I want to give a reasonably broad high level view of the way the Government is thinking about public services.

I think the first point is that all organisations, public or otherwise, are dealing with a number of what are now permanent changes.

The first that I would pick out is debt reduction in the developed world which is a generation long project. We have really no idea of what the on-going dynamics of large-scale debt reduction are because we’ve never had such high levels of debt before and no one else has quite done it under the circumstances that the developed world faces.

So that makes constraint permanent.

The second great force is ubiquitous free information. The traditional power of government was as a holder and controller of information. That is gone.

Not only can anyone get it for free starting with 9 year olds who have access to everything immediately, the public don’t think that government should hold that power over people in the way that they used to accept.

The third feature that I think is permanent is the on-going shift of wealth, power, and therefore influence from our traditional markets and allies to the Asia Pacific region and other emerging continents.

The New Zealand and Australian public services are in a unique position to harvest ideas for change.

On the one side we have the developed world that has begun and will continue for a couple of decades with radical experimentation in crunching the costs of public services.

That process has only begun. If we think that the current debate about austerity is almost over, that’s wrong. Debt levels are still rising across the developed world and governments are just shuffling that debt around, not reducing it.

They are still deciding whose balance sheet it is going to end up on. It’s like staff in hospital emergency departments standing around discussing how much adrenalin to pump into a very sick patient. That’s a long way from the cure.

So on one hand the developed world is going through radical experimentation, and on the other hand are the developing Asia Pacific economies and the emerging economies that want more consumption-led growth and therefore are developing an appetite for public services which they don’t have.

So we are ideally positioned to harvest the ideas on the more radical experiments in other economies that are under more pressure than Australia and New Zealand and to on sell our expertise and those ideas as efficient stable providers in public services to emerging economies who will want them and where there is scale for massive and rapid growth in the provision of effective public services.

We can learn from them new ideas about how a state builds public services in the twenty first century.

I was delighted to hear Alan Fels, who is the head of ANZSOG talking about the ANZSOG initiative in providing knowledge sharing opportunities for Chinese public leadership, because that is a massive market that’s going to grow public services in the next 20 or 30 years.

So we are entering an age of experimentation on a scale that we haven’t seen since the 2nd World War or post war period.

How does a government in little New Zealand think about that?

Well here are a few things that we are doing, some of which were covered by the Prime Minister in his earlier speech.

In a sense we are trying to create sufficient stability so that we can get more change. Let me explain that. It’s hard to make change in large sophisticated organisations with very sensitive customers very sensitive to service levels when you’re on a short term budget process. People focus more on the annual process of bidding and savings than on what you’re trying to achieve.

So we’ve taken the opportunity over the last few years to make a number of changes. I call it the responsibility model.

You and your organisations are responsible for making change and delivering services within fiscal constraints - not the Treasury, not the Minister of Finance, not the central agencies.

You are responsible because you know what you’re doing in your service. Politicians, central agencies often actually don’t know. And their culture tends to be watching and monitoring what’s happening as opposed to the people who actually have to do it.

So the responsibility is in your hands. You have all these pressures and it’s essentially up to you to deal with them.

So there is a number of tools that we have put in place to try and create the sense of stability and responsibility which we believe leads to better long term decision making.

The first is taking a long-term focus. We have avoided the temptation to rush in and grab the savings in an irrational and random manner. That has been the long-term habit of Treasuries driven by the requirement to meet a target for the next budget so they just go in and grab the money.

And that preoccupies everybody about their short term survival and decision making and prevents them from thinking about the longer term and the real fiscal drivers. So that’s the first one - focusing on the longer term fiscal costs.

The Government has accepted deficits in the short term with the view that if we think very hard about what we’re doing, two, three or five years down the track we can be spitting out hundreds of millions of spare cash, not just the 20 million that’s preoccupying us now.

And the long term focus works best when we know what we’re trying to achieve. You have today heard the Prime Minister take you through the Government’s focus on results.

A couple of critical aspects of those results: one is that we are trying to get the strengths of targets without weaknesses. The second is that they are results focused on communities and populations not government departments.

People don’t live in government departments; they don’t measure success of the public service by the success of the government department. They measure it by looking around in their street, in their suburb, and their particular public service that they just used yesterday.

And that is absolutely critical about these results. They relate to where the people are, not where we are.

Our services are too often defined by the parliamentary accountability system which is all about tracking the dollar, not about whether it works. We have to blend parliamentary accountability with the real world.

Another thing we’ve done is to break the annual budget cycle and we’ve moved consciously to four year budget plans. We’ve had one round of those.

A recent survey of chief executives has shown that it is now leading to the right kind of conversations about the longer term effects they are trying to achieve and the critical relationships they need across government to achieve those results.

Probably a fourth factor that we’ve been looking for that’s part of all that, is judgement, not process.

Leadership in the public service, in the end, should be about judgement not primarily about going through all the right processes. As we move into a more adaptive environment we don’t have time for all the processes.

We need people who are willing and able to take a position and make a judgement.

For instance, if a department’s capabilities are stretched you need to do something about it, decide that something’s not working so it should stop, rather than waiting around for the next budget cycle.

So those changes that we’ve put in place are starting to have some effect. We are unashamedly taking a longer view than the electorate cycle and a longer view than the life of the Government.

Ideally most government departments don’t take part in the budget cycle because they’ve got their four-year revenue track and plan, and they go off and do it.

We keep an eye on them, which will free up a significant proportion of the senior managers’ time.

So that’s what we’re doing to create stability.

What other kinds of changes are going to happen within the public services?

Well there are three or four points I’d like to make here, not in any particular order, about the kind of world that ANZOG as an organisation and the public sector leadership need to consider.

This is necessarily a politician’s view. The first one is that usual political boundaries don’t apply anymore, in New Zealand anyway and I suspect across the world.

What do I mean by that? Well I read an official’s report the other day which kept referring to the political risks of a particular proposition. I agree that public servants need to be aware of those risks but their assessment was completely wrong.

It was based on what was talked about five years ago. The public now are much less susceptible to lobby groups and self-interested pleading.

The public are now much more interested in politicians just getting on with it. They’re not as concerned about whether they were consulted and not as concerned with the political sacred cows of the years up to 2008.

They just want you to get on with it and ensure it is working. The self-censoring risk management built into public service from the years of plenty is now outdated.

We politicians are finding the constraints are our processes, not public opinion. The public are not marching in the streets against change, because they know change is necessary.

They’ve been making change in their homes and businesses. Central government is just catching up with them and they know local government is another two years behind.

The public are focussed on the economy. They want their public services to work well. They want us to show respect for the hard earned taxes they pay.

They also want their public service focused on economic growth. As we write our regulations and our policies, we need to know that the people, who actually pay for us, have as their top priority job security. They want a job for their teenager and a bit more income so they can increase their savings and pay off their debt.

Everything else comes after that and we’ve got quite some way to go to for that strong focus on economic opportunity to filter into every corner of the public service.

The whole world is headed in this direction. I was part of discussions last year with countries like Canada and Japan, who for generations have been opposed to free trade.

They now have leaders, regardless of their political colour, out there advocating free trade. Why? Because there’s not much else around the economy that’s working, so they cling to something that might make a difference to jobs and incomes.

Our public know the world’s changed and expect us to behave in a different way that reflects their deeper sense of economic insecurity and they expect us to do everything we can to reinforce a sense of economic security.

So the usual political constraints don’t apply.

Second, policy is a commodity. My 12 year old can print off world best practice policy from the OECD website or any other website in 10 minutes flat if I just give him a topic.

He doesn’t need a degree; he doesn’t need high trained policy thinking. He can get it anywhere for free right now.

What matters now is not the ability to think about a new policy. What matters is a detailed understanding of how it applies here and how to make it work.

I think our public services have got some way to go to ask themselves a new set of questions. For any given policy, the question is what incentives are there on public servants to make it work, how do they tell whether it’s working? And if they found out its not working, would they or could they do anything about it?

Too often the answer to the last question is no, so we find another idea and put it on top of the one that’s not working. And if that doesn’t work, then we go and find another one.

And over 30 years, we accumulate a pile of expensive failure. Well if we’re going to fail, let’s do it at low cost.

Public services need to be built around the institutional arrangements that are going to make policy work. The public aren’t going to tolerate us spending money on stuff that doesn’t work. They used to, but now they don’t.

International lenders aren’t going to lend New Zealand money for stuff that doesn’t work. So if we want to maintain service levels for the public, we must flush out what doesn’t work.

That needs change in institutional incentives and our understanding of institutional economics. What incentives do people face? What price signals are there? Because all funding is a price.

What signals are out in our public service market that tells people how to behave?

We need to better understand the institutional arrangements that make success more likely. That’s where the results focus that the New Zealand Government is putting in place will provide a big test for public services.

I can feel change already. Since the Prime Minister announced what the Government is seriously committed to achieve, public service conversations are more focussed.

There is less time to write strategies and more time to work out whether the 35 per cent of GDP we spend in government actually achieves what we think it should achieve.

The third thing we are going to change is accepting that other people can help us.

We’ve had a period in New Zealand, and to some extent in Australia, where the political third rail was privatisation. In New Zealand, in the decade until 2008, the Government put a strong emphasis on public provision of services and excluding private sector provision and ideas.

Their view was the public service were the only ones who cared and anyone outside the public service was going to rip the public off, make excessive profits and didn’t care.

So they cut themselves off from the skills required now - how to manage financial and operational risk within constraints.

In the public service in the last 20 years, risk management meant managing media stories. In the next 20years, it will mean whether you can manage the operational and financial risk of limited operating expenditure and capital expenditure. We don’t have those skills.

It’s obvious in the low quality of our large asset base.

Governments are terrible at managing assets. There are businesses outside the public sector that spend billions building up investments in intellectual property and managing assets. Why don’t we use some of their knowledge instead of relying on our own limited capacity and insisting on owning everything we can?

Nor do we know much about our social programmes’ impact on communities. We don’t actually know if what we do undermines the natural collectivism of the non-government community.

We should go and work with those who do understand. Let’s find the people who know a lot about the places where our customers live and how the dynamics of those communities work. We need to see these communities as partners.

We’ve had a fantastic experiment with this recently called the social sector trials.

We decided to go to six small towns with problems with youth, find anyone who might have a go and tell them that they control government spending relating to services supporting youth. They would make the decisions.

Just twelve months after this experiment began we had presentations to a Cabinet committee from people from small provincial towns with populations of less than 10,000 telling us what they had achieved in 12 months.

It was fantastic. We heard from people from small provincial towns, who had a fully-blended grip of all the public policy issues associated with the financing, delivery and effectiveness of services for quite a difficult part of the community. They were exemplary in their presentation and description of what they were doing.

That capacity is everywhere. Public services have to learn how to use it, because most of our stuff doesn’t work when we ignore that capacity in communities and families. Other people can help us.

Unless you are working with other people, you’ve probably got it wrong. If you’re working in a bubble where the public service cares and we know what we’re doing and other people don’t know, you are wrong.

I haven’t come across a single example in the last three and a half years where that is the correct diagnosis of the situation. I have come across many examples where reaching out and recognising that other people know stuff that we don’t know, has allowed us to make huge advances in quality and efficiency of our services.

And all those things lead to a different kind of leadership. Our existing skill sets come from a time of plenty.

Knowing how to get into the minister’s door, how to crank cash out of politicians, how to manoeuvre the strategy out there so your patch is bit bigger and the other guy’s is a bit smaller – they all redundant skills now.

Now the kind of leadership we need is leadership that allows disruptive talent to emerge.

In an environment where we have all these changes and pressures, we need people who see these things differently, who have a fresh analysis, who think a bit laterally, who have a different set of relationships. The question is, can these people succeed in your organisation?

Can they succeed?

If the answer is no, then you are headed for trouble. Too much of an incremental response to dropping baselines, changing technology and increasing public demand is going to squeeze your capacity and make your staff anxious, stressed and ineffective. In the end someone else is going to have to come in and do the job.

We must have room for disruptive talent.

The Government is implementing across the board quite a range of significant change.

The Defence Forces are going through the biggest reorganisation of probably any defence force in the developed world.

We’re making changes to our law and order system, closing prisons for the first time in a generation.

We’re implementing welfare reform, and the investment approach. We are fundamentally changing our thinking about how to support our welfare population.

We’ve got a massive challenge that we haven’t made much progress on yet around affordability of housing and social housing - the Government’s single biggest asset and the public’s biggest single cost of living.

We are trying to change the way we deal with information and privacy. We expect over the next three or four years to make some real progress.

We think that most of the talent we need for a shift to an adaptive culture is in our public service.

We need to give that talent a clear sense of direction, and we need to work on the culture that allows different sort of talent to come to the fore.

I will end with a good example, around the Christchurch earthquakes.

Immediately after those earthquakes, I got to see New Zealand’s public service adapt to a high stress situation that demanded rapid action across a number of complex issues that they’d never had to deal with before.

A small group of magnificent people were the drivers in those early stages, and that level of excellence has been maintained.

We are fortunate in New Zealand to have our own radical experiment: What will you do in a place where you can break all the rules?

A lot of the stuff I’ve talked about today is lessons from what you do when you are allowed to break all the rules.

We hope to harvest the product of that experiment and spread it across our public service, because we think that’s the only way we’ll be able to [...NEXT]