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An innovative public service - Pete Hodgson Speech

Hon. Pete Hodgson
Thursday, 18 October 2001 [11.30am] Speech Notes

An innovative public service

[Address to Public Service Senior Management Conference 2001, Te Papa, Wellington]

In 1984 the Treasury gave Roger Douglas a briefing paper, which many of you will remember well, called Economic Management.

Among its many influential suggestions was one that, quote, "fundamental changes to the way the government machinery is organised may be appropriate if the goal of greater efficiency in the use of resources is to be met".

It happened that fundamental changes were made – through the State Sector Act, the Public Finance Act and the State Owned Enterprise Act, to name just the three most significant pieces of legislation.

And the paramount goal was indeed "greater efficiency".

Improving transparency, accountability and services to the public were also genuine and important concerns.

But the prime driver of public sector reform in the 80s and 90s was the desire to contain public expenditure by doing more with less – or doing the same with less, or doing less with less.

This was entirely consistent with the direction of government economic policy through that period.

There was an intense focus on cutting costs, an attempt to apply to the public sector, as much as possible, the private sector virtues of efficiency and competition.

Times have changed.

Business has realised the limitations of focusing too much on efficiency and cost-cutting.

Smart managers and entrepreneurs are now paying more attention to innovation as the chief source of competitiveness.

It is time for a similar shift in our thinking about the public service.

Of course it is important for the machinery of government to run smoothly and economically. But it is not sufficient.

Government today must be more nimble, which means being more innovative, less risk-averse, more collaborative.

This is where we run smack into the paradox that is the theme of this conference: the contradictory demand for both innovation and stability.

We expect the public service to be cautious, rigorous, disciplined and discreet. But now we want you to be bold, inventive, unlimited and open as well.

Your difficulty as managers is that striving for efficiency in your organisations will directly undermine your ability to meet these new demands.

Efficiency comes from order, routine, discipline and certainty. It grows quietly and steadily, as you tweak and polish your organisation's performance.

Innovation thrives on different ground. It grows from experimentation and exploration, often from the relaxation or even abandonment of discipline and control.

If you have devoted yourselves to making your organisations efficient, there won't be a lot of that sort of behaviour going on.

So how can you respond to such contradictory demands?

One way, commonly taken, is to adjust your approach issue by issue.

You ease up a bit on the drive for efficiency, accommodating people and behaviour that will be valuable when more creative responses are called for.

You surrender a degree of consistency and focus for the sake of flexibility. You muddle through.

I don’t want to be too hard on muddling through. When your supplies of talent and resources are thin and under pressure it can be an approach that at least keeps your organisation intact and functioning.

But muddling through requires you to be inconsistent and reactive. It is difficult to generate a clear collective sense of purpose and organisational culture. Staff tend to feel uncertain and directionless.

Muddling through can be adequate, but never more than adequate. And New Zealand is at a stage of its history where adequate just won’t do, not in any sector. Mediocrity will sink us.

I am not about to argue, however, that the correct response is to transform your organisation dramatically in the other direction.

I'm not going to asking you to flatten all hierarchies, burn all partitions and tear up the carpets so people can skateboard around the office.

Skateboarding is really hard.

No, a government department is not a dotcom or a high-tech start-up. Your job is not to be innovators above all else.

It would be as much of a mistake to apply the business model of the new economy dogmatically to the public sector as it was to apply the business model of the eighties.

But we can learn from the thinkers of the new economy. There are characteristics of innovative organisations that should increasingly be characteristics of a modern public service.

Before I talk about some of the new habits that I think are required, I want to offer you a guiding idea.

I think I owe you one.

I have just said that muddling through won’t do.

So before I talk about combining innovative behaviours with efficient ones, I should explain how I think the result can be a meld, rather than a muddle.

I think the key might be the idea of a learning organisation.

Learning, as a goal and as a process, embraces discipline and independence, rigour and invention, order and diversity.

It requires both efficiency and experimentation.

It requires us, in other words, to reconcile many apparently contradictory behaviours and skills.

The good news is that we can do this. We’ve been doing it for centuries. The drive to learn is a very powerful guiding force.

I think the idea of a learning organisation is useful in confronting the paradoxes confronting you as public service managers.

A genuine learning organisation will consistently be both active and purposeful. A commitment to learning can sustain your sense of direction even in the face of criticism and failure.

You could contrast this with an older notion of the public service as a repository of wisdom — a source of established knowledge that can be applied and re-applied to problems that recur, generation after generation.

You could contrast it also with what a champion of innovation might demand — a service committed to tearing up all the old rules in a quest for novelty and invention.

So what would be some of the characteristics of a learning organisation?

You heard Trevor Mallard mention some earlier today – collaboration between agencies, contingency planning, and the early involvement of ministers in policy development.

Trevor also mentioned the importance of being ready to learn from mistakes.

If government is to make bold moves, it must be prepared for failure. Like anyone trying to lift their performance, if we are not failing occasionally we can be sure we are not taking enough risks.

I want to talk a little bit about collaboration — which is typically a key element of innovation success — and then make a suggestion of my own about another useful habit.

It is easier to talk about collaboration than to do it, I know.

The essential challenge of management is to weld individuals into a functional organisation. It can be hard enough to do that with your own people, let alone trying to coordinate the efforts of one organisation with one, two or three others.

My experience with the climate change programme has demonstrated this in spades.

At last count there were 11 government agencies involved with climate change policy. It’s also the most complex and far-reaching public policy issue I know of.

When I was made responsible for overseeing the programme I decided I didn’t want all the officials gathered into a “greenhouse office”, as for example the Australians have done.

The implications of climate change extend right across the economy: I wanted people thinking about it right across the public sector, rather than have them together in an office that everyone else might think had little or nothing to do with them.

That’s changing now. We’re about to bring everyone together into what we’re calling a project team, in one office.

The workload has mounted and will require intense effort over the next few months. It has become too difficult to coordinate people scattered across Wellington.

I don’t think this necessarily means the initial strategy was a mistake. It got us so far. Now the next stage needs a different approach.

Like I said, collaboration is hard. There’s no one right way to go about it. So the structures enabling it must be flexible.

That climate change project team could morph again, in a year or two, as different pressures and opportunities arise.

Maybe it’s useful to think of collaboration as a continual experiment, whose results can inform and change the method.

I’m fond of learning by doing. If we do more government collaboratively I think we will learn more about what we can achieve by it.

So I’m giving you a question to ask yourselves, preferably at the beginning of a policy process:

Who can we bring in on this?

I’d like to think that could become one of the first questions on the whiteboard — maybe even before some of the more traditional ones, about who holds the pen and who holds the money.

I’d also like to think it’s a question that can reach beyond the public service.

The question of how you do that brings me to that other useful habit I said I’d mention.

Robert Reich, whose influence some of you will already have noticed, calls it deliberation.

I don’t really mind what you call it, but its key features are openness, inclusiveness and iteration.

Let me quote a bit of Reich, rather than paraphrase him.

“The process is iterative and ongoing. You use a variety of devices to elucidate an issue, to show how it is connected to other issues and broader purposes, and to propose solutions.

“The communication flows in both directions: A first round of explication often will be followed by a second, after those likely to be affected by your proposals have had an opportunity to ponder them, understand their significance, and respond.

“A second round may be more detailed; it may involve a smaller group of better-informed intermediaries; the range of ambiguous or disputed issues may be narrower than at first; the spectrum of choices may be narrower and the data of higher quality, since there is now more agreement about what needs to be known.”

(Public Management in a Democratic Society, 1990)

If Reich had been a New Zealander he might have said:

“Right, you take your public policy problem and, without being too smart about it, you lay it out for the people who’ve got an interest, and you tell them what you think you could do about it and you ask them what they would do. After you’ve listened to them and had a bit of a think, you work up some details on what you want to do and you go back to the ones who were most useful the first time and you give them another crack. And then you probably have a bit more of a tinker and then you have a go.”

This is something more than consultation – or, if you like, it is a particular kind of consultation.

More often than not, consultation means seeking public comment on fully formed policy proposals. This is about collaboration with people outside the public sector in the development of policy, from the very early stages.

And this is not an idea I have dredged up just for today. Those of you who have been involved with the export credit guarantee programme, the business incubator support programme, or the venture investment fund will know that.

For export credits, incubators and the venture fund we went early to sector groups and other stakeholders with our objectives and initial policy ideas. We went back to them again and again, building up knowledge and refining options.

For the export credit guarantee programme we brought exporters, their bankers and insurers together to argue in front of us about whether there was a gap in the market — and if so, what size it was. We learned there was both a market gap and a knowledge gap, and we agreed on moves to fill both.

For the business incubator support programme we brought incubator managers from around New Zealand to Wellington for a day, gave them our policy outline and watched them re-write it. One of the features is an advisory group that will help us tweak the programme in light of what we learn as we go.

For the venture investment fund we went fishing for ideas in Israel and the United States, settled on a framework, then refined the operating detail in a series of exchanges with the venture capital sector and innovators. We brought in the father of Israeli venture capital to talk with local and international venture capitalists to make sure we had it right, and to make sure at the same time that the national interest remained central to the design of the scheme.

We’ll be going back to all these people yet again – and they’ll be coming back to us – now that the programmes are under way.

If I’d carried on quoting from Reich earlier the next line would have been “Few issues will ever be resolved permanently”. Because learning is not something you finish.

Clearly this kind of approach makes complex demands on you as managers. But I know you’re equal to them.

The New Zealand public service is innovative.

Later today you’ll be hearing more about some recent, successful examples. They add to a history of innovation in this country’s public sector.

I’m urging you to keep it up, and more: to make learning and innovation intrinsic to the culture of your organisations. Make the examples being showcased this afternoon less exceptional.

Trevor said to you earlier that he appreciated a “no surprises” approach from the public service. I say yes to that, but be clear what it means and what it doesn’t mean.

Don’t surprise us with late runs. Don’t surprise us with conflicts you’ve been trying to paper over until the last possible moment. Don’t surprise us with policy outcomes you’ve foreseen, but discounted, and failed to plan for.

Perhaps above all, don’t surprise us with a lack of options. There are few things worse for a minister to hear than “there is no alternative”. And it is very seldom true.

Do surprise us with your originality. Surprise us with your vision and your initiative. Surprise us with your ability to reach outside your own organisations for ideas.

I promise you we will be grateful.


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