Stephen Sedgwick: culture kills the strategy — so fix the culture


Picture shows Coverage of the “Ethics and Leadership in the Public Sector conference” which was held over held over 2 days on Thursday 7 and Friday 8 May at the Hilton Hotel, 488 George St, Sydney. Pictures taken as per brief. Contact Lauren Knight-Advisor NSW Public Service Commission Level 14, Bligh House, 4-6 Bligh Street, Sydney NSW 2000 Direct: +61 2 9272 6120 | Mobile: 0413 072 522 [email protected] | www.psc.nsw.gov.au

As many of you will know, I’m very proud of our Australian public service. The evidence is clear that it is a well-led resilient institution with a committed workforce that exists to advance the interests and wellbeing of Australia and its citizens.

That evidence is to be found, for example, in the pages of the State of the Service report (which, amongst other things shows consistent rises in employee engagement over the past three years); and in the reports of capability reviews (which consistently praise the commitment of APS employees).

Yet we face the need to deliver not just incremental change but transformational change if we are to meet contemporary needs. The necessary changes are not confined only to what the APS does for citizens on behalf of the government of the day. They relate also to how we organise and govern ourselves.

Why do I say that? Let’s start with the second issue: how we organise and govern ourselves.

Transformational change in the APS

As a way into this issue let me start with a digression into the role of the Australian Public Service Commission. We in the commission believe we perform a number of different roles.

At times we are a regulator — setting and enforcing standards. Articulation of the APS values and the code of conduct are examples. At other times we act as a broker or network manager that brings together agencies, subject matter experts and other players to share and disseminate good practice.

At still other times we act as a thought leader — an entity that assembles evidence, possibly uncomfortable evidence, and presents it to identify an issue that needs to be addressed and seeks to build constituencies for change.

An example of the thought leader role is the work undertaken by the commission over the past couple of years that led to the identification of seven seemingly intractable problems facing the APS. These have been identified as:

  • Strengthening APS capabilities respectively to manage risk, manage change and manage performance;
  • Progressing a sensible approach to shared services;
  • Lifting the representation of some diversity groups;
  • Addressing uncomfortably high perceptions of bullying; and
  • Responding effectively to an unexplained rising trend in unscheduled absence.

These seemingly intractable problems were identified through a combination of findings from the capability reviews, agency self-assessments, analysis of data from the APS employee census, agency surveys and the APS employment database. What these have in common is that:

  • They were identified as needing attention some years back;
  • They are issues on which considerable work has been done over recent years to develop new tools and to identify effective practices;
  • They are issues on which progress is being made, albeit slowly; and
  • They are issues that I am increasingly coming to believe will not be satisfactorily addressed without significant cultural change in the APS.

These are long-term problems that are not easily controlled or directed. And the evidence is accumulating that we aren’t going to get enough traction if we just keep doing what we’ve been trying for years!

If you need convincing on that point just consider that the median unscheduled absence rate keeps rising across APS agencies (without explanation) despite the concentrated attention that has been paid to it for the past several years.

By their very stubborn nature, the seemingly intractables require a shift in thinking, a shift in assumptions, a shift in the accepted norms. They certainly require working collectively, sharing intelligence and experimentation. They most likely will require transformation of at least some of our systems, governance, and processes. And, much harder to achieve, I believe they require transformation of some deeply entrenched elements of our cultures.

In the meantime, let me consider the case for transformational change in what we do on behalf of government. The root cause of this concern is that our external environment is evolving rapidly and presents us with a series of conundrums that will only be resolved if we can find ways of delivering for government at a dramatically lower unit cost to our society.

Indeed, the APS needs to respond to complex and, at least in a general sense, bipartisan challenges such as:

  • Delivering on high and rising community expectations (and meeting the needs of an aging population) in a tight fiscal environment, without dramatically higher taxation and while repairing the budget over time;
  • Lifting national productivity growth, which for us means securing better outcomes for the community at lower costs;
    • And by costs I mean not just tax dollars consumed to achieve an objective but also the compliance burden imposed on businesses and individuals, including through regulation.
  • Making the most of emerging technology to engage with and deliver more effectively to citizens; and
  • Working more collaboratively across program and agency boundaries to deliver a cohesive customer experience; secure better outcomes with greater capacity for citizens to influence both what and how services are provided to them; and achieve greater efficiency.

We also receive feedback from time to time that the government of the day is looking to us for more creativity and fresh ideas; and for clearer evidence that we are changing at the requisite fast pace.

Taken together, our seemingly intractable problems and the externally driven policy challenges confronting the APS tell us that incremental change will no longer best equip our institution to face the challenges of the future. Transformational change is required, not just in terms of what the APS does but also in terms of how it manages itself.

Building the platform: the last five years

I’d like to briefly reflect on the journey the APS has been on these past five years (possibly longer), which I believe has established a strong platform for the transformation we are now tackling. When I returned to the APS in December 2009, it was clear to me that the APS had experienced a sustained period of relative plenty.

The century- and- better- high terms of trade had produced revenue streams for government that had produced a fiscal environment quite unlike my earlier experience of the APS, which principally reflected the austere years of the mid to late 1980s and ’90s.

In a sense, fiscally, the years that lie ahead of us are more like the mid-80s and 90s than more recent decades. Even more fundamentally at the time of my return the leaders of the APS were asking important questions of themselves such as:

  • How do we create a more forward looking, technically competent, innovative and creative APS?
  • What does a highly capable APS workforce for the future look like?
  • What needs to happen to ensure we continue operating at a consistently high standard?

Some of the people who were asking these questions approached me to ask if I would like to have some fun and be part of the effort to try to find some answers. How could I refuse?

One manifestation of this search was the 2010 blueprint for reform of the APS. Although the blueprint did contain a number of recommendations (28 in all), virtually all of which have been implemented, the real value of the Blueprint lay in the conversation that it provoked and the permission it gave us all to envision new ways of working in the APS. As most of you will know the bulk of this work fell to the APS commission.

The government’s initial support for the recommendations contained in the blueprint was matched with promises of serious cash. Unfortunately the promises expired with the next election and we were left with a big agenda and pitiful financial capacity to prosecute it.

And that’s when the leadership of the APS stood up to be counted big time — not only has every secretary, indeed virtually every APS agency head, stumped up a large proportion of the missing cash, they have actively joined in the conversation and contributed ideas and a willingness to experiment to see what happens when we do things differently.

It has been an amazing ride. And I cannot thank my colleagues enough.

In the commission, the thought leaders, the brokers and networkers, and, when necessary, the regulators kicked into gear and worked with colleagues across the APS, as a result of which we now have a stunning array of new insights and new tools to apply to dealing with the challenges that we face, including the seemingly intractable internally-facing ones that I referred to earlier.

Insights and tools are necessary but they are not sufficient to effect change. To make change, we have to change behaviour. And that is the next frontier.

Let me give you some examples. Changing market dynamics and technology are changing the balance to be struck between agency autonomy and devolved decision making on the one hand and more centralised purchasing and greater standardisation on the other.

I can give you several examples. Two relate to a class of activities that we summarise as “invent once, use many times”.

Core skills and APS census

The APS census is classic example of a collaborative approach that is reaping rewards.

Each agency used to conduct its own employee survey. Often the same external consultant would deliver essentially the same survey that the commission conducted on a small sample basis for the purposes of the SOSR, collecting fees from agencies each time since they claimed that they owned the IP. This year over 99,000 of our employees completed a single survey administered as a census by the commission.

Not only does the employee census provide the service with financial efficiencies — estimated savings are about $4 million annually — but the majority of agencies rely on it for information about the attitudes of their workforces.

Reports provided to agencies allow agencies to benchmark their performance against comparable APS agencies and both private and public sector benchmarks. One agency has described it as “the gift that keeps on giving” because of the invaluable workforce data and insights it can provide when agencies choose to exploit its potential.

This year, for example, questions were included in the census (and the results reported to agencies) that form an important component of the diagnostic tool that the Commission developed to assist agencies to assess their performance management practices (which may stand in sharp contrast to their typically best practice policy statements).

By the way, that tool has been delivered to agencies without cost to them — let me put in the thought bubble for the moment: “what use has been made of it”? We will return to that question.

In the learning and development world, agencies have been working together to design and develop learning programs that build skills that are common across the APS — skills like leading and management change, or performance management. Known as the Management and Core Skills Projects, this work is also an example of “build once, use many times”.

The project has the potential to deliver significant savings in provider costs, in the order of several tens of millions, achieved by working together to develop learning materials once, rather than paying for the same product many times over.

The development and testing process is highly collaborative — in many respects collaboration across the APS at its best. And the authorising body (and funder) of this work and each learning design and module is the Secretaries Board.

Agencies can choose between alternative delivery options: using their own L and D staff; employing an external provider (a list of pre-qualified and quality assured providers is available but not compulsory); or use APSC trainers. The early signs are encouraging.

The first seven programs developed under this project have been delivered to almost 5,500 APS employees in agencies across the APS by early November, from a standing start early this year. The evaluations so far are encouraging — participants are certainly reporting a demonstrable shift in their perceived skill levels as a result of these programs. Two questions to put into that thought bubble:

  • Are the newly acquired skills being applied (answer: too soon to tell but we will find out, down the track, as part of our evaluation strategy)? and
  • Are the modules being applied as (collaboratively) developed or are agency Learning and Development teams heavily amending them (I fear the answer is sometimes, though thankfully far from always, that there has been much re design, which is puzzling given the investment of cash and effort that agencies have made).

Did I tell you I wanted to come back, later, to the hard task of cultural change? For the moment just park the last question in that thought bubble, please.

Shared services

Shared and common services is probably the archetypal example of where changes in technology and market dynamics challenge the way that our back office systems have been delivered for the past decade or two.

The decisions made 15 or 20 years ago were not wrong. They were right for their times. But times have changed.

The secretaries board has commissioned a deal of work about how best to harness current conditions to deliver better value to agencies (and to taxpayers) through shared services arrangements while avoiding the expensive traps that some jurisdictions have fallen into by rushing to impose approaches that prioritised cost reduction over meeting the legitimate business needs of agencies; and which were predicated on sullen compliance rather than (even reluctant) buy in.

The board’s (and the broader APS leadership’s) willingness to engage constructively with this issue (and the corollary that greater standardisation of agency processes, terms and conditions is necessary to maximise the benefits on offer) is profoundly encouraging.

But how skin deep is the acceptance of the need for change? and how many agency back office teams silently harbour the hope that they can convince their management that their circumstances are sufficiently singular that standardisation is not for them?

In other words: have we really addressed and won on the ground the battle for cultural change and the sublimation of agency autonomy? Let’s add that to the thought bubble, and turn to another example where change is in the wind.

Performance management

Let’s turn to the vexed issue of performance management. I suspect more ink has been spilt about this issue than over any other in the APS (apart, possibly, from unscheduled absence).

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, it is about setting priorities, communicating them effectively 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.

The clarity with which individuals understand their responsibilities in turn can be affected by how clearly work level standards are communicated and by issues associated with the efficiency of organisational design.

These are all areas on which the Commission has worked in recent times, culminating in the promulgation of revised work level standards, which became mandatory 10 days ago (the APSC regulator at work), and work with agencies intended over time to improve management spans of control, wind back “bracket creep” implement relevant work level standards and reduce reporting layers within organisations (the APSC as broker and networker, at least at his stage).

Performance discussions also 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, including work to develop and, in time, implement a more common approach to succession and performance management based on the so called nine-box grid pioneered by General Electric. The grid encourages a discussion with individuals at both the highest and lowest levels of performance and aspiration. It also encourages the identification and recognition of both high fliers and those highly valued employees whose performance is superb but whose aspiration is rooted in their current level of responsibility.

But let’s be clear, 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 requires, however, the adoption of interminable or excessively bureaucratic processes. Four more questions for that thought bubble:

  1. Why are our EAs so often so prescriptive: does this betray a deep cultural predilection to view performance management as an episodic compliance issue rather than an instinctive approach to engaging with our people about clear goals and expectations and honest two-way dialogue in the workplace?
  2. And, if our goal is the latter – conversation not just compliance – then why have so few agencies applied the performance management diagnostic tool, developed and tested collaboratively across the APS, which allows managements to assess how effectively their policies are applied in practice?
  3. And why have so few HR units drawn the attention of senior managers to the special report provided to them of the agency’s results against the APS census questions specifically designed to provide some insight into this question?
  4. And why isn’t every agency prioritising the core skills modules that focus on the seemingly intractable issues, such as performance management (OK, there may be resource constraints, but I think you get the point about the relative priority accorded to such work!)

Now there is every possibility that you are sitting in the audience thinking “this guy is trying to say it’s our entire fault (rather than his) that change is slow” and “change is easy when you are sitting in the cheap seats as the loyal in-house critic about to head off into the sunset”. Those responses are understandable but they miss a couple of important points.

First, I am not making these points to score points, but to make a point. That point is that we, meaning “we us and co” (which includes me and my marvellous colleagues at the Commission) have done the easy bit. We know what the problems are. We have a number of new tools (though possibly still not the whole tool box – damn that rising unscheduled absence!).

But we still haven’t cracked some key problems. The missing bit is cultural renewal. A culture that values (and requires) individual supervisors who:

  • encourage and practice honest two way dialogue about work priorities and expectations;
  • recognise and reward good performance; and
  • deal promptly and constructively with underperformance,

is more likely to encourage debate and innovation; promote an attendance culture; and stamp out any tendency toward  bullying and harassment, amongst other things.

A culture that empowers individuals and holds them personally accountable is more likely to adhere to recently mandated work level standards and the newly developed guidelines about spans of control to redress classification creep and secure high performance, to the benefit of both the individuals concerned and the organisations to which they belong.

Not just because they feel an obligation to comply with the demands of the regulator but, more importantly, because they see the value to the organisation of using the new tools to good effect.

Cultural change is hard

And change management is not our strongest suit. Analysis undertaken at the request of the secretaries board, triggered by capability reviews and confirmed by agency self-assessments,  suggests we are culturally programmed to do project management rather than change management. The difference is the attention we pay to bringing people along with us.

As I said before, ours is a task oriented culture. We know that people matter (and, intellectually, we accept that bringing them with you will reduce long term change management costs, but at the possible risk to completing the task required today). And we haven’t touched risk management.

Nor the thought-provoking criticisms of APS culture embedded in the report of the royal commission into the HIP or the Scales review into policy development in respect of the NBN. Amongst other things, these reports challenge our self-perception of our capacity to “tell truth to power” (as the Americans put it) — to provide clear advice that, as necessary, addresses unwelcome or inconvenient facts or views and does it in a way that preserves the relationship with the minister; and knows how to push back when a minister (or, inexcusably, a staffer) makes demands that entail excessive risk, or worse!

Let me now suspend the task of adding to your thought bubbles and cut to the chase. Our organisations are complex, human systems. Systems need good governance. Human systems need close attention paid to culture — since culture eats strategy every time.

You can’t shift a culture with a training program alone. You can’t change your performance management templates and expect brilliant performance processes will follow.

Shifting a culture means using every lever at your disposal. It means understanding how incentives, expectations, governance arrangements, processes, performance systems, leadership, work value and capability interact, to name just a few. It means understanding your agency as a system.

Incidentally, this means that the tools developed in the last five years need to be integrated into a coherent process for change if they are to bear maximum fruit.

Putting the work into action

Mahatma Gandhi once said that, “you may never know what results come from your action, but if you do nothing, there will be no result”. Doing nothing is not an option (not now, probably not ever).

Working with our colleagues across the APS, the APSC has developed tools and processes with the potential to make a real difference to the service. But these alone have no value.

The true value comes from agencies taking the toolkits, frameworks, review findings etc and applying them skilfully in their businesses. At the end of the day, agencies are the guardians of their culture and are best placed to know which combination of levers to pull to create change.

Making transformation happen in agencies

As I said in my introduction, I’m very optimistic that the APS is on the precipice of truly transformational change because I see evidence across the service of agencies picking up the theories, the tools and bold ideas and putting them into action with impressive results.

But there is one particular tool, which is not a panacea but which has amazing potential to help us to look holistically at the system that each agency and the APS represents, that is worthy of another go. And that is capability reviews.

Capability reviews

Capability reviews are externally led and provide a high level assessment of agency strategy, leadership and delivery. Five further reports were posted on the Commission’s website last Friday. They are well worth a read.

These reviews have been amazingly successful in assisting agency heads to get a fuller understanding of the systemic and cultural issues that confront their organisations. Typically, the findings have been welcomed by the agency head.

Taking a considered response to findings of the capability reviews has led most agencies to embed comprehensive reform initiatives. For example, the 2013 capability review of the Agriculture department highlighted the need for improvements to the department’s service delivery and service delivery operations. In response, Agriculture implemented a programme of service delivery modernisation; focusing on the modernisation of the department’s service delivery infrastructure and arrangements to increase the convenience and cost effectiveness of service delivery and facilitate compliance with regulatory obligations.

We have just finished the last of these reviews, but we are also conducting health checks of those who were at the start of the process a few years ago. The outcome so far is that there is good evidence capability lift, at least in the first three checks we have completed. Health checks also provide externally-led oversight, and give us an opportunity to assess the extent to which cultural renewal is underway.

A second formal round of reviews will give us a solid basis on which to measure our progress in securing cultural change and building more effective organisations.

Maintaining momentum

Let me conclude with a few observations.

First, I have resisted the temptation to give you a list of all the amazing work that has been undertaken over the past five years to build our understanding of the issues that we face and refresh the tools at our disposal to address them. The list is very long and their potential just enormous. The team at the commission — and across the APS — has done stunning work of which I am immensely proud.

Even so, we need as an institution to be more agile, adaptable, efficient and creative. In short, we need to be an institution that can re-invent itself. We have the tools and the know-how available. It is now up to us to put them into practice so transformation can take hold.

Second, leadership is key — and the courage and coherence of the secretaries board that I have had the privilege to be a member of has been superb. Cost reduction is important, but we need to make sure productivity gains are sustainable and that we are building the capability we need for the future.

But leadership is broader than the secretaries board. We must continue building leadership, management and core skills at all levels. In period of transformational change, sophisticated leadership practice is needed more than ever to help us move towards a new future.

With truly amazing support from the board we have reinvented leadership development and talent and succession management the APS at every senior level. Spectacularly so. With, to date, spectacular results.

Adaptive leadership is not appropriate to every situation, but knowing which style to apply in which circumstance and where to go for help is the essence of modern leadership. And we are developing a cadre of leaders with those skills. In fact we are seen as world leaders in this space.

Third, leadership development is no longer an inoculation. It is a journey — ultimately a career long journey of discovery. But it is not a journey undertaken by a sole individual. The job of a supervisor is not done when they send a subordinate on a fancy new APSC course. It has only just begun.

A supervisor/mentor is an essential partner in the journey of discovery that our emerging leader has embarked upon — and this is true whether our developing leader is an EL1 or a Band 3!

Finally, the story of this speech (and my parting message) is that the opportunities available are limitless if our culture can evolve to exploit the potential of our new tools (even better to realise that they are not isolated tools but ones that can be used in combination to secure benefits which together “exceed the sum of the parts” — which is a story for another day) .

Leaders at all levels — and their willingness to accept personal responsibility to champion change — will determine whether or not those opportunities are captured. Perhaps I am Pollyanna. But the group of APS leaders that I know cares about the APS and cares about the role of the public service in our national life.

The APS values matter. Nurturing and tending the ethical framework within which we operate matters. Being an effective organisation that delivers in the here and now but develops capability for the future, matters. And that matters to me because, consistent with the APS values, I care.

I am impartial, committed to service, accountable, respectful, ethical. I may be a retiring member of the APS, but I am nonetheless committed for that.

Public service is the best game in town. And, I wish you well as you reinvent the APS and build a strong, resilient forward-looking culture that respects and requires performance, that demonstrates the high ethical standards that maintain public trust in the APS, and that has the confidence and skill to “tell truth to power”.

Culture kills strategy. So let’s work on the culture!

This is an edited speech delivered by Stephen Sedgwick to the Institute of Public Administration ACT Division annual address in Canberra on December 11.

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