3.3  Key principles

The key principles underlying the New Zealand public management system, as outlined in Government Management (Treasury, 1987) are: clarity of objectives; freedom to manage; accountability; effective assessment of performance; and adequate information flows [see Figure 1]. Norman (2003) has suggested that the core principles of the New Zealand model provides for a distinctively cybernetic or thermostatic-like view of organisations (p. 43). In other words, the system provides for a cyclical flow of information about the activities of government, within a closed environment.

The principles as originally expounded are outlined below, with some consideration of how they might be reshaped looking towards a managing for outcomes environment. In attempting to undertake the latter I have been cognisant of the paradoxes that can be created within a cybernetic system, such as those highlighted by Norman (2003).

3.3.1  Clear specification of objectives

The clarity of objectives principle responds to a perception that agents need to be aware of what they are expected to achieve before they can effectively deliver against specified expectations.

What does this mean in a managing for outcomes environment? Firstly, the imperative that objectives actually be specified must stand – people need to know what they are seeking to achieve if they are to effectively work towards that goal.

Secondly, it needs to be recognised that “objectives” will be specified for different reasons and in different ways. In this case “clear specification of objectives” will need to allow for both the explicit specification of outputs with performance indicators that will assist in implementation of accountability systems; and clear articulation of outcomes to provide a framework within which policy can be developed and with performance indicators that will assist in learning and evaluation.

Thirdly, the system needs to have a realistic expectation of how outcomes will be expressed. Articulation of outcomes is not a simple process: it is often difficult to untangle individual objectives from the whole, and it is nearly impossible to develop outcome statements that do not reflect or lead to multiple and sometimes conflicting objectives. Further, the multi-layered nature of outcomes means that attribution of interventions to the achievement of outcomes can be difficult. In a public management system based on performance management and allowing for accountability of activities this potentially creates real difficulties in moving towards a managing for outcomes environment.

These difficulties can, partially, be resolved by allowing for the differentiation of outcomes into different strata, but it also means that the issues associated with providing for some understanding about the level at which outcome objectives can support an accountability system need to be addressed. Issues which become more complicated when it is acknowledged that using performance measures associated with outcomes can also provide for the development of a learning environment, where the effectiveness of interventions can be assessed as an input for the policy development process.

Finally, specification of outputs and anticipated links between outputs and outcomes will continue to be important as this should provide for a way for management of some of the tensions between accountability and evaluation for learning. This will be of particular moment if specification of the two allows for a focus on different aspects of the wider system.

Clarity of expectations is important for all involved in a system – if only because it provides a level of transparency about what the different actors are expected to deliver. How those expectations are expressed and with what purpose would appear, however, to be an issue that needs to be resolved in looking towards a managing for outcomes environment. If, as the discussion around the other principles will suggest, outputs still need to have a clear role it would appear that a revised principle (at the least) needs to be more specific about what is meant by “objectives’.

3.3.2  Managerial discretion

The “freedom to manage” principle is based on the theory that those closest to the decision point will generally be best placed to make relevant management choices. Implementation of the principle has tended to be restricted by risk management processes built into the New Zealand public management system – for example, through the promulgation of central agency guidelines relating to financial delegations, bargaining parameters, and the monitoring of major information technology projects.

The impact of rhetoric on the implementation of the New Zealand model can, perhaps, be most clearly identified in relation to this principle. The quid pro quo for freedom to manage in all of the papers supporting the reforms was the introduction and maintenance of an effective accountability system – managers would have the freedom to manage inputs, but they would still have to account and be responsible for performance against specified objectives.

It may be that this rhetoric helped to drive the culture that has seen chief executives resist central agency engagement in assessing and assisting with the effective and efficient operation of government agencies (no doubt assisted by central agencies taking some time to determine what their role should be in an environment not characterised by command and control systems). It could also explain why increased financial flexibility – in order to support a managing for outcomes focus – is now sought by some chief executives and others charged with implementing a managing for outcomes focus. Conversely, within the current environment there are also demands for greater centralisation of some activities and decisions, particularly those activities or systems focused on human resource management.

Both issues seem to come back to a discussion about the level at which decision-rights should be set – i.e. should chief executives or Ministers make decisions about the inputs to be utilised, the outputs to be delivered or the outcomes sought – in order to provide for managerial freedom whilst also managing risks (political, policy and operational) to the Government.

Determining where these decision-rights best sit is not a simple process – as Brady (2002) illustrates in her paper on the decentralisation of decision-making. No common risk management framework exists, and often where decision-rights sit in various circumstances will depend upon the “political” nature of those decisions. Nevertheless, it might be possible to look at a matrix that relates “political / strategic” risk management by Ministers to managerial ability to make the most informed decisions.

Figure 2 – Decision rights

Such a matrix would suggest that Ministers will have the most interest when the political / strategic nature of the decision is high, and managers’ ability to make an informed decision is low, and that this is most likely to require a focus on outcomes. The converse will be true when the political / strategic nature tends to be low, and managerial ability to make an informed decision is high, and that this will generally occur around inputs. Finally, depending upon the nature of specific outputs, both Ministers and managers will have clear roles to play.