8  A managing for outcomes model

The preceding chapters have identified that in developing a managing for outcomes model the New Zealand public management system should:

• be underpinned by structures that provide for coordination of activity;
• be based upon a performance management culture that provides for both accountability for outputs and evaluation of impacts on outcomes;
• be supported by a financial management system that provides managers with financial flexibility and for the reallocation of resources; and
• be placed within a strategic framework that clearly specifies all objectives sought by Ministers.

The paper suggests that the principles upon which the system is based need to be revisited, and that this could result in the identification of principles such as:

• Clarity of objectives – The initial element of a management process must be as clear a specification as possible of the objectives which managers are responsible for achieving. This implies that the objectives managers are accountable for achieving, the behaviours expected of managers, and the objectives managers are expected to work towards should all be clearly expressed.
• Managerial discretion – Managers must be given the power to make the achievement of specified objectives possible, within limits determined by constitutional, risk management and accountability systems. Managers should have the freedom to make resource allocation decisions on a basis that enables the most efficient delivery of outputs, and the effective management of capability, but they should gain Ministerial agreement to the most effective mix of interventions to be used in seeking to achieve outcomes.
• Accountability – Freedom to manage is not a sufficient precondition for good management. Intrinsic and extrinsic incentives and sanctions must be in place to modify the behaviour of managers to ensure that they do act to meet established objectives rather than pursuing independent goals of their own. For this to be achieved, managers must be accountable for the decisions they make, and those on whose behalf they act must have the means to make that accountability “stick’.
• Effective assessment of performance – If managers are to effectively manage for outcomes, and be held accountable for the delivery of outputs, sound systems that provide for both the evaluation and assessment of performance are required. These systems should inform each other, but not constrain the ability of managers to learn from mistakes in identifying the most appropriate mix of interventions to assist in the achievement of outcomes.
• Adequate information flows – Adequate information flows between and within agencies are an imperative component in a system seeking to provide for whole-of-government coordination, performance management and assessment of accountabilities. Information processes that support all three aspects will be required in a public management system seeking to manage for outcomes.

Further, the paper reflects a view that in providing for this model outputs and outcomes will need to play differing roles in the different parts of the system. Specifically, the strategic management system should be focused on outcomes, with clear reflections of the links between the outcomes and the interventions to be used and the capability required by the agency in seeking to achieve the specified outcomes. The financial management system should be based upon outputs, whilst supporting (re)allocation of resources in order to support outcomes. Finally, the performance management system should provide for the assessment, monitoring and evaluation of performance against both outcomes and outputs, albeit with different foci for each.

What does this mean for the institutional design of the New Zealand public management system? The following sections outline one possible picture of how the system might operate.

8.1  Ministerial leadership

Ministers would need to promote change by modelling the behaviours they expect of the public service. This could extend to:

• structuring the ways in which Ministers work together so that senior Ministers have clear responsibilities for setting strategies and budget allocations in sectoral areas;
• providing for active promotion of reallocation of resources both within votes and portfolios, but also across votes if strategic processes indicate that there may be a more effective way of achieving outcomes;
• promoting the evaluation of interventions, with the goal of providing for improved policy advice on how outcomes may best be achieved;
• engaging more proactively on the establishment of output performance indicators and the decisions involved in moving resources between appropriations (i.e. more engagement in the purchase role); and
• engaging more proactively in ensuring that agencies have appropriate capability mixes to support the achievement of outcomes (i.e. more engagement in the ownership role).

Ministers will need to be supported in undertaking some of these roles, possibly through central agencies providing more direct advice and support where requested.