Governance: Transformation and Change

1. Governance: Transformation and Change Professor Stephen Bartos Director, National Institute for Governance Presentation to VTA Conference 25 August 2006

2. What is governance? • “…the processes by which organisations are directed, controlled and held to account. It encompasses authority, accountability, stewardship, leadership direction and control exercised in the organisation” (ANAO, 2003) • “The processes whereby decisions important to the future of an organisation are taken, communicated, monitored and assessed” (Bartos, 2005)

3. Other meanings • How a country is run ( frequent use of the word) • Public administration (the sense in which it is often used in the USA) • Management (many people don’t make a distinction between G and M)

4. Further meanings of governance • Used in many other fields: • IT governance • Medical governance • Project governance • University governance • Everyone wants a piece of governance

5. The topic of the moment • Living in interesting times • Governments worldwide have discovered “governance” – why? • not an end in itself: govt. believes good governance improves outcomes • governance spins well politically

6. Governance in transformation From • backroom to centre stage • compliance to performance • academic to practical And perhaps also • from too little to too much?

7. Private sector governance cases • Enron, World Com, Parmalat, HIH • Heightened attention to corporate governance issues • Variety of responses worldwide • Governments lack credibility in lecturing private sector on governance if they fail to act internally

8. Victoria • Australia’s leading State in terms of governance thinking • Impressive approach in many areas of activity, including TAFE • Leadership from SSA at State govt. level, OTTE at sector level

9. Continuing change • Education and Training Reform Act 2006 • Effective from 1/1/07 • Expect more changes in future years • that’s just the way the world now works • need adaptable and flexible approaches

10. Approaches to governance • Compliance: • Legal compliance • Accounting framework, audit and control • Fraud prevention • Performance • How top level decisions are made • Emphasis on relationships and incentives

11. Performance dimension • Harder to pin down in reports and standards • But an emerging realisation that it is MORE important to effective governance • But don’t abandon compliance side

12. Is governance important? • Not much empirical evidence linking good governance to good results • Plenty of links between poor governance and poor results • Performance determined by many factors

13. Public sector governance or corporate governance? • Both organisational concepts • Much of the public sector is organised into corporations • ‘Public sector governance’ is a more embracing term • And recognises that even corporations in public ownership face specific issues

14. Special issues affecting public sector governance • Role of the Minister • Setting and measuring objectives • The accountability regime

15. Principles of public sector governance • Rule of law • Accountability • Ethics and probity • Performance measurement • Managing risk • from Bartos, 2004, Public Sector Governance Australia

16. Rule of law • Applicable laws, regulations and conventions • Many Boards (in general – this is not a remark directed at TAFE) are unaware of many of the laws for which their own body is responsible • Need also awareness of other State laws (eg Financial Management Act 1994) • plus applicable Commonwealth law (eg Trade Practices)

17. Accountability • Essential component of governance • “Provision of information on performance to a person or body who can take action on that information” • Bartos 2004

18. Accountability regimes • Transparency • Clarity • Regular reporting • Should NOT be compliance based • Compliance only one element of the broader accountability regime

19. TAFE sector transparency • Websites, employer info, student info, all well supported and transparent • Question for you to consider: how open is the sector to external scrutiny by people who don’t understand TAFE?

20. Ethics and probity • Bring down organisations if not observed • Is determined by culture • Can be managed - within your control • Governance is vital • Ethical standards start at the top

21. Ethics and probity • Ministers set the tone for ethics • And in the Australian system, have the final say on what constitutes ethical conduct • But each Board should still maintain a separate ethical monitoring framework

22. Performance measurement • Governance responsibility: • Decide what should be measured • ask the right questions of management • More difficult in the public sector: long term, sometimes conflicting objectives • But still desirable to measure progress where possible

23. Public sector performance measurement difficulties include: • Unclear objectives & unclear problems • Are Minister’s real performance measures the same as the published? • Tensions between what is good for government as a whole and what benefits an individual Minister or agency

24. Issues in performance measurement • “what gets measured gets done” • Only a cliché because almost always true • Key governance role is determining what the (few) important measures of performance should be

25. TAFE sector performance measurement issues • Outcomes are long term • Immediate outputs may not relate to outcomes • Sensitivity to small errors – can undermine overall performance measurement

26. Risk management • Extensive risk reporting in the public sector in Australia • Assessment of risk mandated • An increasingly important role for audit committees • Not as clear that risk is managed (vs. reported on)

27. For further information • Visit the National Institute for Governance at • http://governance.canberra.edu.au/

28. Questions and comment