linard_1996-abf-public sector performance management & learning organisation

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Performance Management in the Public SectorThe Asia Business Forum - Kuala Lumpa August 1996

PUBLIC SECTOR PERFORMANCE MANAGEMENTNOW AND FOR THE FUTURE

Keith T LinardSenior Lecturer, School of Civil Engineering

University College (University of New South Wales) Australian Defence Force Academy

Keithlinard#@#yahoo.co.uk (Remove hashes to email)

SUMMARY

This paper seeks goes behind the cliche of the learning organisation, examining how organisational structures can teachdysfunctional behaviour or, conversely, foster the creativity of their employees. Referring to the decade of federal publicservice reforms in Australia initiated by the Labor Government in 1983, it outlines some archetypal pathological structuralfactors that teach inefficiency. It discusses the application of systems thinking in analysing these pathologies and indeveloping systemic interventions aimed at promoting enduring change for the common weal.

The paper gives an overview of the characteristics of systems thinking and summarises the key features of the healthylearning organisation . . . a fundamental aspect of which is a shared vision built on the foundational human values ofwonder, humility, compassion and love.

Finally, through reference to a culture change project with ABC-Television, the paper develops the concept of the livingorganisation as the basis for analysing how organisation structures, performance criteria, the corporate communicationsframework and work practices help or hinder the development of a truly human shared vision.

Keywords: Public sector management; evaluation; performance indicators; learning organisation; shared vision;

systems thinking; system dynamics; Powersim.

Keith Linard, as Chief Finance Officer, Australian Department of Finance, was responsible for the Machinery of

Government Section and later the Financial Management Improvement Section during the 1983-88 'reform' of the

Australian Federal Public Service. Keith currently runs the postgraduate system dynamics program at the Australian

Defence Force Academy and co-directs the postgraduate program in project management.

Introduction

The term learning organisation, invented by Peter Senge, has become a cliche. It has entered thelexicon of management professors and management consultants alongside terms such as total qualitymanagement, benchmarking and so forth, often with little understanding of the original meaning.Now, in a saga reminiscent of Lewis Carrolls great nonsense poem The Hunting of the Snark, the huntis on to find one of these rare creatures . . . notwithstanding the warning by Senge and Kofman thatthere is no such thing as a learning organisation.

1In Senges construct, the learning organisation is

a vision for humanising the workplace, a vision for creating a type of organisation we would truly liketo work within.

I too started on this hunt, armed with the definition given by David Garvin in the August 1993 HarvardBusiness Review that a learning organization is "an organization skilled at creating, acquiring, andtransferring knowledge, and at modifying its behavior to reflect new knowledge and insights" and withthe argument of Charles Handy, from the London Business School, that the learning organization isheld together by shared beliefs and values, by people who are committed to each other and to common

1 Kofman, F and P M Senge, Communities of Commitment: The Heart of the Learning Organisation", in Chawla &Renesch's (ed.) Learning Organizations: Developing Cultures for Tomorrow's Workplace (Portland, Oregon:

Productivity Press, 1995), p.31.


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Performance Management in the Public Sector

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goals2.

Every Organisation is a Learning Organisation. . . but what are they teaching ?

Over the past 12 months virtually a day has gone by in Australia without amazing revelationsemanating from the Royal Commission into corruption in the New South Wales Police Force. OnMarch 9 this year the words in the Sydney Daily Telegraph report leapt out at me:

A Police officer who joined the force because he admired its integrity told yesterday how he

became a criminal from the day he swapped his uniform to become a plain-clothes detective.

. . . you want to become part of a group you admire, because of the way they operate . . . You

become something that youd absolutely never thought youd be . . . You become a crook.3

Based on the definitions of Garvin and Handy, this, I realised, was a learning organisation parexcellence. A generation of idealistic young men educated into a web of corruption in the veryorganisation established to fight corruption ... the NSW Police Force. Not only was the culture andstructure of the NSW Police Force very effective in teaching corruption to its members, but theculture of the State bureaucracies, Courts and Parliament similarly taught their respective members to

ignore what was before their very eyes . . . what was common knowledge to the press and in the clubsand bars of Sydney and NSW regional centres.

Reflecting on this I appreciated more fully what I have grappled with for many years, that everyorganisation is a teaching/learning organisation, and that many organisations, in both public sectorand private sector, teach pathological behaviour.

2 Charles Handy, "Managing the Dream", in Chawla & Renesch's (ed.) Learning Organizations: Developing Culturesfor Tomorrow's Workplace (Portland, Oregon: Productivity Press, 1995), pp. 44-55.

3 The Daily Telegraph, 9/3/96. p.1


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This proposition has significant consequences. It implies that organisations are not neutral entities . .. empty shells without moral values or ideology. Rather, they are influenced by, and in turn influence,the behaviour and culture of their inhabitants. In this view, organisations do have values which theyinculcate and which they express in their day to day dealings with the public, but which may differdramatically from the idealised goals expressed in corporate plans and vision statements. Thechallenge, I suggest, is not so much to build learning organisations, but to ensure that what ourorganisations teach is in harmony with the organisational vision which in turn is explicitly derivedfrom broadly based societal values. I illustrate this by way of a review of the reform of the Australianfederal public service and our application of a systemic approach to the analysis of perceivedorganisational problems and to the design of remedial actions

Australian Public Sector Reform of the 1980s

In 1984 the Australian federal Minister for Finance established a task force, the Financial Management

Improvement Program (FMIP) with a charter to reform the public service, focusing particularly onquality of service and value for money. In particular, FMIP sought to reorient public sectormanagement from its traditional focus on system efficiency (doing the job right), towards a focus onsystem effectiveness (doing the right job).

Over the subsequent decade the changes wrought by FMIP have transformed the face of the Australianfederal public sector through:

the reform of Cabinet and parliamentary oversight of the public sector, particularly

widespread rationalisation of federal audit and financial legislation;

introduction of goal oriented program budgeting;

cash limited annual budget appropriations;

introduction of a rigorous framework for public sector wide program evaluation; devolution of authority and responsibility from the central agencies to departments;

reform of departmental corporate planning, management and administrative practices; and

the corporatisation or privatisation of government business enterprises.

FMIPs systems thinking methodology

Our first action in the reform process was to visit all departmental central and regional offices, meetingwith the chief executives, other senior executives, staff and unions. We put some simple questions toall: What are examples of poor decision making that have beenforcedupon you as a result of externalconstraints? What external constraints stop you from doing an more effective job? If you had the

authority, what policy changes would you effect to enable you to be more effective?

4

This exerciseresulted in a compilation of innumerable stupidities in managerial decision making: a litany of poormanagement decisions costing the tax-payer hundreds of millions of dollars a year.

A basic premise of the FMIP team's approach was that managers do not make stupid decisions becausethey like doing stupid things. Rather, where pathological behaviour was seen to exist, we looked forthose aspects of the "system" which enforced, encouraged, rewarded or reinforced such patterns ofbehaviour. Because of the nature of the respective remedial actions required, and particularly the locusof control, we categorised these pathologies into three distinct but inter-related systems:

4 Whilst our emphasis was on the external constraints, for pragmatic psychological reasons, the exercise identified

many internal short-comings.


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the budgetary and regulatory environment;

management systems within departments and agencies; and

bureaucracy standards and practices (the culture).

From the outset FMIP focused on patterns of dysfunctional behaviour, rather than on individualproblem events, in order to understand the systemic processes that encouraged or reinforced thisbehaviour. This provided the foundation for identifying possible leverage points for change.

The following sections examine a five examples of pathological behaviour, drawn from our review ofthe budgetary and regulatory environment, departmental management systems and public service wide"accepted" practices.

1. Supplementary funding from the budget was commonplace to address departmental or programspending overruns.

2. Managers focused unduly on program inputs rather than on the purpose that the programs wereestablished to achieve.

3. Management information systems were not geared to performance reporting.

4. Program evaluation was seen as a weapon with which to criticise managers, rather than as a tool toassist the managers to be effective.

5. There was excessive and wasteful use of inter-departmental services.

Figure 1: Systems in the public sector with potential to 'teach' dysfunctional behaviour

Budget Supplementation - Success to the Incompetent Archetype

Both within and between Departments a "success to the incompetent archetype" was endemic. Anadministrative breakdown would occur in Agency X. The Agency would claim it occurred because ofinsufficient staff or resources. The press and lobby groups would demand more resources.Government would comply, reallocating resources from well managed Agencies. Clearly, they were

Legal, regulatory &budgetary environment

Management systems &organisational architecture

Perceived standards& practices ('culture')

ACTIONS


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over-endowed if they had no problems! Thus, the incompetent managers were rewarded and thecompetent were penalised. This is depicted in Figure 2.

Such "fixes" worked in the short term. Indeed they often served to spur good managers to do betterwith less. Over time, however, well managed areas would build in pathological responses to protect"their" budget.

Breaking this pathological cycle required mechanisms which rewarded the good and penalised the badmanager, even at the short term risk to program delivery. Analysis of this and associated feedbackloops suggested a package of changes to budgetary practices which largely eliminated this "success tothe incompetent archetype" at the inter-departmental level. Changes included:

withdrawal of Department of Finance from micro level oversight of Agency estimates;

introduction of global "cash limited budgets" for each Agency;

budget supplementation only in the case on new government policy initiatives;

moving from cash based accounting to accrual accounting; and

permitting Agencies to reallocate funds, subject to the cash limit, between the various areas ofoperating expenditures, including salaries.

Reorienting from inputs to outcomes

A 1984 FMIP survey of every senior executive in the Australian federal bureaucracy found that 94%saw their primary role as ensuring their budget was spent and staff numbers were at the authorisedlevels. Few saw as a high priority the achievement of program objectives! A 1985 FMIP survey of theDeputy Heads of 55 federal government agencies found that fewer than 70% included achievement ofobjectives amongst their topseven critical success factors.

Our assessment of the systemic forces which had, over time, led to this exaggerated focus on inputs

suggested the following causal chain:

1. The key sources of budget information provided to Ministers, Parliament and the public were theinput based annual Appropriation Bills and the supporting Budget Papers. These providedcomparative year-by-year expenditures by category of agency operational (input) spending;

there was no data linking operational spending with achievement of results.

2. Because changes in inputs spending are easy to understand, parliamentarians and the press wouldfocus attention on changes or seeming anomalies in the input spending patterns.

also, since input data was divorced from purpose, Opposition parliamentarians or the presscould readily characterise domestic or international travel, use of taxis / hire cars, telephone orpostage costs etc as extravagances.

Manager A exceeds budgetManager B within budgetB's surplus bails out A

Short term: A loses any

incentive to manage wellShort term: B strives to doeven betterLong term: B loses anyincentive to manage well

Resourcesto B

Incentive forA to manage

Resourcesto A

Failureof A

Allocation to Ainstead of B

Successof B

DELAY

ss

s

s

o

oo

o

so

Incentive forB to manage

Figure 2: 'Success to the Incompetent' Archetype - Budget Supplementation


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3. In order to respond effectively to such scrutiny, departments developed management informationsystems to give detailed data on input items.

4. Responding to the parliamentary and ministerial focus, the Department of Finance and the PublicService Board monitored resource inputs closely.

5. Lacking any pressure or incentive to provide detailed analyses of outputs or outcomes, fewDepartments developed information systems to track outcomes.

6. Over time, managers at all levels of the bureaucracy were taught that input control was importantwhile outcomes or results were irrelevant.

Our analysis of this pathological behaviour at a global level, and the interacting forces responsible forit, are depicted in the upper portion of the causal loop diagram on the left side of Figure 3. The inputfocus encouraged reactive "quick fixes" rather than a more productive examination of the root cause ofprogram problems (depicted in the bottom left hand loop).

Parliament & pressfocus on inputs

PB Reporting(results focus)

Senate committee focusobjectives relevancestrategy appropriatenessindicator validityvalue for money

Managementresults focus

Effectiveness

evaluation

Programachievement

Outcomes budget data now focusesparliamentary attention on goals,

strategy, outcome indicators

Reactivesolution

Quick fix

Symptomaticprogramproblems

Demandfor data

Inputperformance

indicators

Focus on

results

Proactivesolutions

Root causeanalysis

Outcomeperformance

indicators

Input focus encouragedreactive "quick fixes"

Figure 3: Program Budgeting - A Systemic Intervention to Achieve a Results Focus

The causal loop analysis suggested key leverage points: the focus of parliamentary scrutiny and thenature and format of the Budget Papers and Appropriation Bills. The right hand causal loop of Figure 3illustrates the intended logic of the reforms.

One of the first successes of FMIP was gaining Cabinet approval to change the way this criticalinformation was presented. From 1986 all departmental expenditure data was presented in programbudgeting format, with a focus on outcomes. For every program, Ministers, Parliament and the presswere given detailed statements of:

the goals and objectives of each program;

the strategies intended to achieve the objectives;

outcome indicators used and the performance achievement to date; and

the departmental input expenditures used to achieve these results.

Parliamentarians soon started to realise the potential advantages of using the goals oriented informationcontained in the Portfolio Program Performance Statements. They could focus on the fundamental


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political issue of value for money. They questioned trivial performance indicators. They homed in onthe reported levels of performance. They started to address the appropriateness of objectives.Understandably, Ministers and their senior executives wished to avoid embarrassment in the face ofthis new line of questioning, so they in turn began to demand better (output) information. Thismessage started to reach down the levels of the bureaucracies to junior clerical staff and those at thefront line of service delivery. A powerful reinforcing loop had been established for focusing attentionon program results.

Output oriented management information systems

Today, the Program Statements are invaluable documents for internal departmental planning and forexternal accountability. Critical to these documents has been the development of outcomes orientedmanagement information systems. A 1985 survey of every federal Department and major StatutoryAuthority found that not evenone of the 55 Agencies had management information systems which

integrated input and output data for their various programs. The cause of this pathology is illustrated inthe right hand loop of Figure 4.

The right hand loop illustrates how the change in parliamentary focus , through the introduction ofprogram budgeting, drove the changes in departmental information systems.5 Today virtually allfederal programs are supported by comprehensive input/output based MIS

Making evaluation work for program managers

Prior to 1987 over $100 million was spent each year on external evaluation of federal governmentprograms. A significant portion of this related to Royal Commissions or Commissions of Inquirywhich had been prompted by major administrative breakdowns. Generally, evaluation was undertakenwhen there was reason to suspect there were problems. Managers of programs being evaluated felt thatthey were under the spotlight, and were taught to be defensive and even obstructive. Figure 5illustrates a very simplified picture of the feedback loop mechanisms.

5 It is pertinent to note that there was significant internal opposition with the federal Department of Finance to theintroduction of program budgeting on the grounds that departmental MIS were inadequate to the task. The view thatprevailed was that, without the (feedback) impetus stemming from program budgeting, Departments would not move

to upgrade their systems.

Reports inprogram

Demandfor goal

related data

value for money

" No agencies have MIS which permit integration of financial & staffing

data ... with data on outputs ..."Management Information Systems in the Australian Public Service. Dept of Finance 1985

Parliament focuson inputs

Demandfor input

data

Parliament focus on

budgeting format

outputsfocused MIS

Budget Papersin input oriented

format

Inputsfocused MIS

Figure 4: Outcome oriented Management Information Systems (MIS)


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The challenge was to break the cycle of distrust. In essence the critical need was seen to break theperception that evaluation was linked to failure, but rather was a tool for good management.

In 1988 Cabinet agreed that all programs should be subject to a review every 3 to 5 years. It furtherdirected every Department to prepare annual Program Evaluation Plans detailing what programs hadbeen evaluated and the schedule and nature of proposed evaluations. Today, evaluation is seen as anintegral aspect of good program management and is regarded as a high status activity. Thepathological loop has been broken.

Eliminating the "free lunch"

The only certain aspect to "free lunches" is that someone eventually pays. Over the years many inter-

departmental services had developed across the Australian federal bureaucracy. On the rationale that itwas merely a "book entry" for one agency to pay another for services provided, budget allocations weremade direct to the service providers and the services were provided free of charge to user agencies.Such services included catering, property management, building maintenance, printing and publishing,payroll, and computer bureau services.

Unfortunately, where any service is provided free of charge the service recipients, be they individualsand organisations, tend to demand more of that service than they really need. The real costs are hiddenand users have no need to contain costs.

On the supply side, the service managers are happy to oblige with extra services as this is evidence ofthe importance of their work and increasing demand enables them to argue for more staff and higher

status for themselves. When capacity limits are reached, there is prima facie evidence that the serviceshould be expanded.

Publicinquiry

Programfailure

Apportionblame

Evaluation was typically seen as a 'witch hunt'

called for when problems were evident

Evaluation now a basic program management tool

programs evaluated every 3 to 5 yearsannual program evaluation plans to Parliament

extensive evaluation training for line managers

Distrust &subvert

evaluations

moraleLow

Figure 5: Making Evaluation Work for Managers


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The left hand causal loop in Figure 6 depicts this reinforcing behaviour. The resultant pathologicalbehaviour was very costly in terms of cost and quality.

Analysis of the systemic interrelationships suggested a variety of modifications to the system whichwould bring about a genuine marketplace where market forces of supply and demand can work toachieve an appropriate balance, depicted in the right hand loop of figure 6:

full user charging by service agencies for services provided;

allocation to user agencies (away from the supply agency) of the annual service budgets which

could then be used to purchase services (or reallocated to higher priority areas); removing restrictions on users on the acquisition of services from private sector competitors;

outsourcing of a very large variety of non-core services to the private sector;

corporatisation or privatisation of supplier agencies.

The implementation of these changes has led to significant improvements in supplier-customerrelationships and service quality, and to dramatic cost savings.

An integrated suite of reforms

While the above examples focus on specific problems, it is emphasised that the reform processfocussed on the three interlocking systems identified in Figure 1. Pathological behaviour was generally

the result of reinforcing tendencies over time deriving from a combination of: the budgetary and regulatory environment (especially as expressed in the provisions of the Audit

Act, Finance Regulations and Procurement Regulations);

management systems and organisational architecture (embracing the corporate planningframework, program management, management information systems and evaluative procedures);and

perceived standards and practices (especially the unwritten rules regarding cash management,procurement, budgetary estimating etc).

Correspondingly, our analysis of the root causes of these pathologies and our development of remedialstrategies normally embraced each of the above areas.

SurplusCapacity

Demand

Price

CashreservesMaintenance &

expansion capacityDemand

'Congestion'

Pressure forBudget $

DEL

AY

Marketing ofsurplus capacity"free" of charge

$ forAdditionalcapacity

o

o

os

s

s

s

s

s

s

"User pays" gives genuine marketsignals for demand and provides

reserves for expansion

s

Figure 6: 'User Pays' for Inter-Departmental Services


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The healthy learning organisation

This rapid overview of a decade of the most dramatic (and possibly traumatic) period of public sector

reform in Australias history has shown how the system can teach dysfunctional behaviour. Thechallenge is to plan and manage our organisations so that they foster positive learning . . . the learningcharacterised by Peter Senges vision of the learning organisation.

Although the term 'learning organisation' surfaced only in the last few years, the ideas behind the labelhave been percolating for decades. From systems dynamics in the 1950s and soft systems modelling inthe 1960s to organisational development in the 1980s, a succession of management approaches haspaved the way for current theorists such as Peter Senge. Senge creates his portrait of the learningorganisation by combining ideas from theorists in the field of music, visioning, quantum physics, groupdynamics, personal development and, perhaps most important, systems theory, where organisations arecomposite organisms affected by the actions of each member but capable of learning as a single unit.

His vision of a learning organisation is:an organisation where people continually expand their capacity to create the results they truly desire,

where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and

where people are continually learning how to learn together.

He articulates this vision in The Fifth Discipline where he defines the five disciplines of a learningorganisation.

1. Team learning is a tool for raising the collective IQ of an organisation above that of anyone in it.The discipline includes dialogue and talking and thinking together. Senge says team learning isvital because teams, not individuals, are the fundamental learning unit in an organisation. Unlessthe team can learn, the organisation cannot learn.

2. Shared vision binds people around a sense of destiny. A genuine shared vision tends to causepeople to do things because they want to, not because they have to.

3. Mental models are deeply ingrained assumptions and generalisations that influence how we see theworld and how we take action. In organisations such mental models control what people think canor cannot be done. Changes rarely take place unless people change their shared mental models.

4. Personal mastery is a discipline of continually clarifying and deepening our personal vision, offocusing our energies, of developing patience, and of seeing reality objectively.

5. Systems thinking is a framework for seeing interrelationships and patterns rather than things andsnapshots. It does away with boundaries that we invent and find ourselves trapped inside. Applied

in organisations it cuts down on complexity and stops people from saying "there's nothing I can doabout it, it's the system".

Senge goes on to argue that:

"The 5th Discipline (Systems Thinking) is the cornerstone of how learning organizations think

about their world. . . the essence lies in a shift of mind: seeing interrelationships rather than linear

cause-effect chains, and seeing processes of change rather than snapshots."6

I will now elaborate on two of these. First, the area of systems thinking, where I see a need to clarifythe distinction between the traditional business systems disciplines of operations research and systems

6 Senge (1990), op. cit.


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analysis, and soft systems methodologies. Secondly, I will address the area of building a sharedvision, because this is central to developing a sustainable and functional learning organisation.

Of hard systems, soft systems and system dynamics

The systems thinking perspective

The essence of the systems perspective lies in seeking interrelationships rather than linear cause-effectchains, and seeing processes of change and patterns of events rather than individual snapshots. It isholistic, seeing the whole as greater than the sum of its parts.

Thus defined, systems thinking has been with us for millennia. However, in European cultures, thedominant world view, especially in business and government, has been linear, causal and eventfocussed. This mentality has its origins in the philosophical framework of Plato and Aristotle in the 4thcentury BCE, reinforced by the scholastic philosophers of the Middle Ages and cemented in the

European psyche by the reductionist framework of Descarte in the 16th century and by thephilosophers of the Enlightenment. This is linear causal mindset is exemplified in the logic frameworkapproach to evaluation used by numerous government aid agencies, and which underlies the approachto evaluation by Australian Federal and State Governments. Figure 7 illustrates this one-way view ofthe world, a view which limits significantly the insights which policy analysts can gain about systeminterrelationships.

Hard systems and soft systems

Within the diverse systems disciplines the distinction between hard and soft systems is critical tounderstanding the learning organisation concept of Peter Senge and his colleagues. It is the latter,soft systems, which are relevant to our considerations of the learning organisation.

Hard systems are characterised by:

clear and unambiguous objectives;

widespread agreement with the objectives;

high degree of agreements on the facts; and

high degree of knowledge concerning the principles of operation.

In such situations the technical decision paradigm is optimisation. For example consider thecommitment by United States President John F Kennedy, on 25 May 1961, . . . before this decade is

Resource Inputs

Political Cultural &Legal Environment

Are presumedto bring about

Ongoing Program

Activities

Short TermOutputs

Achievement

of Objectives



Have we consideredthe political impact ...?

Are the staff trained ?Is there union / employer

support ?

What data isthere to prove

this ?

Are the objectives still relevant ?

Figure 7: Logic Model for A Typical Government Program

(Adapted from Evaluating Government Programs - A Handbook, p.14)


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out, of landing a man on the moon and returning him safely to Earth. The aim was clear andunambiguous and there was very broad national support for the objective. The facts regarding thecommitment were unequivocal . . . man, earth, moon and alive. There was clear understandingof the technical dimensions of the challenge. NASAs task was one of optimisation - bring the projectin on time, at low risk and at the lowest feasible cost.

Soft systems, on the other hand are characterised by:

multiple objectives which may be fuzzy or conflicting;

multiple stakeholders who may have multiple and/or conflicting interests;

no clear agreement on the objectives; and

complex inter-relationships between system elements which may not be well understood or whichmay even be subject to dispute between competent professionals.

In soft systems, human rather than technical issues dominate, and the paradigm is one of mutual

learning between client, project team and the diverse stakeholders. An example of a soft systemsproblem would be that of urban accessibility. To the highway engineer a freeway may seem theobvious solution. Some house owners might agree provided it is located away from them. Othersmight be concerned about broader environmental issues. Yet others will say that the problem is one ofthe location of work places - bring the jobs to the people rather than vice versa. Then there will bethose who ask why telecomputing cannot solve the problem. And a lonely economist might argue thatthe real problem is the lack of an appropriate road pricing strategy.

Peter Checkland coined the mnemonic C A T W O E to characterise the dimensions of the mutuallearning process that must take place for successful solutions to soft systems problems.

Customers (of the planned service)

Actors (who will deliver the service)Transformation Process (that enables service provision)

World View (of the owners, actors and customers)Owners (who have authority to initiate or kill the service)

Environment (which constrains the options).

The vast majority of systems problems are soft systems. Unfortunately, a significant proportion of thetechnically trained professionals in government and business have a grounding in the two best knownsystems disciplines, operations research and systems analysis which are applications of hard systemsthinking. The main soft systems approach, soft systems methodology (SSM), was developed atLancaster University by Peter Checkland over 25 years ago and is widely used in the UK andAustralia7. It is an invaluable tool for the fifth discipline.

Soft systems, feedback and system dynamics

Senge notes that the practice of systems thinking starts with understanding a simple concept called"feedback" that shows how actions can reinforce or counteract (balance) each other. Feedback, indeed,is one of the characteristics that distinguish the domain of system dynamics. The other is delay.

7 Checkland, P and J Scoles. Soft Systems Methodology in Action (Chichester, Wiley. 1990).


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A feedback system8 is one in which an action is influenced by the consequences of a previous action.One class of feedback systems - balancing (or negative) feedback - seeks a goal and responds as aconsequence of failing to reach that goal. The second class of feedback systems - reinforcing (orpositive) feedback - generates growth processes where action builds a result that generates still greateraction. The causal loops in Figure 2 to 6 are combinations of reinforcing and balancing loops.

Misperceptions of feedback - the critical issue for managers and employees

There is abundant research in the field of system dynamics as well as in the fields of experimentaleconomics and psychology, which suggest that managers have great difficulty managing dynamicallycomplex tasks where there is feedback, especially delayed feedback. Professor John Sterman of MITsSloan School of Management argues persuasively from his research that there is systematicmisperception of feedback 9.

In more recent experiments, where graduate students had full information, training, incentives and

opportunities for gaining experience, Diehl and Sterman still found poor managerial performance in theface of variations in feedback strength and delay. They argue that the mental constructs and heuristicsthat managers bring to bear on complex tasks are fundamentally dynamically deficient:

Subjects were unable to account well for delays and feedback effects because (1) peoples mental

representations of complex tasks are highly simplified, tending to exclude side effects, feedback

processes, delays, and other elements of dynamic complexity; and (2) even when these elements are

known, peoples ability to infer correctly the behaviour of even simple feedback systems is poor.

Systems dynamics, causal loops diagrams and simulation software.

Regarding the first deficiency, causal loop diagramming, the structured approach popularised by Peter

Senge and following clear guidelines

10

, provides powerful insights into systemic problems, takesexplicit account of feedback and provides pointers to possible intervention strategies, as discussed inrelation to the Australian public sector reform program.

Causal loops, however, provide little help in predicting the complex interaction between multiplereinforcing and balancing loops, especially where there is delay in the feedback information tomanagers consequent on their decisions. The rosy picture provided earlier of the FMIP implementationconveniently ignores unexpected side effects as the changes were implemented. Some of theseimposed significant costs on both programs and people. In retrospect these side effects were due tomisperceptions of feedback.

Fortunately, as discussed in my paper Focussing on Feedback Dynamics - Designing ValidPerformance Indicators for the Public Sector, a new generation of system dynamics simulationsoftware is available which can assist greatly in the task of evaluating the likely impact of programchanges.

8 More correctly, a closed feedback system. The definitions here are adapted from Forrester J W, Principles ofSystems (Cambridge, Massachusetts; Wright-Allen Press, 1968), p.1-5.

9 Sterman, J. Misperceptions of Feedback in Dynamic Decision Making. Organisational Behaviour and HumanDecision Processes, 1989, 43(3), 301-335.

10 Refer for example Senge (1990), op. cit., or virtually any issue of The System Thinker, Pegasus Communications,

Cambridge MA


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Building a shared vision . . .

Will the NSW Police Force be our model?

My opening comments regarding the NSW Royal Commission into Police Corruption and myexamples from the Australian public service reform process show that organisations can teachpathological or dysfunctional behaviour as readily as they can teach the skills and attitudes necessaryfor corporate citizenship into the ever changing future.

This suggests that if we wish to make our organisation a learning organisation, an organisation wewould truly like to work within, we cannot escape the task of identifying what values we want it toespouse . . . corruption . . . greed . . . self interest . . . or . . .

Or should a culture of love be our answer?

We cannot escape the task of identifying what values we want our organisation to espouse. . . honesty .. . compassion . . . altruistic love. We cannot be neutral. Our failure to articulate and strive toimplement mutually agreed values will leave a vacuum which can and will be filled after the fashion ofthe New South Wales Police Force of the 1960s - 1990s. We cannot be interested in just anylearning organisation, but rather a learning organisation whose values reflect the deepest and mostcherished values of our society.

Peter Senge and Fred Kofman argue that a learning organisation must be grounded . . . a culturebased on transcendent human values of love, wonder, humility and compassion.11 To me such afoundation would be a bulwark against the corrupting temptation of power and greed. These are thevery values which can unleash the creativity of the individual and the group. But how do we move inthis direction in the real world.

Culture Change at ABC-TV

The Australian Broadcasting Corporation is required by its Charter, inter alia, "to provide [...]television programs that contribute to a sense of national identity and [...] reflect the cultural diversity

of the Australian community". This is very significant when it is realised that over 20% of Australianswere either born, or was a child whose parents were born, in non-English speaking (NES) countries.Further, some 53% of the population in the last census identified, to some degree, with other thanAnglo-Celtic ancestry.

In 1993 ABC Television contracted with Synergy International Consulting Pty Ltd to effect culturechange by "embedding the concepts of cultural diversity into the operating practices and procedures of

ABC-TV". A systems thinking framework was adopted in analysing how reward structures, thecorporate communications framework and work practices foster or inhibit the development of a sharedvision regarding cultural diversity.

Studies of the Australian bureaucracy suggest that corporate plans, vision statements etc do not enterdeeply into the day-to-day mindset of managers and staff. ABC-TV was no different. Interviews withsome 80 senior executives found that few were familiar with the recommendations, adopted by theBoard. Some 25% had little understanding of cultural diversity despite its emphasis in the 1991 and1993 Editorial and Program Policies Manual. 40% to 45% had a perspective limited to tokenistichiring of people of NES background, and including a few foreign accents and swarthy faces in high

11 Kofman and Senge (1994), op. cit., p.34.


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rating shows. Both groups, almost 70% of senior managers, tended to see Australian society in termsof mainstream and minority ethnic groups, thinly disguising an "us" and "them" mindset withpolitically correct terminology.

On the bright side, top management understood and accepted the vision of cultural diversity, acceptedthe business sense of changing the culture of ABC-TV more fully to reflect the society's culturaldiversity, and were prepared to give strong leadership. Our challenge was to help facilitate building ashared vision.

Starting from a foundation of love and compassion

The environment was not auspicious. These were busy managers in a stressful competitive businesswith better things to do than meditate on "philosophical" issues. Most started off polite but brusque;some were overtly hostile; few were enthusiastic. Our action learning orientation was crucial toachieving an entre into the active thinking and reflection of our audience. Our approach, built on

experience, involves the following steps.

The consultant must empty her/his self, creating a "loving void" of silence so that the clients can"hear" their own grappling with the subject. This in turn necessitates:

the consultant must recognise her/his concerns, prejudices or assessments and temporarily putthem aside;

(if more than one consultant) recognise the other's concerns or prejudices and temporarily putthem aside; and

the consultant must try to understand the anxieties and prejudices of the immediate client(s)and temporarily withhold judgment.

Into this emptiness the consultant drains (at least temporarily) the anxieties and external pressuresof the client so that, at least for a period, they feel free to focus on the issue at hand.

Within this emptiness, a rapport is achieved where both consultant and client can recognise andexplore the perceived mental model(s) of the client in relation to the organisation vision.

Given this rapport, the consultant and client can explicitly revisit, acknowledge and explore eachothers' prejudices or presumptions to the extent they impinge on their mental model(s).

This process of listen-feedback-listen breaks down the official relationship between the partiesallowing these mutual updating dynamics to achieve a synergy which goes beyond the mechanics ofconsulting into a new dimension where creativity flourishes and ideas are generated.

Our paradigm - The fully visioned organisation based on altruism and mutual loveOur guiding paradigm drew on the work of Peter Senge on the critical importance of building a sharedvision (Senge, 1990). It also drew its philosophical origins from the writings on personal wholeness ofChiara Lubich, founder of the Movimento Internationale Umanit Nuov12, and the application of theseto organisation design by Leo Andringa of De Nederlandsche Bank (1988).

Following Andringa, our approach was to view the ABC-TV as an holistic entity, analogous to ahuman person, where a "whole" or "fully visioned" person,:

directs her/his abilities and talents;

which are oriented primarily towards others;

12 Zambonini, F., Chiara Lubich - A Life for Unity. New City Press, New York, 1992.


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is guided by values and norms;

takes responsibility for her/his psychological health;

is in harmony with her/his self and the environment; acquires knowledge, insight and skills;

such that the interrelationship of these aspects matures the person so that s/he can make responsibledecisions in accordance with personal aims s/he has set.

As applied, the following holistic framework emerged, where ABC-TV is an entity which:

1. directs, monitors and evaluates the application of physical resources andpeople skills, fostering in all staff a sense of service;

1. Resources

2. having a client focus, providing a variety of informational, educational and

cultural services to its diverse audiences;

2. Audience

orientation3. being guided by values which take their origin from the Charter and are

given vitality through leadership which fosters a shared vision embracingall staff;

3. Vision & focus

4. the creation of which shapes and is shaped by the health of theorganisation's social framework, especially its lived sense of communityand elimination of discrimination;

4. Socialframework

5. which evolves within and is given effect through a well integrated andharmonious organisational framework;

5. Organisationalframework

6. the vitality of which depends on education, training and awareness raising; 6. Education7. and which also depends on corporate communications maintaining

awareness of individual and group achievements, building a sense of prideand belonging to a corporate family.

7. Internalcommunications

Figure 8 Change paradigm for ABC-TV - towards a fully visioned organisation

The character of ABC-TV, particularly its creative artistic environment, the sense of social mission thatcharacterises its staff, and its service orientation made this holistic model particularly apposite. Allfacets of the ABC-TV structure, procedures and management were reviewed, against these 7 aspects, toidentify the factors facilitating or inhibiting the development of a "shared vision", particularly inrespect of our fundamental consulting charter - develop a shared vision on cultural diversity.

Towards a shared understanding of cultural diversity

We appreciated why busy executives might harbour cynicism towards the project. Accordingly weinvolved managers fully in deriving a practical definition of cultural diversity which, in turn, wouldstimulate practical ideas for effecting change in their areas of responsibility. "What do you understandby . . . ?" generates platitudes. "How will you implement . . . ?" forces one to struggle with themeaning and the complex issue of the interrelationships of policies and performance indicators.

The understanding that emerged through dialogue was a systemic perception of cultural diversity; thata culture is not simply the sum of its component parts but rather the product of their interaction.


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Cultural diversity became understood as a multi-faceted dynamic, based on the intrinsic worth of eachhuman person, embracing: the cultures of indigenous aboriginal populations; the prototypical culturesof immigrants; the effects of the transplanting into Australia of immigrant cultures, isolated from theirhomeland ambience and evolution; and especially the interaction between the diverse cultures withinthe unique geographical and physical environment of Australia.

A shared understanding, however, is only the start. Our discussions also probed the diversity of policy,structural and educational strategies and performance indicators necessary to embed this sharedunderstanding in the organisational culture. We subsequently recommended, against the seven aspectsoverleaf, some 150 actions designed to effect permanent change towards this shared vision.

Isnt this too idealistic?

Within months of completing the project . . . for which we received no thanks other than a healthycheque . . . there was virtually a complete blood-letting in top management, stating with the Director of

Television and including the HR Manager who had carriage of our report. We banked the cheque,grateful that our meals were paid for the foreseeable future, but saddened that our vision haddisappeared into the realms of executive bookcases. Then, two years after the project had finished, wehad an unexpected call from the ABC-TV Human Resources Manager - a stranger who had been hiredwell after the project finished. She simply rang to say that, in her judgement, it was the most effectivemanagement consultancy she had come across, that most of the changes had now been implemented,and that the new Editorial Policies fully reflected our guidance. I may be biased, but I believe that Ican see clear changes in programming which reflect acceptance of the shared vision on culturaldiversity.

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linard_1996-abf-public sector performance management & learning organisation

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