1. Introduction
2. Methodology and format of report
3. Nature of the Review
4. The Nature of the Problem
5. Context and Scope of Decision-making

D. THE NATURE OF THE PROBLEM

4.1    As the submissions to this review show, and as our interviews have confirmed, the nature of the problem depends on one's perspective. The decisions that must now be made by Ministers are at a different level from those which will make it possible for staff to do their job. Nevertheless, because all the parties from Cabinet to Case Managers and their clients must work together to achieve the ultimate objectives of Government and the electorate, it is important to understand and deal with the issues at each level. This review is one attempt to do so: because of the complexity of the matters involved, however, other contributions will be necessary for balanced decisions and clarity of future directions.

4.2    On the face of it we are confronted with a paradox. On the one hand the organisation has achieved a great deal in a relatively short time, given the size of the task and the period of years normally required for a major restructuring of this kind to succeed. In broad terms these achievements were acknowledged by the previous Government which was responsible for the concept of the department, the policies on which it was based and the implementation framework during its first twelve months of existence. DWI has fulfilled its organisation integration goals before time and within budget, it has put together the largest government department in the country with extraordinarily difficult tasks to perform, it has introduced significant new policies and accepted additions to its responsibilities and it has done all this while covering the Government's main risk, namely the possible failure of the benefit system.

4.3    On the other hand, the organisation finds itself the object of severe criticism and ridicule around the country. In twelve months it has managed to alienate the public, parliamentarians, colleagues, clients and their advocates, tertiary students and university administrators, the media and members of its own staff. It is not surprising that Ministers have concerns as to the department's ability to implement their decisions. The cost of success has been very high indeed.

4.4    The Annexes to this report illustrate the criticism that has been levelled at the department. They also describe the formation process and attempt to reach a balanced view on the organisation's performance - it has met the organisational goals for the initial period but the principal employment policy objectives, the raison d'etre for DWI's existence, remain elusive. Some annexes deal with specific issues within the review's terms of reference.

4.5    But none of this material explains fully what has marred a potentially impressive performance. Some of the criticism was to have been expected as part of the teething problems of setting up such a large and sometimes unwieldy enterprise. Some of it has stemmed from the "shoot the messenger" syndrome: work first and benefit reductions are not universally popular. Some of it derives from disagreements during both the design and implementation phases which have yet to be settled and cannot be settled by DWI alone.

4.6    There is a great deal more to it than this, of course, but this review can only go part of the way in exploring the reasons for apparent failure. It has been made clear to us, as we have already pointed out, that certain matters are beyond our authority while others are not within our terms of reference. Ministers will need to take those other matters into account as well as those described in this report.

4.7    We have referred in a subsequent passage to the "unique" nature of the "experiment". Equally significant has been the political context. The welfare sector and its administration are at the heart of politics in this country. Nothing and no-one can escape criticism. While media attention has not been as unrelenting as it has been over the past year, welfare departments have always had to work within a highly politicized environment which generates constant criticism. From a media perspective, also, individual hardships (often arising from a few mistakes among hundreds of thousands of routine successes) generate human interest stories which support the journalists' central theme that inherently bureaucrats are bunglers. The special feature in the case of DWI was that the structural solution was a political solution. The department was not set up, as most are, to provide people and processes to implement whatever policies are directed to it: in this instance the department was the policy. It was natural, therefore, that it attracted political attention from the beginning being seen as the instrument of a particular point of view which was not accepted by many. Consequently any failure has been drawn on as evidence that DWI is flawed - in the eyes of some, fatally.

4.8    The department has not helped itself by continually adding to this volatile mixture, or, rather, by appearing not to be able to avoid mistakes. It can claim that a number of its errors were no worse and, in some cases, not as bad as those in other public sector organisations. But it cannot overcome the poor impression created by what seems to the public to be a series of mishaps. Perceptions have been formed from a regular diet of stories office fit-outs; the sale of personal information; the disastrous Wairakei affair; corporate activities such as mock weddings at managers' meetings; the pay-offs and resignations of staff; the problems first with student allowances and then, despite assurances to Parliament, with student loans. All of these, with the inexorability of Gresham's Law, have overshadowed the achievements and undermined the department's public credibility. It is to be hoped that the department has learned from this that it does not matter whether others have sinned more than it has or that others must share the responsibility for some of these things, it is inescapable that it is working in an environment where a reputation either for waste and extravagance or for systems failure will create so many difficulties and divert so much management attention that it will not be able to do its job properly. As much as anything the contrast between what is perceived to be carelessness with the taxpayers' money and the distressed circumstances of many of the department's clients, has raised doubts over appropriateness and thus of competence, which will take some time for DWI to dispel.

4.9    One aspect to consider in the light of the current Government's views is the corporate business culture which DWI has pursued - initially, the product both of the origins of the former Employment and Income Support Services and of the service delivery approach of the ITT. The current DWI management has added its own dimension to the original concept. Reference is often made to DWI "running one of the largest businesses in the country". One businessman has commented to us that a Government monopoly in facilitating transfer payments is not a business and that to portray itself as such is misleading - DWI has no competitors and therefore it has no "customers" because its clients have no choice.

4.10    There are other examples of the influence of the corporate culture. For the purposes of this discussion of the nature of the problem perhaps the most important is the "can do" style which typifies DWI's approach to problem solution. The upside of it is the drive to achieve and to overcome major obstacles. It took well-developed organisational skills and highly focused managers to put in place the full structural integration model and to implement work first and the community wage within DWI's first 18 months. The reverse side is the danger of over confidence, as would seem to have been partly the reason for the student allowances/student loans episodes, and the danger that staff will be put under such pressure that demotivation will lead to an inability to cope. "Can do" has also left the impression with others that DWI is insufficiently analytical when it is faced with problems and that it tends to say "just leave it with us and we'll get it done our way". Unfortunately, in the light of the matters already mentioned along with others such as the use of consultants, "our way" has become identified with the notion that "if you throw enough money at it, you'll solve it". In fact, DWI points to all the work it has done since the Wairakei incident to improve its financial controls, to tighten expenditure and to establish a probity programme. For our part we have noted in the annex on IT, the department's risk averse approach in that area. Nevertheless, DWI is still left with the problem that it takes considerable time to repair damage of this kind and it will have to prepare itself for the long haul of allowing observed changes in behaviour to speak for themselves.

4.11    One final point to be made in this definition of the problem which faces the Government arises from its wish that DWI become more departmental in its style. There are two aspects to this - one internal, the other external. Internally, the dominant culture, as described below, is that which derived from the Income Support Service and it tends to be process driven and prone to rigidity. If Ministers make decisions, which, for example, split the employment and benefit functions within the organisation, there will have to be a corresponding culture shift to encourage greater flexibility on the employment side. Moreover, the high performance culture DWI has encouraged has certainly improved productivity in some areas but it has created tensions and the organisation will need to be careful its demands on staff do not outstrip their capability.

4.12    The Review Team has discussed the matter of external relationships with DWI and while we both agree there is an urgent need to improve them, we differ considerably on the extent of the task and the cause of the problem. As we understand it DWI's view is that it is not inherently inwardly focused but it has been obliged by the need to concentrate all its efforts on achieving structural integration, to give priority to internal issues. This has been exacerbated by the diversion of management attention to deal with all the enquiries and reviews that have taken place (including this one). DWI can now see its way ahead to giving a higher priority to developing external relationships and has already begun to do so.

4.13    For our part we see the issue as more fundamental than this. It is a result both of the corporate business culture and of inexperience in what the rest of the country calls "the Wellington game". The corporate approach tends to emphasise the importance of the single organisation as it strives to compete in an unforgiving world. It stresses difference, taking charge of one's own destiny, a unique mission, vision and strategy - all of which are aimed at the bottom-line. There is less emphasis on collegiality, the collective interest and a shared set of values across many organisations, which are essential to the running of the Public Service.

4.14    In our view this has its genesis in the origins as well as the experience of senior managers - again an observation which DWI disputes. There is no doubt the senior management group can demonstrate considerable Public Service experience, including working with Ministers, but the majority of them came from the Income Support Service where they were not part of the policy making or government relations functions. This is not a criticism; it is simply the product of a particular career development path. Certainly, it is an issue which is apparent to DWI's colleagues in other departments. In our discussions with departmental chief executives they felt DWI had failed to recognise the need for external consultation, seeking advice from senior colleagues and building useful relationships with those who had had long experience in the political/constitutional/legal environment. Even sharper were their comments on the effect of DWI's mistakes. While acknowledging that in most cases they were not aware of all of the background and that the media were giving the issues a very high profile, chief executives were perturbed about the behaviour that appeared to give rise to the political and public criticism. There was real concern that this was reflecting very badly on the Public Service in general and that the management, credibility and political and public faith in the integrity of the Public Service was being badly damaged. It was felt that the "corporate style" was not appropriate in public sector management. This style was not seen as a necessary prerequisite to good programme delivery.