Management and leadership in the Civil Service: An international conversation with Iain Rennie

Iain Rennie, New Zealand State Services Commissioner and Head of State Services, discusses his role as leader of the Civil Service, employer and manager of all departmental secretaries across the New Zealand government.

Mark Lowcock, Permanent Secretary of the Department for International Development and Chair of the Civil Service Reform: Accountability Implementation Board responded.

The discussion was chaired by Peter Riddell, Director of the Institute for Government. The IfG has published assessments of how civil service leadership and accountability arrangements for senior leaders could be strengthened.

Iain Rennie

New Zealand had been on an evolutionary, rather than revolutionary, journey over the last two decades in its approach to senior leadership accountability in the public sector.  Since the late 1980s, New Zealand has evolved an understanding of the relationships between, and proper roles of, ministers, chief executives and the State Services Commissioner as the recruiter and performance manager of chief executives.  Some of this evolved understanding was written in statute, some in the Cabinet manual, but other parts were less formal, implicit understandings that had built up over time.

The impact of these changes has not been to transform the statutory responsibilities of ministers for their departments, but to develop a better understanding of the balance and division of responsibilities between ministers and chief executives. 

In theory, the State Services Commissioner’s recommendation of candidates for appointment to chief executive posts is subject to Cabinet approval, but in practice the right of veto has been used only once in twenty-five years.  The Commissioner has a duty to take into consideration the Cabinet’s outlook and programme of action when selecting candidates, and is responsible for resolving tensions between serving ministers and chief executives.

The system relies on strong relationships of trust between ministers, chief executives and the State Services Commissioner.  It is, therefore, richer than purely contractual descriptions of the model may make it appear.

Performance management has become more active in recent years.  It had hitherto been less effective in managing poor performance and facilitating best practice and driving strong performance.

Over the last fifteen years, the diagnostics of areas in which government performance was at its worst had not changed appreciably, so there was a need to really focus on improving these areas through targeted, collaborative effort.  Following the 20 September 2014 NZ election, the Commissioner would provide a collective briefing, agreed by all chief executives, on the shape of government and direction of change within the public sector.

Rennie had recently introduced a new, streamlined set of performance ‘expectations’ for chief executives.  These objectives are a blunt tool, so it is important to keep them small in number.

Rennie was trying to place more emphasis on delivering expectations than on the articulation or definition of these expectations during the performance conversation.  He was also trying to get away from heavily context-specific expectations, which would differ markedly across departments, and to define a series of more widely applicable expectations, emphasising collective requirements across the public sector.

The four new core expectations were: serving ministers; people; financial management, and core business.  This emphasised stewardship responsibilities over a longer term, focus on people management and the wider, full government outcomes.

There was also a move towards definition of good performance, in terms of behaviour and evidence that can shape the performance conversation.  This would strengthen the focus on stewardship responsibilities concerning people and assets.  Performance Improvement Frameworks would also help to develop this area. 

Rennie described ‘stewardship’ as similar to investment portfolio management, in that there were different pay offs on different time-scales:  chief executives needed to consider pay offs over the life-time of a minister’s tenure, the life-time of a particular administration, and over the longer term when considering the future of the public sector.

Rennie believed that this process would increasingly entail greater corporate sector support for chief executives in meeting these expectations, and ensuring that the best advice was accessible to chief executives.  There would also be a continuing process of deepening the relationship between chief executives and the State Services Commissioner.  In the past, this relationship had been distant, and overly focused on assessment rather than performance management.  Chief executives should feel empowered to look to the centre for support, advice and expertise, e.g. in talent management.  Overall, the relationship should become less transactional and more interactive.

The State Services Commissioner also needed to provide ministers with a holistic view of the relevant chief executive’s performance, and to help drive improvements in talent management, professional development, and public sector capacity.  Chief executives should embrace their role in driving forward this central initiative.

Mark Lowcock

The last fifteen years have seen several studies of Australia and New Zealand to learn lessons regarding public sector reform.  Lowcock was heartened that the process was ‘two-way’, with the New Zealand government interested in the experiences of the UK government in areas such as digital. 

There is a similarity between the UK and NZ systems in upholding core capabilities and values that underpin good governance and that are thereby the envy of governments that lack this capacity.

Such a civil service can only be maintained by persistent and continuous learning and investment in improvement.

Another similarity is that both UK and NZ manage a careful balance between accountable public sector leadership and the core responsibility to support ministers in delivering the programme of the government.  Lowcock invoked an analogy recently deployed by Martin Donnelly, that government was like a play, in which increased visibility of the back-stage staff and work added little value, and even detracted, from the centre of attention.  It is right that some functions stay in the background. 

On the other hand, the decline of deference and rise of the transparency agenda have meant that the UK system has needed to move slightly further in the direction of open accountability.

The UK Permanent Secretary Appraisal Process

Lowcock said that the next round of annual performance objectives for permanent secretaries would be published shortly.  They seek to add greater clarity to understanding of the mix of roles which are performed by permanent secretaries, especially (1) delivering the agenda of the government of the day in the relevant department; (2) a longer-term stewardship function, building government capacity for the future, and (3) a wider, collective responsibility to contribute to the delivery of the government’s programme as a whole.

Lowcock described the performance appraisal process for British permanent secretaries as perhaps less well understood than it ought to be.  There are, he said, an unsurprisingly large number of willing contributors to that process.  The key features of the process are:

• The most important conversation is that between the permanent secretaries’ respective secretaries of state and their performance managers (either the Head of the Civil Service or the Cabinet Secretary).
• Another important conversation occurs between the performance manager and the lead non-executive director on the departmental board.
• The centre – e.g. HMT, Cabinet Office Human Resources – comments on the department’s performance against the government’s shared objectives.
• An additional layer is provided by extensive 360˚ feedback, both internally within the department and externally.
• The accumulated data from all these processes is sent to the permanent secretaries’ remuneration committee, chaired by John Browne.  The committee discusses the permanent secretaries’ performance and makes a recommendation to the Prime Minister, whose decision determines, e.g., whether a non-consolidated payment is awarded.

Tenure: After considering evidence from Australia and New Zealand, the UK government recently decided against formal, fixed-term contracts for permanent secretaries.  Instead, since mid- to late 2013, permanent secretaries have been appointed on the basis of five-year contracts.  During the fourth year of tenure, the Cabinet Secretary and Prime Minister discuss the desirability or otherwise of an extension.  Extensions can be granted but not for a period equal to or exceeding the length of the original contract, i.e. for a period less than five years.

Separate, external scrutiny is provided by organisations such as the Institute for Government in preparing assessments of departmental performance.

Changes have also been made in relation to permanent secretaries’ relationship with Parliament.  Major project decisions are often taken by senior officials, and is does not make sense to hold ministers accountable for all such decisions.  More clarity and transparency needed to be injected into the process. Parliament can scrutinise the senior officials responsible for such major projects and can determine which decisions had been affected by ministerial interventions.

Capability review systems had been enhanced by Departmental Impact Plans.  These aimed to make more transparent the results of departmental efforts to implement civil service reform.  A big feature of this process is its focus on people issues, succession planning, and diversity plans. Functional leadership and central capability to improve professional areas was also a significant feature of this evolving process.

Questions

Lowcock responded to a question about the Cabinet Secretary/Head of Civil Service split by saying that the difference between the present and the past should not be over-stated.  Much depended on the relationship between the incumbents, and Heywood and Kerslake worked very well together. 

Both jobs were important and very big, so it was likely that two people would be needed to do them in future. 

Answering a question about the role of special advisers in government, Lowcock said they were important and valuable, especially as the Civil Service was less good at providing the political advice that ministers needed.  Political professionals like special advisers could fill this gap.

Separately, when asked about hierarchies of accountability and transparency at the top of government, Lowcock also said that, as far as he was concerned, his key performance relationship was the synergistic relationship between himself and his secretary of state.  He saw delivering their priorities and sharing their problems as a fundamental part of his job.  He was not keen to be drawn on the precise, “Jesuitical” description and delimitation of how responsibilities are meant to be divided and exercised in theory, and was keener to stress that the important thing was that things could be worked out well in practice, if necessary “behind the scenes”.

Rennie addressed the Cabinet Secretary/Head of the Civil Service question by stressing the tripartite relationship at the heart of the NZ centre.  This encompassed the Treasury, Head of the Prime Minister’s Department and the State Services Commissioner.  They cultivate strong, instrumental relationships with each other and approach core business as a team, e.g. on civil service reform.  In recent years, the NZ government had decided to retain this configuration of posts to fulfil the responsibilities at the top of government.  But Rennie could see the arguments for and against fusing the responsibilities in a smaller number of posts; he was agnostic.

On special advisers – or ministerial advisers, as they are known in New Zealand – Rennie said that the experience was different, in that ministers had at most a couple of advisers and they were probably less influential in the government system than they were in Australia and the UK. In part, this might be because New Zealand ministers do not work in their departments, but in separate private offices.

Rennie described the New Zealand system of parliamentary oversight of the executive as relatively weak, especially vis a vis its legislative oversight.  He said that parliament was relatively small, busy with scrutinising primary legislative, and had a patchy process of questioning senior officials that was not “illuminating”. 

Lowcock said that there was an open debate about cross-departmental functional leadership and machinery of government issues, and that a cross-party group was contributing to this process.

Rennie felt that the senior public sector leadership in NZ was pro-active in addressing stewardship issues, including in offering machinery of government advice to government.

Rennie described the NZ performance management process as similar to that outlined by Lowcock, but said that they had identified a need for greater focus within departments on people and financial management issues, especially in using performance information to underpin and shape these discussions.

Chief executives ought to be the most knowledgeable people in the New Zealand system about their own agencies, so there was an inevitable information asymmetry in the performance management process.

Asked about the New Zealand experience of devising metrics to assess the success of performance management processes, Rennie answered that he would look at how the department had changed, and that successful processes would lead to the cascade of good practices throughout the department.

On the way in which the New Zealand system managed tensions and poor performance, Rennie said that it was the State Services Commissioner’s responsibility to resolve tensions between ministers and chief executives.  In a sense, if a serious tension erupted then he had already failed in his persistent effort to defuse such tensions before they became serious.  He gave one example of a serious political issue involving the teacher pay-roll system.  This caused intractable tension between the responsible minister and chief executive.  The process of analysing the problem and recommending solutions resulted in the appointment of a new, more experienced chief executive and the designation of a new, more senior minister to undertake oversight of the project.