The present study was commissioned jointly by the State Services Commission and the Treasury to examine whether further improvement should be made in the management of the State sector. The terms of reference for the study are set out in Appendix I. In conducting the study, the author made two visits to New Zealand, in May and August 1995, during which he interviewed numerous officials and observers, as well as a number of Ministers and Members of Parliament. The author also reviewed more than 500 documents, reports, and other publications pertaining to reform of the State sector, including budget documents, financial statements, audits, corporate and strategic plans, purchase and performance agreements, legislation and Parliamentary reports, guidances issued by the central agencies as well as by various departments, and other relevant material.
The study concentrates on the State sector, especially the central agencies, core departments, and Crown entities. It does not deal with state-owned enterprises or local government. Moreover, it considers the work of Ministers and Parliament only to the extent they are relevant to management and operation of the State sector. The internal work of Parliament, the overall responsibilities of Ministers, and Cabinet work are generally outside the scope of this study.
This report provides one person's observations and comments. I believe the judgments and impressions recorded here to be sound and balanced, but I understand that others might come to different conclusions. The nature of management reform is such that an assessment cannot be grounded solely on hard evidence of what has succeeded or failed. One's own judgment must be brought to bear, as well as that of others - participants and observers - who have seen the reforms in operation and have thought much about how the system is operating.
Research for the report was largely completed before the Commission of Inquiry on the Cave Creek tragedy issued its report in November 1995. Because of teaching obligations and other work commitments, the present report was not completed until August 1996. In writing this report, I had available the findings of the Commission of Inquiry, some of which pertain to the State sector reforms. Nevertheless, I have decided not to comment in this report either on these findings or on the incident itself. The methods used for assessing the overall efficacy of the reforms are not the same as those that should be used in investigating a tragic breakdown in organisational performance.
In view of the impact of the reforms on the Public Service, I would urge that a separate study be undertaken of human resource management, including the recruitment, motivation, training and supply of skilled managers.
I am mindful of the strong interest, both at home and in the international community, in the New Zealand reforms. This report selectively focuses on matters that may warrant change. Inevitably, therefore, the tone is somewhat critical. But the number and tenor of the comments should not detract from one overriding conclusion: the reforms have lived up to most of the lofty expectations held for them. What has been accomplished in New Zealand is unprecedented anywhere else in the world. There are risks, however, in pioneering in public management, including the risk of having to learn from one's own experiences rather than from those of others. Without a doubt, the rich harvest of ideas and practices gleaned in New Zealand deserves consideration by other countries willing to take bold steps to improve the efficiency and quality of public services.
The following chapters of the report cover most of the salient reforms and the issues associated with them:
Chapter 2 summarises the economic and political conditions that paved the way for transformation of the New Zealand economy and the State sector. It also analyses the powerful ideas that shaped the reforms and distinguish the New Zealand model from public management initiatives in other countries.
Chapter 3 examines the basic structure of the State sector, focusing on departments, central agencies, and Crown entities. It briefly comments on the implications of delayered management and devolved responsibility for field units.
Chapter 4 turns from structure to capacity. Having mapped out the organisational entities that make up the State sector, the report then considers the factors that determine the capacity of these organisations to perform the tasks set for them. The discussion encompasses the recruitment and role of chief executives, the corps of senior managers, and the government's ownership and collective interest.
Chapter 5 assesses the departments in terms of their capacity to define and implement policies in congruence with the government's strategic objectives. The discussion ranges from the strategic and key result areas to the specification of outcomes and the monitoring of results and the allocative efficiency of budget policy.
Chapter 6 examines the method by which resources are budgeted to implement government policy and finance department operations. Questions concerning the adequacy of the resource base include the capital charge, the accounting basis for budget allocations, the situation facing departments with rising workloads, and the carry-over of unused funds to the next financial year are discussed.
Chapter 7 considers the accountability framework for assessing the performance of departments and managers. Internal controls are a vital part of this framework, as are annual reports and audits. The chapter questions the extent to which accountability for non-financial performance is adequate.
Chapter 8 offers concluding remarks on the transformation of the State sector management framework and the further steps that might be taken to enhance performance.