Management Today

January/February 2004: Cover story

Public v. Private: It's closer than you think

Value for money in service provision; a focus on outputs and outcomes rather than input and process; the adoption and adaptation of new information technology; improved client focus: it all sounds more like private enterprise than the Australian Public Service. Richard Jones reports.

Private and public sector management and leadership issues have far more similarities than differences, according to one of Australia's top public sector administrators, Dr Peter Shergold, Secretary of the Department of Prime Minister and Cabinet.

"I think there are undoubtedly distinctions between the public and the private sector, not the least that in the public sector you are working within an environment of political contest in which there is a very high emphasis on accountability.

"However, my view is that the challenges we face in our large organisations in the public service are very similar to the challenges faced in large private sector organisations: that is the constant danger of organisational sclerosis; of not being sufficiently responsible for the changing environment, of starting to focus on processes and inputs rather than on outcomes and outputs.

"That is something we must focus on in the public sector but, from talking to my colleagues in large private sector organisations, they face a similar challenge. That's why I think it is very important that the public sector be fully engaged with the Australian Institute of Management."

Dr Shergold says that while he is not sure that leadership can be taught, he is fully convinced that leadership could be learned.

"You learn it, in part, by the process of choosing your role models and mentors and watching what they do, and partly by a process of constant self reflection. 'How did I run that meeting;' 'Why did I fail to get the outcomes that I wanted?'; 'Why is it that a significant number of staff are still dissatisfied with their work environment?'."

Dr Shergold says he is convinced that management can be taught; and that good management skills are needed in order to become a good leader.

"One of the messages I have been emphasising recently is that while one must continue to focus on 'leadership capabilities'; you can't exhibit strong leadership unless you have within yourself, and within your organisation, an understanding of the fundamentals of management.

"In the public service this includes how to manage contracts. These are essential skills because there has been a dramatic shift in the extent to which the delivery of government services now takes place through third parties.

"So we need these new management skills - contract management and long term relationship management - in order to ensure that the government gets the best gains out of outsourcing. One also uses strong levels of records management, financial management and people management. You build up the management skills that are required in an organisation and then add to that the leadership capabilities that you expect to see displayed at the workplace.

"I think it is very important that people understand that there isn't a single style of charismatic leadership. Leadership, in my view, is increasingly about the day in, day out hard yakka rather than the inspiring speech every three months."

While Dr Shergold agrees that the leader should provide the mission, the vision, the big picture, the leader can only do that if he or she has surrounded themselves with a team of people who are actually 'on the game' in terms of the detailed management of the organisation.

"If you had a team where all of you were focusing on the big picture, then you would soon have an organisation in strife. Certainly I think that the public and the private sector can learn from each other. I think public servants have learned, and will need to continue to learn, from the private sector in things like service culture. And in the way we deal with customers and clients - even though we are dealing with citizens.

"Against that, the private sector can learn from things we have done pretty well in the public sector. Equity and promotion on merit, for instance, has delivered much larger numbers of women in senior executive roles and I think that is something the private sector can learn from us."

He also believes it is important to have a dialogue of managers and leaders, and that "we don't just draw too rigid a demarcation between the challenges we face in the public and private sectors".

According to Dr Shergold, outsourcing has been a success story for the public service.

"My view is that some of the key benefits from outsourcing have already been achieved. We have now achieved
significant benefits through outsourcing printing, publishing, catering, security and, to some extent, payroll and records management. Those are things that we have done pretty well.

"I believe that IT outsourcing will continue but in a different way. I think you'll see a much more agency-based outsourcing in which there are clear decisions made about what part of IT and communications to outsource and what to hold inside. The discipline associated with benchmarking and market testing must continue - you need that in order to drive a process of continuous change."

The use of outsourcing by Australian governments is not new. However, its level and scope are growing markedly. When the Industry Commission released its report Competitive Tendering and Contracting by Public Sector Agencies in 1996, it noted that gazetted service contracts let by the Commonwealth budget sector had increased fourfold between 1991-92 and 1994-95. That trend has continued. Since 1996, for example, the government has undertaken significant outsourcing of information technology services (estimated to be worth $1.2 to $1.3 billion over five years), labour market programs (approximately $3 billion over three years) and the delivery of new apprenticeships (approximately $340 million over four years).

Dr Shergold continues: "The outsourcing of legal services I believe has been very successful; today agencies make conscious and rational decisions about whether to use the Australian Government Solicitor or private sector firms.

"My only reservation about outsourcing is that we have to do it in a way which ensures that we do not lose strategic control of the process. The danger we had with IT is that we had the potential to lose effective control of IT - it's very difficult, for example, to have an exit strategy from your IT provider without significant termination costs. It's much easier to change the company providing you with legal services or payroll services or security services. And that's what we have got to think about: what can we continue to outsource in order to get much greater efficiency for public funds but without losing strategic control."

Asked why women were achieving higher management levels within the public service, Dr Shergold was clear.

"I think one of the reasons that women perform better and are rewarded more generously for their performance is the fact we have a very high emphasis on promotion based on merit.

"There has been a significant effort in the public sector to try and provide a more flexible working environment. And I am not just talking about the provision of 12 weeks maternity leave and the opportunities to have a graduate return to work after having children. More generally, the public sector at its most senior levels is working on policy and legislation and oversighting delivery. It manages knowledge on behalf of government. Although that work is intense, it does have ebbs and flows. So you do need to build a working environment where you can provide sufficient flexibility for people to balance their work and personal lives.

"I think we have been doing it with some degree of success: allowing people to purchase additional annual leave, allowing people to job share and, at least for certain periods, to be able to work from home.

"All of that provides flexibility that I think is much more attractive to workers who have family responsibilities. The other thing is that of those who are now applying to join the public service as graduate assistants, about 55 per cent of those recruited are women. It seems to be a sector that attracts very high quality women - our challenge then is to ensure that they can progress up system through middle management and then to senior management."

Dr Shergold also believes that financial management reforms have placed a much greater emphasis on results in the public sector. Both financial and personnel management, together with responsibility for workplace relations, have progressively been devolved to agencies. The last decade has seen much greater emphasis placed on value for money in service provision; explicit focus on outputs and outcomes rather than input and process; the adoption and adaptation of new information technology; improved client focus; and the introduction of systematic measurement and evaluation of corporate and individual performance.

"The Australian Public Service (APS) has not only responded effectively to government direction: to a considerable extent it has provided the impetus for reform", he says.

"The administrative reforms that have marked generational change in the APS, often characterised as the 'new public management', have been extolled, debated and criticised. But, beneath, something far more profound has happened almost unnoticed. Governance has been democratised.

"The elements of this quiet revolution are clear enough. There is increasing competition in the delivery of services to government and on behalf of government. Benchmarking, market testing and contract management have become a staple of public administration. The provision of policy advice has become contestable. The delivery of public policy has been outsourced. Such developments are now the standard fare of public service commentary."

Dr Shergold says what has not been sufficiently appreciated has been the extent to which this competitive environment has come about as a result of more groups and individuals, within and outside the public sector, being able to contribute to the process of governance.

"It is this widening of the circle of democratic involvement which has shaken irrevocably the old bureaucratic structures and with it, the unchallenged authority wielded in the past by its mandarins. As the framework of governance continues to expand, so will the need for new approaches to public administration."

Richard Jones is the editor of Management Today.

Bureaucracy at work

Never underestimate just how effectively the bureaucratic organisation works. Beneath its cumbersome image it is well designed to deliver government on a national scale with remarkable efficiency. Every fortnight, for example, Centrelink makes approximately 8.5 million payments to some 5.7 million Australians. Every year it answers over 23 million phone calls. It does all this with less than 25,000 staff. The ATO processes the returns of approximately 11.9 million taxpayers a year, with less than 20,000 staff. Both of these organisations have surveys indicating a high level of satisfaction (75-80 per cent) with their services.

Overall the Commonwealth makes some 50 million decisions a year. An extraordinarily low number are appealed or reviewed.

Dr Peter Shergold - a history

Dr Peter Shergold has been Secretary of the Department of the Prime Minister and Cabinet since February 2003.

He received a B.A. (First Class Honours) in Politics and American Studies from the University of Hull; an M.A. in History at the University of Illinois; and a PhD in Economics from the London School of Economics. In 1971-72 he was a Research Fellow at the Institute of Historical Research, London, before migrating to Australia to take up a lectureship at the University of New South Wales.

In 1985 Dr Shergold became Head of the Department of Economic History at the University, working closely with non-government organisations in the area of ethnic affairs. He has taught at the University of Illinois, Southampton University, the London School of Economics and Pennsylvania State University.

In 1987 he joined the Australian Public Service to establish the Office of Multicultural Affairs. He became a Deputy Secretary in the Department of the Prime Minister and Cabinet in 1990. From 1991 he headed the Aboriginal and Torres Strait Islander Commission (ATSIC). At the end of his term in July 1994 he was appointed Chief Executive Officer of Comcare Australia, with responsibility for workers' compensation and occupational health and safety in the Federal arena.

He was Public Service Commissioner from September 1995 to February 1998, playing a leading role in promoting legislative and administrative reform in the APS. He continues to pursue his interest in APS management through chairmanship of the Management Advisory Committee and speaks extensively on public service issues.

In 1998 he was appointed Secretary of the Department of Workplace Relations and Small Business which, following the election, was expanded to become the Department of Employment, Workplace Relations and Small Business. He served in that capacity for almost four years before becoming, in January 2002, Secretary of the Department of Education, Science and Training. He took a leading role in developing the Government's reform strategy for higher education.

Dr Shergold has also been a member of the Advisory Council of the Centre for Public Management at Monash, Mt Eliza Business School and the Advisory Board of the Australian Centre for International Business at the University of Melbourne. He has served on the Australian Statistics Advisory Council.
He was on the Board of Centrelink from 1998-2002. From 2002-2003 he was a Board member of the Australian Research Council, Commonwealth Scientific and Industrial Research Organisation and the Enterprise and Career Education Foundation.

The Department of the Prime Minister and Cabinet

The principal matters that the Department deals with are: coordination of government administration; assistance to Cabinet and its committees; policy advice and administrative support to the Prime Minister; intergovernmental relations and communications with State and Territory governments; status of women; and government ceremonial and hospitality.

It is the role of the Department:

The Department provides advice and information to the Prime Minister on major policy matters of domestic and international concern. There is a particular responsibility to advise on the implications of proposals for Commonwealth-State relations and to facilitate those relations.

The Department takes a particular responsibility for policy coordination. In this area it seeks to ensure that the Prime Minister has the best possible advice drawing from across the whole of the government system.

The Department is the primary source of advice on government and parliamentary policy matters covering such issues as Cabinet processes, accountability and the management of the public service.