This section argues that a more flexible range of organisational options will enhance the ability of the New Zealand Public Service to achieve better outcomes and better services for New Zealanders.

The State Sector Act provides only a limited range of organisational options for the operation of the New Zealand Public Service; only Departments and Departmental Agencies can be established under the Act and operate within the legal Crown.

Currently, the Public Service is arranged into a number of separate departments (also known as Ministries) e.g. the Ministry of Health, the Department of Internal Affairs, Oranga Tamariki. As discussed in Chapter Two, in most cases individual departments are good at delivering services that fall within their specific area of responsibility. However, they struggle to deliver services as effectively when citizens have needs that relate to more than one department, or where the Government is seeking to achieve outcomes that require the coordinated efforts of two or more agencies.

A range of experiences, including importantly the response to the Canterbury earthquakes, has shown the necessary for greater agility in tailoring functions and services to changing circumstances, often across existing organisational boundaries. Citizen-centric service design, co-production, co-location, and active exploration of the potential for information sharing, all have a greater part of play now than formerly. Increased availability of options and tools for innovation is critical. Some of these tools and methods are found in new or changed organisational forms.

We believe that a broader set of organisational options will help us solve this problem, by enabling us to join up the resources and operations of departments where this is the best way to achieve better outcomes or improved public services.

We have already introduced some innovations that improve our ability to join up departments. The State Services Commission, working with a group of Public Service Chief Executives, recently developed a ‘System Design Toolkit’ to provide an organising framework for possible solutions to cross-departmental problems. The toolkit sets out a spectrum of solutions to enable cross-agency working, ranging from ‘soft’ (voluntary) to ‘hard’ (structural reorganisation). In the ‘middle’ are various solutions that involve greater commitment or mandated engagement without formal structural changes. An overview of the toolkit is set out in Figure 1 below:

Figure 1: System Design Toolkit

Picture1


These innovations have been successful in many cases, but we think we could be even more effective if we strengthened the toolkit and made more options available for cross-departmental working.

Opportunities to strengthen the System Design Toolkit

The System Design Toolkit sets out a comprehensive range of non-structural models that are available within the current legislative framework. Reform of the State Sector Act provides an opportunity to strengthen these models or address gaps in the toolkit, as highlighted in Figure 2 below:

Figure 2: Areas of the toolkit that could be strengthened through legislation
Picture2

We have developed four proposals for inclusion in changes to the Act:

Proposals to strengthen the System Design Toolkit or address gaps

Public Service Executive Boards – support joined-up strategic policy, planning and budgeting around shared outcomes (strengthen the ‘Collective Accountability’ and ‘System Leadership Governance’ models in the System Design Toolkit)
Public Service ‘Joint-ventures’ – delivery vehicles enabling a small number of agencies to hold joint resources including assets and staff, and mechanisms to support sustained collaboration by larger numbers of agencies (fills a gap in the ‘Delivery Vehicles’ model in the System Design Toolkit)
Executive Agencies – support joined-up frontline delivery by many agencies (strengthens the ‘Federated Services’ model in the System Design Toolkit), and
Statutory Officers – provides the ability to establish new lines of Ministerial accountability for departmental functions without structural change (fills a gap in ‘Semi-structural Integration’ model in the System Design Toolkit).

Enabling some of these models would require changes to the current State Sector Act to set out establishment and disestablishment processes, accountabilities (including collective accountability), and other necessary features of the specific models. Some of the models would also require changes to the Public Finance Act.

The remainder of this chapter considers each of the above proposals in turn.

Public Service Executive Boards

Boards of Public Service chief executives have existed as vehicles for cross-departmental collaboration for some time, with varying degrees of formality and collective decision-making authority. The goal of these types of boards is to align strategic policy, planning and budgeting around shared goals or cross-cutting issues, without changing accountability for delivery activities.

Early board models improved information flows between agencies, but suffered from many of the common problems of cross-departmental activity, such as prioritisation of vertical accountabilities, patch-protection and lack of commitment. The relatively large size of the boards also resulted in lack-of-ownership issues, with chief executives feeling little individual responsibility for problems in a group of, in some cases, more than ten agencies.

Currently we are able to establish more formalised Boards through Cabinet mandate. Here we propose a stronger, legislated, version of the model to be available to Cabinet as an option for use in the future.

Accordingly, we propose that the Act includes a Public Service Executive Board model, the key features of which would include:

• A formal terms of reference agreed by Cabinet (including the scope and functions of the Board);
• Collective accountability to the Minister(s) responsible for the Board (as designated by the Prime Minister), for the work of the Board;
• Establishment by addition to a schedule of the legislation (requires a Cabinet decision followed by an Order in Council);
• A departmental remit agreed by Cabinet and set out in the schedule of the legislation where the Board is named;
• Chief executive membership (no more than six members including the chair) appointed by the Commissioner from the departments within the Board’s remit;
• Ability for the Commissioner to appoint independent members from outside the Public Service, to whom the same responsibilities and obligations under the legislation would apply for their work as a Board member;
• Ability for the Board to administer an appropriation; and
• Ability for the Board to employ staff and enter into contracts (as a separate administrative unit of the legal Crown).

Figure 3: Public Service Executive Board
Picture3

The key uses of the model would be to:

• align strategy and planning activities for a group of agencies operating in overlapping policy areas, and/or
• harness the distinctive operational capabilities of individual departments around a specific cross-cutting problem or priority. In these instances, responsibility for delivery activities that contribute to the board’s priorities would remain with individual departments.

The two most important differences between the proposed Public Service Executive Board and the existing Cabinet-mandated Specific Purpose Board are:

• Formalising collective chief executive accountability: Under the Cabinet-mandated model, chief executives owe their individual accountabilities for the work of the Board to the Minister responsible for the Board. However, the concept of collective accountability (i.e. a requirement for individuals to take ownership of decisions made collectively) does not appear in the current State Sector Act. It is important to provide for collective accountability as where there is a perceived conflict between the Board’s collective priorities and individual portfolio interests, it will force members to resolve issues internally rather than through escalation to Ministers.
• Ability to administer appropriations: Currently only a Public Service department can administer an appropriation under the Public Finance Act. Enabling the Board to administer an appropriation reinforces the collective accountability of the Board, and will also provide an institutional mechanism to strengthen collective planning, funding and budgeting processes that currently favour the needs of individual departments.

Public Service Joint-ventures

A Joint-venture in the private sector is a business arrangement where two or more parties agree to contribute resources to undertake a specific activity. There are two types of Joint-venture:

• Non-equity Joint-ventures – where shared resources and/or capabilities are governed by licensing or contractual arrangements without combining equity into a separate legal structure.
• Equity Joint-ventures – where two or more firms bring together resources into a separate legal company they establish (and own shares in) for achieving a joint purpose (usually limited to 2-3 shareholding entities).

Public Service departments are unable to enter into traditional Joint-ventures with one another, as they are not distinct legal entities but separate administrative units of the same legal entity (the Crown). This means that agencies cannot contract with one another, and cannot hold separate ownership stakes in a company. Many of the existing arrangements for cross-agency work are similar in nature to non-equity Joint-ventures, but are given effect through Memoranda of Understanding or Service Level Agreements (which are not enforceable legal contracts).

Joined up delivery activities are often difficult to sustain over time due to prioritisation of vertical accountabilities, lack of stability in the context of personnel changes. Where Public Service Executive Boards provide a vehicle for joining up strategy and planning across departments, Public Service Joint-venture options would provide an avenue for coordinating delivery activity across agencies.

Better joint venture arrangements could be beneficial for joined-up service delivery in a number of areas, including for instance, at the border where several agencies now perform various related functions in relation to people moving through our airports.

There are a number of different ways in which a Public Service Joint-venture arrangement could be enabled through legislative change, modelled on either equity or non-equity Joint-ventures in the private sector. We have identified three different potential models for consideration:

• Public Service Non-equity Joint-venture: A non-equity Joint-venture would require a mechanism to strengthen and enforce the existing quasi-contractual agreements between departments. One option would be to enable the Commissioner, at the request of the relevant chief executives, to issue a statutory direction that chief executives must comply with a specific cross-departmental working arrangement.
• Statutory Interdepartmental Joint-venture: This option would involve enabling the establishment of a Joint-venture Board of chief executives, which would require Cabinet agreement and an Order in Council. The Board would report to a Joint-venture Minister or group of Minsters, and have flexibility to establish Joint-venture vehicles in the same way that separate departments can establish business units.

Figure 4: Statutory Interdepartmental Joint Venture
Picture4

Interdepartmental Joint-venture: This option would provide greater flexibility for chief executives, subject to consultation with central agencies, to establish Joint-venture vehicles to hold joint resources (assets and people), without requiring Cabinet agreement or specific authorisation under a statute. This model would not involve a Minister, but would leverage existing individual Ministerial accountabilities. A mechanism would be required to establish a Joint-ventures. One option would be a direction issued by the Commissioner at the request of the partner chief executives.

Figure 5: Interdepartmental Joint Venture

 Picture5

Executive Agencies

Citizen-centred approaches to public services make it easier for people to access the services and support they need from multiple departments.

The current approach to cross-departmental delivery and service improvement can use existing tools, for example:

• Federated services e.g. SmartStart, to provide a single portal to navigate information and services from a range of agencies enabled by individuals using a RealMe account
• Information sharing between agencies, which may include an Order in Council under the Privacy Act to share personal information that was collected for one purpose to support a wider service delivery purpose when there is sufficient benefit
• Collective-impact boards, including the co-location of people to support knowledge sharing and trust, as well as the provision of navigator services to shift the burden of search costs from citizens to the government, and
• Pooled funding through administration and use arrangements under the Public Finance Act.

As in these examples, existing tools can support coordination and alignment between departments at a national level. However, delivery happens within separate departments. This means that the accountability for delivery sits between the responsible Minister, and a chief executive and the way they manage their individual agency. Accountability for collective issues is effectively concentrated on a single person with limited tools to achieve change in the activity of other departments. This means that when outcomes require cross-departmental delivery, these accountability structures can limit the effectiveness of service design.

We propose to use an Executive Agency model to address this problem. An Executive Agency would provide a single point of delivery for people to access a range of services provided on behalf of other Public Service departments. This does not require a new legislative vehicle, but could be a department listed under Schedule 1 of the current State Sector Act. The key shift would be in enabling the Executive Agency to provide the frontline services for areas with funding models and policy frameworks set by different agencies. There are instructive examples of this approach on other jurisdictions including Service Canada and CentreLink in Australia.

Figure 6: Executive Agency

Picture6

 

Statutory Officers

The current State Sector Act provides for the establishment of departments and departmental agencies, which are part of a host department but with their own chief executive and responsible Minister. The original intent of the Departmental Agency model was to use it for operational and regulatory matters. However, in practice Departmental Agencies are being used to highlight policy functions that might otherwise lose visibility as part of a large multifunctional department.

This is because the Departmental Agency model is the key existing structural alternative to a Department for establishing a direct relationship between a particular function and a Minister. The problem is that the structural changes required to establish a Departmental Agency are costly and time consuming. We propose exploring a variation of the model that supports a direct relationship between a Minister and a policy area but with lower transaction costs.

Our proposal is to use a generalisation of the existing Statutory Officer model, which would provide the flexibility to establish direct Ministerial accountability for a particular area within a Department. This could occur without requiring the full Departmental Agency change in management responsibility and financial reporting and without the establishment of a new chief executive position.

Legislation is currently required to establish a Statutory Officer and set out their functions, usually including a specific decision-making mandate.

A generic Statutory Officer model establish Statutory Officers by Ministerial agreement or by Order in Council. The agreement or Order would likely set out the:

• responsible Minister
• title of the statutory officer
• employer of the statutory officer (namely the host department chief executive), and
• allocation of existing functions, duties or powers to the statutory officer.

While this model could not be used to establish new powers or functions, it could be used to change the relationship to a responsible Minister in relation to the administration of particular functions, duties or powers. It would also allow for a differentiation in reporting lines without requiring structural change. The legislative framework would be broad enough to cater for application to policy functions, as well as the types of functions exercised by existing Statutory Officer positions.

The chief executive of the host department would remain the employer of the statutory officer with the responsibility for appointment and performance, and would remain responsible for how the Statutory Officer administers the resources delegated to them. The Statutory Officer would be responsible for exercising any function, duties or power conferred on them, and for providing advice to the responsible Minister.

Implications for financial management

The proposals outlined in this chapter have potential implications for the financial management settings of the Public Service. Some of the proposals, if implemented, would require amendment to the Public Finance Act to support them. The most notable change would involve enabling administrative units other than departments to administer, use, and in some cases be accountable for appropriations.

Careful consideration of the full implications of these changes is critical. The State Services Commission is working closely with the Treasury and other departments to understand how all the proposals in this chapter will work in practice.