Death by a thousand paper cuts

What IR's mega-transformation can teach us about the false economies of public sector transformation

So far, I’ve written a lot about the difficulties of public sector reforms and restructuring specifically – but today I want to contrast that with what I believe to be a standout example with lots to learn from. That is... within reason. I’m talking about Inland Revenue’s epic decade-long transformation.

The basis of my doctoral research has been a database of consultation- and decision-documents from nearly 500 internal restructures that took place across New Zealand’s 62 “public service” institutions between 2018 and 2021. That’s a whole lot of PDF! And yes, I read all of them (I always say, doing a PhD doesn’t mean you’re very smart, it just means you have some form of semi-productive obsession). And so many of them follow the same playbook, the same stories, graphs and abstracted reasoning, over and over again...

Inland Revenue’s documents stood out for a few reasons.

First of all – and this may only be remarkable for the nerds out there: they were able to fulfill my OIA request in lightning speed. Weeks before the due date, they sent me a host of well-organised zip files. If you still grew up in a paper-based world and you can imagine the feeling of handling towering stacks of documents – that’s what it felt like. And this is the next way in which they were unusual: IR’s restructure documents were complex, multi-volume, highly-structured and carefully created affairs, just look at this screenshot from my folder structure:

Multiple phases, documents in separate parts A-D, and each of them chopped up into minute details for each individual team and scope. Having authored similar documents in the past, my head hurts just thinking what it must have been like to pull these together – and frankly, to be at the receiving end of them. Yikes!

Then again, their tone and framing was different from what this highly-produced structure might suggest. For me as the outside-reader, it felt like budding into an group of people in the midst of an intense and engaged debate. A lot what pre-sumed, to start with:

“I know for many of you, it feels like this has been a long time coming, in fact we’ve been working towards this stage since 2015”

But the biggest and most remarkable difference in these documents were the frequent references to other work that has been going on, and the structural changes being a result of the changed conditions that this had created.

The difference between this and the narratives of other restructures may seem small, but it’s vast in my eyes. Everyone broadly gestures to changed conditions, customer needs and strategies, and IR still does a fair bit of that too. But the references to real manifested projects are peppered through the whole lot:

“We have better tools and processes (...), we’ve seen policy changes, new platforms and new ways of working. (...) We now receive more complete income information earlier, and most of it arrives automatically. That means, more of our compliance effort is upfront, rather than waiting until the end of the year.”

[I had to shorten a lot of this, because they can’t help using a lot of business-bingo filler words nevertheless.]

And while the restructures in my time frame were across 7 different teams and directorates, all of them reference the roll-out of a phase of their new ICT core system as a major driver of change.

Why is this remarkable?

My biggest concern with how change processes inside public sector organisations is run, is that the large majority of events show NO SIGNS of running the BASIC METHODS that even the most simple handbook of strategic management recommends: it’s all structure, no substance.

I know, many will claim restructures don’t actually intent to make substantial changes to a team’s function or behaviour – a claim that I’ve gradually moved away from as I’ve dug my way through my self-inflicted rabbit hole. I do think that there is usually at least some expectation to make a functional change, often in a kind of one-stone/multiple-birds kind of situation. But if you actually want to move a team or a function into a desired direction, it takes a lot more than a rearrangement of roles, responsibilities and reporting lines.

It’s the interplay between roles, tools, policy, process, and practice that determines how a public service is delivered – and not least, all the invisible workarounds, ingrained habits and “that’s just how we do it” approaches that public servant are forced to develop in sub-optimal conditions, to “make things work”. I’ve shown already how there is no structured post-implementation follow-up or monitoring after internal reforms in New Zealand’s public sector.

So that’s to the core of my criticism:

Claiming one will achieve efficiencies, modernisation and “give effect to” new organisational strategies by a restructure process that’s run with no discernable supporting methods like reviews of policy, practice, tools and training, is like declaring one will fully renovate a house and use nothing but a sledgehammer.

This is WELL documented stuff in management literature. There are some great case studies that look at broader organisational change, often digital transformation. Just read the number of activities that companies run in these examples to shift their operations in measurable amounts. And the case studies still tend to find some pitfalls, e.g. when people still revert to old habits of governance. This example in particular is worth a read.

That’s my gripe – none of this can be spotted in the vast majority of restructure documents, despite far-reaching and ambitious claims and polished operating models. We always seem the expect that solely by re-stating intent and vision, and by making some structural changes, the rest will come out in the wash…

And yes, IRD seems to be different here...

Photo by StellrWeb

So how did they manage that?

On this, I have my own suspicions, and I’ve also heard some compelling tales from people who were in the belly of the beast at one time or another – and a beast it sure was. So let’s go through them:

Hinged on the development a new core system

I can’t over-emphasise the importance of this enough. It looks very much like IR’s transformation was run hand-in-hand with the development of its new core system. If you haven’t dealt with “core systems” before, it may be hard to see why they are so important, but in my view, they are the biggest barrier to effective internal reform.

You want to “remove silos”? Well, if your core system doesn’t make the right data go from one point in your org to another, you ain’t gonna – no matter how often you lump teams into the same directorate and expect them to “work closer together”, magically.

IT projects are notoriously difficult to predict, manage and deliver, and we all see them blow out or get abandoned all the time – the public only sees a fraction of them as a lot of them are not interesting enough to get OIA’d. But we know our fair examples, right? *cough*novopay*cough*

About a decade seems absolutely reasonable to me for a project as enourmous as that. Over that time, such a development undergoes many, many phases and staged releases. So if they actually made a lot of their other transformation efforts contingent on the improvements that their new system can gradually deliver (which is what it reads as to me), then you have a massive factor or success, right there!

SO many other restructures identify barriers and limitation that come from their IT systems and tools, but they proceed, seemingly based on the idea: well, we can’t change it (i.e. that’s “out of scope”), but we can fiddle around the edges and try make that a little better. I can’t conclusively say whether such a minimising strategy is futile… but it sure feels like it.

When you know the hinge-points at which certain operational- or functional aspects of your target operating model (there, I said it, happy now!?) lean on well-designed and fully practice-tested tools, then you can plan your transformation based around those points – simply put. And that’s what the IR documents read like to me, that structural changes were pulled when other contingent changes were either well on the way, or live in action.

A long-term plan, and long-term commitment

I’ve been told that IR’s leadership first defined an vision for where they wanted to do (as everyone does) – and then allowed themselves two years of focused work to figure out how that can be done. The line I heard was:

“We know what we want, but we don’t yet know how we get there. We need to work that out.”

If that is true, then that is – to me – another success factor. And I should add very quickly – that also speaks of massive privilege!

I do find a fair number of managers are humble enough to admit they don’t know how to get to a complicated goal, but typically find themselves under pressure to find an answer, stat! Having the discretion and the funds to pay highly experienced specialists and go thoroughly through the complexities of all-org-transformation over years of preparation is something many would wish for, but do not get. I assume.

This is tricky to gauge from the outside. Our culture of managerialism often wants to make us believe managers have everything in hand, and it’s their superior knowledge and skill in negotiating that draws the line between hero story and… a tragic hero story. But so much has to come together, I won’t claim there’s a clear, repeatable formula in this point.

Working with all levels

My understanding is, however, that the leaders of the IR transformation did not shy away from working through, and with, all tiers. If so, that is something quite rare, again.

By hook or by crook, public leaders seem to broadly consider organisational change as a sole prerogative of management and their consultants.

I don’t know how genuine and open-minded the employee participation in IR’s transformation was perceived by the staff – I’d expect to find varying degrees at different times and different teams, in a best-case scenario.

But with what I can read in the documents and what I heard from people who were there, the floor of this collaboration is likely at the ceiling-level of 90% of the other restructures I’ve analysed. Again – time, resource, commitment makes things possible.

MONEY

Which leads to the bottom-line of it all – there was money, right? I’ve found varying figures here and I’m not sure any of the are citable, so I’ll just be technical here and call the budget of IR’s transformation AN ABSOLUTE SHEDLOAD! An eye-watering amount that few others could ever claim to bid for in their wildest business-case dreams.

So is it just that – money talks? Everyone can transform their org, if they have that kind of cash?

I think it’s a bit like with rich people and good taste – one doesn’t guarantee the other. Deep pockets are a necessary condition to successful transformation or a whole org, but I myself was part of a massive transformation process that I consider quite expensive, and that I can’t say lead to much “hard facts” in the end.

Too big to fail?

It’s possible that IR is a special case, from which it is difficult to take much lessons learned in a straight line. Because it has conditions in its favour that others don’t have. It may well be too big to fail. Being the tax agency, it’s the engine that brings in the cash for the whole blessed beast of a country. It’s much easier to be convinced that it needs to have a modern IT system and that money invested here will see a reliable, and long-term return on the dollar for everything invested. I don’t know how this all tallies up, but it seems an easier case to make than many of the more indirect public services and their economic pressures.

And before I come to my conclusion, let me get this clear: Out of ALL the examples I’ve seen, I DO think that IR’s transformation is a good example of a different - and yes - better approach to internal reform.

But I’m not suggesting it was any less painful, tiring or disruptive to affected staff.

And I’m sure that people who were there, particularly closer to the coalface, would have plenty of stories where the transformation had ugly, unplanned, uncontrolled and (at least to them) unreasonable approaches and effects.

I don’t think anyone expects reform to be without disruption, and we must acknowledge that it seems nigh impossible to carry out substantial changes without affecting some people negatively. I won’t advocate for an acceptance of “collateral damage”, but I will say that from where we are currently at with our reform approaches, we can move the dial a WHOLE lot more in the right direction before we’d have to seriously face that concern.

A false economy?

Considering the high “cost” of IR’s transformation process, and the potential factors that came together in their favour, it would be easy to conclude that this is a nice story, but broadly impossible to apply to most other public service institutions.

If we wanted to confidently answer that, however, we’d need to know some crucial facts that are notoriously foggy: We’d need to be able to actually compare IR’s investments on all levels and over time to the investments that all other institutions constantly make in their much less controlled, and much less sustainable reform habits – on all levels.

If I had another PhD to write (shudder), I’d sit down an make a very careful calculation of what our current internal reform- and restructure practice costs us. I’ve made some speculations in one of my very first posts, but honestly, it’s a tricky thing to do.

Redundancies, legal cost, hiring and re-hiring, consultant fees, time and effort of management and staff, HR, comms and all other teams involved, paid sick-leave, EAP cost – and then, what about lost opportunity, what about delays in projects, all the fallout effects that domino their way through the organisation each time a single team gets restructured…?

A classic case of under-reporting, imho.

As I said in my last post: it’s expensive to be poor. And if we never do our books on the full extent of our internal reform cost, we continue to turn a blind eye to how much resource we’re - pardon me - pissing away by approaching internal changes as individual, one-off events in the hands of a few, and with limited checks and balanced.

As we’re approaching budget week and blowing the dust of the idea of “austerity” - isn’t it bizarre that we don’t have the facts to compare long-and short term costs and benefits of such a fundamental question, how we manage and improve how the public sector works?

Death by a thousand paper cuts? Quite possibly.

Big, scary transformation programmes designed around a core-system change are scary, unwieldy, and not always the answer - but if we knew more of the alternative, they may be more reasonable that we assume. And that’s not to take away from the idea of incremental change. The difference is having a practice-anchored red thread that drives tangible change in stages, such as digital transformation, that structural changes can be contingent on - instead of a constant re-negotiation of strategic semantics.

With a few exceptions, most public service organisations might well benefit from a long-term, committed, and tool-, people- and practice-led transformation approach under a consistent leadership that does not fear complexity. That leadership would need to be both on the institutional- and the political-level. And the change process would need to be run in such a way, that the people with the big coffers can, in fact, see that their investment and their patience pays out over time. Instead of swinging pendulums between centralised- and decentralised services, or generic- and specialisted functions, we would need tangible markers of progress.

That’s a lot to ask, and a lot of open questions to be sure of. But this is the reason why I find ideas like Ashley Bloomfield’s call for a 10-year bipartisan plan for health reform in NZ so interesting. It’s not without major difficulty, to say the least. But we should not act as if we don’t already know quite a lot about what “good reform” looks like, and what it takes.