Managing Government Better

Government Management: The Billion-Dollar Opportunity

Suppose the New Zealand government won a lottery, and magically had an extra billion dollars available every year from now on...

What would you do with that money? Spend it? Save it? Cut taxes? Whatever your answer, I'm sure you’d welcome the money!

There is no lottery like that. But one billion dollars a year is there for the taking, just by managing the business of government and the delivery of government services better. It’s a non-political dividend that we should expect any government, regardless of its political beliefs, to deliver.





(John Mendzela's article appeared in The Independent in March 2005. If you use or quote from this material please attribute it to the author and publishers.)

One billion a year sounds like a lot of money -- surely I'm exaggerating! But that is less than 1% of GDP. An independent commission on Britain (not the world’s worst government) recently estimated potential savings there at 2% of GDP.

Ah, you may say, we’ve already made those savings. Didn't huge improvements to government management make New Zealand the world leader in that field? And don't we have more efficient government than other countries?

Yes, New Zealand was the world leader for a time. Was. More recently, we've gone backwards while others have moved forward. The new management concepts and systems we introduced a generation ago have gone stale. Why? Many reasons. But just as motivation was a key factor then, the lack of improvement drive so evident now is failing to cope with a continually changing world.

Yes, we do have more efficient government than many countries. But economically speaking “not bad” isn't good enough. New Zealand has slid in per capita income rankings from 3 rd to 31 st over the last 30 years. To recover, we need every competitive advantage we can create. What's more, as a small country New Zealand faces the same problems of scale a small company does. We need our government management to be more nimble, effective and efficient than others.

So what’s going on in government management? There seem to be so many busy people there! But being busy and being productive are two different things. Effective management structures and systems are needed to convert busyness into practical results, not wasted energy.

Let's look at structures first. We have:

  • 38 government departments
  • 87 local authorities
  • 20+ health boards
  • A myriad of "authorities", "agencies", "commissions" etc

In total, the Auditor General audits nearly 2000 entities (other than schools) - and the number rises every year!

Do we need such a complex and fragmented system to manage just four million people – in world terms, the population of a single medium-size city? Of course not. This confused machine poorly suits today’s world, never mind tomorrow’s. Government management is tripping over itself at every turn. No matter what individuals within any one unit do, overall effectiveness and efficiency is impossible.

In management systems, we have frustration. Vast amounts of information are produced. Key individuals -- including senior managers and scarce technical resources like scientists -- spend far too much time generating that paperwork and not enough doing their core roles. And despite all that "accountability", the stream of technical and managerial failures has not slackened!

But our most subtle deficiency is a lack of strategy. Government initiatives often pull in opposite directions. New programs "add-on", duplicating or diverting effort. System complexity and "accountability" paperwork consume vast resources. Meanwhile those at the front line struggle on, depressed by their commonsense intuition that waste is rampant.

Far too many of government’s important tasks aren’t getting done well, cost far too much, or both. What must we do to get better results and make that yearly one billion-dollar cheque a reality? Actually, nothing very dramatic. Let's look at the hurdles.

#1 -- Good governance and leadership

Imagine a group of eight to twelve government ministers, chosen for quality and with coherent responsibility areas. Suddenly we would have

  • A competent top team of effective size
  • A major reduction in Ministerial salaries and support costs
  • A distinct legislative function and a more independent Parliament

But that first hurdle is tough. People know that MPs receive far more pay and perks than many of them could ever hope to earn elsewhere -- an annual package of about $126,000, plus generous allowances and fantastic pensions. But few realise the further pay and perks sloshing around. Of the 51 government MPs:

  • 25 receive Ministerial salaries of an extra $58,000 or more, + lots more perks
  • 19 receive “upgrades” for their routine work in parliament, mostly of $10,000+
  • Just seven -- yes really just seven -- struggle along on that MP’s package

What about appointments to state-owned enterprises and government bodies? We may not be a corrupt country in the usual sense, but even a quick survey of “jobs for the boys and girls” demonstrate how we have created new career paths for those in favour.

This “slosh fund” costs a lot, directly and indirectly. Human beings have natural bull bars. If those at the top talk about helping others while they are really helping themselves, those further down will follow that example. To quote Albert Schweitzer, “Example is not the main thing in influencing others. It is the only thing.”

What are the chances of leaping this first hurdle? The current government seems addicted to patronage, while the largest opposition party has historically operated the same way. But let's hope good governance and leadership take hold. What's next?

#2 -- Effective central coordination

Imagine that central government agencies provide sound strategic thinking, effective financial control and low-overhead quality assurance for management. Government activity would be directed towards achievable long-term outcomes, with financial and human resources aligned accordingly.

What are the prospects here? In some ways, good. Financial management reforms provided most of the tools. Our Treasury has reasonable competence. Strategic thinking capability exists.

But one piece is missing -- that management quality assurance. The State Services Commission is focused on academic theory and bureaucratic procedure, not practical management reality. Its irrelevance leaves a yawning gap.

Can we fix that? It’s not hard to do – just clear the decks and start again. With real-world people in charge and a fresh culture, a new governance management body could:

  • Partner and complement the strategic thinking of Treasury
  • Focus on leadership and management competence, not intellectual theory
  • Lead improvement of management and service performance
  • Take decisive action on incompetence and serious failure

After that, the hurdles get much easier:

#3 Simpler structures . Reduce duplication. Consolidate and rationalise agencies and intermediaries. And manage that process properly to avoid high transition and redundancy costs.

#4 Simpler programs . Reduce the administrative overhead of overlapping programs. Align responsibilities with competence. Focus delivery on core programs that give high benefit for low cost.

#5 Better leadership and management skills . Concentrate existing resources in the simpler structures and systems. Re-open the "public service manager" ghetto. Focus on leadership not intellectual skills, management not technical competencies.

#6 Simpler processes and systems . With less commotion and complexity and stronger management, substantial productivity gains would become feasible. The main change principle would be determined evolution, not revolution.

#7 Responsibility not "contracts" . The notion that drawing up the perfect contract will result in the perfect outcome has become almost a disease - "contractualitis". All too often accountability has become the paperwork that ensures no one can be held responsible when someone should be. Responsibility is the cultural characteristic necessary to make real accountability stick.

Is it as simple as that? Yes. Of course courage, skill, energy and above all good judgment are needed to deliver practical results. Capable implementation of good ideas cannot be taken for granted. But implementation is doable -- many people have delivered those practical results in government and business organisations. The starting point for any human progress is a hunger to improve, high energy levels and leadership by personal example. What's lacking today is mainly not skill, but will.

Even supporters of big government know the design and delivery of government services is seriously flawed. Would anyone seriously claim that the 21% increase in direct government employees between June 1999 and June 2004 has delivered anything like 21% improvement in the quantity or quality of output?

We have enjoyed golden economic weather in recent years – mainly a combination of good luck and payoff from past efforts. But all cycles turn. Mend the roof when the sun is shining, not wait until heavy rain. Let’s decide to write that billion-dollar annual check to ourselves, now.

So how do we get started? Hurdle #1 – good governance and leadership -- is the essential starting point. And it's not really that hard. This year, we get our say. It’s called voting. I will be looking for a party that not only talks about better government (they’ll all say that) but also specifically commits to a maximum of 12 government ministers with no ifs, ands or buts. After that the rest is easy – and without that it can’t happen.

You can help write that billion-dollar check too -- just demand that simple and specific commitment to good governance and leadership in exchange for your vote.