INTRODUCTION

This note provides information on how DWI's performance is monitored and the extent to which DWI is meeting its objectives. It is divided into three main sections:

1. Performance Under the Existing Regime - an assessment of the extent to which DWI has achieved the objectives specified by the previous Government.

2. The Existing Performance Assessment Regime - a discussion of the range and impact of performance assessment and monitoring processes that apply to DWI.

3. Towards a New Performance Assessment Regime - an assessment of work underway to align services and performance measures with the objectives of the current Government.

A final section summarises the conclusions reached in the other three sections.

The source material for this note includes existing documents on DWI's performance, the responses of departments to the questions put to them by the review team and discussions with officials from DWI, MSP, DoL, Treasury and SSC.

A. DWI'S PERFORMANCE UNDER THE EXISTING REGIME

The previous Government had two distinct sets of objectives that led to the establishment of DWI:

• structural integration - the merger of income support and employment functions, and associated financial savings; and

• employment strategy outcomes - in particular moving working age beneficiaries into work.

Objectives related to the accurate and timely delivery of income support were later included in the Chief Executive's job description and output performance measures.

The discussion below assesses DWI's performance in terms of the previous Government's objectives. It considers:

• the extent to which DWI has achieved its integration objectives;

• DWI's own assessment of its performance against its Key Performance Indicators (KPIs);

• an assessment of DWI's performance against the measures in its purchase agreement by MSP and DoL acting in their role as purchase and monitoring advisers;

• an assessment of DWI's performance relative to the performance of business units in DSW and DoL before integration;

• the extent to which the specific employment strategy outcomes established by Cabinet have been achieved; and

The discussion concludes with some general comments on DWI's current performance focussing on measurement issues and the relationship between KPIs the purchase agreement.

Structural Integration

An analysis of the extent to which DWI has met its initial integration objectives is contained in the SSC's Departmental Performance Assessment 1998/99. This assessment used the Business Case to Establish the Department of Work and Income and purchase agreement outputs as the basis for assessing the department's results.

Overall, the SSC commended DWI for meeting the results in the Business Case and highlighted a number of major achievements during the nine months to 20 June 1999 including:

• the integration of employment and income support service delivery sites;

• the implementation of major new employment and welfare policies;

• the development of regional plans for 13 regions;

• completion of a major front line restructuring;

• completion of complex employment contract negotiations; and

• the development of new remuneration policies.

Following the establishment of DWI, the integration timeframe was brought forward to enable DWI to deliver an integrated service six months earlier than planned. According to DWI, integration was accelerated because:

• Ministers and the public expected improved employment outcomes to accrue earlier;
• job seekers/non-job-seekers wanted to receive services under the same roof earlier to reduce transaction costs and eliminate confusion about where to receive income and work services; and
• staff wanted to perform new roles earlier so that they could provide a fully integrated service to job seekers/non job seekers. Staff also needed to work closer together in order to quickly establish a new WINZ culture.²³

The SSC commented favourably on the accelerated integration process in its Departmental Performance Assessment 1998/99, noting that "the changes to the business case have contributed to improved service delivery sooner than expected".

DWI has met its financial targets for integration. The original business case included total capital and one off costs of integration of $43.309 million, with downstream net benefits of $24.038 million per annum, once a steady state was reached.

A revised business case has recently been prepared to take account of changes in stakeholder expectations and changes to integration strategies resulting from the DWI strategic plan. This shows a marginal improvement in DWI's financial position over the original business case.

While there is no doubt that DWI has provided services more efficiently as a result of structural integration, there is debate about whether it has been more effective. The issue of effectiveness is discussed further below.

Performance Against the KPIs

DWI has developed its own Key Performance Indicator (KPI) framework with a range of indicators which cover:

• customer satisfaction;

• Maori customer group - percentage on the register, customer development activity and placements;

• benefit accuracy;

• benefit timeliness;

• customer plans - quantity and quality;

• customer development activity;

• placement composition;

• stable employment; and

• budget management.

The KPIs are based on a model that was introduced to Income Support (IS) in early 1997 following a restructuring of IS into fuctional business units. Key elements of the KPI approach are the inclusion of KPI targets in performance agreements for individual staff and a system of national and regional reporting in terms of the targets.

DWI's internal analysis indicates that it is meeting or exceeding most of its targets, except in the areas of customer plans and stable employment. Most trends are steady or improving. For example it has provided information to the review team showing that:

• performance against the Benefit Accuracy and Timeliness KPIs has shown a gradual improvement since 1997;

• the Customer Satisfaction KPI has remained steady with a noticeable dip around the August-November 1999 period;

• the KPI relating to the Quality of Customer Plans has shown a positive trend since its introduction in the latter months of IS;

• the Stable Employment KPI shows a falling away of results during the first half of 1998 and a complete absence of data due to information technology reporting capability for much of 1998. This occurred during the period when the KPI was the responsibility of NZES. Since the latter part of 1999 (when DWI was responsible for the KPI) there have been major improvement in performance; and

• Customer Development Activity and Placements KPIs show positive trends in recent times.

Performance Against the Purchase Agreement

The main external measure of performance is the extent to which DWI meets the requirements set out in its accountability documents including the purchase agreement, the chief executive's performance agreement and the Estimates of Expenditure.

The purchase agreement specifies:

• the outcomes and outputs being purchased from DWI in support of the Government's overarching goals and strategic priorities.

• the performance measures to be used to assess the delivery of those outputs (in terms of cost, quality, quantity and timeliness); and

• the activity monitors/indicators that are to be maintained.

DWI currently has very large output classes (for example $276 million for services to provide benefit entitlements and obligations to working age beneficiaries and to promote self sufficiency, and $210 million on services to minimise the duration of benefit dependency and unemployment and move people into work). Some departments have argued that there should be greater specification of outputs within the output classes to provide a basis for assessing the cost effectiveness of DWI's services.

The output classes and performance measures included in the purchase agreement are similar to those that applied to DSW and DoL before the establishment of DWI. At the time that DWI was established the Minister (Mr McCardle) rejected a closer specification of outputs because he wanted the department to have flexibility to decide on its own delivery approaches.

Performance measures related to DWI's income support role are transactional in nature (for example the accuracy and timeliness of benefits) and are only loosely related to the Government's overarching goals and strategic priorities. This partly reflects the fact that income support services are controlled by legislation and need to be delivered on a uniform basis throughout the country.

In contrast the employment measures are focussed on results rather than processes (for example the number of long term unemployed rather than the number of people participating in employment programmes). This reflects DoL's view that achievement of the Government's goals is the only appropriate measure of departmental performance.

DWI is required to report to the Minister quarterly and at the end of each year on its achievement in terms of the performance measures and activity monitors set out in the agreement. The comments on these reports provided to the Minister by MSP and DoL, in their role as purchase advisers, provide a useful perspective on DWI's performance in terms of its purchase agreement.

Income Support Performance. In its most recent report MSP notes that in the income support area DWI's performance has been satisfactory or more satisfactory against most measures: "Overall DWI has continued to meet all key performance measures and targets e.g. timeliness and accuracy and within its budget allocation."²⁴

MSP has recently raised the possibility of some performance measures in the income support area being "moved up" in the 2000/2001 Purchase Agreement, to establish higher expectations for DWI and reflect the fact that DWI appears to be having little difficulty in meeting existing targets.