Tuesday 2 December 2014

State of the Service Report 2013-14: Steve Sedgwick Dodgy APS Commissioner Launch speech

1 December 2014

Good afternoon.
I would like to begin this afternoon by acknowledging the Ngunnawal People and their ancestors on whose traditional lands we come together today to launch the 2014 State of the Service report.
I would also like to pay my respects to their elders past and present, and extend that respect to other Indigenous Australians who have joined us for the launch.
I see many of my senior colleagues—thank you all for making the time to be here today.
I also see my colleague from PNG, John Kali, who is the Secretary of their Department of Personnel Management, and some of his senior colleagues.
John also attended the launch last year and we are grateful that he is again in town and able to join us.
My thanks also to the Shared Services Centre (and to Secretaries Lisa Paul and Renee Leon) for making this facility available to us today to launch this Report.
Our hope is that this State of the Service report and the surveys and other reports that underpin it will be a valuable resource for you.
This is the seventeenth State of the Service report.
The earliest compilers saw it primarily as a report card for the APS.
However, over the years, it has evolved to become more of a collaborative document through which the Commission works with agencies to identify opportunities for continuous improvement.
This collaboration has intensified since we moved to an APS employee census in 2012.
I would like to thank the 99,392 APS employees who completed the census and all the agency heads and their contact officers for the support they provided to us this year.
The report has grown to become a core source of information and analysis for agencies.
However, most importantly, much of the data that underpins the report is now made available to agencies sooner and in more useable forms than ever before.
Each agency, for example, has had access to their results of the employee census—including key benchmarks against comparable agencies—for some months.
This year, in addition, the demographic data from the Australian Public Service Employment Database (APSED) was made available through the Statistical Bulletin in September rather than the traditional December.
This was possible because of efficiencies in how we collect the data but mostly it is possible because the diligence of agencies in providing cleaner data to us.
Hence, although the State of the Service report is principally a statutory report by the Commissioner to parliament, it is the tip of a much larger iceberg of information exchange, learning and collaboration that takes place between the Commission and agencies throughout the year.
The State of the Service report is a small example of a more collaborative approach to improving APS performance that is working its way into every aspect of the work we do together in the APS.
This year the report takes a systems-level view of the Service.
What does that mean?
It means the report is focused on the way processes, systems, culture and structures combine to deliver better business outcomes more efficiently.
Why are we focusing on this?
Because we stand at an important cross roads in the history of the APS.
Both sides of politics are looking to us to help them reinvent government so that they can deliver against the community's dramatically higher expectations for services and engagement without dramatically higher taxation and while repairing the budget over time.
And both sides of politics are looking to the Service to play its part in lifting national productivity growth—which effectively means to secure greater outcomes at lower costs, including by working more collaboratively across program and agency boundaries.
In effect our challenge is to review, root and branch, what we do and how we do it.
This slide captures this requirement schematically.
We need to examine the efficiency of what we do (including in respect of our back office), the effectiveness of programs, the effectiveness of our organisations and how well we collaborate to maximise outcomes achieved.
The focus on organisational effectiveness and on collaboration are relatively new issues for us.
The attention now paid to organisational effectiveness partly has arisen because when we have looked into the entrails of the occasional major failure in delivery by the APS we find typically that there have been multiple points of failure in those systems, processes, governance arrangements and culture that go together to produce results in an organisation as complex as the APS.
What does this mean in practice?
This means that in practice we need to think beyond the management of projects and teams to the management of each APS organisation as complex, human system.
A system needs governance and in a human system culture eats strategy every time.
We need to pay close attention to both.
Moreover, priority setting and the alignment of resources to priorities is key to maximising the outcomes achieved with the resources available.
This lies at the heart of an effective performance management system.
But, equally, does clarity about the accountabilities and responsibilities of every individual, backed up with a workplace culture that supports and requires that accountability of each individual.
Indeed, it means that our focus on managing performance—organisationally or individually—must be intense.
Far more intense that it has been in the past.
I'll say more about this shortly.
This chart, which appears in the Overview of the report also provides a road map to where these issues are addressed in the body of the report.
Why do we need to focus on this now?
Over the years we have successfully created an APS that is responsive and action-oriented.
But having successfully created a responsive, action oriented culture concerns have emerged that the APS may have become too reactive, too focused on the short term and the delivery of tasks, and unable to generate the range of new ideas that we might have liked.
For the first time, the State of the Service report includes a diagnostic that allows us some insights into APS culture.
This is based on a widely accepted model of organisational culture that sees organisations responding to two sets of competing demands:
  • first, there is a tension between the need to maintain stability to deliver consistent outcomes (a focus on task and process) and the need to constantly adapt to changing circumstances (a focus on innovation and people);
  • second, there is a tension between the need to manage internal agency resources that produce capability (a focus on people and processes) and the need to meet stakeholder expectations (a focus on task and innovation)
This model is a little complex.  You will find a fuller explanation of it in Chapter 5 of the report.
This slide shows the results when this model is applied to the agencies that comprise the APS.
The whiskers show the range of average scores recorded against the model across agencies.
The diamonds show the average of agency scores and the boxes the interquartile range, i.e. first to third quartile.
As you can see there is some variation in the extent to which employees believe their agency emphasises the different aspects of this model.
Nonetheless, there is also strong agreement that APS agencies place more weight on task and process than on people or innovation—an emphasis on stability over adaptability.
This is not surprising but we do need to ask ourselves:
  • At what cost? What are we missing?
  • Is the urgent distracting us from the important task of longer term organisational renewal?
  • Are we preserving what we have rather than focusing on where we need to be?
Today, in the cold light of recent external reports we need to address these questions openly and directly.
Although in general we have a record of achievement that we can be very proud of, both the Independent Audit of NBN Public Policy Processes and the Home Insulation Program Royal Commission, explicitly or implicitly, levelled substantial criticism at the culture and capability of the APS.
While a lot has been done across the APS over recent years, particularly to encourage a greater focus on becoming more forward looking, innovative and creative, the task of renewal remains incomplete.
These imperatives have been reflected in amendments to the Public Service Act introduced in 2013.
Of course, APS leaders remain responsible for delivering the government's immediate agenda.
The changes to the Public Service Act now also require leaders:
  • to develop and use the capability to provide forward looking, creative contributions to the government about what that agenda should be; and
  • to be stewards of an enduring institution who scan the horizon and build capability within their agency ahead of predictable need.
The renewed emphasis on capability is an encouragement to think beyond the immediate to the medium and longer term, recognising that it may be necessary to invest in building capability in the short term to minimise costs and maximise the effectiveness of the agency over time.
But we also need to reform our organisational systems.
The Capability Reviews—which are intensive, externally led examinations of agency leadership, strategy and delivery systems—have provided particularly powerful insights into both agency practices and systemic issues across the APS.
The messages emerging from the Capability Reviews complement those of the other external reviews, including the Report of the Royal Commission into the Home Insulation Program, and are reinforced by three years of data from the employee census.
We have a set of seemingly intractable problems that we must work collectively to fix. These are:
  • strengthening APS capabilities respectively to manage risk, change and performance
  • progressing a sensible approach to shared services
  • lifting the representation of some diversity groups
  • addressing uncomfortably high perceptions of bullying
  • responding effectively to an unexplained rising trend in unscheduled absence.
I don't have the time today to address each of these but I would like to touch briefly on performance, risk, and change.
Each of these was identified in 2011 as an area in which the vast majority (70%) of APS agencies needed to lift their capability in the short term.
Yet in 2013 it was clear that little had changed in the APS overall.

Let's start with performance management.

Too often performance management is seen as code for dealing with underperformers.
Sometimes the service is criticised because ‘not enough’ employees have had their employment terminated for under performance.
However, performance management has two dimensions.
First and foremost, as we hinted earlier, it is about setting priorities, communicating them effectively within the agency and ensuring that resource allocation remains consistent with priorities as they change over time.
Secondly, it relates to the clarity with which agency goals and priorities cascade to the work plans of employees and the quality of feedback provided by supervisors to their employees.
Such discussions afford managers the opportunity to identify and nurture their most talented employees.
It is very pleasing that increasing attention is being paid to talent management and succession planning in the major APS agencies.
This work is being progressed collaboratively under the auspices of the Secretaries Board.
Where performance is deficient it needs to be addressed.
If an employee is not sufficiently responsive and performance expectations remain unfulfilled, then the Public Service Act is clear that an ‘agency head may at any time, by notice in writing, terminate the employment of an [ongoing] employee … [for] non-performance or unsatisfactory performance, of duties’.
However an examination of agency enterprise agreements has highlighted that many agencies have, over time, surrounded the performance management process with excessive procedural and other encumbrances.
The need to afford an employee procedural fairness is deeply enshrined in administrative law and APS practice.
Similarly the need to provide an individual with reasonable opportunity and support to lift their contribution is deeply entrenched in APS culture.
Neither of these require, however, the adoption of interminable or excessively bureaucratic processes.
To be clear, the principles of effective performance management are not rocket science.
Four things need to come together to support good practices in managing the performance of employees:
  • clear expectations of what is required and how it should be achieved;
  • managers and employees who are skilled at designing implementable performance agreements and in giving and receiving feedback (preferably continuously rather than just a ‘tick and flick’ once a year);
  • streamlined but fair processes that provide balanced and accurate assessments of performance to all employees; and
  • a workplace culture that expects and values honest two-way conversations in the workplace.
A number of tools have been developed in conjunction with agencies to assist with this.
On the one hand, programmes have been developed to upskill APS employees and managers.
The Core Skills Project being progressed by the Commission, again under the auspices of the Secretaries Board is an example.
This programme delivers facilitator-ready modules on structuring work, developing performance agreements, and giving and receiving feedback, amongst many others.
This approach – central development of training modules with high levels of agency buy in – has the potential to save the APS tens of millions compared to each agency continuing to do its own thing.
The early uptake of these programs has been very encouraging.
The take up of the new modules has grown steadily over the last year – to date over 5,000 APS employees have participated in some form of core skills learning with more than 4,000 participating in change or performance management programs.
On the other hand, the Commission has developed and tested a diagnostic tool to assist agency heads to understand how performance is managed in practice in their agency.
The diagnostic was developed because our analysis should that, although typically agency policies ticked best practice boxes, their application within the agency was highly variable.
The survey component of this diagnostic was administered by the Commission as part of the employee census this year and a separate performance management benchmark report produced for each agency down to the level they have specified, in some cases Branch level.
The use made of such tools and the effort devoted to procedural and cultural reform is essentially a matter for agency leadership.
However, take up of the diagnostic tool has been disappointingly slow and dissemination of the benchmark report within agencies seems to be variable.
This slide presents some of the data that supports part of the diagnostic.
Again it shows the variability of average responses within agencies across the APS.
The whiskers show the range.
The diamond shows the average of agency averages.
Note that the interquartile ranges (the boxes) are quite tight, suggesting that views of each of employees and managers are relatively uniform across agencies.
The results show that employees (data on the left hand side) are generally less satisfied with the effectiveness of their agency's performance management system overall than they are with actions taken by their managers ( shown as ‘practices’) or the processes supporting performance management in the agency.
Managers (data on the right) rate their practices in giving clear guidance etc highly and more highly than employees do.
Indeed, employee perceptions of the value of the feedback they receive are generally low (only 44% believe their most recent performance feedback was helpful).
Yet managers' views of their own ability to provide effective feedback about staff performance seem to be persistently optimistic.
In a few agencies, employee perceptions of the effectiveness of the feedback they have received have declined in recent years, which is particularly concerning.
The business case for investing time and effort to improve the quality of performance management across the APS would seem to be overwhelming.
Add to this that the HIP Royal Commission also raised questions about another element of performance culture that may resonate beyond the particular agencies that were the subject of their report.
This relates to the degree to which employees accepted (or were required to accept) personal responsibility and personal accountability for their actions or inactions.
The HIP Royal Commissioner particularly questioned (as did the 2011 Review of the Defence Accountability Framework undertaken by Rufus Black) the roles of committees in decision making and the roles of individual members of committees and their contribution to decision making.
He found that collective decision making made accountabilities unclear and led to too much ‘group think’.
He also found a lack of robust debate and too little challenging of the status quo.
There is a considerable body of work for us all to do in addressing every aspect of our individual and collective behaviour that contributes to instilling a culture of performance and accountability across the APS.
We have made a good start but there is more to be done.

Risk management

Similar issues occur in respect of risk management.
Expectations have been rising since the late eighties that the APS would manage rather than avoid risk.
Yet both external and self-assessments of APS practice suggest that too often risk management is seen as a compliance exercise rather than a way of working.
Again, the HIP Royal Commissioner's observations are informative.
It is to be hoped that the requirement in the PGPA Act that agencies develop and communicate a ‘risk appetite’ will prompt a mature dialogue between public servants and Ministers that will permit and require productive cultural change.
This is often a difficult conversation for Ministers and officials to have because the public's appetite for what they might perceive to be mistakes can be low.
The public require failure rates in the public sector to be much lower than are acceptable in the commercial world.
Recent research has argued that a traditional risk-mitigation strategy employed in the public sector has been to ‘use time as a resource to reduce uncertainty in a way that the private sector cannot’.
A tendency towards more compressed implementation timetables may have eroded the efficacy of such a mitigation strategy, the HIP possibly being a case in point.
Both political and public service leaders will have a role to ensure that discussions about risk appetite and implementation timetables are mature.
Ministers can more confidently engage in such a dialogue if they believe that risk management skills in the service are well-honed.
In some respects there is circularity at work.
Ministers and officials need to know that they each share the same appetite and capability to manage risk.
Possibly both parties fear they do not at the moment.
If so, these issues are deep seated and may not be easily resolved.
A survey of agencies conducted by the Commission in May 2014 showed that, of the 79 agencies that completed the survey, 23% reported they did not have a documented formal risk appetite statement, 26% were developing a statement; only 49% had published risk appetite statements.
Additionally, while, thankfully, only 7% of agencies did not have an agency–wide risk management plan, 35% of agencies said they only reviewed agency risks annually.
ANAO believes risk should be reviewed continually, as part of the culture, and not just as an annual compliance exercise.
It seems that we still have much to do here.
The bulk of that work will need to focus on culture and performance as much as policy and procedure.

Change management

This year 13,000 APS employees were directly affected by 36 separate machinery of government changes.
In fact, in the employee census, 74% of respondents reported they experienced change in their workplace over the previous year—a proportion that has been trending up for three years (see the set of columns at the left side, 2014 is in red).
However, only about one-third of employees agree that change is managed well in their agency (second last set of columns)
And less than half agree that senior managers effectively lead and manage change.
In each case significantly fewer Executive Level employees responded positively.
Whereas 56% of SES agreed that change is managed well in their agency, only 30% of EL 1 and EL 2 employees did.
The difference is important because it is often middle managers (the EL cohort in most agencies) who operationalise an agency's strategy and effect change within their workgroup.
Now, some say that in a survey nobody is going to say that change is managed well and that senior leaders are always rated poorly.
But the data is not so easily explained away.
Here is data for the APS in the last two years (black is 2014) compared to the private sector (red) and two surveys of the public sector (worldwide and the UK, respectively)
This shows (top set of bars) that while we do a little better against other public sector organisations in perceptions of managing change, the private sector seems to do significantly better – indeed the private sector outperforms against all three criteria.
And, most importantly, everybody does substantially better that the APS on communication between senior leaders and employees—an attribute that you would think is critical to effective change management.
The Secretaries Board asked a bunch of Deputies to look into why the perceptions of our ability to manage change seem so poor.
One of the most interesting things they found is that our skills are principally those of project managers rather than change managers.
As a consequence we tend to get the task done but do not bring our people with us.
The missing ‘people’ piece is the difference between project and change management.
They recommended that each agency adopt and communicate a change management framework, with line managers (rather than a central unit) having clear accountability for effective implementation of it.
That middle managers have poorer perceptions of how well change is managed is interesting when we consider span of management in the APS.
You might remember that the National Commission of Audit noted that ‘high performing organisations generally have wider spans of control and fewer management layers (which is not to be confused with the classification system, which relates to relative work value).
It suggested that ‘best practice’ benchmarks for spans of management, depending on agency function (agency type), range from five to 10 employees per manager.
In the 2014 employee census we confirmed and deepened the Commission of Audits findings on this issue.
We found that 34% of EL employees report they have no direct performance management responsibility; with the bulk of these employees at the EL 1 classification.
This finding has interesting implications for performance management; for example, if 43% of EL 1's are not managing people then where are they learning those skills which they will almost certainly apply as an EL 2.
But they are also important when we think about the implementation of change management in an agency.
The effectiveness of our management structures are critical to how effectively resources are applied within an agency to achieve results.
While there is no single model for creating more effective management structures, there are key elements that contribute to best practice organisational design.
These include ensuring that:
  • structure is aligned with strategy
  • decisions are made at the appropriate level
  • roles reflect work value, and individuals are in the right roles with the required capabilities
  • the approach is systematic and aims to develop a flexible, fit-for-purpose structure that supports business needs.
We do not seem to have paid sufficient attention to organisational design over the past decade, probably more.
One manifestation of this has been classification creep – or the elevation of work performed to higher levels within an organisation.
Newly developed APS work-level standards, which become mandatory for agencies to apply today, and associated guidance material and workbooks are useful tools to assist agencies in this work.
The material has been developed collaboratively across the APS and successfully tested in a number of agencies to ensure they are useful.
Work has also been undertaken, in collaboration with APS agencies to refine the benchmarks established by the C of A.
This will assist agencies to establish spans of control and a management structure that is appropriate for each work type, and to the needs of their business.
Supporting guidance to assist agencies in making these decisions is being progressed by the Commission under the auspices of the Secretaries Board.
The expectation is that each agency will review its current structure and map out a path for change, as necessary.
The tools are available.
Their application will be governed by the willingness of leaders to do this work and the cultural fit of the answers it delivers.
How do we measure up?
By any measure the APS is an effective, resilient institution that delivers on the agenda of the government of the day.
Episodes like HIP (or ‘green loans’) are remarkable because they are the exception.
The APS has implemented quite significant change in the past year or so:
  • the first full year of a new Government with new priorities;
  • a budget intended to give effect to some of those priorities coupled with a major push to cut red tape and amend redundant legislation;
  • the consummation of significant rearrangement of portfolio responsibilities through machinery-of-government changes;
  • successful implementation of major collaborative ventures such as OSB, MH17 or hosting the G20; and
  • the reduction of about 8,000 in the APS headcount in 2013–14, roughly half of which was achieved by natural attrition.
The APS has responded to its changing environment, and it has done so at pace.
In many areas of our organisational culture we compare well against others.
In these sets of bars our results are the top two (light blue and black)
We have strong values that are visible in the behaviour of our leaders – top set.
We have good, safe workplaces where people from different backgrounds are welcome and where necessary we cooperate to get the job done.
We compare well on measures of workplace conditions—see the bottom two sets of bars, again we are the top two bars) but there is still much to be done in better managing underperformance (second from the top).
As I have said, we are focused on improving all aspects of our performance, not just underperformance.
But when we look at perceptions of work and value, the APS lags behind other public sector organisations in most areas.
For example,
  • how valued employees feel for their contribution (bottom set of bars),
  • the opportunity their job provides to utilise their skills (third from top) and
  • that their work gives them a feeling of accomplishment (fourth from top).
This may be a challenge for us in the way that we have designed work.
Equally, the practices and attitudes that lead to better managing performance could be expected to positively effect some of these measures.
Similarly, APS employees are more likely
  • to be proud to work in their agency (third down),
  • to recommend their agency as a good place to work (fourth down) and
  • to feel a strong personal attachment to their agency (fifth down).
However, the APS lags behind other public and private sector agencies in inspiring employees to do the best in their jobs (top set), significantly so compared to the private sector.
Moreover, our environment is evolving rapidly and the evidence is accumulating that incremental change is not the option that will best equip the APS to meet the challenges of the future.
Rather change of a transformational kind is required—not just in what the APS does on behalf of government but also in terms of how it manages itself.
These are changes in culture and practice that we will need to make now.
Our focus on risk, change and performance are but three areas where change needs to take place.
I could just have easily focused on:
  • diversity  (where we have treaded water again this year),
  • unscheduled absence (which has again unaccountably risen);
  • perceived bullying (which still appears stubbornly high) and
  • shared services (where there is an enormous amount of work to be done and where greater recourse to shared services, as seems inevitable, will challenge now deeply entrenched predispositions towards agency autonomy and customisation).
Underneath all these issues is the need for a forensic focus on the way processes, systems, culture and structures combine to deliver business outcomes.
Most importantly, we need an equally forensic approach to ensuring the lines of accountability and responsibility are clear for every APS employee.
We are all living in ‘interesting times’, which has always been portrayed as a curse.
I prefer to see this as a time of great opportunity.
The next year or so will be critical to chart a future course for the APS that:
  • recognises the Government's ‘smaller government agenda’
  • reconciles competing claims of different sections of the community for services and influence
  • exploits technology to enhance delivery options available to government while driving down costs
  • exploits emerging opportunities to secure economies of scale and scope through more collaborative procurement and, at the margin, possibly some increased centralisation of decision making
  • develops a confident leadership cohort with the skills to communicate clearly with Ministers, ‘tell truth to power’ when required without sacrificing the relationship with the government of the day, and engage creatively and authoritatively in policy discourse within government.
With a Government with a large agenda to prosecute and the fifth anniversary of the publication of the Blueprint looming the Secretaries Board is well placed to accelerate the pace of change.
The APS has achieved transformational change before.
There is no reason why, with a committed and experienced leadership and a committed and resilient workforce, both of which the APS has, that it cannot do so again.
I am deeply encouraged by the highly collegiate way in which the Secretaries board is now working to build APS capability and to be stewards of this wonderful and enduring institution, the APS.
But we have barely scratched the surface of the kinds of transformational change we require to what and how we do things.
A second round of Capability Reviews would certainly sustain the momentum for agencies to embrace a culture more focused on building capability and organisational effectiveness.
As the HIP Royal Commission illustrates, it is certainly cheaper to build that capability upfront than to engage in remediation after disaster occasioned by capability gaps.
It is to be hoped that the programme of Capability Reviews is repeated and results published.
However, we may also need to look at the incentives that agency heads face and the support available to the Secretary, PMC and Commissioner to assess performance of Secretaries and agency heads – not just as deliverers of tasks but as the stewards of an enduring and constantly changing organisation.
Because incremental change will no longer be good enough.
And we need to make sure that the urgent – doing our day jobs – does not crowd out our attention to the important—longer term reform of the APS.
I think that is enough from me.
This year the State of the Service Report has taken a different approach—like the APS it continues to evolve.
I commend this report to you as a resource for today but also one for the coming year.
It's time for questions.
Who would like to go first?
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