Learn to live with uncertainty, and other tips on public sector governance and leadership. Sometimes you have to push back and take a stand for due process, but it’s getting harder

By Stephen Easton

Thursday September 19, 2019

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Governments don’t govern alone. The shared responsibilities of public sector governance fall broadly into two categories – performance and conformance – and a lot of them land on public servants. Discharging these solemn duties can be a challenge when time is of the essence and process becomes a dirty word.

Public service leaders should expect sudden change and be comfortable with uncertainty and ambiguity, but they also have to ensure compliance and risk management aren’t abandoned in the rush to respond to changing circumstances.

Three public sector leaders — federal auditor-general Grant Hehir, the ACT government’s most senior public servant, Kathy Leigh, and former federal secretary Martin Bowles — recently shared their thoughts on governance in a discussion hosted by the Australian Institute of Company Directors and the Institute of Public Administration Australia. Here’s their lessons on leadership, managing people and making sure laws, rules, codes of ethics, processes and procedures are followed.

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Bowles and Leigh both opined that governance standards were actually very high in the Australian public sector and subject to a lot of unfair criticism and spurious comparisons with the private sector.

From Hehir’s point of view, core public sector governance skills are “undervalued” these days, and “irrespective of the really good things that happen in the public sector” there is still a lot of non-compliance with various rules. The auditor-general said good governance required consistent compliance, not leaders deciding the rules matter in some situations more than others.

Bowles, a former federal secretary who is now chief executive of Calvary Health Care, raised personal integrity as a key factor in governance, but also thinks it has become harder for senior public servants to “push back” against ideas they find troubling. Leigh is worried it has lately become “fashionable” to criticise public servants for wanting to follow due process.

Governance is about following rules and doing a good job. In the public sector, according to an APS better practice guide from 2006, it is all the “responsibilities and practices, policies and procedures, exercised by an agency’s executive, to provide strategic direction, ensure objectives are achieved, manage risks and use resources responsibly and with accountability”.

“It also encompasses the important role of leadership in ensuring that sound governance practices are instilled throughout the organisation and the wider responsibility of all public servants to apply governance practices and procedures in their day-to-day work,” adds a 2007 guide produced by the APS commission.

Then-commissioner Lynelle Briggs made a clear distinction between the “musts” and the “shoulds” in her guidelines, which aimed to focus on the latter through clear case studies. “Firstly, there is no ‘one size fits all’ approach to governance,” she advised.

“While there are common elements, themes and models, agencies need to develop systems that meet their specific circumstances and be prepared to adapt and evolve their governance arrangements to meet changing needs. Secondly, governance can only work if it is part and parcel of the culture of the organisation – it needs to be actively upheld and implemented by every person in the organisation. Everyone must know and act on their responsibilities.”

The auditor-general’s view: no more Mr Light Touch

The auditor-general said a wholesale regulatory “reset” was underway following the failure of light-touch approaches to enforcing rules – both inside the government and in the wider economy.

“We’ve been through quite a period in the public sector with a focus on devolution of control and I’m not certain that at the same time, we’ve built an accountability framework in public sector, which makes it clear that devolution doesn’t mean ‘no accountability’…”

In Hehir’s view, the idea that regulatory action should be proportionate to the risks being managed gave way to “either light-touch or no-touch regulation” in too many cases over several decades. He sees a move back to more active regulation in general after this led to growing compliance issues in the public sector, just as in other areas like the financial sector.

“I’d say the the stand-out ones from an audit perspective that we’ve dealt with lately would be cyber security, where non-conformance is pretty system-wide; it’s more unusual to find an entity which complies with rules and requirements than one that doesn’t.”

In procurement, the auditor-general began to say there was “systematic non-conformance” but paused and chose different words – “an approach to undertaking procurement which is more driven by what’s easiest to procure than what’s in the best interests of the taxpayer” under a regulatory framework clearly built around the taxpayer’s interests.

“At the end of the day compliance can only be effective if people aren’t just complying with the letter of the rules, but the intention of them,” he added.

“What you’d expect to see is that a lot of the rule frameworks that the public sector operates under, and particularly the ones that we deal with, which tend to be about resource usage, are about ensuring that every cent of taxpayer money is spent in the interests of the taxpayer. And to make that happen, you need to have a culture which focuses on that. Culture is driven from the top, at the end of the day.

“That means that you need to have decisionmakers consistently … making decisions which drive that type of culture. If you want … a culture which has a strong compliance element to it, you can’t have the leadership of the organisation making decisions about when compliance matters to them and doesn’t matter.”

In Hehir’s view, behavioural norms follow the behaviour of leaders. “At the end of the day you have a rule set. You have to, as a leader, set an expectation that it is met 100% of the time. Culture flows from that.”

The public service leader’s view: junior staff need support

Sticking with the example of procurement, Kathy Leigh said government agencies had to recognise they were thrusting “quite serious decisions” upon relatively junior staff members at times.

“And it is much more in the comfort zone of those staff to know that they tick a box – yes or no – and that they have effectively discharged their responsibility. So I think we’re expecting a lot of staff when we say, ‘No, we need to lift that up and we need to actually understand the objectives and the overall framework to make the right decision here.’ And we need to recognise that and support those staff, train those staff, and perhaps sometimes elevate the levels at which those decisions are made.”

It is also legitimate for public servants to question whether the frameworks of rules are fit for purpose, she said.

“I agree entirely with Grant that when there are rules, the rules have to be complied with. But do we have the right structure? If you have rules that are so rigid that they’re no longer actually sensibly addressing the situation that you’re asking staff to deal with, then they will either blindly tick the box — because if they don’t, they’re breaking the rules – or they’ll say, ‘This is stupid,’ and try and go around…”

Leigh thinks traditional procurement systems, in particular, are ripe for reform.

“[Information technology] is an interesting one. It’s moving so fast that the traditional approach of going out to tender and very prescriptively [describing] what we want as a product isn’t necessarily going to get us the best outcome. We need to be thinking about iterative development of what the product is; we need to perhaps have more outcomes-based procurement rather than product-based procurement.”

Bowles strongly agreed. It is hard and perhaps getting harder to predict future capability requirements and the longer procurement takes to complete, the greater this risk becomes. While flexibility is the obvious answer to uncertainty in general, he said it presented a problem in procurement. Changing a project changes its cost, and quite often “everyone gets upset” on both sides of the deal.

“So you’ve got a real problem but from a leadership perspective, you’ve …. got to give people permission to think differently and try things occasionally.” In many cases, he suggested, permission would not be enough; as a department head he often had to persistently and actively encourage staff to question the way things had always been done.

Good leaders, good teams, good governance

Leigh and Bowles were in furious agreement on the importance of encouraging executives to be adaptable, flexible and comfortable with ambiguity, but also building diverse teams and trying to make use of all the brains and all the different strengths available to them.

The head of the ACT’s central agency is a big fan of mobility among senior staff within the territory’s public service. Bowles said leaders should always support staff members who want to leave and do something different, and reassure them that their past experience won’t be forgotten if they want to come back later.

Not everyone is comfortable with uncertainty, however, and recognising that is part of building diverse teams and harnessing their full potential, according to the ACT public service leader.

“So … the people who are less adaptable, may be the [people] who are absolutely rigorous and great on the technical details and who like order and control, and you actually need all of them in designing your organisation,” Leigh observed.

The panel was not as enthusiastic about the supposed value of fresh perspectives from outside the public sector. Recruits from the private sector have not worked out in plenty of cases, Hehir noted, while Bowles observed that “from a leadership perspective, we probably haven’t accepted them that well either”.

Agencies need a receptive culture in order to learn from outside, according to the auditor-general. “If the organisation that you have isn’t willing to listen to alternative views, then bringing in a consultant or bringing in a person from a different sector isn’t actually going to change the organisation at all,” he said.

“The starting point from a leadership perspective is to demonstrate from the top that you’re open to ideas, you’re willing to be challenged, that you’re comfortable with people from in your organisation and from outside your organisation telling you what’s good and bad, and listening and adapting to those things.

“And if you can build a culture like that, then maybe you’re in a position where you can bring in people and generate benefit from them, but I think you’ve got to start with that openness to learning as the first thing.

“Now, we hear a lot in the public sector about being innovative and about learning cultures. The most important indicator of that, I think, is how people respond to criticism.”

Leigh said public servants should definitely be “challenging ideas” all the time but trying to avoid “challenging people” directly.

When the panellists were asked for their views on the most important leadership qualities, she nominated skills in strategy, analysis and communications, along with a positive, enthusiastic attitude towards working with others and being up for whatever challenge comes along.

Bowles said it was important to “be a decent human being” and have genuine respect for people – and also reinforced the importance of adaptability, while noting it is harder to teach than technical skills.

Speaking of technical skills, Hehir thinks they have been generally undervalued in potential leaders but again senses a pendulum swinging back. “I think the one thing that hasn’t worked well in leadership in the public sector, based on the experiment of the last 20 years or so, has been we’ve moved away from technical specialists [or] technical capability in leadership, to a bit of a focus on generalist capability.”

He said that “being a person of no technical capabilty whatsoever” he had benefited from that trend. “But I think more and more, it’s becoming clear that there are leadership roles across the public service which actually need strong technical skills … just to be able to do the job properly.”

Due process

Bowles said it was often challenging for public service leaders to reconcile their personal principles with their professional duties. He said the question often was, “How do you deliver the government of the day policy outcomes, when you’re challenged yourself in those things?”

In his view, “you need to be comfortable with yourself” to be an effective leader.

“You have to be able to stand by the principles you have, your own morals, your own ethics, and say, ‘I’ve done that. I’ve implemented that policy in the best possible way that delivers for the government of the day but doesn’t compromise where I sit in myself.’

“Now, I think I was able to do that. That’s not to say I wasn’t challenged; I definitely was challenged. But I think what I was also able to do — and not everyone can and should do this — I could actually push back. And that’s one of the things that I think is harder and harder, as politics is changing. We’re now in quite a different political environment than we traditionally have been.”

Bowles later described a major breakdown of process in the Rudd government’s home insulation program, based on his experience leading the “rectification” project.

Contrary to popular belief, he said, it’s not strictly true to say there was no risk assessment. “There was. There was a comprehensive risk assessment that was done around the home insulation program of work that was [initially] put to government.”

Then the global financial crisis occurred and the program changed entirely to maximise its value as economic stimulus. Instead of giving consumers rebates, the government would pay the installers directly. “That changed the risk profile totally.”

An industry with about 250 businesses and grew “overnight” to 10,000 and the risks, in terms of health and safety and potential fraud, should have been reassessed. Perhaps, he suggested, a new risk assessment was not done because that box had already been ticked, albeit for a substantially different program.

“Risk analysis is not a stable thing; it is a dynamic thing,” Bowles said, responding to a question from Dr Jill Charker, a deputy secretary at the Department of Jobs and Small Business.“It’s something that you do have to build into your thinking as part of governance.”

Changing things without reassessing the risks will “open up a whole can of worms that you really haven’t thought about” just as it did with the home insulation scheme, he advised.

Being comfortable with ambiguity and uncertainty means expecting these sudden changes, said Bowles, and being able to “keep your head” much as Rudyard Kipling counselled. Perhaps it was also a moment when the department could have pushed back and stood up for due process.

Another lesson from the same rectification program: risk management requires good data. “You have to have it. You have to understand what you’re trying to measure, and make sure you have definitions of what you’re trying to measure.”

During the rectification process, Bowles found lots of competing viewpoints from the people involved with the scheme. “I asked for a picture and I got 14 versions of that picture. That’s another really important thing to remember when you’re out there: you will see things depending on where you sit.”

Early in the discussion, the head of the ACT public service opined that “process is one of the reasons why the public service is strong” because it means decisions are based on “objective measures and checking back against them that you actually met those measures” rather than more subjective views.

Leigh said the relatively rigorous public service recruitment processes were a good example of that.

“I think that’s one of the reasons why we have such strong public services,” she said, “and it’s become a bit fashionable to talk about that as though it’s all a whole lot of, you know, paper and process. I don’t want to see us swing to the other side on that.”

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