Knowledge@Australian School of Business Public Policy and Management Research Article

Knowledge@Australian School of Business

In its 2012 budget, the New South Wales government axed 10,000 jobs and programs but opted to leave the decisions about who and what goes to the heads of state departments and agencies. Premier Barry O'Farrell's government has given school principals a freer hand. In the public health system, facilities and services are now being controlled by local authorities. The "devolution revolution" is under way.

The NSW government's approach was also evident in a job advertisement, published in April, for the newly created position of customer service commissioner. As the ad outlined: "The purpose of the commissioner's role is to bring the interests of public service customers and the defence of public value and public interest to the heart of decision-making. This will be accomplished by developing practical and sustainable ways to give government customers the value and results they deserve and ensuring customer-centred services are a strategic priority for government, with ministers to be the champions of the ‘customer' within their portfolios … You will have led customer service transformation in retail, financial services, airlines, transport, professional services or other customer-centric organisations and will be inspired by the opportunity to reshape the service culture within the NSW Public Service."

At the time, seasoned commentators noted that consultants may be framing old conflicts in refreshing ways, but they pointed out that the new approach would not make problems disappear. For example, in a stoush between wheat growers and NSW Transport over rail freight rates, how would government ministers become "champions of their customers"? Might the transport minister have to choose whether his or her customers were the commodity shippers or the transport providers? Similarly, how does giving "government customers the value and results they deserve" work for indigenous Australians, who experience disproportionate levels of educational, employment and social disadvantage, as well as poorer health than other Australians? With such extensive needs, there may be a disparity between what an indigenous community wants, and what the government can give. So, what do such phrases mean when the rubber hits the road?

The job description in the advertisement fits with the thinking of Gary Sturgess, the inaugural Premier's ANZSOG (Australian and New Zealand School of Government) Chair in Public Service Delivery at the Australian School of Business, who was appointed in 2011 to lead research focusing on the role that frontline managers play in service delivery and the science of service design.

Formerly a driving force for public sector reform in the NSW government of premier Nick Greiner (1988-1992), Sturgess might be seen to be picking up where he left off 20 years ago. Some of his gap years were spent as executive director of London's Serco Institute, a think tank focused on the development of sustainable public service markets. The institute is the research arm of Serco, the UK-based public services group, which provides health, education, prisons, transport and other contract services in 36 countries.

During Sturgess's tenure at the institute, a research survey was conducted of former public servants who were delivering public services in the private sector. They were asked for their observations on the differences between the two sectors. In the majority, the participants agreed with former US vice-president Al Gore, who in 1993 announced that the problem with modern government is "good people trapped in bad systems". The big difference was a relative lack of bureaucracy in the private sector, giving managers more autonomy or more freedom to change things, they insisted. Private sector managers could recruit their own staff and tailor their decisions to the challenges at hand. Service managers felt much more personally accountable for the outcomes of a contract, not just the process.

The Good People, Good Systems study suggested a number of ways in which governments might design better contracts: by using the shield of the contract to protect managers from inappropriate interventions, placing a greater emphasis on improving service quality, and ensuring that service managers have a greater say in service design.

How the Frontline Refashions Policy

A strand to Sturgess's thinking has been the influence – or the lack of it in government reform – of a 1980 study, Street-level Bureaucracy; Dilemmas of the Individual in Public Services, by former Massachusetts Institute of Technology professor Michael Lipsky. This traced how policy was made at the top, but in reality was refashioned by public sector workers on the frontline of teaching, healthcare and policing, who represent government to the people. It showed how "great expectations in Washington are dashed in Oakland". Mass processing of clients affects the outcomes of public policy. For instance, police disproportionately single out black people for attention, not from official policy but in the shorthand way they implement a law and order policy.

Sturgess says his ideal is to wrap the policymakers around the street-level bureaucrats to devise practical, workable policies, first time. He champions the devolution of management that's happening in various Australian governments, but warns that governments are doomed to fail unless serious attention is given to the underlying gulf between the two worlds of policymakers and frontline bureaucrats. Mediating between the ideal and reality would save a lot of time and money, as making ill-fitting policies work eats up a significant amount of public service resources, according to Sturgess, who notes that the public sector comprises up to 20% of GDP and the productivity gains of a reform agenda could be as high as 20%.

As Sturgess wrote recently in The Australian Financial Review: "This relative inefficiency has almost nothing to do with the superiority of the private sector. In my view, it is overwhelmingly caused by a policy class in Canberra and at the heart of most state governments who attempt to micro-manage public services from the top. Attempts at rationalising the back office and shifting resources to the frontline have left the layers of middle management largely untouched."

Sturgess favours radical change by policymakers at the top of government to allow managers at the frontline to innovate. Policymakers have traditionally intervened through command and control, so he's not surprised that public services are plagued by poor productivity, given how easy it is to email a new policy directive to frontline managers.

"Frontline service managers are baffled by the great importance that the policy class places on uniformity and standardisation. To a school principal, it is self-evident that schools have their own needs, and that curriculum and staffing must be adapted to local conditions. This is a large part of their objection to the NAPLAN."

The National Assessment Program – Literacy and Numeracy (NAPLAN) was introduced in 2008 after all states and territories agreed they would replace their local literacy and numeracy tests with a national one. Prior to this, each state and territory conducted its own regime of numeracy and literacy testing in primary and secondary schools.

"(NAPLAN) is a statistical measure of school performance designed to help the policymakers in Canberra ‘see' what is happening across the country without leaving their desks," notes Sturgess.

Compared with head office policymakers, those working on the frontline experience more teamwork and less hierarchy – it's more like being in a small business. Notably, policymakers usually deal with the complexity of modern society with strong leadership, improved co-ordination and rationalisation of overlap and duplication, says Sturgess, who observes that "we've evolved to look to the intelligent, wise, brave leader when what's needed is coordinated decentralisation with more diversity and local knowledge, and with less intervention". The pendulum has now swung this way with the states in the area of education, Sturgess points out. Despite NAPLAN, the federal government is also pushing for greater school autonomy on issues such as governance, staffing mix, budgets, and infrastructure and maintenance: "For the most part, these initiatives have been driven by politicians and not by public servants. That's because, as members of parliament, they spend a great deal of time out at the frontline of service delivery."

The devolution of responsibility is not without its challenges. In NSW, teachers recently walked off the job for a day over the government's decision to allow principals to choose at least 50% of new staff and control 70% of their budgets. The NSW Teachers Federation argues that the 'Local Schools, Local Decisions' reforms will lead to an increasing casualisation of teaching staff, and labelled the policy a wolf in sheep's clothing that would cut education spending and shift the blame from government to communities.

Bringing on Social Innovators

Another strand informing Sturgess's thinking comes from the global New Synthesis Project led by Canadian Jocelyne Bourgon, which is exploring the challenges of 21st century public administration. Her view is that public administration has been operating without the benefit of a guiding theory or up-to-date framework for quite some time, a situation that deprives public servants of a frame of reference to guide their actions. This gap has generated risk aversion in public organisations at a time when innovation and creativity in government are most needed.

Bourgon says governments cannot go it alone, citing the Singapore prison system as an example. It transformed itself from "custodian" of prisoners to "captain of the lives" of the offenders. By working with families, employers and other stakeholders to reintegrate them into society, it changed the focus from agency results to societal results, nearly halving recidivism and cutting costs.

Australia's federal government joined an international trend by launching a public service Innovation Action Plan in 2011 and establishing a unit similar to the Danish government's MindLab. This laboratory for public sector innovation is in the Danish tradition of service design and has "user experience" at its core. MindLab chief Christian Bason has told Australian bureaucrats that there's a shift in the public sector globally, from recognising the need for innovation to working out how to do it.

Such labs are springing up across the world with the intention of designing the future and solving "wicked problems", notes Lisa Torjman, of the Canadian MaRS Solutions Lab. They draw on the fields of group psychology, complex adaptive systems theory, design thinking and computer modelling tools to devise initiatives for social innovation. "These methodologies for changing whole systems aim to include a greater percentage of the population in the decisions that govern their own welfare," she says.

An early example of this type of thinking came from 19th-century British civil engineer Isambard Kingdom Brunel who designed the Great Western Railway, between Bristol and London, for the best possible journey. Instead of leading off with the locomotive, he zeroed in on the passenger experience of travel. In the interconnected world of the internet, participation has increased the pool of ideas, which in turn has increased the probability of finding transformative ideas outside an organisation.

In Australia, Aboriginal disadvantage is the sort of "wicked problem" with which the two-person Australian design lab InWithFor is grappling. Partner Sarah Schulman says: "We start with what people want for their lives (outcomes) rather than what the system wants for people (targets). We try new practice and policy (prototyping) rather than use policy to shape new practice (piloting). We create solutions that enable people to do more good stuff (not just less bad stuff), connect people to other people (not just to professionals) and to new kinds of local resources (not just to information and services)."

Hal Colebatch, a visiting fellow at the UNSW School of Social Sciences, says Sturgess's devolution argument is interesting, but questions whether hospital managers alone can get on with the job without asking what the job is. Is it to deliver services, or is it to improve health? Being a hospital CEO is a demanding job – leaving no time to think about whether this is the best use of resources. "That's left to these dreadful policy people, who point out that 85% of the health budget is spent not on health, but on sickness response, that much of it is ineffective," he says.

Traditionally the NSW government has not been dominated by a policy class but by technocrats whose hierarchies of expertise have been entrenched in the bureaucratic structures, argues Colebatch. "They were very good at what they were doing, but less good at asking whether this was the best thing to do. The move to have policy units came as a response to this. This was one of the themes of the Coombs report (which followed the Royal Commission on Australian Government Administration in 1976), and for Peter Wilenski in his 1977 review of the NSW public service," he says.

Colebatch points out the issue was taken up strongly by the Greiner government (in which Sturgess was the cabinet secretary) at the end of the 1980s, which made a split between a policy-oriented health department and a service-oriented department responsible for hospital management. "This proved quite unworkable and was quietly abandoned. But the demands for central control remained as strong as ever, not because some power-hungry policy class demanded it, but because ministers wanted to make feel-good announcements and avoid blame," Colebatch says.

Chris Walker, a lecturer at UNSW's School of Social Sciences, suggests it may be unfair to blame an elite policy class for policies that implement the political platforms of an elected government. "There exist great needs within bureaucracies for experienced policy practitioners who have the skill to link their conceptual understanding of systems and programs with the operational detail of how things work on the ground," he says. "Finding staff with these skills is rare and finding organisations that manage policy staff in a way that permits them to liaise and engage with service delivery staff is also less frequent."

Walker, who previously worked as a senior executive service officer in the NSW Cabinet Office, recalls with great clarity the deputy director-general "directing me not to go out to meet with other agencies, ‘they come here to meet with us, you do not go to them'".