal problems, demands for better services, and the ongoing globalization. The notion that government must have the approval of citizens in the fourth element drives government to work towards the interest of citizens, which also works as one of the main drivers of public sector reform all over the world.

Comprehensive reformers in many countries have engaged in extensive

marketization via privatization and contracting out, restructuring their public sectors through downsizing and decentralization, and establishing a customer orientation in service provision.

1 D. Beetham, The Legitimation of Power, London: McMillan, 1991.


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Public sector reform can be defined in many ways. According to the purpose of this research, the definition chosen is that public management reform consists of deliberate changes to the structures and process of public organizations with the objective of getting them to run better. 2 At this point, the term “run better” can be understood as meaning to improve the performance of the government, to work better with less, and to provide better services to its citizens. Further explained by Christopher Pollitt and Geert Bouckaert3,

• Structural changes may include merging or splitting public sector organizations (creating a small number of bigger departments to improve co-ordination or a larger number of smaller departments to sharpen focus and encourage specialization);

• Process changes may include the redesign of the systems of quality standards for services or the introduction of new budgeting procedures that encourage public servants to be more conscious and/or to monitor more closely the results that their expenditures generate; and

• Management reforms also embrace changes to the systems by which public servants themselves are recruited, trained, appraised, promoted, disciplined, and declared redundant.

A different but similar definition is provided by Colin Knox, who states that public

service reforms in a comparative context can be captured by the term New Public Management.4 At the heart of Knox’s reforming ideology is the notion that public service provision tends to be inefficient and of poor quality, and that it needs to learn from the private sector. This notion includes a greater emphasis on performance measurement, the promotion of competition, improvements in financial management, a focus on service outputs, and private style management practices, which empower public sector consumers.

Knox also provides a framework of public sector reform. A generic framework for

public sector reform comprises three core elements: • pressures driving the need for reforms, which derive from both the socio-

economic and the political context; • feasible changes that can be achieved (as opposed to what might be desirable);

and • the extent to which the reforms can be implemented.

Another framework of public sector reforms is provided by the OECD study: In

Search of Results: Performance Management Practices. Drawing on the elements of legitimacy and the challenges face by many countries, the OECD distils the main issues 2 Christopher Pollitt and Geert Bouckaert, Public Management Reform: A Comprehensive Analysis, Oxford University Press, 2000, p. 8. 3 Ibid. 4 Colin Knox, Review of Public Administration Briefing Paper: Public Service Reform, [http://www.rpani.gov.uk/reform.pdf], Northern Ireland, University of Ulster, 2002.


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in the trend toward performance governance5:

• A normative position on the size of government in society; this is a function of societal performance requirements and it has implications in terms of savings and budget size;

• Positioning among different actors in society “to get things done” and define relationships, e.g., citizens as customers, private sector, public managers; this has implications for well-performing networks, partnerships, and interactions;

• Performance management in the public sector itself, which is about well-performing policy management and service delivery.

The major elements in performance management are the objectives, approaches, institutional arrangements, and performance information systems. There are different objectives in developing, implementing, pursuing, and evaluating performance management.

Based on the understanding of these concepts and the existing frameworks of public sector reforms and performance management, the framework of this study is set as the following.

• Challenges, pressures, and drivers, which are discussed as Background in the country sections of this report;

• Feasible and achieved changes, including structural changes, process changes, management changes, and changes towards better performance, which are entitled Main Initiatives in the country sections of this report;

• Success factors with which public sector reforms achieved the expected results in those countries, and which are grouped as Key Elements in the country sections of this report; and

• Common themes of the countries involved in this research, or international themes of public sector reforms and performance management practices in these countries, addressed in this section of the report.

Common Themes

During the research, several common themes were found throughout the four

countries researched. These can been seen as success factors or important elements of the reforms achieved by these jurisdictions. These themes are:

• Main Drivers, • Legislative Commitment, • Leadership, • Setting Objectives and Measuring Performance, • Performance-based Budgeting,

5 OECD, In Search of Results: Performance Management Practices, Paris, 1997.


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• Performance-based Human Resource Management, • Performance Reporting and Reviewing, and • Building Performance Culture.

Main Drivers

With the economic and social developments after the Second World War, all of the four reviewed countries enjoyed economic growth before the 1970s. However, from the late 1960s, problems arose, and these countries were faced with new challenges. One resolution they chose was public sector reform.

In 1995, the Public Management Service of the OECD released the report entitled

Governance in Transition: Public Management Reforms in OECD Countries. The driving force or common agenda was identified in the report, e.g., “… encompasses efforts to make governments at all levels more efficient and cost-effective, to increase the quality of public services, to enable the public sector to respond flexibly and more strategically to external changes, and to support and foster national economic performance.”6 This report identified the ideas of New Public Management and the intentions of the OECD countries. However, the reasons behind this agenda are more complex, and include, for example, the economic problems, dissatisfaction with public sector, new ideas of public management, and other social reasons. These reasons were related to each other and became the main drivers that pushed the public sector reform forward.

Fiscal Problems. Fiscal problems, or economic crises were seen as the most

important drivers behind the public reforms of the reviewed countries. From the 1970s on, these countries began to face economic problems after their rapid growth. For instance, political and popular awareness of the federal deficit grew in the United States during the 1980s because of the high levels of defence spending under the Reagan administration and its failure to cut back on social programs. Similarly, from the mid-1970s on, the Australian public sector relied significantly on deficit spending. By the 1980s, Australia’s economy was less able to withstand the pressure from a more competitive global economy. As with other countries, the main driving force for these changes was the changing economic situation. In the late 1970s and early 1980s, the New Zealand economy was near the point of bankruptcy because of the collapse of protectionism, the cost of its extensive social safety net, and the changed economic relationship with the United Kingdom. Similarly in the United Kingdom, fiscal problems led to criticisms from politicians and dissatisfaction from its citizens.

Increasing Demands for Better Government. Increasing demands for better

government came about as a result of criticisms from politicians and the dissatisfaction of its citizens. Politicians began to suggest that poor government policies caused the stagnation of economies. Citizens demanded more responsible government and better services. For example, as early as the 1960s, Fulton argued that the traditional British

6 OECD, Governance in Transition: Public Management Reforms in OECD Countries, Paris: OECD, 1995, p.7.


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civil service was incapable of dealing with the problems of an increasingly complex society. 7 The situation was worse in the United States of America. Compared with most European countries, the USA was only a “thin” welfare state8, leading to criticisms from its citizens. Since the 1970s, US public opinion has tended to be increasingly critical of both the motive and the competence of the federal government. Many Americans believed that the federal bureaucracy wasted huge sums of money. As a consequence, the USA experienced strong anti-government rhetoric and low public trust. By the end of the 1980s, there were signs of a real collapse of morale within the federal government service.9 Even though there was no evidence of popular opinion against the government in Australia and New Zealand, it was clear that the public was unwilling to put up with poor services or economic crises. They demanded improvements in the economy, constrained public expenditures, and the provision of better services which together pushed governments toward public sector reforms.

New Ideas of Public Management. Due to the social problems of the 1960s, there

was a global wave of generic managerialism ideas, including management by objectives (MBO), total quality management (TQM), downsizing, benchmarking, re-engineering, and so on. Many countries began to accept the concepts of the New Public Management, which included three dimensions:

• A smaller public sector with downsizing and reorganizing,

• Marketization and commercialization of public programs though a greater reliance of market force or public-private partnerships to deliver services and allocate resources, and

• Adoption of managerialism or private sector experience to improve performance and accountability.

The four reviewed countries all accepted the ideas of New Public Management at different levels. The United States of America was characterized by a “business-oriented”, “free enterprise” culture, and both the Republican Party and the Democrat Party had been willing to build a more “businesslike” government. These factors made it easy for the USA public sector to accept the concepts from the private sector, and the federal administration has shown enthusiasm towards many of the contemporary management techniques. The United Kingdom was also part of the world of managerialism. Mrs. Thatcher focused on pub lic service reforms. She hired Derek Rayner, a businessman, as her first efficiency advisor and brought many other managers into government in various advisory capacities. New Zealand also embraced the new concepts and began its privatization and commercia lization in the 1980s. In Australia the concepts began to have

7 The British Council, The Evolution of the UK civil Service 1848-1997 , [www.britishcouncil.org/governance/manag/civil/index.htm], July 1997. 8 Christopher Pollitt and Geert Bouckaert, Public Management Reform: A Comparative Analysis, Oxford: Oxford University Press, 2000, p. 278. 9 Cited in Christopher Pollitt and Geert Bouckaert, Public Management Reform: A Comparative Analysis, Oxford: Oxford University Press, 2000, p. 280.


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a direct and powerful influence after the Howard- led National Government came to power in the late 1990s.10

Other factors that contributed to the reforms. Demographic changes brought

challenges for the public administration and increased the requirements for efficiency and effectiveness of the public service at different levels and different locations. Technological developments enhanced the expectations of citizens and also made more efficient service delivery feasible. The social and economic impacts of globalization required government to respond quickly and appropriately to world competition.

Legislative Commitment

Legislative commitment is one of the most important elements of public sector reforms in all of the four reviewed countries. Laws provided legal support to the reforms, thereby consolidating the reforms and ensuring their continuity. Legislative commitment also provided a legal framework for the reforms, such as setting objectives, identifying priorities, clarifying responsibilities of public servant at all levels, and requiring performance information. The United States of America

The most important legislation in terms of public sector reform was the Government

Performance and Results Act passed in 1993, under Clinton’s administration, which brought the US public reform into a new era. This comprehensive legislation was intended to improve the effectiveness of the federal government as measured by results, and to do this through better management. Transparency and accountability were introduced as the two core values reflected in it. A key feature of GPRA is that it did not fade away with the end of Clinton’s administration, and it still provides strong support for reforms under Bush’s administration. Australia

Legislative commitment has been a critical success factor of Australian public sector

reforms over the past 20 years. Laws that support the reform initiatives are comprehensive at three folds:

• Laws were passed at both the federal level and the state level; • Laws were passed in the fields of performance management, human resource

management, and financial management; and • Laws were amended according to the changing environments.

Legislative supports provide a lega l framework for the Australian public sector reforms, making the reform not just an initiative of a single government, but making it a national-wide and lasting initiative toward better performance and accountability.

10 Christopher Pollitt and Geert Bouckaert, Public Management Reform, p. 200.


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New Zealand Legislative commitment is quite clear and strong in the New Zealand public sector

reforms where laws related to different aspects of reforms were passed. The State Sector Act 1988 was designed and passed to grant managers greater authority and flexibility. The Act was seen as the first comprehensive legislation in the public sector reforms in New Zealand. In 1989, the Public Finance Act introduced a radically different system of financial management and accountability. The new system completed and consolidated the changes made by the State Sector Act, increased the relevance of performance information, improved accountability and shifted financial management away from the detailed control of cost to service quality and government desired outcomes. Another fundamental piece of legis lation was the Fiscal Responsibility Act passed in 1994, which was designed to redefine the role and responsibility of the state, and establish an environment facilitating responsible and business-like, longer-term public management. These three main laws, along with other laws, such as the State-Owned Enterprises Act and the Crown Entity Bill, built up the legislative framework, which ensured the continuity of the reforms during the transitions of the Government when different parties were in power.

The United Kingdom

Legislative support for the UK civil service reform was not as strong as in the other three countries, and no comprehensive legal framework was developed. However, there were some laws related to reforms. The Civil Service (Management Functions) Act passed in 1992 empowered the government to delegate management functions relating to staff to individual agencies, and the decentralization of the determination of pay and conditions to the agency level has been encouraged. The Freedom of Information Act was also passed in 2000 to ensure access to the information of public authorities, thereby enforcing the transparency and accountability of the civil service.

Leadership

Leadership is a critical success factor in reforming the public sector in all the four reviewed countries. Public sector reforms need leadership support from many aspects: truly believing in the reform ideas, communicating with stakeholders and Parliament, developing a clear vision of expected results, identifying priorities, setting objectives, measuring and monitoring programs, and converting the plans into real results. Strong leadership support comes from both the political leaders and the senior managers: leadership from the political level will ensure the continuity of the reforms and consolidating of the previous reforms; and leadership from the management level will contribute to strategic thinking, cultivating a work environment, communication, and achieving results.


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The United Kingdom

Leadership has been a critical success factor through the whole process of the civil service reform of the United Kingdom. Evidence suggests that there was strong political support. For instance, some of the Next Steps changes were, in practice, very similar to the recommendations of the 1968 Fulton Report. However, the practices were achieved in the 1980s, having failed in the 1970s. The key difference between the two attempts was the political leadership. Since the end of the 1970s, when Thatcher’s Government came in to power, the leadership support from the political aspect has been strengthened. In the following 20 years, the UK government, no matter Conservative or Labour, has been strongly committed to reforming the civil service towards better government. Leadership for the changes has not only come from the political level, but also from within the civil service. For example, in the case of the Citizen’s Charter, high- level commitment across the public service has proved essential, with Charter Mark winners. The United States of America

As with the UK, leadership has been one of the critical success factors during the past two decades of the USA public reforms. President Clinton created the National Performance Review (NPR) in 1993, led by Vice President Gore, who demonstrated strong commitment to this reform. Although President Bush did not continue the NPR, he announced the President’s Management Agenda in 2001, which set out a framework for the federal government and agencies. The principles set out that government should be citizen-centered, not bureaucracy-centered; results-oriented; and market-based, actively promoting rather than stifling innovation through competition. Australia

Leadership support for the Australian public sector reforms come from both the political perspective and the administrative perspective. All four Prime Ministers during the period covered in this report (Fraser: 1975-1983, Hawke: 1983-1991, Keating: 1991-1996, and Howard: 1996-Present) put their efforts toward better performance and accountability. Clear political leadership can also be found at the state level. For instance, during the election season in 2001, Mr. Geoff Gallop, who later became the Premier of Western Australia, put “honest, accountable and inclusive government” as his number one priority.

Leadership support also comes from the senior executives. Senior managers are

responsible to the Parliament and public through their agreements with ministers. The Senior Executive Leadership Capability Framework not only established the core criteria for Senior Executive Service selection, but also made the administrative leadership support realistic in terms of strategic thinking, achieving results, cultivating productive working relationships, exemplifying personal integrity, and communicating with influence.


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New Zealand

As noted in The Spirit of the Reforms, political leadership is essential to the New Zealand Public Sector reforms.11 Both the Labour and National Party focused on improving the economic conditions and accountabilities. Once in power, the National Government continued to press for full implementation of the management model and pursued additional reforms. However, the election of a left-wing coalition ended the bipartisan support for the reforms that had existed for fifteen years.12

Leadership support does not only come from political leaders, it also comes from the

managers. The New Zealand Public Sector has focused on its leadership capacity for a long time. As the fiscal problem was resolved, the reforms entered a new stage, the main focus of which was to strengthen people, culture, and leadership. It will be fully implemented through the State Sector Senior Leadership And Management Development Strategy in the following five years.

Setting Objectives and Measuring Performance

The common objectives of the public sector reforms in all the reviewed countries are to improve performance and accountability, to provide better services to citizens, and to focus on outputs and outcomes rather than focus on inputs. Priorities are ident ified through strategic plans and key results areas, including short-term, mid-term, and long-term plans. Responsibilities and accountabilities have been clarified through performance agreements or performance plans at all levels. Appropriate measures are developed concerning inputs, outputs, outcomes, efficiency, effectiveness, etc. The United Kingdom

The Civil Service Reforms of the UK have a clear objective of ensuring accountability for performance. Each organization has a clearly defined task, which is set out in the framework document. Detailed plans are required, setting out aims, goals, and targets that cover financial performance, efficiency, effectiveness, and service quality; measures have been developed for monitoring and reporting. Clear principles have also been published, which can be adapted to fit different circumstances, rather than a completely rigid model. 13 This has been considered one of the success factors of the reforms.

11 NZ State Sector Commission, The Spirit of the Reform: Managing the New Zealand State Sector in a Time of Change, [http://www.ssc.govt.nz/spirit-of-reform], 1996. 12 Graham Scott, Managing Government for Better Performance and Results, [http://unpan1.un.org/intradoc/groups/public/documents/un/unpan001961.pdf], Workshop on Financial Management and Accountability, United Nations Department of Economics and Social Affairs and the Government of Italy, 2001. 13 For more information about these principles, please refer to the relevant documents. Audit Commission, Aiming to Improve: the Principles of Performance Measurement, http://www.audit-commission.gov.uk/Products/AC-REPORT/72370C4D-1030-4b87-88F4-CD2A14B2A1AE/mppperfm.pdf, London, 2000.


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As a comprehensive program, all the major performance management initiatives in

the UK have been centrally initiated, and participation is not at the discretion of departments and agencies. Performance targets are set by the ministries after consultation with the agencies. The use of instruments has often been mandatory rather than voluntary. Although the reforms are comprehensive and centrally initiated, it is considered important to ensure flexible implementation. As noted previously, there are basic principles that are easily adapted to fit different circumstances. The three-year cyclical Comprehensive Spending Review also provides department and agencies flexibility in setting and adjusting their targets. A critical part of the spending review process was the use of Cross-Cutting Reviews14 to determine how best to co-ordinate the work of those departments that shares an interest in the overlapping areas and ensure delivery.

One problem raised and addressed was the excessive number of targets to measure,

leading to incomplete performance information from the agenc ies. Another problem was that items targeted and measured for agencies did not necessarily reflect the most important aspects of their activity, but rather were the easiest to count at the point when targets needed to be designed. A general lesson learned from these reforms was the need for greater sophistication in the use of performance measures. The United States of America

The objective of public reform in the USA has been to transform departments and agencies into lean, flexible organizations that emphasize performance and accountability for government spending by measuring the outputs and outcomes rather than only the amount of money spent.

According to GPRA, departments and agencies were required to develop strategic

plans and annual performance plans, defining these performance goals for a fiscal year. GPRA also required the Office of Management and Budget to prepare an annual government-wide performance plan, which would be based on the strategic plans of agencies and would be part of the budget of the fiscal year. The President’s Management Agenda (PMA) also combined the government-wide priority areas with specific agencies areas.

Different types of measures have been used in the USA public reforms including, for

example, input, output, outcomes, efficiency and effectiveness measures. Among these, GPRA and the PMA clearly focus on outputs and strategic outcomes. As “Putting customers first” is one of the central elements of the performance management reforms in the USA, detailed customer service standards have been set, and customer satisfaction is one of the most important measures.

National Audit Office, Measuring the Performance of Government Departments, [http://www.nao.gov.uk/publications/nao_reports/00-01/0001301.pdf], London, 2001. 14 HM Treasury, Cross-Cutting Reviews, [http://www.hm-treasury.gov.uk/spending_review/spend_ccr/spend_ccr_index.cfm], London, 2000.


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Performance management reforms, such as GPRA, NPR, and PMA, have been initiated from the top. However, attention has been paid to allow for flexible implementation according to the needs of different agencies. Central requirements are usually not very prescriptive. For instance, GPRA gave departments and agencies several years to develop their first strategic plan and annual performance reports; PMA also set two-part scorecards to encourage those departments and agencies with poor performance to make greater improvements in the following year. Australia

The main and overall objectives of Australia’s public sector reforms are to improve

the performance and accountability of the Australian Public Sector and to provide better services to its citizens. The goal is to improve public sector productivity and efficiency by reallocating resources and putting them to more effective use rather than finding direct savings on budgets. To achieve this goal, various reallocation agreements and regulations have been signed between the federal government and the states, between the finance department and other departments, and between the departments and agencies. For instance, New South Wales developed the Service and Resource Allocation Agreements in year 2000. Ministries, agencies, and employees are also required to develop clear objectives and goals.

Measurement and benchmarking of performance is another key element in the

Australian public sector reforms. Departments and agencies at both the federal level and the state level have focused on developing measuring systems. The measures are of all types, both qualitative and quantitative, including inputs, workloads, outputs, service quality, and outcomes, but the emphasis is on the development of outcome measures. Two examples of clear measures are the Managing for Outcomes Model of Queensland and the Output-Based Management of Western Australia. New Zealand

Since the main driver behind New Zealand’s reform was its fiscal problems, the objectives of the country’s public sector reforms were firstly focused on improving financial management and reforming the bureaucracy and process. Another objective was to meet the public demand of higher quality service while retaining fiscal responsibility. The reforms during 1984 and 2000 can be described as the development of managerialism with a focus on outputs.

Ever since the State Sector Act 1988, expectations of chief executives have been

clearly set in performance agreements and purchase agreements. Beginning in 1993, a strategic management system was established. It outlined the Government’s strategic vision for New Zealand in the medium term. The strategic management system also involved interactions among Ministers, chief executives, and central agencies. The system introduced the Strategic Results Areas (SRAs) in a government-wide plan and Key Result Areas (KRAs) in departmental plans and individual agreements.


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Before 2000, a key feature of the New Zealand public management was its emphasis on outputs rather than outcomes in the performance management process. The measure were then focused on the quantity, coverage, timelines, cost, and quality of outputs. With the development of the performance management system, the New Zealand Public Sector began to shift its emphasis to outcomes. One of the main priorities of the new government is a greater focus on results. The Minister of State Services noted that since year 2000, public management in New Zealand has been moving towards leadership and outcomes (getting results).15 Performance-based Budgeting

As the budget is one of the critical areas to a review of government performance, performance-based budgeting has an important role in the performance management systems of the reviewed countries. Two proposed advantages of a performance-based budget process are that:

• the size of the budget will be related to past performance; and • making targets explicit and using performance information will provide budget

process stability and a long-term budgetary commitment. The United Kingdom

In the UK, the allocation of resources is combined with the setting of annual performance targets. The most significant practice in performance-based budgeting are the Comprehensive Spending Reviews, which allow government to tie the allocation of resources by departments to the achievement of specific and measurable performance targets and give flexibility to the internal budget process of departments. The United States of America

One of the GPRA’s objectives was to move federal budgeting to performance-based

budgeting. GPRA has always envisioned the complete integration of the annual performance plan with the budget. Both strategic plans and annual performance reports were to be included in the budget plan of the fiscal year.

As well, two of the five priority areas of the President’s Management Agenda are

Improved Financial Performance and Budget and Performance Integration. Senior officials at the Office of Management and Budget have described performance-based budgeting as the Bush administration's top management priority. The importance of this reform has been emphasized in the President's Budget each year. Even more significant is the fact that OMB has outlined specific requirements for the initial phases of this reform, both as part of the President's Management Agenda and as key elements in the Program Assessment Rating Tool.

15 NZ State Sector Commission, Current Problems in Public Management, [http://www.ssc.govt.nz/current-problems -public -management], 2003.


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Australia

The goal of Australia’s public sector reforms is to achieve productivity and efficiency through effective resource reallocation rather than through direct savings. The budget system is clearly aligned to this goal. Resource Agreements were signed, providing flexibility beyond what is normally available in the budget process, and serving as a complementary management tool to the budget process. Departments and Agencies are required to report the outcomes against the inputs, and this performance information is also used in the budget process. Legislative frameworks to ensure financial management and accountability have also been established at both the federal level and the state level. New Zealand New Zealand probably has the closest link between the allocation of resources and performance.16 Performance measurement is linked to the budget process directly through the Purchase Agreements and Output Budgeting. Under the Public Finance Act 1994, ministers are responsible for determining the outcomes the government seeks. The Government then selects the outputs that can best provide the outcomes and allocates resources to them. The budget process is based on performance information about the volume and price of the outputs, rather than inputs. The objective is to link, as closely as possible, resource allocation with performance. Performance-based HR Management

Human capital is critical to performance management. Common incentives to improve performance are to introduce the performance concepts to employees at all levels, to provide clear directions for performance target setting, to provide financial awards or job enrichments, and to provide training opportunities for employees to improve their performance. The United Kingdom

Performance-based pay is seen as an important aspect to improving civil service efficiency. The Civil Service of the UK also placed performance-based pay as a key element of its reforms. Performance information is increasingly important in relation to the pay arrangement. For example, a key principle of the Citizen’s Charter is to link the individual’s pay and his or her contribution to the achievement of the organization’s objectives. The employment of the chief executive of a Next Steps Agency and his or her performance pay relate to the agency’s performance against the targets set by the minister.

16 OECD, Governance in Transition: Public Management Reforms in OECD Countries, Paris: OECD, 1995, p.23.


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The Public Sector Excellence Programme 17(formerly called Public Benchmark Project) encourages organizations and their managers to conduct self-assessments against the Business Excellence Model, which helps them better understand their performance and their position relative to other organizations, and better identify their strengths and areas for improvement. The program encourages the public sector to share best practices more systematically with each other, with the private sector, and with most successful government bodies. The United States of America

Various performance-based pay arrangements have been used in the federal government, including cash awards, merit pay, bonuses, and sharing of productivity gains. For instance, the Civil Service Reform Act passed in 1978 introduced performance appraisal and merit pay. NPR also developed the Hammer Award to encourage teams and individuals to work towards the direction of greater accountability. NPR also requested that agencies should design their own performance pay system. One goal of NPR was to empower employees to get results. PMA also recognized the importance of human resource management, which was defined as the first of its five priority areas, entitled Strategic Management of Human Capital. Australia

The main focus of human resource management in the Australian public service is to improve staff performance by building better labour and management relationships, staff training, and performance-based payments.

Laws have been passed to ensure that recruitment to the public sector is based on

merit and performance. Training has been provided to staff from all levels of the public sector. For instance, the Middle Management Development Initiatives of the early 1990s focused on those managers with substantial people management responsibilities, while the Senior Executive Leadership Capability improved the performance of senior managers and executives. The development of a performance-based pay system had been a key element of performance management ever since the early 1980s, before it finally became a special feature of the Australian public service. Unions have important roles in developing a better labour relationship in the public sector and in developing the performance-based pay system.

However, there is also an argument that a strong performance culture has not

emerged within the Australian public service despite the introduction of performance-based pay. Michael O’Donnell contended that in the Australian public service, managerial prerogatives were used in an arbitrary and subjective manner, with favourites rewarded and others less favoured potentially victimised.18 He found that those officers 17 UK Cabinet Office, Public Sector Excellence Programme , [http://www.cabinet-office.gov.uk/eeg/1999/benchmarking.htm], London. 18Michael O’Donnell, “Creating a Performance Culture? Performance-based Pay in the Australia Public Service”, Australian Journal of Public Administration, Vol. 57, No. 2, June 1998, p. 34.


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working in “high-profile” areas also received the highest rating, while senior officers working in “lower-profile” service areas, such as delivery services or corporate services, tended to receive merely “satisfactory” rating scores.19 The author suggested that more focus should be placed on improving the quality of performance feedbacks provided by supervisors. New Zealand

In New Zealand, performance-based human resource management was introduced as a part of its overall reforms. As early as the State Sector Act 1988, clear requirements of responsibility and accountability were set up for chief executives. The roles of Responsible Ministers, Chief Executives and senior managers in terms of ownership are defined in the purchase agreements and performance agreements. Given that chief executives are on fixed-term contracts, the reputation of being a high performer is critical, should they wish to secure chief executive appointments in the future. Another important initiative for managers is the State Sector Senior Leadership And Management Development Strategy, which focuses on improving the leadership capacity.

Some scholars noted, however, that too much weight was put on the minister-chief

executive relationship, and that the idea that chief executives followed individual contracts might lead to a loss of the collegiality and shared experience of the public service as a whole.20

Under the instruction provided by the State Sector Act, the State Sector Commission

published the Service Code of Conduct in 1990, the purpose of which was to offer guidance on the standards of behaviours required of public servants. Three principles were also established: that employees should fulfill their lawful obligations to Government with professionalism and integrity; employees should perform their official duties honestly, faithfully and efficiently, respecting the rights of the public and their colleagues; and employees should not bring their employers into disrepute through their private activities. 21

Staff are hired based on their merits, and flexible pay agreements based on

performance appraisals are used for most staff; this, along with clear objectives, is said to have led to clarification of goals and improved performance of staff. Training is another important aspect of human resource management. The Chief Executive of the New Zealand Public Service, with the support of the State Services Commission, established the Management Development Centre (MDC) in 1995 to promote excellence in the education, training and development of Public Service leaders and senior managers.

19 Ibid. 20 Simon Smelt, Operational Efficiency in the New Zealand Public Sector, [http://firms.findlaw.com/smelt/memo6.htm], World Bank, 1997. 21 NZ State Sector Commission, Public Service Code of Conduct, [http://www.ssc.govt.nz/coc], 2001.


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Performance Reporting and Reviewing

The backbone of a performance management system is the performance information system, which includes the collecting, reporting, reviewing, and using of performance information. Collecting and using performance information has been covered in the sections on measuring performance, performance-based budgeting, and performance-based human resources management. This section will focus on performance reporting and reviewing.

In all the four reviewed countries, annual performance reports are required, in which

performance will be reported against performance targets, performance agreements, or performance plans. Central agencies are responsible for reviewing the quality of the performance reporting process to ensure it is accountable and transparent. Performance information is also considered and used in the next planning cycle. As well, special reviews may be taken by independent review groups or committees based on the requirement of the Parliament or the central agencies. New assessing and reporting tools, such as Scorecards and Report Cards, have also been developed and put in use. The United Kingdom

The department and agencies are responsible and accountable to the Parliament and the public through periodic reports. For instance, all the Next Steps Agencies publish annual reports and accounts. In addition, the Cabinet Office publishes the annual Next Steps Reviews, summarizing the performance of all the Executive Agencies and providing comparative data. Similarly, there are annual reports published by the Cabinet Office on the Modernising Government Program. Performance information from these reports will be used in budgeting and planning processes for the future. From the review perspective, it is important to have the ability to review initial changes before too long. In the Next Steps program, for instance, this is done by regularly reviewing agency framework documents. Over time, the focus of these reviews has been more and more on outcomes. As noted in the Modernising Government White Paper, reviews will take into account the views of customers, and look at the scope for improving services through collaboration. The United States of America

The General Accounting Office assists the Congress in its oversight of the executive

branch and encourages effective management and accountability. The Office of Management and Budget helps agencies develop their reports. Great attention has been paid to performance reporting and reviewing, and the performance information has been used in the budgeting process. For instance, GPRA required all the departments and agencies to develop strategic plans and annual reports, which would be assessed by GAO and OMB. To support the President’s Management Agenda, OMB developed scorecards for departments and agencies. The quarterly reviews and annual reports help departments understand their own strengths and weaknesses and make progress.


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Australia

Annual reports, as the key performance reporting documents, are to provide information to enable Parliament to make fully informed judgements on departments and agencies. Since the mid-1990s, annual reports have included performance information that was previously included in budget documents (known as performance statements). Annual reports are also required to focus on outcomes and to reduce the amount of activity-related information. The Department of Finance is responsible for reviewing the budgeting and performance information, while the Australia National Audit Office (ANAO) has overall responsibility for reviewing the reports.. During the early 1990s, the Department of Finance commissioned two independent reviews, Effective Reporting in Program Performance Statements22 in 1993 and Performance Reporting in Commonwealth Annual Reports23 in 1995, both of which identified some problems with performance information.

An important feature of the Australian reviewing system is the role of the

administrative review bodies. The Administrative Tribunal (AAT) and the ombudsman are the two principal federal administrative review bodies24. The review bodies were established to enhance accountability of executive ministers and officials to all of the Australian people for “micro- level” decision-making including policy that affects individual interests. New Zealand

Defining and monitoring purchase and ownership performance requires comprehensive information about the full costs. For this reason, all government entities in the New Zealand Public Sector are required to report financial performance on an accrual accounting basis, using the same generally accepted accounting practices. Each department must provide a full set of financial statements to their ministers and the Treasury on a monthly basis. In addition, departments must also submit an audited annual Statement of Service Performance, outlining the outputs produced versus the outputs agreed. Departments also report publicly against their Department Forecast Report.

The New Zealand Audit Office has overall responsibility of reviewing the

performance of the public sector in both financial and non-financial areas. Ad hoc reviews of specific programs are also undertaken, both in relation to new policy objectives and expenditure pressures. Another important feature of the reviewing activities in New Zealand’s Public Sector is the independent review. For instance, both the Logan Review 1991 and the Spirit of the Reforms 1996 were led by independent review groups. The Logan Review recommended that a standard of good performance for

22 Sue Funnell, Australian Department of Finance, Effective Reporting in Program Performance Statements, Canberra, 1993. 23 DGR Consulting and Australian Department of Finance, Performance Reporting in Commonwealth Annual Reports, Canberra, 1995. 24 Other major review bodies are the Immigration Review Tribunal (IRT), the Refugee Review Tribunal (RRT), the Social Security Appeals Tribunal (SSAT), and the Veteran’s Review Board (VRB).


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a department should be the existence of a program of self- review covering internal audit and financial controls, management review, and evaluation of output effectiveness. 25 These reviews provide government and Parliament with clear performance information for future directions. Building Performance Culture

Building a performance culture includes changing the way government works and changing the way people think. With the progression of their public sector and performance management reforms, all four countries have been building a performance culture. Leaders, managers, employees, and citizens, it is suggested, truly understand and believe in the performance concepts. The emphasis of management is being changed from focusing on inputs to focusing on outputs and outcomes. Expectations are set through performance plans, and results are reported against the targets set. Employees are said to feel comfortable making suggestions for improvement and questioning the policy or practice of government. In summary, a more outcome-focused, citizen centered, and performance-oriented culture is being built in these countries. The United Kingdom

Civil Service Reform does not only refer to the changes in the structure of the government or of policies, but also to changes in the culture and mentality of people. After many years of reform in the UK, the majority of people working in the public sector, it has been suggested, share the view that this has been a radical change and that it has brought significant benefits in terms of efficiency, effectiveness, clear focus on results, greater transparency, and greater accountability to taxpayers. Moreover, the concepts of delegation, wider business/customer involvement, and the introduction of experience from the private sector have all been applied widely across the public sector. All these changes are said to be building a performance culture. The United States Along the road towards greater accountability, the overall goal of the USA public management reforms is to make the government citizen-centered, performance-oriented, results-focused, and market-based. The past reforms also focused on changing the way government works with business and communities, seeking to serve Americans better, transforming access to government through technology, and making the government a better place to work. With the progressing of the reforms, these concepts have taken root in the minds of political leaders, administrators, public sector employees, and citizens, leading to a performance-based culture.

25 OECD, In search of Results: Performance Management Practices, Paris, 1997, p. 83.


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Australia

After more than two decades of public sector reforms, the focus has shifted to an emphasis on outcomes rather than inputs or processes. Significant advances in accountability have been achieved by breaking down central control in finance and employment, establishing resource agreements, developing a performance-based pay system, and improving performance information. According to Warren McCann, the chief executive of the Department of the Premier and Cabinet of South Australia, though there was still room for improvement in the system, there was a firmly established performance culture in the public sector throughout Australia, and the basic notion itself—that the public sector was driven to perform—has become an integral part of everything. 26 New Zealand

According to the State Sector Commission, the New Zealand public services are more accessible and responsive, more sensitive than in the past to the needs of citizens and clients, and much more efficient, compared to its past and compared to many other countries.27 A culture of performance is said to have penetrated the New Zealand public management. Chief executives and managers know and accept that they are judged on the performance of their organisations. Their responsibilities are set up in the purchase and performance agreements. They accept that improving performance must be an ongoing objective, and that it is necessary that productivity gains in the state sector keep pace with developments in the market economy. Public sector employees are also affected via New Zealand’s performance-based human resource management system. Clear direction is provided through the Public Service Code of Conduct. Summary

Lessons can be learned and leading practices identified from the efforts of these reviewed countries. Among them:

• Improving the performance of government needs strong legislative and leadership commitment, which will ensure the continuity of the public sector reform and the development of a performance culture.

• Reducing public expenditure can be realized through downsizing and reorganizing, for example, by splitting big departments into small functional departments or by reorganizing departments based on their functions, rather than reducing the quantity or quality of public service.

26 Warren McCann, “Institution of Public Administration Australia: Some Observations About the Profession of Public Service”, Australian Journal of Public Administration, Vol. 60, No. 2, June 2001, p. 111. 27 NZ State Sector Commission, The Spirit of the Reform: Managing the New Zealand State Sector in a Time of Change, [http://www.ssc.govt.nz/spirit-of-reform], 1996.


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• Improving responsibility and accountability requires that detailed performance targets with appropriate flexibilities be signed by departments and employees through performance-based budgeting and performance-based human resource management at different levels, and that employees, agencies, and departments report their performance against the assigned targets on a regular basis.

• Improving government efficiency and effectiveness requires performance information systems, which include the collecting, reporting, reviewing, and using of performance information.

• Improving government transparency requires more communication and consultation with citizens, stakeholders, interest groups, and the private sector, better partnerships with the private sector, and stronger coordination at different levels of government.

As suggested in The New Public Organization, public sector organizations should be citizen-centred, people-centred, change-oriented, and results-orientated. (Figure 1.) Given these efforts by many governments, one can expect continued international development toward this goal.


21

Figure 1. New Public Sector Management – Progress of an Organization Over Time 28 Traditional Results-based Organization Organization 1995 2005 Organization-centred Citizen-centred

Position Power Leadership

Rule-centered People-centred

Independent action Collaboration

Status-quo-oriented Change-oriented

Process-oriented Results-oriented

Centralization Decentralization

Departmental Form Non-departmental Form

Budget-driven Revenue-driven

Monopolistic Competitive

28 Source from Kenneth Kernaghan, Brian Marson, and Borins Sandford, The New Public Organization, IPAC, 2000.


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Reference:

Beetham, D., The Legitimation of Power, London: McMillan, 1991.

British Council, The Evolution of the UK civil Service 1848-1997, [www.britishcouncil.org/governance/manag/civil/index.htm], July 1997.

DGR Consulting and Australian Department of Finance, Performance Reporting in Commonwealth Annual Reports, Canberra, 1995.

Funnell, Sue, Australian Department of Finance, Effective Reporting in Program Performance Statements, Canberra, 1993.

Kernaghan, Kenneth, Brian Marson, and Borins Sandford, The New Public Organization, IPAC, 2000.

Knox, Colin, Review of Public Administration Briefing Paper: Public Service Reform, [http://www.rpani.gov.uk/reform.pdf], Northern Ireland, University of Ulster, 2002.

McCann, Warren, “Institution of Public Administration Australia: Some Observations About the Profession of Public Service”, Australian Journal of Public Administration, Vol. 60, No. 2, June 2001.

NZ State Sector Commission, The Spirit of the Reform: Managing the New Zealand State Sector in a Time of Change, [http://www.ssc.govt.nz/spirit-of-reform], 1996.

NZ State Sector Commission, The Spirit of the Reform: Managing the New Zealand State Sector in a Time of Change, [http://www.ssc.govt.nz/spirit-of-reform], 1996.

NZ State Sector Commission, Public Service Code of Conduct, [http://www.ssc.govt.nz/coc], 2001.

NZ State Sector Commission, Current Problems in Public Management, [http://www.ssc.govt.nz/current-problems-public-management], 2003.

O’Donnell, Michael, “Creating a Performance Culture? Performance-based Pay in the Australia Public Service”, Australian Journal of Public Administration, Vol. 57, No. 2, June 1998.

OECD, Governance in Transition: Public Management Reforms in OECD Countries, Paris: OECD, 1995.

OECD, In Search of Results: Performance Management Practices, Paris, 1997.


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Pollitt, Christopher and Geert Bouckaert, Public Management Reform: A Comprehensive Analysis, Oxford University Press, 2000.

Scott, Graham, Managing Government for Better Performance and Results, [http://unpan1.un.org/intradoc/groups/public/documents/un/unpan001961.pdf], Workshop on Financial Management and Accountability, United Nations Department of Economics and Social Affairs and the Government of Italy, 2001.

Smelt, Simon, Operational Efficiency in the New Zealand Public Sector, [http://firms.findlaw.com/smelt/memo6.htm], World Bank, 1997.

UK Audit Commission, Aiming to Improve: the Principles of Performance Measurement, http://www.audit-commission.gov.uk/Products/AC-REPORT/72370C4D-1030-4b87-88F4-CD2A14B2A1AE/mppperfm.pdf, London, 2000.

UK Cabinet Office, Public Sector Excellence Programme, [http://www.cabinet-office.gov.uk/eeg/1999/benchmarking.htm], London.

UK HM Treasury, Cross-Cutting Reviews, [http://www.hm-treasury.gov.uk/spending_review/spend_ccr/spend_ccr_index.cfm], London, 2000.

UK National Audit Office, Measuring the Performance of Government Departments, [http://www.nao.gov.uk/publications/nao_reports/00-01/0001301.pdf], London, 2001.

Notes on Public Sector Reform and

Performance Management Australia

Notes On Public Sector Reform and Performance Management—Australia

0

Table of Contents

Australia

1. Background 2. Timeline of Main Initiatives in Federal Government 3. Main Initiatives in Federal Government

3.1. General Reforms 3.1.1. The Reid Review 3.1.2. 1983 White Paper: Reforming the Australian Public Service 3.1.3. Public Service Reform Act 1984 3.1.4. The Public Service Act Review Group 3.1.5. Program and Policy Reviews 3.1.6. Public Service Act 1999 3.1.7. Government’s Public Service Agenda

3.2. Budget, Financial Management, and Related Reforms 3.2.1. 1984 White Paper: Budget Reform 3.2.2. Financial Management Improvement Program 3.2.3. Program Management and Budgeting 3.2.4. A New Legislative Framework for Financial Management and

Accountability 3.3. Improve Staff Performance

3.3.1. Merit Protection Act 1984 3.3.2. Middle Management Development Initiative 3.3.3. Performance-based Pay System 3.3.4. Senior Executive Leadership Capability Framework

4. Initiatives in the states 4.1. New South Wales 4.2. Queensland 4.3. Western Australia

5. Key Elements 5.1. Legislative Commitment 5.2. Leadership 5.3. Setting Objectives and Measuring Performance 5.4. Performance-Based Budgeting 5.5. Performance-Based Human Resource Management 5.6. Performance Reporting and Reviewing 5.7. Building Performance Culture

6. Reference


1

Australia1 1. Background

In the post-war period, Australia experienced an economic boom, and became one of the countries with the highest living standards. Australians thought of themselves as the “lucky country”. 2 But from the mid-1970s on, the public sector relied significantly on deficit spending. By the 1980s, Australia’s economy was less able to withstand the pressure from a more competitive global economy. The need to restructure the economy and to correct the country’s fiscal imbalance exposed the public sector to greater budget pressures. The public sector was required to be more efficient and to reduce government expenditure. By 1983-1984 the federal government deficit amounted to 4.27 percent of the gross domestic product (GDP)3, and efforts to reduce spending intensified.

By the early 1980s, it was clear that Australia’s traditional administration was not

adapting sufficiently to deal with the changing situation. The innovation in the 1970s, which introduced new administrative laws4, did not offer solutions to broader problems. The Report of the Royal Commission on Government Administration, the last old style comprehensive review, 5 was not implemented, in part because the government changed. The failure of the 1970s experiences and processes indicated the need for a new and more effective reform package.

Even though there was no evidence of popular opinion demanding a specific

program of public sector reforms, it was clear that the public was unwilling to continue putting up with poor service or bureaucratic obstructions. The failure of management in specific agencies was exposed through public inquiries. The weakness in the public service was seen to be a product of the system, which put too much emphasis on inputs and due process.6 The generic managerialism ideas, such as Total Quality Management, benchmarking, re-engineering, and so on, also emerged among public administrators.

Reforms were also driven by the Labor party’s concern with political control. By the

time the Labor party came into power in 1983, there was a growing consensus that the public service elite had become too much of a “law unto themselves”, and there was an

1 Quite limited information was found on public sector reforms and performance management in Australia through Internet-based research and in consultation with academic scholars. Limited by time and resources, this section may lack detailed information. 2 Office of the Auditor General of Canada, Reform in the Australian Public Service 1983-1996 , [http://www.oag-bvg.gc.ca/domino/other.nsf/html/aus.html], Ottawa: OAG, 1996. 3 Ibid. 4 The Administrative Laws that were introduced during the 1970s included Administrative Appeals Tribunal Act 1975 (Cwlth) (hereafter 'AAT Act'), Ombudsman Act 1976 (Cwlth), and the Administrative Decisions (Judicial Review) Act 1977 (Cwlth) (hereafter 'ADJR Act'). 5 John Halligan, The Australia Civil Service, [http://www.indiana.edu/~csrc/hallig3.html ], Bloomington: Indiana University, 1997. Part 3: Representativeness. 6 Ibid.


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appetite for reassertion of political direction. 7 With this general sense in mind and with the introduction of managerialism ideas, a new stage of public service reforms emerged in the 1980s.

7Christopher Pollitt and Geert Bouckaert, Public Management Reform: A Comparative Analysis, Oxford: Oxford University Press, 2000, p. 201.


Timeline of Main Initiatives in Australia

1983 1994 1984 1987 1996

The Reid Review

1983 White Paper

Financial Management Improvement Program

Program Management & Budgeting

Merit Protection Act

Public Service Act Review Group

1997 1999

McLeod Report

Government Public Service Agenda

Auditor-General Act

Commonwealth Authorities & Companies Act

Financial Management & Accountability Act

Public Service Act

Public Service Reform Act

1984 White Paper: Budget Reform

1992

Performance-based Pay Agreements


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2 Main Initiatives in the Federal Government8 2.1 General Reforms 2.1.1 The Reid Review

Facing pressure from inside and outside Australia, Prime Minister Fraser initiated a

Review of Commonwealth Administration, (also known by its Chairman as the Reid Review). In its early 1983 report, the Reid Review recommended that changes be designed to increase public sector efficiency, devolve responsibility, make public servants more accountable for their actions, free up recruitment procedures for senior managers and increase ministerial control over departments. The Reid Review was seen as the first major reform initiative in the Australian public sector reforms. 2.1.2 1983 White Paper: Reforming the Australian Public Service

In 1983, the newly elected Hawke Labor government also put its efforts into

reforming the public sector, issuing a White Paper entitled Reforming the Australian Public Service9. The 1983 White Paper focused on practices related to the appointment, removal, and other terms and conditions of employment of departmental secretaries, and similar practices pertaining to other public service executives. As expressed in the White Paper, the Labor government's objectives were to develop a public service that:

• was more responsive and accountable to ministers and Parliament; • was more efficient and effective; • gave all citizens an opportunity to compete on merit to join and advance within it,

and provided greater opportunity for disadvantaged groups; and • had a more streamlined and independent system for protecting the rights of staff.

2.1.3 Public Service Reform Act 1984

In June 1984, many of the measures outlined in the 1983 White Paper were legislated through the Public Service Reform Act, 198410. They have been termed "the most wide-ranging reforms of the Australian public service since its creation at the time of federation". 11 The principal elements can be summarized as follows:

8 The framework of this section is based on the OAG study Reform in the Australian Public Service 1983-1996 at http://www.oag-bvg.gc.ca/domino/other.nsf/html/aus.html. 9 R.J.L. Hawke, Reforming the Australian Public Service: A Statement of the Government's Intentions, AGPS, Canberra, 1983. 10 Australian Attorney-General’s Department, Public Service Reform Act 1984, Act No. 63 [http://scaleplus.law.gov.au/cgi-bin/downloadtxt.pl?text&/scale/data/comact/5/2539], Canberra, 1984. 11 P. Wilenski, “Administrative Reform-General Principles and the Australian Experience”, Public Administration, Autumn 1986, p. 271-273.


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• Legislative and administrative arrangements were to be adopted, such as the political appointment of ministerial advisors, to reinforce the control of ministers over departmental administration;

• More flexible procedures for the appointment, removal of departmental secretaries, and clarification of their relationship with ministers were to be introduced;

• A Senior Executive Service was to be established, with appointments through competitions open to the public as well as public servants, and public advertisement of vacancies;

• Amendments to the "objects", or purposes, were to be set out to include responsibility for equitable as well as efficient administration;

• A statutory requirement was to be made that departments develop, maintain and implement equal employment opportunity programs;

• Statutory requirements for industrial democracy were to be introduced - the development and implementation of action plans in each department and agency regarding organization of work, financial and human resource planning, occupational safety and health, and introduction of new technology;

• Measures were to be established to strengthen the merit principle, including establishment of the Merit Protection and Review Agency to handle grievances and appeals formerly heard by the Public Service Board; and

• Permanent part-time employment, with benefits, and upgrading of management improvement activities were to be introduced.

2.1.4 The Public Service Act Review Group In response to the recommendation of the Joint Committee of Public Accounts that

the legislation governing the public service be updated, the Labor government established the Public Service Act Review Group.

The Review Group's report, issued in December 1994 and known as the McLeod

Report 12, was largely endorsed by the Labor government in August 1995. Among the significant recommendations accepted was one to remove from the Act the concept of "office", the consequence of which would be to encourage "a wider use of promotion to level arrangements... promotion would be to a classification (rather than to a specific position)"13. In a November 1995 report, the House of Representatives indicated that this recommendation would be implemented under the new Public Sector Act.

It was the intention of the Labor government that the introduction of a new Act

would follow consultation with the public service unions, but this did not occur before the March 1996 election. The change in government at that time caused further delay through reconsideration of the review.

12 Australian Public Service Commission, The McLeod report, [http://www.apsc.gov.au/publications96/apsactreview.htm], Canberra, 1996. 13 Ibid.


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2.1.5 Program and Policy Reviews

Among more recent initiatives was a series of major program and policy reviews initiated in the 1993-94 Budget. Department of Finance documents portray these reviews as complementary to the Labor government's program evaluation strategy. The context of the reviews was the government's target of reducing the deficit to around one percent of GDP by 1996-97.

Reviews took account of expenditure trends across all portfolios, together with

ministers' own reviews of their portfolio priorities. Most reviews were conducted by interdepartmental committees, including the line portfolio(s) and one or more of the central co-ordinating departments: Finance, Prime Minister and Cabinet, and Treasury.

Reviews focused on areas of rapid expenditure growth, and other areas where, for a

variety of reasons, there was scope for program improvements. Many reviews emphasized value for money and "finding ways of doing things better for the same or reduced cost"14. Approaches to efficiency improvement included benchmarking, commercialization and cost recovery. Many reviews entailed the collection of new evaluation information; others involved the synthesis of a range of available evaluation and review findings.

The 1993/94 cycle of reviews, which comprised 48 individual reviews, related to

aspects of programs that collectively covered over 50 percent of federal government expenditures.15 About half of these reviews were completed by the time of the 1994-95 Budget, when several additional reviews were launched. 2.1.6 Public Service Act 1999

The Public Service Act 199916 was passed to replace the old legislative framework

for the establishment and management of the Australian Public Service (APS). The Act intended to provide a legal framework for APS employment that achieved a balance between improved accountability and devolved responsibility so as to maximize the efficiency and effectiveness of the APS. The framework was to encourage managers to transform the present APS management culture by seeking maximum value for money rather than minimum risk-taking. This Act was also intended to improve the quality of people management in the APS, which, in turn, was expected to translate, among other things, into:

• more efficient, effective and ethical use of the Commonwealth’s resources; • responsiveness to Government in providing timely advice and implementing the

Government’s policies and programs; and • fair, effective, impartial and courteous services for all Australians.

14 Office of Auditor General Canada, Reform in the Australian Public Service 1983-1996 , [http://www.oag-bvg.gc.ca/domino/other.nsf/html/aus.html], Ottawa: OAG, 1996. 15 Ibid. 16 Australian Attorney-General’s Department, Public Service Act 1999 , Act No. 147, [http://scaleplus.law.gov.au/cgi-bin/download.pl?/scale/data/comact/10/6059], Canberra, 1999.


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2.1.7 Government’s Public Service Reform Agenda

The Public Service Act 1999 was actually an element in the Government’s Public

Service Reform Agenda17 in 1996, which had three parts: • modernising the APS legislative framework- this was to keep a careful balance

between devolved responsibility and improved accountability; • simplifying APS awards and agreement-making processes; and • transforming the APS management culture, which would be the responsibility of

Agency Heads.

The agenda set out the directions for change. It indicated the legislative, industrial and administrative flexibility that the Government intended to provide to APS managers. The employment framework was to be transformed, providing the APS leadership with the freedoms that were necessary to pursue more innovative ways of seeking high performance.

The Agenda also identified a range of initiatives that might serve to improve public

accountability for performance, increase competitiveness and enhance leadership. These initiatives included Government Service Charters, public performance agreements for Agency Heads and the SES, the replacement of out-of-date hierarchical controls with more contemporary team-based arrangements, greater devolved responsibility to the agency level, giving agencies flexibility to decide on their own systems for rewarding high performance, and streamlined administrative procedures. A strategic approach to the systematic management of risk was to be encouraged. Enhanced public accountability was to ensure that taxpayers' funds would not be used fraudulently or wastefully.

One other significant example of the Government’s effort on public sector reform

was Centrelink18, the “one stop shop” providing an integrated range of services to customers. Centrelink was established with an emphasis on customer service. Counters and barriers were removed to provide an environment that was more alive to customers’ needs.19 Centrelink also developed a “balanced scorecard”, which measured the agencies’ success against the expectations of the customers, client departments, the community, agency staff, and the government. Performance at all levels of the organization was to be measured by local, area, and national targets, and performance improvement targets were to be negotiated with stakeholders—government and community—and staff. Government Report Cards were also used to inform Australians about key areas of public services, a key element of the current government.20

17 Peter Reith, Towards a Best Practice Australian Public Service, [http://www.apsc.gov.au/publications96/apsreformdiscussionpaper.htm], Canberra, 1996. 18 More information on Centrelink is available at the homepage http://www.centrelink.gov.au/internet/internet.nsf/home/index.htm. 19 David Kemp, “Public Administration in the New Democratic State”, Australian Journal of Public Administration, Vol. 57, No. 2, June 1998. 20 Prime Minister of Australia Website, Government Report Card , [http://www.pm.gov.au/gov_report/index.htm], 2003.


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Overall, the objective of the Australian Public Service is to improve the performance

of the APS and, by so doing, provide public servants with a rewarding, quality-working environment in which they can pursue their careers. As the Australian Public Service Commissioner, Andrew Podger, stated,

“The modern public sector environment will continue to give rise to challenges in meeting the high standards of performance and accountability expected of the public service. We will continue to face the challenges of seeking to strike the right balance between the devolved management and strengthened accountability that underpin the frameworks now operating in the APS.”21

2.2 Budget, Financial Management, and Related Reforms

The theme of budgetary and financial management reforms represents the centrepiece of Australia's reform program. These reforms have been undertaken in a context shaped by two key factors: an effort to cut government spending in the face of a burgeoning deficit and a perceived need to modernize budgeting, financial management and related practices in order to improve decision-making and government effectiveness.

2.2.1 1984 White Paper: Budget Reform

Issued in April 1984, Budget Reform dealt with reforms already established or being implemented, as well as those being proposed. Its three major themes were: focussing and streamlining budget decision-making by government; improving the information base and processes for parliamentary and public scrutiny of government performance; and upgrading the financial management of programs. The government's stated objectives were to:

• develop better means of identifying and setting government priorities; • focus attention on the goals and objectives of programs, in relation to the

resources they use; • develop and apply specific techniques aimed at improved performance and more

efficient resource use (for example, devolution of financial management responsibilities and the introduction of a new system of program budgeting); and

• set up machinery to ensure that the effectiveness and efficiency of programs were reviewed regularly, and that such reviews were used in setting budget priorities.

Both the expenditure reductions and the financial and budgetary reforms were facilitated by a revamped Cabinet committee system. In particular, the Expenditure Review Committee of Cabinet, established in 1983 and chaired by the Prime Minister,

21 Andrew Podger, The Emerging Framework of Australian Government Administration: Efficient, Agile and Accountable, http://www.apsc.gov.au/media/podger110902.htm, Australian Public Service Commission, 2002.


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assumed a pivotal role in resource allocation, becoming the "single most important mechanism for co-ordinating and implementing the government's policy agenda". 22

One of the themes of the White Paper Budget Reform was the need for improvement in the information base and processes for parliamentary and public scrutiny. A set of documents known as Portfolio Budget Measures Statements, containing an overview of each portfolio's objectives, program structure and resources along with a discussion of budget measures, was issued with the budget. Agency annual reports, redesigned to focus on essential information for Parliament to "make a fully informed judgement as to the effectiveness of the agency in meeting its program objectives"23 were issued several months after the statements. These budget statements and annual reports have become the main accountability vehicles by which Ministers reported to Parliament and the public on the effectiveness of the programs for which they are individually responsible.

2.2.2 Financial Management Improvement Program

The Financial Management Improvement Program (FMIP)24 was initiated by central agencies shortly aft er the 1983 election of the Labor government. It was an umbrella under which many of the resource management initiatives were developed and promoted. What is most important to note was the belief that there was substantial scope for improvement in the management of public sector resources and the delivery of government programs. The reforms were built upon each other and were seen as an integrated whole.

Those responsible for FMIP started with a diagnostic study, which examined the

extent of financial management problems and led to a strategy for the implementation of new systems. These systems were based on the need for long-term, service-wide improvements aimed at creating a public service culture focussed on "managing for results". An important theme of FMIP was that financial management systems should be driven by clearly stated, publicly disclosed objectives, defined at the level of programs. This was seen as requiring fundamental changes such as relating program costs to evaluated outputs and outcomes, as opposed to a simple recording and control of inputs. FMIP also aimed to remove unnecessary constraints and to "let the managers manage."

Three fundamental strategies have underlined the FMIP: • adapting budget and regulatory processes to reduce the need for central controls

and to encourage efficiency through effective departmental management practices; • introducing techniques and systems to focus departmental and agency managers

on results; and • changing administrative procedures and practices to motivate better management

and raise awareness of resource costs. 22 Cited in Reform in the Australian Public Service 1983-1996 , http://www.oag-bvg.gc.ca/domino/other.nsf/html/aus.html], Ottawa: OAG, 1996. 23 Ibid. 24 Australian Public Service Board and Department of Finance, Financial Management Improvement Program-Diagnostic Study, Canberra, 1984.


11

The FMIP became the subject of several reviews and served to guide other reform efforts.

2.2.3 Program Management and Budgeting

Program Budgeting, which became Program Management and Budgeting (PMB) after 1987, was intended not only to contribute to improved parliamentary and public scrutiny, but to make staff feel responsible for the results of the programs they were administering. 25

The key elements of this information framework were the establishment of program

structures in agencies, clearer statements of agency and program objectives (strategic and outcome-oriented), and the determination of appropriate performance indicators.

Under PMB, expenditures were classified on the basis of a hierarchy of programs,

subprograms and activities, each related to purposes and objectives (as opposed to the line- item budgeting system previously in use). Management reporting systems to monitor and report on program achievement were based on this program structure. As well, the program format enhanced the alignment of the annual parliamentary appropriations with program management. Under PMB, performance information was seen as essential.

Accountability was also enhanced through the disclosure of performance objectives

before the fact in spending estimates, along with after-the-fact disclosure of results in departmental annual reports.

2.2.4 A New Legislative Framework for Financial Management and Accountability

In 1994, the Labor government brought forward three legislative proposals bearing on the financial management and control framework for the public sector, to replace the Audit Act (1901). These were: the Financial Management and Accountability Bill; the Commonwealth Authorities and Companies Bill; and the Auditor-General Bill. These bills were finally passed in 1997, providing a new legislative framework for financial management and accountability.

The intent behind the Financial Management and Accountability Act (FMA)26 was to

modernize the legislative base for financial administration. It did not result in major changes in existing financial management practices, but rather brought the underlying legislation up to date to reflect the reforms instituted to that time.

The FMA incorporated the Audit Act's financial control principles, simplifying and

clarifying them where possible, and applying them "in ways that support...reforms in public sector financial management." Improved accountability within government was expected. The FMA required chief executives to manage resources in an efficient, 25 Office of Auditor General Canada, Reform in the Australian Public Service 1983-1996 , [http://www.oag-bvg.gc.ca/domino/other.nsf/html/aus.html], Ottawa: OAG, 1996. 26 Attorney-General Australia, Financial Management and Accountability Act 1997, Act No. 154, [http://scaleplus.law.gov.au/html/pasteact/2/3068/pdf/FinManAcc97.pdf], Canberra, 1997.


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effective and ethical manner, prepare fraud control plans, and establish high- level audit committees within their agencies. Better external accountability (from government to Parliament) was expected to flow from the restructuring of fund accounting arrangements by creating two purpose-related funds: a commercial activities fund and a reserved fund.

The Commonwealth Authorities and Companies Act27 aimed to implement a standard

framework for reporting, auditing and ethical requirements for directors of federal government statutory authorities and Government Business Enterprises. It would have supplemented obligations in corporate law respecting the accountability of those directors to ministers and Parliament.

The Auditor-General Act28 was intended to enhance the Auditor-General's

effectiveness, scope and independence from government. The Act defined the powers and functions of the Audit Office to support its functional independence from government through parliamentary involvement in the appointment of the Auditor-General, by giving the Auditor General the right to report to Parliament on any matter, and by clarifying and strengthening his mandate.

2.3 Improving Staff Performance 2.3.1 Merit Protection Act 1984

A main focus of human resource management reforms during this period was to improve staff performance, based on the recognition that getting the most out of people was crucial to improving public sector performance. In 1984, the Merit Protection (Australian Government Employees) Act 198429 was passed, and the Merit Protection Review Agency was created. The Agent was to ensure that relations between an authority and its employees was established and ensure that actions taken and decisions made were fair and equitable.

2.3.2 Middle Management Development Initiative

Another important example was the Middle Management Development Initiative announced in 1989 and begun in July 1990, which linked productivity, remuneration, and increased training. The initiative focused on those managers with substantial people management responsibilities and thus, to a significant extent, on regional offices. Departments were required to establish plans for middle management development as a

27 Australian Attorney-General’s Department, Commonwealth Authorities and Companies Act, Act No. 153, [http://scaleplus.law.gov.au/cgi-bin/download.pl?/scale/data/comact/9/5719], Canberra, 1997. 28 Australian Attorney-General’s Department, Auditor-General Act, Act No. 151, [http://scaleplus.law.gov.au/cgi-bin/download.pl?/scale/data/comact/9/5717], Canberra, 1997. 29 Australian Attorney-General’s Department, Merit Protection (Australian Government Employees) Act 1984, Act No. 65, [http://scaleplus.law.gov.au/cgi-bin/downloadtxt.pl?text&/scale/data/comact/5/2541], Canberra, 1984.


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precondition for funding. An important element of the program was the development of a management course to provide training in people management and other aspects of the changing responsibilities of managers.

It was recognized that strategic management of people and their performance

required the development of a contemporary conceptual framework to identify the fundamental links between the various elements that comprised human resource management. The Public Service Commission30 developed and published such a framework in July 1992 (updated in 1995).31 Without being prescriptive, it put forward its framework to assist managers and reiterate the importance of integrating human resource management into normal management decision-making. The framework described in some detail key sectors of human resource management, including human resource planning, staffing practices, working conditions, performance management, human resource development, and staff relations.

The Task Force on Management Improvement Evaluation 1993 provided a

perspective on these initiatives. Human resource management was viewed by the staff as the reform area that had the greatest positive impact on the quality of their work, and was the one that also should be given the greatest priority. 32 2.3.3 Performance-based Pay System

The rationale behind the performance-based pay schemes was that individual public servants would be motivated to work harder where their pay was linked to performance.33 Negotiations regarding this issued had been ongoing ever since the 1980s. A performance-based pay system was eventually included in the APS service-wide bargaining agreement between the federal Labour Government and public trade unions in December 1992 (referred to as Improving Productivity, Jobs and Pay in the Australian Public Service 1992-1994). The performance-based pay system in APS was underpinned by performance appraisals, which aimed to link individual performance to corporate goals, improve communication between senior officers and their superiors, and identify the senior officers’ training needs. The process by which senior officers was appraised were also intended to improve the level of feedback provided to them regarding their performance.

2.3.4 Senior Executive Leadership Capability Framework

30 More information about Australian Public Service Commission is available at the Commission’s homepage http://www.apsc.gov.au/index.html . 31 Australian Public Service Commission, A Human Resource Framework for the Australian Public Service, [http://www.apsc.gov.au/publications96/hrmframework6.htm], Canberra, 1996. 32 Office of Auditor General Canada, Reform in the Australian Public Service 1983-1996 , [http://www.oag-bvg.gc.ca/domino/other.nsf/html/aus.html], Ottawa: OA G, 1996. 33 Michael O’Donnell, “Creating a Performance Culture? Performance-based Pay in the Australia Public Service”, Australian Journal of Public Administration, Vol. 57, No. 2, June 1998, pp.28-39.


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In 1999 a Senior Executive Leadership Capability Framework34 was established and became the core criteria for Senior Executive Service (SES) selections from September 1999 on. The priorities include: shaping strategic thinking, achieving results, cultivating productive working relationships, exemplifying personal drive and integrity, and communicating with influence. The framework provided the basis for the design of a Career Development Assessment Centre, which was piloted in December 1999. Since then, a total of 16 Centres have been run. The Centres focus on the identification of specific developmental needs of high potential executive level staff, and incorporate suggestions for addressing those needs with development plans. 3 Initiatives in the States

3.1 New South Wales

Major reforms of the NSW public sector commenced in the 1980s and were built on five core principles35:

• Setting clear and consistent objectives and standards; • Giving managers increased operational responsibility and autonomy; • Holding agencies to account by objective performance evaluation; • Giving managers and their agencies the incentive to perform better; and • Removing privileges or handicaps to put government agencies on a comparable

footing to their private sector counterparts. In 1984, the New South Wales Government introduced the Annual Reports

(Statutory Bodies) Act36, and in 1985 the Annual Reports (Departments) Act37. The Head of a department or statutory body was requested to prepare a report of the department within 4 months of the financial year end. The report was to include the financial statements, the opinion of the auditor, and the response of the department or the statutory body to the opinion. The introduction of these two Acts made annual agency performance reporting mandatory.

In fiscal year 1985/86, Program Budgeting was introduced by the NSW Treasury to augment the previous emphasis on inputs by reporting key outputs and outcomes in NSW Budget Papers. The NSW Treasury also introduced an annual report on the Performance of NSW Government Businesses in the late 1980s.38 Accrual-based reporting of

34 Public Service Management and Protection Commission, Senior Executive Leadership Capability Framework , http://www.psmpc.gov.au/media/ministerspeech19may.htm19 May 1999. 35John Pierce, Efficiency Progress in the New South Wales Government, [http://www.treasury.nsw.gov.au/pubs/trp97_8/eff_prog.htm#five_two_budget], NSW Treasury, 1997. 36 NSW Parliamentary Counsel’s Office, Annual Reports (Statutory Bodies) Act 1984 No 87 , [http://www.legislation.nsw.gov.au/maintop/scanact/inforce/NONE/0 ], Parliamentary Counsel’s Office, 1984. 37 NSW Parliamentary Counsel’s Office, Annual Reports (Departments) Act 1984 No 156, [http://www.legislation.nsw.gov.au/maintop/scanact/inforce/NONE/0], Parliamentary Counsel’s Office, 1985. 38 NSW Council on the Cost and Quality of Government, Overview of NSW Government Services 1995-2000, [http://www.ccqg.nsw.gov.au/performance_reports/], NSW, 2000.


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government expenditure and revenue was introduced in the fiscal year of 1990/91 to reflect real time use of government resources more accurately.

In 1995, NSW Parliament established the Public Bodies Review Committee (PBRC)39.

The Committee examined annual reports of all public bodies including the adequacy and accuracy of all financial and operational information, and on any matters arising from the annual report concerning the efficient and effective achievement of the agency's objectives.

Following an agreement between heads of government in 1993, major NSW

Government agencies in the policy areas of Health, Education, Law, Order and Public Safety, Social and Community Services, and Housing have collaborated with other states and territories to develop and publish nationally standardised indicators of effectiveness and efficiency in key service areas. These indicators were published annually in the Report on Government Services produced for the Counc il of Australian Governments by the Steering Committee for Commonwealth/State Service Provision. The reports included many of the interstate comparisons used in the Report on Government Services.

As part of a financial management framework for the general government sector, the

Service and Resource Allocation Agreements (SRAAs)40, introduced by the NSW Treasury, was launched in 2000. Service and Resource Allocation Agreements were "outcomes-focused" funding and performance agreements, developed on an agency-by-agency basis and signed by the agency's CEO and Secretary of Treasury, and by the relevant Minister and the Treasurer. The SRAAs set out output and outcome targets for achieving value for money for individual general government sector agencies, and would result in improved performance reporting in Budget Papers and annual reports. 3.2 Queensland

No significant reform initiative was conducted in the Queensland public service until

the Savage Committee Report in 198741, which produced 90 reform recommendations including the devolution of departmental responsibility away from central control.

More dramatic reforms of the public sector occurred with the election of the Goss Labor Government in 1989. The original 27 departments were reduced to 18. A Public Sector Management Commission (PSMC) was established in 1990 as a reforming agency under the Public Sector Management Commission Act 199042. The Commission conducted wide-ranging departmental reviews, established a Senior Executive Service, 39 NSW Parliament, Public Bodies Review Committee, [http://www.parliament.nsw.gov.au/prod/parlment/Committee.nsf/fa9f673838aee9b04a2567e600294777/c6d70cbc7e8a13334a2564ca00182fcf!OpenDocument ]. 40 NSW Treasury, Service and Resource Allocation Agreement, [http://www.treasury.nsw.gov.au/indexes/pubs_by_pol.htm], NSW, 20000. 41 Queensland Parliament, Fact File—Queensland Public Sector, [http://www.parliament.qld.gov.au/Education/ForSchools/pdf%20files/Others%202002/Queensalnd's%20Public%20Sector.pdf ], Queensland, 2003. 42 Queensland Parliament, Public Sector Management Commission Act 1990, [http://www.legislation.qld.gov.au/s97is.vts], Queensland, 1990


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created a number of public sector standards, introduced equal employment opportunity policies and placed a greater emphasis on training within the public sector. As well, an Office of Cabinet was created, as part of the Premier's Department, to assist in the coordination of policies and programs emanating from all government departments and agencies.

Queensland once lagged well behind other Australian jurisdictions in administrative

law reform. However, in the mid-1990s, the situation changed. In 1994, the Public Sector Ethics Act43 was passed, with the aim of establishing a more ethical public service.44 The Act stated explicitly a set of professional expectations or values to be socialized in the public sector: respect for the law and the system of government; for integrity and diligence; and for economy and efficiency. One perspective of the ethic reform was to improve public sector performance toward efficiency and effectiveness.

In 1996, the Public Service Act45 was passed, replacing Public Sector Management

Commission with an Office of the Public Service (OPS) 46. A key objective of the Act was to establish the public service as “an apolitical entity responsive to Government need”. Services were to be provided in “a professional and non-partisan way”. The Act also set out the principles of public service management and employment. Management was to be directed to the provision of “effective and efficient services to the community and Government”, implementing government policies, maintaining impartiality in advising Government, managing resources in a fully accountable manner, and ensuring the ongoing development of public service employees. The Act also placed considerable importance on the role of the Premier in the management of the Queensland Public Service.47 OPS was given responsibility for employment, training, the Senior Executive Service, and policy advice on matters pertinent to the Queensland public service.

The Financial Sector Reform Acts 48, passed in 1999, amended the existing financial

management acts and regulations with the aim of improving financial management in Queensland.

The Queensland Government also adopted the Managing for Outcomes Model

(MFO)49. The aim was to ensure that the social, economic and environmental outcomes

43 Queensland Parliament, Public Sector Ethics Act 1994, [http://www.legislation.qld.gov.au/s97is.vts], Queensland, 1994. 44 Noel Preston, Public Sector Ethics in Queensland Since Fitzgerald, [http://www.archivists.org.au/events/conf99/preston.htm], Australia Society of Archivists, 1999. 45 Queensland Parliament, Public Service Act 1996, [http://www.legislation.qld.gov.au/s97is.vts], Queensland, 1996. 46 More information about Office of Public Service of Queensland is available at http://www.opsme.qld.gov.au/about/legfunc.htm. 47 Max Spry, Public Sector Reform in Queensland: the Public Service Act 1996, [http://www.aph.gov.au/library/pus/rn/1996-97/97rn39.htm], Parliament of Australia, 1997. 48 Queensland Parliament, Financial Sector Reform Act 1999, [http://www.legislation.qld.gov.au/LEGISLTN/CURRENT/F/FinSecRefQA99_001.pdf], Queensland, 1999. 49 Queensland Treasury, Managing for Outcomes, [http://www.treasury.qld.gov.au/subsites/fmb/tier2/mfo.htm], Queensland.


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for Queensland communities were optimised through the efficient and effective management of available government resources, strategic alliances with industry and engagement with communities. The framework emphasised the importance of a focussed effort across the public sector towards achieving the Government's priorities, ensuring resources were being directed to areas of greatest need and benefit.

MFO applied to all agencies within the General Government sector including

departments and statutory bodies funded from the Budget. Agencies were required to budget, monitor and report to Government on a regular basis on the efficiency and effectiveness of services delivered. The Chief Executives MFO Advisory Committee was established to facilitate an inclusive whole-of-Government approach to developments and promote agency ownership of the process. The Committee was supported by a Reference Group comprising senior Departmental representatives. Strategic Planners and the Directors of Finance groups were also closely involved.

The Queensland local government also developed a new framework for internal and

external reporting, following the commissioning of a report by the Local Government Association of Queensland (LGAO).50 The Report, Best Practice Simplified Internal and External Reporting for Local Governments in Queensland, focused on improving the quality of internal management reports to councilors and senior management and on making external financial statements easier to understand.

3.3 Western Australia

As required by the Financial Administration and Audit Act 1985, Annual Reports

were produced by most agencies and departments in Western Australia. The Annual reports were to include detailed information about how funds were managed and spent, and about the general efficiency and effectiveness of agency operations, as reflected in the performance indicators, during the financial year. These reports were to also include any ministerial directions issued to management. The Reports were independently reviewed and assessed by the Auditor General. Annual reports were to be provided to the responsible Minister by the end of August each year and were then tabled in Parliament. At this point they become public documents and represent one way an agency accounts directly to the community.51

In 1989, the Burt Commission examined specific issues regarding the accountability

of certain Western Australian public sector agencies. In doing so, the Commission drew several conclusions about accountability, which had general application across the public sector. In particular, it indicated that accountability required that government agencies be subject to the control of a Minister of the Crown. In addition, every agency was to be ready and able to account (through its Minister) to Parliament, for its actions, decisions,

50 CPA Australia, Queensland Report Explores Local Government Reporting Improvements, [http://www/cpaaustralia.com.au], CPA, 20002. 51 WA Public Sector Management, Accountability in the Western Australian Public Sector, [http://www.dpc.wa.gov.au/psmd/pubs/psrd/governance/accountb.pdf], WA, 1998.


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and the way in which it had exercised the authority vested in it and managed the resources entrusted to it.52

In 1993, an Independent Commission (known as the McCarrey Commission) was

established to review public sector finances. The Commission also touched on broader issues of public sector management. It suggested that the previous system of public sector management needed to be “swept away” and replaced by a framework that was responsive, flexible, accountable and, above all, efficient.53 The report also recommended that the public sector be exposed to more competition in the provision of services.54

Rather than amend the existing Public Service Act, new legislation was introduced in

Western Australia in 1994: the Public Sector Management Act. The major contribution of this change was the Act’s enshrinement of general principles to be followed by all parts of the public sector in regard to public administration and management, human resource management, and official conduct.55

A cornerstone of the new Act was that the chief executive officers and boards of

management were to be empowered to manage their organizations, subject to appropriate accountability arrangements, which included the intended achievements of the agency for the coming financial year in line with agreed outcomes required by Government.56 The other key aspect of the Act was its provision in regard to “ministerial officers”, including those appointed from outside the public sector to assist political office-holders. The Public Sector Management Act 1994 was to be seen as the second phase in establishing a broad-based legislative framework for public administration and human resource management in Western Australia.57

Output Based Management (OBM), commenced in 1996, was seen as one of the

biggest reforms impacting the public sector of Western Australia.58 Budgets were presented on the basis of desired outcomes and the outputs required to achieve them, and comprehensive output measures and other indicators were developed to measure agency performance. OBM provided benefits to Parliament, government, the community, and agencies, by improved specification of: Government desired outcomes; the outputs to be provided by agencies; the full accrual cost of agreed outputs; and performance of agencies in the delivery of agreed outputs.

52 Ibid. 53 WA Public Sector Management, Public Sector Management Act Review Report, [http://www.dpc.wa.gov.au/psmd/pubs/exec/machgovt/kelly/summary.pdf], WA, 1997. Intorduction. 54 Janis Bailey, Bob Horstman, Kristin Berger, and Ray Fells, “Public Sector Labour Relations in Western Australia—An Overview”, Australian Journal of Public Administration , Vol. 59, No. 4, December 2000, pp.100-108. 55 Ibid. 56 WA Public Sector Management, Accountability in the Western Australian Public Sector, [http://www.dpc.wa.gov.au/psmd/pubs/psrd/governance/accountb.pdf], WA, 1998. 57 WA Public Sector Management, Public Sector Management Act Review Report, [http://www.dpc.wa.gov.au/psmd/pubs/exec/machgovt/kelly/summary.pdf], WA, 1997. Introduction. 58 WA Treasury, Financial Reform, [http://www.treasury.wa.gov.au/default.asp], WA, 2003.


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A requirement for agencies to report actual results against targets (for output measures) in their annual reports was introduced for the 1998-99 financial year.59 All Agencies were required to disclose output measures of quantity, quality, timeliness and cost - comparing actual results with Budget targets in their annual report. A brief explanation of the reason for any significant variation between actual and target output production was also to be disclosed. Additionally, budget funded agencies were required to provide regular progress reports during the year against output performance targets.

The Government Financial Responsibility Act, passed in 2000, outlined a framework

for comprehensive financial planning, targeting and reporting of public sector finances. The framework was designed to strengthen the financial accountability and transparency of government. It was also intended to provide an enduring basis for the prudent financial management of the resources, assets and services of the State for the benefit of current and future generations.

In year 2001, Geoff Gallop became the Premier of Western Australia. As he stated in

the election policy Delivering a Better Government, the Labor government is committed to rebuilding and maintaining a strong state public sector.60 The seven priorities of the Labor government are:

• Honest, accountable, and inclusive government, • Sound financial management, • A growing and diversified economy, • Strong and vibrant regions, • Safe, healthy, and supportive communities, • An educated and skilled future for all Western Australians, and • A valued, protected environment.

Among the seven priorities, accountability is identified as number one, and is being

improved through the monthly Government Achievements Reports61. 4. Key Elements 4.1 Legislative Commitment

Legislative commitment is a critical success factor of Australian public sector reforms over the past 20 years. Laws that support the reform initiatives are comprehens ive at three folds:

• Laws were passed at both the federal level and the state level; • Laws were passed in the fields of performance management, human resource

management, and financial management; and

59 Ibid. 60 Geoff Gallop, Delivering a Better Government, [http://www.premier.wa.gov.au/policies/public_sector_reform.pdf], WA Premier’s Website, 2001. 61 WA Premier’s Website, Government Achievements Reports, [http://www.premier.wa.gov.au/main.cfm?MinId=01&Section=0072].


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• Laws were amended according to the changing environments. Legislative supports provide a legal framework for the Australian public sector reforms, which makes the reform not just one initiative of a government in power, but a national-wide and lasting initiative toward better performance and accountability. 4.2 Leadership

Leadership supports for Australian public sector reforms come from both the political perspective and the administrative perspective. All four Prime Ministers during the period covered in this report (Fraser: 1975-1983, Hawke: 1983-1991, Keating: 1991-1996, and Howard: 1996-Present) have put their efforts in public sector reforms toward better performance and accountability. Clear political leadership can also be found at the state level. For instance, during the election season in 2001, Mr. Geoff Gallop, who later became the Premier of Western Australia, put “honest, accountable and inclusive government” as his number one priority.

Leadership supports also come from the senior executives. Senior managers are

responsible to the Parliament and public through their agreements with ministers. The Senior Executive Leadership Capability Framework not only established the core criteria for Senior Executive Service selection, but also made the administrative leadership support realistic in strategic thinking, achieving results, cultivating productive working relationships, exemplifying personal integrity, and communicating with influence. 4.3 Setting Objectives and Measuring Performance

The main and overall objectives of Australia’s public sector reforms are to improve

the performance and accountability of the Australian Public Sector and to provide better services to its citizens. The goal is to improve public sector productivity and efficiency by reallocating resources and putting them to more effective use rather than finding direct savings on budget. To achieve this goal, various reallocation agreements and regulations have been signed between the federal government and the states, between the finance department and other departments, and between the departments and agencies. For instance, New South Wales developed the Service and Resource Allocation Agreements in year 2000. Ministries, agencies, and employees are also required to develop clear objectives and goals.

Measurement and benchmarking of performance is another key element in the

Australian public sector reforms. Departments and agencies at both the federal level and the state level put great efforts into developing measuring systems. The measures are of all types, both qualitative and quantitative, including inputs, workloads, outputs, service quality, and outcomes, but the emphasis is on the development of outcome measures. Two examples of clear measures are the Managing for Outcomes Model of Queensland and the Output-Based Management of Western Australia.

4.4 Performance-based Budgeting


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The goal of Australia’s public sector reforms is to achieve productivity and efficiency through effective resource reallocation rather than direct savings. The budget system is clearly aligned to this goal. Resource Agreements were signed, providing flexibility beyond what is normally available in the budget process, and serving as a complementary management tool to the budget process. Departments and Agencies are required to report the outcomes against the inputs, and this performance information is also used in the budget process. Legislative frameworks to ensure financial management and accountability have been established at both the federal level and the state level. 4.5 Performance-based Human Resource Management

The main focus of human resource management in the Australian public service is to

improve staff performance by building better labour and management relationships, staff training, and performance-based payments.

Laws have been passed to ensure that the recruitment of public sector employees is

based on merit and performance. Training has been provided to staff from all levels of the public sector. For instance, the Middle Management Development Initiatives during the early 1990s focused on those managers with substantial people management responsibilities, while the Senior Executive Leadership Capability improved the performance of senior managers and executives. The development of a performance-based pay system had been a key element of performance management ever since the early 1980s, before it finally became a special feature of the Australian public service. Unions have important roles in developing a better labour relationship in the public sector and in developing the performance-based pay system.

However, there is also an argument that a strong performance culture has not

emerged within the Australian public service despite the introduction of performance-based pay. Michael O’Donnell argued that in the Australian public service, managerial prerogatives were used in an arbitrary and subjective manner, with favourites rewarded and others less favoured potentially victimised.62 The proof of this is that those officers working in “high-profile” areas also received the highest rating, while senior officers working in “lower-profile” service areas, such as delivery services or corporate services, tended to receive merely “satisfactory” rating scores.63 The author suggested that more focus should be placed on improving the quality of performance feedback provided by supervisors. 4.6 Performance Reporting and Reviewing

Annual reports, as the key performance reporting documents, are to provide

information to enable Parliament to make fully informed judgements on departments and agencies. Since the mid-1990s, annual reports have also included performance

62Michael O’Donnell, “Creating a Performance Culture? Performance-based Pay in the Australia Public Service”, Australian Journal of Public Administration, Vol. 57, No. 2, June 1998, p. 34. 63 Ibid.


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information that was previously included in budget documents (known as performance statements). Annual reports are also required to focus on reporting on outcomes and to reduce the amount of activity-related information. The Australia National Audit Office (ANAO) has the overall responsibility for reviewing the reports; the Department of Finance is responsible for reviewing the budgeting and performance information. During the early 1990s, the Department of Finance commissioned two independent reviews, Effective Reporting in Program Performance Statements64 in 1993 and Performance Reporting in Commonwealth Annual Reports65 in 1995, both of which identified some problems with performance information.

One important feature of the Australian reviewing system is the role of the

administrative review bodies. The Chief Justice of High Court, Sir Gerard Brennan, in 1998 stated,

“Although more rigorous political control of the Executive Government is not to be expected and judicial supervision is limited to ensuring that executive action is lawful, the exercise of some administrative powers—notably those that affect individual interests—needs to be subject to external merits review.”66

Sir Gerard encapsulated the need for accountability to be filled by administrative review bodies at the federal level of government. The Administrative Tribunal (AAT) and the Ombudsman are the two principal federal administrative review bodies67. The review bodies were established to enhance the accountability of executive ministers and officials to all of the Australian people for “micro- level” decision-making including policy that affects individual interests. 4.7 Building Performance Culture

After more than two decades of public sector reforms, the focus has shifted to an emphasis on outcomes rather than inputs or processes. Accountability has been emphasized by breaking down central control in finance and employment, establishing resource agreements, developing a performance-based pay system, and improving performance information. And, according to Warren McCann, the chief executive of the Department of the Premier and Cabinet of South Australia, although there was still room for improvement in the system, there was a firmly established performance culture in the

64 Sue Funnell, Australian Department of Finance, Effective Reporting in Program Performance Statements, Canberra, 1993. 65 DGR Consulting and Australian Department of Finance, Performance Reporting in Commonwealth Annual Reports, Canberra, 1995. 66 Gerard Brennan, The Parliament, the Executive and the Courts: Role and Immunities, cited in Alan Rose, “The Role of Administrative Review Bodies”, Australian Journal of Public Administration, Vol. 58, No. 1, March 1999, p. 64. 67 Other major review bodies are the Immigration Review Tribunal (IRT), the Refugee Review Tribunal (RRT), the Social Security Appeals Tribunal (SSAT), and the Veteran’s Review Board (VRB).


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public sector throughout Australia, and the basic notion itself—a public sector driven to perform—has become an integral part of everything. 68

68 Warren McCann, “Institution of Public Administration Australia: Some Observations About the Profession of Public Service”, Australian Journal of Public Administration, Vol. 60, No. 2, June 2001, p. 111.


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Australian Attorney-General’s Department, Public Service Reform Act 1984, Act No. 63 [http://scaleplus.law.gov.au/cgi-bin/downloadtxt.pl?text&/scale/data/comact/5/2539], Canberra, 1984.

Australian Attorney-General’s Department, Merit Protection (Australian Government Employees) Act 1984, Act No. 65, [http://scaleplus.law.gov.au/cgi-bin/downloadtxt.pl?text&/scale/data/comact/5/2541], Canberra, 1984.

Australian Attorney-General Department, Financial Management and Accountability Act 1997, Act No. 154, [http://scaleplus.law.gov.au/html/pasteact/2/3068/pdf/FinManAcc97.pdf], Canberra, 1997.

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Australian Attorney-General’s Department, Auditor-General Act, Act No. 151, [http://scaleplus.law.gov.au/cgi-bin/download.pl?/scale/data/comact/9/5717], Canberra, 1997.

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Australian Public Service Board and Department of Finance, Financial Management Improvement Program-Diagnostic Study, Canberra, 1984.

Australian Public Service Commission, A Human Resource Framework for the Australian Public Service, [http://www.apsc.gov.au/publications96/hrmframework6.htm], Canberra, 1996.

Australian Public Service Commission, The McLeod report, [http://www.apsc.gov.au/publications96/apsactreview.htm], Canberra, 1996.

Australian Public Service Management and Protection Commission, Senior Executive Leadership Capability Framework, http://www.psmpc.gov.au/media/ministerspeech19may.htm19 May 1999.

Bailey, Janis, Bob Horstman, Kristin Berger, and Ray Fells, “Public Sector Labour Relations in Western Australia—An Overview”, Australian Journal of Public Administration, Vol. 59, No. 4, December 2000, pp.100-108.

CPA Australia, Queensland Report Explores Local Government Reporting Improvements, [http://www/cpaaustralia.com.au], CPA, 20002.


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DGR Consulting and Australian Department of Finance, Performance Reporting in Commonwealth Annual Reports, Canberra, 1995.

Funnell, Sue, Australian Department of Finance, Effective Reporting in Program Performance Statements, Canberra, 1993.

Gallop, Geoff, Delivering a Better Government, [http://www.premier.wa.gov.au/policies/public_sector_reform.pdf], WA Premier’s Website, 2001.

Halligan, John, The Australia Civil Service, [http://www.indiana.edu/~csrc/hallig3.html], Bloomington: Indiana University, 1997.

Kemp, David , “Public Administration in the New Democratic State”, Australian Journal of Public Administration, Vol. 57, No. 2, June 1998.

NSW Council on the Cost and Quality of Government, Overview of NSW Government Services 1995-2000, [http://www.ccqg.nsw.gov.au/performance_reports/], NSW, 2000.

NSW Parliamentary Counsel’s Office, Annual Reports (Statutory Bodies) Act 1984 No 87, [http://www.legislation.nsw.gov.au/maintop/scanact/inforce/NONE/0 ], Parliamentary Counsel’s Office, 1984.

NSW Parliamentary Counsel’s Office, Annual Reports (Departments) Act 1984 No 156, [http://www.legislation.nsw.gov.au/maintop/scanact/inforce/NONE/0], Parliamentary Counsel’s Office, 1985.

NSW Treasury, Service and Resource Allocation Agreement, [http://www.treasury.nsw.gov.au/indexes/pubs_by_pol.htm], NSW, 20000.

McCann, Warren, “Institution of Public Administration Australia: Some Observations About the Profession of Public Service”, Australian Journal of Public Administration, Vol. 60, No. 2, June 2001, p.p. 110-115.

Pollitt, Christopher and Bouckaert, Geert, Public Management Reform: A Comparative Analysis, Oxford: Oxford University Press, 2000.

Office of Auditor General of Canada, Reform in the Australian Public Service 1983-1996, http://www.oag-bvg.gc.ca/domino/other.nsf/html/aus.html], Ottawa: OAG, 1996.

O’Donnell, Michael , “Creating a Performance Culture? Performance-based Pay in the Australia Public Service”, Australian Journal of Public Administration, Vol. 57, No. 2, June 1998, pp.28-39.


26

Pierce, John, Efficiency Progress in the New South Wales Government , [http://www.treasury.nsw.gov.au/pubs/trp97_8/eff_prog.htm#five_two_budget], NSW Treasury, 1997.

Preston, Noel, Public Sector Ethics in Queensland Since Fitzgerald, [http://www.archivists.org.au/events/conf99/preston.htm], Australia Society of Archivists, 1999.

Prime Minister of Australia Website, Government Report Card, [http://www.pm.gov.au/gov_report/index.htm], 2003.

Podger, Andrew, The Emerging Framework of Australian Government Administration: Efficient, Agile and Accountable, http://www.apsc.gov.au/media/podger110902.htm, Canberra: Australian Public Service Commission, 2002.

Queensland Parliament, Public Sector Management Commission Act 1990, [http://www.legislation.qld.gov.au/s97is.vts], Queensland, 1990

Queensland Parliament, Public Sector Ethics Act 1994, [http://www.legislation.qld.gov.au/s97is.vts], Queensland, 1994.

Queensland Parliament, Public Service Act 1996, [http://www.legislation.qld.gov.au/s97is.vts], Queensland, 1996.

Queensland Parliament, Financial Sector Reform Act 1999, [http://www.legislation.qld.gov.au/LEGISLTN/CURRENT/F/FinSecRefQA99_001.pdf], Queensland, 1999.

Queensland Parliament, Fact File—Queensland Public Sector, [http://www.parliament.qld.gov.au/Education/ForSchools/pdf%20files/Others%202002/Queensalnd's%20Public%20Sector.pdf ], Queensland.

Queensland Treasury, Managing for Outcomes, [http://www.treasury.qld.gov.au/subsites/fmb/tier2/mfo.htm], Queensland.

Reith, Pete, Towards a Best Practice Australian Public Service, [http://www.apsc.gov.au/publications96/apsreformdiscussionpaper.htm], Canberra: Australian Public Service Commission, 1996.

Rose, Alan, “The Role of Administrative Review Bodies”, Australian Journal of Public Administration, Vol. 58, No. 1, March 1999, p.p. 64-74.

Spry, Max, Public Sector Reform in Queensland: the Public Service Act 1996, [http://www.aph.gov.au/library/pus/rn/1996-97/97rn39.htm], Parliament of Australia, 1997.


27

WA Public Sector Management, Public Sector Management Act Review Report, [http://www.dpc.wa.gov.au/psmd/pubs/exec/machgovt/kelly/summary.pdf], WA, 1997.

WA Public Sector Management, Accountability in the Western Australian Public Sector, [http://www.dpc.wa.gov.au/psmd/pubs/psrd/governance/accountb.pdf], WA, 1998.

WA Treasury, Financial Reform, [http://www.treasury.wa.gov.au/default.asp], WA, 2003.

WA Premier’s Website, Government Achievements Reports, [http://www.premier.wa.gov.au/main.cfm?MinId=01&Section=0072].

Wilenski, P., “Administrative Reform-General Principles and the Aus tralian Experience”, Public Administration, Autumn 1986.


Performance Management New Zealand

Notes On Public Sector Reform and Performance Management—New Zealand

0

Table of Contents New Zealand

1. Background

2. Timeline of Main Initiatives

3. Main Initiatives

3.1. 1984-1987 Labour Government Reform 3.2. Build a Legislative Framework for Reforms

3.2.1. Government Management 3.2.2. The State Sector Act 1988 3.2.3. The Public Financial Act 1989 3.2.4. The Logan Review 3.2.5. The Fiscal Responsibility Act 1994

3.3. Continuing and Consolidating the Reforms 3.3.1. Strategic Result Areas for the Public Sector 3.3.2. Public Service Principles, Conventions and Practice 3.3.3. The Spirit of Reform 3.3.4. Crown Entity Reform

3.4. A new Stage: Getting Better Results 3.4.1. Review of the Centre 3.4.2. Other Initiatives

4. Key Elements

4.1. Legislative Commitment 4.2. Leadership 4.3. Setting Objectives and Measuring Performance 4.4. Performance-Based Budgeting 4.5. Performance-Based HR Management 4.6. Performance Reporting and Reviewing 4.7. Building Performance Culture

5. Reference


1

New Zealand 1. Background

The reforms in the New Zealand Public Sector have widely been seen as the most radical one within OECD countries.1 There have been reforms of government commercial enterprises, reforms focussed on core public sectors, and reforms to improve accountability and employment relations. As with other countries, the main driving force for these changes was the changing economic situation.

Three main features were found in the New Zealand economics before the 1980s.

First, the system of protectionism had been in place ever since the Second World War. With the use of central planning to direct the economy, they developed a consensus among major groups—farmer, manufacturers, and workers—about their roles and entitlements.2 This consensus was sustained throughout almost 20 years of full employment. A consequence of this was the continued willingness “for the government to act when matters were thought to need attention… to intervene whenever market actors were not producing desired outcomes.”3 Second, New Zealand had developed an extensive social safety net, which included an extensive medicare system consisting of many free services, subsidized housing, free education through university level, as well as unemployment benefits and other social transfer payments.4 The third feature was that New Zealand had close economic and cultural ties to the United Kingdom. However, these began to dwindle after the UK joined the European Community in 1973, and it became obvious that the favoured arrangements for New Zealand agricultural exports to the UK market could not survive. By 1982, only 14.7 percent of exports went to the UK, compared to the 65 percent in 1952.5

With these features and social changes, the New Zealand system of protectionism

was close to the point of collapse by the early 1980s. Following a mid-1984 election campaign dominated by economic issues, the Muldoon government was resoundingly defeated. The change of government precipitated an economic crisis that had been building for some time. A significant underlying cause of the crisis was a decade of

1 Colin Talbot, Lyn Daunton, and Colin Morgan, Measuring Performance of Government Departments—International Developments, [http://www.tintern.org/nao_gov_report.pdf], Report to UK National Audit Office, London: Public Futures Ltd, 2001. 2 OAG Canada, Toward Better Governance - Public Service Reform in New Zealand (1984-94) and its Relevance to Canada, [http://www.oag-bvg.gc.ca/domino/other.nsf/html/nzbody.html ], Ottawa: OAG, 1994. 3 P. McKinlay, ed. Redistribution of Power? Devolution in New Zealand, via OAG Canada, Toward Better Governance - Public Service Reform in New Zealand (1984-94) and its Relevance to Canada. 4 OAG Canada, Toward Better Governance - Public Service Reform in New Zealand (1984-94) and its Relevance to Canada, [http://www.oag-bvg.gc.ca/domino/other.nsf/html/nzbody.html], Ottawa: OAG, 1994. 5 Christopher Pollitt and Geert Bouckaert, Public Management Reform: A Comparative Analysis, Oxford: Oxford University Press, 2000, p. 252.


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worsening trade balance. The exchange rate for the New Zealand dollar had been maintained around the 1972 level, despite a decline of approximately 30 percent in the country’s terms of trade.6 New Zealand was forced to suspend foreign currency trading, having nearly exhausted its reserves of foreign exchanges; the country was in real danger of defaulting on its overseas borrowing. The situation was compounded by the very high level of government deficit and accumulated debt.7

Prior to 1984, unemployment had usually been low (less than 5 percent) in New

Zealand. However, the unemployment rate rose rapidly between 1985 and the early 1990s, rising more than 10 percent in 1992/93. The social effects of this were widespread and harsh. 8 By 1984, the annual deficit was $3 billion and public overseas debt was above the $8 billion mark,9 leaving New Zealand bordering on bankruptcy. It appeared that the only solution was swift and radical reform of both the economy and the state.

6 OAG Canada, Toward Better Governance - Public Service Reform in New Zealand (1984-94) and its Relevance to Canada, [http://www.oag-bvg.gc.ca/domino/other.nsf/html/nzbody.html ], Ottawa: OAG, 1994. 7 Ibid. 8 Christopher Pollitt and Geert Bouckaert, Public Management Reform: A Comparative Analysis, p. 252. 9 NZ State Service Commission, New Zealand’s State Sector Reform: A Decade of Change, [http://www.ssc.govt.nz/decade-of-change], New Zealand, 1998.


Timeline of Main Initiatives in New Zealand

1984 1986 1987 1988 1994 1995 2001 1996 2003

Labour Government Reforms

2000 1989

State-Owned Enterprises Act

Building a Legislative Framework

State Sector Act

Public Finance Act

Fiscal Responsibility Act

1991

Logan Review

Continuing and Consolidating the Reforms

A New Stage: Getting Better Results

Public Service Principles, Conventions and Practice

The Spirit of Reforms

Crown Entity Reform

Review of the Centre

1. Managing for Outcomes 2. State Sector Leadership Management and Development 3. E-government 4. Values and Integrity


4

2. Main Initiatives 2.1 1984-1987 Labour Government Reforms

The social condition and economic crisis, together with the election of the Labour government (1984-1990), brought about major public service reforms in 1984, which focused on both the economy and the state.

The economy was the first priority of the government. The changes in economic

policy brought in by the Labour government were so extensive that they were also known collectively as “Rogernomics”, after Sir Roger Douglas, the Minister of Finance during 1984 and 1988. The essence of the Rogernomics was a return to the free play of market forces in the economy, stripping away the complex and comprehensive web of regulations and subsidies, which had characterized government interventions of the past.10 The policies included11:

• Removal of all price, wage and income controls, and foreign exchange controls; • Elimination of controls over foreign investment, except for certain sensitive areas; • Removal of most subsidies to agriculture and industry; • Establishing a more independent central bank; and • Tax reform, including the introduction of a goods and services tax and a negative

income tax for families.

The change of economic policies was joined with a vigorous reform of social policies. Public sector reforms were focused on two areas: decentralization of decision-making and commercialization.

The New Labour government emphasized greater managerial discretion over inputs,

as a means of improving the efficiency, adaptability, and responsiveness of the public service. Senior managers were given greater control over resources, and efforts were made to delegate authority to managers to “the lowest level of competency”12. In mid-1986, an exercise known as Removal of Constraints streamlined the rulebooks. The State Service Commission removed a lot of its controls over day-to-day management of departments, including matters such as salary fixing, job classification, hiring and firing of staffs, and other aspects of personnel management. Such changes resulted in the deletion of 95 percent of the 2,000 or so detailed instructions contained in the Public Service Manual, which was la ter abolished.13

10 OAG Canada, Toward Better Governance - Public Service Reform in New Zealand (1984-94) and its Relevance to Canada, [http://www.oag-bvg.gc.ca/domino/other.nsf/html/nzbody.html ], Ottawa: OAG, 1994. 11 Ibid. 12 J. Boston, “Transforming New Zealand’s Public Sector”, Public Administration, winter 1987, p. 434. 13 OAG Canada, Toward Better Governance - Public Service Reform in New Zealand (1984-94) and its Relevance to Canada, [http://www.oag-bvg.gc.ca/domino/other.nsf/html/nzbody.html ], Ottawa: OAG, 1994.


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Commercialization included the adoption by government departments of a “set of operating guidelines based on financial criteria”. The objectives were to “emulate a commercial management environment in the provision of service with cost-effectiveness and competition as the driving force.”14 Strong efforts were put into cutting public spending and reducing the deficit. In 1986, the Minister of Finance put forward a set of principles requiring all government agencies to realize the full potential for profitable trading.

Another important reform area was the management of state-owned enterprises. The

thrust behind this was to reorganize New Zealand’s public service by separating commercial from non-commercial activities and constituting state-owned enterprises (SOEs) to carry on the commercial-oriented activities. Roger Douglas stated,

“The management of State-owned enterprises… will improve accountability to Parliament and to the community. It will also provide a rational basis for implementing those of the Government’s social objectives that have previously been tangled up in trading operations.”15

In 1986, the State-owned Enterprises Act was enacted, the purpose of which was to establish state-owned enterprises that would take over major areas of state trading activities and be run as profitable operations. Studies carried out by the New Zealand Institute of Economic Research showed that, across seven large SOEs revenue rose by 15 percent between 1988 and 1992, and after-tax profits quadrupled from NZ$ 1.02 billion to NZ$ 1.02 billion. 16 Beginning in the second term of the Labour government (1987-1990), and continuing since then under the National government, a large proportion of state-owned corporate assets have been privatised. 2.2 Building a Legislative Framework for Reforms

Following Labour’s re-election in 1987, the theme of greater efficiency in

government, together with a willingness to apply economic theories and new policies, led to fundamental revision of the legislation governing the public sector, resulting in a comprehensive legislative framework for reforms. 2.2.1 Government Management

As early as 1984, Treasury officials advised ministers that direct accountability

between chief executives and ministers could make a new and effective public service

14 A. Kouzmin and N. Scot ed. Dynamics in Australian Public Management, 1990, via OAG Canada, Toward Better Governance - Public Service Reform in New Zealand (1984-94) and its Relevance to Canada. 15 Via State Service Commission, New Zealand’s State Sector Reform: A Decade of Change, [http://www.ssc.govt.nz/decade-of-change], New Zealand, 1998. 16 OAG Canada, Toward Better Governance - Public Service Reform in New Zealand (1984-94) and its Relevance to Canada, [http://www.oag-bvg.gc.ca/domino/other.nsf/html/nzbody.html ], Ottawa: OAG, 1994.


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system. 17 These ideas were set out in 1984 in Economic Management: Treasury Brief to the Incoming Government 198418. The concepts were then expanded in another published briefing Government Management: Treasury Brief to the Incoming Government 198719. As suggested, managers should be given greater discretion and authority, matched with effective accountability for clearly specified results, and much greater use should be made of formal arrangements to clarify roles and performance requirements. 20 Treasury also advocated new approaches to the structure of government and to budgeting, accounting, and financial management. These were subsequently adopted by the government and led to some profound changes.

2.2.2 The State Sector Act 1988

The State Sector Act 198821 was designed to introduce into the public service many

of the positive features and incentives of the private sector. The key principle was that managers, if they were permitted to make all input decisions—pay, appointments, organizational structures, production systems, etc—would respond by accepting personal accountability for providing higher quality outputs—the services and goods provided for the Government and citizens.22 The Act extensively amended the 1962 Act and replaced the State Services Conditions of Employment Act 1977. The Act made major changes in the management, personnel, and labour relations in the public service.

The main initiatives could be summarized as the following:

• Chief executives, who were “permanent heads” before, were to be appointed head departments for a fixed term, under contract with the State Services Commission (SSC), and were to be accountable in law for the effective and efficient operation of the departments.

• Chief Executives would know specifically what they were expected to deliver through their performance agreements and purchase agreements, and tune and drive their departments to perform accordingly. Performance expectations were specified and actual performance was to be formally assessed at individual levels throughout most departments.

17 Graham Scott C. B., Public Management In New Zealand: Lessons and Challenges, [http://www.nzbr.org.nz/documents/publications/publications-2001/public_management.pdf], New Zealand Business Roundtable, 2001, p. 4. 18 New Zealand Treasury, Economic Management: Treasury Brief to the Incoming Government 1984, [http://www.treasury.govt.nz/briefings/1984/default.asp], NZ Treasury, 1984. 19 New Zealand Treasury, Government Management: Treasury Brief to the Incoming Government 1987, [http://www.treasury.govt.nz/briefings/1987/], NZ Treasury, 1987. 20 Graham Scott C. B., Public Management In New Zealand: Lessons and Challenges, [http://www.nzbr.org.nz/documents/publications/publications-2001/public_management.pdf], New Zealand Business Roundtable, 2001, p. 4. 21 NZ Parliament, State Sector Act 1988, [http://rangi.knowledge-basket.co.nz/gpacts/public/text/1988/an/020.html], NZ Parliament, 1988. 22 NZ State Service Commission, New Zealand’s State Sector Reform: A Decade of Change, [http://www.ssc.govt.nz/decade-of-change], New Zealand, 1998.


7

• In respect of personnel policy, the chief executive was required to be a “good employer”, which included adherence to the merit principle in all appointments and development of an equality program. The requirement to be a good employer also led departments to establish internal procedures for appeal against management’s personnel decisions.

• A Senior Executive Service was to be established under the auspices of the State Services Commission to develop a core group of senior public service executives.

• Department reviews, were to be carried on separately from annual reviews of the chief executive’s performance. The findings of the reviews of chief executives were reported to the ministers responsible for their departments.

• Although not specified in the Act, the Commissioner, by virtue of the functions of the position, was to be the head of the public service. The principal functions of the Commissioner were to review the machinery of the government; to review the performance of each department; to appoint chief executives of departments and to negotiate their conditions of employment; to provide and maintain in association with the chief executives, a senior executive service; to promote, develop, and monitor equal employment opportunities, policies and programs for the public service and to furnish advice on training and career development of staff; and to exercise other functions with respect to the administration and management of the public service as the Prime Minister would direct from time to time.

The State Sector Act 1988 struck a new framework of relationships between parties

involved in the public management.23 With its pronounced emphasis on performance, it also rapidly altered the way the public service looked and operated.

2.2.3 The Public Finance Act 1989

Seen as a revolution in financial management,24the Public Finance Act 198925 was

the other pillar of the legislative framework of public service reforms, complementing the State Sector Act 1988 and introducing a radically different system of financial management and accountability.

Until 1989 the New Zealand Government financial management system was

operated on a cash basis. Little or no consideration was given to multi-year items such as depreciation or accrued expenses, and each financial year stood on its own, disconnected

23 Graham Scott C. B., Public Management In New Zealand: Lessons and Challenges, [http://www.nzbr.org.nz/documents/publications/publications-2001/public_management.pdf], New Zealand Business Roundtable, 2001, p. 11. 24 NZ State Service Commission, New Zealand’s State Sector Reform: A Decade of Change, [http://www.ssc.govt.nz/decade-of-change], New Zealand, 1998. 25 NZ Parliament, Public Finance Act 1989, [http://rangi.knowledge-basket.co.nz/gpacts/public/text/1989/an/044.html], NZ Parliament, 1989.


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from the financial activities of previous years or any following years.26 Under these circumstances, a new system was introduced through the Public Finance Act in 1989.

The Public Finance Act was based on three important principles:

• Parliamentary scrutiny—the government was to receive its authority to spend from Parliament, which must be satisfied with the justification advanced for money to be appropriated, and that money was to be spent responsibly, for the purpose for which it was to be provided;

• Accountability—Departments were to report to Ministers, and Ministers to Parliament, to show that they have acted within their authorities; and

• Improved managerial performance—Departments and other government agencies needed incentives to encourage good financial management practices, and prudent but enterprising use of resources.

Based on these principles, the Act provided a framework for reform of the whole financial management of government by27:

• Developing a definition for performance; • Removing many administrative controls; • Making chief executives responsible for departmental financial management, • Establishing departmental and Crown reporting requirements; and • Redefining the appropriation process to change the emphasis from the control of

inputs to the purchase of outputs.

The new financial management system had several very significant benefits. It complemented and consolidated the changes made by the State Sector Act; it substantially increased the volume and quality of relevant information available about departmental operations, particularly about the true costs of producing and supplying individual outputs, and about the overall financial worth of the State sector; and it enhanced accountability, with the roles and responsibilities of Ministers and chief executives clearly defined, particularly in relation to the purchase and supply of outputs. The reforms shifted the focus of financial management away from detailed control of costs of production, and much more squarely onto the value of the goods and services supplied, and hence, achievement of the Government's desired outcomes.28

2.2.4 The Logan Review

As noted above, the Labour government carried out a series of public sector reforms to improve performance and accountability. It also enacted a legislative framework for

26 NZ State Service Commission, New Zealand’s State Sector Reform: A Decade of Change, [http://www.ssc.govt.nz/decade-of-change], New Zealand, 1998. 27 Graham Scott C. B., Public Management In New Zealand: Lessons and Challenges, [http://www.nzbr.org.nz/documents/publications/publications-2001/public_management.pdf], New Zealand Business Roundtable, 2001, p. 17. 28 NZ State Service Commission, New Zealand’s State Sector Reform: A Decade of Change, [http://www.ssc.govt.nz/decade-of-change], New Zealand, 1998.


9

the new management model in the public sector. As time passed, performance and accountability became the number one priority of the government. The National party also expressed certain concerns about the new management model. After the National party’s election victory in 1990, some of these concerns were addressed in its policies.

In 1991, the Cabinet State Sector Committee appointed a steering group as an

independent reviewer to comprehensively review the past reforms in the New Zealand public sector. The group was appointed to assess “the effectiveness of the State Sector reforms, brought about by the State Sector Act 1988 and the Public Finance Act 1989, in improving the efficiency and effectiveness of the Public Service.”29 The review was intended to answer the following questions: what were the reforms intended to achieve; what happened so far as a result of the reform program? What benefits were being realized? And what more was needed to be done to realize the objectives of the reforms and minimize their costs?

The steering group presented the Review of State Sector Reforms30 in November

1991, (also known for its chair as the Logan Review). The findings of the review can be summarized as follows.31

• There were matters that required “explicit attention”, essential to the success of the reforms. The legislative framework for the public service reforms was viewed as sound, and it had a significant and beneficial impact on the effectiveness and efficiency with which the core service operated. Performance improved in most key areas as a result of the reforms.

• The review pointed out that the four essential areas, which were seen as “cornerstones” of any management systems were: the translation of collective strategies into an organizational plan; accurate specification of required performance standards and measures into chief executives’ agreements; objective measurement and reward for performance; and the creation of conditions for management of sufficient quality to be attracted, developed, retained, and motivated to perform the reform’s objectives.

• The review recommended improvements in performance agreements to ensure that chief executives were adequately responsive to ministers; in particular, performance agreements needed to reflect “a joint understanding of the main priorities for the minister/chief executive partnership for the coming year.”

• The review also found some transition problems. For example, one confusion was about the roles and responsibilities of central agencies in facilitating reform in a

29 Via OAG Canada, Toward Better Governance - Public Service Reform in New Zealand (1984-94) and its Relevance to Canada, [http://www.oag-bvg.gc.ca/domino/other.nsf/html/nzbody.html ], Ottawa: OAG, 1994. 30 B. Logan, Review of State Sector Reforms, Wellington: Steering Group on the Review of State Sector Reforms, 1991. 31 Based on the OAG Canada Study, Toward Better Governance - Public Service Reform in New Zealand (1984-94) and its Relevance to Canada, 1994.


10

number of areas, such as “lack of clarity or roles and process in output specification”.

Many of the Logan Review’s recommendations formed the basis of government actions to round out and complete the management model of the National government. 2.2.5 Fiscal Responsibility Act 1994

One fundamental piece of the National government’s reform package was the Fiscal

Responsibility Act 199432, which was also seen as the last piece in the suite of legislation—the others of which were the State Owned Enterprises Act, the State Sector Act, and the Public Finance Act—designed to redefine the role and responsibility of the state, and establish an environment facilitating responsible and businesslike, longer-term public management.33 The long title of the Act referred to improving “the conduct of fiscal policy and responsibility by specifying principles of responsible fiscal management and by strengthening the reporting requirements of the Crown”.

The Act established a set of five principles regarding responsible fiscal management.

These principles were: • Reduction of total Crown debt to prudent levels by achieving operating surplus

every year until a prudent level has been obtained; • Maintaining a prudent level of debt once these have been achieved by ensuring

that total operating expenses do not exceed total operating revenue; • Achieving and maintaining a level of Crown net worth so as to provide a buffer

against factors that may impact adversely on the Crown’s net worth in the future; • Managing prudently the fiscal risks facing the Crown; and • Pursuing consistent policies with a reasonable degree of predictability about the

level and stability of tax rates for future years.

The key elements of these principles were predictability and transparency. Departures from these principles were allowed. However, any departure from these principles had to be both transparent and temporary.

The Act also built upon the reporting requirement in the Public Finance Act 1989 and detailed several new forms of disclosure of fiscal and economic information. Several statements and reports were to be tabled in the Parliament or published on a regular basis. Two of these—the Budget Policy Statement34 and the Fiscal Strategy Report35—were to relate to the long term intentions of Government, while the remaining were designed generally to disclose and verify as much information as possible about the state of the economy and the progress of the reforms.

32 NZ Parliament, Fiscal Responsibility Act 1994, 33 NZ State Service Commission, New Zealand’s State Sector Reform: A Decade of Change, [http://www.ssc.govt.nz/decade-of-change], New Zealand, 1998. 34 Budget Policy Statements (1995-2003) are available at http://www.treasury.govt.nz/budgetpolicy/. 35 NZ Treasury, Fiscal Strategy Report, [http://www.treasury.govt.nz/budget2002/fiscalstrategy/], NZ Treasury, 1994.


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The Fiscal Responsibility Act imposed a medium and long-term focus on

government’s expenditure and provided this essential context to the operation of the budget and management cycles under the existing financial management system. 2.3 Continuing and Consolidating the Reforms 2.3.1 Strategic Results Areas for the Public Sector

A strategic management system was established in 1993, when the Government produced a document entitled Path to 201036, outlining its strategic vision for New Zealand in the medium term. The strategic management system also involved interactions among Ministers, chief executives, and central agencies, which were interpreted through:

• Strategic Results Areas (SRAs) – a limited number of major desired results for the public service, linking higher expressions of political intent (Government’s desired vision) to public service activity;

• Key Results Areas (KRAs) in the performance agreement of chief executives of individual departments and ministries; and

• Department performance assessments.

In 1995, Strategic Results Areas for the Public Sector: 1994-199737 was published,

which set out the strategic objectives for the 1997 period, and identified activities that must be done well over three to five years to achieve the longer-term strategy. The Results Areas for 1994 to 1997 were:

• Maintaining and accelerating economic growth, • Enterprise and innovation, • External linkages, • Education and training, • Community security, • Social assistance, • Health and disability services, • Treaty claims settlement, and • Protecting and enhancing the environment.

The essence of the strategy was to be purposeful and selective, to focus on results and, to frame objectives. The government’s SRAs would be completed by departmental KRAs, which focused priorities within departmental budgets and work plans and were part of the accountabilities set out in the performance agreements.

36 NZ Office of Prime Minister, Path to 2010 , [http://www.executive.govt.nz/93-96/policy/index.htm], 1993. 37 NZ Office of Prime Minister, Strategic Results Areas for the Public Sector: 1994-1997, 1995.


12

The new strategic management system was straightforward:38 Ministers were to decide and specify the government’s priorities and the public service was to distil them into achievable objectives for each department; Ministers and chief executives would conclude formal contracts to cover these priorities; performance against these agreements would be assessed; and the information obtained would be used to improve the quality of the next cycle.

2.3.2 Public Service Principles, Conventions and Practice

In 1995, the State Services Commission published the Principles, Conventions and

Practice guidance series,39 a series of essays designed to guide officials on the duties and responsibilities of public servants. The series included:

• The Constitutional Setting, which described the basis and relevance of the New

Zealand constitution within which the New Zealand Public Service operated, outlined briefly the sources of New Zealand's constitution, and discussed issues for public servants.

• The Public Service and Official Information, which was concerned with the responsibility of public servants in relation to information held by their departments and with the need to maintain a balance between the security of the State and the power of the State to acquire, use and disclose information on the one hand, and the protection of individual rights and freedoms, and personal privacy on the other.

• The Public Service and the Treaty of Waitangi, which emphasised the importance of the Treaty of Waitangi, which has been described as New Zealand's founding document.

• The Public Service and the Public, which stated that public servants, first and foremost, had a duty to the law - to uphold the law and the principles of justice and fairness according to the law.

• The Public Service and the Law, which provided an overview of the legal framework within which public servants operated, and offered guidance to an appropriate appreciation of that framework.

• The Public Service and Government, which discussed the nature of the official's relationships with Ministers, and Cabinet; the concept of the collective interests of government; the conventions and practice related to changes of government; the responsibility for advocacy of policy; and the contestability of advice.

38 NZ State Service Commission, New Zealand’s State Sector Reform: A Decade of Change, [http://www.ssc.govt.nz/decade-of-change], New Zealand, 1998. 39 NZ State Service Commission, Public Service Principles, Conventions and Practice, [http://www.ssc.govt.nz/display/site_search.asp?p=1&rootnavigationid=&qry=%27Principles%2C+Conventions+and+Practice%27&sortby=rank&x=26&y=5], 1995.


13

• The Public Service and Parliament, which was concerned with the relationship between the Public Service and Parliament and also traversed guidance concerning Parliamentary questions.

• The Senior Public Servant, which discussed some of the issues that arise for senior public servants as employees.

• The Public Service Employer, the purpose of which was to set out the statutory basis for the employer role of chief executives and senior public servants and the general legal obligations of Public Service employers; to highlight additional or special provisions that apply to Public Service employers; and to discuss some specific issues and particular situations that can arise.

2.3.3 The Spirit of Reform (Schick Review 1996)

In 1996, another independent review of the New Zealand state sector management framework was completed. The Spirit of the Reform: Managing the New Zealand State Sector in a Time of Change40 (also known for its author, Allen Schick, as the Schick Review).

The report, commissioned by the State Sector Commission and the Treasury, found

that the reforms had lived up to most of the high expectations held for them. The organisational cocoon of the old State sector had been broken open and structures reshaped through the application of the reforms' overriding principles. The State sector was more efficient, productive, and responsive, and there generally had been significant improvement in the quality of services provided to New Zealanders.41

The report also identified three areas that could be improved.

• Strategic Capacity. Within strategic capacity, which was defined as government’s ability to make purposeful and directed change, the report found that the SRAs and KRAs had improved government strategic focus. However, it also pointed out that the Government was still geared more to short-term outputs than the long term.

• Resource Base. The resource base, or the ability to allocate resources efficiently in terms of the outputs to be produced, was examined in light of getting both the financial incentives right for managers and getting the price right for the production of outputs. The report stated that the financial reforms had been successful and far-reaching. The report also identified the lack of rigorous costing mechanisms as hindering the process of negotiating and setting “price” in annual purchase agreements. As well, the report found that New Zealand still needed to deal with the issue of operating surplus in order to not distort the performance incentives within the system.

40 NZ State Service Commission, The Spirit of the Reform: Managing the New Zealand State Sector in a Time of Change, [http://www.ssc.govt.nz/spirit-of-reform], 1996. 41 Ibid.


14

• Accountability for results. Accountability, according to the report, had been the most successful aspect of the reforms. Although specifying and reporting on outputs had improved over the years, the report suggested that a greater use of trend and comparative data in the Estimates would improve the ability to judge performance and lessen the increasing demands from Parliament for supplementary questions addressed to departments.

As Schick concluded at the end, the next step for the New Zealand State Sector was to embrace a larger agenda. They would have to move from management issues to policy objectives to fostering outcomes, such as social cohesion, that had been enunciated by the Government and embraced by New Zealanders. They would have to do for outcomes what had been accomplished for outputs. The task ahead, according to Schick, was much more difficult than what had been accomplished thus far, but the rewards of success would be even greater.42 2.3.4 Crown Entity Reform

The Crown entities in New Zealand were normally established under their own empowering legislation. The statutes were often silent on what role the Ministers of State Services and Finance might have to implement whole-of-government interests. The roles of key players—Ministers, Crown entity Boards, and departments—were often unclear. Successive reviews also expressed concern about the current Crown entity governance framework. As they stated, improving the governance of Crown entities was important to improve performance, and establishing a clearer relationship between Crown entities and Ministers would enhance accountability, which in turn would lead to improved performance and achievement of Government's outcomes.

Based on these concerns, in August 2000, the Government announced changes to

governance and accountability arrangements for Crown entities and a proposed legislation. The Government was seeking to amend the current incomplete legislation to include provisions that would strike the right balance between accountability and autonomy. To achieve this, the Government introduced a Crown Entities Bill into the House of Representatives at the end of the year.

More than 70 Crown entities were to be allocated to one of four Classes: Crown

Agents, Autonomous Crown Entities, Independent Crown Entities, and Crown Companies. Each class would have its own distinct governance and accountability framework, which would ensure that the Government’s needs were met while balancing the right amount of flexibility for each Crown entity to function effectively.

In addition to improving vertical accountability—management to Board to

Minister—the draft legislation also addressed concerns about "horizontal" connections, which would focus on ensuring that the work of the entity would be well-aligned with whole-of-government interests, and working towards common outcomes.

42 Ibid.


15

The proposed Crown Entities Bill was seen as the biggest legislative change in

public management in the last eight years: more than 70 Crown entities were to be given clearer governance and accountability arrangements.43 The overall Crown Entity Reform package, including the guidance issued, was identified as one of the key initiatives designed to support the Government's goal of improving trust in government organizations.44 2.4 A New Stage: Getting Better Results

From year 2001, the State Services Commission has been sponsoring and leading a wide range of initiatives to improve public management, and consequently to get better results for citizens, Ministers and staff. These initiatives, which are called Overview: Getting Better Results45, as a whole aim to help the New Zealand Public Service and State sector to:

• focus more on achieving results; • get more citizen- and community-centred in how they do business; • build stronger people, culture and leadership; and • strengthen the integration of structures and processes.

2.4.1 Review of the Centre

The Review of the Centre46 was established by the Prime Minister, the Minister of State Services and the Minister of Finance in July 2001. A Ministerial Advisory Group was appointed, consisting of the heads of the three central agencies and three other members, indicating a desire for both internal experience and external challenge.

The Review was essentially a review of the public management system - of how well

it responded to the needs and expectations of Ministers and of citizens. The Advisory Group looked at the public management system as a whole. The Review:

• considered both departments and Crown entities;

• focused on the operation of the Executive rather than other branches of government - Parliament or the Judiciary; and

43 NZ State Sector Commission, Crown Entity Reform, [http://www.ssc.govt.nz/upload/downloadable_files/ce_reforms_overview.pdf], 2000. 44 Currently, there are five papers available from the State Services Commission or Treasury regarding the Crown Entity Reform: State Services Commission’s papers Crown Entity Reform: Governance and Crown Entity Reform: Assignment of Crown Entities to Classes, and Treasury’s papers Financial Arrangements, Reporting Requirements, and Subsidiaries. 45 NZ State Sector Commission, Overview: Getting Better Results, [http://www.ssc.govt.nz/overview-getting-better-results], 2001. 46 NZ State Sector Commission, Review of the Centre, [http://www.ssc.govt.nz/review-o f-the-centre], 2001.


16

• was aimed at the performance of the system in (among other things) supporting Ministerial decision-making, and implementing government policy decisions, and delivering services. It was not about the merits of particular government policies.

The report and recommendations of the Advisory Committee were released in December 2001. The Committee identified four priority areas for change: better integrated service delivery; addressing fragmentation and improving alignment in the State sector; enhancing people and culture; and improving central agency leadership.

Its major finding was that "the public management system as it stands today provides

a reasonable platform to work from, but some significant shifts in emphasis are needed to better respond to the needs of the future". 47 The report suggested a direction for change, rather than specifying all the details or costings of the change. Some of the recommendations made the future aspiration clear, but required further analysis to test and refine the actions to be taken. It identified three priority areas for change:

• Achieving better integrated, citizen focused service delivery, particularly where complex social problems are dealt with by multiple agencies, making sure the system is focused on the results that citizens and governments want in terms of outcomes and services;

• Addressing fragmentation and improving alignment particularly through: a stronger emphasis on outcomes; developing more effective, higher trust means of working together; harnessing technology; re-examining the large number of agencies and votes, and the tendency to emphasise vertical accountabilities rather than whole of government interests; and

• Enhancing the people and culture of the State sector, particularly building a strong and unifying sense of values, staff and management development, and meaningful opportunities for collective engagement in organisational decisions.

The Review report was considered by Cabinet, and its recommendations were

adopted in full on 17 December 2001. The Government also added two requirements to the Review's set of recommendations:

• to evaluate the integration of service delivery against the needs, priorities and interests of Maori; and

• to ensure that in addressing issues of fragmentation, the need for a whole of Government approach to issues of Maori policy would be considered.

A progress report on the Review of the Centre - One Year On - Getting Better

Results48 was issued in 2003. This report summarises the work done to date under the four priority areas for change, describes some of the results starting to emerge, and gives examples of the sorts of results and changes expected. 2.4.2 Other Initiatives

47 Ibid. 48 NZ State Sector Commission, Review of the Centre - One Year On - Getting Better Results, [http://www.ssc.govt.nz/roc-one-year-on], 2003.


17

Approved by the Cabinet and launched by the State Sector Commission in 2001,

Managing for Outcomes49 in the Public Service is an outcome-based approach to departments' planning, management and reporting. Its aim is to improve the performance of the Public Service and requires departments to adopt a strategic and outcome-focused approach to planning, management and reporting while focusing on delivering outputs. A Steering Group led by the State Services Commission, Treasury, Ministry of Maori Development, and the Department of the Prime Minister and Cabinet is overseeing the implementation of the initiative across the Public Service.

To ensure the State sector development infrastructure is able to address the career

aspirations of talented future leaders and senior managers, a package of new initiatives, known as The State Sector Senior Leadership And Management Development Strategy50, is currently being developed. The initiatives will be supported by legislative changes to the State Sector Act. The changes will emphasise the individual responsibility of the State Service Commissioner for setting standards for Public Service-wide senior leadership development and succession management, and the joint responsibility of the Commissioner and Public Service Chief Executives to deliver on them. Whilst the initiatives have a focus on senior leadership development and succession management, the term “leadership development” is not limited to chief executive and/or manageria l positions. It also includes senior specialist roles such as those involved in project management.

E-Government51 is mostly about citizen-centred delivery. It also contributes to

integrating processes. The Government launched the E-government Strategy in April 2001. The aim, under the strategy, is to create a public sector that is structured, resourced and managed to perform in a manner that meets the needs of New Zealanders in the information age and which increasingly delivers information and services using online capabilities.

Values and integrity is also about strengthening State sector people and culture. Public servants carry out the business of government with: shared values, high ethical standards, and in the spirit of service. To achieve this outcome, the Commission will support the Commissioner in the actions or interventions specified in the Statement of Intent 200252.

These initiatives are intended to shift the public service toward the following

directions: • a greater focus on results,

49 More information on Managing for outcomes is available at http://www.ssc.govt.nz/managing-for-outcomes. 50 More information on The State Sector Senior Leadership And Management Development Strategy is available at http://www.ssc.govt.nz/slmd . 51 More information on the E-government Programme is available on the e-government website at http://www.e-government.govt.nz/ . 52 NZ State Sector Commission, Statement of Intent 2002, [http://www.ssc.govt.nz/soi2002], 2002.


18

• a more citizen and community-centred process, • more integrated structures and process, and • stronger people, culture, and leadership.

More detailed expectations have been set up in the Current Problems in Public Management; however, as the Minister of State Sector noted, there is still work to be done on the interconnectedness of the initiatives, the risks and issues associated with their multiplicity, and exactly how they might change the public management system in total. 53 3. Key Elements

After almost twenty years of reform, the New Zealand Public Service has made great

improvement, taking New Zealand to the frontiers of performance practices internationally. The main driver, an economic crisis, no longer exists, given the surplus recorded in 1994 after two decades of deficit. Regarding the main initiatives, several key elements can be found through the New Zealand Public Service Reforms. 3.1 Legislative Commitment

New Zealand’s public sector reforms are well supported by legislation. The State Sector Act 1988, the first comprehensive legislation in New Zealand’s public sector reforms, was designed and passed to grant managers greater authority and flexibility. In 1989, the Public Finance Act introduced a radically different system of financial management and accountability. The new system completed and consolidated the changes made by the State Sector Act, increased the relevance of performance information, improved accountability, and shifted the financial management away from detailed control of costs to service quality and government desired outcomes. Another fundamental piece of legislation was the Fiscal Responsibility Act passed in 1994, to redefine the role and responsibility of the state, and establish an environment facilitating responsible and businesslike, longer-term public management. These three main laws, along with other laws, such as the State-Owned Enterprises Act and the Crown Entity Bill, built up the legislative framework, thereby ensuring the continuity of New Zealand’s reforms during the transitions of the Government when different parties were in power. 3.2 Leadership

As noted in the Spirit of the Reforms, political leadership is essential to the New Zealand Public Sector reforms.54 Both the Labour and National Party sought to improve the economic conditions and accountabilities. The National Government pressed for full implementation of the management model and pursued additional reforms. However, with the election of a left-wing coalition, bipartisan support for the reforms that had 53 NZ State Sector Commission, Current Problems in Public Management, [http://www.ssc.govt.nz/current-problems -public-management], 2003. 54 NZ State Sector Commission, The Spirit of the Reform: Managing the New Zealand State Sector in a Time of Change, [http://www.ssc.govt.nz/spirit-of-reform], 1996.


19

existed for fifteen years came to an end.55 After two years in office, the Coalition Government had made only modest changes.

Leadership support comes not only from political leaders, but also from managers. In

the New Zealand Public Sector, leadership capacity has long been a focus. As its fiscal problems were resolved, New Zealand’s reforms entered a new stage, with a focus on strengthening people, culture, and leadership. It will be fully implemented through the State Sector Senior Leadership And Management Development Strategy in the following five years.

3.3 Setting Objectives and Measuring Performance

Since the main driver of the reform was the country’s fiscal problems, the objectives of the New Zealand public sector reforms were focused firstly on improving financial management and reforming the bureaucracy and process. Another objective was to meet the public demand of higher quality service while retaining fiscal responsibility. The reforms during 1984 and 2000 can be described as the development of managerialism and a focusing on outputs.

Ever since the State Sector Act 1988, clear expectations of chief executives have

been set in performance agreements and purchase agreements. Beginning in 1993, a strategic management system was established outlining the Government’s strategic vision for New Zealand in the medium term. The strategic management system also involved interactions among Ministers, chief executives and central agencies. The system introduced the Strategic Results Areas (SRAs) in a government-wide plan and Key Result Areas (KRAs) in departmental plans and individual agreements.

Before 2000, a key feature of the New Zealand public management was its emphasis

on outputs rather than outcomes in the performance management process. The measures were then focused on the quantity, coverage, timelines, cost, and quality of the outputs. With the development of the performance management system, the New Zealand Public Sector began to emphasize outcomes. One of the main priorities of the new government is to put more focus on results, so that: 56

• Citizens will find complex problems get sorted out better, find government in Wellington less distant, notice less duplication, and feel well-served by public servants;

• Ministers will see more innovative solutions dealing with long-standing problems, be more confident on policy-making based on sound analysis and evidence, and hear fewer complaints about coordination and duplication; and

55 Graham Scott, Managing Government for Better Performance and Results, [http://unpan1.un.org/intradoc/groups/public/documents/un/unpan001961.pdf], Workshop on Financial Management and Accountability, United Nations Department of Economics and Social Affairs and the Government of Italy, 2001. 56 NZ State Sector Commission, Current Problems in Public Management, [http://www.ssc.govt.nz/current-problems -public -management], 2003.


20

• Staff will be better able to see and understand the results of their work, see their views being listened to and put into action, find work more satisfying, see senior people in frontline, and have more contact with people in other sections.

As the Minister of State Services has noted, since the year 2000, public management in New Zealand has been moving towards leadership and outcomes (getting results).57

3.4 Performance-Based Budgeting

Performance measurement is linked to the budget process directly through purchase agreements and output budgeting. Under the Public Finance Act 1994, Ministers are responsible for determining the outcomes the government seeks. The Government then selects the outputs that can best provide the outcomes and then allocates resources to them. The budget process is based on performance information on the volume and price of the outputs, rather than inputs. The objective is to link resource allocation as closely as possible with performance. 3.5 Performance-Based Human Resource Management

Performance-based human resource management was introduced as a part of New Zealand’s overall public sector reforms. As early as the State Sector Act 1988, clear responsibility and accountability requirements were set up for chief executives. The roles of Responsible Ministers, Chief Executives and senior managers in terms of ownership are defined in the purchase agreements and performance agreements. Given that chief executives are on fixed-term contracts, the reputation of being a high performer is critical should they wish to secure chief executive appointments in the future. Another important initiative for managers is the State Sector Senior Leadership And Management Development Strategy, which focuses on improving the leadership capacity.

However, some scholars have noted that too much weight was put on the minister-

chief executive relationship, suggesting that the idea that chief executives follow individual contracts could lead to a loss of collegiality and shared experience of public service as a whole.58

Under the instruction provided by the State Sector Act, the State Sector Commission

published the Service Code of Conduct in 1990, the purpose of which was to offer guidance on the standards of behaviour required of public servants. Three principles were also provided: that employees should fulfill their lawful obligations to Government with professionalism and integrity; employees should perform their official duties honestly, faithfully and efficiently, respecting the rights of the public and their colleagues; and employees should not bring their employers into disrepute through their private activities.59

57 Ibid. 58 Simon Smelt, Operational Efficiency in the New Zealand Public Sector, [http://firms.findlaw.com/smelt/memo6.htm], World Bank, 1997. 59 NZ State Sector Commission, Public Service Code of Conduct, [http://www.ssc.govt.nz/coc], 2001.


21

Staff are hired based on their merits, and flexible pay agreements based on

performance appraisals are used for most staff. This is said to have resulted in a clarification of goals and improved performance of staff. Training is another important aspect of human resource management. The Chief Executive of the New Zealand Public Service, with the support of the State Services Commission, established the Management Development Centre (MDC) in 1995 to promote excellence in the education, training and development of Public Service leaders and senior managers.

3.6 Performance Reporting and Reviewing

Defining and monitoring purchase and ownership performance requires comprehensive information about the full costs. For this reason, all government entities in the New Zealand Public Sector are required to report financial performance on an accrual accounting basis, using the same generally accepted accounting practices. Each department must provide a full set of financial statements to their ministers and the Treasury on a monthly basis. In addition, departments must also submit an audited annual Statement of Service Performance, outlining the outputs produced versus the outputs agreed. Departments also report publicly against their Department Forecast Report.

A range of approaches are used to review performance. The New Zealand Audit

Office has the overall responsibility of reviewing the performance of the public sector in both financial and non-financial areas. Ad hoc reviews of specific programs are also undertaken, both in relation to new policy objectives and expenditure pressures. Another important feature of the reviewing activities in New Zealand’s Public Sector is the independent review. For instance, both the Logan Review 1991 and the Spirit of the Reforms 1996 were led by independent review groups. The Logan Review recommended that a standard of good performance for a department should be the existence of a program of self-review covering internal audit and financial controls, management review, and evaluation of output effectiveness. 60 These reviews provide government and Parliament with clear performance information for future directions. 3.7 Building Performance Culture

According to the OECD, New Zealand public services are more accessible and responsive, more sensitive than in the past to the needs of citizens and clients, and much more efficient, compared to its past and compared to many other countries.61 A culture of performance is said to have penetrated New Zealand’s public management. Chief executives and managers know and accept that they are judged on the performance of their organisations. Their responsibilities are set up in the purchase and performance agreements. They accept that improving performance must be an ongoing objective, and that it is necessary that productivity gains in the state sector keep pace with developments

60 OECD, In search of Results: Performance Management Practices, Paris, 1997, p. 83. 61 NZ State Sector Commission, The Spirit of the Reform: Managing the New Zealand State Sector in a Time of Change, [http://www.ssc.govt.nz/spirit-of-reform], 1996.


22

in the market economy. Public Sector employees are also getting clear values of performance management through the Public Service Code of Conduct and the performance-based human resource management systems. From the year 2000 on, more emphasis will be put on building a performance culture in the New Zealand Public Sector.


23

Reference: Boston, J., “Transforming New Zealand’s Public Sector”, Public Administration, winter 1987. Logan, B., Review of State Sector Reforms, Wellington: Steering Group on the Review of State Sector Reforms, 1991. NZ Office of Prime Minister, Path to 2010, [http://www.executive.govt.nz/93-96/policy/index.htm], 1993. NZ Office of Prime Minister, Strategic Results Areas for the Public Sector: 1994-1997, 1995. NZ Parliament, State Sector Act 1988, [http://rangi.knowledge-basket.co.nz/gpacts/public/text/1988/an/020.html], NZ Parliament, 1988. NZ Parliament, Public Finance Act 1989, [http://rangi.knowledge-basket.co.nz/gpacts/public/text/1989/an/044.html], NZ Parliament, 1989. NZ Parliament, Fiscal Responsibility Act 1994, [http://rangi.knowledge-basket.co.nz/gpacts/public/text/1994/an/017.html], 1994. NZ State Sector Commission, Public Service Principles, Conventions and Practice, [http://www.ssc.govt.nz/display/site_search.asp?p=1&rootnavigationid=&qry=%27Principles%2C+Conventions+and+Practice%27&sortby=rank&x=26&y=5], 1995. NZ State Sector Commission, The Spirit of the Reform: Managing the New Zealand State Sector in a Time of Change, [http://www.ssc.govt.nz/spirit-of-reform], 1996. NZ State Sector Commission, New Zealand’s State Sector Reform: A Decade of Change, [http://www.ssc.govt.nz/decade-of-change], New Zealand, 1998. NZ State Sector Commission, Crown Entity Reform, [http://www.ssc.govt.nz/upload/downloadable_files/ce_reforms_overview.pdf], 2000. NZ State Sector Commission, Public Service Code of Conduct, [http://www.ssc.govt.nz/coc], 2001. NZ State Sector Commission, Overview: Getting Better Results, [http://www.ssc.govt.nz/overview-getting-better-results], 2001. NZ State Sector Commission, Review of the Centre, [http://www.ssc.govt.nz/review-of-the-centre], 2001.


24

NZ State Sector Commission, Review of the Centre - One Year On - Getting Better Results, [http://www.ssc.govt.nz/roc-one-year-on], 2003. NZ State Sector Commission, Statement of Intent 2002, [http://www.ssc.govt.nz/soi2002], 2002. NZ State Sector Commission, Current Problems in Public Management, [http://www.ssc.govt.nz/current-problems-public-management], 2003. New Zealand Treasury, Economic Management: Treasury Brief to the Incoming Government 1984, [http://www.treasury.govt.nz/briefings/1984/default.asp], NZ Treasury, 1984. New Zealand Treasury, Government Management: Treasury Brief to the Incoming Government 1987, [http://www.treasury.govt.nz/briefings/1987/], NZ Treasury, 1987. NZ Treasury, Fiscal Strategy Report, [http://www.treasury.govt.nz/budget2002/fiscalstrategy/], NZ Treasury, 1994. OAG Canada, Toward Better Governance - Public Service Reform in New Zealand (1984-94) and its Relevance to Canada, [http://www.oag-bvg.gc.ca/domino/other.nsf/html/nzbody.html], Ottawa: OAG, 1994. OECD, In search of Results: Performance Management Practices, Paris, 1997. Pollitt, Christopher and Geert Bouckaert, Public Management Reform: A Comparative Analysis, Oxford: Oxford University Press, 2000. Smelt, Simon, Operational Efficiency in the New Zealand Public Sector, [http://firms.findlaw.com/smelt/memo6.htm], World Bank, 1997. Scott, Graham, Public Management In New Zealand: Lessons and Challenges, [http://www.nzbr.org.nz/documents/publications/publications-2001/public_management.pdf], New Zealand Business Roundtable, 2001. Talbot, Colin; Lyn Daunton; and Colin Morgan, Measuring Performance of Government Departments—International Developments, [http://www.tintern.org/nao_gov_report.pdf], Report to UK National Audit Office, London: Public Futures Ltd, 2001.


Performance Management The United Kingdom

Notes On Public Sector Reform and Performance Management—the United Kingdom

0

Table of Contents The United Kingdom

1. Background


3. Main Initiatives

3.1. Next Steps 3.2. Citizen’s Charter 3.3. Performance Management Practices during the Mid-1990s 3.4. Comprehensive Spending Reviews 3.5. Modernising Government White Paper

4. Key Elements

4.1. Legislative Commitment 4.2. Leadership 4.3. Setting Objectives and Measuring Performance 4.4. Performance-based Budgeting 4.5. Performance-based HR Management 4.6. Performance Reporting and Reviewing 4.7. Building Performance Culture

5. Reference


1

The United Kingdom 1. Background

The United Kingdom Civil Service has a long history. For many years the Civil Service of the United Kingdom was regarded as the best in the world. Most of the civil servants came from middle-class families, who were well-educated, had good reputations and social status. However, by the early 1960s, there was increasing criticism of the civil service. Some critics even condemned civil servants as the main reason for bad policies which caused the stagnation of British Economics.1

The most famous criticism was the Fulton Report in 1968. Fulton argued that the

traditional British civil service was amateurish and incapable of dealing with the problems of an increasingly complex society. Fulton suggested that the Administrative Class should sharpen up its act and its language and style.2

The report also recommended changes in the management and structure of the Civil

Service and in 1968 the Civil Service Department (CSD) was established. Sir. William Armstrong understood that the job of the CSD was “to carry out a programme of reforming the Civil Service, with the object of improving its efficiency, and its humanity…”.3 The Civil Service Reform in the United Kingdom began to put its emphasis on efficiency of the government. The United Kingdom has evidenced its Civil Service Reform in the three coming decades ever since then.

As it turned out, however, the CSD was not a great success. Its head did not

command enough staff to carry weight with the colleagues of Whitehall, or to persuade the HM Treasury, and it was critically dependent on the Prime Minister.

Civil Service reform did not stop with these challenges. Margaret Thatcher placed

her stamp upon Civil Service reform when she became the Prime Minister in 1979, and, with her power in hand for 11 years, she made great impact on the Civil Service. The main doctrine of Thatcher’s government was:

• Rolling back the state • Providing value for money for taxpayers • Getting a grip on public spending • Privatization • Learning from best private-sector experience • Introducing management and efficiency into government

1 Terry Chih-sung Teng, The Reform of Civil Service in UK since 1980s, British Politics & Current Affairs, [http://www.efl.arts.gla.ac.uk/Mag/polciv1.htm], 1996. 2 The British Council, The Evolution of the UK civil Service 1848-1997 , [www.britishcouncil.org/governance/manag/civil/index.htm], July 1997. 3 Ibid


2

These elements brought the Civil Service reform in the UK into a new period with the focus not only on efficiency, but on the concepts of value for money, financial management, and accountability.

However, it seemed unlikely that the Armstrong memorandum, reminding officials

of the permanent constraints on their position and of the unchanging nature of their role subordinated to democratically elected Ministers, could be bettered as a statement of classic truth. 4 By 1987, the changes introduced by Thatcher’s government had hardly made an impact. However, with Sir Robin Butler as the head of the CSD and the re-election of the conservative government for the second time in 1987, the process began to accelerate.

The early initiatives and the socio-economic changes were part of the context of the

public management reform in the United Kingdom. The early initiatives changed the attitudes of people. Public servants began to accept that public service should get better results out of limited resources, that the aim of public service was to raise the standard of service and make them more responsible to the users, and that it was important to have effective leadership through delegation of pay and grading.5 Other drivers included demographic changes that increased the requirements of the civil service; the technological developments that allowed services to respond more efficiently; and the international impacts of globalization.

All the factors above led the UK government in the direction of more accountable

performance management reforms in the late 1980s and 1990s.

4 Cited in Civil Servants and Ministers: Duties and Responsibilities, Cmnd 9841, July 1986. 5 OECD, Strategic Review and Reform—The UK Perspective, [http://www1.oecd.org/puma/strat/symposium/uk.pdf], OECD: 1999.

Notes On Public Sector Reform and Performance Management—The United Kingdom

Timeline of Main Initiatives in UK

1968 1979 1988 1991 1994 1995 1999 1996 2000

Fulton Report

First Steps The Next Steps

The Citizen’s Charter Service First

1998

Code of Practice in Access to Government Information

Senior Civil Service

Comprehensive Spending Reviews Public Service Agreements

Modernizing Government White Paper

1992

Civil Service Act 1992

Freedom of Information Act

Civil Service White Papers Continuity and Change

Taking Forward Continuity and Change


4

2. Main Initiatives 2.1 Next Steps

As mentioned in the Background Section, the reform process was accelerated in 1987. In the 1980s, there were the Management Information System for Ministers (MINIS, 1980) program and the Financial Management Initiatives (FMI, 1982), which were seen as the first steps. However, after several years of these programs, the Efficiency Unit found that the reforms were not enough. In 1988, it issued a more radical program based on the report Improving the Management of Government: The Next Steps.

The report recommended that the executive function of government, which was

distinct from the policy advice, should be carried out by distinctive unit departments called executive agencies. At the heart of this new approach was the need to reorient systems and attitudes to focus on the delivery of services. The aim was to deliver government service more efficiently and effectively within available resources, for the benefit of taxpayers, customers, and staff. It also recognized that improvement also depended on individuals being personally responsible for the results.

The Next Steps report suggested that the establishment of Executive Agencies was

the most practical way to deliver civil service. An Executive Agency was defined as a discrete area of work, and was in the charge of a Chief Executive with personal responsibilities to a Minister for the day-to-day management. The Agency was structured around and focused on the tasks to complete. Ministers allocate resources, set annual performance targets for the results to be achieved, and delegate managerial responsibilities to the Chief Executive, who decides how best to run the organization and get the tasks achieved.

As a legislative support, the Civil Service (Management Functions) Act6 was passed

in 1992, empowering the government to delegate management functions relating to staff to individual agencies and thereby encouraging the decentralization of the determination of pay and conditions to the agency level. The Civil Service Act clarified the legal position regarding delegation of functions from Ministers to other servants of the Crown, including Agency Chief Executives.7

The relationships between ministers and Executive Agencies became one more akin

to management by contract, in which a “framework document” set out expectations and responsibilities between a minister and agency. The framework document addressed such items as the following8:

• Aims, objectives and targets

6 UK Parliament, The Civil Service (Management Functions) Act 1992, London: HSMO, 1992. 7 Statskontoret, What Lessons Can We Learn from the UK’s Next Steps Agencies Model? , http://www.statskontoret.se/pdf/200123.pdf, Sweden, 2001. 8 Efficiency Unit, Improving the Management of Government: the Next Steps, HMSO, 1998.


5

• Finance • Personnel, pay, and training • Communication and employee relations • Reporting, evaluation, and accountability By 2000, there were 140 agencies and 4 departments running on Next Steps lines,

covering 76% of the Civil Service and around 390,000 civil servants.9 Reviews and reports were published since 1991 on agenc ies’ activities, resources, performance against the targets, and future targets, and adjustments were made according to the previous reviews. The political response has been positive, and Mr. Major’s and Mr. Blair’s governments continued it with equal vigour. The relevant Parliamentary selected committee also viewed Next Steps as “transferable technology” that any government would wish to adopt.10

To sum up, the Next Steps made the separation of a core civil service that was responsible for project designing and the managerial autonomy agencies that engaged in service delivery. Moreover, the Next Steps brought the notion of government by contract and a more performance-oriented approach into Whitehall. 2.2 Citizen’s Charter

One of the most important initiatives of the Civil Service in the 1990s was the Citizen’s Charter Program, launched in 1991 by the Prime Minister, Mr. Major. In the introduction to the first publication, Mr. Major states11,

“to make public services answer better to the wishes of their users, and to raise their quality overall, have been ambitions of mine ever since I was a local councillor… I want Citizen’s Charter to be one of the central themes of public life in the 1990s…”

He also mentioned that

“There is a well-spring of talent, energy, care and commitment in our public service. The aim of the Citizen’s Charter is to release these qualities.”

The Citizen’s Charter was set as a ten-year program, following the previous reforms and adding care and commitment to the qualities that were needed. As noted by Mr. Major the aim was to improve the quality of public services and make them answer better to the wishes of their users. The emphasis has been on improving public servants’ efforts to fulfill their duties rather than upon creating new “rights” for citizens.12

9 OECD, Strategic Review and Reform—The UK Perspective, [http://www1.oecd.org/puma/strat/symposium/uk.pdf], OECD: 1999. 10 Cited in The Evolution of the UK civil Service 1848-1997, [www.britishcouncil.org/governance/manag/civil/index.htm], July 1997. 11 HSMO , The Citizen’s Charter: Raising the Standard , Cm 1599, London, July 1991. 12 The British Council, The Evolution of the UK civil Service 1848-1997 , [www.britishcouncil.org/governance/manag/civil/index.htm], July 1997.


6

The first white paper set out the principles which the government expected all public

services to follow, the scope of the program, and the agenda for its implementation. There have been four further white papers setting out progress and future plans. The initial focus was on establishing national charters in all of the main central government public services. The main principles of the Citizen’s Charter are:

• Standards. Standards are set, monitored, and published so that users can know what they can reasonably expect.

• Openness. Information should be full, accurate, in plain language, and with a clear indication of who is in charge, how services are run, and how much they cost.

• Choice. Choices should be provided wherever possible, and users consulted. • Courtesy and Helpfulness. Services are available equally to all, and public

servants should wear name tags. • Putting Things Right. Explanations or apologies should be made when things go

wrong, and complaints procedures should be clear. • Value for Money. Efficient delivery of services should be provided within

affordable resources.

After having been in progress for several years, the Citizen’s Charter has seen a whole series of mechanisms in place for delivering the basic principles. These include Charters for most government departments that deliver services directly, such as:

• Patient’s Charter • Taxpayer’s Charter • Contributor’s Charter • Parent’s Charter • The Victim’s Charter

By 1998, over 40 national charters were in place covering the main pub lic services. In addition, some 10,000 local charters were developed, covering, for example, individual hospitals, local authorities, services, and local schools.13 Organizations could apply for the Charter Mark Award, given to public services that demonstrated good performance in providing excellent service.

The Charter program provided more information about public services. Performance tables for schools, hospitals, local authorities, and police forces were given to people, for the first time, so they could see for themselves how their local services were performing.14 Progress under the Charter was reported regularly to Parliament and the public in a comprehensive report by the Prime Minister and Chancellor of the Duchy of Lancaster.

The development of the Citizen’s Charter went beyond the simple idea of measuring

customers’ satisfaction. Consumers’ interests were being defined in terms of performance

13 OECD, Strategic Review and Reform—The UK Perspective, [http://www1.oecd.org/puma/strat/symposium/uk.pdf], OECD: 1999. 14 OECD, In Search of Results: Performance Management Practices, Paris, 1997.


7

measurements. The emphasis moved from the initial concentration on setting standards for aspects of progress—for example, the waiting time of hospitals—to developing standards for outcomes—for example, the quality of education that children receive. The policy also seemed to be heading towards performance budgeting so that those organizations with better performance would receive more funds within the total limited budget. The hope was that the organizations with poor performance would improve their service in order to get more funds.

The Citizen’s Charter did not have a great impact on the machinery of the

government, but it did change the mentality and the language of government civil service delivery. It also received praise from the Public Services Committee of the House of Commons, which judged that it had made a valuable contribution to improving public services.15 The New Labour Government, which renamed the Citizen’s Charter as Service First, shared this opinion.

Following on from several years review of the UK Charter program, and from additional extensive consultation, the Blair Government in the UK re- launched the UK Charter program in 1998. The new charter program still aimed to improve service delivery across the public sector. It built on what had already been achieved throughout the country, but gave a new emphasis to promoting responsiveness, qua lity, effectiveness, and cross-sector working.16 The program includes:

• new principles of public service delivery for all services to sign up to; • a review of the major existing Charters over the next two years; • detailed guides aimed at improving the quality of national and local Charters; • a program of new Charters which includes new agencies; • a nationwide program of consultative workshops. In addition, changes are being made to the process of Charter development. One

example is the move of the Citizen's Charter Unit away from an enforcement role. Instead, the Unit's role is to encourage and assist organisations to instil into their organisational culture a general acceptance of the role that service standards have to play in the successful operation of each organisation. The function of the Unit has become more like that of consultant.

The Charter Mark award has also changed. Originally awarded through

competitions, it is now given to organisations that have successfully achieved a certain standard after the change. Organisations whose services reach the standard will automatically receive a Charter Mark award; this avoids an artificial limit on the number of organisations that could receive the award and encourages organizations to improve their performance. 2.3 Performance Management Practices during the Mid-1990s

15 The British Council, The Evolution of the UK civil Service 1848-1997 , [www.britishcouncil.org/governance/manag/civil/index.htm], July 1997. 16 Service First Unit, Service First: The New Charter Program, [http://www.servicefirst.gov.uk/1998/sfirst/bk1toc.htm], 1998.


8

During the mid-1990s, public sector reform focused on the continuing development

of performance management in the UK Civil Service The Code of Practice in Access to Government Information came into effect in April,

1994. The code was not simply concerned with answering requests for information, but with providing facts and analysis connected with major policy decisions, explanatory guidelines about departments dealings with the publics and information under the Citizen’s Charter about targets, cost, performance, and methods of complaints and redress of public services. A revised code came into effect in 1997.17 The vast majority of the amendments to the Code represent steps towards greater openness and accountability.

The Civil Service White Papers refer to two reports: Continuity and Change (1994)18

and Taking Forward Continuity and Change (1995)19, which were published by the Office of Public Office to sum up and, in a sense, to stabilize the process of continuous changes in the Civil Service. Government reaffirmed its commitment to maintaining a permanent civil service based on the values of integrity, political impartiality, objectivity, selection and promotion on merit, and accountability through Ministers to Parliament. Pay and grading was delegated to departments. The Civil Service Commission, part of whose functions have been taken over by Recruitment and Assessment Services (an Executive Agency), saw elements of privatization. The White Papers also expected further improvement in performance with tightly-controlled running costs and the elimination of unnecessary layers of management. In essence, the two reports have both reshaped the civil service and placed it in a position to evolve in the future.

The Senior Civil Service(SCS) was created in April 1996 to fulfill a policy of the 1994 White Paper Continuity and Change by acting as a deliberate counter-balance to the delegation of terms and conditions to department and agencies. Over 3,000 senior managers and advisers, while employed and managed by their own departments, had a broader identity as part of a cohesive group at the top of the service and are covered by a common framework of terms and conditions. This framework gave limited scope to the employing department or agency to vary terms and conditions, and includes:

• A common pay system, contracts and job evaluation methodology (JESP – Job Evaluation for Senior Posts);

• A common appraisal system using SCS core criteria or competencies; • Inter-departmental mobility arrangements including agreements on vacancy

filling; and • Training and development events.

Whilst the overall systems were common, there was some room for the systems to be tailored to meet local needs. With some exceptions, responsibility for all key pay and

17 Lord Chancellor's Department, Code of Practice in Access to Government Information, [http://www.lcd.gov.uk/foi/codpracgi.htm], 1997. 18 Office of Public Service, The Civil Service: Continuity and Change , Cm 2627, London: HMSO, 1994. 19 Office of Public Service, The Civil Service: Taking Forward Continuity and Change, Cm 2748, London: HMSO, 1994.


9

career decisions rested with local management. The Senior Civil Service constituted a coherent corporate recourse serving and underpinning collective government. The possibilities of wider and open competition was considered for many Senior Civil Service vacancies. The pay system also related pay to performance.

The practices during the mid-1990s were not seen as significant as those at the turn of the 1980s and the 1990s. However, these practices confirmed and strengthened the previous reforms, and pushed the wheels of reform further towards responsibility and accountability. 2. 4 Comprehensive Spending Reviews

As before, Civil Service reform did not stop with a change in government. One of the main initiatives of the new government was the Comprehensive Spending Review (CSR), which was undertaken in place of the normal public spending survey that would have been conducted during the autumn leading up to a Unified Budget in late November 1997.

The review was conducted in two tiers – a large number of separate departmental

reviews (over twenty) feeding into the wider overall review conduct by a Cabinet committee of senior Ministers looking across government as a whole.20 The CSR examined the resources allocated to each area of spending and, for the first time, the government published the service improvements and reforms required in return for the resources allocated to the departments’ expenditure programs.21

In July 1998, the government published the White Paper Modern Public Services for

Britain: Investing in Reform – Comprehensive Spending Review: New Public Spending Plan 1999-200222, setting out the results of the CSR and the new public spending plans for the period 1999 to 2002. In December 1998, another White Paper Public Service for the Future: Modernisation, Reform, Accountability – Comprehensive Spending Review: Public Service Agreements 1999-2002 was published23, setting out Public Service Agreements (PSA) that set out aims and objectives for each department as well as performance targets including measures of operations and outcomes.

20 OECD, Strategic Review and Reform—The UK Perspective, [http://www1.oecd.org/puma/strat/symposium/uk.pdf], OECD: 1999. 21 HM Treasury, Outcome Focused Management in the United Kingdom, [http://www.hm-treasury.gov.uk/media//1BE78/GEP_outcome%20focused%20management.pdf], London, 2002. 22 HM Treasury, Modern Public Services for Britain: Investing in Reform -- Comprehensive Spending Review: New Public Spending Plans 1999-2002, Cm 4011, [http://www.archive.official-documents.co.uk/document/cm40/4011/4011.htm ], London, July 1998. 23 HM Treasury, Modernisation, Reform, Accountability – Comprehensive Spending Review: Public Service Agreements 1999-200, Cm 4181, London, December 1998.


10

Since 1998 the CSR departments have been given budgets for three-year periods and allowed to carry forward money not spent in one year to the next, which has promoted medium-term planning by departments and taken away the incentive to wastefully spend money at the end of the year. As part of the CSR, each department has a Public Service Agreement (PSA) which is agreed between the Departments and the Treasury. It is a short document that consists of the department’s aim, objectives, and high- level performance targets. In addition, the PSA also includes a statement of who is responsible for its delivery. As stated in the Public Service for the Future: Modernisation, Reform, Accountability, “while the PSAs are intended to set out firm plans, departments will also be seeking, where they can and within existing recourses, to better existing targets and some departments may wish to add to them. ”24

Further, since the 2000 Spending Review (SR2000) there have been some

adjustments. First, the number of targets was reduced from 600, which was considered too many to follow, to 160. Second, there was a shift from setting a large number of output and process targets (process 51%, output 27%, and outcome 11%25) to setting a smaller number of mainly outcome targets (outcome 67%, process 14%, and output 9%26). This change reflected the government’s intention to make real changes to people’s experience of public services and the need.

PSAs were further supplemented in SR2000 by Service Delivery Agreements

(SDA)27, which outlined how the department intends to deliver its PSA targets. SDAs provided links between the PSAs and the more detailed business plans of departments and their agencies, which allowed government’s high- level targets to cascade down to the operational level. Technical Notes were also introduced, giving details on how departments’ performance against PSA targets would be measured.

Departments reported to HM Treasury on their performance against the targets on a

quarterly basis. Although Parliament had no formal role in setting the Government’s high level PSA targets, the publication of performance against these targets provided an important tool for Parliament in its role of scrutinizing the executive.

The UK Government was aware of the issues with cross-departmental boundaries,

where access to funds depended on the agreement of all ministers concerned. A critical part of the spending review process was the use of Cross-Cutting Reviews28 to determine

24 Ibid. 25 House of Commons Treasury Committee, Ninth Report: Spending Review 2000, [http://www.publications.parliament.uk/pa/cm199900/cmselect/cmtreasy/485/0072003.htm], London, 2000. 26 National Audit Office, Measuring the Performance of Government Departments, [http://www.nao.gov.uk/publications/nao_reports/00-01/0001301.pdf], London, 2001. 27 HM Treasury, Spending Review 2000: Service Delivery Agreements 2001-2004, A Guide, [http://www.hm-treasury.gov.uk/spending_review/spending_review_2000/service_delivery_agreements/spend_sr00_sda_index.cfm], London, 2000. 28 HM Treasury, Cross-Cutting Reviews, [http://www.hm-treasury.gov.uk/spending_review/spend_ccr/spend_ccr_index.cfm], London, 2000.


11

how best to co-ordinate the work of those departments whose areas of interests overlap and to ensure delivery.

The CSR allowed government to tie the allocation of resources explicitly to

commitments by departments to achieve specific and measurable performance targets. Under the reform, government departments were free to reallocate funds between different streams of their expenditure programs. Once departments agreed to their PSA commitments, they were free to use resources flexibly in order to ensure that they would meet their objectives. The CSR, thus, promoted both greater planning and performance delivery.

As noted in the News Release to the White Paper Public Service for the Future:

Modernisation, Reform, Accountability – Comprehensive Spending Review: Public Service Agreements 1999-2002, as “a revolution in the Government's approach to public services”29, the CSR was considered a milestone in the Civil Service Reform of the United Kingdom towards greater accountability. 2.5 Modernising Government White Paper

“Government has a mission to modernise – renewing our country for the new millennium… The new issues are the right issues: modernising government, better government, getting government right.”30

With this mission in mind, the Blair Government published the Modernising Government White Paper in 1999 as the Government's agenda for modernising Public Services, setting out its vision making government smaller and making life better for the citizens and business, by more strategic policy making and joined-up services.

The White Paper outlined the Government’s ambitions in the UK to modernize government with the idea of changing the way that services are planned and provided so that they are “citizen-centred”. As a long term program, Modernising Government would be achieved through five key principles:

• Policy Making. With more emphasis on outcomes, improving the way risk is

managed, tackling cross-cutting policies, expecting departments and other bodies with overlapping concerns to work together, better regulations and evaluating the impact of government programs.

29 HM Treasury, News Release on Public Service for the Future: Modernisation, Reform, Accountability – Comprehensive Spending Review: Public Service Agreements 1999-2002 , [http://www.hm-treasury.gov.uk/newsroom_and_speeches/press/1998/press_212_98.cfm], London, 17 December 1998. 30 Cabinet Office, Modernising Government White Paper, Foreword by The Prime Minister, Tony Blair, [http://www.nao.gov.uk/publications/nao_reports/00-01/0001301.pdf], London, 1999.


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• Responsive Public Service. To meet the needs of citizens in a joined up way through, for example, encouraging partnerships at all levels of government, and developing a more co-ordinated approach to delivering services.

• Improving the Quality of Public Services. With more emphasis on what taxpayers get for their money through clearer target setting, PSAs to shift the focus from inputs to outcomes, benchmarking to spread excellence, and a whole systems approach to performance management and inspection, thereby improving the effectiveness of the whole system.

• Information Age Government. Making better use of information technology through electronic commerce and electronic services for citizens and business. A new target has been set that all dealings with government be deliverable electronically by 2008.

• Public Service. Improving the performance of the Civil Service through better training, incentives, and more emphasis on innovation, drawing on private sector skills.

The first Modernising Government annual report Citizens First31 was published in September 2000. The report captured the spirit of the modernisation program, with over 45 examples of how the Government’s strategic vision (better government to make life better for people) has been translated into real action. These examples included Trade Partners UK using the Internet to send sales leads directly to businesses, Tenants auditing Sandwell Council's housing policies, NHS Walk-in Centres offering healthcare advice without the patient having to take time off work to make an appointment, etc.

In November 2000, Parliament passed the Freedom of Information Act32. The Act is an extension of the Data Protection Act 1998 and gives a general right of access to all types of 'recorded' information held by public authorities, sets out exemptions from that right and places a number of obligations on public authorities.

Noted as “the biggest investment in public service in modern times”33 in Prime Minister Mr. Tony Blair’s Introduction to Citizens First, the Modernising Government Program offered a challenge to the whole public service to modernise the government, to achieve citizen-centred services, to integrate policies and programs, to join up service delivery across departments and agencies, to harness the potential of information technology, to value the ideals of public service, and to get the best out of staff. As a “mixture of the old themes”34, the Modernising Government Program is the overall plan for the UK Civil Service in the 21st Century.

31 Cabinet Office, Citizens First, [http://www.cabinet-office.gov.uk/moderngov/download/anreport.pdf], London, 2000. 32 UK Parliament, Freedom of Information Act, [http://www.hmso.gov.uk/acts/acts2000/20000036.htm],London: HSMO, November 2000. 33 Ibid. 34 Christopher Pollitt and Geert Bouckaert, Public Management Reform: A Comparative Analysis, Oxford: Oxford University Press, 2000, p. 274.


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3. Key Elements

Over more than thirty years, there have been many significant initiatives in the UK Civil Service Reform. Even though there were different features at each stage within different governments, these initiatives share some common features and key elements. 3.1 Legislative Commitment

There has always been strong legislative commitment to the UK Civil Service Reform. The Civil Service (Management Functions) Act passed in 1992 empowered the government to delegate management functions relating to staff to individual agencies, and decentralization of the determination of pay and conditions to the agency level has been encouraged. The Freedom of Information Act was also passed in 2000 to ensure the access to information of public authorities, which enforced the transparency and accountability of the civil service.

The House of Commons of UK also provides support through its select committees.

The select committees of the House of Commons have reviewed the reform programs, and provided recommendations to the programs. 3.2 Leadership

Leadership has been a critical successful factor through the whole process of the Civil Service Reform of the United Kingdom. Evidence suggests that political support is important. For instance, some of the Next Steps changes were, in practice, very similar to the recommendations of the 1968 Fulton Report. However, the reforms were achieved in the 1980s, having failed in the 1970s. The key difference between the two attempts was the political leadership supports. Since the end of the 1970s, when Thatcher’s Government came to power, the leadership supports from the political aspect has been strengthened. In the following 20 years, the UK government, no matter Conservative or Labour, have strongly committed the Civil Service Reform towards better government.

Leadership for change has not only come from the political level, but also from

within the executive level of the Civil Service. For example, in the case of the Citizen’s Charter, high level commitment across the public service has proved essential and has been recognized with Charter Mark winners. 3.3. Setting Objectives and Measuring Performance

The Civil Service Reforms of the UK have a clear common objective of ensuring accountability for performance. The delivery of services is separated from the formulation of policy. Each organization has a clearly defined task, which is set out in the framework document. Detailed plans are required, setting out aims, goals, and targets that cover financial performance, efficiency, effectiveness, and service quality. Clear measures have been developed for monitoring and reporting. Clear principles have also


14

been published, which can be adapted to fit different circumstances, rather than a completely rigid model. 35 This has been considered one of the successful factors to the reforms.

As a comprehensive program, performance management in the UK has been initiated

from the top. All the major initiatives have been centrally initiated and participation is not at the discretion of departments and agencies. Performance targets are set by the ministries after consultation with the agencies. The use of instruments has often been mandatory rather than vo luntary. Although the reforms are comprehensive and centrally initiated, it is considered important to ensure flexible implementation and in practice, the performance targets are developed in discussions between the department and the agencies. While adhering to basic principles, the three-year CSR circle also provides departments and agencies with flexibility in setting and adjusting their targets.

One problem often raised was that there were too many targets to measure, leading to

incomplete performance information from the agencies. Attention has been paid to this problem. For instance, the number of targets was reduced from 600 in year 2000 to 160 in year 2001. Another problem was that the items targeted and measured for agencies might not be the most important aspects of their activity, but simply those things that were easiest to count at the point when targets needed to be designed. One general lesson from the past reforms was the need to become more sophisticated in the use of performance measures. It is recognized that outcome and performance analysis should be introduced as part of resource accounting and budgeting to reflect such a sophisticated approach. 3.4 Performance-based Budgeting

Performance measures and indicators are used in the budget process to set and review the budget, and to facilitate regular evaluation of achievements against objectives. The UK Government has put its efforts into planning and monitoring systems. The allocation of resources is combined with the setting of annual performance targets. The most significant practice in performance-based budgeting is the Comprehensive Spending Reviews, which allow government to tie the allocation of resources explicitly to commitments by departments and to the achievement of specific and measurable performance targets. 3.5 Performance-based HR Management

Performance-based pay is seen as an important aspect to improving civil service

efficiency. As such, the Civil Service of the UK made performance-based pay a key element of its reforms. Performance information is increasingly important in relation to

35 For more information about these principles, please refer to the relevant documents. Audit Commission, Aiming to Improve: the Principles of Performance Measurement, http://www.audit-commission.gov.uk/Products/AC-REPORT/72370C4D-1030-4b87-88F4-CD2A14B2A1AE/mppperfm.pdf, London, 2000. National Audit Office, Measuring the Performance of Government Departments, [http://www.nao.gov.uk/publications/nao_reports/00-01/0001301.pdf], London, 2001.


15

the pay arrangement. A key principle of the Citizen’s Charter is to link the individual’s pay and his or her contribution to the achievement of the organization’s objectives. The employment of the chief executive of a Next Steps Agencies and his or her performance pay relate to the agency’s performance against the targets set by the minister.

The Public Sector Excellence Programme 36( formerly called Public Benchmark

Project) encourages organizations and their managers to conduct self-assessments against the Business Excellence Model, which helps them better understand their performance and their position relative to other organizations, and better identify their strengths and areas for improvement. The program encourages the public sector to share best practice more systematically with each other, with the private sector, and with most successful government bodies.

3.6 Performance Reporting and Reviewing

The department and agencies are responsible and accountable to the Parliament and the public through periodic reports. For instance, all the Next Steps Agencies publish annual reports and accounts. In addition, the Cabinet Office publishes the annual Next Steps Reviews, summarizing the perfo rmance of all the Executive Agencies and providing comparative data. Similarly, there are annual reports published by the Cabinet Office on the Modernising Government Program. Performance information from these reports will be used in budgeting and planning processes for the future. From the review perspective, it is important to have the ability to review initial changes before too long. In the Next Steps program, for instance, this is done by the regular review of agency framework documents. With the passing of time, the focus of reviews has been more and more on outcomes. As noted in the Modernising Government White Paper, reviews will take into account the views of customers, and look at the scope for improving services through collaboration. 3.7 Building Performance Culture

Civil Service Reform does not only refer to the changes in the structure of the government, or to changes of policies, but is also important in changing the culture and people’s mentality. After many years of reform in the UK, the majority of people working in the public sector share the view that this has been a radical change and that it has brought significant benefits in terms of efficiency, effectiveness, clear focus on results, greater transparency, and greater accountability to taxpayers. Moreover, the concepts of delegation, wider business/customer involvement, and the introduction of experience from the private sector have all been applied widely across the public sector.

36 Cabinet Office, Public Sector Excellence Programme , [http://www.cabinet-office.gov.uk/eeg/1999/benchmarking.htm], London.


16


17

Reference

Audit Commission, Aiming to Improve: the Principles of Performance Measurement, http://www.audit-commission.gov.uk/Products/AC-REPORT/72370C4D-1030-4b87-88F4-CD2A14B2A1AE/mppperfm.pdf, London: Audit Commission, 2000.

Cabinet Office, Modernising Government White Paper, Foreword by The Prime Minister, Tony Blair, [http://www.nao.gov.uk/publications/nao_reports/00-01/0001301.pdf], London: Cabinet Office, 1999.

Cabinet Office, Citizens First, [http://www.cabinet-office.gov.uk/moderngov/download/anreport.pdf], London: Cabinet Office, 2000.

Cabinet Office, Public Sector Excellence Programme, [http://www.cabinet-office.gov.uk/eeg/1999/benchmarking.htm], London: Cabinet Office, 2000.

Efficiency Unit, Improving the Management of Government: the Next Steps, London: HMSO, 1998.

HM Treasury, News Release on Public Service for the Future: Modernisation, Reform, Accountability – Comprehensive Spending Review: Public Service Agreements 1999-2002, [http://www.hm-treasury.gov.uk/newsroom_and_speeches/press/1998/press_212_98.cfm], London: HM Treasury, 17 December 1998.

HM Treasury, Modern Public Services for Britain: Investing in Reform -- Comprehensive Spending Review: New Public Spending Plans 1999-2002, Cm 4011, [http://www.archive.official-documents.co.uk/document/cm40/4011/4011.htm ], London: HMSO, July 1998.

HM Treasury, Spending Review 2000: Service Delivery Agreements 2001-2004, A Guide, [http://www.hm-treasury.gov.uk/spending_review/spending_review_2000/service_delivery_agreements/spend_sr00_sda_index.cfm], London: HM Treasury, 2000.

HM Treasury, Cross-Cutting Reviews, [http://www.hm-treasury.gov.uk/spending_review/spend_ccr/spend_ccr_index.cfm], London: HM Treasury, 2000.

HM Treasury, Outcome Focused Management in the United Kingdom, [http://www.hm-treasury.gov.uk/media//1BE78/GEP_outcome%20focused%20management.pdf], London: HM Treasury, 2002.

House of Commons Treasury Committee, Ninth Report: Spending Review 2000, [http://www.publications.parliament.uk/pa/cm199900/cmselect/cmtreasy/485/0072003.htm], London, 2000.


18

HMSO, The Citizen’s Charter: Raising the Standard, Cm 1599, London: HMSO, July 1991.

Lord Chancellor's Department, Code of Practice in Access to Government Information, [http://www.lcd.gov.uk/foi/codpracgi.htm], London, 1997.

National Audit Office, Measuring the Performance of Government Departments, [http://www.nao.gov.uk/publications/nao_reports/00-01/0001301.pdf], London: NAO, 2001.

National Audit Office, Measuring the Performance of Government Departments, [http://www.nao.gov.uk/publications/nao_reports/00-01/0001301.pdf], London: NAO, 2001.

OECD, Strategic Review and Reform—The UK Perspective, [http://www1.oecd.org/puma/strat/symposium/uk.pdf], Paris: OECD, 1999.

OECD, In Search of Results: Performance Management Practices, Paris, 1997.

Office of Public Service, The Civil Service: Continuity and Change, Cm 2627, London: HMSO, 1994.

Office of Public Service, The Civil Service: Taking Forward Continuity and Change, Cm 2748, London: HMSO, 1994.


Service First Unit, Service First: The New Charter Program, [http://www.servicefirst.gov.uk/1998/sfirst/bk1toc.htm], London: HMSO, 1998.

Statskontoret, What Lessons Can We Learn from the UK’s Next Steps Agencies Model?, http://www.statskontoret.se/pdf/200123.pdf, Sweden, 2001.

Teng, Terry Chih-sung, The Reform of Civil Service in UK since 1980s, British Politics & Current Affairs, [http://www.efl.arts.gla.ac.uk/Mag/polciv1.htm], 1996.

The British Council, The Evolution of the UK civil Service 1848-1997, [www.britishcouncil.org/governance/manag/civil/index.htm], July 1997. UK Parliament, The Civil Service (Management Functions) Act 1992, London: HSMO, 1992. UK Parliament, Freedom of Information Act 2000, [http://www.hmso.gov.uk/acts/acts2000/20000036.htm], London: HSMO, November 2000.


Performance Management The United States of America

Notes On Public Sector Reform and Performance Management—the United States

0

Table of Contents The United States of America

1. Background


3. Early Initiatives

4. Main Initiatives

4.1. National Performance Review 4.1.1. Background 4.1.2. Contents 4.1.3. Implementation and Achievements 4.1.4. Reviews and Findings

4.2. Government Performance and Results Act 4.2.1. Background 4.2.2. Contents 4.2.3. Implementation and Achievements 4.2.4. Reviews and Findings

4.3. President Management Agenda 4.3.1. Background 4.3.2. Contents 4.3.3. Implementation and Achievements 4.3.4. Reviews and Findings

5. Key Elements

5.1. Legislative Commitment 5.2. Performance-Based Budgeting 5.3. Performance-Based HR Management 5.4. Leadership 5.5. Setting Objectives and Measuring Performance 5.6. Performance Reporting and Reviewing 5.7. Building Performance Culture

6. Reference


1

The United States of America 1. Background

The United States of America is characterized by a “business-oriented,” “free enterprise” culture. Its system of government is also open and fragmented.1 The two parties, Republican and Democrat, are also influenced by the general “free enterprise” culture. The majority of both parties have been willing to build a more “businesslike” government. These factors made it easy for the USA public sector to accept the concepts from the private sector, and the federal administration has shown enthusiasm towards many of the contemporary management techniques, including management by objectives (MBO), total quality management (TQM), downsizing, benchmarking, and re-engineering.

However, fewer obstacles on the road towards privatization do not necessarily mean

that the public sector has been reformed enough. There are always pressures from different perspectives.

Though noted in Public Management Reform: A Comparative Analysis, that the need

to constrain public expenditure has been a prominent theme throughout the history of public reforms, this is not the problem in the case of the USA. 2 Although rich, based on average per capita incomes, the USA spent a surprisingly small amount of government money on social expenditure.3 Compared with most European countries, the USA is only a “thin” welfare state.4 This brought forth the citizens’ criticism. Since the 1970s, US public opinion has tended to be increasingly critical of both the motive and the competence of the federal government. Many Americans believed that the federal bureaucracy wasted huge sums of money. The USA experienced strong anti-government rhetoric and low public trust. With this in mind, each of the four last Presidents felt it politically advantageous to include criticism of the federal bureaucracy as a significant element in their electoral campaigns.

The 1980s also was a period during which political and popular awareness of the

federal deficit grew. Very high levels of defence spending under the Reagan administration, together with its failure to cut back on social programs, also contributed to this problem. In the late 1980s and early 1990s, the US fiscal position was weakened considerably, and was accompanied by crises in a number of public policy areas, such as

1 Christopher Pollitt and Geert Bouckaert, Public Management Reform: A Comparative Analysis, Oxford: Oxford University Press, 2000, p. 279. 2 Ibid, 195. 3 Source from OECD, via Colin Talbot, Lyn Daunton, and Colin Morgan, Measuring Performance of Government – International Developments, Report to the UK National Office, [http://www.tintern.org/nao_gov_report.pdf], London, 2001 4 Christopher Pollitt and Geert Bouckaert, Public Management Reform: A Comparative Analysis, Oxford: Oxford University Press, 2000, p. 278.


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crime, health, and education. By the end of the 1980s, there were signs of a real collapse of morale within the federal government service.5

5 Cited in Christopher Pollitt and Geert Bouckaert, Public Management Reform: A Comparative Analysis, Oxford: Oxford University Press, 2000, p. 280.

Notes On Public Sector Reform and Performance Management—The United States

Timeline of Main Initiatives in USA

1978 1982 1993 1997 2002 2000 2003

Civil Service

Reform Act The Grace Commission

Government Performance and Results Act (GPRA)

National Performance National Partnership for Review (NPR) Reinventing Government (NPR)

2001

Reform 88

GPRA First Annual Report

President Management Agenda (PMA)

Managerial Flexibility Act Freedom to Manage Act Proposals

PMA Mid-Session Review

PART

GPRA Strategic Plans


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2. Early Initiatives

Aware of the social and financial problems of their country, all five Presidents (Carter, 1976-1980; Reagan, 1980-1988, Bush, 1988-1992; Clinton, 1992-2000; and G. Bush, 2000-present), have instituted a number of reforms.

One reform was President Carter’s Civil Service Reform Act (CSRA) in 1978. CSRA created a Senior Executive Service (SES) of about 8,000, and introduced performance appraisal and merit pay. CSRA set out to define a modern management system that would continue to protect the merit system while placing increased emphasis on personnel programs, improved management, and greater productivity. Its stated purpose was to "ensure that the executive management of the Government of the United States is responsive to the needs, policies, and goals of the nation and otherwise is of the highest quality."6 The Government's senior executives would be held accountable for individual and organizational performance. To achieve this purpose, CSRA gave greater authority to agencies to manage their executive resources and assigned Office of Personnel Management (OPM) the responsibility for government-wide leadership, direction, and oversight. This comprehensive reform of the civil service system was seen as “the first since the Pendleton Act of 1883”7.

The Reagan government introduced a welter of reforms, many of which were designed to bring “business disciplines” to the federal civil service. Some main initiatives were:

• The President’s Council on Integrity and Efficiency, established in 1981, which “questioned many practices, identified billions of savings as a result of audits, launched civil service and criminal actions, and introduced many sanctions against government agencies or employees.”8

• Reform 88, launched in 1982, was a broad-scope program, somewhat lacking in focus. Actions included upgrading computer systems and improving financial management and accountability.

• The President’s Private Sector Survey on Cost Control (PPSSCC, better known as the Grace Commission), created in 1982, was considered one of the most publicized of these initiatives, and in some ways typified the Reagan administration’s approach. 9 The program brought large numbers of business people to identify bureaucracy waste and to make recommendations.

6 US Congress, Civil Service Reform Act, Public Law 95-454, Oct. 13, 1978. 7 Federal Labor Relations Authority, A History of the Statue, [http://www.flra.gov/reports/20yr1.html], Washington DC, 1999. 8 D. Savoie, Thatcher, Reagan, Mulroney: In Search of New Bureaucracy, Toronto: University of Toronto Press, 1994, p.189. 9 Christopher Pollitt and Geert Bouckaert, Public Management Reform: A Comparative Analysis, Oxford: Oxford University Press, 2000, p. 282.


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• The President’s Productivity Program introduced in 1985, which aimed at increasing the productivity of government agencies by 20 percent by 1992. Measures included the widespread adoption of total quality management (TQM).

As noted by Savoie, “although not nearly as successful as he would have liked, Reagan promoted privatization, contracting out, and user fees at every opportunity.”10

It seems no major reforms were taken during the Bush administration (1988-1992), even though in 1989 a task force identified serious weaknesses in the public services including pay, performance appraisal, career development systems, and morale. One observer wrote, “America’s flame of managerial reform seems to have died down to a glowing ember.”11

By contrast, the incoming Clinton administration of 1992 was keen to restore status to the federal government machine by pursuing a high-profile reform that was intended to lead to government that “works better and costs less”. This notion led to the main initiatives in the public management reforms in the USA in the 1990s.

10 D. Savoie, Thatcher, Reagan, Mulroney: In Search of New Bureaucracy, Toronto: University of Toronto Press, 1994, p.215. 11 A. Hede, “Trends in the Civil Services of Anglo-American Systems”, Governance, 4:4, October 1991, pp. 489-510.


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3. Main Initiatives 3.1 National Performance Review 3.1.1 Background

President Clinton took office at a time when extensive public management reforms were being implemented in other jurisdictions, as well as within the US federal and state governments. These changes came about because of pressures from global competition or were the result of local financial crises. One of the biggest pressure was the increasing public distrust in the ability of the federal government to do things right. Having promised to “reinvent” the federal government and to make it work better and cost less, President Clinton created the National Performance Review (NPR) on March 3, 1993 with Vice President Gore as its leader. The President asked the Vice President to have a six-month review and to report the results by September 7, 1993. 3.1.2 Contents

The review was staffed by about 250 civil servants. In addition, some interns, state and local government employees, and consultants were involved in the work force. Two sets of teams were organized: one would review the individual agencies and the other would focus on government systems—procurement, budget, personnel, etc. Agencies were also encouraged to create their own internal “reinvention” teams to work with the NPR teams. The Review started with a clear set of principles and an inspiring vision. The goal was to create a government that “works better and costs less” by following four key principles12:

• Cutting red tape, • Putting customers first, • Empowering employees to get results, and • Cutting back to basics: producing better government for less.

Following the principles, was the action plan, which included the following key elements: • Create a clear sense of mission, • Steer more, row less, • Delegate authority and responsibility, • Replace regulations with incentives,

12 Al Gore, From Red Tape to Results: Creating a Government that Works Better and Costs Less, [http://govinfo.library.unt.edu/npr/library/nprrpt/annrpt/redtpe93/index.html], Washington DC: Government Printing Office, 1993. Introduction.


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• Develop budgets based on outcomes, • Expose federal operations to competition, • Search for market, not administrative, solutions, and • Measure our success by customer satisfaction.

Based on the NPR’s key principles, the final report From Red Tape to Results:

Creating a Government that Works Better and Costs Less was presented to President Clinton on September 7, 1993. The NPR made 384 recommendations, based on 38 “accompanying” reports that detailed 1,250 specific actions. The recommendations were expected to save $108 billion in five years, to reduce the number of “overhead” positions, and to improve government operations.

Immediately after the presentation of the report, the President and Vice President made a tour of the country to promote the report and issued President Directives to begin implementation of the recommendations, including cutting 252,000 positions 13, cutting internal regulations in half, and requiring agencies to set customers service standards.

13 NPR, History of the National Partnership for Reinventing Government Accomplishments, 1993-2001, [http://govinfo.library.unt.edu/npr/whoweare/appendixf.html], National Performance Review, 2001.


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3.1.3 Implementation and Achievements

After the initial report, the NPR team undertook to implement the many recommendations, and then conducted a second round of reviews in 1995. NPR approached the implementation of these actions at three perspectives: government-wide, agency-specific, and employee-focused. After the first Clinton-Gore term, nearly two-thirds of the changes had been made. In their second term, the National Performance Review was renamed National Partnership for Reinventing Government. NPR began to focus on transforming the culture in the most agencies with the most public contact so as to be more results-oriented, performance-based, and customer-focused. During the seven years of implementation, NPR is said to have achieved these significant accomplishments14:

• NPR’s recommendations adopted by the Congress led to savings of about $136 billion.

• The size of the federal work force was reduced by 426,200 between January 1993 and September 2000. For the first time the government was the smallest it had been since the Eisenhower administration.

• More than 640,000 pages of internal agency rules were cut, more than 16,000 pages of federal regulations were eliminated, and another 31,000 pages were rewritten into plain languages.

• More than 1,200 Hammer Award15 teams were honoured for reinvention efforts that would save $37 billion as they estimated.

• Agencies completed a substantial majority of the 1,500 recommendations that NPR made in 1993, and in 1995, President Clinton signed more than 50 new directives and Congress passed 90 laws16 to streamline government operations as the Presidential and congressional supports.

• Partnerships and networks with communities were used to streamline services including reduction of gun violence, books4kids, 21st Century Skills Community Network, etc.

• 570 federal organizations committed to more than 4,000 customer service standards.17 30 agencies measured satisfaction with their services via a third party with international standards.

14 John Kamensky, History of the National Partnership for Reinventing Government Accomplishments, 1993-2001, [http://govinfo.library.unt.edu/npr/whoweare/appendixf.html], National Performance Review, 2001. Appendix F. 15 More information about Hammer Award is available at [http://govinfo.library.unt.edu/npr/library/awards/hammer/index.htm]. 16 More information about legislations related to NPR is available at List of Laws Signed by President Clinton Containing NPR Recommended Actions, 1993-2000, [http://govinfo.library.unt.edu/npr/whoweare/appendixc.html]. 17 More information about Customer Service Standards is available at NPR’s Customer Service Standards Reports, [http://govinfo.library.unt.edu/npr/library/system_reports].


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• A one-stop website, FirstGov.gov was developed for government information, transactions, programs results, and e-mail feedback to government officials, with connections to 27 million web pages and around 1,000 forms and services.

3.1.4 Reviews and Findings

Different conclusions have been drawn about the NPR ever since its inception.

When the NPR report was released in 1993, some cynics dismissed it as “just another hollow piece of the rhetoric.” Academics attacked it as dangerous to the public interest. 18 Gore’s team was also criticized for focusing heavily on cutting federal jobs.19 Another problem was that NPR was an uneven phenomenon. Where the NPR was a top priority, employees were three times as likely to think that government organizations had made good use of their ability and twice likely to think that productivity was better than where NPR was not emphasized. 20

On the other side, there are also many comments that support those activities. Kettl

noted, “in the first year, the NPR has proven one of the most lively management reforms in American history. It has helped reorient the federal bureaucracy toward a far more effective attack on problems that it must learn to solve.”21 The supports also came from local administrators. As John Koskinen, deputy mayor and city administrator for the District of Columbia, said, “the vast majority of the improvements recommended by NPR were moving in the right direction, though the organization had a hard time getting everyone to see the big picture.”22

Overall, as the longest public reform in American history, NPR did make changes in the culture with an emphasis on putting customers first, focusing on results, empowering employees, and downsizing government. Kettl commented that NPR would be abolished if anyone other than Al Gore were to sit in the Oval Office in January 2001, “however, it will have to lead to its re-creation (under a different name) soon there after.”23

18 Via Donald F. Kettl, Reinventing Government? Appraising the Nation Performance Review, [http://www.brook.edu/dybdocroot/gs/cpm/reinventing.htm], Brookings Institution, 1994. 19 Via Jason Peckenpaugh, Reinvention Remembered: A Look Back at Seven Years of Reform, [http://www.govexec.com/dailyfed/0101/011901p1.htm], GovExec.com Daily Briefing, January 19, 2001 20 Donald F. Kettl, Has Government Been “Reinvented”?, [http://www.brook.edu/dybdocroot/views/testimony/kettl/20000504.htm], Brookings Institution, 2000. 21 Via Jason Peckenpaugh, Reinvention Remembered: A Look Back at Seven Years of Reform, [http://www.govexec.com/dailyfed/0101/011901p1.htm], GovExec.com Daily Briefing, January 19, 2001 22 Via Tanya Ballard, Ex-Y2K Czar Says Bush Should Put Management on Front Burner, [http://207.27.3.29/dailyfed/0601/062601t1.htm], GovExec.com Daily Briefing, Jan 26, 2001. 23 via Brian Friel, The End of Reinventing Government as We Know It , [http://www.govexec.com/dailyfed/0200/020100b1.htm], GovExec.com Daily Briefing, Febrary 1, 2000.


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3.2 Government Performance and Results Act 3.2.1 Background

Another significant reform initiative during Clinton’s administration was the Government Performance and Results Act (GPRA)24 passed in 1993. An important distinguishing aspect of the GPRA initiative from other reforms is its basis in law. It is thus a creation not only of the President, but also of the Congress. Laws are enduring monuments to government, while Presidential directives might begin or end with a Presidential term.

Although GPRA was passed by the Clinton government, its origins go back to the

1990s. Inspired by the sophisticated performance-based management and budgeting system of the city of Sunnyvale 25, Mr. John Mercer, a former Mayor of Sunnyvale, proposed the idea of GPRA to Senator William V. Roth in January 1990. In October 1990, Senator Roth introduced the Federal Program Performance Standards and Goals Act of 1990 to the Committee on Government Affairs. Again, in January 1991, a revised version, S.20, was referred to this Committee for hearings. The Committee considered S.20 on August 5, 1992 and adopted an amendment retitling the bill the Government Performance and Results Act 1992. In January 1993, S.20 was introduced again for additional hearings.

The idea of GPRA was supported strongly by the Office of Management and Budget

(OMB) and the General Accounting Office (GAO). Legislation passed the House on May 25 and the Senate on June 23. President Clinton signed GPRA on August 3, 1993, noting it as “an important first step in the efforts to reform the way the federal government operates and relates to the American people.”26 3.2.2 Contents

John Mercer stated in his Congressional testimony in 2001 that

“GPRA was intended to point the federal government in a particular direction toward a generally defined vision of improved government performance, and then to begin moving it down that road a ways toward fulfilling this vision. … It [GPRA] was intended to lay a firm foundation upon which to build a more complete structure of performance management.”27

24 US Congress, Government Performance and Results Act, Public Law 103-62, [http://www.john-mercer.com/library/gpra_text.pdf], August 3, 1993. 25 More information on performance management system of Sunnyvale is available at http://www.john-mercer.com/mpb_system.htm. 26 Bill Clinton, Remarks by the President at Bill Signing for the Government Performance and Results Act of 1993, [http://clinton6.nara.gov/1993/08/1993-08-03-signing-of-the-government-performance-and-results-act.html], Washington DC: The White House, August 3, 1993. 27 John Mercer, The Results Act: Has It Met Congressional Expectations?, [http://www.john-mercer.com/library/jm_testimony.pdf], Congressional Testimony, June 19, 2001.


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GPRA was intended to improve the effectiveness of the federal government as measured by results, and to do this through better management. Transparency and accountability were introduced as the two core values reflected in GPRA. Stated in the legislation, the purposes of GPRA were 28:

• to improve the confidence of the American people in the capability of the Federal Government by systematically holding Federal Agencies accountable for achieving program results;

• to initiate program performance reform with a series of pilot projects in setting program goals, measuring program performance against these goals, and reporting publicly on their progress;

• to improve Federal program effectiveness and public accountability by promoting a new focus on results, service quality, and customer satisfaction;

• to help Federal managers improve service delivery, by requiring that they plan for meeting program objectives and by providing them with information about program results and service quality;

• to improve congressional decision making by providing more objective information on achieving statutory objectives, and on the relative effectiveness and efficiency of Federal programs and spending; and

• to improve internal management of the Federal Government.


Although passed in 1993, GPRA implementation actually began in 1997. GPRA attempted to achieve its goals by requiring agencies to prepare strategic plans, annual performance plans, and program performance reports. Agencies were also required to describe the timing, content, and consultation information of each plan. More specifically, GPRA required that:

• Each federal agency develop a 5-year strategic plan to be updated every three years. The first strategic plan was to be submitted no later than September 30, 1997. Each strategic plan was to include general agency goals and objectives, outcome measures, and how these related to specific program performance goals. In creating the plan, agencies must consult with Congress and stakeholders. OMB oversees the development of these plans and provides guidelines29 for the preparation of the submission.

• Each federal agency develop an annual performance plan covering each program activity and establishing performance goals that are objective,

28 US Congress, Government Performance and Results Act, Public Law 103-62, [http://www.john-mercer.com/library/gpra_text.pdf], August 3, 1993. 29 OMB, OMB Circular No. A-11, [http://www.whitehouse.gov/omb/circulars/a11/01toc.html], Washington DC: The White House, 1993. A Revised Version can be found at [http://www.whitehouse.gov/omb/circulars/], June 27, 2002.


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quantifiable, and measurable. An initial draft was to be provided to OMB by September 1997, along with the strategic plan, and then be revised and included in the FY 1999 US Budget.

• Starting in 2000, each federal agency must submit program performance reports to Congress, which must review and evaluate the success of achieving the performance goals from the previous fiscal year. The first annual report was to be submitted on March 1, 2000.

• In exchange for accountability to achieve a performance goal, OMB may grant agency managerial waivers designed to allow administrative flexibility. Agencies can submit the waiver requests with their first performance plan, and must describe the anticipated effects on agency performance.

• No less than ten agencies must be designated as pilot projects. The selected agencies were to reflect a representative range of Government functions and operations of the agency. OMB was to submit a report, no later than May 1, 1997, as to the assessment of the pilot projects.

Walter Groszyk noted, “by design, GPRA is not trying to transform immediately the

whole Executive Branch of government.”30 A four-year period was planned for making any needed changes in government processes, systems, and practices before the law was to take full effect in 1997.

The law provided the creation of no less than ten pilot projects, but OMB took

advantage of the opportunity and, by 1997, 72 pilot projects were approved. Even though waivers were permitted during the pilot phase of GPRA, it was not easy to get them effected. OMB rejected all of the 61 proposals because they did not fit into the required guidelines or could be waived under other authorities.31 In 1997, all of the 14 departments and important agencies submitted their drafts of strategic plans for OMB and GAO to assess.32

Performance Notes from Leaders’ Forums, which were held by the National

Academy of Public Administration, suggest that agencies had made significant progress in implementing GPRA. 33 A number of agencies took important steps to increase stakeholder participation in understanding performance measures. For instance, the Patent and Trademark Office (PTO) utilized outside research and stakeholders’ consultation in the development of performance measures. Steps were also taken to better integrate financial, planning, and budget processes. For example, the Small Business

30 Walter Groszyk, Implementation of the Government Performance and Results Act 1993 , [http://www.govinfo.library.unt.edu/npr/library/omb/gpra.html ], OMB, 1995. 31 OMB Watch, Analysis of the Government Performance Act 1993, [http://www.ombwatch.org/gpra/1997/gpradesc.html], OMB Watch, 1997. 32 GAO Assessments can be found at http://www.gao.gov/new.items/gpra/gpra.htm . 33 Leaders’ Forum, Performance Notes, [http://www.napawash.org/pc_government_performance/recent_performance.html], National Academy of Public Administration, November 16, 1999.


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Administration (SBA) aligned its 2000 and 2001 budgets with GPRA. Starting in fiscal year 1999, departments and agencies submitted their performance

plans to OMB and GAO for assessment. GAO described the strengths and weaknesses of departments’ plans in the report Managing for Results: Opportunities for Continued Improvements in Agencies’ Performance Plans.34 As noted in the report, overall, agencies’ fiscal year 2000 performance plans showed moderate improvements over the fiscal year 1999 plans and contained better information and perspective. The major strengths were:

• Result-oriented goals and quantifiable measure were frequently used to address program performance.

• Use of baseline and trend data to identify past performance was widespread. • Program strategies were often discussed in relation to the achievement of

performance goals.

The key weaknesses were:

• Attention to mission-critical management challenges and program risks were not consistent.

• Coordination of crosscutting program areas needed additional effort. • Presentations of how agencies’ human capital and management resources and

strategies would be used to achieve results were insufficient. • Confidence that performance data will be credible was limited.


GPRA was intended to shift the focus of federal agencies from accountability for process to accountability for results. In doing so, the legislation introduced an important new emphasis into federal performance measurement – the need to identify desired outcomes. As John Mercer stated, the distinction between measuring program outputs and measuring actual outcomes was fundamental to the ultimate accountability of Congress and federal agencies for the effectiveness of the programs they created and administered.35

As a law, GPRA provided legal support for public management reforms. The GAO

described GPRA as “the centerpiece of a statutory framework Congress put in place during the 1990s to address long-standing weaknesses in federal operations, improve federal management practices, and provide greater accountability for achieving results.”36 Through this statutory framework, Congress sought to improve the fiscal, program, and

34 General Accounting Office, Managing for Results: Opportunities for Continued Improvements in Agencies’ Performance Plans, [http://www.gao.gov/new.items/gpra/g199215.pdf], GAO, 1999. 35 John Mercer, Overview of Government Performance and Results Act, [http://www.john-mercer.com/gpra.htm], GPRA and Performance Management Services Website http://www.john-mercer.com/ . 36 General Accounting Office, Managing for Results: Agencies’ Annual Plans Can Help Address Strategic Planning Challenges, [http://www.gao.gov/archive/1998/gg98044.pdf], GAO, January 1998.


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management performance of federal agencies, programs, and activities. After several years of implementation, GPRA was viewed as “a powerful tool to strengthen government performance”37 not only by governments but also by non-profit organizations and academic scholars. Kettl noted in his statement before the joint hearing of committee on Government Reform and Oversight and Committee on Government Affairs, “it [GPRA] can provide the missing link between authorizations and appropriations, on the one hand, [and] the worries about government performance on the other.”38

GPRA has several key features:

• GPRA provided agencies enough time to review their strengths and weaknesses, allowing them time to develop a useful strategic plan.

• There was no single or uniform approach to performance measurement across the government, thus avoiding over-specification or rigidity in how agencies met the Act’s requirements.

• To avoid debates on how best to categorize particular measures, GPRA defined only two types of performance measures: output and outcome measures, both of which were defined sufficiently broadly to cover other measures, such as impact, efficiency, etc.

• No new GPRA bureaucracy was developed. Agencies were not asked to “reinvent the wheel”, but to use and apply existing processes and products when developing the plans and reports for GPRA.

• Pilot projects conducted before the full implementation of GPRA provided agencies with experiences and lessons.

• Consultation with Congress enabled agencies to consider the views of those entities potentially affected by or interested in the plan.

Scholars and government agencies also made recommendations to improve the

implementation of GPRA. Ellen Taylor stated in her testimony of GPRA that “GPRA’s success depends on government’s commitment to it.”39 If GPRA is to succeed and not to become yet another partially successful reform, Congress and the Executive Branch, in partnership, must build on past efforts as they move to a new Administration and devote time and resources to the full implementation of GPRA. Taylor also suggested the GPRA reports, plans, and performance information be more easily accessible to the public and written in ways that would be understood by the public, thereby increasing the public’s awareness about GPRA. From the non-profit aspects, OMB Watch suggested that Congress mandate stakeholder involvement in the performance planning process.

37 Ellen Taylor, Seven Years of GPRA, Has the Results Act Provided Results, [http://www.ombwatch.org/article/articleview/887/1/90/ ], OMB Watch, 2000. 38 Donald F. Kettl, Implementation of the Government Performance Act of 1993, [http://www.brook.edu/views/testimony/kettl/7f85c224f737ff3a5bd873580a141465.htm], Brookings Institution, 1996. 39 Ellen Taylor, Seven Years of GPRA, Has the Results Act Provided Results, [http://www.ombwatch.org/article/articleview/887/1/90/ ], OMB Watch, 2000.


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GPRA did not fade away with the change of administration. In his Speech Getting Results From Government, President Bush mentioned he would reform and modernize government on the basis of three key objectives: citizen-centered, results-oriented, and market-based. One of the key elements to make government results-oriented is to “enforce the Government Performance and Results Act (GPRA) so that funds flow to programs that work. Agency Inspectors General will certify the accuracy of GPRA reports, and OMB will factor the results into its budget recommendations”. 40

3.3 President’s Management Agenda 3.3.1 Background

When President Bush came into his position in the year 2000, performance management reforms had already caught the focus of US administrations for more than two decades. With the implementation of past reforms, satisfaction with government service had increased and was near on par with the private service. However, the public’s trust in government was still low. 41 Comptroller General David M. Walker stated,

“Congress and the new administration face an array of challenges and opportunities to enhance performance and assure the accountability of the federal government. Increased globalization, rapid technological advance, shifting demographics, changing security threats, and various quality of life considerations are promoting fundamental changes in the environment in which government operates. We should seize the opportunity to address today’s challenges while preparing for tomorrow.”42

In summer 2001, the Office of Management and Budget (OMB) announced the President’s Management Agenda (PMA), an aggressive strategy for improving the management of the Federal government. PMA focused on five areas of management weakness across the government where improvements and the most progress could be made. In the President’s Message, Bush stated,

“Government likes to begin things—to declare grand new programs and causes and national objectives. But good beginnings are not the measure of success. What matters in the end is completion. Performance. Results. Not just making promises, but making good on promises. In my Administration, that will be the

40 Gorge W. Bush, Getting Results from Government, June 9, 2000. Full Text is available at [http://www.fpmi.com/FedNews/bush.shtml]. 41 The American Customer Satisfaction Index, released in December 1999, rated customer satisfaction with government as compared to customer satisfaction in the private section, finding that the public sector is on par with the private sector. (Public services had a range of 51 to 87 on a 0-100 scale, with a weighted aggregate score of 68.6; private services had a range of 53 to 86 with a weighted aggregate score of 73.) Via Ellen Taylor, Seven Years of GPRA, Has the Results Act Provided Results, OMB Watch, 2000. 42 Via George W. Bush, President Management Agenda, [http://www.whitehouse.gov/omb/budget/fy2002/mg mt.pdf], Washington DC: Executive Office of the President Office of Management and Budget, Whitehouse, 2001.


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standard from the farthest regional office of government to the highest office of the land.”43

3.3.2 Contents

Clearly stated, the President’s vision for government reform is guided by three principles. Government should be citizen-centered, not bureaucracy-centered; results-oriented; and market-based, actively promoting rather than stifling innovation through competition.

The Agenda contains five government-wide priority areas and nine agency-specified

goals to improve federal management and deliver results that matter to the American people, which are being undertaken in advance of, not instead of, other needed management improvements. Fourteen priorities make up the framework of the Agenda. Each priority area identifies the problems, the initiatives, and the expected short-term and long-term results. The five government-wide areas are:

• Strategic Management of Human Capital, • Competitive Sourcing, • Improved Financial Performance, • Expanded Electronic Government, and • Budget and Performance Integration.

These five areas are closely interrelated and reinforce each other.

• Workforce planning and restructuring undertaken as part of the Strategic Management of Human Capital will be defined in terms of each agency’s mission, goals, and objectives—a key element of Budget and Performance Integration.

• Agency restructuring is expected to incorporate organizational and staffing changes resulting from Competitive Sourcing and Expanded E-government.

• Likewise, efforts toward Budget and Performance Integration will reflect improved program performance and savings achieved from Competitive Sourcing and will benefit from financial and cost accounting and information systems which are part of the efforts of Improved Financial Management.

The Agenda also requires legislative commitment. As micro-management from various sources—Congressional, departmental, and bureau—imposes unnecessary operational rigidity, the administration will sponsor a three-part “Freedom to Manage” initiative to clear statutory impediments to efficient management:

• Statutory cleanup. As part of the 2003 budget process, OMB has asked departments and agencies to identify statutory impediments to good management, which, if repealed, would remove barriers to efficient management.

43 Ibid.


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• Fast-track authority. Legislation will be proposed to establish a procedure under which heads of departments and agencies could identify structural barriers imposed by law, and Congress would quickly and decisively consider and act to remove obstacles.

• Managerial flexibility. OMB will package affirmative legislation comprising proposals to free managers in areas such as personnel, budgeting, and property disposal.

As the barriers are removed, higher performance and greater accountability are expected. Agencies will take a disciplined and focused approach to address these long-standing and substantial challenges and begin the steps necessary to become high performing organizations in which:

• hierarchical, “command and control” bureaucracies will become flatter and more responsive;

• emphasis on process will be replaced by a focus on results; • organizations burdened with overlapping functions, inefficiencies, and turf battles

will function more harmoniously; and • agencies will strengthen and make the most of the knowledge, skills, and abilities

of their people, in order to meet the needs and expectations of their ultimate clients—the American people.


Implementation of PMA began in August 2001 when President Bush ordered Cabinet Secretaries and agency heads to appoint a “chief operating officer” who would be made responsible for the day-to-day operations. Each of these officers was then added to the President’s Management Council (PMC), which was re-established to provide a cross-agency mechanism for PMA implementation and integration.

To track and encourage progress, the Office of Management and Budget (OMB)

created scorecards to rate departments and major agencies on where they stood on each of the five priority areas, which would be shared semi-annually with the President.44 Scores would be based on five standards for success defined by the President’s Management Council and discussed with experts throughout government and academe, including individual fellows from the National Academy of Public Administration. The standards for financial management, for instance, were reviewed by the Secretary of the Treasury, the Comptroller General, and the Director of the Office of Management and Budget.

The scorecard employs a simple "traffic light" grading system common today in

well-run businesses: green for success, yellow for mixed results, and red for unsatisfactory. Under each of the five standards, an agency is "green" if it meets all of the standards for success, "yellow" if it has achieved some but not all of the criteria, and

44 OMB, Agency Scorecards, [http://www.whitehouse.gov/omb/budintegration/scorecards/agency_scorecards.html], Washington DC: The Whitehouse, 2001.


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"red" if it has even one of any number of serious flaws. For example, in financial management, an agency is "red" if its books are in such poor condition that auditors cannot express an opinion on the agency's financial statements. This rating system is also used by the Government Performance Project to evaluate the states, cities, and counties.45

On February 4, 2002, the President released his Budget of the U.S. Government for

FY 2003,which included the results of the initial Executive Branch Management Scorecard. All 14 cabinet departments and 12 independent agencies were rated on their compliance with the core criteria for each of the five areas. Out of 130 total scores shown, there was one rating of "green," 19 of 'yellow," and 110 of "red." An explanation of the reason for each score was also included in the Budget.46

On July 15, 2002, OMB's Mid-Session Review47 was released. This annual document

was a supplemental update of the Budget transmitted to Congress earlier in the year (February) and contains revised budget estimates (in this case, for FY 2002 through 2007). In this document, OMB made a few revisions to the Scorecard ratings published in February to reflect the status as of June 30, moving three up to "ye llow" and one up to "green," while demoting two down to "red." With these adjustments, there were a total of two "greens," 20 "yellows," and 108 "reds" on the baseline of Executive Branch Management Scorecard.

Because virtually all agencies received a fa iling score in the first scoring in February

2002, OMB also added a second part to the Scorecard, rating each department and agency's progress in implementing each reform on the President's Management Agenda. While an agency might have a score of "red" for its present status in implementing a reform, it could get a "green" for its plans to improve and progress against those plans. In fact, on this part of the scorecard, of the 130 ratings, there were 67 "greens," 54 "yellows," and 9 "reds."

On July 16, 2002, the Director of the Office of Management and Budget issued a

memorandum48 to the heads of federal departments and agencies announcing a new approach being used by OMB to assess program performance during development of the President's Budget.

As indicated in the memorandum, OMB began using a Program Assessment Rating

Tool (PART) for formal evaluation of federal programs. OMB intended to apply this

45 More information about the Government Performance Project is available at www.maxwell.syr.edu/gpp/about. 46 Detailed Scorecard is available at http://www.whitehouse.gov/omb/budintegration/scorecards/agency_scorecards.html . 47 OMB, Mid-Session Review, [http://www.whitehouse.gov/omb/budget/fy2003/msr.html], Washington DC: The Whitehouse, 2002. 48 Mitchell E. Daniels, Jr., Memorandum for Heads of Departments and Agencies, [http://www.whitehouse.gov/omb/budintegration/part_guidance_letter_agencies.doc], Washington DC: The White House, 2002.


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detailed analysis to 20% of all federal programs every year. With previously reviewed programs also being included, this meant that 40% would be reviewed in the second year, 60% in the third year, etc. This effort began immediately after announcement of the PART, and a list of the programs being evaluated for the FY 2004 Budget was included as an attachment to the memorandum. This first round of reviews was concluded on September 16, 2002.49

As promised in PMA, in October 2001 the President sent two proposed bills to

Congress to further this agenda. The first, the Managerial Flexibility Act of 200150, included a wide range of specific reforms in areas related to the five initiatives. The second, the Freedom to Manage Act of 200151, would streamline the elimination of obsolete laws that impede effective management. However, GAO cautioned that the Freedom to Manage Act contained several provisions that would significantly limit traditional congressional debate and involvement.52 As noted in David M. Walker’s testimony, GAO believed this bill would provide significant new power to the President to not only initiate changes, but also to affect the ultimate debate and outcomes. GAO suggested that Congress take a reasonable amount of time to assess related legislative proposals.


The implementation of PMA is still at the beginning stage; hence it is too early to assess whether it is a successful reform or not. However, several key features make PMA important:

• The five government-wide priority areas provided a framework for the reform and gave departments and agencies clear direction.

• The program assessment efforts presented an opportunity to inform and improve agency GPRA plans and reports, and establish a meaningful systematic link between GPRA and the budget process.

• The revised scorecards evaluated departments and agencies on two levels: one grade for their status relative to the five areas, and the other grade for their progress toward the PMA goals, which encouraged those departments and agencies with bad scores to make great improvements.

• Freedom to Manage Act granted departments and agencies flexibility during the implementation of the PMA.

49 More information about PART is available at http://www.whitehouse.gov/omb/budintegration/part_assessing2004.html and http://www.whitehouse.gov/omb/budget/fy2004/pma.html. 50 US Congress, Managerial Flexibility Act of 2001, Bill S. 1612, [http://www.whitehouse.gov/omb/legislative/mfa_bill.pdf], Washington DC, 2001. 51 US Congress, Freedom to Manage Act of 2001, Bill S. 1613, [http://www.whitehouse.gov/omb/legislative/fma_bill.pdf], Washington DC, 2001. 52 David M. Walker, Observations on the President’s Proposed Freedom to Manage Act, [http://www.gao.gov/new.items/d02241t.pdf], GAO, 2001.


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With the development of the assessment system, agencies improved their performance ratings. Eleven agencies showed improvements in at least one category. For instance, Defense went from a red to yellow light in both human capital and integrating budget and performance. The Energy Department went from red to yellow in three categories—human capital, financial performance, and e-government. Meanwhile, both the Small Business Administration and NASA dropped to red in financial management.53 Mark Everson, OMB’s deputy director for management, stated, “we are beginning to see better scores on progress as [agencies] execute their plans.” 54 4. Key Elements 4.1 Legislative Commitment

Legislative commitment is one of the most important elements of the public sector reform of the USA. Ever since the 1970s, there have been several important laws passed to support public sector reforms.

The first was the Civil Service Reform Act 1978, passed under President Carter’s

administration. The act defined a modern management system that would continue to protect the merit system while placing increased emphasis on personnel programs, improved management, and greater productivity.

The most important legislation for public sector reform was the Government

Performance and Results Act passed in 1993, under Clinton’s administration. This comprehensive legislation was intended to improve the effectiveness of the federal government as measured by results, and to do this through better management. Transparency and accountability were introduced as the two core values reflected in it. As a law, GPRA provided legal support for reforms such as NPR. Moreover, GPRA provided a framework for the public sector reform in the USA. A key feature of GPRA is that it did not fade away with the end of Clinton’s administration, and it continues to provide strong support for reforms under Bush’s administration.

President’s Management Agenda, announced in 2001, required additional legislative

support to clear statutory impediments to efficient management. In the year 2001, two laws were proposed: the first, the Managerial Flexibility Act of 2001, included a wide range of specific reforms in areas related to Bush’s five initiatives; the second, the Freedom to Manage Act of 2001, would streamline the elimination of obsolete laws that impede effective management. However, GAO argued that the two legislative proposals would also reduce the power of the Congress. The Act is still under the process of hearings.

53 Matthew Weinstock, Agencies Slow to Move from Red to Green in OMB Performance Rating, [http://www.govexec.com/dailyfed/0103/013003w3.htm], Daily Briefing, GovExec, January 30, 2003. 54 Ibid.


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4.2 Leadership Leadership has been one of the critical success factors during the past two decades of

the USA public reforms. As noted previously, all five Presidents since 1976 recognized the social and financial problems that existed and put their efforts into reforming the public sector.

4.3 Setting Objectives and Measuring Performance

The objective of public sector reform in the USA has been to transform departments

and agencies into lean, flexible organizations that emphasize performance and accountability for government spending, through measuring the output and outcomes rather than only the amount of money spent.

According to GPRA, departments and agencies were required to develop strategic

plans and annual performance plans, defining performance goals for a fiscal year. GPRA also required OMB to prepare an annual government-wide performance plan, which would be based on the strategic plans of agencies and would be part of the budget of the fiscal year. PMA also combined the government-wide priority areas with specific agencies areas.

Different types of measures have been used in the USA public sector reforms, for

example: input, output, outcomes, efficiency, effectiveness, etc. Among these, GPRA and PMA clearly put their focus on outputs and strategic outcomes. As “Putting customers first” is one of the central elements of the performance management reforms in the USA, detailed customer service standards have been set, and customer satisfaction is considered one of the most important measures.

Performance management reforms, such as GPRA, NPR, and PMA, have been

initiated from the top. However, attention has been paid to allow for flexible implementation according to the needs of different agencies. Central requirements are usually not very prescriptive. For instance, GPRA gave departments and agencies several years to develop their first strategic plan and annual performance reports; PMA also created two-part scorecards to encourage those departments and agencies with poor performance to make greater improvements in the following year. 4.4 Performance-Based Budgeting

A GPRA’s objective was to move federal budgeting toward performance-based budgeting. GPRA has always envisioned the complete integration of the Annual Performance Plan with the Budget. Both strategic plans and annual performance reports would be included in the budget plan of the fiscal year.

PMA also focused on budget and finance. Two of its five priority areas are Improved

Financial Performance and Budget and Performance Integration. Senior officials at the


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Office of Management and Budget have described performance-based budgeting as the Bush administration's top management priority. The importance of this reform has been emphasized in the President's Budget each year. Moreover, the OMB has outlined specific requirements for the initial phases of this reform, both as part of the President's Management Agenda and as key elements in the Program Assessment Rating Tool. 4.5 Performance-Based HR Management

Various performance-based pay arrangements have been used in the federal government, including cash awards, merit pay, bonuses, and sharing of productivity gains. For instance, the Civil Service Reform Act passed in 1978 introduced performance appraisal and merit pay. NPR also developed the Hammer Award to encourage teams and individuals to work towards the direction of greater accountability. NPR also emphasized that agencies should design their own performance pay system. One goal of NPR was to empower employees to get results. PMA also recognized the importance of human resource management, which was defined as the first of the five priority areas, entitled Strategic Management of Human Capital. 4.6 Performance Reporting and Reviewing

The General Accounting Office assis ts the Congress in its oversight of the executive

branch and encourages effective management and accountability. The Office of Management and Budgeting helps agencies develop their reports. Great attention has been paid to performance reporting and reviewing, and the performance information has been used in the budgeting process. For instance, GPRA required all the departments and agencies to develop strategic plans and annual reports, which would be assessed by GAO and OMB. According to PMA, OMB developed scorecards for departments and agencies. The quarterly reviews and annual reports help departments understand their own strengths and weaknesses and make progress. 4.7 Building Performance Culture

Performance management reforms are not only meant to change the structure of government, but are also meant to change the way people think and work. Along the road towards greater accountability, the overall goal of the USA public management reforms is to make the government citizen-centered, performance-oriented, results- focused, and market based. Previous reforms also focused on changing the way government works with business and communities, serving Americans better, transforming access to government through technology, and making the government a better place to work. As these reforms progress, the hope is that these concepts will take root in the minds of political leaders, administrators, public sector employees, and citizens, thereby leading to a performance-based culture.


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