21 October 2010. 'State Services Commissioner's Annual Report on the State Services', and the section 'State sector system performance'.

The full report is published at http://www.ssc.govt.nz/ar2010.

State Services Commissioner's Annual Report on the State Services

The purpose of the State Services Commission is "to provide leadership to the State Services so that government works better for New Zealanders".

To that end, over the last 12 months, the State Services Commission has begun to narrow its focus to ensure a concentration on only those interventions that are likely to make the greatest contribution to improved system performance and a better experience of government for New Zealanders.

This has meant shifting responsibility for most of our operational functions to agencies that are more appropriately designed for these functions. In July, we successfully transitioned Learning State, the industry training organisation for the public sector, to a not-for-profit company under Schedule 4 of the Public Finance Act. With the move of Mainstream to the Ministry of Social Development in July 2008 and Government Technology Services to the Department of Internal Affairs in July 2009, the State Services Commission is now more exclusively focused on leadership, trust and integrity in the State sector, and system performance.

In addition, like many agencies in the State Services, we have adapted to the realities of ongoing financial constraint. In the SSC's case, this has meant scaling back from July 2009 some of our remaining functions including some areas of corporate support. This has placed the SSC on a much more sustainable financial basis to manage through the next three to five years.

There are four dimensions of system performance where the SSC has a leadership role:

1 Recruitment and performance management of Public Service chief executives

2 Overall system performance

3 Workforce cost and productivity

4 Transforming service delivery.

Performance management of chief executives

The most significant impact the SSC can make to improve State sector performance is to appoint high-quality chief executives. This is followed by setting clear expectations, supporting chief executives in their achievement of these expectations and in their development as a chief executive, and fairly but rigorously assessing their performance. Over the last 12 months we have made significant progress in improving our chief executive performance management. From recruitment through to regular performance reviews, we are working much more closely with Ministers on establishing clear expectations for chief executives and then ensuring that the priorities of chief executives are much more closely aligned with the Government's priorities. A clearer understanding of these priorities by chief executives, and consistent focus on delivery against them, translates into more effective use of resources and better services for the public.

Traditionally professional development of chief executives has not been undertaken systematically. Most chief executives are in their leadership roles for lengthy periods of time, so there is a payoff from professional development for the State sector in terms of stronger performance. A programme of targeted development for all chief executives was started in 2009/2010 to examine the most cost-effective ways to enhance chief executive development.

Another area in which the SSC is supporting chief executives and Ministers is through the development of senior leadership talent, to ensure we have a pool of people who can develop into future leaders across the State Services. We continue to work closely with the Leadership Development Centre, the Australian and New Zealand Schools of Government and Victoria University of Wellington's School of Government to develop a pool of future leaders.

Overall system performance

Perhaps the most significant progress that the SSC has made in the last 12 months has been the rollout of the Performance Improvement Framework. Together with our central agency colleagues in the Department of the Prime Minister and Cabinet and the Treasury we have successfully rolled out the first set of reviews.

The Performance Improvement Framework supports chief executives to develop priorities for the ongoing improvement of their agencies. These priorities are shaped by an independent report on their agency's performance across a range of different performance indicators. It is proving a valuable continuous business improvement tool for chief executives to manage their agency's development. The reports also provide the three central agencies and Ministers with a shared view of performance and capability across the system.

The results of the two pilots and the first four agency reports were released in September 2010.

The SSC also continues to publish a range of other system performance information so that chief executives and Ministers have an informed view of a range of indicators across the system. This information includes Kiwis Count, the survey of New Zealanders' experience of their State Services, which showed that their overall satisfaction increased over the previous two years, the Integrity and Conduct Survey and employee engagement data.

All of this information is publicly available so as to increase transparency and to ensure that New Zealanders' trust in their State Services, which also increased over the previous two years, continues to be earned and maintained.

Workforce cost and productivity

Another area where the SSC has successfully refocused and delivered better results for the Government is around wage moderation across the State Services. Starting with chief executive remuneration, where I have a range of influence - from setting the pay of Public Service chief executives to consent or concurrence in other State Services entities - the SSC has been more active in conveying clear expectations and a framework for remuneration across the system.

Over the last 12 months, during a time of considerable financial challenge for agencies, the SSC has worked closely with agencies to ensure that their wage negotiations are consistent with the Government's Expectations for Pay and Employment Conditions, are affordable for agencies in the medium term and, wherever possible, include provision for productivity increases. In line with trends seen in the private sector, there has been a rapid moderation in wage settlements in the Public Service. This has supported the Government's fiscal strategy to reduce fiscal deficits and check the increase in public debt over the medium term. While there has been a reduction in jobs in the core government administration, the rapid wage moderation we have seen over the past year is likely to have played a significant role in reducing the extent of job losses.

The SSC has also worked across government departments over the past 18 months to monitor the Government's cap on the growth of the core government administration and to ensure that agencies delivered on Ministers' expectations around the cap.

Transforming service delivery

The final area of system leadership that the SSC has been focused on over the past year has been to set in motion steps to improve New Zealanders' experience of service delivery particularly in respect of transactional services. For some time, it has been clear that New Zealanders want government services to be made more accessible to them. Developments in information technology are likely to mean that these aspirations can be met cost-effectively. Working with a range of agencies, the SSC has been developing the governance arrangements to support the integration of a set of service offerings from agencies into a seamless experience for New Zealanders.

The initiative is paralleled by similar developments overseas. The SSC's role will expand, as the initiative progresses, to ensure that the public management system can support these developments and assist performance improvement.

With the sharpened focus and clearer set of priorities for the SSC over the past year, we have been more effective in leading improved agency and system performance across these four dimensions. My intent for the 2010/2011 year is to continue to focus on these areas and to work with agencies and Ministers to improve the performance of the State Services so New Zealanders do experience better government that they trust and that meets their increasing expectations.

Iain Rennie
State Services Commissioner

State sector system performance

This part of the Annual Report provides a high-level overview of the performance of key aspects of State sector performance.

The New Zealand State Services is a complex system covering the 34 Public Service departments, four non-Public Service departments, Crown entities, the Reserve Bank and entities on the new Public Finance Act Schedule 4 (such as Fish and Game Councils). With over 200,000 State servants and total budgets in the billions of dollars, the performance of the State Services is critical to the performance of New Zealand as a whole.

We have a high-quality State Services by international standards. Within the current environment of fiscal constraint, the State Services and individual State servants have continued to deliver high-quality services to the public of New Zealand, rising to the Government's challenge of delivering 'better services for less' - but there is always room for improvement. To support this improvement, a range of initiatives have been implemented across the system and others are under way to challenge and improve the performance of chief executives, agencies and the public management system.

Dimensions of performance

A significant range of performance information is available to the public from which to make judgements about the performance of the State Services. This report uses the key dimensions of performance used by the Performance Improvement Framework as a means of assessing the performance of the system.

Leadership, direction and delivery

One of the ways of determining the health of the system is to consider whether it is reviewing its policies, programmes and services to ensure it is delivering its intended results. The Performance Improvement Framework provides this kind of health check. The first tranche of PIF results completed in 2009/2010 developed a number of insights into the performance of the system; at a high level agencies tend to do well at:

  • delivering on clearly defined government priorities
  • the basics in organisational management
  • undertaking immediate tasks in their core business.

But agencies tend to do less well at:

  • strategic capability - taking a three- to five-year view
  • cost-effectiveness, including identifying what is needed to deliver agency outcomes
  • network governance and accountability.

External relationships

Arguably the State Services' most critical external relationship is with the public. The health of this relationship can be measured by how well the public's expectations of service quality and trust are met.

The Kiwis Count survey 1 is a measurement tool based on the Canadian government's international best practice survey Citizens First. The survey, among other things, indicated that in 2010 New Zealanders' overall quality score for public services was 69, a small but significant improvement from 2007's 68 percent in a time of recession and pressure not only on the State Services but on all New Zealanders. The Kiwis Count survey also tells us something about the channels New Zealanders prefer to use when accessing public services.

  • Two-thirds of New Zealanders use the telephone to find information about, and to carry out transactions with, public services but satisfaction with telephone was the lowest of all channels.
  • Young people don't do everything over the internet; in fact, younger people were more likely than others to have contacted public services in person.
  • There is no 'one size fits all' channel for better service delivery.

The State Services Commission is working with agencies to help them understand and apply a range of these findings to the way they design and deliver services.

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The Kiwis Count survey also indicates that around 3 percent more New Zealanders agreed 'public servants treat people fairly' and that they had 'confidence that public servants do a good job' than in 2007.

By independent assessment, New Zealand has the most corruption-free public sector in the world. Transparency International's 2009 Corruption Perceptions Index 2 ranked New Zealand first in their 2009 index ahead of 179 other countries. New Zealand was also rated equally as the least corrupt public sector in 2006, 2007 and 2008. To a large extent this achievement can be attributed to the behaviours and ethics displayed by public servants. The 2010 New Zealand State Services Integrity and Conduct Survey of 8,238 State servants shows suggestions of a stronger culture of integrity across the State Services than when the same survey was run in 2007. The survey also identified areas that were not consistently rated across the State Services or where poor ratings continued from 2007; in particular, there was no greater awareness of integrity and conduct training offered by agencies and there was lack of awareness of the Protected Disclosures Act.

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People development

The culture of the Public Service is critical to the overall performance of the system. New Zealand public servants are known for acting with professionalism and integrity, for wanting to make a difference. A committed and engaged workforce is linked to improved employee retention, reduced absenteeism, increased productivity, positive workplaces, and improved service delivery. Engagement survey scores from across the Public Service 3 show that of the 14 agencies who surveyed their staff in both 2008 and 2009 10 improved their engagement scores, three dropped and one remained the same within a challenging operating environment.

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Financial and resource management

The State Services are responsible for the care of billions of dollars' worth of resources and budget appropriations. How these resources are managed, particularly within a constrained fiscal environment, is critical to the performance of the system.

The cost of wages is a significant component of agencies' expenditure. Across the State Services the aim is for Public Service salary movements not to exceed those of the Private Sector. Salary and wage rates increased for both the public sector (up 2.1 percent, 4 0.5 percent excluding Health and Education 5 ) and private sector (up 1.5 percent) during the 2009/2010 year. The cumulative effect of wage moderation practices across the State Services is more evident in the respective public and private sector wage rate changes in the June 2010 quarter - Public sector salary and wage rates rose 0.2 percent while private sector rates rose 0.5 percent.

The cap on the core government administration was introduced to help ensure that agencies operate within their allocations while focusing their resources on frontline delivery. Supporting agencies to do this is a key priority for the State Services Commission. The cap has been set at 38,859 full-time equivalent positions (FTE staff and vacancies) and as of 30 June 2010 there were 36,771 FTE positions within the core government administration. 6 The State Services Commission and Ministers expect this number to continue to fall over time.

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1 www.ssc.govt.nz/nzers-experience

2 www.transparency.org/policy_research/surveys_indices/cpi/2009

3 www.ssc.govt.nz/employee-engagement-2008-09

4 www.stats.govt.nz/browse_for_stats/economic_indicators/prices_indexes/LabourCostIndexSalaryandWageRates_
HOTPJun10qtr.aspx

5 Higher growth in health and education reflects multi-year wage deals agreed before the onset of the global financial crisis in 2007.

6 www.ssc.govt.nz/capping

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