CHANGES IN STRUCTURAL DESIGN
IN THE NEW ZEALAND SOCIAL SERVICES SECTOR

Judy Whitcombe
School of Government
Victoria University of Wellington

Abstract
Reform and reorganisation of the New Zealand public sector have been ongoing since the 1980s, resulting in changes to the structural design of public sector agencies. The belief that providers of services, bureaucrats and professionals were capturing the policy process influenced the separation of policy ministries from operational departments. The impact of those changes on the social sector throughout the 1990s was profound. Ministers expressed concerns about the quality of the policy advice they were receiving. The initiatives developed in the Ministry of Social Policy encountered implementation difficulties, which meant that unspent funding for social policy initiatives was carried forward from year to year. After 1999 a Labour-led government adopted an approach aimed at reunifying the social sector and addressing the problems of fragmentation and “siloisation”, which were identified in the Review of the Centre by the Ministerial Advisory Group. The result has been a re-coupling of policy and operational agencies across the social services sector, with the Ministry of Social Development now the largest government department. 

Introduction

The structural changes that have taken place under the public sector reform process in New Zealand are linked to changes that have taken place worldwide to modernise the public sector and improve its performance. In New Zealand the reform process involved the removal of business functions from the public sector to create state-owned enterprises, and a review of the operations of the core public sector to establish a clear focus for government agencies. 

This paper focuses on the successive changes that have occurred in the structure of social service departments and the logic behind the changes that have taken place under different governments since the initial separation of policy ministries and operational departments. The changes reflect the perspectives of the various governments and key ministers within those governments. The decoupling of policy and operations in the social sector that went on during the 1990s resulted in concerns about the quality of the policy advice the Government was receiving and the problems that were becoming apparent with the implementation of policy initiatives. 

Background

The most appropriate environment for the development of robust social policy has exercised governments, ministers, academics and government agencies over the years. These issues were considered by the New Zealand Planning Council in their 1982 report Who Makes Social Policy? At that time, the Planning Council had been accused of giving more weight to economic rather than to social issues. The report identified the Cabinet Committee on Family and Social Affairs as having the function of shaping social policy at the highest level. Although the Planning Council’s report reviewed the other participants in the development of social policy, its comments on the overall organisation of policy development are most relevant to the situation in the 21st century.

The report noted that there was a “compartmentalised approach” to social policy and that competition between departments, and defensive attitudes, underlay the very fragmented approach to social planning in New Zealand. Greater interdepartmental cooperation in the exchange of information and in research efforts, which would recognise the inter-relationships and interdependence, was suggested. The report’s conclusion addressed structural issues and noted that attempts in the past to improve coordination between departments had gone as far as amalgamating departments or parts of departments, but then asked “would any improvement be gained from creating a joint Health-Education-Social Welfare department?” (New Zealand Planning Council 1982:48). A more coordinated approach was seen as being essential for the development of social policy over the longer term. This message was subsequently echoed in the Review of the Centre (2001) report.

The need to separate policy advice from operational activity was first outlined in Government Management (Treasury 1987). The public management system at that time was criticised for not providing government with high-quality policy advice. Conflicting objectives arose when advice and implementation occurred within one organisation. The phenomenon of “producer capture” was also identified. Because government required advice to enable it to assess the most appropriate intervention, doubt was expressed that the agency involved in the provision of advice would be impartial if it were also involved in the delivery of services. Ministers needed contestable policy advice from a variety of sources. The decoupling of policy ministries from operational departments followed progressively. 

Structural reform proceeded throughout the 1980s and 1990s. The creation of state-owned enterprises, through the State Owned Enterprises Act 1986, was followed by environmental and conservation restructuring in 1986/87, and then restructuring of the Ministry of Research, Science and Technology in 1989 with the establishment of Crown Research Institutes. Agencies established in the 1990s included the Department of Prime Minister and Cabinet and the Ministry of Māori Development, Te Puni Kōkiri. In the social sector, changes commenced in 1989, starting with the separation of the Department of Education and proceeding through Housing, Justice and Social Welfare in the 1990s. The last department to be established was the Department of Child, Youth and Family Services in October 1999. 

Concerns about the quality of policy advice

The passing of the State Sector Act in 1988, the Public Finance Act in 1989 and the consequent managerial reforms resulted in a period when departments and governments were focused on achieving efficiency and effectiveness. However, after the first flush of freedom and excitement, Ministers began to concentrate on the quality of the advice they were receiving. In 1991 the Minister of State Services, Hon W. Birch, directed the State Services Commission to review the purchase of policy advice. He wanted to achieve a permanent improvement in the cost-effectiveness of advice (State Services Commission 1992). 

In March 1997 the then Minister of State Services, Hon. Jenny Shipley, also expressed concerns about aspects of the advice being received. The Minister commented on the inability of the public service to clearly define the outcomes the Government sought to achieve and to put forward sound policy solutions for the Government’s consideration; the inadequate human resource capability in some departmental policy units; and the lack of attention to implementation issues. The Minister and the State Services Commissioner agreed to initiate a project that would investigate how the quality of policy advice could be improved. The project identified five contributing factors:
1.	lack of clarity in Ministers’ statements about desired outcomes
2.	insufficient incentives for active cooperation by departmental chief executives
3.	significant variation in standards of leadership, and in the performance of policy units
4.	substantial under-investment in capability development – in the past and currently
5.	significantly inadequate and/or ineffective use of information, research, evaluation and consultation techniques as inputs to policy development.

The first two factors were partly addressed in the work in 1998 on strengthening strategic management, which contributed to strategic priorities and the establishment of ministerial teams. Points 3 and 4 were being addressed in the State Services Commission’s current work programme (State Services Commission 1999b) Included in the five sections of the paper was one on “Encouraging significantly better consultation as an input to policy advice”. 
 
Further work to address the quality of policy advice continued. In August 1998 the Minister of State Services approved the State Services Commission’s proposal to do further work to develop and promote training in policy management and policy advice. This was published in 1999 as Working Paper No. 2, Gaining Through Training: Developing High Performing Policy Advisors, with Pieces of the Puzzle: Machinery of Government and the Quality of Policy Advice (dated June 1998) published in February 2000 as Working Paper No. 4. 

While the State Services Commission was focusing on addressing the quality of policy advice, within the Ministry of Social Policy initiatives were being developed to meet the Government’s social policy agenda. The programmes were required to be delivered by operational departments.

Implementation evaluated and deficits identified 

The decoupling of the service delivery operations of the Department of Social Welfare resulted in the establishment in 1992 of the Social Policy Agency, Income Support Service (later to become the Department of Work and Income), the Children, Young Persons and their Families Service, and the New Zealand Community Funding Agency (NZCFA). In January 1999 the latter two business units were combined to form the Children, Young Persons and their Families Agency, and on 1 October 1999 a new department, the Department of Child, Youth and Family Services, was established. The major social policy functions remained with the Ministry of Social Policy, which became the Ministry of Social Development when the Department of Work and Income was recombined with the Ministry of Social Policy in October 2001.

Throughout the 1990s social policy initiatives were developed, and funding was obtained through the Budget process for implementation by the operating agency. Each year when the Budget was announced, usually in the third week of May, the operating agency would receive several million dollars to implement specific projects for delivery to targeted groups. The availability of funding from 1 July (the commencement of the Government’s financial year) meant a short lead time in which to have the programme operating. Because of the Budget secrecy convention operating at that time, the initiative could not be discussed with the providers who would be delivering the programme. The period between the Budget announcement in May and the 1 July date for implementation was a maximum of six weeks. This resulted in instances where, because of the extensive lead time required for gearing up for delivery and employing suitably qualified staff, the available funding was unable to be spent in the financial year for which it was appropriated. As a result, unspent appropriated funds were often carried forward to the next financial year or returned to the consolidated fund. 

In order to focus on the implementation process, three initiatives that were developed by the Ministry of Social Policy and initially delivered by NZCFA are examined and discussed below: 
•	Family Service Centres, which were initially funded in Budget 1993, with evaluations in 1995 and 1997
•	Family Start pilot programmes, which began service delivery in 1998, with the evaluation in 2003
•	the Social Workers in Schools pilot, which was introduced in 1999 and the evaluation was completed in 2000. 

The evaluation reports from these programmes provide some evidence of the initial delivery difficulties that occurred. 

Family Service Centres

The six pilot Family Service Centres (Mangere, Otara, Huntly, Opotiki, Porirua and Motueka) were based on the model operating at Kelvin Road School in Papakura. Their function was to provide well-integrated, culturally appropriate services to families with children under six years of age in need of support. The centres were to provide family and parental support services, health services, an early childhood education centre, and HIPPY (Home-based Instruction Programme for Preschool Youngsters). The initial expectation by the Government was that the six pilot centres would be fully operational by February 1994. This meant that buildings would be constructed and the core services in place by that date, but at the end of 1994 only one building had been constructed and another was nearing completion. Full family support services were underway in only one centre at year’s end.

The first-year evaluation report (Health Research and Analytical Services 1995) notes that relationships between the centres themselves and the primary funding agency, NZCFA, were often tense, because a model centrally determined did not readily accommodate local variances. NZCFA were responsible for arranging for the delivery of the programmes according to the model specified by the policy agency. There were also tensions between the centres and the Ministry of Education. In the light of the slow establishment, evaluators questioned whether the timeframe for establishing the centres was ever possible. In the second half of 1996 the broad model of four core services operating from one building was apparent in only two of the six pilot centres, although most centres were moving closer to the intended model. 

The Final Evaluation Report (Department of Social Welfare 1997) noted that the following factors had affected implementation: 
•	the timeframe available for implementation after the announcement of the initiative, which was unrealistic
•	the extremely limited consultation with purchasers, potential providers and communities prior to the announcement of the initiative, due to Budget secrecy
•	the slow development of operational policies
•	tensions inherent in the implementation of a centrally determined and highly prescribed model, which was to be delivered by community-based providers and to have community support.

Family Start

Family Start is an intersectoral policy initiative jointly sponsored by the Ministers of Health, Education and Social Welfare, and which in the 1990s was part of the Government’s Strengthening Families Strategy. The funding responsibility rested with the Health Funding Authority; Child, Youth and Family (CYF); and Early Childhood Development. Programmes at three sites were introduced in the 1998/99 year and an additional 13 sites were developed in the 1999/2000 year. The programme is a home visiting initiative with the aim of providing early intervention to the highest-need families to improve the longer term outcomes for their children. The support provided includes parenting advice, advocacy and referrals to appropriate social services, such as health services, budgeting advice, counselling, and early childhood education services. 

The Family Start process evaluation (Evaluation Management Group 2003) noted that commentary from the sites suggested that insufficient time had been allowed to get the service up and running given the work required to develop a service from scratch. It also stated that discussion of the outcome/impact methodology highlighted the tensions involved in trying to meet the expectations and requirements of the multiple stakeholders. There was an expectation of timeliness from government officials, yet the service providers were clear about the need to take time for informed participation to occur.

Issues for consideration were highlighted for any future roll-out of the programme. These related to:
•	timing – the establishment phase could take much longer than planned for, and it was likely to take two to three years before a programme was fully operational
•	community consultation versus competitive tendering
•	the existing/available governance infrastructures within a community
•	the relationships between the proposed Family Start service and existing services in a given location.

Other issues raised in the evaluation related to the operating guidelines, the fit between the programme and the target group, and the staff skill mix and training. The staff turnover within the policy agencies meant that continuity was not always maintained, and the co-funder challenges of tight timeframes prevented planning and relationship building. 

Cultural issues were also highlighted in the report. Although the guidelines had specified that the Treaty required Māori involvement in the development of Family Start, a number of stakeholders were concerned about the lack of involvement of Māori in the original policy group and the changing composition of the co-funder’s group, which came to have very limited Māori representation. There had been minimal consultation with Māori communities (papakainga iwi) in the setting up of the sites and a failure to draw on important cultural expertise in the processes of establishing service boundaries. 

Overall, however, the Family Start programme was considered to have been successful, and the evaluation drew attention to the community and provider relationship issues that needed to be addressed. (Family Start received additional funding of $31.9 million over four years in the 2004 Budget to establish new Family Start sites. This funding went to Family and Community Services, which had been established within the Ministry of Social Development in 2004 as a provider and funder of services.)

Social Workers in Schools (SWIS)

This programme was announced in May 1999 and the pilot began in schools at the commencement of the third term in 1999, with the initial contracts with providers running to December 2000. The SWIS model was developed by an interdepartmental team and was based on overseas (US particularly) and New Zealand models. 

The pilot was an inter-agency initiative led and financed by CYF. The delivery of social services to schools and their families/whānau was piloted in three areas: East Coast, Northland and Porirua / Hutt Valley. Clusters of schools were funded to provide services themselves or through a third party provider. The 56 participating schools were largely decile 1, although decile 2 and 3 schools were eligible. 

The pilot evaluation was published in December 2000. In the schools where the pilot was working well there was enthusiasm, and the social workers and principals developed relationships of trust. The social worker was based in, or was a regular visitor to, the school and the children knew him/her by name. The model of practice the social worker practised was appropriate to the needs of the school community.

However, in the schools where the programme was not working there was a lack of clarity about the role of the social worker, the social worker did not spend sufficient time at the school to establish a working relationship with the principal and other teachers, and there were logistical problems of distance. Some schools were not fully committed to the programme from the beginning, and changes in personnel – especially with principals going on leave or transferring − undermined the continuity of service. There was suspicion at kura kaupapa Māori (Maori Language Immersion Schools) that SWIS was a mainstream service, and it was seen as an external agency. 

The programme has continued to run successfully, with the recommendations of the evaluation contributing to its continuation. These included: reducing the isolation of social workers working alone, where possible; providing the programme through external and experienced social service providers; recognising the special advantages of Māori and Pacific providers; and developing the flexibility to meet local needs.

Summary of the Initiatives

The evaluations of these three initiatives indicate that implementation deficits occurred as the programmes were rolled out. These problems could be attributed to the development of the initiatives by the policy agency, which did not take into account the implementation requirements. Some difficulties occurred through a lack of understanding of the conditions in the communities where the programmes were to be rolled out. The lack of consultation with communities was a common theme. 

The experiences of people involved in the social sector over this phase of the reforms provided a variety of views, but the danger of isolating policy development from the operational realities of service delivery was acknowledged. In the words of one community representative:

“Policy people don’t have contact with the community. Formerly the Department of Social Welfare had offices in local areas and knew what was going on. Departments lost staff and lost the collective memory and that was incredibly important. New people were appointed who didn’t have the background – they seem to have been brought in for another purpose.”

In the community sector, the “commercial” focus of the contractual arrangements and accountability requirements was a massive shock, for which voluntary organisations were unprepared (see Cribb 2006). 

Impact of the Changes since 1999

In its pre-1999 election manifesto the New Zealand Labour Party identified problems in the public sector. These included fragmentation of the sector, both in terms of the number of agencies and the different types of agencies, all with responsibility for aspects of output delivery. Operational departments and policy ministries existed in isolation, resulting in duplication and inefficiencies. Despite the efforts of the State Services Commission throughout the 1990s, the incoming government was not happy with the quality of policy advice. 

In order to address a number of weaknesses in public administration and management, the Government established the Advisory Group on the Review of the Centre in 2001 to review the public management system. In a series of reports from 2001 onwards the Advisory Group identified coordination problems and suggested solutions to combat “siloisation” and achieve the goal of departments working together in a constructive way, with improved service delivery to client groups and a continuing emphasis on managing for shared outcomes.

The Prime Minister, Helen Clark, gave her views on rebuilding the public sector in a speech to the Australia and New Zealand School of Government in June 2004. She took the opportunity to review the situation when her government had come to power in 1999, summarised the changes that had taken place since then, and expressed an opinion on the way forward. She noted that the earlier reforms had improved the management focus of public sector agencies. However, the extent of fragmentation in the sector made it difficult to coordinate activities across agencies, and undoubtedly meant the sector was less effective overall:
 
Rebuilding the capacity of the public sector also meant addressing its excessive fragmentation. Reforms in the 1980s and 1990s had seen the old large and powerful departments split in a number of ways. In their place were established policy ministries, funding agencies, and a plethora of provider agencies, – some departmental, and others with independent boards. As a result, the skills within the departments were dispersed. Policy ministries ran the risk of losing touch with operational agencies, and the latter were not always sufficiently informed by policy. (Clark 2004)

The way forward involved rebuilding capacity and addressing excessive fragmentation. The breaking up of departments had caused the dispersal of skills, and policy ministries had been losing touch with operational agencies. The converse also applied, in that operational agencies were not always sufficiently informed by policy. The re-coupling taking place to deal with these deficiencies involved Social Welfare, Education, Justice, Transport and Housing. 

Since 2001 there have been numerous structural changes in the sector. A summary of the changes that have taken place, and the reasons provided for the actions taken, is presented in Table 1. The sequence and variety of actions indicate that a case-by-case approach was taken within the overall parameter of determining the best way to achieve cohesion in a whole-of-government context. Analysis of the information contained in the table indicates that, of the 15 actions identified, five agencies (departments or Crown entities) returned or merged with their previous departments. Some of the changes were a result of the Government creating new portfolios and ministries and needing an organisational office location for them. Six of the structural changes resulted from a review – usually ordered by the Minister of State Services, Hon. Trevor Mallard. These reviews produced results ranging from mergers, through restructuring, to the status quo with the agencies remaining independent. 

Table 1  Summary of Structural Changes in the Social Sector from 2001−2006 

Year	Change	Reason(s) given for the change	
2001	Housing Corporation merged with Housing New Zealand, and housing policy staff from the Ministry of Social Policy, to form Housing NZ Corporation. 	The move was designed to bring all those agencies under one roof and provide a one stop shop for housing services and a better service for customers.	
2001	The Ministry of Social Policy and the Department of Work and Income were re-coupled to form the Ministry of Social Development.	The Government had decided on the merger to provide a better organisational basis for implementing a social development approach, to deliver more effective solutions to social issues. Better coordination between policy and operations was wanted. 	
2002	The Special Education Service (a Crown entity) returned to the Ministry of Education.	A review ordered by the Minister of Education found the service was “ineffectual, fragmented and distanced from schools and parents”. Better coordination could be achieved under the Ministry.	
2002	The Office for Disability Issues was added to the Ministry of Social Development.	The Office was established to support the Minister for Disability Issues. The portfolio was established in 2000, and policy capability was wanted following the passing of the new Disability Act (2000). 	
2003	Capability reviews were done of the Ministries of Women’s Affairs and Youth Affairs.	It was decided after the review that the Ministry of Women’s Affairs would remain as a stand-alone department because of its over-arching cross-governmental focus.	
2003	The Ministry of Youth Affairs moved to the Ministry of Social Development. 
	The review found that Youth Affairs sits closely with the social development interests of the Ministry of Social Development. This was part of a move to house small ministries under a bigger department.	
2003	The Office for the Community and Voluntary Sector was added to the Ministry of Social Development.	The Office was established to support the Minister for the Community and Voluntary Sector. The new portfolio was established in 2000,
	
2003	Early Childhood Development (a Crown entity) returned to the Ministry of Education.	The integration followed a review of Early Childhood Education and the aim was to help progress the goals of the 10-year strategic plan by combining the strengths of each organisation to build greater support for the sector.	
2003	The Department for Courts merged with the Ministry of Justice.	The Minister of State Services directed the State Services Commission to review the “fit for purpose” of the 1995/96 Justice restructuring and to achieve better sector and policy/operations coordination. 	
2004	The transport sector was reorganised following a comprehensive review in 2003.	The recommendations from the review were implemented with the aim of better aligning the sector and the legislation with the New Zealand Transport Strategy. Structural changes included transferring the policy functions of the Land Transport Safety Authority and Transfund to the Ministry of Transport to support its role of leading the sector.	
2004	The Ministry of Housing was expanded and renamed the Department of Building and Housing. 	The change was aimed at improving and streamlining building and housing services for the public to provide a one stop shop..	
2004	The Family and Community Services Group (FACS) was established in the Ministry of Social Development.	The aim was to lead and coordinate government and non-government actions to support families and communities, and to contract out operational funding transferred from the Department of Child, Youth and Family Services. 	
2004	The Department of Labour was restructured.	This was done to realign key functions and improve responsiveness and organisational adaptability to the labour market. Service delivery and policy advice capabilities were brought together.	
2005	A review of the education sector looked at the effectiveness of the machinery of government and governance arrangements for education sector agencies (Ministry of Education, New Zealand Qualifications Authority and Tertiary Education Commission).	The review found that the three agencies should work together more closely, their policies and activities should be better aligned, and the Ministry of Education should exercise leadership. The review concluded that, at this time, there should be no major structural change. 
	
2006	The Department of Child, Youth and Family Services merged with the Ministry of Social Development.	In light of the departure of the chief executive, and after reviewing four options, the State Services Commission recommended the merger option to achieve better alignment in the social services sector.	

The Current Situation

Since 2000, departments and ministries in the social sector have been receiving attention, as outlined in the table above. They are required to focus on key functions and reduce fragmentation through better alignment of policy and service delivery. With the merger of the Department of Child, Youth and Family Services with the Ministry of Social Development in 2006, the Department of Social Welfare business units, which had been initially separated out in 1992, were now back together again. 

There had been further moves to focus on the coordination of services, with the establishment of the Family and Community Services Group (FACS) in the Ministry of Social Development in July 2004. Its role was to lead and coordinate government and non-government actions to support families and communities. Funding for community-based programmes was transferred from Child, Youth and Family Services to FACS in the 2004 Budget. FACS has two roles within the sector: first, as a provider and funder of services, including information and advice for families and communities; and second, as a leader and coordinator of services for families at a general, as well as a case work, level. Further funding for family and community programmes was transferred from CYF in 2005 and 2006. 

The Ministry of Social Development is now the largest government department, with almost 10,000 staff. The Ministry leads the Families – Young and Old budget process and coordinates cross-sectoral collaboration in the social sector. The chief executive chairs the Social Sector Chief Executives Group. The Ministry’s organisational structure comprises three clusters – policy, service delivery, and corporate governance and risk. The regional commissioners have a leadership mandate across those structures, and put people together in teams based on common outcomes. Although policy and service delivery are separate groups within the national office, they work together through cross-cutting soft processes, which allow people from policy and service delivery to work together in teams. There is now integrated case management, and there are shared programmes with other agencies. The importance of bringing the policy and service delivery functions closer together was identified, and now policy and delivery work is undertaken in teams to focus on outcomes, with projects led by different groups, depending on the project. 

Conclusion

Although the splitting of policy and service delivery functions in the public sector reduced the capture of policy by delivery agencies, the negative impact of separation proved that policy development had not taken sufficient account of the circumstances in which services are delivered. The result was deficits in implementation. The way forward − to emphasise a whole-of-government approach to achieve shared outcomes − should produce greater structural consistency across the sector, better-grounded policy and more realistic implementation development.

References

Clark, H. (2004) “Rebuilding public sector capability” (the Paterson Oration), paper presented at the Australia / New Zealand School of Government, Wellington.
Cribb, J. (2006) Being Accountable: Voluntary Organisations, Government Agencies and Contracted Social Services in New Zealand, Institute of Policy Studies, Wellington.
Department of Social Welfare (1997) Final Report: Family Service Centres Evaluation, Department of Social Welfare, Wellington.
Evaluation Management Group for the Ministry of Education, Ministry of Health and the Ministry of Social Development (2003) Family Start Process Evaluation Final Report: A Summary and Integration of Components of the Process Evaluation Phase, Ministry of Social Development, Wellington. 
Health Research and Analytical Services, New Zealand Council for Educational Research (1995) Family Service Centre Evaluation: Report on 1994 – The First Year.
Ministry of Social Policy (2000) Evaluation of the Social Workers in Schools Pilot Programme Final Report, Ministry of Social Policy, Wellington
New Zealand Planning Council (1982) Who Makes Social Policy? New Zealand Planning Council, Wellington.
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State Services Commission (2002) The Review of the Centre: One Year On: Getting Better Results − For Citizens, Ministers and Staff, State Services Commission, Wellington.
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