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"IF I KNEW THEN WHAT I KNOW NOW"1 Speech for Terry Moran AC

President, Institute of Public Administration Australia and Vice-Chancellor’s Professorial Fellow at Monash University

ANZSOG 2014 Conference 1.00pm-2.30pm Thursday 7 August 2014

Hyatt Hotel Canberra

[JENNY AND ANDREW]

First – I want to say what a pleasure it is to be on stage with Andrew and Jenny2. Andrew has made the very wise career move of moving from Canberra to become the Secretary of the Department of Premier and Cabinet in Victoria! And both of us are being reminded of the delights of a crisp morning in the middle of winter in Canberra! And second – it is an honour to share a platform with Jenny whose political courage in driving a reform agenda is a matter of historical record. [SUMMARY]

In summary – I think there are two main things I wish I had got a clearer focus on. But in describing in them – I think that our focus should be on what now needs to be done – rather than just a lament for the past. So to prevent this discussion from becoming too dirge like – I'll finish with some brief reasons for guarded optimism! [REFLECTION #1 – CHANGE IN MINISTERS]

1 This plenary session will draw on the accumulated wisdom of public sector leaders from both sides of the Tasman who have been intimately engaged in the major reform initiatives of the past two decades. What has remained the same and what is different about the drivers for change in the contemporary environment? 2 Fellow presenters are Andrew Tongue and Dame Jenny Shipley

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My first reflection is that a combination of:

• change in the media industry.

• the growing power and ubiquity of IT services

• and the disintegration of formal party structures… …have changed Ministers and I didn’t anticipate fully by how much.

Early in my career I acquired a view of Ministers which shaped much of how I approached my job thereafter. I was not so much naive as perhaps a little optimistic in forming a view of how Ministers approached their life within government… …as distinct from acknowledging the battlefields of adversarial politics and what it demands. Ministers, I thought, are rational and wise with an assured sense of how community sentiment may be divined and shaped. These Ministers also know their own limitations and thus respected professional advice which suggested anticipation, insight and good judgement in those giving it. They could accept occasional failings in their own judgements and in the advice they received. I have known many such Ministers on both sides of politics, indeed too many to name. The mix of capabilities they all possessed varied – but they had a grasp of the arts of governing and the skills in cultivating relationships with the many different groups, including the civil service, upon which they depended for success. Their personalities were such that they could live with occasionally challenging advice from those around them within government – and as much as anything it was a source of protection for them.

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Ministers of this type appreciated the art of the long view and were strategic in thought and action. But that was certainly not a description of all the Minsters I – and probably many in this room – have worked with. In contrast to my rather my naïve ideal – Pat Weller made a useful contribution by describing a fuller Ministerial typology some years ago. His list included:

• the maintenance ministers

• the spruiker ministers

• the policy driver ministers

• the warrior ministers

• the partisan ministers. Within these broad stereotypes – my sense is that we now have more of the warrior and partisan classes. And not surprisingly – that shift in Ministerial types has been mirrored in the attitudes of people working in Ministerial office. And the fact that experience as a ministerial advisor is rapidly becoming a job pre-requisite for aspiring politicians means that this not-so-virtuous circle is becoming complete. My concern is that the relative shallowness of the pool that we are drawing our future political class from makes evidence-based policy reform that much harder… … and makes the management of government services and programs less impressive than they might be. So my regret is that we should have pushed for a more compelling, continuous and strategic debate of governance issues in recent decades.

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And our democracy is suffering because of that neglect. [REFLECTION #2 – ECONOMICS IS IMPORTANT BUT NOT

EVERYTHING]

My second reflection is that I probably didn't recognise early enough the degree to which we were losing broader perspectives on policy challenges – perspectives that go beyond economics. As a guess a good deal more than 95% of public sector employees are currently engaged in service delivery, program management or regulatory activities. The majority of those employees are in agencies or delivery institutions with some level of independence from departments of state. All told these public sector employees now make up 16% of the total workforce, which is down from 25% thirty years ago. With advances in technology, out-sourcing of activities, privatization, private sector service providers, co-payments for many services… … as well as a bi-partisan cap on how much of GDP is available to the public sector which is currently around 35%... …the proportion of public sector employees in the total workforce will continue to decline. This has been the work of a generation and the policy establishment transformed itself to get it done. For thirty years we have been working hard on driving reforms from a macro and micro economic perspective. It's an approach that has generated wealth, opportunity and choice for more people. But it has come at the cost of public servants and Ministers losing sight of how to understand – in a profound way – the parallel universe of commercial analysis and dealings at the level of individual businesses which are the

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mainstay of the real economy. This has occurred at a time of massive change in the tools applied – and the approaches adopted – in the commercial world. I worry that, for many senior public servants, this area of thought is now a black box and that too often our response is that a well framed market will take care of almost all problems – by definition. As a consequence the commercial universe is very poorly reflected into policy development – and thus government is well behind in its view of key influences on economic growth as seen from the perspective of the firm. There is a further body of thought and analysis which is important but left out of what most policy advisers learn – what I call “strategic policy”. I am referring here to evidence-based approaches applied to the complex problems experienced by large organizations. These approaches span management and the formulation of business strategy. There are many techniques, already in use in the private sector, which we should know more about – commercial strategy, business planning, project management, IT and systems, capability development, accountability… These approaches may serve an economic purpose – but they are not derived in a direct fashion from the work of economists alone. Rather they come from the management challenge for various organizations in delivering goods and services in competitive markets. Much of what is behind these approaches has informed many of the key reforms within government in the last thirty years – including those which have reduced the relative size of public sector employment. But the preponderance of economic analysis – has meant that Canberra’s policy establishment has missed getting the right balance of:

• economics

• advances in contemporary management

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• and the parallel real commercial world experience… …in thinking through the challenges facing government as a whole – and in preparing advice to Ministers. The right balance here is critical to get the settings and strategy right for the 95% of public servants engaged in service delivery. And that gap is aggravated by the increasing feeling that senior public servants who take on adviser positions in Ministerial offices are having their cards marked by whoever is then in Opposition. Without wanting to sound 'Rumsfeld-ian' about it – the result is that there are too many “unknown unknowns" in Canberra and to an extent in the States and Territories at the moment. [THREE REASONS TO BE CHEERFUL… ] Rather than finish with those depressing thoughts – I want to outline three observations that might make us feel a little more optimistic about the future. First – it was very heartening to read the proposal from the new President of the BCA Catherine Livingstone about cl osing "the gap between what governments think and what business kn ows". Her proposal3 for twenty of Australia’s leading companies to offer highly structured Secondments for senior public servants – with the aim of improving mutual understanding between the public and private sectors – is a very positive one. It’s a good sign that one of our leading business groups is reaching out to government. Their proposals also go to the real urgency of the economic challenge we face. As part of their Secondment proposal – BCA also released some research from McKinsey's which looked at establishing a baseline of Australia’s

3 Vision for a Competitive Australia: Speech by Catherine Livingstone to the AICC, 28 July 2014 http://www.bca.com.au/docs/a726dd96-2d94-48ad-bbe6-e4cea9e1f3e2/CL_AICC_speech_Vision_for_a_Competitive_Australia_FINAL_28.7.2014.pdf

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comparative advantages McKinsey's assessment was only five of nineteen Australian industry sectors currently have the capacity to grow in a global marketplace. That means that if we only have people in government thinking with an economics perspective… …and we don't have people with an ability to be able to think strategically about how can we help those fourteen other industry sectors build their capacity to grow… …then we risk leaving future generations a rapidly shrinking economic legacy. My second reason for optimism is that the growing d emand for more open and transparent processes in government is goi ng to force Ministers and public servants to lift their game. One of the many things that New Zealand can teach us – apart from an extraordinarily competitive dairy industry – is the beneficial effect of shining a bit of sunlight on the internal processes of government. If you go onto a New Zealand government website you'll be able to see:

• Departmental briefs to incoming Ministers – and even Prime Ministers.4

• A range of Cabinet papers – which in many cases are published proactively without FOI requests.5

• And high level internal briefing documents – including for example Treasury documents relating to the design, strategy and Ministerial briefing processes of the 2014 Budget.6

I have to confess to having had a "road to Damascus" type conversion in my thinking about this area – where I now think that Australia lags behind our Kiwi cousins.

4 http://www.dpmc.govt.nz/sites/all/files/publications/brief_to_incoming_minister_2011_0.pdf 5 http://www.dia.govt.nz/Pubforms.nsf/wpg_CabinetPapers_LGAREV?OpenView 6 http://www.treasury.govt.nz/publications/informationreleases/budget/2014/

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And in part – my change in thinking reflects some of the concerns I expressed earlier. A greater level of openness has the potential to create a virtuous circle where:

• Ministers are held to account for the strategies they endorse – rather than media-driven "gotcha" minutiae

• And public servants are held to a high standard in the quality of the advice that they provide to Ministers.

It is true that having that level of release puts some extra stress on the ability of public servants to offer free and frank advice to their Minister. However one practical way of meeting that challenge would be to give public service heads the protection of a permanent or long fixed-term appointment – such as happens with the ten year appointment of the Victoria Ombudsman or seven years for the Auditor General. My final reason for optimism is that the tide in go vernance thinking seems to be flowing in the right direction. As far as I can see – the long term future for public sector governance is going to be for service delivery and accountability processes to be moved closer to the local level. As that happens – what you can think of as the "head offices" of public sector departments and agencies in Canberra are going to become far less involved in service delivery decisions… …and far more focused on the six core areas of Ministerial responsibility:

• policy

• strategy

• budgets

• appointments

• performance of the system

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• and engagement with the community. In that world the service delivery cookie jar is put further out of Ministerial office reach – which is a better outcome for everyone Ministers included. It's not a panacea – because that strategic advice flowing from Departments does still have to be acted on by Ministers and their offices. But it will probably make it clearer when it's not being acted on. [HUMILITY] What we need in essence is a little more humility. 220 years ago Edmund Bourke observed a bit caustically that almost any plan could be improved… "…by the observations of those who were much inferior in understanding to the person who took the lead in the business". That very old message is one that we need more of our current political leaders, business leaders and public sector leaders to reflect on.