Follow Up review findings
Significant leadership change has occurred within Treasury since the 2010/11 PIF Review and further change is about to occur...
The 2010/11 Formal review was carried out on the eve of the retirement of the previous CEO. The new CEO (Mr. Gabriel Makhlouf) has been in place for just over 12 months and has significantly changed the leadership structure (a new ELT structure) and style within the Treasury (a more deliberate leadership style internally and externally).
The CEO has articulated a clear organisational vision and framework for the Treasury, which encapsulates the external paradigm within which the organisation is required to operate. The ELT is relatively new - and is further identifying and refining its role in regard to organisational leadership. There is however, coherence and strong ownership within ELT of the new framework, and evidence that ELT members have an organisational focus, which sits above their own portfolio focus. Internally, the Treasury has improved its own forums for debate, and accountabilities for decision-making under this new leadership.
The ELT needs to further develop its capacity for strategic leadership and to tackle the fundamental issue of operationalising the new vision and framework for the Treasury within the new State sector context and Better Public Services.
This needs to be addressed with urgency for the Treasury to be able to deliver on the Government's agenda and expectations in this area, along with the other central agencies and State sector organisations. Third parties are looking for the Treasury to execute its new operating paradigm but in many instances they are still not seeing tangible change on the ground - with the Treasury 'lagging' versus 'leading' in some key areas.
There have been a number of personnel changes at the senior level within the Treasury post the 2010/11 Formal review with a number of senior managers leaving the organisation. This provides both an opportunity and a challenge for the organisation. The loss of institutional knowledge has adversely impacted some key external parties but the Treasury has developed acceptable strategies to address this with these parties.
On the positive side, the incoming leaders that have replaced those leaving may help enable the Treasury to more readily move to its new operating paradigm.
During the review the Treasury appointed Vicky Robertson to the role of Deputy Chief Executive (DCE), following the departure of the previous DCE who moved from the Treasury to head the Department of the Prime Minister and Cabinet (DPMC). This is a critical position within the organisation and must be leveraged to enhance the organisation's capacity to undergo the transformation that is required.
The direction on which the Treasury has embarked under the new CEO is the right direction...
The new environment has required the Treasury to rethink what they are there to do, ie, their purpose and role, what the challenges are, and how they will deliver, ie, their new operating model.
While the CEO and ELT have done considerable work in this area and have identified a framework for the future which will redefine how the Treasury performs its Ministry of Finance and Corporate Centre roles, and engages externally, this work has not been completed nor have the implications for the operating model been determined. This will have significant implications for the role and capabilities of the Treasury's devolved vote and policy analysts, as well as its interaction and modus operandi with its two other Corporate Centre partners (DPMC and State Services Commission (SSC)), and the newly coordinated sectors and functional lead roles.
Changing the Treasury operating model and in particular the roles, accountabilities and capabilities of frontline policy and vote analysts is a prerequisite to the Treasury leading and adding significantly more value in the new State sector paradigm. Further, operationalising the economic strategies, which the Treasury has developed and published since the 2010/11 Formal review, and using its new 'higher living standards for New Zealanders' framework, will impact the Treasury's prioritisation in decision making and identify where it has capability gaps.
While this framework and associated goals, roles and values could be very powerful in refocusing the Treasury's future role, purpose and operating model, it is essential that it is brought down to a level that is owned and operationalised across the organisation, and on the frontline. This must occur with urgency so that the Treasury can be effective in playing the role that is being demanded of it.
The critical issue facing the Treasury is that there is a major gap between the CEO/ELT intent and aspirations for the organisation and frontline delivery...
The CEO and the ELT acknowledge that they are very much at the beginning of the organisation's transformation journey.
Consistently, the review found that frontline delivery (which is devolved in the Treasury operating model) has undergone little or no change from what it has been in the past (and what was observed in the 2010/11 Formal review). This is a consequence of the new operating model not being operationalised, and hence delivery on the ground is not aligned to the intent articulated by the CEO/ELT, and is not aligned to the new State sector paradigm.
Line-of-sight from leadership intent and prioritisation to actual frontline delivery is still a major issue facing the Treasury. This is a real issue given most of the contact between the Treasury and other organisations (even for their CEOs) occurs at this level.
With empowerment and accountability moving to sector leads, the role and engagement model for the Treasury frontline analysts must change. The Treasury has not clarified what this means for them nor have they identified how they would manage the change process required to undergo this transformation.
Changing its operating model is extremely challenging for the Treasury due to the breadth of its reach (versus depth), its need to be responsive to issues of the day, and the devolved execution of its functions. These current characteristics and the current modus operandi are deep in the culture/'DNA' of the organisation and motivation of its workforce. A key challenge will be to keep clarity and focus on developing and moving to the reformulated operating model while being challenged by the need to be responsive to day-to-day demands.
The current engagement scores for staff provide a further barrier and challenge in regard to addressing this.
The gap will only be closed through culture change and capability-build (in areas such as engagement and co-creation/co-production). This will be very challenging. Recognition is needed of what beliefs need to change deep in the organisation's 'DNA' and what is required to change these, ie, what does it look like? why work at the Treasury? etc. The fundamental role and capability of a Treasury Analyst needs to change.
Treasury has refocused its senior external engagement strategy and external leadership and has demonstrated a boldness to be prepared to lead external debate...
However, effective engagement is person dependent and variable, and is exacerbated by the gap observed between frontline delivery and the articulated leadership intent.
In regard to frontline engagement between the Treasury and agencies, it is sometimes unclear who the Treasury counterpart is and whether progress made with the counterpart will actually stick. Organisations spoken to in this review feel they can still get blindsided by the Treasury in a non-timely and 'costly' manner.
In the new context the Treasury is being asked to engage and help find and take ownership in solutions and ways forward. This co-production model has not been part of the culture for many in the organisation.
Treasury has made significant progress on the development and articulation of a medium-term economic strategy for New Zealand and usefully contextualised this into 'higher living standards for New Zealanders'...
This has the potential to be a powerful lens for the Treasury's own prioritisation and capability development going forward. The next challenge is to turn this into useable advice and ensure coherent consistent alignment and action by the organisation to support it and drive innovation.
The Treasury's organisational understanding and responsiveness to work with Māori is undeveloped despite this being needed using the 'higher living standards for New Zealanders' lens.
Operational disciplines within the Treasury have been enhanced and will be required to support the leadership aspirations and change management challenge ahead...
A demonstrable cultural change is evident at the leadership level in regard to recognising the role and benefit of strong operational disciplines and process to underpin organisational performance.
The Treasury has recently invested in operational tools to better support the organisation including an improved performance management system, management information system and risk management framework. Further work is in progress to reposition the external Advisory Board to enable it to add more value to the organisation. These tools all require further development to be able to be fully leveraged. They will then be able to support the Treasury's transformation but they will just be platforms to assist the change - they will not drive the change themselves.
Treasury's work with Central Agencies Shared Services (CASS) is a positive commitment to improved efficiency and effectiveness but this now needs to be fully leveraged and progress against aggressive implementation Key Performance Indicators (KPIs) measured and reported upon...
Engagement in State sector change needs significant development (the BPS and CASS work to date is not enough). Deep acceptance from within the Treasury is needed regarding the developing Corporate Centre (also known as Ministry of Finance also known as BPS), versus the nervousness and/or reserved position that was observed at the time of the review. The organisation will need to give up some deep held positions to make real progress.
