Lord Gus on engagement, leaders and why well-being matters

Lord Gus O’Donnell served as cabinet secretary to three British prime ministers as the highlight of a decorated civil service career. The economist has become a global thought leader on public administration and was recently in Australia to discuss his learnings. He sat down with The Mandarin

On happiness, loneliness and well-being …

Welcome to Australia. I want to take you through the concept of well-being. You have done a report for the OECD on the concept of well-being. Why did you undertake this research and produce this study?

“When you leave government, you think, ‘so looking back on it, what do I feel that I missed?’. And one of the things that I wish that I had spent more time on is defining this concept of what the success would be like. And that leads to an even more basic question: what’s government for? It was prompted as much by David Cameron as Prime Minister, saying it’s actually all about improving people’s well-being. I think that’s right.

“In a sense that’s what I always thought, but Cameron’s focus gave me the opportunity to explore this dimension more fully. But if it’s all about people, and it’s all about improving the quality of people’s lives, how do we measure that? It struck me that we measure that by asking people how satisfied they were with their lives, if they feel their lives were worthwhile overall, those kinds of questions. Basically, how happy were they? If you started off with the right success measures, then pretty much everything flows from that, including what you should do and how you should evaluate the policies. So it’s a very powerful framework, but too often it is omitted from the way we do government.”

What are the limitations behind the other traditional, GDP-focus, or cost-benefit type of analysis that’s done typically in government?

“GDP is a great activity measure, but it’s not a great quality of life measure. We know that we can get GDP up by cancelling everybody’s holidays. Would that make them happier? No. Would that make them more productive? We include in GDP things like illegal drug activities, prostitution. I completely understand that because it’s all about activity; but we leave out important things like volunteering. No one would argue that the more illegal drug activity goes up, the better off we as a society. That’s not a sign of progress. GDP isn’t designed — it was never designed — to measure progress of a society. It measures activity.

And if, for example, we measure volunteering, what is the size of that?

“Well in the United Kingdom, Andy Haldane from the Bank of England gave a speech about this, and he reckoned at least 50 billion pounds sterling was the value of volunteering.”

So if Australia is a third of the UK’s size, and volunteering is say something in that same order, then its around $30 billion a year. So it’s a significant number.

“It’s a significant number. This is people giving their time free, and you’re trying to work out what would you have paid for that. And also, we know this is where the well-being comes in. Traditional cost-benefit analysis would just look at average earnings for those hours, and that’s it. A well-being analysis would take into account that people who volunteer turn out to be much more satisfied with their lives. Volunteering gives them a real buzz; and the reason they’re doing it is that they really feel better for it. Altruism makes people feel better when they actually devote themselves elsewhere. And, they’re helping other people.

How mature are the measures for well-being?

“In a technical sense, very mature . The four measures the UK Office of National Statistics use have been granted the status of the official statistics. So that’s quite a big hurdle. The statisticians will know what that means. Martine Durand, of the OECD, worked with me on the Legatum Report and has pioneered the development of these measures across the EU and many OECD countries.”

What were those four, just to headline them?

The four are: overall, how satisfied are you with your life; secondly, do you regard your life as worthwhile; thirdly, about happiness; and fourth is about anxiety. Three positive and one negative. Obviously you want the anxiety numbers to be as low as can be.”

And are those data sets starting to become more robust?

“Exactly. We have picked up huge national samples on that. We’re doing it regularly. The only problem is that I wish we started doing these 10 years ago.”

So what’s the road map look like for governments who want to adopt this approach?

“Once you’ve got the measures, first of all, build it into your policy process. Let’s take a big social issue like loneliness. We know loneliness could be a big issue, and is getting bigger because of our ageing societies. We might have one or two policy ideas about what we would do about that. We know loneliness affects your physical health, so it costs government a pile of money. If you reduce loneliness, you save on your health budget.

“So if you’ve got a policy on that, how would we evaluate it? You mentioned cost-benefit analysis. Where would that work in this case? The best approach would be to measure people’s well-being beforehand; then look at the policy application, seeing any impact it had on well-being straightaway, and see if it was sustained.

“You might even be doing some randomised control trials or experiments whereby one group is the control group and you didn’t apply the policy to them, and then the other one you did. Then you’ll be able to see, is it making a big difference?”

But governments have traditionally struggled though to really come up with robust outcome measures …

“The interesting thing about this is that it is a direct outcome measure, where we’re saying to the people involved, how do you feel? It’s the ultimate democratisation because it’s the people deciding. It’s not government saying, ‘well actually, this policy works really well, because we’ve got 10 more people at work’. That’s 10 more people at work maybe at jobs they really hate, and they may not feel better off.”

Outside of the UK, which other jurisdictions are more advanced in this space?

“Some of the Scandinavians are starting to look at this. I was over in Finland to talk to them about it. It’s not just national government levels, it’s sub-governments. Bristol in the UK are defining themselves as the happy city. The French started off looking at it very strongly under the Sen-Fitoussi-Stiglitz commission; that’s come back a bit, I would say. There’s quite a bit going on in Canada. When we launched our well-being ‘what works’ centre, there were a lot of hits. We did it on a website, and Australia was the second largest number of hits. We had 24 countries getting involved. It’s spreading.”

On giving out regulators more flexibility …

I listened to you speak last night at the IPAA Spann Oration. At one point, you talked about legislation and regulation. I just want to explore some of these things about better government. I think you said, I’m going to quote you badly, that legislation was a relatively clunky way to administer things. What do you mean by that, and what are some of the alternatives?

“Well, quite often in government, we’re trying to change people’s behaviour. Take smoking. Governments around the world are trying to dissuade people from smoking which is obviously a good idea. One policy option would be pass legislation banning cigarettes. Remember in the United States, prohibition? Those approaches tend not to work very well. So we’ve used economic instruments. We’ve used tax. We’ve increased the price. We’re now looking at ideas from behavioural economics. How can we influence people to do the thing that probably they really want to do, which is give up? How do we help them?

“In the case of smoking, we’ve seen the rise of e-cigarettes. You’ve got all sorts of interesting, appetising, different ways of trying to tackle that problem; and similarly with alcohol abuse. There is a way of doing legislation to tackle these things but in these areas, like prohibition and alcohol in the States, they don’t work at all. All that did was create a black market and all sorts of bad things happened.”

One of the tensions we have here is, I’m probably overstating it, but just to generalise, Australia is relatively a black letter law regulatory country. We tend to lay down the regulation and say that’s it. If you want to change it, come back and change it. It’s prescriptive, what we call Dixonian, named after one of our High Court judges. Yet a lot of the modern issues you’re dealing with require more flexibility. If I could just take say one area, the digital world, which is global, and very dynamic. What are your observations on that?

“Yes. It’s exactly what you say. When you do legislation, it’s very difficult to get through. Quite often you can start with a very simple piece of legislation and it gets amended a great deal, sometimes for the better, sometimes not. But inevitably it becomes more complicated. And then to repeal it or amend it is also very complicated. You have to fight for legislative time, which is usually at a premium; so you might not be able to do it. You end up with legislation that was designed for the age in which it was passed, and technology is moving on so fast that solutions that you thought were a good answer turn out to be a very bad answer. The world is just very dynamic.”

Does that imply that we’ve got to give some of our regulatory institutions a bit more flexibility?

“Yes. It’s like saying, ‘what’s the outcome we want?’. Regulation should really be for the public, for the consumer, making sure they get the best outcome. What that means will change quite a lot through time. If you did it in retail, for example, you quickly realise it’s not just about retail, it’s about the impact of online shopping. How do you ensure the people are being treated fairly? And you’ve got all these comparison websites. That seems to be a good development until you realise that some of them can be manipulated as people do deals to influence how the sites work.

“So regulation has got to be a lot smarter now. It needs to be principle-based instead of just rules.”

Fifty Shades Of Grey and accountability …

In one of the pieces you wrote, I noticed you used the description 50 Shades Of Grey to describe some government performance indicators. What were you referring to?

“It was the accountability issues I was really concerned about. The example I used to give is the Bank of England. It used to be that the chancellor would set interest rates, now it’s the monetary policy committee of the Bank of England that sets interest rates, not the governor. This is an important point. They do it very transparently. They all vote on it. Now, if they end up making a complete dog’s dinner of it, they are clearly accountable for that. And the chancellor is accountable for the system and setting the inflation target. That’s very clear and simple.

“But when you get this area where you’re not sure how much the minister is doing and how much he’s delegating to his officials, then it all becomes a bit grey. And if things go wrong, well why did they go wrong? Was it because the public servants didn’t deliver or was it changed halfway through because the minister decided to change what was to be delivered? That happens a lot in military procurement, where suddenly the military says, ‘well, we don’t want that jet, we want a different jet and we’d like it to have these capabilities we didn’t think of in the first place’. Suddenly the price goes up. Whose fault is that?”

In your speech you said a better approach perhaps is to think through the institutional structures, but then give those institutional structures the flexibility to go and do what they want to do. Is that the model?

“That’s exactly right.”

Lord O’Donnell IPAA Spann Oration 2014 – Created with Haiku Deck, presentation software that inspires

On engagement and political disenchantment …

You use a relatively simple approach to leadership in government: understand the future, engage people into that vision, and then deliver. I want to focus on that engagement bit. Is there a paradox at the moment, both in your country and ours? Surveys showing very low level of engagement in democratic processes, historically low. And yet on the other hand, we know, from just watching our own kids on the streets, they are incredibly engaged in issues and each other through Facebook, Twitter and Instagram. How do we get that connection back again into the system?

“It’s a very good question because we’ve got to get the next generation as interested in these subjects as we used to be some time back. Participation rates used to be very high. I think people have got a bit disillusioned with politics. What they have observed of politics is very adversarial, very little consensus, and basically that turns them off. I think there’s merit in trying a new politics where you have grown-up conversations. Social media can often host very vibrant debates that cut through. It’s true that there’s some ludicrous things said on Twitter, for example, but at the end of the day you get an interesting debate and I think people often come out with smart answers. People involved correct factual errors and can apply all sorts of self-managing rules and norms.

“I think there’s a new way of doing this, but it does require politicians to get smarter about digital tools and platforms to engage more directly with the issues and with people, rather than engaging with each other.”

On leadership and the danger of Americanisation …

What would your advice be to people who are entering public sector, wanting to make a difference, as most people do, knowing what you know? Do you have any tips or observations?

“That’s interesting because I’ve faced this. My daughter has just joined the British civil service. My advice to her is: it’s a great career. You really can make a difference. Be absolutely clear about that.

“You have to be able to speak truth unto power. It doesn’t help ministers if you’re just a Yes, Minister person all the time. You’ve got to look at the evidence objectively and then give advice on it. But also, I would say, I think in my day, we were a bit too deferential.

“When I was talking to the new fast-streamers who are starting in the British civil service I said: ‘You’re the future. You’re technically savvier than us. You’re much closer to your peers who are changing. Actually question everything above you. Always ask: why are we doing it this way?’.

“And the fact that, ‘well that’s how we do it’, or ‘that’s the way we’ve always done it’, is a terrible answer. You should be the agents of change. You can make public services much better for everybody by understanding the technology, understanding ways of communicating using social media.

“So for me, it’s a great future for them, and I think we need to accelerate them through the ranks rather more quickly than it used to happen in my day. Give them more responsibility earlier. It’s potentially a fantastic career. But we’ve just got to watch that it doesn’t become a highly politicised area, which becomes a real risk in Australia.”

Reflecting on your own recent career as a senior leader in the British civil service, if you had a group of cabinet secretaries here, what are some of the things you would be saying to them around leadership themes? I know everyone’s got their own advice, but you’ve been in a unique position between political and bureaucratic at a high level. It’s an interesting position to be in. What advice do you have for people in that world?

“There’s a group of us that used to get together from Australia, Canada, New Zealand and Ireland at cabinet secretary level, and one thing that I think is important is the permanent civil service, the impartiality of it, their ability to be there and speak truth unto power, and not think they’re going to be sacked if they do that. I think we need to try very hard to maintain the quality of that.

“I think you just need to look at America to see a different model. People in America think that if the answer is government, then the question is wrong. Government generally has a poor reputation.

“We need, I think, to be very careful. The Westminster model, as it is evolving in Australia and Canada, is drifting towards more of the American model. I think that’s a really dangerous direction.

“Secondly, always, always remember that we’re in this for the public, to improve services to the public. And yes, we need to work for democratically elected politicians, absolutely. But we also need to be guardians of the public service, and deliver a public service that gets better at delivering for ministers and the public.”

More at The Mandarin: Lord Gus O’Donnell: leadership and reform in the public sector

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