CPDS Home Contact Professionalism: Chronological Summary
Email 23/6/06

23 June 2006

Mr Mark Christenson,

Reforming Queensland's State Administration

I should like to offer feedback in relation to your recent suggestion about reforming Queensland's state administration on a 'corporate' / 'business-like' basis - because I suspect that this could aggravate (rather than reduce) existing deficiencies.

My interpretation of your article: For first time in a decade Queensland plans to spend over $10bn on infrastructure - and this is a good thing. The state budget is like a set of corporate accounts. There is a need to ask why Queensland has little debt - as this can be used productively? In the past states carried debt because they had no choice - but recently most have reduced debts rather than capitalizing on recent good times. Problems in transport, water and electricity has shown the need to consider the long term. There is a need to actually deliver on promises, and skills shortages are the biggest constraint. A more corporate philosophy should be developed in government. This doesn't mean adopting profit as only goal or ignoring non-financial measures of success or surrendering to the white shoe brigade. While other areas of the economy have had to cope with microeconomic reform, governments have been in a time warp. If Queensland Government was taken over, it would be restructured into something more efficient / responsive. Structure of public service business units is outdated, riddled with duplication / conflicting roles. A better model would give government a department of infrastructure which dealt with transport, energy and water holistically. Another key issue is one of core and non-core activities (ie what is it that a company should do or not do). As funds become tighter senior executives need to become more honest about core business. Tough questions need to be asked about whether it is in public interest for government to own electricity generation, fright railways, container ports and publishing businesses. Government needs to be more proactive and business-like - but taking on debt now seems more reactive than strategic. Premier and Treasurer need to be asking hat else needs to be done; what is core business; how is government best structured; and do internal capabilities exist to deliver (Christensen M. 'Bligh's bounty', Courier Mail, 7/6/06).

As I understand it you are suggesting (for example) that: government be restructured to be more efficient / responsive; a department of infrastructure be established; distinctions be made between core and non-core activities; and government should be more proactive and business-like - eg by taking on debt strategically.

Unfortunately simple 'corporate' (ie having a unified approach) and 'business-like' analogies are not a useful way to think about effective governance.

Rather than being in a 'time warp' where they were sheltered from micro-economic reform, governments have (inappropriately) been the main focus for such efforts. As argued in Review of National Competition Reforms: A Commentary, the result of this has been (a) micro-economic developments affecting the market economy which could have made a great difference to productivity have been neglected and (b) governments have become quite ineffectual.

In particular the adoption of pseudo-corporate models and 'business-like' methods (involving highly centralized strategic planning as well as corporatisation / commercialization) have been major factors in the loss of effectiveness of governments Australia-wide - see the Decay of Australian Public Administration: A Diagnosis.

The latter suggests that the core problem is that government is not like a business because its core function is to manage relationships that can't be coordinated through market / social relationships within the community. Moreover non-socialist governments tend mainly to be involved in providing goods and services in functions that are subject to market failures - and those intrinsic characteristics in government functions result in inefficiency and complexity no matter whether traditional administrative or pseudo 'commercial' / 'market' mechanisms are used.

In particular the shambles that exists in Queensland's public sector, to which your article referred, seems primarily to be the result of attempts (mainly but not only by the Goss administration) to apply pseudo-corporate and 'business-like' methods and of politicization of the Public Service to protect 'reformers' from hearing about the risks involved (see Queensland's Worst Government?). Centralization and politicization has created a system of government which has great difficulty in making decisions that take account of practical requirements, as illustrated by crises affecting electricity distribution and health (see Improving Public Sector Performance in Queensland; Intended Submission to Health System Royal Commission ; Failure in Queensland's Electricity Distribution Network )

Moreover the fragmentation of responsibility for infrastructure which resulted from commercialization / competitive service delivery / central planning / private participation has arguably been a major (though not the only) cause of the backlogs and problems that have arisen in infrastructure generally (see Defects in Infrastructure Planning and Delivery in Queensland). It seems to be anything but a good thing that the State Government has now launched into an heroic $10bn pa infrastructure program, because inadequacies in the machinery through which this must be managed suggests that disasters much like those apparently occurring in Victoria are probable.

Unfortunately the infrastructure problem can't now be fixed by putting all responsibility into a single agency as your article suggested, because infrastructure involves the capital component of many functions (eg water, health, transport) which each have non-capital dimensions. Separating the capital and non-capital components of those functions (ie by creating a department of infrastructure) would be an obstacle to holistic / integrated management of those functions. It is intrinsic to government functions that there are complex relationships involved - so simple-minded attempts by those who lack experience to boost efficiency in one respect are very likely to increase problems and inefficiency in other ways.

There is certainly a need for a competent evaluation of which activities governments should engage and for strategic use of debt. However it unlikely that Ministers and any clique of politically compliant 'senior' executives they install will on their own have enough knowledge and competence to properly judge such questions.

Reform now seems to require (a) serious professional accountability in the Public Service and (b) the establishment of machinery of government that more realistically takes account of the actual functions that governments have to perform (eg along the lines suggested in Improving Public Sector Performance in Queensland).

I would be interested in your reactions to my speculations.


John Craig

Reply (27/6/06) and Response Reply (27/6/06)

Thanks for your thoughts. Flat out at the moment, but my initial reaction: agree there is no simple answer to improving performance. That said, there are principles of the private sector “accountability” model which could be usefully applied to Government. It is true the key to public performance is relationship, but I would suggest this also holds for private.

In essence, the message from my article was about Government being more rigorous about asking what are we doing, why and how can we do it better. The structural and institutional change needed to promote such questions is probably an open question.

Response (28/6/06)

Thanks for feedback.

There is no doubt that public and private sector both deal primarily with relationships. However they are quite different. The private sector deals with direct relationships (ie between a firm and its customers / suppliers) which can be characterised as a 'market' relationship. Governments by contrast are responsible for influencing indirect relationships (ie those in which government itself is not a party such as between the community and the environment; or between different components in a transport system) which can be characterised as 'non-market' relationships. Bottom line results are relevant in coordinating market relationships in which parties seek to maximize their own benefits and don't have to worry about others too much because it can be assumed that they will also be trying to maximize their benefits. However financial calculations are of limited benefit in dealing with non-market relationships - which require that governments try to understand the interests of all parties in making judgments.

Needless to say if governments are structured and managed on a quasi-market basis, they must be seriously incapacitated in relation to carrying out their primary functions.

There undoubtedly are principles from private sector accountability that could be applied to government. The problem has been that sole focus has been placed on these at the expense of any serious consideration of principles of public sector accountability for at least 15 years. There has, for example, been no real requirement for professional accountability by 'senior' public servants or consideration of professional competencies in making 'senior' appointments - and thus the system has been unable to maintain a pool of relevant experience and knowledge.

The more general point in your article, about governments asking what they are doing and why, is undoubtedly valid. However because governments generally have given precedence to conies and 'yes-men' over professionals to provide them with policy advice and implementation support for so many years, I strongly doubt their ability now to credibly answer the questions you have posed.


John Craig

Reply (29/6/06) and Response Reply (29/6/06)

Not real sure about your direct/indirect relationship. The Premier and the CEO of a large company don’t have direct relationships with public/customers. The distinction I think you are trying to make is in terms of the product they deliver. For Government, it is often less tangible and harder to price because it is not a “thing” or competitive service.

Response (30/6/06)

The CEO of a company does not have any direct relationship with customers - but the company itself does. The distinctive / core function of government involves creating a (say legal) framework for relationships amongst individuals / organisations in the community (eg creating an industrial relations system, or developing the economy). This involves creating a framework for relationships in which neither the premier nor any part of any government organisation has any direct involvement at all. Involvement in functions in which there are 'customers' / clients (eg health / education services) is very much a secondary function of government. Though service-delivery activities now absorb a lot of public spending, it is government's primary (ie framework-creating) functions that are of most significance in terms of contributing to the welfare of the community - and thus these should be given most priority in organising government (eg by ensuring appropriate policy advisory competencies). Unfortunately this has been totally ignored for years while crazy efforts have been made to make governments 'business-like' on the naive assumption that this will have the same effect on service-delivery functions which are subject to significant market failures as it does in the private sector which deals with goods and services that are not subject to those complexities.

John Craig

Reply (30/6/06) and Response Reply (30/6/06)

The CEO of a company approves the creation of what amount to policy and procedures for determining how his  / her people interact with others (eg customers, each other, partners). The only difference is a state-based legal framework may be at a higher level and impact more people than for example, BHP's commercial policies and corporate norms, but the principle is the same.

Agree framework making is core function of Government, though I would argue its also the most important role of a corporate executive.

Response (30/6/06)

There is no doubt that 'framework making' should be the most important role of corporate executives - but this involves a different type of framework. The corporate executive is concerned primarily with the framework that directly affects his company. Though this involves external as well as internal arrangements (eg in terms of value chain management, or the tax / regulatory regime affecting the firm), the focus is quite different to government whose main emphasis should be on the community as a whole - and where success has to be judged in terms of others', rather than one's own, welfare.

The assumption that 'corporate' models and methods (which at best focus on social and economic sub-systems) is adequate for government is a major source of problems - especially in the Queensland / Australian environment where business has had a branch office / small business character and understanding of top-management's framework-making role has been virtually non-existent.

For example, for the past decade or so emphasis has been placed on improving the efficiency of specific service-delivery tasks using pseudo-corporate methods, rather than on whether the systems of which those tasks are part are effective. Failures in the latter respect have destroyed any gains attributable to the former. Similarly in the past Queensland has suffered from a 'major project' focus in trying to develop its economy - ie on dealing directly with individual 'things' rather than creating a framework in which business can succeed. The result was the rapid growth of a chronically low productivity economy. And, over the past decade, attempts to develop a framework in which business could succeed have continued to be amateurish because emphasis was placed on direct government 'assistance' to firms (which is the opposite of developing the economy - ie of the ability of firms to assist one another - see 'Queensland's Economic Strategy'

A 'society as a whole' emphasis of government seems to be quite explicitly recognized in the concept of government which has emerged in Europe under Roman law traditions whereby the state is considered to represent the community as a whole. And in a different way, influencing society as a whole seems much more directly the role of governments in East Asia as by-product of traditions and methods for problem solving (eg see 'Asia Literacy') that focus much more on relationships (ie wholes) than on 'things'.

John Craig