Australian Public Sector Internal Report:

Australian Public Sector

Internal Report: Managing Out Executive Summary

This document highlights various concepts related to management in Australian public sector reform. As the business world changes, so does theories and concepts related to management. Increasingly, more linear than vertical relationships have been built between managers and employees, and the concept of managing out has become increasingly important.

For the Australian public sector, this is a particularly challenging, but also necessary process. The reason for the particular complexity of leadership issues in this sector is the many stakeholders and partners involved in providing public services. The public, private sector service providers, and the government all need to be taken into account when making public sector reforms. This is why it is essential to manage reforms and build trusting relationships between managers, employees and service providers.

Introduction

Management theories have faced a variety of changes throughout the twentieth century. As the business world is facing the dawn of a new century, it is inevitable that new ways of managing business transactions will also see the light. Managers are thus faced with several challenges related to the new world of business. As a business entity, the Australian public sector is no exception to the managing challenges of the twenty-first century. Indeed, the public sector with its many stakeholders and interested parties, needs to pay particular attention to business and managing practices (Shergold 2004). These need to be updated to a standard at which the public sector provides the greatest value of service at the lowest cost possible. The purpose of this internal report is therefore to explicate the various ways in which the concept of "managing out" is used in the Australian public sector in order to create optimal value in its services to the public.

The Australian public sector has undergone a number of changes since the 1970's. After the relative prosperity experienced in the country during the post-war period, the mid-1970s were marked by a significant dependence upon deficit spending. Combined with this, the increasingly competitive global economy placed significant pressure on the country by the 1980's, and a wide-scale restructuring program became necessary. The process of reform in the public sector began during the 1970's, and continued through the 1980s in the form of various legislative reforms. The culmination of the program thus far is the Public Service Act of 1999. This Act introduced the ideals of accountability, responsibility, transparency, ethics and probity as central into the public service paradigm. While these concepts have always been part of public service, the 1999 Act articulated them for the first time (Shergold 2004).

Along with the policies regarding public service, management practices evolved and changed to suit not only the most current business principles, but also to suit the industry of public service itself. Managing out has been one of the most important aspects of public sector reform.

Management Roles within the Public Sector

Managing any service industry has never been a simple task. Indeed, the way in which business management theory has evolved has only increased the complexity of the management paradigm (Shergold 2004). This is particularly so in the Australian public sector, as many stakeholders and business partners are involved.

Management in the public sector can therefore no longer be seen as an isolated function. This makes the task more complex, even as outsourcing services takes some of the pressure away from public service provision (Mulgan 2004). This complexity is exacerbated by elements such as technological advances and expanded knowledge production. The result is that public sector employees need the assistance of outside parties to handle many of the complexities within their work. This is where partnerships rather than a hierarchical management structure become relevant.

Whereas employees in the past were mostly accountable to their managers, the order has reversed to a certain degrees. Currently the public sector manager bears most of the accountability to clients and stakeholders. In Australia, current public sector management thus plays a facilitating rather than governing role. The public sector works in partnership with other sectors of society to create the highest possible value for its clients.

As a result of rapid changes and reforms in the Australian public sector, as well as the many partners and stakeholders involved, managers in the sector face a number of challenges. In creating optimal value in the public sector then, these challenges have to be faced and dealt with from the basis of managing out.

Management Challenges and Stakeholders

The greatest challenge faced by public sector managers is the paradigm shift of leadership styles from fairly authoritarian towards a more democratic paradigm. Combined with this is the general perception by the public that public sector managers are bureaucratic and inflexible. These challenges are the basic problems that public sector managers need to address.

The most important way in which to handle the challenges to management is to take into account the roles of various stakeholders both within and outside of the public sector. Including these stakeholders in public sector development entails a focus on the horizontal dimension of alignment between stakeholders. Pollitt (2003:169-171) refers to the leadership role in its "fixing" or "coping" capacity. Management, according to the author, is still essential in the public sector, but the dimension of managing out is equally important. Furthermore, according to Edwards et al. (2003:9), relationships based on trust and transparency are to be at the basis of the new management style. Task alignment should then be managed very carefully, including all stakeholders and partners in aspects such as goal definition, means of achieving goals and resources for the necessary task implementation.

Particular challenges relating to public perception entails middle management, which especially in the public sector, has been perceived as inflexible and hierarchical. Many researchers have however begun to recognize the potential for alignment within middle management. Middle managers for example can serve as a catalyst for relationship building between top management, employees and the public itself (Sethi 1999:1).

In the new paradigm of managing out, middle managers play a primarily important role in the assessment of public needs. Public demand can thus be analyzed in order to assess the amount of taxes that the public would be willing to pay for certain services. Service quality, resource assessment and public demand can thus be aligned by middle management.

The bottom line of Australian public sector reform is thus the move away from government towards governance (OECD 2001).

This means that management exists in its capacity to assist rather than to govern in a hierarchical structure. All stakeholders, including the general public, are thus to play a role in public sector reform.

The increasing focus on outcomes and results rather than services, resources or leadership itself has had profound effects on the public sector, and on the ways in which services are perceived by the public. The focus is now on how the public can best be served in the most economic way possible. The public sector is no longer closing its eyes to financial realities, but has taken responsibility to allocate and use resources with responsibility and accountability. The public is thus recognized as "customers" or "clients," who must be treated and served according to the new paradigm of leadership.