"A public service organisation differs from most other institutions to the extent that upon its integrity and performance public confidence in governments may rest. It is special because public service officials are entrusted with managing public funds and resources, and may act as defenders of constitutionality and probity in governance."
Introduction in Principles, Conventions and Practice Guidance Series (1995)
This paper outlines a framework for ethics in the administration of government to clarify the State Services Commission's (SSC) role, and the roles of departments and chief executives of public sector organisations. It also addresses the application of this framework to the wider State sector, which includes those bodies identified with government that are beyond the definition of the legal Crown. It defines roles and responsibilities, and proposes some steps that the SSC may wish to take to fulfil its role.
Part One of the paper establishes working definitions and explains the infrastructure that supports ethical conduct. It locates New Zealand's approach to the management of ethics within an international context, and considers the strengths and risks of a system that is highly devolved and results-based, with significant managerial autonomy, relying largely on the integrity of its participants and processes rather than the application of extensive rules and central control.
In Part Two, the paper describes the legislative environment and the key instruments of accountability that support an integrity approach.
Part Three describes four levers of influence that managers can call upon to influence ethical conduct. This is the core of the framework presented. A modular framework is proposed, which can be adapted to suit the nature, size, and purpose of organisations. It is applicable to departments and central agencies alike.
Part Four outlines the SSC's role in assisting the devolved management of ethics. It uses the modular framework to analyse the SSC's current work, and suggests that the SSC should be more active in the 'soft' elements of management to complement the 'hard' elements on which it has focused to date.
Finally, the paper looks at the application of the modular approach to departments and the Departmental Performance Assessment (DPA) system. This system is changing to take the future capability of departments into greater account. The modular framework addresses this by suggesting extensions to the DPA's present focus on organisational integrity.
Part One: Introduction
"Those unhappy people were proposing schemes for persuading monarchs to choose favourites upon the score of their wisdom, capacity and virtue; of teaching ministers to consult the public good; of rewarding merit, great abilities and eminent services; of instructing princes to know their true interest by placing it on the same foundation with that of their people; of choosing for employment persons qualified to exercise them; with many other wild chimeras, that never entered before into the heart of man to conceive, and confirmed in me the old observation, that there is nothing so extravagant and irrational which some philosophers have not maintained for truth."
Jonathan Swift, Gulliver's Travels
1 The introductory section (Part One), draws heavily from the OECD/PUMA Paper No.14: Ethics in the Public Service, 1996, and on material in the Introduction to the Principles, Conventions and Practice Guidance Series.
The changing environment
The New Zealand Public Service has changed significantly over the last two decades. This has followed the changes in the role of the State from doing and controlling things itself, to enabling other parts of society and the economy to do those things themselves.
The formation of State Owned Enterprises (SOEs), and the alignment of agencies' objectives, particularly the separation of policy advice from service delivery, has fundamentally altered the Public Service's functions, size and structure. In 1984 the Service employed some 86,000 permanent staff and was dominated by a dozen large, multi-functional departments, some with long histories. Now it employs fewer than 33,000 employees, with only a handful of large departments.
A number of agencies have been created that are ancillary to the core State. There are more than 3000 Crown Entities, which creates a substantial challenge to one of the overarching purposes of the State Sector Act 1988 - imbuing employees with "the spirit of service to the community". An increasing number of the employees in these organisations have a limited background in the Public Service and their knowledge of the constitution and conventions of government is weak.
The last two decades has also seen unprecedented structural change. Sixteen departments have been through substantial restructuring, and eight are undergoing fundamental structural change in 1998. The SSC estimate that, at any point in time, approximately 25 percent of the State sector is undergoing restructuring. The impact on institutional knowledge and expertise is considerable.
Information technology and the communication revolution is also altering organisational cultures. Large numbers of public servants have immediate desk-top access to people all over the globe, and to almost infinite resources of information. There is no certainty that the conventions and controls of the old, paper-based system have been replicated for the information technology-based system. This adds to the management challenge of maintaining an ethical Public Service.
A new employment dynamic has replaced the life-long Public Service career. Service incentives such as the Government Superannuation Fund, and regular career rotation between departments made possible by homogenous conditions of service, are no longer available. The loyalty engendered in the old Public Service is not so easily created in the more competitive labour market of the State Sector Act 1988, and the Employment Contracts Act 1991.
This is not to hark back to the old career Public Service, which also had many down sides characterised (though sometimes caricatured) by conservatism and risk aversity. New Zealand's reforms have greatly improved public management and organisational responsiveness. But it does recognise that loyalty is significantly more at risk in a devolved environment with its many semi-autonomous bodies.
In summary: The cumulative effect of the changes in the last two decades has developed a different culture in the Public Service, which reflects the wider range of institutions with their own organisational values, and the large number of individual employment contracts, particularly at the management level. The requirements of ethical conduct may not have altered, but the discretion of public officials has increased. This makes it important that the particular characteristics and responsibilities of 'public service' in the new environment be considered and, where necessary, reaffirmed. 2
2 A point highlighted by several high profile cases of failure of responsibility in the last decade, which a number of senior public servants and parliamentary officers consider to have had profound impact on public perception.
Values, ethics and conduct - the definitions
The terms 'values', 'ethics', 'integrity' and 'conduct' are often used interchangeably, and uncertain language is one of the barriers to establishing a widely understood framework for ethics. For the purposes of this paper, the following definitions will apply:
- ethics - what ought to be; the ideals of what is just, good and proper;
- values - the commonly held beliefs that guide judgement about what is good and proper, and from which ethical principles derive;
- integrity - normally one of the key ethical values; but also used in the current Departmental Performance Assessment as synonymous with a departmental framework for ethics (see Part Five);
- codes of conduct - the rules that translate ideals and values into everyday practice; and
- conduct - the actual behaviour and actions of public servants.
Normative ethics is largely about values and the accepted norms for 'right' conduct. Applied ethics is the practical application of values and standards, which sometimes involves choosing between values in a particular context. This paper is concerned with applied ethics, where values are translated into conduct.
Why are ethics important?
The ethical behaviour of all elected and appointed representatives of government is critical for democracy, particularly in an environment of greater choice and discretion in decision making.
Public servants assist in the stewardship of public resources, perform policy making functions, and interact with citizens. Their ethical conduct helps to guard against the abuse of powers and the derogation of due process, and assists in maintaining confidence in government and its institutions.
But, as the OECD note, public sector ethics is an activity, not a status. Encouraging ethical behaviour is not about establishing a list of rules to be kept or a status to be attained. It requires ongoing attention.
"Ethics may be only instrumental, it may be only a means to an end, but it is a necessary means to an end. Government ethics provides the preconditions for the making of good public policy. In this sense, it is more important than any single policy, because all policies depend on it." 3
Consequently, the absence of ethics is often more noticeable than their presence.
"When ethics are in disorder, when citizens reasonably believe they are, one should not be surprised that disputes about ethics drive out discussions about policies. Ethics makes democracy safe for debate on the substances of public policy. That is why it is so important. That is the sense in which it is more important than any other single issue. 4
3 D. F. Thomson, "Paradoxes of government ethics" Public Administration Review, Vol 52, 1992, p.255. Cited in the OECD Paper No 14.
4 Ibid, p.256.
Most countries have adopted, with varying degrees of consciousness, an infrastructure to sustain ethical conduct. The OECD views the infrastructure as having three dimensions: control, guidance, and structure. Each of these dimensions has a number of contributing factors.
Control can be achieved through:
- a legal framework enabling independent investigation and prosecution;
- effective accountability mechanisms; and
- public involvement and scrutiny.
Guidance can occur through:
- a well-articulated commitment from political leadership;
- codes of conduct expressing values and standards; and
- professional activities such as education and training.
Structure can be realised through:
- sound human resources practices; and
- leadership and maintenance of the ethics infrastructure by either an existing central agency, or a special ethics body.
The ideal mix of these functions varies according to the political culture of each administration. For example, the tradition of checks and balances in the United States emphasises control. In the Netherlands, a tradition of trust emphasises guidance and management. But it should be noted that these are generalisations to some degree, because the mix is not static in any jurisdiction.
In New Zealand, the legal framework of control is established largely through statute law, augmented by common law, and reinforced by the functions of the Office of the Ombudsman and specialised Commissioners, and by the independent role of the Audit Office.
Government has ultimate accountability to the electorate for the performance of the public sector. This is played out through the political accountability of Ministers to Parliament. Chief executives have delegations under law, as well as responsibilities under performance agreements, for the operation of their departments, which are separate in many respects from their Ministers. But politicians are affected by substantial failures in their departments, for which the public expects them to be politically accountable.
The underlying constitutional convention for this has been the doctrine of ministerial responsibility, 5 where the employees of a department are considered to be the Minister's agents. The State Sector Act enacted in 1988 may have altered this. The tradition of simple ministerial accountability for performance failures has faded, and senior public servants have become more visible than in the past. But constitutional experts like Sir Geoffrey Palmer also believe it likely that the doctrine was never as embedded in New Zealand as was commonly believed.
Accountability to Parliament and accountability to Ministers is now governed by the overarching State Sector Act 1988 and the Public Finance Act 1989, supported by a range of legislation that establishes accountability for specific areas. Particularly important is the Official Information Act 1982, whose purposes are to make official information available, enhance participation, and promote accountability. A 'whistle-blowers' protection statute is also intended.
Statute law covers a number of matters. For instance, the Crimes Act 1961 covers judicial corruption (s.100); bribery of a judicial officer (s101); corruption and bribery of a Minister of the Crown (s102); corruption and bribery of a member of Parliament (s103); corruption and bribery of a law enforcement officer (s104); corruption and bribery of an official (s105); and corrupt use of official information (s105A).
Public involvement and scrutiny is facilitated by the legal traditions of the country. The evolving development of public and administrative law imposes substantial requirements on public institutions to consult before making decisions. The Courts can overturn these decisions through a judicial review of the decision-making process. The provisions of the Official Information Act 1982 and the operations of a free press are also important. These legislative instruments are discussed in more depth in Part Two.
Together, the legal framework, accountability instruments and public scrutiny provide a sound infrastructure of control. However, the infrastructure in New Zealand in the second infrastructural area of guidance is perhaps weaker.
The primary instrument of central guidance is the 'expectations letter' 6 issued by the State Service Commissioner to all new chief executives. The letter is built around the concept of a broadly defined 'duty of care'. It expects chief executives to conform to the highest standards of integrity and probity, and ensure that they have systems and procedures in place to maintain and enhance public trust and confidence in the integrity of their departments, the Public Service as a whole, good government and representative democracy. It was first issued in 1997, after the SSC conducted a review of accountability following the tragic incident at Cave Creek, suggesting that it could have been useful before the tragedy. 7
There is also a Public Sector Code of Conduct, which is enabled under s 57 of the State Sector Act. It was first issued in 1990 by the SSC. This has been augmented by the Principles, Conventions and Practice Guidance Series (1995). Informal surveys show that both the Code and the Principles, Conventions and Practice Guidance Series have a quite limited penetration. The Code is most effective where it has been adapted by departments for their particular business.
Perhaps more important than these limitations is that the instruments of guidance apply only to the Public Service, and do not extend to the numerous Crown entities, State owned enterprises or Crown companies that, despite their names, are not part of the legal Crown. Given the size of this wider State sector, this is a significant weakness.
The structural dimension of the infrastructure to support ethics is possibly also weaker in New Zealand than in other jurisdictions, but this needs careful consideration. In one area, New Zealand is very clear. The State Sector Act 1988 provides an explicit framework for human resource practices that are mandatory for the core State sector. Its practices extend into the non-core sector, and it is viewed as sound human resource management by the Employment Court.
The strength of this Act has reduced the need in New Zealand for a central body concerned with guarding ethical behaviour. But the primary weakness in the New Zealand arrangements again lies with the large number of bodies that are outside the legal Crown. Two thirds of the government budget and the majority of the service connections with the public are operated by these bodies, and they keep or have access to large amounts of sensitive and private information. While the SSC has an over-arching responsibility for influencing ethics, its jurisdiction is limited to the core Public Service and does not extend to the wider State sector. The devolved management environment of the New Zealand Public Service may also limit the impact and influence of the SSC in the area where it has most say. 8
5 G. Palmer and M. Palmer, Bridled Power, The New Zealand government under MMP, OUP, 1997, p.72.
6 The letter has become known as the 'great expectations' letter to distinguish it from the annual letter of expectations that sets the basis against which departmental performance is assessed.
7 Perhaps less in the sense of preventing the loss of fourteen lives than in clarifying accountability. However, aspects of the liability of the Crown and of Crown employees remain unclear.
8 In the Australian Commonwealth Public Service the central agencies share responsibility for a wide variety of activities contributing to the management of administrative ethics. In the USA a well-resourced, separate Office of Government Ethics operates at the federal level in a wide range of activities. By comparison, New Zealand has not created a separate ethics agency, and no central agencies apart from the SSC have a role in ethics.
Compliance-based versus integrity-based ethics management: a typology
In practice, most countries endeavour to manage ethical behaviour through a range of systems and processes. The chart below, which is derived from the OECD 9 , builds a typology of nine countries that is useful in providing some international comparison. However, caution needs to be exercised in interpreting the material because it is necessarily generalised.
At one end of the scale is the integrity-based approach to ethics management. This approach is consistent with a focus on results. While there are clear rules against illegal behaviour, and sanctions applied when those are breached, the focus is the actions or effects that should be achieved, rather than the behaviour that should be avoided. This suggests an emphasis on:
- the definition of overall aspirational 'values' for the public sector (the OECD calls this the 'high road');
- what is achieved rather than how it was achieved (that is, a focus on ends rather than means); and
- encouraging good behaviour rather than policing errors and punishing bad behaviour.
At the other end of the scale is an approach to ethics that is compliance-based. This focuses on strict adherence to administrative procedures and rules (often detailed in legislation), which define what public servants should do and how. In this context, codes of conduct often consider the negative; i.e. what public servants should not do, and what sort of behaviour they should avoid. The OECD calls this the 'low road' approach: setting minimum standards beyond which behaviour should not fall. The emphasis is on policing actions and catching wrongdoing, reinforcing the tendency to manage by rules because they provide a base-line for identifying error.
None of the nine OECD countries fits neatly into either of the two scenarios. But New Zealand is identified as closest to the integrity-based approach, and classifies itself as such. 10 By contrast, the United States reflects a very complex and comprehensive rules-based system, though the implementation of the National Performance Review also focuses clearly on results. Portugal and Mexico focus on rules, mainly because they are in the process of defining an ethics infrastructure and a modern system of public administration.
New Zealand stands at the extreme of two axes, and at first glance would appear to run some ethical risks through having an integrity approach aligned with devolved management. Concentrating on the integrity of people and systems as the way to manage ethical conduct implies less external control. The New Zealand reforms have aimed to increase management autonomy and institutional responsiveness to local conditions, and a greater margin for error or mistake has been accepted - at least theoretically - in return for greater management effectiveness and responsiveness. But the risk this poses is reinforced by the extensive devolution of functions, which some critics of the reforms have called 'atomised fragmentation'.
The counter argument is that the OECD chart does not accurately reflect the reality of New Zealand's State sector as it operates in practice. Precisely because it is not an homogenous system, agencies apply more or less control according to the nature of their business. For instance, delivery agencies typically have a broader span of 'systems controls' than small policy organisations that have flattened management structures. But while the latter may have fewer controls, they have more than the delivery agencies in the area of policy. Management autonomy is also not necessarily about looseness. On the contrary, it has generally brought better control of the inputs and outputs of production. The risks of an integrity-based approach are therefore specific rather than general.
It appears that this observation has been borne out in practice and in international surveys of corruption in administrative government 11 New Zealand continues to rank as one of the most trustworthy states. But specific instances of unethical conduct have emerged in both the core and wider State sector, and the SSC is currently reconsidering its role in the management of ethics.
9 OECD/PUMA, Ethics in the Public Service, Paper No. 14:, 1996, p.34.
10 In referring to New Zealand, the OECD appears to include both the core Public Service and the ancillary bodies of the wider State sector.
11 Transparency International, 1998, Index of Perception of Corruption Around the World, Berlin, 31 July 1997.
Part Two: The legislative framework and the role of the SSC
This section describes the key ingredients of the New Zealand legislative framework governing ethical behaviour.
The long title to the State Sector Act 1988 makes use of the term 'State Services', rather than the narrower term 'Public Service'. But the SSC's role in relation to ethics and values in the wider state sector remains unclear. It has particular functions in relation to parts of the wider State sector; for instance, it must be consulted on any code of conduct issued by the Secretary of Education, and statutory boards. It is therefore reasonable to assume that the SSC is the obvious body that the Government would look to for assistance in the wider State sector if it is necessary. But a decisive mandate for this role is missing, and the preceding part of this paper has identified that weakness in coverage.
Executive action is subject to external and independent review by the courts (judicial review), by the Officers of Parliament (the Ombudsman and the Parliamentary Commissioner for the Environment), by the Privacy Commissioner, and by the Controller and Auditor-General. Parliamentary select committees also play an increasingly important part in the process.
The activities of government departments and entities outside of the legal Crown are also subject to legitimate and ongoing scrutiny by Ministers, the Human Rights Commission, the Race Relations Conciliator, various self-appointed public 'watchdogs', the media, interested lobby groups and individual members of the public. Some of the key processes and roles are:
- judicial review
- Office of the Auditor General
- Office of the Ombudsman
- Official Information Act 1982
- whistle-blowers legislation
- legislation surrounding the Public Service
Judicial review is the review by a judge of the High Court (or on specific employment matters, by a judge of the Employment Court) of almost any decision made by a public official affecting individual interests. The purpose of judicial review is to safeguard individual interests against unreasonable administrative action taken without following proper procedures. In doing so, it helps define the principles governing public administration. 12
Judicial review is not the same as an appeal. It is concerned with the process by which a decision is made and not the merits or otherwise of the ultimate decision. The principal grounds of review are illegality (acting outside the scope of the power conferred), unreasonableness, and unfairness (both procedural and substantive or actual).
Office of the Auditor General
In New Zealand, all authority for governmental activity stems ultimately from Parliament. Public sector organisations are accountable to Parliament for their use of resources and powers conferred by Parliament.
Parliament seeks independent assurance that public sector organisations are operating, and accounting for their performance, in accordance with Parliament's intentions. For this reason, Parliament reserves the right to appoint the auditor of entities that are accountable to it.
Office of the Ombudsman
The Chief Ombudsman and the Ombudsmen are independent officers of Parliament appointed by the Governor-General on the unanimous recommendation of the House of Representatives. Their functions are to investigate and form opinions on the merits of complaints about the administrative acts and decisions of government agencies at central, regional and local levels. The staff of the Office of the Ombudsmen are appointed independently by the Chief Ombudsman, and assist the Ombudsmen to discharge their statutory responsibilities.
Official Information Act 1982
The Official Information Act 1982 creates a legal requirement that official information is to be made available to anyone who seeks it unless there is good reason to withhold it. That reason must be found in the Act itself or in some other enactment.
In stating the grounds on which this principle of availability rests, the Act contains an authoritative summary of some constitutional principles relevant to the Public Service. The availability of official information to the people is intended to:
- increase progressively in order to progress more effective participation in the making and administration of laws and policies;
- promote the accountability of Ministers and officials; and
- enhance respect for the law and promote the good government of New Zealand.
Three implications of this are particularly important to State servants. The first is that the regime established by the Act is dynamic, not static. Parliament has envisaged that information will become more freely available as time goes by. Secondly, Parliament has accepted that officials as well as Ministers are to be accountable, in line with the general title 'public servant'. Thirdly, private individuals are to be able to take an effective part in making and administering laws and policies.
However, as the Chief Ombudsman has said, this does not overrule representative democracy and the supremacy of Parliament. Nor does it mean that the public are to sit in on decision making. But participation in policy making requires that individuals must have:
- the right to know what options are open and being considered;
- sufficient information about them to form a proper judgement; and
- time to enable consideration, and to express views, before the government is committed to a policy.
The main purposes of a protected disclosure law are to promote the public interest, and protect employees who make disclosures about serious wrongdoing in their places of work.
New law in this area is intended, because of the perceived limitations of the current law to protect employees who expose some form of serious wrongdoing within their organisation. At present, there is no clear process for employees to follow when confronted with perceived wrongdoing, and they may face disciplinary consequences even if they have a defence against such action by their employer. The intended legislation is only for the public sector, not the private sector.
The legislation will provide protection only to employees who make disclosures of information in accordance with established internal procedures. 13 Protection will not be afforded to those employees who avoid internal mechanisms or 'go public' with information about serious wrongdoing.
Legislation surrounding the Public Service
The New Zealand Public Service serves the Government of the day within the framework of the law. The Public Service consists of the departments listed in the First Schedule of the State Sector Act 1988. This includes the three central agencies, though they are not mentioned by this term in the Act. It does not include Crown entities, State-owned enterprises, Crown companies or other miscellaneous bodies that are part of the State services.
Parliament has enacted legislation that establishes much of the framework within which the Public Service operates, but conventions are also important. The legislation reflects the expectations Parliament and successive governments have had of the type of Public Service New Zealand should have, and the values it should hold. It also represents an assertion that the Public Service is not simply the 'property' of the Government of the day but that Parliament has an interest as well, on behalf of the community.
The long title of the State Sector Act 1988 states that it is an Act -
"(a) To ensure that employees in the State services are imbued with the spirit of service to the community; and
(b) To maintain appropriate standards of integrity and conduct among employees in the State services; and
(c) To ensure that every employer in the State services is a good employer."
12 See The Judge Over Your Shoulder: Judicial Review of Administrative Decisions, Crown Law Office, 1989.
13 Prototypes of these procedures have been developed by the SSC. It is expected that each department will develop their own procedures.
Role of the SSC and chief executives
In addition to the objectives set out in the Long Title, those parts of the 1988 Act that bear explicitly on the values and ethics of public servants are:
- the office of State Services Commissioner itself;
- the Commissioner's extensive powers of inquiry and investigation;
- the process for appointing chief executives;
- the option of issuing a Code of Conduct;
- the Senior Executive Service;
- the responsibilities of chief executives;
- the provisions relating to the employment of individual employees;
- the merit principle; and
- the requirement for departments to be disestablished by legislation rather than regulation.
The SSC therefore shares responsibility for maintaining and enhancing Public Service values with other players in the public management system, notably Ministers, central agencies, chief executives, senior managers and departmental staff.
The SSC's roles in the area of ethics encompass leadership, guardianship, standard setting, 14 review and monitoring, advice and counsel.
There is an inherent tension in the SSC fulfilling a role of setting standards ('expectations'), carrying out a quasi-judicial role of audit and monitoring, and having an advisory or counselling role. In practice, the tensions are reduced through effective relationship management and a common sense approach to the matters at hand. However, the ambiguity in the roles remains, and may explain why clear guidance on chief executives' responsibilities did not exist before Cave Creek.
A 'pure' policy would separate the roles, but because of its complex nature 15 public policy often admits impurities that appear to work. For example, the same tension exists in the role of the Commissioner as the employer of chief executives and the Commissioner's and Deputy Commissioner's role as a sounding board and advisor to chief executives. Consequently, this paper will assume no change to the SSC's legislated functions.
Other parts of the State Sector Act 1988 that relate the SSC to matters of values and ethics include:
- the responsibility to review departmental and chief executive performance (ss6 & 43). Given the responsibilities of the chief executive, this could include reviewing matters of values and conduct;
- the extensive investigatory powers of the SSC (ss8-10 & 25); and
- the process for appointing chief executives. This is, itself, of fundamental importance in the maintenance of a non-partisan Public Service, and requires the State Services Commissioner (or the Governor-General in Council) to have regard to chief executives who:
"(b) will imbue the employees of the Department with a spirit of service to the community;
(c) will be a responsible manager of the Department; and
(d) will maintain appropriate standards of integrity and conduct among the employees." (s35)
The SSC is also charged, along with chief executives, with maintaining and developing a senior executive service of persons who will (among other things):
"assist the chief executive to-
(a) Imbue the employees with the spirit of service to the community;
(c) Ensure the responsible management of the department; and
(d) Maintain appropriate standards of integrity and conduct among the employees of the department." (ss6, 46, 47, 48 & 55)
The State Services Commissioner may from time to time issue a code of conduct, setting out minimum standards of integrity and conduct. (s57)
Finally, matters of values and conduct are important in many major areas of SSC activity, even where this is not immediately apparent. For example, when the SSC gives advice on the machinery of government and human resource management, it must consider the possible impacts of that advice on ethical behaviour.
The principal responsibilities of a chief executive under the State Sector Act are expressed in these terms:
"The chief executive of a Department shall be responsible to the appropriate Minister for:
(a) The carrying out of the functions and duties of the Department (including those imposed by Act or by the policies of the Government); and
(b) The tendering of advice to the appropriate Minister and other Ministers; and
(c) The general conduct of the Department; and
(d) The efficient, effective, and economical management of the activities of the Department." (s32)
Chief executives, in particular, are responsible not only for the "general conduct of the Department" (s32), but also for ensuring that "all employees maintain proper standards of integrity, conduct, and concern for the public interest" (s56), as well as for appointing and developing senior managers who will assist the chief executive to maintain those standards (ss47 & 51) and for being a good employer.
Together, chief executives and the SSC have a shared responsibility for the management of ethics. It is primarily chief executives as the employers who have the direct responsibility. The SSC's role is to support chief executives to carry out this responsibility, and also to ensure that the responsibility is requited.
These complementary roles apply, however, only in the Public Service, a subset of the wider State sector. This again raises the issue of coverage.
14 Such as conveyed in the 'great expectations' letter, and by the standards set through the Departmental Performance Assessment.
15 Ministers are not like private sector boards of directors, voters are not like shareholders, and citizens who are coerced by government agencies are not clients.
Part Three: Managing ethics: adopting an integrated approach
The public management system
Devolved management is the key to understanding how the New Zealand Public Service works. The underlying principle is that public sector managers work best under conditions of clear performance requirements, with managers having sufficient authority and discretion to meet the requirements. Employment arrangements and incentives are linked to specified performance, and good information flows are encouraged to keep the system in balance and to enable risks to be managed as close as possible to their source.
Government operates as a single enterprise around a common strategy and resource allocation system, creating the centripetal force that allows the managers of the various government businesses to exercise considerable autonomy in pursuit of high performance.
But Government does not only pursue high performance in the production of outputs leading to the achievement of outcomes, it is also an owner of the 'businesses' from which it purchases these results.
Consequently, a large part of the chief executive's job is managing government ownership interests in their departments. They are responsible for ensuring that their departments are in the right condition to meet requirements over time.
Complementing this responsibility for managing government ownership interests in each department is the collective responsibility of the three central agencies, the Treasury, the SSC and the Department of the Prime Minister and Cabinet. Their tasks call for a sophisticated approach. They must maintain sufficient control, without undermining the autonomy and initiative of the devolved management system by imposing unnecessary and burdensome regulation.
It is within this context of devolved management balancing production and capability that a framework for ethical conduct must be located. This paper proposes a modular approach able to be applied to a variety of situations.
An approach first advocated by Simons 17 proposes four modes or levers of influence that may be used to assist organisations to set appropriate goals and develop the behaviour that enables them to be achieved. The following discussion focuses on how these levers can influence ethical conduct.
The four levers are:
- reflective/integrative levers - these involve articulation of the values and direction of an organisation through statements, guidance material, leadership and modelling, personnel management, and education and training programmes, which help to shape the culture or 'ethos' of the organisation and keep it attuned to its purpose and its responsibilities.
- pre-emptive levers - these levers include statute law, manuals and regulations, codes of conduct, internal procedures and employment conditions. These instruments usually tell employees what not to do, rather than what to do, and by their nature they specify and provide the basis for enforcement. But they can also allow employees to have considerable autonomy within set boundaries by setting the limits of acceptable conduct.
- diagnostic levers - these levers of influence include the clarification of targets through ex-ante specification, and the monitoring and evaluation of performance. Such evaluation can involve the use of audit and reviews of compliance, and mechanisms such as community consultation and customer/ client/citizen feedback.
- interactive levers - these levers include the formal information systems and the informal systems that maintain communication and allow strategies to evolve through dialogue. For a Public Service organisation, this may include networking at an inter-departmental and governmental level, nurturing relationships with sectoral groups, developing a communications strategy, and involving stakeholders in strategic business planning.
A flexible approach
The four groups of levers can be seen as modules making up a whole, though each module and the instruments within it may vary for different types of business and organisations. At one level, the modular approach to the management of ethics applies to the whole system of public sector management. For instance, the SSC operates a pre-emptive lever in ensuring departments have clear functions; and operates a diagnostic lever in conjunction with the other central agencies, in the purchase and performance arrangements that yield clear targets and performance measures. A fuller description of the levers applied by the SSC follows in the next section, Part Four.
The modular approach also applies to departments. It allows for the mix of levers to be tailored to differing circumstances and risks. In most circumstances, departments do not need to choose between the compliance or integrity-based approaches proposed by the OECD. Rather, they can blend the two approaches to suit the nature of their business or their culture.
In the devolved environment, the more that can be achieved through informal means, such as affirmation of values and the development of relationships and opportunities for dialogue, the less reliance needs be placed on formal instruments and exchanges. In many circumstances, however, the formal instruments are entirely appropriate and specific legislation often calls for them. Choosing the right balance of levers means departments must first know their business and the profile of their staff.
The application of the modular approach to departments is considered in Part Five.
16 This section draws on the work of Gerald Scanlan and Colin Hicks, "Integrating Ethics" Public Sector Ethics: Finding and Implementing Values, Federation Press, Sydney, 1997.
17 See Robert Simons, "Control in an Age of Chaos" Harvard Business Review, November 1994.
Part Four: The framework in practice for the SSC
The SSC's contributions in recent times
- reflective/integrative - Administrative Practice in a Time of Change; Striving for Excellence; Principles, Conventions and Practice Guidance Series; Working Under Proportional Representation; Responsibility & Accountability: Standards Expected of Public Service Chief Executives 1997; and the Commissioner's leadership initiatives;
- pre-emptive - NZ Public Service Code of Conduct; CE employment contracts; and SSC circulars;
- diagnostic - CE performance agreements; departmental reviews (regular); and ad hoc reviews, for example, the review of Chief Executive Credit Card Expenditure.
- interactive - regular meetings with CEs; the annual Public Sector Senior Managers conference; interagency working groups; e.g. the group that developed the EEO Policy to 2010.
Reflection on these contributions suggests that the face of the SSC has been stronger and more persistent in the 'hard' management areas of the diagnostic and pre-emptive levers, and that it is weaker in the 'softer' areas of interaction and integration. This may be partly perception, because the soft levers are on-going activities not able to be locked into visible systems, structures and documents. Roles, responsibilities, delegations, accountabilities and structures represent the hard elements. The soft elements include values, motivation, communications, teamwork and leadership.
It is important to recognise the symbiotic relationship between hard and soft elements.
"The relationships ... are of very great significance ... Systems of planning control and monitoring have moved to backstage while the softer elements of management have become seen as the critical elements of success. This is not a reflection of a view that the hard elements of management are unimportant; far from it. It just means that they do not make the decisive difference between excellent and ordinary organisations ... Further, the softer sides of management are unable to bear fruit without the backdrop of systematic management." 18
18 Graham Scott, unpublished draft, Chapter Three, p.7.
Future work for the SSC
Where does this lead to? In his evaluative study of the New Zealand State sector reforms, Professor Allen Schick has pointed out that in New Zealand there is a danger that accountability can fall through the cracks not because it is overlooked, but because contracting parties are acutely aware of the boundaries of their contracts, and will only be held accountable for what is directly in their control.
Schick suggests that an emphasis on bilateral contracts between ministers and their agencies risks ignoring third parties in such contracts. These third parties might be the government in its collective responsibility, citizens at large, or the clients or beneficiaries of public programmes.
Schick also identified a risk that a contractual style of management may diminish 'public-regarding' values and behaviours in government. The values that Schick identified included the trust that comes from serving others, the sense of obligation that overrides personal interest, the professional commitment to do one's best, the pride associated with working in an esteemed organisation and the stake one acquires from a Public Service career.
There are counter opinions to Schick, but most commentators agree that future contractual arrangements need to include a greater emphasis on relationship building and management, in order to ensure that the complex responsibilities in the public sector are not narrowly reduced to short-term, commercial parameters. This is not a return to the central management of the Public Service, nor a retreat from an integrity-based approach to the management of ethics, because it is clear that laws and internal organisational policies and instruments can never be specific enough to cover all situations and contingencies encountered by an administrator. Supervision or management cannot hope to monitor more than the broad boundaries of activity.
But it is clear that the SSC has traditionally adopted a low-key stance on ethics. Ethical conduct has tended to be an issue only when something has gone wrong, and lessons are then typically converted into rules or guidance material. This approach is not sufficient. A more active role is desirable to build awareness and sensitivity to ethical issues, and provide leadership to chief executives in the Public Service, in the same way that the chief executives need to provide leadership on ethics within their departments.
The SSC's future emphasis in operating its direct and indirect influence would then centre on constantly redefining what responsibility means in the context of public management, and seeking to find the necessarily shifting balance between external accountability mechanisms and internal sources of responsibility, such as professional values and standards.
With this in mind, the SSC should continue to make contributions in the following areas:
pre-emptive - set boundaries:
- maintain and review the Code of Conduct and guidance material for public employees;
- encourage departments to set standards that fit their business through the expectations expressed in the letters to chief executives; and
- monitor organisational integrity through the Departmental Performance Assessment or other instruments.
diagnostic - targets and monitoring:
- collect and analyse information on ethics-related issues; 19 and
- provide objective feedback to chief executives and departments on their management of ethical conduct.
And it should give special emphasis to:
integrative - create a culture:
- encourage and support education and training that emphasise the Code of Conduct, the role of the constitution, and the conventions of government administration;
- offer support to departments and chief executives on departmental self-audits; and
- offer ethical conflicts resolution, where organisations seek external help.
interactive - ensure communication:
- maintain a dialogue with chief executives on ethical issues, through the expectations and performance appraisal processes, and through occasional seminars and conferences on key constitutional issues; 20 and
- promote ethics through participation in forums, conferences, seminars, and workshops.
This creates a combination of incentives for chief executives through the SSC providing support and guidance, and nurturing a culture of communication and learning and dialogue, in addition to setting performance standards that are then monitored and backed by rewards and sanctions.
What precedes the balance of these incentives is the SSC's understanding of the innate complexity of its business, and the employment of a balance of levers that fit its purpose. Because it has a range of functions, some of which require internal trade-offs, its business will change constantly in response to environmental pressures. The balance needed between hard and soft elements will alter continually. There is a time to increase power at the centre and a time to lessen it, and the SSC must constantly appraise which levers it needs to pull and which to release slowly.
However, a familiar caveat emerges. These roles apply in the first instance to the core Public Service. The far greater challenge is to extend the levers of the SSC to the wider State sector.
Sections 6 to 10 in the State Sector Act set out comprehensive powers of investigation for the State Services Commissioner. Section 11 sets out the power of the Commissioner in the non-core sector, which allows the Commissioner to employ the powers of Sections 6 to 10 upon the written mandate of the Prime Minister, and to exercise the functions and powers of the Commissioner under Sections 6 to 8 if so requested by the head of, or Minister in charge of, any part of the State services. This sets the SSC at a remove from the Crown entity sector and from State-owned enterprises and Crown companies.
This distance is consistent with the arms-length distance these bodies have in general from the Executive. In some cases, this takes the form of independence from the Minister, where it is inappropriate for the Minister to be involved in decisions; e.g. the Human Rights Commission. With other entities, the relationship is separateness. Most bodies have boards of governance.
In the longer term, it may be opportune for the Commissioner's powers of investigation to be extended to the wider State sector, so that the Commissioner can act independently without the written instruction of the Prime Minister. However, this will be constitutionally more intrusive than the present arrangements, and will need considerable exploration before being adopted.
In the light of the current work on Crown entities, it may also be opportune to explore a responsibility for the boards of Crown entities, in appointing a Crown entity chief executive 21 ; to apply the same standards that the Commissioner applies in his appointment of a Public Service chief executive. It may also be opportune to explore the idea of a parallel legislative or Ministerial requirement that Boards should seek assurance of the ethical health of the organisation and its employees in their performance monitoring of chief executives.
A third initiative would be for the State Services Commissioner to request departments to apply the modular framework to ensure they are systematic in their management of ethical behaviour.
The expectations could require departments to plan their management of the ethical conduct of their employees through:
- considering the nature of their business, staff and environment;
- considering the risks that may ensue; and
- subsequently mapping out a comprehensive management strategy, using the modular framework, to establish those levers, which they can adjust in the future.
This is discussed in more depth in Part Five.
A fourth initiative would be for the SSC to propose a specific output to be purchased by the Minister of State Services "to provide State sector wide advice and guidance on ethics", or as a sub-set of this, advice and guidance on ethics to departments. A project group could be established within the SSC to cost that guidance and advice, using whatever empirical evidence is available from the branches of the SSC.
The skills and knowledge required for that output include legal advice, constitutional and legislative advice, advice on Parliamentary and administrative conventions, and advice on ethics and the Code of Conduct.
As part of the output, the SSC would log and report the amount and type of interaction it undertook in a year, thus establishing a profile for future planning and pricing decisions.
Finally, it is also worth noting that the recent allegations of corruption in the Public Service are likely to lead to a renewed interest in the Protected Disclosures Bill. The debate this will open offers the SSC an opportunity to demonstrate leadership to the State sector in the management of ethics in general, and more specifically as it relates to the Bill. The SSC should ensure that the work initiated on internal SSC procedures to manage whistle-blowing is completed, and that guidelines for other departments are made available in a timely fashion.
19 Such as the number of complaints concerning ethical behaviour made to the Office of the Ombudsman, the Office of the Controller and Auditor General and similar Parliamentary offices; and the number and type of dismissals reported by departments and entities; and the number and type of employment related prosecutions of 'government employees'.
20 Such as the processes surrounding the formation of a new coalition government.
21 Section 12 of the State Sector Act.
Part Five: Applying the framework - a practical example
Assessing integrity in the context of departmental performance assurance
The ethics framework as it applies to individual departments in the public sector has been considered under the term 'integrity'. This reflects the uneasy language and interchangeable terminology referred to within Part One.
Integrity is a key ethical value, and simply means being honest and sincere. For analytical purposes, integrity can be seen at three levels:
Concerned with personal credibility and conduct as a trustworthy individual.
Subscribing to professional values and standards.
Concerned with how organisations express their collective values and are seen to be operating.
In reality, none of the categories is exclusive of the others. Organisational integrity relies in some measure on the professional integrity of the members of the organisation. In turn, professional integrity relies in part on personal integrity. But equally, organisational integrity is something more than the aggregate of personal and professional integrity. It is created by the organisation in its vision, mission, values and operational systems.
Personal integrity is correctly the preserve of the individual, though it impacts on the employment relationship with the chief executive. For instance a criminal conviction can be grounds for dismissal. But professional and organisational integrity are shared concerns of chief executives and the State Services Commissioner. 22 This interest in professional integrity has not been the focus of the Departmental Performance Assessment to date, but incidents in 1998 involving the sale of personal information to private debt collectors has led the State Services Commissioner to link the performance pay of chief executives to their management of the conduct of their employees.
Also, in the future, the SSC is intending to develop Departmental Performance Assessment around a department's capability, with three levels of review: self-review, which will receive a new emphasis; regular external review; and 'special occasion' reviews focusing on an issue of concern. Individual, professional and organisational integrity will be part of this framework.
The Commissioner has an interest in ensuring that professional standards in the Public Service are maintained. Part of the Commissioner's interest in the maintenance of professional values and standards arises from the nature of delegated authority. Chief executives have the power to delegate their functions or powers to employees under s.41 of the State Sector Act 1988, but are responsible for the individual conduct of those so delegated. In summary, this means that:
"The delegation of a function or power to act creates certain legal and moral expectations on both parties. Those who make the delegation must ensure that they have the power to do so, that they have complied with any pre-conditions to the making of the delegation, that the person receiving the delegation is an appropriate person to entrust with those powers or functions, that any conditions or limitations to the delegation are clearly expressed, and that there is an appropriate means of monitoring the exercise of that delegation.
The extent of any responsibility that might attach to the person making the delegation would depend largely on whether the delegation had been made and monitored in a responsible manner. Even then, it is not unusual for the person holding the original functions or powers to be held accountable for specific decisions made under the delegation." 23
When the Commissioner reviews the performance of chief executives, which includes the performance of each department, the review extends to the professional integrity of those who perform delegated functions. And, before making the appointment of a chief executive, the Commissioner must consider whether the prospective person is able to maintain appropriate standards of integrity and conduct among the employees of the department.
The letter to chief executives on the expectations for the SSC's Review of Departmental Performance 1997/98 concentrated on the level of the organisation and two levers - the pre-emptive and integrative levers - as the selected centre of interest for that year's performance.
The Expectations for 97/98
That departments have a customised code of conduct, and conflict of interest policies/systems.
In particular, the Commission expects to see evidence of:
- a customised code of conduct that addresses nature of the business;
- development of strategies to inculcate, reinforce and monitor ethical conduct - e.g. plans that address issues of integrity in mission/vision/value statements; HR strategies; information policies;
- systematic approaches to consultation with publics;
- guidelines for contracting;
- processes for dealing with conflicts of interest;
- effective means of communicating with publics;
- developing clear understandings of statutory and regulatory obligations; and
- developing a shared understanding of what is meant by the public interest in the context of the organisation.
However, a complete assessment of a department's management of ethical conduct would not be confined to the pre-emptive and integrative categories alone. The four levers of control discussed in Part Three can be used to categorise or 'map' more fully what departments are doing.
Laws and codes - which set the boundaries.
Reflective; value statements; education and training; guidance material - aimed at shaping culture.
The targets set and the monitoring of their achievement - providing the formal means for 'taking the integrity pulse' of the organisation.
Maintaining dialogue, bridging the information gaps and developing relationships - bringing coherence and common purpose.
A more complete picture of a department's approach to organisational integrity would therefore cover all four levers of influence, and would assess the balance between the instruments or tactics used which are appropriate for the business.
For instance, a highly dispersed and decentralised service organisation will have a different profile from a small, centralised policy agency. A service department with a high degree of statutory discretion and coercive authority is likely to adopt a different approach to managing organisational integrity than one with very little direct contact with citizens.
What does this mean in practice?
Departments can consider the following sorts of activities, most of which are well known, though less attention, perhaps, has been paid to their mix and intensity:
integrative - create a culture:
- chief executives and senior managers provide active leadership through meticulous role modelling, walking the talk, incorporating ethics into management directions, staff talks, coaching, etc;
- encourage and support education and training that emphasise the Code of Conduct, the role of the constitution, and the conventions of government administration, recognising that public service is a statecraft that needs to be learnt;
- establish an in-house ethics committee to plan sustained ethical awareness activities;
- identify specific people within the organisation to whom staff can confide concerns about unethical conduct, and who can resolve low-level conflicts of interest;
- establish clear processes for 'protected disclosure' situations, and ensure these are well known by staff; and
- ensure orientation programmes include constitutional and ethical content and maintain induction and refresher courses.
pre-emptive - set boundaries:
- create organisationally specific and customised Codes of Conduct, guidelines for contracting, rules for contractors and employees with flexible employment conditions;
- establish rules governing information security, including the access to and release of electronic information; and
- conduct 'ethical risks' planning at an organisational level, and also at Branch and team levels, particularly where there is regional or local delivery of services.
diagnostic - targets and monitoring:
- conduct regular reviews of financial and non-financial internal delegations;
- maintain rolling cycles of internal audits of business units and/or functions;
- invite selected external audits;
- include ethical conduct as one of the measures within individual performance management; and
- build feedback from audits, DPA and chief executive performance assessment into future planning.
interactive - ensure communication:
- engage regularly in client surveys and formal feedback mechanisms to ensure stakeholder input;
- build communication strategies at a variety of levels into strategic planning;
- use the strategic business planning processes to engage staff in the mission, vision and values of the organisation; and
- encourage interagency exchanges of experience in detecting and addressing unethical conduct.
22 The difference between personal or private integrity and public or professional integrity in public life is contrasted by the following account by an anonymous supporter of Grover Cleveland in the presidential campaign of 1884: "Cleveland's opponent, James G Blaine, had corruptly profited from public office but lived an impeccable private life. Cleveland had a reputation for public integrity but had been forced to acknowledge an illegitimate child. "I gather that Mr Cleveland has shown high character and great capacity in public office," said Cleveland's supporter, "but that in private life his conduct has been open to question, while, on the other hand, Mr Blaine, in public life has been weak and dishonest, while he seems to have been an admirable husband and father. The conclusion that I draw from these facts is that we should elect Mr Cleveland to the public office which he is so admirably qualified to fill and remand Mr Blaine to the private life which he is so eminently fitted to adorn"." (related in Dennis F. Thompson, Ethics in Congress: From Individual to Institutional Corruption, 1995, The Brookings Institution, Washington, D.C.)
23 SSC, "The Public Service Employer" Principles, Conventions and Practice Guidance Series, 1995.