bout de papier, Vol. 16, No. 2 (1999) — Summer 1999 // Été 1999, pp. 20–25
At 03:59:46 AM Chatam Island time Saturday 1 January, 2000 the first rays of the millennium will be seen from atop Mount Hokipa, Chatam Island, New Zealand. Given the island’s unique location east of 180 east longitude but west of the International Date Line (GMT + 1245) the mountain will be illuminated earlier than even those Pacific islands which straddle the date line. The millennium will reach mainland New Zealand two hours ahead of Canberra, four hours ahead of Tokyo, twelve hours ahead of London and Paris and eighteen hours before Ottawa and Washington. The first light of the millennium in fact represents an apt analogy to the management of foreign policy around the globe. For each and every day New Zealand gets a head start on the rest of the world. To their credit they also remain well ahead.
There are important political reasons for this to have occurred. In 1984 New Zealand suffered the most severe financial crisis of any OECD member state prior to South Korea in 1997. A new Labour government on taking office found that the country’s foreign reserves and credit were exhausted. Drastic measures were called for to bring under control an economy and government which was so highly regulated and protectionist that New Zealand commentators in recent years, most notably Dr. Graham Scott who was Secretary of The Treasury throughout the period, have described it as akin to socialist Eastern Europe in its rigour and penetration of society. An assertive government supported by senior officials in the core ministries — Department of the Prime Minister, Treasury (Finance), and State Services Commission (Public Service Commission) set about remodelling the government in a totally revolutionary fashion.
Their goal was to establish the most efficient and cost effective system possible for the taxpayer. Fifteen years later this lean and clean system (some would say lean and mean but I would not agree) is still being fine tuned. Most importantly the major reforms of government process were placed in statutes by the Labour governments (1984-1990) and re-enforced by legislation introduced by National (conservative) governments (1990-present). The result is a comprehensive approach to effective management of government directed clearly from the political leadership throughout the bureaucracy for the best part of a generation. Unlike the many swings in government and civil service policy which we have seen in Canada in the same time period, New Zealand has set its course and stuck firmly to it. Of equal importance is the rigorous theoretical base on which the New Zealand model of government is based. Public Choice Theory, Agency Theory, Transaction Cost Analysis and New Public Management have each been woven into the fabric to produce a unique approach to governance. It is of interest to note that there is a consistent focus on economic theory and “best practice” business methods in managing government. New Zealand officials at all levels of government are well versed in these concepts and constantly involved in a lively debate with respect to their application.
How have the kiwis gone about this process? Can valid comparisons be drawn for Canada foreign policy management from their experience?
To begin a consideration of these questions we must first examine just how the Ministry of Foreign Affairs and Trade goes about the tasks of managing foreign policy and the personnel who are its principal input. The first issue to address is the “size thing.” Every Canadian I speak to about the New Zealand revolution always immediately says that it is mush easier for New Zealand because they are a small state. New Zealanders recall in mantra-like fashion at every international meeting that is a small country (3.7 million) with limited interests in the world. Canada, as we are quick to note is eight times as large (30 million) with a wider range of concerns. But, as anyone who has watched Wayne Gretzky or Theo Fleury play hockey knows full well, in the big leagues of hockey or diplomacy being small in stature demands greater not less talent from the individual. Colin Keating, New Zealand Ambassador to the United Nations during their recent Security Council tenure, put it succinctly when he told me “A small country such as new Zealand is unable to set the international agenda and must therefore extend linkages, take risks, and seize opportunities in order to have any influence.” What he is in fact saying is that New Zealand’s foreign ministry must be very well managed to be effective.
Managing Foreign Policy
How do they go about it? To begin with New Zealand has developed a very focussed, management-oriented planning process throughout government. In addition to the campaign manifestos of political parties (akin to the “Red Books” of the last two Canadian governments), and Speeches from the Throne (similar in both form and content in both countries), New Zealand governments establish, in accordance with legislation, a series of Strategic Result Areas or SRAs. These are an expression by the government of what it intends to accomplish over a three to five year time horizon in terms of outcomes. In a remarkable display of brevity the current SRA related to foreign policy read as follows:
Enhancing New Zealand’s position as a successful open and secure trading nation by strengthening economic linkages with international markets and countries and enhancing New Zealand’s overall security. Particular emphasis is to be placed on: a) Pursuing and enhancing the open international trading system and exploiting the successful outcome of the Uruguay Round, by addressing new forms of protectionism and moving key economic relationships to a new level;
b) Asserting New Zealand’s role in the wider Asia-Pacific region through bilateral and regional initiatives to create new regional trade and investment opportunities, and through active participation in regional security dialogue.
In addition to this strategic horizon drawn for the period of a government’s mandate, the entire cabinet meets each September at a “Premier’s House” session where the goals for the forthcoming twelve months are hammered out. These appear as the Key Result Areas (KRAs) for each department of government. KRAs are unique from two perspectives:
First, KRAs do not encompass the entire range of activity of the department. Rather they are expressions of particular areas of focus which are of particular interest to the minister in achieving his or her SRA goals.
Second, KRAs are accepted by the Secretary of Foreign Affairs, who is the Chief Executive of MFAT, as forming explicit links between departmental business and the government’s SRAs. The substance of this linkage is formally established through the annual Purchase Agreement which the Secretary enters into with the Minister on behalf of the Ministry (more on that later).
The KRAs for the Ministry of Foreign Affairs and Trade are few in number although broad in scope. For the most recent fiscal year (1998-1999) they are:
• pursuing and enhancing the open international trading system;
• moving key economic relationships to a new level;
• asserting a greater role for New Zealand in the wider Asia-Pacific region;
• building New Zealand’s reputation as a responsible international citizen;
• acting to support New Zealand’s interests in the environment and sustainable development;
• maintaining a cost-effective foreign relations capability and network.
It is of particular interest to observe within MFAT that KRAs are utilized to cut the cloth of the Ministry to fit the objectives of the government. By way of example, with a KRA which focuses on Asia-Pacific MFAT has decided that its presence in Africa, notwithstanding New Zealand’s status and seniority within the Commonwealth, is limited both in terms of representation and development assistance. The resulting savings have permitted a greater focus on the islands of the South Pacific where New Zealand’s influence is significant and its strategic interest paramount. Had MFAT continued to try to service both areas they would have been spread too thinly and been relatively ineffective in both regions. New Zealanders realise that to be effective managers, whether in a small state or a large one, they must pick the issues of real importance to a clearly defined national interest and pursue them with maximum vigour. To ensure that Ministers and Secretaries develop rigorous KRAs the State Services Commission, on behalf of the centre of government, has set out a series of assessment criteria for well specified KRAs which are:
• strategic alignment
• strategic consistency
• continuity
• focus on results, and • assessability
With the Key Result Areas identified, the Minister and his/her staff negotiate a Purchase Agreement with the Secretary of MFAT based on the latter’s role as Chief Executive of the Ministry. The Purchase Agreement stipulates a set of outputs which the Ministry undertakes to provide to the Minister on behalf of the Government for the year ahead. It is sufficiently broad to represent a thorough outline of the Ministry’s plan of work for each fiscal year. From the Purchase Agreement the Secretary’s personal Performance Agreement, which is contractual in nature, is developed. Neither of these documents is in the public domain because the former indicates the relative priority which New Zealand attaches to international relationships while the latter identifies the Chief Executive’s specific areas of focus. Unique to this process is the fact that renewal of the Secretary’s annual contract is based on successful completion of the outputs stipulated in the Purchase Agreement. This approach serves particularly to wonderfully focus the attention of the Secretary and the Ministry on the development and implementation of concrete outputs. Thus the Purchase Agreement process is not a shadow exercise but rather a concrete one.
By way of contrast, at DFAIT the Executive Committee established 15 Policy and Program Goals as near term objectives in September, 1998, not unlike New Zealand KRAs, but then amplified them with 44 Business Line Priorities which themselves are fleshed out by 106 Sub-Priorities. In this fashion everything DFAIT does has a place at the table but it is far from clear which issues represent the real departmental priorities. One is reminded of the sign on the desk of a naval officer I once worked for which read, “Everything is critically important except that which I am doing now which is more so.”
Central to the MFAT Purchase Agreement is the fact that the budget attached to each of the outputs is costed based on accrual accounting. This means that the real costs of production, including salaries, other personnel costs, operating costs, rentals and depreciation are fully accounted for as they are incurred and outlined on an annual basis. In addition, the Ministry pays a capital charge to Government in the order of 10% representing the return on capital investments such as chanceries and residences. The result is a realistic, close to commercial, operation conducted in real time. The contrast with the Canadian system could not be any more striking. Within Foreign Affairs and International Trade budgets, represented by reference levels, are renewed annually without review. All costs are presented on a cash basis which concentrates attention on short term expenditures rather than lifetime costs, leading to the natural tendency to develop programs with great appeal at the front end while ignoring lifetime costs in the certainty of the rotational world that the implementor will be long gone before their full impact is apparent. Without a capital charge component all monies coming into the department for use in capital investments appear as “free money.” There is no incentive to determine the most cost effective approach to issues in the long term or in coordinating within or between Groups of Bureaux which are intended to be our basic management unit. It is no exaggeration to observe that outside the Corporate Service branch DFAIT only noticed the impact of continually adding staff on headquarters capital asset base year after year when The Citizen ran an article observing that the department now rents one third of the office space at Ottawa City Hall!
To bring the New Zealand Key Result Areas into action MFAT produces an annual Operational Plan. This is developed on a coordinated basis for all missions overseas and each division at headquarters in Wellington. Output Classes which focus most specifically on bilateral and multilateral relations are used to set out unit objectives, action plans, performance indicators and resource allocation. Central to the process is the establishment of milestones which represent “lights along the way” in the achievement of KRAs. Milestones are reviewed every six months and “Areas of Risk” “, ie. significant changes which will have an impact on the direction of the Operational Plan, are reported to the Chief Executive and Minister quarterly. Thus the collapse of Asian economies or the onset of drought in Indonesia are not addressed solely from a crisis perspective. Rather MFAT within three months of the onset of a shift in the dynamic of a situation is considering how it will modify its profile with respect to that issue in the longer term both from a policy and resourcing perspective. As MFAT Secretary Richard Nottage describes the process “We always know that we will be blown off course somewhat each year. It is the continuous assessment and half-yearly reports which permit us to deal with the 20 per cent of our work which is unpredicted and unpredictable.” Just as Gretzky, when you watch him in the game, circles in anticipation of the action to “suddenly” appear behind the net picking up loose pucks and turning them into goals. DFAIT’s Business Planning system, to which my colleagues in SMR/SMP have devoted great effort, has only two planning cycles under our belts and a long way to go before it can be identified as a comprehensive planning tool.
Managing Human Resources
As every foreign ministry readily concedes, human resources is by far the principal asset in the achievement of its desired outputs. This is no less the case in New Zealand. In fact with a small staff of 600 in total (200 of whom are overseas) there is a particular premium on ensuring staff commitment to the delivery of consistently high quality foreign policy advice.
Central to the New Zealand approach to management is to make it clear to staff at all levels that senior management is in charge both in both senses — authority and responsibility.
At the apex of the structure the Secretary of the Ministry is the Chief Executive Officer. As described above the Secretary is personally responsible for the delivery of the Ministry Purchase Agreement upon which his/her salary is based. He or she has complete responsibility for the Ministry and its staff. The Secretary, rather than a central agency, hires, fires, negotiates salary and working conditions and has complete control of the budget. There is no extraneous third party as we find in Canada which prevents management from acting on improvements to FSDs nor upon whom management can slough off the blame when contract negotiations prove less than satisfactory. In return for assuming the large responsibility the Secretary receives a private sector compensation package. To prevent the “Deputy Minister for Life” syndrome which existed in pre-revolutionary New Zealand, Chief Executives can not be appointed for more than 5 years or receive more than one 3 year extension. Competition for senior positions is completely open. The Economist of 27 March-2 April 1999 had an advertisement on the world market for the successor to Mr. Nottage which neither restricts candidates to New Zealand government officials nor indeed New Zealanders. The most recent competition for positions at the Deputy Secretary level (ADM equivalent) included short-listing individuals from the private sector. While an outsider has yet to be appointed to MFAT senior management, it is but a question of time. Meanwhile a clear signal is sent that “lateral entry” is not just an approach taken for staffing junior positions. The Secretary and four Deputy Secretaries (DS). This group performs strategic planning and management functions but organizes itself in an interesting fashion. Rather than having a DS for each business line as we do in Canada, MEAT’s four DS’s are simply designated DS1-DS4. Their areas of overall responsibility are grouped according to the talents and backgrounds of individuals as well as the shifting burdens of workload. This approach naturally integrates geographical and functional interests as each DS has some of each and minimizes the turf wars which a “by the business line” approach creates.
Beneath the Deputy Secretary level the Assistant Deputy Secretary (Director General) has been eliminated. While this no doubt has created fierce competition amongst senior officers for scarce assignments it has devolved responsibility downwards. In the first instance Directors are generally more senior officers with significant ambassadorial experience. As such they have the trust of senior management which permits them to lead directly on major issues. For example, the Director of the South Pacific Division was the principle departmental negotiator working directly with the Minister on the extremely sensitive Papua New Guinea peace negotiations.
By virtue of employing Directors in substantive roles they do not spend their days editing the work of their Deputy Directors who in turn gain supervisory experience managing staff with the steady hand of experienced Director available as required.
Desk officers benefit from this real empowerment process as well. Recruit officers routinely “draft for final” and sign their own routine correspondence within four weeks of hiring. They both organize and participate in ministerial level travel during their first year on staff. As an exchange officer, the author was given full authority to negotiate and draft positions interdepartmentally and, with negotiating instructions that I had drafted, led New Zealand delegations at international meetings. The “delayering” of authority is remarkable and results in staff at all levels taking real responsibility for their work in the manner of a law firm where each individual operates as a professional.
The management of both foreign policy and human resources is captured in the personnel reporting process. Objectives are developed for all staff at the start of the year (no exceptions) and each staff member receives a written assessment at mid-year as well as year end (also no exceptions and no delays)! While everyone grumbles about the work involved it is clear that frequent reporting to established objectives is both easier to do for the reporting officer and more meaningful for staff. Rolling up the individual objectives also permits the creation of the milestones required for the Operational Plan. To ensure that the information flow regarding assessment permeates the system promotion board, decisions are ratified by the Senior Management Group at all levels, as is proposed in DFAIT for FS2 to EX1. Most importantly all officers’ rating and standing is conveyed back to the staff member through their Director. Once again individuals are required to assume responsibility for their standing while their managers must take responsibility for the impact of their rating reports. Finally, and critically for both the development of managers and early identification of those who seek to rise in the ranks at the expense of their own staff MFAT has a formalized “Upward Feedback” process through which staff are able to provide meaningful input on their immediate supervisor’s performance to that individual’s supervisor.
Conclusion — Working Hard to Make the Complex Easy
To the casual observer from outside the New Zealand Ministry of Foreign Affairs and Trade the system might well appear overly complex and impossible to implement when each and every day is filled with world crises and important work for the Minister. I for one arrived with great scepticism as to whether foreign policy could be subjected to the measurement schemes at the heart of the New Zealand model. But, having undertaken a study of “Foreign Policy Outputs — Measuring the Unmeasurable” as part of a Master’s of Public Policy program which I completed while on exchange with MFAT, I have been won over to the kiwi revolution. It is precisely because MFAT has developed a thorough management model which it implements with rigour and constant improvement that a foreign ministry which is small in stature can be highly effective in foreign policy while maintaining strong human resources at the same time. It follows once again from the Gretzky analogy as psychologists believe that Gretzky’s superior playmaking skill lies in his ability to see patterns where everyone else sees chaos and make plays based on his foresight, integrity and work ethic. The New Zealand Ministry of Foreign Affairs and Trade too works at identifying the emerging patterns of policy and developing the staff capable of responding effectively to the first rays of each foreign policy day as they strike the slopes of Mount Hokipa in order to retain its lead on the rest of the world.
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Originally published in bout de papier, Vol. 16, No. 2 (1999) — Summer 1999 // Été 1999, pp. 20–25. Read the rest of this issue →
