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

E. CONTEXT AND SCOPE OF DECISION-MAKING

5.1    In considering the mass of material presented to the review, one is struck by the complexity of the issues and the degree of difficulty confronting any government agency operating in the welfare and employment sectors. There is nothing new in this, DWI's predecessors were subject to similar pressures and encountered similar hostility at some periods in the past.

5.2    In DWI's case the ambitious nature of the experiment in attempting to bring together such disparate streams of activity has been complicated by the problems the organisation itself has created. Some of the mistakes were the inevitable accompaniment of trying to do too much too soon. Others have demonstrated lack of judgement and experience. For their part the public and political leaders have made it very clear that certain behaviours are unacceptable and DWI has gone some way to meet the criticism. More will be needed to restore public confidence. Whatever else remains to be done to achieve this, the time has come to look beyond the personal issues and to focus on the big picture. DWI has an essential role to play in a sector which is fundamental to the well-being of our society. All of us as citizens have an interest in the success of the organisation charged with such important responsibilities.

5.3    The matters on which Ministers must deliberate can be viewed at various levels. The development of new strategies to give effect to the Government's social policies will require further articulation at each of these levels so that public servants who have the task of implementing the new policies are in no doubt as to what is expected of them. Once Ministers have made the major policy and strategy decisions and indicated their preferred method of implementation, it will be the responsibility of chief executives and their senior managers to ensure these directions are understood and acted on throughout their departments. To ensure this hierarchical management process works there must be clarity of purpose and procedure at each level.

Government Policy

5.4    For several decades unemployment has been at the forefront of governmental concerns and a number of solutions have been attempted with varying degrees of success. At times the problem has seemed well nigh intractable.

5.5    The previous Government's policies were directed to developing individual responsibility and self-respect and with reducing both welfare dependence and welfare budgets. One means of achieving this was seen to lie in establishing a single process together with the appropriate structure to manage it, by means of which all the elements of the benefit and skill training systems could be brought together with those government functions responsible for the employment service, community work and community employment. The idea was that if all the relevant tools could be assembled in the one place the chances of solving the problem of long term unemployment could be maximised. The result was DWI and "work first".

5.6    The Minister of Social Services and Employment has indicated he wishes to move immediately to introduce certain elements of his Government's platform, the first five priorities being:

• resolving the role and placement of the Community Employment Group;
• increasing the employment focus of the department;
• introducing a number of service delivery developments arising from the beneficiary advocacy consultation process he has initiated;
• improving the department's services to Maori and Pacific peoples; and
• bringing about a culture change in DWI - a culture which would appropriately reflect the role and responsibilities of a core Public Service department and encourage collaboration and co-operation with other departments to achieve Government's objectives.

5.7    In order to ensure the best fit between the new policy objectives and any consequent modification of the existing organisation, Ministers will need to satisfy themselves the problem to be solved has been defined satisfactorily. At present, a number of initiatives are being explored. The danger is that pursuing each of these initiatives separately will result in a series of ad hoc decisions. In making decisions about new structures or procedures it is advisable that Ministers should reach consensus on welfare and labour market policies; the nature and extent of Government interventions; economic, social and financial implications; strategic and capability frameworks; preferred modus operandi and so on. It would be advisable also to get a handle on the implementation and resource issues. Already there have been discussions in Cabinet on these matters. The Minister of Social Services and Employment has gone some way in defining both the Government's social policies and his own expectations, in public statements and in directions to his officials. Other Ministers have also contributed to the clarification of the Government's position from the viewpoint of their portfolios. It would now be useful to bring all this material together into a cohesive and consistent document approved by Cabinet which is transparent to the public, to the stakeholder groups and to public sector officials whose job it is to implement the Government's new social policy directions. This does not need to be a massive task nor take months to complete. Past experience has shown, however, that time taken at the outset to provide a policy setting and clarify objectives leads to smoother implementation.

The Future of the Public Service

5.8    The Government has indicated that it wants to bring about changes in the Public Service as a whole. This is not the place to explore that issue in detail. The point to be made in this context is that it is the duty of the Public Service to serve the Ministers of the day to the best of their ability and with the utmost professionalism; to implement the policies of the Government in power, and to give objective, high quality advice freely and frankly. The Public Service must do this in accordance with the law, the prevailing constitutional conventions and Parliamentary procedures and the Public Service ethic as set out in the Acts of Parliament, Codes of Conduct, guidance from Cabinet and the State Services Commission and elsewhere. Within this framework a wide range of behaviours is possible and it is open to any Government to determine what these are to be during its term of office. As far as DWI is concerned it would value greater detail on how the general requirements that are to be laid on the Public Service should impart on its service delivery role and its daily operations with its clients.

Governance

5.9    The governance arrangements for DWI are more complex and demanding than they are for almost any other department. Ministers will recall that during the establishment phase the previous Government debated whether the desired employment/benefit process could be achieved more effectively through "virtual integration" (i.e. a unified process through co-located units still attached to their parent departments) or through full structural integration. Having decided on the latter (and also decided to include the whole of the benefit system and not just that part of it related to unemployment) the question arose as to whether the new organisation should be a Crown entity, based on a corporate business model, or a Government department.

5.10    In retrospect one has the impression that in deciding on the departmental option somehow the corporate business model became incorporated with it. (Certainly, corporate concepts of business practice, service delivery, branding and references to "customers" all pre-dated the establishment of DWI and the appointment of the chief executive). In a sense this was reinforced by the deliberate move to focus DWI on service delivery with limited policy functions, dependent on another Ministry for its IT and data management. In addition the dual MSP/DOL monitoring, purchase advice and performance evaluation process placed DWI in a unique position to which it has had some difficulty in adjusting.

5.11    The Responsible Minister in the previous Government (who has no objection to his view being recorded) remains convinced that the governance arrangements were appropriate in the context of his Government's policy objectives. He considers that it would not have been possible for DWI to have achieved so much in such a short time if it had not been driven hard along the service delivery track. Equally, it was his Government's clear preference to divorce DWI from a policy role (other than operational policy), to have separate purchase advice and, in view of its size and expenditure, to set up special monitoring arrangements - although the previous Minister has also observed that the monitoring and performance assessment arrangements could have become burdensome and it had been his intention, in due course, to concentrate them in the Ministry of Social Policy. In the event DWI had developed into a modern organisation which could have been a model to other Government agencies: he thought that the errors DWI had made had obscured its very real achievements.

5.12    There is no doubt, therefore, that the previous Government remained satisfied with the governance arrangements, involving DWI and other departments, and was generally happy with DWI's overall performance in its first year. This is not to say the previous Government condoned the department's mistakes; on the contrary they made their strong views known at the time. Nevertheless, it is probably fair to say that previous Ministers, being aware of the magnitude of the task and that it was likely to take at least 4 years before DWI would settle down, were more understanding than others of the pressures and the likelihood that errors would be committed. The important point is that the governance arrangements were seen by the previous Government as appropriate "within the context of its policy objectives." The question that will arise, once the current government has decided on its overall policy direction, which is likely to have a somewhat different emphasis, is whether the existing governance arrangements should remain in place. At the least it will be essential to clarify DWI's peculiar role as "solely a service delivery agency" and how the Government wants DWI to conduct its relationship with the two departments responsible for policy, purchase advice and performance assessment.

5.13    Without in any way reflecting on the integrity of the departments concerned, the question arises in the context of current evaluation theory and practice elsewhere, whether the same organisations should be responsible for both policy and purchase advice on the one hand and ex post performance assessment on the other. In this case, in the light of the major adjustments that are likely to be made and the continued uncertainty over the attainment of the principal policy objectives, it would make sense to confirm the current monitoring arrangements for the time being.

Organisation Design

5.14    The most interesting insight into the desired organising principle for DWI derives from the views of the Ministers, both the previous and current ones, and from the Cabinet paper which authorised the department's establishment and defined its two major objectives. In setting up DWI and in deliberately excluding it from a policy role (other than operational policy), the previous Government had it in mind that eventually DWI would become the State's principal delivery arm of social services and that the Ministers would provide the overall policy and purchase direction through MSP. It was for this reason that the Government passed the responsibility for student loans and allowances to DWI at such an early stage in its existence. The Government at that time was dissatisfied with the way the student schemes were being managed and satisfied that despite the risk of overload, DWI was the appropriate place for them.

5.15    The current Government, on the other hand, sees a more limited, albeit important, role for the department. The emphasis the new Government intends to place on economic development and the new structure it has set up for that purpose has meant that some of the activities which DWI has, or might have, undertaken at the local level might best be directed through the Ministry for Economic Development. The Minister of Social Services has indicated that this would refocus DWI on the task of managing part of the Government's investment in human capital development. The implication of this shift in emphasis needs to be worked through but it could have a significant effect on DWI's configuration and modus operandi.

5.16    Turning to the original Cabinet paper it is instructive to recall that the decision to establish DWI was taken in the context of a radical shift in employment policy and in the planning stage the organisation was referred to as the Integrated Employment Service. While the functions originally envisaged for the department included benefit reform and a contribution to "Strengthening Families", the emphasis was on minimising long-term unemployment and maximising community work.

5.17    In fact the largest proportion of DWI's core business is in paying benefits. (It is difficult to make a definitive calculation but one estimate puts the ratio at 30% employment placement/70% benefit related). Given that the performance of DWI was intended to emphasise employment placement it is little wonder that the systems which have driven performance management have produced some distortionary effects.

5.18    For example, the main service delivery model is based around case management and the relationship between case managers and work brokers. According to DWI this has proved a powerful tool, although its full potential has yet to be realised. Steps are in train to evaluate the model formally, following which it should be clearer as to what modifications are likely to enhance the delivery of the Government's outcomes.

5.19    Currently consideration is being given to going back, albeit within the one organisation, to the separation of income support and employment services. The majority of staff would prefer separation along the lines of work-tested and non work-tested clients. Whichever of these alternatives is preferred the problem of overload has to be solved. Further siphoning off the front end of the client base and reserving case management to be used in the most cost effective manner could be one way of doing it. Tied with greater specialisation and more flexible locally based work processes, the burden on case managers could be lifted while the difficulties over benefit entitlements and special needs grants could be relieved.

5.20    The first step in dealing with these process issues would be to recognise that the dominant part of DWI's core business is the payment of benefits and that the main risk to the Government would be an inability or failure to deliver that service - as the publicity over the student loan episode has amply demonstrated. It is likely that such a recognition of reality in any redesign of the organisation, following the reformulation of the policy framework, would also help to ameliorate some of the other difficulties encountered by staff including the mismatch, as they see it, between what performance areas are measured and what they actually do.

Staff Matters

5.21    It is clear from the summaries of submissions presented in this report that the staff have come under immense pressure to meet the demands placed on the organisation. It was always going to be a difficult task to bring together such disparate elements and forge them into a single purpose organisation of a kind which has few parallels internationally. From the outset there has been a consciousness that DWI would be breaking new and uncertain ground. The task has been made immeasurably greater by some of the events of the past 12 months which have shaken the public's confidence in the "experiment".

5.22    The effect on management and staff has been profound. The constant criticism, the strength of what are often personal attacks, the perception that DWI lacks support "from the system" and the continuous reviews have had a demoralising effect and strengthened the inward focus which was implicit in the corporate business model. It was clearly understood from the beginning that it would take at least four years for an organisation of this size and complexity to shake down into the seamless operation that was planned. The unfavourable publicity that has been the accompaniment of the past twelve months has complicated the transition phase. In order to assist the organisation to emerge from this difficult period and to move forward, it will be essential to listen carefully to what the staff and field managers have to say about their experience at the coal face.

5.23    As it has moved around the country the review team has been impressed with the quality of the staff and their dedication to the success of the department's policy objectives. Despite both the public battering they have had to endure and their current uncertainty as to what is now expected of them, there appears to be a general consensus (with some significant exceptions) that the "one stop shop", the range of interventions available to them and the case management approach and the close working relationship between case managers and work brokers have produced an environment which they claim has increased substantially their ability to achieve the objective of reducing the percentage of long term unemployed. The enthusiasm of staff who have been able to exploit the new opportunities and resolve difficult cases (some clients who have been out of work for up to 10 years are now back in stable employment) is in marked contrast to other staff who are weighed down by the case loads or by the immediacy of meeting pressing needs for benefit assistance and are unable to apply the "work first" philosophy. (It is necessary to distinguish between the staff enthusiasm for the service delivery model, which is not questioned, and the efficacy of the model, which is).

5.24    To a degree the "one stop shop" has become a "one stop person" in the sense that clients (other than superannuitants, invalid beneficiaries and those on special programmes like Compass) tend to be directed to a single case manager when greater specialisation and a team or cluster-based approach, together with other processes for groups with special requirements, might be more cost effective - and indeed this is already happening in some centres.

5.25    There is a call for much greater flexibility at regional and service centre levels so that local solutions can be tailored to local circumstances. The "one stop shop" should not be based on "one size fits all". For its part, DWI accepts the time is opportune to consider greater flexibility but would prefer to see it expressed within the service delivery model rather than as a series of separate processes.

5.26    "Multi-skilling", on which case management is currently founded is seen as an ideal but one which is difficult to attain. The complexity of the benefit system is such that staff estimate it takes up to two years to understand all its permutations. Taking into account the staff turnover rates of 13% overall it is evident that at any one time a substantial proportion of staff are not fully trained and require continual support. These turnover rates are not out of the way - the overall rate is in line with the Public Service average. But the implications of basing a substantial part of the operational model on multi-skilling need to be reconsidered.

5.27    Reinforcing this view of multi-skilling is the staff concern over training. The importance of training and the development of a range of skills to cope with the complexity of the task cannot be over-emphasized. There is already a huge investment in training - around $9 m annually or 6% of payroll - and it is not likely that further funding will be made available even if that were the answer. Listening to the comments of staff there would appear to be considerable scope for reviewing the training programme once Government has decided on its future policy and implementation frameworks.