Monday, May 31, 2010

Meaning of Australia English - two chances

Two chances is a popular Australian slang phrase. It is variously expressed as you've got two chances, you've got Buckley's or, in full, you've got two chances, Buckley's or none. The phrase means not a hope.

The phrase was probably Victorian in origin. Growing up in Northern NSW, I knew it but did not use it. Today, it's use wide spread.

Two different origins are generally given for the phrase, although other claims have been out forward.

The first and most widespread is that the phrase comes from the convict William Buckley. Buckley absconded from Port Phillip in 1803, living with the Aborigines until 1835. He captured the public imagination by surviving. If the phrase does link to this experience, then the meaning has been inverted, for Buckley did survive. Such inversion would fit with Australian culture.

Australian historian Russell Ward certainly believed this explanation, for that was the way he explained it to us in Australian History.

The second main explanation for the phrase is that it is rhyming slang drawn from the name of a popular Melbourne Department store, Buckley & Nunn

In exploring the origin of the phrase, Frederick Ludowyk notes that it does not appear to have come into common usage until the 1890s. Initially, it was written in inverted commas to mark the fact that it was slang Within ten years, the inverted commas had been dropped, making the phrase a normal part of the language.

The 1890s is very late for a term based on William Buckley's experiences. However, whatever the origin, the phrase is very Australian because of its ironical description of fate.    

Sunday, May 30, 2010

Sunday Essay - the university experience

In a comment, KVD wrote:

You recently said “too much politics” – to which one might add “and management” so, for a wet weekend I give you 101 Blog Post Titles.

The link David provided took me through to a set of exam papers from All Souls College, Oxford. I could see what David meant, but I couldn't help wondering what the questions were for. Some were very general, but in all they covered a remarkable range of topics. Further, they were clearly designed for long essays and took a form that I had not seen for many years - 'A lunatic is easily recognised. Sooner or later he brings up the Knights Templar' (Umberto  Eco). Discuss.

All this made me curious, so I started digging around.

Each Autumn, All Souls College elects two Examination Fellows from a field of fifty or so candidates. The Fellowships lasts for seven years and cannot be renewed. Examination Fellows are full members of the College's governing body, with a vote, a salary, free board and lodging, and various other benefits. The College pays the University fees of Examination Fellows who are studying for degrees at Oxford.

Some Fellows pursue academic careers. However, Fellows can also pursue careers outside Oxford. The College describes the academic stream in this way:

You get seven years of research in ideal conditions, in regular contact with leading scholars in your field, and free from many of the pressures, financial and otherwise, which can afflict graduate students. In seven years you might, for example, be able to complete a doctorate, turn it into a book, and then get started on another project. The College also encourages Fellows to get involved in University teaching. So, if you aim for an academic career, the College helps you get experience of tutorial teaching, and if you give lectures your salary is increased.

To get a Fellowship, you have to sit  four papers of three hours each. Two of these are in the chosen specialist subject – Classical Studies, Law, History, English Literature, Economics, Politics or Philosophy; the other two are general. Short-listed candidates have to undergo a viva. All Fellows can participate in the selection process.

As at  November 2009, All Souls had seventy-six Fellows, nine Visiting Fellows, and twenty-four Emeritus Fellows, whose continuing research the College actively supported. At that point, the College had fourteen Fellows of the British Academy (and a further sixteen amongst its Emeritus Fellows), four Fellows of the Royal Society, and one Nobel laureate. 

The College describes its Fellows in these terms:

Of the current Fellows, twenty-eight are academics entirely funded by All Souls (as Senior Research Fellows, Post-Doctoral Fellows, and Examination Fellows), seventeen are academics with Oxford University positions attached to All Souls, and the rest include academics at other universities, non-academics (e.g. barristers), former Fellows who have attained distinction in public life, and the College Chaplain and Bursars. The non-academic Fellows play an important part in the governance of the College and help connect academic and public life, notably in law, economics, politics and international relations.

In the very funny British TV series Yes Minister, Nigel Hawthorn played the role of Sir Humphrey Appleby, head of the Department of Administrative Affairs. Sir Humphrey read classics at the fictional Baillie College, Oxford. The on-going relationship between Sir Humphrey and his old college is one of the sub-themes in the series. On one side, Sir Humphrey seeks recognition, on the other side the College plays on the link. I thought of this when I read the College's description of its Fellows. 

All this carried me back into that past world before large classes, aptitude tests, short answers and group exercises came to dominate, the world of elite universities. Here David arguably had the opposite effect to that intended; this is territory I have travelled before!

I have written a fair bit about Australian universities with a focus on their life and culture and their place in Australian history. I do so because it interests me. This was the world in which I grew up, a different world from today. It was also a world in which universities and their academics were far more important than they are today.

Earlier I used the phrase "elite universities". That's true, because there were (and are) pecking orders among universities. However, I should probably have used the phrase universities for the elites.

Don Aitkin nominated the growth of mass secondary and tertiary education as the single most important Australian achievement of the last part of the Twentieth Century. I know what he means. When I first entered university, university education was already expanding rapidly. Still, even then, perhaps 5 per cent of young people attended university.

Paul Barratt's What a privilege it was ... provides a nostalgic look at those days through the prism set by our old university. Paul started in 1961 when there were just 600 on-campus undergraduates. By the time I started in 1963, there were 1,200. Paul points to the very low staff/student rations as a key element. I found the same.

At Oxford today, there are around 20,000 students, of which 11,766 are undergraduates. The University states that the tutorial is at the core of undergraduate teaching and learning at Oxford. It offers students a unique learning experience in which they meet regularly with their tutor, either on a one-to-one basis or with one or two other students.

In the US, Yale has around 11,250 students, of which 5,247 are undergraduate. Again, the student/staff experience is central.

By contrast to Oxford or Yale, many Australian universities are now very large. Sydney University has 47,775 students, the University of NSW close to 40,000. These are substantial cities in their own right, dominated by the constraints necessary to deliver mass education. The small tutorial groups that I knew and that were central to my university experience are rare. Close relations between staff and students no longer exist.

This post is not a plea for a return to the past, although I might argue for some elements of that. Rather, it represents an oddly nostalgic reaction to the All Souls exam papers. Clare MAHA cruise

Just at present, both my girls are at University here in Sydney, one at Macquarie, one at UNSW. Their experience confirms some of my prejudices, but also reminds me not to generalise too much.

The photo shows youngest on the Macquarie Ancient History Association Harbour cruise. I am not sure how many students there are at Macquarie, but it too is a very large university. However, within Macquarie Clare is getting a university experience that is closer to mine.

This partially reflects the girls' interests.

Clare has selected a minority course - Ancient History - where numbers are lower. She has been doing subjects - Middle Kingdom hieroglyphics and now Latin - that can hardly be described as main stream! Her Facebook name keeps changing and has now moved to Z (why not?) Clare Agrippina. Agrippina? Well, this was one strong if strange lady

  Helen is more organised.

To her, university is a means to an end. Working, playing and coaching netball, university is less central, something to pass though. However, this does not mean that she is less critical of the University experience than Clare. The opposite is true.

Both girls support their universities, although its a funny mixed thing. There is not the one-eyed support that you would and will get from me for the University of New England.

Clare, for example, is at Macquarie, but plays hockey goalie for a UNSW team and is a regular at the UNSW Circus group. Given her UNSW connections, members of the UNSW Circus group were expected to come to the Macquarie Ancient History Review and indeed some did. So you won't get criticism of UNSW.

With Helen, if I attack UNSW I get a defence. However, her own criticisms of the University are quite forensic. How does the place perform in terms of her own objectives and interests? Not always well, is the answer.

Two girls plus one father, three very different reactions.

In all this, the single thing that I would like to see in the current Australian university system is simply more variety. It's not just that student interests vary. Variety is also important because it allows for flexibility and experimentation. I don't think that we have this at present.

Saturday, May 29, 2010

Saturday Morning Musings - weekly round up

The Australian Government has been advertising inviting comments on the new draft national curricula. I haven't revisited this topic since Australia's new draft national curricula back in March.

I hadn't seen the proposed senior modern history curriculum before; I must say that my heart sank. It's over-laden with extraneous matters and suffers from selection bias. If I was advising a student who could do just one history in final years, I would suggest ancient. By the nature of the subject, there is more history, less current perception.

  I accept that I am not going to win this one, and indeed my heart isn't in it. It's just too hard.

One of the practical difficulties in writing history lies in the assumptions made about reader knowledge. If you look back at past histories, you can see that those writing in fact tacitly assumed certain levels of general knowledge among their readers. If you explicitly assume zero knowledge, then you face new challenges in deciding just how much information needs to be included to give the reader sufficient context. This is a constant issue in the writing that I do.

In February in Education and Australian skilled migration: a policy catastrophe? I mused about the impact of the changes in education and skilled migration rules on current students and Australia's export education sector.The current Australian Government cannot be blamed that the core problem emerged in the first place, although questions can be raised about the precise way the Government responded. Now the impact of the changes is starting to come through.

According to IDP chief executive Tony Pollock,international placements into Australia across IDP's network were down 37 per cent in April compared with a year ago, with current Indian demand almost wiped out. He said the Australian High Commissioner in India had told his staff there that the number of student visa applications it had on hand had crashed to just 200, compared with 8600 a year ago.

So far university student numbers have held up, with the decline concentrated in the vocational sector. Fifteen colleges have closed since the start of the year. According to Mr Pollack:

The government's desire to clean up the industry is entirely admirable, but they have made the changes so abrupt that there is little time for the kind of structural adjustment that is necessary in any big change of this nature, both for the students and the institutions.

Mr Pollack has a very specific interest in this one. Founded some forty years ago and now half owned by 38 universities, half by on-line recruitment firm Seek, IDP is the largest student placement organisation in Australia. IDP's business has clearly taken a hit. However, there was one thing that Mr Pollack said in passing that interested me; the decline in numbers in vocational and English language studies was likely to feed through to university numbers since these were feeder course.

I will continue to watch this one with interest.

The big floods continue to roll down the Darling River. There has apparently been some controversy (I couldn't re-find the link) about the volume of water that will finally reach the mouth of the Murray. The key problem is evaporation. The water takes so long to travel across the plains that a lot Bourke cotton field Aimee Volkofskyis lost.

In the meantime, the area around Bourke has its first cotton crop in three years. Bourke has become one  of Australia's poorest communities. The better seasonal conditions flows through into the local economy in a variety of ways, including the return of seasonal work.

There is no doubt that this is a funny mixed up country. If we just take climate and weather, there are so many little micro-climates. So in the midst of all the rain that has taken place, Bundarra near Armidale remains obdurately in drought.

Growing up in a cold area by Australian standards, I have always been fascinated by micro climates, including the way you can sometimes create them. However, that's another story!

Finally, I do love the way in which changing Australia keeps on throwing up its own funny little cultural micro-climate equivalents.

I have a friend who knows a lot of funny wog jokes. Now he can tell them because, as he puts it, he is a wog! I am not, so I cannot.

There is a rather fascinating description of the Australian use of the term on the ABC's Lingua Franca program. I mention this because one of the currently successful Australian films is The Kings of Mykonos: Wog Boy 2. I also mention it because youngest (Clare) had an interesting experience in a Sydney lift recently.

She was standing there listening to a conversation between two girls. Both felt that Chinese settling in Australia must be required to learn English. Now I have always been relaxed about this one. But if I were to argue this line, I could quickly find myself in a degree of trouble.

Now what struck Clare was that both girls were Chinese, both speaking with very Chinese English accents. I guess that both can say this and for the same reason that my friend can tell wog jokes, they are the thing that they are talking about.     

Friday, May 28, 2010

Victoria's fires - leadership, authority and responsibility

Back in February 2009, I wrote a number of posts on the disastrous Victorian bush fires.

Since I wrote, the official inquiry into the fires has been grinding away. Now on its last day, the focus has been on failures in leadership. You will get a feel for the coverage here, here, here and here.

At this point, Counsel Assisting is arguing that those at the top failed to provide leadership and that, consequently, the system failed. I would put it a little differently.

Based just on the little evidence I have heard, the system itself failed; failures in leadership were a symptom, not a cause of that failure.

I do not know to what degree systemic failure added to loss of life and property. No doubt the Commission will report on this in due course. However, the fact that the system failed is itself of obvious concern.

But why do I say that the system itself failed?

To begin with, we are dealing with a centralised system that appears to have suffered from two key weaknesses. First, there appears to have been a lack of definition in responsibilities, essentially who was responsible for what. Secondly, those a little further down the chain appear to have lacked the authority, or felt that they lacked the authority, to take action at critical points.

Here let me quote from  one story:

Police oversight was non-existent during the height of the fires, with Christine Nixon going out to dinner at a crucial time and her deputy, Kieran Walshe, unable to replace her until almost three hours later.

Political oversight was threadbare at best, with Police and Emergency Services Minister Bob Cameron absent from the Melbourne emergency control centre until 8pm. Those who were there, led by Country Fire Authority chief Russell Rees, were, in the words of Rush, "unable or unwilling to influence or attempt to influence the tragedy that was unfolding".

The first question to ask is what is the role of political oversight in an event like this?

This is a large scale operational matter. The role of ministers in these circumstances is to facilitate, to support. This is certainly a leadership function. However, if the presence of a minister is necessary to run the operation, to overcome problems, to coordinate, then it seems to me that you have a systemic problem.

The second question to ask is just who had final authority, who was responsible for what? The answer appears to be no-one. Again, this is a systemic problem.

Much of what I have written on administrative and management matters over the last few years has been concerned with what I see as inbuilt systemic weaknesses in current approaches to management, including the use of command and control systems. I know that this gets pretty boring from a reader perspective, but it is something I feel very strongly about.  

I would hope that in reporting, the Commission will focus not just on leadership issues, but on the actual system design features and on associated cultural aspects. I have put it in this way because the type of problems that appear to have occurred do not just happen, they develop with time. For example, why were people not prepared to act to get a warning out, in so doing to ignore chains of command?

Thursday, May 27, 2010

Regional traditions in Australian culture

Too much serious political stuff recently on this blog, at least for me!

Just at the moment I am wrestling with one of my periodic topics, the relationship between geography and life and the way we see the world. The trigger in this case is, as is often the case, my research into New England history.

I don't think that Australian history is especially well served by its focus on national history because it ignores variation. The cultural histories of Sydney and Melbourne, for example, are not the same. Both link to different social structures and patterns of life.

Why, for example, was the left stronger in cultural terms in Melbourne rather than Sydney, whereas the right was more dominant in political terms in Melbourne?

My feeling is that this links to the structure of society. Melbourne was more rigidly stratified than Sydney, making cultural activities a more important form of alternative expression. Yes, a gross generalisation I know, but one (I think) not without merit.

To the degree that Australian historians have been concerned with regional variation in cultural activities, their focus has been on differences between the main capital cities.

Perth, Adelaide, Sydney and Brisbane are very different cities, remarkably different if you stand back and consider them against a backdrop set by so much writing that presents Australia in terms of standard national trends or patterns. Still, the differences have been recognised and indeed play themselves out today in terms of, for example, tourism and city promotion. These promotional activities focus on and try to present differences.

Sydney may be ranked above Melbourne in international livability rankings, but pretty much everybody I know outside Melbourne ranks that city ahead of Sydney in lifestyle terms. It's a marketing triumph.

Outside the metros, there has been very little writing that I know of on regional cultural variation. Yet the work that I am doing on New England suggests the presence in this area at least of a distinct if varied cultural tradition.

Just to put a rough scale on this, I suspect that there are more literary works (fiction, poetry etc) being published each year by Armidale writers alone than the total Australian output of equivalent works seventy years ago.

The definition and analysis of cultural and especially literary traditions is a complicated business. It involves the identification of patterns that then themselves feed back into the tradition. The observer influences the observed.

Earlier New England historiography had a strong political, institutional and economic focus. There was very little such writing before the establishment of the New England University College in 1938. Those specifically New England histories were generally local celebrations; the jubilee of this, fifty years since that.

With the establishment of the College, local and regional histories began to expand through monographs, theses, articles and books. This writing peaked around the bicentenary and then went into decline as historical fashions shifted. By the 1990s, very little was being written.

Interest in New England cultural history first really emerged at the start of the eighties when Michael Sharkey and Julian Croft, both distinguished writers in their own right, started the basic process of documenting writers with New England connections. Both had political (ideological?) as well as literary reasons for so doing, for this was the time that the Armidale poets were attempting to establish themselves as a credible alternative voice to what they saw as the dominance in power as well as intellectual terms of the Sydney and especially Balmain push.

There was then a gap, before a renewed interest led by people such as John Ryan (Ryan had been writing throughout) and Alan Atkinson led to new writing. By 2006 when High Lean Country was published, sufficient time had passed that Julian Croft was able to reflect on the history of modern New England, especially Tablelands and Armidale, writing.

Julian pointed to two key themes.

The first was the writer in a new land. Some New England writers, Judith Wright is an example, had grown up there and in that sense wrote as an insider. To the degree that I can be classified as a writer, I do too. By contrast, many New England writers and especially those from Armidale were new arrivals. Their writing records their response to a new place.

The second was the the juxtaposition of the very different worlds of coast, tablelands and slopes and plains. Each influenced writing. However, the tablelands as what Julian calls the vestibule, a distinct world but also the point from which you could go east and west, forms a central unifying element.

I am at the stage now that I have sufficient knowledge to start capturing and building on the New England cultural tradition. I do wonder, however, just how much exists in other major regional areas that I know nothing about.

Wednesday, May 26, 2010

Problems with profits 2

Comments on Problems with profits were interesting, but left me feeling that I wasn't explaining myself very well. I wrote in the post:

I do have real problems, however, with one point you made, the idea of a constantly improving bottom line. I now question whether this is either a desirable or achievable business objective.

The problem here is in part one of definition. I am not saying that firms should not seek to improve performance and profits. Obviously individual managers do need to be aware of the impact of their activities on profitability, although many aren't. However, to my mind, the current mind-sets applied to profit have had some quite pernicious side-effects.

We live in a world of earnings guidance, of short term targets, of performance measurement and rewards against targets. All this just is, although I campaign against it. It's the effects that I am concerned with.

At the most macro-level, I made the point in my last post that when the totality of projected profits exceeded maximum potential profits, then shortfalls were inevitable. There is nothing especially profound in this statement. However, where the gap is a big one institutionalised through reporting arrangements, then the outcome can be instability.

To illustrate with an example, in the late eighties I was involved with the development and marketing of certain financial services. As part of this, I listened to strategic presentations to staff in the US setting out the firm's financial growth targets. The firm in question was an arm of a much bigger bank.

It all sounded wonderful. The problem was that most of the financial institutions were setting targets in the same way. These targets were then institutionalised in unit and personal targets linked to reward systems.

In theory, any one bank could achieve target by increasing market share. In practice, the total of bank targets exceeded what was possible by a substantial margin. The endeavour to maintain target led to some rather creative financial techniques that increased risk, led to a weakening of credit worthiness. This was not properly picked up the banks' internal control mechanisms. The outcome was the financial crash of the late eighties that almost brought the Australian banking system to its knees.

At the start of the period we are talking about, one of my favourite little books was called simply "How to double your profits without really trying." This is still a popular topic. A web search on "how to double your profits" generated 190,000 hits. Titles include: how to double your profits the easy way; how to double your profits by tweaking just two business levers; double your profits in twelve months or less; and so on.

The two core points in the book were that cost reduction flowed straight to the bottom line and therefore gave better results than sales increases; and that the most effective way of reducing costs came from a series of small improvements across cost functions. If your profit margin was 4%, a 1% reduction in a major cost item could have a significant bottom line impact. I liked the book because it was quite a simple language guide.

A fair bit of my professional consulting work has been with professional services firms. Prior to the introduction of more professional management techniques within professional services, it was possible to get very quick paybacks by applying the type of techniques set out in the book. Generally, the greatest gains came from proper time recording systems, thus capturing lost time; from action to improve the translation of WIP (work in progress) to billings; and from faster collection of billings. The first increased the productivity of the existing workforce (personnel payments are by far the biggest cost item in professional services) , the second two improved cash flow and reduced funding costs. The net result was a considerable increase in profit per equity partner. 

By the early 2000s, most of the low hanging fruit had been picked. Further, the costs of the new approaches were becoming clearer. Pressures on staff to maximise billable hours increased staff turnover, while also making it harder to get staff to do other things (marketing is an example). Clients were becoming increasingly concerned about the rising cost of professional advice and began looking for alternatives.

The problem was further complicated by the increasing move of some firms into new areas from the early 1980s in search of profits.

The collapse of Arthur Andersen in 2002 marked a new stage. Over the preceding fifteen or so years, Andersen had tripled the per share income of its partners. Tensions in the firm over the 1990s led to an acrimonious split with consulting partners who formed Accenture. Renamed just Andersen, Andersen moved back into consulting, but then hit the wall in the fall-out from the Enron collapse.

While Andersen is the most spectacular example of collapse, it has not been the only one.

This is not a history of professional services, nor of the structural changes continuing in areas such as accounting and law. Rather, my point is that while the focus on profit improvement did yield results, it also had costs. Profit improvement now involves new approaches, including questions such as the sustainability of profits.

Professional services, especially consulting services, is a leading economic indicator.

In the first months of 1990, the Australian market for business related professional services dropped by one third as businesses started to cut discretionary spend in the face of economic downturn. Business turned from soft consulting such as strategic advice to focus on services that would yield immediate cost reductions.

This was the period of process re-engineering, of retrenchments, of proliferating PIPS (profit improvement programs). New consulting firms emerged whose fees were based on a percentage of costs saved. We came to call them business destruction firms as a parody on cost reduction.

As an example, we had been working with one CEO pulling a major Australian firm together after a tumultuous period that had seen the company on the point of collapse.

The company's troubles dated back to that crazy period of Australian corporate activities especially in the second half of the 1980s. At one point, the company had a manager divestments attempting to sell businesses, while a manager acquisitions was attempting to buy businesses to fit with those the other was trying to sell!

Knowing that they were potentially all for sale, central cohesion collapsed as business units kept their heads down and focused on immediate survival. At our first-cross company marketing workshop, we found business unit CEOs and marketing managers exchanging cards because they had never met each other! We had been making progress, but the then CEO was persuaded to bring cost cutters into the biggest business unit to try to improve immediate profits. The results were bad.

Of course there are circumstances where retrenchment is necessary for company survival. However, the evidence appears to be that companies that restructure and retrench to improve immediate profits through reduced costs rarely achieve sustainable improvements. The problem lies not so much in restructuring costs, although these may be substantial, but in damage done to business culture and operations. A fair number of companies that restructure once need to do so again within two years.

I accept that this is a generalisation. However, it does fit with my personal professional experience.

One of the very interesting studies in this context can be found in Jim Collin's Good to Great. There they found (among other things) that the less performing group used lay-offs as a tool five times more frequently than the best performing group.

Where am I going in all this?

I started with a macro point, that the current focus on profit growth, or at least the form it took, was undeliverable in an aggregate sense and was likely to create instability. I used the banking example to illustrate this.

The subsequent discussion explored some of the implications of the profit focus through a prism set by my own experiences as a management adviser. In my next post, I will look at some further elements here, then set out the overall conclusions I reached.

Tuesday, May 25, 2010

Problems with profits

In a comment on Sunday Essay - threads in Belshaw thought, Ramana wrote:

 having been a professional manager with hands on experience of the planning process and facing the music for actual delivery, I am convinced that it is a total waste of time. The best that one can do in business is forecast for the short term to plan for needed resources, innovate as you go along and keep delivering a constantly improving bottom line.

I have a lot of sympathy with Ramana's position. However, in responding, I also said in part:

I do have real problems, however, with one point you made, the idea of a constantly improving bottom line. I now question whether this is either a desirable or achievable business objective.

I don't have time this morning for a proper post, but I did want to flag this issue.

Without going into full details at this point, my concerns can be summarised this way:

  1. Profit itself is not a clear cut concept. Leaving aside definitional issues, do we define profit as profit at a point or sustainable profit over time?
  2. Profit as a share of GDP fluctuates, but over time tends to grow around the rate of growth in GDP.
  3. In a competitive marketplace, above normal profits earned by particular firms tend to be eroded through competition.
  4. If, as is presently often the case, the sum of present and future profit projections by individual firms exceeds the total profit share by a significant margin, then it follows that the majority of firm's projected profits are unachievable. Worse, in trying to achieve them, they are likely to substitute short term gains for longer term profits.

To illustrate this, consider price/earnings ratios.

These used to be expressed in terms of the ratio between price and profits in the preceding period. I could understand this. The only judgement that I needed to make lay in a decision about the sustainability of past profits.

Now P/E ratios are based on projected profits. Since I know that profits as a whole must fall short of projections, it follows that the majority of P/E's will be wrong. They provide no guide at all.

See what I mean?    

Monday, May 24, 2010

Problem definition, ownership and the importance of consultation

While I am still working my way through the exploration of my own ideas now underway in Sunday Essay - threads in Belshaw thought, I wanted to point to two posts by Paul Barratt that I thought were interesting and quite important.

The first post, Afghanistan is a wicked problem, deals with the issue of problem classification, in this case in the context of Afghanistan.

Tim Russell, a wise colleague of mine, promotes the concept of problem ownership. He suggests that before you respond to a problem, you actually have to decide whether the problem is really yours. To his mind, people often try to respond to problems over which they are have not control and are not in fact theirs.

Part of Tim's message is that before you act on a problem, you have to actually analyse it. Paul's post links in that it deals with particular types of problems.

Paul's second post, Resource rent tax: what happened to the nemawashi?, deals with consultation processes.

Looking at Paul's Japanese comparison reminded me of something that I have tried to teach, using the difference between Australian and Japanese approaches as an example.

In Japan, I suggested, they spend a lot of time conceiving and defining the project, but then act fast. In Australia we act fast, but then have to spend lots of time fixing things up. My message was more thought, less problems and faster overall action.

Paul has had, I think, more consultation experience than me and at a higher level. However, his comments and especially his emphasis on proper consultation before action ring very true.

The most complex and indeed frightening consultations that I have been involved in involved the telecoms unions and the deregulation of the Australian telecoms marketplace. This was part of the process that I referred to in Case studies in public administration.

The immediate issue was possible changes to the protection afforded the manufacture of communications equipment in Australia. However, we knew that the whole telecommunications sector including services was facing major change. When I mentioned this at a meeting with the unions, Col Cooper as chair threatened a national strike!

To say that this scared me would be an understatement. There was no Government policy position. I was providing advice as to things that I thought were inevitable based on our analysis. We talked things through and matters calmed down.   Subsequently we got union compliance, if not support, for fundamental change.

My point here is the same one, I think, that Paul is making.

When you want to bring about change, in most cases you don't decide and then try to impose. You allow time and consult. You also do so at lower levels and in an iterative process. This allows issues to be worked out. Even if you are dealing with an issue on which total agreement is impossible, you will still generally get a better result.

Sunday, May 23, 2010

Sunday Essay - threads in Belshaw thought

This long post is a work in progress capturing some of the threads in my own thought. I am going to work on it and revise it over the next few days. Feel free to comment on it or to ask questions in the meantime.

In a comment on Are we what we read or hear?, my old friend and colleague Noric Dilanchian referred to Nassim Taleb's The Black Swan. I hadn't heard of the book, or indeed of Nassim Taleb.  That turns out to be a considerable gap in my knowledge.

It has been a little while since I provided any form of consolidated overview of my own thinking across areas. Because there are apparent similarities in my own thinking and that of Taleb, I thought that I might use him as a spark to provide a summary of the evolving thought and arguments that I have been developing.

I am not giving links to my own writing. I just want to get something down in brief form.

I first  became interested in the idea of culture and cultural change in studying prehistory. Here culture was defined in simple terms as nurture, not nature, all the things that were learned. Necessarily in pre-history, this had a material focus, but anthropological and sociological studies dealt with culture in a broader sense, including interactions between individuals and societies.

During this period I came in contact with what is now called mirroring, the way in which individuals or minority groups (in this case the Australian Aborigines) could come to reflect or mirror the attitudes held about them in the broader society.

You can see this today in the way I approach Aboriginal policy issues - I argue (among other things) that our focus on Aboriginal disadvantage and failures not only stigmatises Aboriginal and Torres Strait Islanders in the broader community, but feeds back into attitudes and perceptions within the Aboriginal community.    

Development economics also dealt with cultural issues. Some studies here had a mechanistic flavour, savings rates, production functions etc, but there was also broader writing.

Gunnar Myrdal's massive work Asian Drama: an Inquiry into the Poverty of Nations (1968) combined knowledge from a wide variety of fields in attempting to explain underdevelopment and possible responses. I read Myrdal with interest when the book was released, partly because I had met him (he was a friend of my father who was also a development economist), partly because I was very interested in the topic. While I was not sure of all elements in his argument it did provide an example of a holistic approach.  

Turning to other influences, in 1956 the economist Kenneth Boulding published The Image: Knowledge in Life and Society. The book explores the way humans use images - what I often call mental mud maps - to simplify and impose patterns on a complex and sometimes chaotic world. These images, symbols, are very powerful and are resistant to change even where external reality and the personal mud-maps diverge.

I first came across Boulding's ideas when I was trying to understand how a particular man thought, how those thoughts had been formed and how they interacted with the world around. Here I was concerned with both the thoughts, perceptions and indeed feelings of individuals and those of the groups to which they belonged. I was also concerned with the way our mental constructs changed over time.

At the time I was reading Boulding, I was also doing some exploratory reading in sociology for the same reason, just trying to understand what it said about culture, the structure and working of society and the processes of change.

Growing up in a small university city with its complicated and overlapping town/gown/country structures had made me very aware of, and interested in, social structures.  Later I had read Bradstow, Wild's pioneering 1974 study of Bowral with its detailed analysis of town working.

This was actually fun. Wild had disguised his town, so I was playing guess the town. This didn't take too long for anybody knowing country NSW as well as I did.  

I found the sociology I was now reading dissatisfying because so much of it seemed mechanistic; individuals and groups became puppets, their fates pre-determined by broader structures and forces. I could hardly accept this given my family background and personal experiences. However, I also discovered semiotics.

In simple terms, semiotics is concerned with the meaning of signs or symbols, the relationship between them and the things they signify, and the impact they have on the people that use them. Semiotics is concerned not just with the attachment of meaning, but the process of communications. The linkage with Boulding will be obvious.   

I wasn't trying to become an expert in semiotics, simply looking for ideas and logical structures. I was also feeding what I read through my own experiences as a political and community activist, as well as my historical research. I found semiotics satisfying because it provided a framework that helped me interpret and refine not just the use of symbols in history, but more practically my own use of symbols and language in trying to bring about change. 

My thinking here was also influence by two further writers.

In Future Shock (1970), Ivan Toffler explored the way in which change could overload our capacity to absorb - as the Wikipedia article puts it, future shock is a personal perception of "too much change in too short a period of time."  In writing, Toffler also coined the term information overload.

Thomas Kuhn's The Structure of Scientific Revolutions (1962) looks at the way one scientific paradigm (the term paradigm shift is Kuhn's) comes to be replaced by another. Initially the scientific status quo is defended fiercely. Then evidence mounts of things that cannot be explained by the current paradigm. Finally, a critical mass point is reached at which point the old paradigm is replaced by a new one that better explains the accumulated evidence.

Here Kuhn's ideas link to Boulding. In exploring the relationship between images and messages, Boulding suggests that messages may have three sorts of effects: the image may remain unaffected; the message may simply reinforce the image or add to it; or the image may undergo revolutionary change and reorganization. This is equivalent to Kuhn's paradigm shift.

The idea of discontinuity is central to the concept of paradigm shift, the replacement of one dominant view by another. When I argue that the 1970s were a shift decade in historical terms, I am in fact using Kuhn's framework, suggesting that this was the decade in which one set of paradigms was replaced by another.

When I first studied history, we were especially concerned with things like trends, patterns, processes. The idea of progress, one that I still think of as valid at a personal level, was both explicit and implicit. There was little focus on discontinuities in history. Yet it is also clear that fundamental change can happen quickly.

While we did not focus on discontinuities, we did address causation in the context of the philosophy of history.

Without going into the full course (I have covered this before), while we did accept causation, we were also strongly influenced by Karl Popper's 1957 book, the Poverty of Historicism. Looking at Popper's work in the context of the philosophy of science, we concluded that you could not prove, only disprove. Putting this in the frame used by Taleb, you could not verify, only invalidate.

This was not to deny causation, nor was it to suggest that you could not marshal evidence to support a position. Simply put, no matter what the evidence, you might be wrong.

Another aspect we looked was the difference between correlation and causation, drawing here from logic. If a followed b, this did not mean that a caused b. Further, just because a and b were found together, did not mean that they were in fact linked. Here my thinking was influenced by another writer.

In 1960 Walt Whitman Rostow published The Stages of Economic Growth: A Non-Communist Manifesto. Rostow's perception that economic development occurred in stages has been criticised on various grounds. However, the concept that I drew from it and have used to this day is that of pre-conditions.

Rostow's argument that a number of preconditions had to be met before sustained economic growth could occur struck me as intuitively plausible. Further, it linked to the discussion on causation and history.

To illustrate with an example from my recent writing.

David Drummond is often described as the founder of the University of New England and indeed in many ways he was. Without Drummond, there would be no university. However, Drummond's success depended on a whole series of previous actions that between them laid the groundwork, set the preconditions, including the existence of the New England New State Movement. Without them but with Drummond still present, there would be no university.

The University's foundation also depended on a series of random events of which two were to be of particular importance. One was Drummond's own arrival in Armidale, the second the presence of T R Forster who donated Booloominbah: without them, the University would not exist; both ended in the area by chance. So, in a very real sense, we can say that the University's existence depended on chance, the luck of the draw.

There is a lesson here for all those looking for certainty and simple solutions. They rarely exist!

Here I want to broaden the argument a little by looking at another element in my thinking, the influence of my professional experience.

Much of my working life whether as a policy adviser, a manager or a management  adviser has involved working in one way or another as a change agent. Much of this work has taken place in an organisational context. Inevitably, my academic research and my writing has fed into my professional work, my professional work back to other parts of my interests.

It is not possible to do my type of work without becoming aware of the importance of organisational culture, usually described in this context simply as the way we do things around here, nor is it possible to be unaware of the importance of stability to people's lives. The two are closely linked, for the organisation's culture becomes part of the fabric of people's lives. They become acculturated to particular ways of thinking and acting.

Now if you look back at the work of Boulding, Toffler and Kuhn, you can see why change within organisations can be so slow. People resist change because of the way it affects how they think and feel. Further, too frequent change can breed change weariness, Toffler's future shock. Worse, push too hard and  you may get a sudden and uncontrollable shift in perceptions within organisations that can actually destroy effectiveness or even the organisation itself.

As a change agent, I have found it relatively easy to get change through that broadly fits within organisational cultures, although even this can be difficult in modern command and control structures, something that I will come to in a moment. These incremental if sometimes substantial changes fit with people's mud maps, maybe altering them slightly. You may meet individual resistance, but organisational resistance itself is generally not a major barrier.

Pursuing fundamental change is far more difficult, for you actually have to bring about Kuhn's paradigm shift and do so without destroying the patient. Further, you cannot always be sure just what you will get. My own views here have shifted several times.

I first became interested in management theory because of my personal dissatisfaction with the way that the Commonwealth Public Service was administered rather than managed.

I found the work of Peter Drucker especially satisfying because he presented management as a profession, while also showing how longer term planning techniques could be used to improve organisational performance. Central to this was the idea of the futurity of current decisions.

Planning was all about process, a way that allowed you to take the future into account in current decision making. It followed from this that any plan itself - the written expression - was ephemeral, at best a semi-colon in a longer piece of writing. Forget this, and the plan would languish on the shelf or, worse, become an increasingly irrelevant straight jacket.

This approach fitted with the views I had formed about planning in the context of economic development. When I first looked at this, five year plans were all the vogue. The idea that Governments could plan effectively, the very idea of long term plans, was beginning to be challenged. My view was that the value of a longer term planning approach lay in the construction of an initial framework that could then be modified in the light of experience, a process of incremental refinement and improvement.            

My Master's degree brought me in contact with evolving theories of public administration, something that I had not studied before. This included an introduction to new approaches to budgeting and program management that were to become accepted thinking over the next two decades.

I said that my views had shifted several times. I became a strong supporter of the new approaches, melding Drucker's views with my thinking on public administration. I was also a strong supporter of the application of then new management approaches including standardisation, measurement and quality management. Then I started to change my mind.

This shift occurred in stages. For example, while I was already moving away from aspects of my previous views, in the late eighties I still became a strong supporter of what was called the New Zealand model, while advocating new approaches to risk management. The progressive shifts in my views reflected my own experiences.

I can best illustrate this by pointing to things that stand out in my mind as watershed moments.

The first is one that I have referred to before, the introduction of quarterly work plans and of agreed activities into the Department I was in, along with the creation of more centralised structures associated with the introduction of corporate models. This tempered my views about performance measurement and performance reporting because I found that it constrained my ability as a manager to be flexible and to do new things.

Then and secondly, by the second half of the eighties strategic planning had become de rigueur. Along with this came an emphasis on business plans and planning, something that was taken up with gusto both inside the public service and through industry development programs that funded small firms to prepare business plans. I found it increasingly difficult to get across the idea that planning was an on-going process.

By the early nineties, the countryside was littered with useless business plans. I saw a lot of these through my professional work.

A wise older businessman that I knew who specialised in technology development put it this way. By their nature, business plans are prospective. Yet you cannot know in advance how things will work. His advice to very small entrepreneurs with new product was to put the money that would have been spent on a business plan (the going rate for a basic plan was then around $15,000) into product development. This gives you the best chance of actually getting something to sell.

I am not opposed to business plans or business planning. However, they are just tools whose value depends on the circumstances.

At a personal professional level I have now been through three high main high technology booms: the electronics boom of the eighties; the following IT and communications boom; and then a little later the internet boom. During that time I dealt with hundreds of technology companies in one way or another . There was very little correlation between the business plans and ultimate company failure or success.

All this led me to question the very conceptual underpinnings and assumptions behind both the strategic and business planning process. For existing firms, the process actually locked them into the past. For new firms, the process did not aid commercial success.

I have run out of time for today. I have to cook lunch. I will continue this post later.

Saturday, May 22, 2010

Channel Seven - one step too far

There used to be an unwritten rule in the hurly-burly of Australian politics that private lives were off-limit.  This was observed by politicians and journalists alike, providing a clear division between public and private space to the mutual benefit of all.

This rule has been progressively eroded over time. This caused distress and commentary, but no one knew what to do about it. Now TV Channel Seven in Sydney appears to have gone one step too far.

For the benefit of international readers, Seven filmed a NSW Government Minister leaving a well known Gay club. It was well set up in a technical sense using multiple cameras. Upon being informed by the network that they would air the story that night, the Minister promptly resigned.

Bear with me if I don't give you details or links. For reasons that I will give in a moment, I regard this as a strictly private matter. 

The justification given by Seven was that Minister had misused his official car to go to the club, something that the NSW Premier referred to in accepting the resignation. I thought that that was very strange at the time because the Minister drove himself, while such cars have always been used in part as private vehicles. Now it has been confirmed that there was no misuse, that private use was allowed.

Channel Seven therefore appears to have fallen back on secondary justifications: the fact that the Minister had used a photo of his wife and children on Christmas Card proved that he was a hypocrite and therefore worthy of exposure; the fact that he had been Police Minister meant that his secret life exposed him to risk of blackmail in such a sensitive portfolio.

There is no evidence that the former Minister broke any laws. There is no evidence that I know of that his private behaviour in any way affected his ministerial performance. Even the Sydney Morning Herald, no friend of the Government, suggested that while his ministerial performance might be open to some general criticisms, the story had nothing to do with his official role.

There was almost universal criticism of the story from both sides of politics. The on-line opinion polls showed an overwhelming view that the story should not have been aired, a view that the Minister should not have resigned. These polls are not statistically valid, but are not a bad reflection of immediate public opinion.

For the first time that I have seen, other media outlets reported on past behaviour of one of those involved on the Channel Seven side. Essentially, if reporters and media outlets are to report in this way, then they can now expect similar return scrutiny.

In all, the story caused acute distress without, so far as I can see, a single public policy benefit.

I have written before on the problems created by this type of reporting - Why are we so hard on our politicians - and ourselves? is an example. I would like to think that in going one step too far, Channel Seven may in fact have created a reaction that will, to some degree at least redress the balance.   

Friday, May 21, 2010

Does Australia face a constitutional crisis?

I have watched the continuing machinations around the Rudd Government's proposed super mining tax with interest. Two important contributions are Treasury Secretary Ken Henry's post budget speech and a long and thoughtful speech by Ross Garnaut.

Ross Garnaut's speech refers in part to the impact of the tax on Commonwealth-State financial relations. A related issue is the doubts now raised about the constitutional validity of the tax. To my mind, we now have a potential constitutional crisis brewing of which the resource rent tax is only part. To understand this, we need to look at our present constitution.

Before going on, I should note my own position. I remain a supporter of a Federal system, but have always supported the idea of more states with greater flexibility in the re-distribution of powers between the centre and the states as needs change. I note my position only for reference. In this piece I am only concerned to scope the parameters of the emerging problem.  

Under our constitution, the Commonwealth has formal responsibility for certain activities, with the states responsible for the rest. In a formal sense, our structure has proved quite rigid. Long running attempts to subdivide existing states have so far been unsuccessful, while the Australian electorate has been resistant to any attempt to alter the constitution so far as Commonwealth-state powers are concerned.

While our formal structure has proved rigid, in practice the system has proved reasonably flexible if cumbersome. However, we may now be at a tipping point.

The functions that the states retain formal responsibility for include activities whose costs are growing quite rapidly. The states' tax base cannot support those functions.

At Federation, customs duties were seen as the main source of Commonwealth revenue, while the states relied on income tax. The effective transfer of income tax to the Commonwealth made the Commonwealth dominant financially.

Increasingly, state budgets came to depend upon Commonwealth payments. Increasingly, too, those payments came with strings. These were partially justified on public policy grounds, but increasingly reflected straight political arguments based on political dynamics at national level. State Governments were responsible to their voters, Commonwealth Governments to their voters, two very different dynamics.

The problems so created worked along two levels.

First, flexibility in state budgets was increasingly constrained, with the states retaining formal authority but without real responsibility. Secondly, to gain money, the states introduced new and extended existing taxes in those areas where they did retain power. These taxes were not only inadequate, but were also increasingly recognised as inefficient in national terms, distorting the operations of the economy.  

The introduction of the GST was intended to address what was called fiscal imbalance by giving the states access to a growth tax. It was also intended to replace a whole series of economically inefficient state taxes, thus enhancing national efficiency. From a state perspective, they gained revenue on one side, lost it on the other; the net effect was meant to be an enhancement in the states' revenue base.

The practical effects were a little different.

Since this was to be a state tax, you would think that each state would be given the GST revenue collected in that state. This did not happen. The distribution of GST revenue was treated in the same way as certain other payments to the states and allocated according to the principles laid down by the Commonwealth Grants Commission. This meant that the states gave up defined revenue sources, their taxes, for payments that were linked not so much to the GST collected in their state, but to total national collections and that varied from year to year.

The practical effect of this was that GST revenues did not give the states the degree of budget certainty that might have been expected, and also accentuated competition between the states. At the same time, first the Howard and then the Rudd Government continued the progressive extension of Commonwealth power into areas that were formally state domains.

In saying this, I am not saying that these extensions were necessarily wrong. I am concerned with the practical effects.

In a NSW context, I have suggested that the power of both the Treasury and Premier's & Cabinet has now become a serious drag upon that State's operating performance. However, I do understand the problems they face. Consider the position of a state treasury.

You are responsible to your minister who in turn is responsible to the Government and beyond that to Parliament and the people of the state. So you are dealing with a whole set of political and policy dynamics.

A significant proportion of your budget is fixed in terms of both revenues and activities because it comes tied in various ways from the Commonwealth. Here you have concerns along at least five dimensions:

  • in cashflow terms, you have to ensure that expenditure and Commonwealth payments match. This can be more easily said than done. One of the early criticisms of the school building program lay in a mismatch between receipts and spend. If expenditure is going to be greater than revenue at any point, you have to find cash from elsewhere to bridge the gap.
  • in performance terms, you have to ensure that the state and its agencies comply with funding terms. This adds state reporting requirements to the plethora of Commonwealth ones.
  • you have to take policy instability into account. Agreements can take time to negotiate and can vary greatly. In one small case that I was involved in in providing contact support to a state agency, I did nine cash flows over three months, including four in one month. All this was during a state budget round. I tried to set up the spread sheets so that I could create new ones by varying key assumptions, but policy fluidity invalidated the lot. Even when the agreement and any associated implementation plans are theoretically in place, they can be and are varied by unilateral Commonwealth decision.
  • you also have to take add-on costs into account. These come in all sorts of forms - matching spend; added overhead costs such as extra finance or other support staff; unseen program costs.
  • finally, you have to match spend to the assumptions and rules built into the Commonwealth support. The Commonwealth Auditor General's School Build report pointed to some of the problems that can arise her.

The higher the proportion of tied funds, the greater the real budget problems. In extreme cases, a significant proportion of the remaining discretionary funds is actually really committed because it is needed to manage problems created by Commonwealth funding mechanisms.

The resource rents tax may actually prove to be the straw that finally breaks the camel's back.

At a conceptual level, the Commonwealth argues that mining resources belong to the Australian people as a whole. It also argues, correctly, that existing state royalties are inefficient.

  The problem is that under the Australian constitution, mineral resources belong to the crown in right of the state in question. Putting this another way, WA resources belong not to all Australians, but to the people of WA. Further, mineral royalties are just about the only revenue growth area left to the states.

The Commonwealth could have handled the economic efficiency argument within the bounds of the existing constitution by saying that we will replace the existing royalty scheme with a new tax, but give the funds to the states on the basis of the tax collected in each state. Instead, it has grabbed for the golden egg, but attempted to accommodate the states by allowing for deductibility of existing royalty payments, in so doing putting a cap on the cash the states can get.

Leaving aside all the arguments for and against the tax in a general sense, I don't think that this is going to work. I have in mind WA in particular. It stood out against the Commonwealth on the GST. Now its recent state budget is centrally based on increases in WA mining royalties.

Even if some form of compromise can be found, it will still leave the general problem. At some point, the growing problems in Commonwealth-state financial problems will simply make the whole system unworkable.            

Thursday, May 20, 2010

Bangkok, prejudice and the importance of manners

The troubles in Bangkok left me feeling very sad, if also relieved that the girls were well back before the trouble escalated.

I have very fond memories of Bangkok because brother David and I stayed there for three months while Prof (we all called Dad Prof) was working for what was then ECAFE. In fact my parents lived in Bangkok for two yearly periods, the second while Dad was, I think, regional economist for the ILO.

Both times they stayed at the same serviced apartments. I spent a little while searching Google maps and think I located where the apartments were, but I need the precise street address to be sure. So much has changed, of course.

Upon our arrival, we received a lecture on Thai customs, what would now be called "cultural sensitivity training" but was then simply called good manners.

The military was everywhere. General Sarit had died three years before, but still cast a long shadow. With Thanom Kittikachorn as Prime Minister, the military remained in firm control. It wasn't just soldiers in the street, the presence here wasn't overwhelming most of the time, but rather a series of littler things such a military owned chain of petrol stations.

While in Bangkok we went to a large army organised birthday party as guests of the man who owned the apartments. My memory says that it was in honour of a man who had been 2ic to General Sarit. That's probably not quite right, but certainly it it was a big affair.

As we drove in, we passed a paddock full of Army trucks. Entering the area past the military guards, we found our table (the whole party was being held out-doors) near the stage. There were only a small number of Europeans present, perhaps eight in all including us. There was no wine as there probably would be now, but lots of bottles of Johnny Walker red label scotch.

I don't remember the food beyond enjoying it, while the speeches were in Thai and therefore largely passed me by. I do remember the entertainment.

The Army had brought down a group of traditional dancers from North Thailand. After the main dances and with much giggling, they asked Prof to dance. He hastily declined, but pointed to me. I had had enough scotch to relax my inhibitions, so joined the girls on the stage. I am not a naturally good dancer, and there was much hilarity as I tried to follow the girls' moves.

All this led to me being invited to join the official table. There I received a useful lesson. I was sat beside a man who turned out to be a minister, Education from memory, in the Thai Government. While I sat there drinking the official scotch - black label this time, not red - he explained to me that we were only there as a special favour to the man who had invited us. The Thais, he said, looked down on Europeans who would not normally be invited to a function such as this.

Memory is an imperfect beast when it comes to detail, much better when it comes to emotional content. I was only twenty.  My main reaction was one of interest, curiosity, even a little bit flattered that I was there.

Growing up, I hadn't really been personally conscious of ethnic, cultural or religious prejudice, beyond the great sectarian divide that scarred Australian society. It was there, of course, but I didn't see it. Certainly at UNE with its large number of Columbo Plan students there was no obvious racism.

It took that trip to give emotional content to prejudice, for I saw a fair bit of it.

In Singapore my brother and I spent a week with an Indian family. Our host was a university lecturer. During that week we were invited to spend the day with a very wealthy Chinese family, friends of my father from Bangkok. Our host was invited as well. The tensions between the family and our host were palpable.

In Taiping in Malaysia we stayed for a week with a Chinese family. Our host in this case was a former tutor of Prof's, a very nice man indeed who was now working for Inland Revenue. He arranged for two young men from his office, both Chinese who spoke good English, to show us around.

When you spend as much time day and night as we did with them, you get to talking. I learned a fair bit about relations between Chinese and Malays from a Chinese perspective.

This was a sensitive time.

Malaysia itself was formed in 1963. In August 1965, just five months before,300px-RAAFAvroLincolnMalaya1950 Singapore had left Malaysia. Confrontation, the undeclared war between Indonesia and the newly formed Malaysia, was in full swing. The Emergency, the war between the Government and the communist rebels, had finished in 1960 but would resume again in 1967.

I knew a fair bit about some of these things, partly because Australia had been actively involved and I had been interested in current affairs. The photo shows an Australian Avro Lincoln bomber dropping bombs on communist jungle targets in Malaya around 1950.

In addition to this interest, Aunt Helen had been a British Red Cross nurse in Malaya during the Emergency, driving to the kampongs to provide medical support. She fell in love with the country, and I had heard a lot about her experiences.     

The big Malaysian race riots of 1969 were still four years away. However, the concerns held by our new Chinese friends were very evident. Our discussions were not political. Rather, I was just interested in what made Malaysia tick. I was then, as I am now, insatiably curious.

I said that these various experiences gave emotional content to prejudice. However, my reactions would probably seem odd to modern Australians. You see, I didn't see prejudice as necessarily a good or bad thing, just something that was and needed to be understood.

I really didn't have a problem with a Thai perception that Europeans were inferior. In Malaysia, I could understand the desire of Malays not to become a minority in what they saw in their own country, while also sympathising with my Chinese friends.

Where I did have a problem lay in the way that prejudices created barriers. In Singapore, for example, the tensions between our Indian host and the Chinese family made me very uncomfortable indeed for it breached what I thought of as two fundamental principles.

The first was good manners. All societies, and the relationships between societies, are ruled by manners. In Thailand, David and I needed to respect Thai manners. I am not saying that we did it perfectly, just that we were aware of the need. If you invite some one to join you as a guest and they accept, then both guest and host need to observe conventions to maintain common civility.

The second was the Australian view that individuals need to be treated as individuals no matter what you think of the group that those individuals came from. I accept that this was, and is not, a universal Australian view. I am saying  that it was my perception of what I saw as a core Australian view.

Another thing that influenced me on this trip was my exposure to what I came to think of as the ugly Australian. By this I mean simply that some Australians I met, a very small minority I should add, were quite contemptuous of the need to adjust to the societies in which they were now living. They just didn't see it.

To finish with a final note on the Thais.

I already had positive views on the Thais from my direct contacts in Armidale. During that time in Bangkok I found them to be almost universally courteous and indeed kind. I came away with a great affection for Thailand and the ordinary Thai people. That remains.         

Wednesday, May 19, 2010

Autonomy and administrative load - the need for simplification

Yesterday's post, Case studies in public administration, took a very long time to write and I have continued musing over the issues.

When I first joined what I now think of as the old public service, my cohort used to complain that the class 11 (section head) kept the most interesting work and passed the rest to the class 9 who did likewise and redistributed the rest. There really was no management as such in the sense of consciously organising resources to get the best results.

When I did my Masters in Economics at ANU, I was part of the first intake in a new course specifically designed to meet public service requirements. I found the course very interesting because, among other reasons, I hadn't done any formal public administration. However, while the course included a range of conceptual material, there was again no management material as such.

All this got me interested in management as a discipline and I started reading books on the subject, including especially Peter Drucker's work. The end result was that when I did get into a position to "manage" and especially after I became a section head, I had formed views and lots of things that I wanted to try.

I now found an odd thing. The very things that I had complained about in the old system actually gave me very considerable freedom to do new things. So long as the work got processed, I could pretty much do what I liked. This included organising the work in such a way as to free up resources for longer term thinking. All this was, quite simply, fun.

Between then and now a couple of things have happened that have diminished real management autonomy. I just want to point to a few. In doing so, I have to be a little cautious because I really don't know the detail applying in all jurisdictions.

The first is the rise of what we can call administrative load. Managers today have to do a lot more administrative things than I had to do when I was a manager. They also have to do them in increasingly systematised and rigid ways.

Consider time sheets and flex time. Just as I became a manager, the old system of time books was replaced by flex time and time sheets. Initially this new system was quite flexible and took very little time to administer. I knew what my people were doing anyway, so simply organised things to be as flexible as possible. This included sometimes bending rules to take individual needs into account.

Today's computer based time systems are far more rigid and complicated. Management by exception is not possible, while there are many more rules - core time, maximum hours, banked time etc. Staff have to learn the rules and enter their time on line, managers have to check and approve. Checks exist to ensure that all this is done.

Say that you have five staff working for you. Checking and approving time sheets now takes between 25 minutes and 50 minutes per week, taking into account the inevitable problems that can arise. This may not sound like a lot, but it is dead time.

This is replicated across systems. It is now the manager's responsibility not just to approve leave, but to handle the processing. Whereas I used to just sign the form and send it off to HR, modern managers have to handle all the HR work themselves. In doing so, they also face more complicated leave rules than used to be the case.

Or consider recruitment. In developing a new area, I grew my staff from 4 to 37 over two years. That's quite a big recruitment load, bigger still if you consider that there was turnover as well during the period. I don't know that I could do this today, or at least not without taking a lot of time away from my primary role.

The recruitment dance has become quite stylised.

Position descriptions have become more complex. It used to take me perhaps two hours to revise or create a one page position description.

In a recent case where I was asked to do this, it took me a day. The multi-page position description then had to go for formal evaluation. So we have increased input and elapsed time.

In advertising positions, I used to prepare a short notice for the Government Gazette and send it to the HR people. If we were advertising outside it was a little more complex because I had to prepare the ad and then send it off, again to the HR people.

Today with computer based systems, and accepting that rules and structures vary between jurisdictions, there is a far more complex process. Without going into details, it took me over half a day input time just to arrange for the position that I am talking about to be advertised in the way we wanted.

The application process has become far more complex and stylised. Short applications have been replaced by far longer applications that must address selection criteria in detail. It is not unusual for managers now to essentially give staff a day of working time to prepare their application.

Job applications serve two purposes.

In the first instance, they are used to exclude candidates. If, for example, you want to interview 7 but have 70 applications, you have to get get rid of 63. More complicated applications don't help here. Worse still, the capacity to meet the formal application requirements becomes an exclusion factor in its own right. This works against candidates from outside.

In the second instance, the application guides questioning during interview. Again, you don't need long and complex applications.

Interviews themselves have become more stylised because of the rules. When I was first interviewing, the focus was on trying to find the best person. Questions of procedural fairness were there, but they were secondary. Of course interviewers are still concerned with getting the best person, but they have now to meet far more rules.

Once the interview has been completed, the consequent checks are far more complicated. I didn't have to worry about police reports, for example.

I am not saying that these things are necessarily wrong in their own right. I am saying that every extra hour a manager has to spend on administration is an hour that not available for that manager's primary role.

I spoke in my post, as I have done before, about the rise of activity based controls. Here I want to introduce a new point.

Cascading performance agreements with their activity focus create a fundamental conflict from the manager's perspective.

The reality is, as it was when I first became a manager, that a fair proportion of work is reactive, A problem comes up, you have to sort it. This holds at all management levels, but cascades down. My boss's problem becomes mine.

This creates an irreconcilable conflict with the standard performance agreement, for that deals with the defined. In theory, you can handle this by building in an allowance for the reactive. In practice, the total time associated with the defined actually exceeds real time available.

All this creates cynicism, especially when combined with project management approaches.

Activity x appears in my performance agreement. I may know that this is not a real activity or project to begin with, just something that appeals up the line. Alternatively, I may think that it is a real project, but I know that it holds up only so long as supported up the line. Then again, it may be real and important, but hard to deliver because reactive demands constantly conflict.

Let me try to illustrate all this with two examples.

The first involved a research task that had been around for some time. I was asked to do something on it. Everybody said that it was important, but nothing had happened. When I looked at it, I thought that there was something there, but previous approaches had been symbolic rather than real. So it kept slipping.

I did a position paper looking at options. This was not welcome: I had gone the wrong way; we just needed to get something done to get it off the list. I had no idea what to do next, so just let it slide. Two years later I believe that it is still on the area's to-do list.

The second is a major project, not one that I have mentioned before. I became project manager. As project manager, I dropped into to do mode. For a number of reasons, nothing happened. All the effort was wasted.

In this case, this is not a criticism of the hierarchy, simply an observation. Once it was defined, given formal status and announced by the minister, once it appeared in my performance agreement, then I had to act. I went to project meetings - this was part of a bigger complex of projects - and reported. I had to field questions on delay. Yet I was missing a fundamental point.

Because the approach was new, because many inter-related things had to be worked through, there was a fundamental conflict between my position and that of the Division Head.

She was constantly changing her position to work out the best overall approach, taking into account a broader range of factors. By contrast, I was meant to get the currently defined thing through.

Had I been more sensitive, had communication been better, I could have managed this. I might have been able to say something like, well if that's your position, this is the way we might handle this. Instead, I tried to deliver on what I had been tasked to do.

I may seem to have come a long way from my starting point. However, I guess in finishing I would make this point. If we are to improve the effectiveness of public administration in this country, we need to do at least two things:

  • We need to increase the autonomy and flexibility of managers
  • We need to reduce the administrative load on managers.

Tuesday, May 18, 2010

Case studies in public administration

Earlier Kangaroo Valley David had one of his usual thoughtful comments on my post,  Rupert Murdoch and the future of blogging. The comment dealt in part with blogging, in part with the reasons for policy failure. I discussed the first part of KVD's comments in A conversation on blogging. This morning I want to pursue the policy success and failure question.

KVD's Challenge

KVD wrote:

You said:

“my colleagues and I spent a fair bit of time looking at the reasons for policy failure: these start from failure to properly define the problem to be addressed; continue with failure to establish a proper nexus between the problem and the proposed responses; are compounded by failure to properly define the proposed responses; and then collapse because of inadequate delivery”

So, were there any worthwhile resulting changes in approach you can report? (The bolding is David's)

In responding, I thought that it might be helpful if I answered David's question by describing the work that we did, the successes and failures, as a case study. I have written on some of this before, and will link back to past posts as appropriate. It's an interesting case because we were trying to do new things and in a structured and sustained way. We also had a longer term perspective. Just as the problems that we were trying to address had their roots deep in the past, so the solutions would take a number of years to come into full effect.

The official records from the period I am talking about will not start appearing on the public record until 2013. However, it appears that some of the papers we wrote can still be found in Departmental libraries.

I have listed some of the known material at the end of the post. I don't guarantee to have all the dates and details right since I am working from memory. I am also writing from a personal perspective.

In a comment on the post I wrote on John Button's death, Bob Quiggin a former staff member wrote:

I suspect that the decline of the industry department was due to any number of things. Many of the senior management positions were filled by people simply not suited to task. I recall one Secretary of the Department bagging out the Government's industry program (that HE had administered for some years) before swanning off overseas on a diplomatic posting.

Button's star declined in the endless pushpull surrounding the Hawke Keating relationship.

And did I ever disagree with the way cars were seen as the primary business and everything else came second!

However, at the same time the Ministry was morphing. When I came, it was a hidebound monster whose employees' natural career progression was from being a bureaucratic protectionist to employment with a tariff agent. When I left, it had become a forward looking and dynamic department, at least for those times. That was very good.

The Belshavik days were fun, and you, Jim, were a such a pirate you should have come with an eyepatch and parrot. The words 'safe harbour' didn't carry much weight with you and sacred cows were served up roasted, with potatoes on the side. It was FUN.

This post is the story of those days.


Prior to 1972, responsibility for industry development rested with the Trade and Industry portfolio, the bailiwick of Country Party leaders John McEwen and then Doug Anthony. The Department was one of the two main Canberra power centres, rivaling Treasury for power.

With the election of the Whitlam Labor Government in 1972, the Department was split into two, Overseas Trade and Secondary Industry. In June 1974, the name of the Department of Secondary Industry was changed to Manufacturing Industry and then, from December 1975, to Industry and Commerce.

I joined the Department of Industry and Commerce from Treasury as Assistant Secretary, Economic Analysis Branch, at the end of 1979 with responsibility for advising the Minister (Sir Phillip Lynch), Department and Australian Manufacturing Council especially on macroeconomics, tax, finance and business regulation issues.

I found a somewhat insecure and shell-shocked Department heavily involved in the administration of a crazy patchwork quilt of industry support arrangements that had grown like topsy over preceding decades. Moves to open the economy up driven especially by Treasury and the Tariff Board (later Industry Assistance and then Productivity Commission) were gaining momentum, but industry policy was still set in a world of export oriented primary industries on one side, protected manufacturing and service industries serving a domestic marketplace on the other. I also found a dearth of new policy ideas. I gave one example here.     

In 1981 and 1982, I took two years leave to work on my PhD thesis. This was quite important because it gave me time to reflect, while I was also looking at some of the historical antecedents of the policy problems I had been dealing with.

In 1983 I rejoined the Department and was given responsibility for the creation of a new branch, the Electronics, Aerospace and Information Industries Branch. Aware that it had the majority of its resources tied up in old industries, the Department was looking to create a new focus on emerging and high technology industries.

Initially, there were just four staff mainly working on computer hardware issues. They included one Director, Michael Blake, a very shrewd operator whose skills meshed with mine and who was to play a very important role in early developments.

Over the next two years, the Branch grew to 37 with both policy and program responsibilities, including the IT and newly re-established national space programs. With subsequent splits and transfers of responsibilities, the areas within the Commonwealth that can be traced back, at least in part, to activities that we began now probably employ more staff across agencies than there were in the total Department of Industry and Commerce when I joined it. 

The rest of this post traces the rise and to a substantial degree fall of the policy approaches that we developed. I also point to some of the unforeseen side effects that have, to my mind, had adverse results.

Institutional Structures

To understand what we tried to do and how we worked, you need to understand something about the formal and informal institutional structures holding at the time. These were very different to those holding today.

We were working at a time of transition, of fluidity, from the old public service to current centralised command and control structures. In a sense, we had the best of both worlds.

At the start of the period I am talking about, I reported as an AS first to my Division Head, initially Don Fraser. Don was pretty busy and largely left me to my own devices.

I also had direct reporting to the Minister, something that I had fought for and jealously tried to maintain. This meant that, within broad boundaries, I had freedom in what I said and wrote, helped by the fact that with time I established a reputation as an expert.

As an AS, I also represented the Department at estimates hearings, Public Accounts Committee hearings and at various Caucus committee meetings. This included briefings to back-benchers. I was also totally responsible for what are now called communications and stakeholder matters. This included press liaison in my area, as well as relationships with unions, the ACTU and industry bodies.

Outside a very limited number of highly classified documents that had to be circulated by hand or which dealt with personnel matters, every minute going to the Minister was circulated across the SES. This meant that everybody saw what I wrote, I saw what everybody else wrote, including minutes from the Departmental Secretary and Deputy Secretaries.

Within the Department, the main formal coordinating body was the weekly First Assistant Secretaries' meetings. Marked by much swearing, this allowed for discussion of common issues and transmission of information. I attended enough of them in my FAS's absence to get a reasonable understanding as to what was going on.

We developed close relationships with the Minister and Minster's office. You will get a feel for this from the post I wrote on John Button's death: John Button - a personal memoir. I say we, because I consciously tried to build relationships between my people and the Minster's office.

I saw the Ministerial staffers as natural allies. Their role was to vet material from a political perspective, while I focused on policy, although in practice I had to be aware of political issues as well.

Each Departmental minute to the Minister was checked by a staffer before it went to the Minister. We made it a practice of fully briefing every new ministerial staffer concerned with our work, then keeping them fully in touch. They knew who was working on what, and could contact staff directly.

I travelled a fair bit with the Minister, accompanied him to meetings with other ministers, sat in on his meetings with others where relevant and indeed sometimes represented him at things like union or caucus meetings.

My known direct lines to the Minister and his office were central to my ability to get things done and I was not frightened to use them.

Outside the portfolio, we dealt with a wide range of agencies.

The Industry Assistance Commission, now Productivity Commission, was both a natural ally and a natural enemy. It was driven by the need to get rid of the crazy patch-work quilt of past industry assistance measures, something that I strongly supported. The IAC also provided a mechanism for review and subsequent submission to Cabinet. Importantly, the Minister submitting a matter to the IAC had responsibility for the subsequent Cabinet Submission, something that Treasury had been trying to change to increase its own control. However, the IAC was also suspicious of anything that smacked of industry assistance of any type and that included the new things that we were trying to do.

We also had to deal extensively with the central coordinating agencies - Treasury, Finance and Prime Minister and Cabinet.

PM&C was only starting to develop the Prime Ministerial control and coordination role that was to come to full flowering under the Howard and Rudd Governments. Its comments were important and sometimes helpful from our perspective, but not dominant.

Within PM&C, the Cabinet Office was very important because it controlled the flow of material to Cabinet for decision. Our planning had to take into account the processes and timelines laid down.

Further, other agencies and especially Treasury were not averse to interfering to try to get matters taken off, or blocked from going onto, Cabinet agendas. We had to get our Minister to intervene, or at least threaten intervention, on a number of occasions to block this.

Finally, our relationships with Treasury and, to a lesser degree Finance, were critical but simple. They would support anything we did that freed the economy up or reduced industry assistance, oppose anything that smacked of direct assistance.

This created a real asymmetry, because we were working to open our industry areas to competition on one side, while putting in place development arrangements that would aid the transition to internationally competitive growth.

In crude terms, Treasury really lived in a neoclassical world of perfect competition, we lived in a world of imperfect competition.

I remember one meeting at Treasury dealing with space policy that encapsulated the difference. Treasury had been playing a blocking role. In frustration, I asked Treasury's David Borthwick, someone I had known well and for a considerable period, was there in fact anything that we could say that would shift Treasury's views?

David kindly explained benefit-cost analysis. He was trying to be helpful. The problem was that the things that we were arguing, including dynamic interactions, were simply not very amenable to standard benefit cost analysis.

Treasury could not be ignored. As a former Treasury official, I had a high opinion of Treasury intellect, as well as the way that Treasury's coherent world view allowed real delegation. It was quite normal for a relatively junior Treasury official to represent the Department at meetings where everybody else was four levels higher.

As a relatively small group trying to do new things in opposition to Treasury, we had to develop alternative views that would not just allow us to challenge Treasury, but also give all our people the coherent common world view that would allow us to delegate. We would fail if everything became centralised on me.

Finally, policy change agents can be uncomfortable people to deal with. I was very lucky during the initial change period when we were at our most successful that I had very good top cover from Tom Hayes as Secretary, Deputy Secretary Alan Godfrey and my FAS. I had been appointed to do new things, and they backed me through some sometimes uncomfortable moments.        

Starting Assumptions

Policy development does not begin in a vacuum. We began our work with certain assumptions based on previous experience:

  1. Australian industry had to internationalise. The previous policy regime had created industry structures that were simply unsustainable. The economy had to be opened up to competition. 
  2. Australian industry did have an international future. One of our problems lay in the commonly held and very simplistic assumption that comparative advantage dictated that Australia's future lay in the export of primary and resource based exports. However, we did not accept that this meant that our future lay solely in these areas. The analysis I had already done showed that Australian international performance was abysmal measured against equivalent countries.   
  3. The importance of cultural change. To bring about industry development we had to change industry culture. Every time we discussed the need for Australian industry to look to international markets, we got a yes but response.
  4. An existing poor base. Reflecting Australia's overall performance and previous import substitution focus, many of the things required for international success were lacking. Australia's total exports of electronics, aerospace and information industries goods and services, then huge growth areas in world terms, were less than $A400 million and had been declining. Further, we had very little original product to sell because of the combination of multinational dominance with domestic market focus.
  5. The importance of time. Time was required to change industry attitudes, to develop new products and to build the international knowledge and networks required for international growth. Selective support was required to support this.
  6. The need for broad industry definitions. Previous approaches had been based on such narrowly defined industries, the room air conditioner industry was an example, that the policy instruments available to support development were effectively reduced to tariffs or bounties. Up to a point, the broader the industry definitions used, the more instruments were available.
  7. Work the percentages. Not all firms or indeed industry sub-sectors would survive the change process. What we needed was an approach that would ensure overall results across sectors. We couldn't prop up individual firms or sub-sectors.
  8. Integration. We needed to find a way of integrating policies and policy instruments that affected our sectors, given that most lay outside the portfolio.
  9. Intellectual and policy hostility. Driven in part by responses to previous policies as well as the prevailing neo-classical climate, there was considerable hostility in Canberra to anything that seemed to smack of support for individual sectors. This was phrased in terms that we regarded as simplistic and also dangerous because they failed to take into account history, market structures and dynamics, but it had to be addressed.

While these assumptions provided the framework for our thinking, they were not taken for granted, nor were they static. We tested them at weekly seminars, and through staff research. As part of this, we looked at the history of industry policy, at past assumptions, at past policy failures (there had been in fact very few successes defined in our terms).            

The Overall Policy Approach

When I began setting up the Branch, I found that one critical policy step had already been put in place,the decision to send a series of integrated references to the Industry Assistance Commission covering the whole electronics sector. The first reference on computer hardware had already been sent.

The decision was an important one because it provided a formal structure requiring Cabinet consideration.

I also found that the basic information required for effective policy development was simply not there. As an example, given my Treasury background with its filing system stretching back to Federation, I got registry to find every Departmental file connected with aerospace. There was not a single policy file. As I looked further, we had no information on even the most basic issues connected with industry structure, conduct and performance.

Taking these factors into account as well as our starting policy assumptions, we used the following policy development approach:

  1. Wide industry definition. We developed the widest definition for the electronics, aerospace and information industries that we could get away with, combining manufacturing and services all centred on the application of systems approaches. When Barry Jones became Minister for Science and Minster Assisting in 1974 following the Department's acquisition of science and technology responsibilities, we further extended reach into information policy. All this was not as easy as it sounds, because we were pushing into areas extending far beyond the Department's traditional manufacturing ambit.
  2. Research and policy analysis. We began a research program intended not just to gather information, but also to articulate and argue our policy approaches. This included Branch seminars and the publication of policy papers.
  3. Matrix approach.One of the simplest but most powerful things that we did lay in the development of what we came to call the matrix approach. We had a number of sectors within the electronics, aerospace and information industries all affected in different ways by a whole range of varying industry and market conditions, as well as different policies and programs. We listed all our various sectors along one axis, all the policies and programs across the other. We then analysed the various sectors on one side, the policies and programs on the other.
  4. Integration. Part of the power of the matrix approach lay in the way it assisted integration. For example, we would analyse the aerospace industry in terms of its performance (the vertical axis) and then analyse, say, Government procurement (the horizontal access) in terms of its impact across the various sectors within aerospace. With time, we knew the impact of procurement policies, or of education and training or R&D policies, across the whole very broad sector.This gave us quite remarkable power and reach for such a small group because we knew what we wanted and why in a whole variety of policy areas.
  5. Consultation. We used very extensive industry and stakeholder consultation processes, well in advance of what was then the norm. We used them to test ideas and as part of the process of changing attitudes and cultures. They were also genuine consultative processes. While we knew what we wanted in terms of broad objectives, we weren't (as is so often the case now) telling industry or others what to do on specifics. We wanted stakeholders including industry and unions to help define and test. This was absolutely critical in getting change through, and led to to some fascinating scenes, as for example, unions and industry associations gathered in breaks to try to work out common positions.
  6. Chunking.  Change takes time. From the beginning, we set up a rolling process that would take a number of years to complete. The various IAC inquiries alone required four years. Our thinking here was that we couldn't do everything at once, that we needed to focus on the most important first, then build in a mutually reinforcing way.
  7. Flexibility. We simply didn't know whether everything we had in mind would work. Further, we had to take into account the normal crises that occurred along the way. Importantly, and this was hard to get across, so long as we were in what we called the plus-plus field, it didn't  matter whether any policy or program was perfect because they could always be adjusted in the light of experience.
  8. Language. We deliberately used language and semantics as part of the change process. For example, we changed the name of what was then called the defence aircraft industry to the aerospace industry. The traditional defence aircraft industry's role was seen as meeting Australian defence needs, whereas the aerospace industry had an international focus.
  9. Selective Intervention. I don't know how to describe this one properly, beyond saying that we would intervene on a selective basis to get what we wanted. When, for example, we were setting up new industry advisory councils, we recommended those who we thought would advance the cause. So we recommended Lindsey Cattermole not just because she was a woman and we wanted female representation, but (and far more importantly) because she represented a new sector. Conversely, certain people who had been involved and who might have expected nomination were dropped. Again, in encouraging the creation of an Aerospace Industries Association, we told one resistant CEO that if his firm joined the new Association he could expect to be on the industry council, but otherwise not. I have given industry examples, but this happened inside Government as well.

Horizontal vs Vertical Policy Measures

I have already mentioned that there was a pre-supposition against Government intervention.

We actually supported this on both theoretical and practical grounds. The history of industry policy was littered with policy failures. However, there is a difference between outright rejection of all forms of intervention regardless and closely justified and targeted measures.

A more important distinction lay in the difference between so-called horizontal and vertical measures. I mention this one because it is still with us today.

If, the argument ran, there is to be a Government policy measure then it must be universal. Vertical measures, those targeting say an individual industry sector, were selective and wrong for that reason.

We took a different view. Our analysis showed that so-called horizontal measures had quite differential on-ground impacts because circumstances varied so much. By contrast, vertical measures were likely to have more uniform effects because they could be targeted to different circumstances. We summarised this in the catch phrase horizontal is vertical, vertical horizontal.

I said that this is still relevant today. If you look, for example, at my arguments on Indigenous policy, I assert that uniform national policies are bound to fail because they fail to take into account diversity in the Aboriginal condition.      

Policy Successes

The policy process I have been talking about had some remarkable successes, especially in the earlier period. Just to list a few; over four years:

  1. Aerospace Industry policy structure. We created the first ever policy statement to guide the development of the Australian aerospace industry as an international industry. This included the re-establishment of a National Space program, something that Minister Barry Jones had been pushing hard.
  2. Computer hardware. This one belongs to Michael Blake, with support from me. We got rid of all tariffs on computer hardware, giving Australians access to computing products at world prices. In their place, we got a bounty on locally produced computer products wherever used. This one was quite clever, for it meant that computers embedded in other products were eligible for bounty. Local production expanded quite quickly.
  3. Communications equipment. We reduced tariffs on telecommunications equipment, while beginning the process of freeing up the telecommunications services marketplace. We did this in spite of a threat at one point from the telecoms union to call a national strike. We also set in place a Communications Industry Development Strategy.
  4. Information Industries Strategy. Finally, we created a broader Information Industries Strategy that was to survive, if in an increasingly attenuated form, for the next decade.
  5. Exports. Exports of electronics, aerospace and information industries goods and services started growing rapidly. 

Beyond all this, we had a quite disproportionate influence relative to our size across a range of portfolios and policy instruments because we actually knew what we wanted to achieve. 

Policy Failures 

These are not inconsiderable successes for a lower level SES officer and his team. However, our failures as well as some of the unforeseen side effects of some of the things that we did are equally instructive.

I said earlier that we wanted to open up Australian industry while setting longer term development structures in place. We succeeded in the first, largely failed in the second.

Our policy failures and the reasons for them can be summarised in this way:

  Program budgeting. I have always been a supporter of program budgeting well done. Central to this is the effective integration of programs, activities and objectives. When program budgeting first came in, our activities across the whole electronics, aerospace and information industries were counted as a program. This gave us added control.

Then, at the direction of Finance, activities had to be broken up by sub-sectors, weakening integration.  Later, and after I left, programs came to reflect changing Departmental structures, actually a total no-no so far as the concept of program budgeting is concerned. The original integration was lost.

This is not an insignificant failure given that our approach depended on integration.

In all this, I made one important error. I recommended that my branch should be split into two - Information and Service Industries, Aerospace and Scientific Industries - because of load factors. While the split made sense, I simply did not take into account the impact it would have on policy integration across the two areas. This largely vanished and quite quickly.   

Performance measurement and key performance indicators. When the Branch was first completed, I set down in broad terms the activities we expected to carry out over four years. Beyond this, our approach had always been flexible and, to a degree, free wheeling. From 1986, we were expected to indicate what we would achieve on a quarterly basis in terms of activities. Now I had to worry not about our core objectives, but about just what I had specified at the start of the quarter.

I tried to make the point that what was important was not the detail of individual activities, but their relevance to our overall objectives. We had to be flexible. I really struggled to get this point across. The position today has become still more rigid because of the frequent presence of cascading performance agreements; achievement on one level depends on achievements at levels above and below. Since  short term performance measurement can only be expressed in activity terms, the practical effect is the lock-in of activities regardless of validity.    

Corporatisation. At the start of the period in question, I was responsible to my Minister on one side, my Division Head (First Assistant Secretary) on the other. I had to be aware of broad Departmental objectives and of reporting arrangements, I had to be aware that every minute I sent to the Minister was seen by all my SES colleagues, but I could focus on my core job.

With corporatisation, I now had to take into account more formalised Departmental objectives as well as the rise of the Departmental executive. Increasingly, my performance came to be seen not in terms of industry development (the mission I had been given), not in terms of my contribution to my Minister and his objectives, but in my compliance to internal Departmental requirements. Further, I had now to take into account a more centralised decision making structure. In some ways, this process was still in its early days when I left, but the trend was clear.

It was in this context that I suffered my first major policy defeat.

We were working on what would become the Communications Equipment Industry Development Strategy. To help in the second stage of the Strategy, growth based on new product, Telecom and the industry had suggested that the Government should create a product development fund that industry could bid for on a competitive basis.

The idea was a simple one. We had a largely multinational industry that had a protected marketplace through Telecom procurement policies. This had to go. However, we had very little locally developed product. Given lags in product development, we needed to encourage greater exports by existing overseas owned players, but then needed new local product to support second stage export growth. The new fund would assist that.

All this was reflected in the proposed Communications Industry Development strategy: with industry, we set a five year export target of  $400 million based on existing product; the next $400 million was to come from new product supported by the fund.

I had sold the idea to the Minister, but was facing fierce opposition from Treasury and Finance. In the meantime, Terry Hilsberg as the new head of the Department's Technology Division was actively promoting the idea of what would become AusIndustry, a single point of contact for industry for all Industry programs. We agreed with the idea of one-stop shopping, but were concerned about the impact on what we were trying to do. We also had a particular problem in that Terry was arguing that so many of the things that we had been working on for several years really belonged to Technology Division.  

One afternoon, Deputy Secretary Alan Godfrey came to see me to tell me that after discussions between Terry and the Executive, the Executive had agreed that the product development fund must be dropped. Instead, we were to rely on partnerships.

We had been looking at this issue for several years.

Under the then offsets program, overseas firms selling to the Australian Government were required to place work in Australia as an offset. The local representative of Boeing had been arguing that replacement of offsets by long term industry development arrangements would benefit both Australia and Boeing. In the meantime, Bob Mounic (CEO of the newly formed Information Industries Association) had been putting forward similar arguments on the computer side based around the concept of partnerships. We had a great deal of sympathy for both viewpoints, and had been working on implementation issues.

My problem with Terry's success in selling his idea to the Executive lay in my belief that it could not work. It was based on the computer industry and could not work in in the way he wanted in the very different circumstances of the communications equipment industry. Indeed it did not. We lost our one product development mechanism without putting anything effective in its place. 

I was faced with a direction, not a suggestion. I was on the fourth draft of the submission and burst into tears at the news. Alan took me to the pub and fed me Scotch. That did help, but it left us with a half-baked approach. It also marked the start of a more centralised approach.  

Return of the central coordinating agencies. The period in which I was most effective in policy terms was also the first period of the Hawke Government when, for a whole lot of reasons, the Canberra system was freed up. As time passed, the central coordinating agencies began to reassert their power.

This had a number of quite pernicious effects in blocking out new ideas, compounded by the way in which senior officials in agencies responded. Rightly or wrongly, I formed the view that our hierarchy had come to measure performance by the regard of their colleagues in the central coordinating agencies, not the achievement of specific Departmental policy objectives.    

Policy instability. Our whole policy process required both flexibility and stability. We had to be able to change things, but we also needed to give industry the certainty they required for decision processes where paybacks could take a number of years. Indeed, we actually mapped product development times for different types of products and systems. All of the things that I have been talking about made for increasing policy instability, as well as increasing rigidity.

Loss of the policy debate. One of the reasons why some of the things that we did were so successful is that we actually attempted to create an intellectual structure to challenge then conventional orthodoxy. Some of the ideas we developed foreshadowed later ideas, but we didn't win at the time.

Errors in personal judgement. I have referred to this one before in the context of the aerospace industry. For example, at a time when Minister Button wanted to go for an aerospace industry development fund, I recommended against because I thought that industry needed more time to change to get the best value from the money. That recommendation actually meant no money at all, because circumstances then changed. This was not my only error of judgement.

Loss of vision and fragmentation. With time, the original development vision became progressively eroded, altered by what were seen as practicalities and day to day concerns. Responsibility became fragmented across agencies.     

All this probably sounds very academic. But let me give you some numbers.

  1. In 1982-1983 our exports of electronic, aerospace and information industries goods and services, a global trade growth area, had dropped to less than $400 million.
  2. The policy development initiatives we were targeting saw potential export growth of more than $4 billion within ten years.
  3. Exports started to grow very rapidly with very little direct Government cash.
  4. Export growth then went in the opposite direction as policy changed. Today, we are talking about the same growth issues as we were in 1983.        

Unforeseen Policy Side Effects

Earlier I mentioned that our policy approach had some unforeseen side effects. This was directly linked to our approach in identifying and trying to integrate policies that affected the growth of the electronics, aerospace and information industries. Just two linked examples to illustrate my point.

Our industries required new product to grow. For that reason, we focused on the commercialisation of university research as one lever.

By the early 1990s, a number of us began to worry that we had gone too far, that the emphasis on commercialisation had begun to excessively outweigh other parts of the university role, including blue sky research and the pursuit of knowledge for its own sake.

In similar vein, the 1967 Information Industries Statement marked the first time that Commonwealth funding was allocated to specific discipline places at universities.

If we were to grow the sector, we had to have the skilled people available. We became impatient with the Commonwealth Education people who tried to argue a counter view, leaving allocation of places to universities. By the mid 2000s, the allocation of Commonwealth funding for specific types of places had become so pervasive that I was beginning to wonder if the cure was not worse than the disease. I dealt with this a little later in Australia's Universities - a personal Mea Culpa.  

Current Manifestations

I have tried in this now very long post to give you a feel for a past policy development process.

Talking to current Commonwealth and State public servants, there is a deep pessimism about the way the system now works. I want to finish by looking at this malaise.   

The combination of activity based performance based indicators with broader corporatisation has become quite pernicious. Whereas, within limits, we could do things fast and flexibly, current public servants face multiple decision levels with greatly reduced real delegation. A division head or group general manager has less real power to do things than I had.

Let me illustrate this with a real example from a year or so back.

I was doing some work back within part of the public service system. In this context, I was formally project managing the roll-out of a changed approach. This had been announced by the Minister with hard public deadlines. My job was to meet those deadlines.

A decision was taken that the communications aspects of the project were so sensitive that they had to be dealt with at Division Head level, with clearances up the line. Now as project manager I faced a problem in that there were multiple decision levels between me and the finalisation of what was meant to be a critical element of the project.  Further, decision timing now depended not just on the time availability of senior staff, but on the scheduled meeting dates of Divisional and Departmental executives.

I was still formally responsible for roll-out, but no longer had any control over a key element of the project. In addition, whichever way I cut the timing, I couldn't see how the internal decision processes (so much time for this, so much time for that, so much time to get a professional editor etc) could mesh with the hard deadlines required for delivery on time. Further, my attempts to make people focus on the problem were making me increasingly unpopular. 

  I am not sure that I handled the situation very well, because I am used to getting things done. However, I did get the project through. To do this, I kept as much as I could out of the formal decision system. For example, we had to re-write a major policy that had not been amended since 1999 because it was seen as too complicated. We formed a representative working group to do this, but did not seek formal approval for this. Instead, we simply asked for nominations. By the time the Divisional hierarchy began to focus on this element, we had a draft policy ready for consideration.

On the communications side, I did two things. I stated that since I had no control over the communications elements, I had to treat them as out of project scope. They would come when they came. However, to meet the required deadlines I used an element that I did control, a series of workshops, to meet the most pressing communications requirements.

I got the policy out, but at a cost. It was clear that I didn't fit and resigned from my role, staying only long enough to complete the first critical roll-out,

A little later, I was involved in providing contract support on the negotiation of a particular National Partnership Agreement. I won't go into the precise details for confidentiality reasons.

The word Partnership implies just that, partnership. In this case, the Commonwealth agency involved essentially laid things on the table and said take it or leave it. The state in question said hang on, you are ignoring the particular features in our jurisdiction. In the end, time was of the essence, there were political considerations involved, and the state involved signed on the basis that issues could be sorted out in the implementation plan.

Negotiation of the implementation plan dragged. Not only would the Commonwealth not move, but the wording of the agreement required Commonwealth approval down to the level of the individual investment. Further, the Commonwealth required a whole series of sub-plans that really fell in the seems like a good idea at the time class.

Negotiations dragged on.

In March 2009, I emailed a colleague saying can we at least authorise preliminary work? If not, I don't think that we can deliver. The answer was no, it's too risky.

By the time the implementation plan was finally signed several months later, the original build plan built into the agreement was no longer possible. There was a scramble to try to find ways to comply with the formal indicators built into the original agreement.  During the time the implementation plan was being finalised , the relevant Federal Minister actually rang the state counterpart to abuse that minister for non-performance, when the problem lay at the Federal level.

I am often critical of the states, but not in this case. From my perspective there were weaknesses in the state response, one was not saying to Canberra that the state would not sign, but the core problem lay in a rigid Canberra command and control national indicator based approach.


As a management consultant, I have often said that form should follow function. By this, I mean that structures should follow and be based on what needs to be done. The challenges that are involved in developing a new approach to industry policy are not the same as those involved in rolling out a national insulation program.

As a manager and adviser, I have tried to plead the case for simplicity, flexibility and delegation. Again, the approach to be adopted depends upon the circumstances. What we call fitness for purpose varies.

You will always get failures in any administrative or management system. That's a fact. The problem that we have now is that our complex systems guarantee failures even where those complexities are designed to reduce the chance of failure. 

A few publications                            

Towards a new approach to industry policy one: the policy development process, Department of Industry, Technology and Commerce Canberra, 1986

Towards a new approach to industry policy two, Historical background, Department of Industry, Technology and Commerce Canberra, 1986

Towards a new approach to industry Policy three, Theory and Concepts one, Department of Industry, Technology and Commerce Canberra, 1986

The Australian information, aerospace, industrial electronics and scientific industries : analysis of structure and performance, Department of Industry, Technology and Commerce, Information and Service Industries Branch, Working paper 9/86. Published as appendix v of the Joint Submission to the Committee of Review on Government High Technology Purchasing Arrangements, October 1986, pp 134-164

The Australian electronics industry 1987-1997, Department of Industry, Technology and Commerce, Information and Service Industries Branch, Canberra 1987