The Impact of Horizontal Coordination in Australia John Halligan University of Canberra Paper for the European Consortium on Political Research Regulation & Governance conference Utrecht University, June 5-7 2008 Abstract Coordination has again become a salient issue internationally with movement away from disaggregation, but it seems to have acquired new perspectives and dimensions. Australia came late to new wave coordination, which emphasises horizontal and whole of government. Earlier experiments had occurred at the federal level – and traditional coordination still existed – but they were not well articulated and strongly supported. The federal government’s whole of government agenda has been ambitious with high-level commitment to a multi-layered approach that includes cultural change, and reflects a broader program of integrated governance reform. At the same time much of the drive has been from central agencies, particularly the Prime Ministers Department, and these centralising agenda need to be differentiated from the promotion of inter-agency collaboration and cooperation. The paper examines several types of horizontal coordination and their significance in different sectors and with reference to the experience of relevant other countries. 2 Coordination has become prominent internationally where movement away from disaggregation has been pronounced and where governments have been seeking to reassert central direction in order to improve performance. Much of the coordination has a traditional character, but it also seems to have acquired new perspectives and emphases. The challenges are well known, and also the rather mixed impact that these agendas have had in countries like the United Kingdom and Canada (Peters 2006). Australia came late to new wave coordination which emphasises horizontal and whole of government. Earlier experiments had occurred at the federal level – and traditional coordination still existed – but they were not well articulated and strongly supported. The federal government’s connecting government agenda (2004-2007) was ambitious with high-level commitment to a multi-layered approach that included cultural change, and reflected a broader reform program of integrated governance. The article examines several types of horizontal coordination and the overall significance of this agenda. Modes of coordination in Australia: traditional and new Coordination has been a perennial consideration in system design, but now features more in reform agendas (Peters 2006; Verhoest and Bouckaert 2005). The new prominence of coordination reflects in part a rebalancing following 1990s new public management (Halligan 2006a, 2007b), but its forms seem to have acquired some fresh characteristics. Australian coordination in the 2000s has taken three overlapping forms: traditional, experimentation with new modes of coordination (variations on joined up and horizontal government) and coordination through integrated governance. The boundaries are not always clear, and the official characterisations not necessarily helpful. A traditional conception of coordination is ‘a process in which two or more parties take one another into account for the purpose of bringing together their decisions and/or activities into harmonious or reciprocal relation’ (Kernaghan 1987: 263). Coordination may be represented as ‘remedial activity’, implying a more retrospective focus, reacting to disasters and responding to communications problems. It would be an overstatement to depict traditional approaches as retrospective and their contemporary counterparts as prospective, except the emphasis has moved more to the 3 prospective. Another definition addresses procedural and policy/functional coordination centred on central agencies (Painter 1987). The archetypal mechanisms of traditional coordination were the interdepartmental committee and central agency coordination through control of transactions. Horizontal government approaches have developed in the last decade in public sector practice in order to promote inter-agency collaboration and cooperation in the pursuit of government policy goals (Bogdanor 2005). These approaches reflect both traditional coordination and new forms of organising, structuring, and coordinating that seek to connect distinct parts of the public sector. In Australia and internationally, such approaches represent an important break with conventional notions of public sector organising, and a popular response to dealing with complex public policy problems and operating in complex environments. Such approaches have gained strong endorsement from governments both in Australia and abroad with parallel developments in the United Kingdom (joined up government), Canada (horizontal government), the United States (networked government) and New Zealand (integrated government)(Bogdanor 2005; Bakvis & Juillet, 2004; Kamarck, 2004; Perri 6 2005). Within these concepts and applications there are a range of meanings that vary between managing horizontal relationships (operating more at the inter-agency level) to broader formulations that envisage integration of government operations. As articulated in the Australian context, connecting government covers policy development, program design and review (MAC 2004). Coordination and integration can be differentiated, but as distinctive elements (Verhoest and Bouckaert 2005). Or they can be regarded as clusters of activities on a spectrum in which coordination refers to fairly rudimentary activities that range from ‘taking into account’ to dialogue and joint planning, but stopping short of implementation, and integration refers to implementation through structures that range from joint working (defined as temporary collaboration) through alliances to unions (Perri 6 2005: 48-50). Much of the recent reform agenda involves integrating governance (Halligan 2007b). This is multi-faceted and the dimensions involving coordination and integration are not necessarily congruent. They range from centrally driven policy and implementation processes to attempts to make horizontal interaction a routine part of agency management. 4 Relationship of horizontal coordination to integrating governance During the reform era, Australian public administration has moved through different machinery configurations. Four central agency models can be distinguished by characterisation, the main locus of activity (centre or line departments/agencies) and the relational basis. Of particular interest are the modes of control through either the myriad of financial and personnel transactions, accountability management or a systemic form of performance management. The integrated hierarchical model is bureaucratically based in traditional public administration. The strategic model reflects attempts to move away from the transaction basis by differentiating strategic policy from operational and delivery matters. The devolved model is assumed to be a product of reform design, either management or market driven, and needs to be distinguished from systems that lack a strong centre. Weak centres appear to either reflect state traditions or factors that are less determinate (e.g. Lindquist 2004 on Canada). The final model is integrated governance, which essentially combines the attributes of a strategic centre with active line departments. This is a rather complex and demanding option that benefits from the directive role of the political executive and an effective system of performance management (Halligan 2006a). The limitations of the models are familiar. The transactional basis of the traditional model was superseded because of its micro-administrative focus. The steering/rowing model may merge into the devolved or weak centre models if the mix of roles tilts towards the line departments. Similarly, the devolved model becomes vulnerable once active political executives become disabused of ideological fixations and as the implications of contracted capacity and the problems of coordination and coherence become prominent. As for the integrated performance model, the strongest challenge comes from sustaining a complex approach and one underpinned by an active political executive and a performance culture. The Australia trajectory has approximated each of these models during the last three decades with the current focus being on integrated governance. The Australian model that emerged in the 2000s represents a significant redesign that has at least four dimensions, each designed to draw together fundamental aspects of governance: resurrection of the central agency as a major actor with more direct influence over departments; whole of government as the new expression of a range of 5 forms of coordination; central monitoring of agency implementation and delivery; and departmentalisation through absorbing statutory authorities and rationalising the nondepartmental sector. A centralising trend within the federal system has also been identified, which stretches across policy sectors. In combination these offer formidable potential for integrated governance (Halligan 2006a). These trends have shifted the focus to some extent from the vertical towards the horizontal. Instead of emphasising the individual agency, there is now also a concern with cross-agency programs and relationships and with driving agenda and monitoring by central agencies. At the same time there is a reinforcement of, and significant extension to, vertical relationships. The result has been the tempering of devolution through strategic steering and management from the centre and a rebalancing of the positions of centre and line agencies. Underlying each of the four dimensions of change is a political control dimension: these include improved financial information on a program basis for ministers; strategic coordination under cabinet; control of major policy agendas; organisational integration through abolition of bodies and features of autonomy; and monitoring the implementation of government policy down to the delivery level. The overall result is greater potential for policy and program control and integration using the conventional machinery of cabinet, central agencies and departments. Resurrection of the central agency in integration and coordination The overriding trend for over a decade – to devolve responsibilities to agencies – remains a feature of the Australian system, but it has been modified in two respects involving central agencies: first, through the whole-of-government agenda driven by the Department of the Prime Minister and Cabinet; and second, through a more prominent role for central agencies in espousing and enforcing principles, and monitoring and guiding in the areas of budgeting, performance and values. The Department of Finance’s role and capacity to oversight financial management and information was enhanced, with a greater focus on departmental programs, a renewed emphasis on cash accounting and an expansion of staff capacity in a shrunken department to provide the necessary advice for government. With regard to monitoring, the Australian Public Service Commission invested in improvements to its capacity for evaluation. The devolved environment was being balanced by greater public accountability through the legislative requirement of an 6 annual report by the Public Service Commissioner on the ‘State of the Service report’. The Commission extended evaluation in the State of the Service report to include surveying employees and agencies, and to scrutinising more closely public service values and practice as part of the greater focus on evaluation and quality assurance (APSC 2006). Central monitoring down to program delivery A core principle of the 1980s was to require departments to manage as well as to provide policy advice. Under the market agenda of new public management, outsourcing, agents and specialised agencies were favoured for service delivery (e.g. Centrelink). The language of the mid-2000s became to enforce effective delivery as well as policy advice with the latter defined in terms of outcomes. Implementation has often been the neglected end of the policy spectrum. Under the market agenda, outsourcing, agents and specialised agencies were favoured for service delivery. Governments have reviewed internal constraints on implementation in response to public perceptions of the performance of delivery agencies. The solution was to extend central control to remove implementation blockages and delays. Following the experiment with the UK Delivery Unit an Australian Cabinet Implementation Unit was established in the Department of the Prime Minister and Cabinet to seek effectiveness in program delivery by ensuring government policies and services are delivered on a timely and responsive basis1. It has been depicted as a partnership with government agencies in producing systematic reform to the implementation of government policies, and to ensuring effective delivery. The implementation being monitored involves testing against reality the logic underlying policy decisions, the policy instruments and the resources allocated during the policy formulation (Shergold 2003; Halligan 2005). The authority of cabinet was drawn on both as a 'gateway' and a ‘checkpoint'. New proposals required appropriate details regarding implementation. Cabinet submissions with a risk element must address a delivery framework including milestones, impacts and governance. Second, adopted policy proposals required formal, detailed implementation plans. On the basis of these plans, progress is reported to the prime minister and cabinet against milestones in 'traffic light' format, which has been regarded as a powerful incentive for organisational learning for public servants. The 7 CIU reviews of policy initiatives that cross portfolio boundaries are seen to be requiring agency reflection on how to improve co-ordination. Around 200 policy implementations have been monitored. The 'traffic light' report to the prime minister and cabinet has been regarded as a powerful incentive for organisational learning for public servants. Cultural change has been promoted around a project management approach employing a methodology designed to codify and think through the connections between policy objectives, inputs, outputs and outcomes, to expose underlying assumptions to questioning and to clarify risks and results (Shergold 2004b; Wanna 2006). Integrating structures Reverting to generic structures: the multi-functional department An important strand of the model has involved the swing back to a more comprehensive ministerial department. The targeting of the broader public sector derived from election agenda and led to the commissioning of the Uhrig review into the corporate governance of statutory authorities and office holders (Uhrig 2003; Wettenhall 2004). The post-Uhrig agenda was for ministerial departments to have tighter and more direct control over public agencies because of two issues: the extent of nondepartmental organisations, and their governance. The array of Commonwealth public bodies had been comprehensively mapped and typed by the Department of Finance and Administration. The dangers of ‘bureaucratic proliferation’ were proclaimed with departments of state employing only 22 per cent of public sector employees – most working in approximately 180 agencies, many with statutory independence. The official concern was with different legislative bases, constitutions (boards or not) and opaque governance. ‘If implementation is to be driven hard it is important that there be clarity of purpose, powers and relationships between ministers, public servants and boards. Good governance depends upon transparency of authority, accountability and disclosure. There should be no doubts, no ambiguities’ (Shergold 2004a). A core principle of the 1980s was to require departments to manage as well as to provide policy advice. The language of the mid-2000s has become to enforce effective delivery as well as policy advice with the latter defined in terms of outcomes (Shergold 2004b). Departmentalisation was expressed through absorbing statutory 8 authorities and reclaiming control of agencies with hybrid boards that did not accord with a particular corporate (and therefore private sector) governance prescription.2 The medium term result was a reduction in the number of agencies in the outer public sector (114 to 88 between 2003 and 2008) and an expansion in the number in the core public service (84 to 100). Delivery integration and inter-agency coordination Centrelink was established as a one-stop-shop, multi-purpose delivery agency to provide services to several purchasing departments, and therefore provides an ambitious case of horizontal coordination of service delivery. Essentially, the two separate networks of two separate networks of regional offices for social security and employment were brought together. Centrelink's services, mainly in the areas of social security and unemployment, have accounted for around 30 per cent of the federal government’s budget.3 It provides a case of a hybrid organisation that combines autonomy through special corporate governance arrangements (an independently appointed CEO and board) and operations (involving relationships with several departments), with informal features that facilitate conformity with government policy and preferences in politically sensitive fields. In this latter respect it might operate like a department of state, although technically a statutory agency that seeks to be entrepreneurial and benchmarked against private delivery systems. Centrelink provides a case of a complex (multi-functional) agency that is political salient and budget significant, and operating in an ‘ambiguous environment’ (Halligan 2007a). The ambiguity derives from how the functions were originally divided up, the scope for differing interpretations of relationships between the agency and departments, and the multiple models that entered into the calculations for the new agency. In essence a horizontal question (inter-agency failures in collaboration) was converted into a vertical question (defining the relationship in terms of purchaser and provider). Formal agreements were introduced to define the relationship, which was also based on resources, but other considerations came into play. Structural reforms of government organisation involving functional boundaries can still leaves public officials with the problem of how to bridge vertical separation and horizontal divisions. In Centrelink’s case, the basis for subsequent debates about the roles of purchasing department and provider agency were laid by embedding 9 several models in its organisational imperatives. The tensions between models also provided opportunities for advocacy of a distinctive agenda and employing smart practices in pursuit of public management innovation and interagency collaboration. The cases of interagency relationships indicated significant changes in scope and style: from purchaser-provider to the alliance; competing for policy roles to value chain; and competing within the context of contestability to expanding business through partnering agreements. Centrelink developed a new service delivery model and reformulated external relationships despite obstacles and the need to balance the several imperatives of customers, clients, competitors and politicians. Importantly, Centrelink was able to transcend relying on its own capacity within a competitive environment to develop interagency collaborative capacity with claims to be thereby enhancing public value. There remain issues about the separation of policy formation and implementation and how best to constitute a multi-purpose service delivery agency. On the vertical dimension, the limitations of basic purchaser–provider as the means for handling relationships were apparent. The advantages of the horizontal integration of welfare delivery can be realised more effectively through partnerships and alliances for delivering services for a range of clients because of the scope for smart practices and the potential inherent in interagency management (Halligan 2006b, 2007a). The position of Centrelink changed in 2004 under the integrating governance agendas about agency governance and ministerial accountability; centralising impulses designed to rebalance the public service by tempering the high levels of devolution, including the number of non-departmental organisations, and Centrelink specific matters regarding relationship issues such as the operation of a purchaserprovider within the same portfolio, governance by board and minister, and interdepartmental tensions. The impact of integrated governance on Centrelink was comprehensive for all dimensions discussed above had an impact. Centrelink came under a new parent department and within a new portfolio under a central agency. A Department of Human Services was created within the Finance portfolio with responsibility for six delivery agencies that operated under direct ministerial control and one advisory board. The rationale was to improve the delivery of services within a whole of government approach. Will this type of strengthening of the vertical dimension (ministerial and departmental control) and horizontal 10 dimension (delivery network across agencies) achieve improvements in service delivery? Whole of government Australia was slower to adopt a systematic approach to whole-of-government issues than Canada and the UK, both of which were pursuing these issues in the 1990s while Australia was focused on management reform agendas. The environment created by these reforms emphasised devolution of responsibility to agency heads, with direct agency accountability through them, and the importance of each agency pursuing its own business and policy agenda. In recent years the need to temper devolution with a broader, whole-of-government perspective has permeated much government activity.4 The shift is expressed in three ways. At the political level, the Prime Minister committed to a series of whole-of-government priorities for new policy-making that included national security, defence and counter-terrorism and other generally defined priorities such as sustainable environment, rural and regional affairs and work and family life (Howard 2002; Shergold 2004a). The priorities have been pursued through a range of traditional coordinating and new whole-of-government processes including changes to cabinet processes aimed at strengthening its strategic leadership role. They involved setting aside more time in the cabinet’s program to consider broader strategy and strategic issues; streamlining consideration of submissions; and giving more emphasis to following up decisions. The priorities have been pursued through a range of coordinating or whole-ofgovernment processes, including: cabinet and ministerial processes (e.g. Ministerial Oversight Committee on Energy); the Council of Australian Governments (COAG) and Commonwealth/State arrangements (e.g. sustainable water management, land transport); inter-departmental taskforces discussed above (e.g. work and family life); integrated service delivery (e.g. stronger regions); and lead agency approaches (e.g. indigenous initiative). The government’s organisational response to the testing external environment experienced by Australia in recent years has been mainly to build coordinating units within current structures, particularly within the Department of the Prime Minister and Cabinet. The whole of government approach to national coordination has covered strategic and operational levels. There has been a National Security Committee of Cabinet, a 11 National Counter-Terrorism Committee (for intergovernmental coordination) and a National Security Division was created to coordinate and apply whole of government principles in national security focusing on border protection, counter-terrorism, defence, intelligence, law enforcement and security. The Department coordinates activities across the Australian Public Service as well as inter-governmentally (Metcalfe 2005). Thirdly, the shift was expressed through a seminal report on Connecting Government by the Management Advisory Committee (2004).5 The report indicates how the Commonwealth can address a series of issues about whole-of-government processes and structures, cultures, managing information, budgetary frameworks and includes the different levels of policy advice, program management and integrating service delivery. Whole of government has been defined as denoting ‘agencies working across portfolio boundaries to achieve a shared goal and an integrated government response to particular issues. Approaches can be formal and informal. They can focus on policy development, program management and service delivery’ (MAC 2004: 1). Despite this specific definition, the boundaries are not readily drawn for whole of government for coordination is also viewed in terms if coordinating departments (the familiar central agencies), integration (reducing the number of departments) and cooperative federalism (MAC 2004: 6-7). Approaches may operate formally and informally, range from policy development through program management to service delivery. There is an underlying rationalist conception suggesting that difficult policy problems and management questions can be laid out, solutions designed and challenges managed leading to improved problem solving, service delivery and performance. The medium term significance whole of government is still being examined. The effectiveness of different approaches depends both on the complexity of the policy or program task and the way it can be configured. In practice, there is wide spectrum of experiments ranging from crisis management through to the challenges of coordinating the administration of indigenous programs and services (Gray and Sanders 2006). IDCs and tasks forces The interdepartmental committee (IDC) was a central component of traditional machinery, numbering as many as 180 IDCs, mainly between departments with 12 responsibilities ranging from routine administration, and adjudication to policy. The policy IDCs (normally between 30 and 50), displayed two significant characteristics: operating as a collection of delegates who defended the interests of their department and ‘the norm, and the practice of, of IDCs of searching for a consensus outcome’ (Painter and Carey 1979: 62). IDCs retain a recognised presence, and their traditional roles are recognised, but they are less valued now as the main mode of cross-departmental coordination for program design, review and management with new structural innovations emerging for strengthening collective and cross-portfolio coordination (MAC 2004). Task forces originally rose to prominence as a means of avoiding the defects of IDCs and as short-term vehicles for giving focus to government agendas. The task force has become ‘semi-formalised as a device to develop new policy or to deal with significant, urgent issues’ (MAC 2004: 29). Whereas once task forces were distinguished informally from other cross-agency structures, the understanding is now consistently entrenched that ‘a task force is a discrete, time-and-purpose limited unit responsible for producing a result in its own right’. Their capacity for operating independently from policy departments is strengthened by the Department of the Prime Minister and Cabinet being assigned administrative responsibility for them in many cases (Hamburger 2007). Coordination and culture Much of modern coordination is similar to traditional arrangements, but there is now a greater intensity and commitment to horizontal coordination and embedding interagency collaboration in the public service. The official literature is inclined to regard all cross-service and inter-departmental activity as whole of government. Of the traditional mechanisms the cabinet (of ministers) and the central agencies are prominent. Task forces have become relatively institutionalised and have addressed significant issues, but they only affect a relatively small proportion of Senior Executive Service/Executive Level public servants (13 per cent). Joint teams (regarded as longer lasting structures that blend functions across portfolios) accounted for 16 per cent. Membership of inter-departmental committees continues to be the most significant activity (22 per cent) (APSC 2006). The principle of ‘function’ is the universal basis for most central government organisation. The key issue with whole of government is about refocusing agencies 13 constituted around functional hierarchies into ones that routinely incorporate horizontal collaboration and integration in their modes of operating. In the new public service, horizontal governance is located alongside vertical relationships and hierarchy. The head of the public service regards building a culture of collegiality and creativity as his primary objective (Shergold Foundations). Culture is a key barrier to successful change (Osborne and Brown 2005). Long-term change is unlikely without cultural change because pressures from functional established systems are too intense. How do public servants incorporate whole of government operating principles into underlying assumptions that shape day-to-day work; and how do agencies substantiate claims about cultural change? The evidence to date is uneven. Most Senior Executive Service/Executive Level public servants have some form of direct dealings with other agencies, but 61 per cent of those surveyed for 2005/06 had no structured engagement. The remainder were involved in task forces and IDCs and joint teams. Figures for the previous two years indicate a marginal decrease across the categories for structured activity (Australian Public Service Commission 2006: 214; see also reports, 2003-04 to 2006-07). Agency support for collaboration was quite strong according to public servants’ perceptions of whether their agency encouraged a constructive approach to collaboration with public organisations. However, some slippage was apparent suggesting that the level of support might be waning as the intensity of commitment to a new initiative fades. Multi-agency forums had been represented as an indicator of change and commitment. Yet public servants saw such forums as more focused on solving agency objectives compared to whole of government priorities. Of the indicators, high support for cross-boundary focus on outcome was the more promising. Horizontal management and whole of government raise intriguing issues in organisation design and behavioural challenges. The Australian whole of government agenda is fairly ambitious in international terms and exists within the broader framework of integrating governance. This compatibility between the agenda and the framework ensures that inherent conflicts do not apply at that level and that there is sustained political and bureaucratic drive and support. Because the conditions are propitious, this case provides an interesting experiment. The obstacles to inculcating cultural change however remain substantial. The imperative of the functional principle and the rigidity of organisational boundaries 14 still loom prominently. There is of course no single formula for balancing agency requirements and whole of government imperatives. The overall commitment to horizontal and integrated governance remained distinctive and strong. The horizontal agenda requires a combination of leadership and incentives. Leadership at the public service level has been clear, but more attention was needed to the incentives for agencies to engage systematically in horizontal collaborations. Conclusion The medium term impact of horizontal coordination in Australia has been mixed. The level of horizontal management activity appears to have been expanded through a mixture of central agency push and shove using task forces, a reliance on traditional IDCs for some purposes, and some new interactive mechanisms. But until more systematic material is acquired the judgement must be qualified6. Even the official judgement records lack of progress: ‘Despite some successes … the overall implementation of the Connecting Government report has been disappointing and the report does no appear to have had a fundamental impact on the approach that the APS takes to its work’ (APSC 2007: 247). There are also two potential challenges. The conventional wisdom became that horizontal relationships were simply incorporated into the routines of governance. Given the pressures of the functional principle, the viability of this expectation in practice was problematic. There was also an earlier experience of mainstreaming evaluation as part of normal day-to-day management, which led to its neglect. There is a more significant medium term challenge. 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(2004) ‘Statutory Authorities, the Uhrig Report, and the Trouble with Internal Inquiries’, Public Administration Today 2, 62-76. 1 In contrast to the UK Delivery Unit, the Implementation Unit has involved public servants, not political advisers and has been integrated into the Department of the Prime Minister and Cabinet. 17 2 Similar agendas for rationalising non-departmental organisations have been apparent in other Anglo-Saxon systems (Christensen and Laegreid 2006) although they are not as systematic. 3 Centrelink was established in 1997 as an independent statutory authority with responsibility for delivering government services to 7.8 million recipients of social welfare benefits and services, accounting for about 30 per cent of total Commonwealth expenditure. For Canada’s recent experiment with service delivery see Tan 2007. 4 Compare Verhoest and Bouckaert (2005) for how such a trajectory is worked through in other countries. 5 The Management Advisory Committee has been a primary vehicle for examining and setting reform agenda with a membership comprising departmental secretaries. 6 A major research project on Whole of Government is getting underway at the University of Canberra, which may provide some answers. 7 There are six states and two territories with powers under the constitution. The intergovernmental reform agenda has been partly prompted by the unusual circumstance of all nine jurisdictions between Labor governments.