APS Hierarchy and Classification Review

APS Agile Champions Group Submission

Introduction

Thank you for the opportunity to make a submission to the Independent Panel for the APS Hierarchy and Classification Review.

It is widely argued that ‘agility’ is essential for governments to operate successfully in the times we live in today - the ‘fourth-industrial revolution’ (WEF 2018/2020, OECD 2015, PMI 2020, NAPA 2020, Gartner 2021, Accenture 2019, Deloitte 2017, PwC 2013, Gartner 2021, McKinsey 2017), one which environment consists of rapid change, uncertain socio-economic conditions, digital disruption whilst operating within fiscal constraints.

The importance of public sector agility in Australia has been highlighted in recent times in papers such as the APS Review Final Report (2019), which called for a “agile, innovative and efficient” APS and the APS Workforce Strategy 2025 (March 2021):

“In the next five years the Australian Government will be required to solve new challenges in new ways and will rely on technology, agile work models and the digital capability of our people to deliver successful outcomes.”

Recently, there have been significant initiatives undertaken by other nations specifically aimed at improving agility (i.e. US, UK, Canada, UAE, Denmark, Italy, Japan, Singapore and others). Many having the purported aim to be in a better position for the post-pandemic world (e.g. Agile Nations 2020).

The APS Hierarchy and Classification Review Discussion paper (May 2021) seeks input related to the future of how the APS operates, including structural changes to better support modern ways of working, including agile teams.

The APS Agile Champions Group was formed in November 2020 with representation from 14 different APS agencies. We are pleased to put forward this paper for consideration.

Strategic Context

At the beginning of the twentieth century, the first ‘Industrial Revolution’ saw transformational changes to organisational management approaches, as a response from shifting from agricultural to the industrial economy (Kajewski et al, 2001). These shifts in the early 1900’s saw the adoption of what is called today ‘classical management’ approaches, including ‘scientific management’ (i.e. Fredrick Taylor, 1856–1915, Henry Gantt, 1861–1919) and ‘administrative management’ (i.e. Henry Fayol, 1841–1925, Max Weber, 1864–1920).

'Classical management' is commonly viewed as seeing organisations as 'machines' (Bolman et al, 1989, Morgan, 1986, Mintzberg, 1979) and are characterised by having a deep hierarchy, specialisation of labour, division between management (e.g. senior executives) and staff (e.g. non-senior executives), command-and-control, bureaucratic, with strategy centralised and fixed (Youngblood 2000, Bartol et al 1999, Morgan 1996)).

Since the 1980's however, another transformation in management approaches is well underway. This transformation has seen the adoption of what is called 'contemporary management' (or modern management) approaches, which has been driven from the seismic shifts in organisational operating environments caused by what the World Economic Forum call the third and fourth-Industrial Revolution (e.g. digital revolution and so on).

Contemporary management approaches refocus from seeing organisations as 'machines' towards 'organisms' (or ‘behavioural’) focus (refer to transition image from McKinsey&Company below). Over the past 30 years, organisations around the world have been shifting towards modern management methods, that are commonly characterised by having flatter organisational structures, hierarchies to networks, de-centralised decision making, emotional intelligence, organisational continuous learning (Senge 1990), with strategic thinking shared and evolving (Youngblood 2000). In the private sector, adopting modern management practices is seen as vital for survival in the economic environment we live in today (Lin, Chiu, & Chu, 2006).

Agile Ways of Working

As highlighted in the APS Hierarchy and Classification Review Discussion Paper (p. 5) and the 2019 Independent Review of the APS, large organisations are adopting agile ways of working, reducing hierarchy, and delegating more decision-making authority to teams to encourage rapid and informed decision-making, and enable greater flexibility.

Agile has been influenced from the Agile Manifesto (2001) which introduced values and principles that underpin many of the approaches today. Agile typically features small, cross-functional, self-organizing teams that include customers working quickly to deliver solutions in increments that immediately provide value. Agile ways of working is further supported in the APS reviews recommendations 29-31 which called for

“empowered teams: Reduce hierarchy to encourage innovation and speed up decision-making. Adopt dynamic and agile ways”.

Agile is not a new term—for two decades it has helped revolutionize software development (Mergel et al 2020) and today is used beyond software for HR, corporate, policy development and more (NAPA 2020). One definition of agile government from the U.S National Academy of Public Administration is:

“Agile government is mission-centric, customer-focused, communication- and collaboration-enabled, and continually provides value to customers and the public. Agile government involves public and customer participation with small teams that are empowered.”

Internationally, Governments around the world have made recent strong steps to seek to increase agility. Agility is being seen internationally as not only as a way to improve the operations of Government, but also an economic advantage for the broader economy in the post-pandemic world. Recent developments include:

Agile Nations initiative (OECD, WEF). Seven countries have signed onto the ‘Agile Nations Charter’ (UK, Canada, Denmark, Italy, Japan, Singapore, and UAE sign)

U.S. Government Accountability Office (GAO) Agile Assessment Guide: Comprehensive guide for US Federal Agencies, 2020. Development of the guide included input from over 400 agile experts across the U.S.

U.S. National Academy of Public Administration (NAPA), Agile Government Center, The Road to Agile Government.

UK Government National Audit Office UK Agile Governance Principles

U.S. NAPA and PMI Report, Building an Agile Federal Government: A Call to Action

The Agile Champions Group support the intent from the APS Hierarchy and Classification Review, including the Discussion Paper. Like other nations, we would encourage bold steps are made to ensure that key issues are addressed (as detailed below) and supported throughout all levels of the Public Sector.

Recommendations

Recommendation 1: Flatter Structures

In the APS Hierarchy and Classification Review Discussion paper, it highlights the assessment from the 2019 Independent Review of the APS that APS classification structures are too hierarchical that both impede innovation and agile decision making. The Agile Champions Group agree with this finding.

As highlighted in a framework co-developed with OECD relating to digital talent and skills in the public sector (OECD 2021), contemporary ways of working require the right environment to operate successfully however (Chapter 2. Right environment to encourage digital transformation). This includes the right leadership, organisational structure and culture.

“The structure of an organisation and its employment models can limit the development of a digital workforce” (p. 21)

A flat or organic structure is better suited to support agile teams than hierarchical ones (Kubheka, Kholopane and Mbohwa, 2013). Hierarchical models are more bureaucratic and traditionally take a top-down approach to establishing and approving processes, decision-making and ways of working. By contrast, flat structures distribute decision-making to those closest to the work. This can allow flexibility in fast-moving environments and empower a workforce to experiment and take risks (OECD 2021).

Today, the APS has an 11 deep classification hierarchy (APS1 to SES3). The APS has on several occasions considered the impact of classification and management structures on the effectiveness of the APS. In 2013, the APSC undertook a review of the 11 deep APS classification structures, identifying that ‘The benefits of flatter management structures and increased spans of control include improved decision making, accountability and communication. They can maximise resource use, encourage innovation and support capacity for change’.

This review led to the development of the Optimal Management Structures Framework in 2014, identifying five design principles aimed at reducing the number of organisational layers and increasing the number of direct reports. The Framework sought to distinguish between APS classifications and organisational layers and was designed to drive performance and achieve sustainable change by assisting agencies to align management structures with strategy and build workforce capability into the future.

On the ground however, what is typically observed is that classification levels tend to form approval gates. For example, it is observed that many agencies have committees formed around classification levels or approval lines, resulting in decisions needing to navigate up and down the line which can take weeks (or even months) to progress. These approval gates represent a broad cumulative impact to the cost of delay in delivering Government outcomes. As shown in theory of constraints (Goldratt 1986), these approval gates applied across the entire value stream of Government processes, would represent a significant cumulative cost in the delivery of public services.

To ensure that classification levels no longer provide a barrier to the governments objective of a more agile and responsive public service, it is recommended that the classification system, role titles, pay points and organisational levels be further separated through reclassifying levels from 11 deep hierarchy to a simple 3 level structure of:

APS Executive (Replacing SES 1, SES 2, SES 3)

APS Senior Employee (Replacing EL1, EL2 and Various Specialisation classifications)

APS Employee (Replacing APS 1 to 6)

It is recommended that staff role titles and responsibilities can be assigned to each classification. APS agencies will have the option to structure organisational structures around operational needs, not around satisfying the classification system.

It is important however to ensure that staff remuneration is reflected in common pay scales which reflect staff experience, responsibilities, knowledge, leadership responsibilities and work complexity.

This approach would decrease the likelihood that classification levels no longer presenting a barrier to the Government’s objective of a more agile and responsive Australian Public Service.

Recommendation 2: Culture and Leadership

Earlier in the year (2021), the APS Agile Champions Group conducted a whole-of-government retrospective activity to help identify key issues holding Government back from adopting agile ways of working.

From this analysis, supportive agile ‘Leadership’ was identified as the most pressing issue being faced by Government agencies. Changing the classification structure is important, however without focus on APS culture and leadership, change towards more agile, flexible and responsive Government will likely not be successful.

These results are also supported by a 2019 survey conducted at the Agile in Government Conference (Canberra) which over 100 attended voted on the most pressing issues in Government today with Culture being identified as the most common barrier to adoption:

Culture is a common issue more broadly globally, with both leading surveys on Agile adoption identifying culture as top issues:

These results highlight the critical importance of addressing both leadership and culture change as part of any structural change.

It is commonly found that that risk of failure can drive people to greater measures of control (Pfeffer & Sutton 2006), which can result overtime in the increase in organisational process complexity, bureaucracy and excessive management control systems. However, research in team dynamics has shown that teams who self-manage and organise tend to not only tend to have higher performance, but also better adhere to organisational rules (Barker 1993).

Research from Mergel (2016) regarding agile adoption in Government, found that a change in the mindset at the executive management level toward agile leadership is necessary to move government organisations.

A number of agencies have internally developed agile leadership and culture change programs (e.g. ATO Agile leadership training and others) which have been found to be successful.

It is recommended that a multi-modal approach is explored to better drive systemic change across the APS, including training, coaching, mentoring and support networks. As part of this, it is recommended that existing APS training programs be revised to ensure that they align to contemporary (agile and human-centred) leadership and management approaches. Fostering culture of learning organisations (Senge 1990) across the APS is also highly recommended. The Agile Champions Group are happy to provide input into training programs designed.

Recommendation 3: Citizen Centricity & Service Management

A common characteristic of agile organisations is a focus on user (citizen) centricity (OECD, World Economic Forum, PMI, Accenture, Deloitte, PwC, Gartner, McKinsey). Today however, many of the Australian Governments products/services continue to be designed within organisational silos.

Organisational structures can influence the structure of how services/products are designed and delivered. Conway’s Law (Conway 1967, Skelton 2019) recognises the inadvertent repercussions of organisational structure in the design of the systems they deliver, a particularly frequent issue for public services that end up reflecting the structure of the organisations they are built by (MacCormack, Rusnak and Baldwin, 2008).

Concepts of ‘Virtual Organisational Structures’ (Davidow & Malone 1992, Magretta, 1998) is another key component of contemporary organisational management. It refocuses organisational hierarchy towards the end-to-end citizen (user) value streams across traditional organisational silos. Establishing a role of ‘Service Manager’ (or similar) within Government would help create a virtual organsiational structure across Government, focused on delivering outcomes based on end-user needs.

“Thus virtual agile organisations derive their competencies from flexible, integrated, customer-driven work processes and structures, which seamlessly integrate partner, supplier and customer sites into a dynamic value network.” (Benton 2019)

One of the main goals of the Digital Transformation Agency (DTA) was to foster better joined up digital (and non-digital) services across end-user life-event journeys (e.g. Giving birth, going to school, find a job, and so on). A key example of this was the review of the Government’s 1027 websites back in 2015, which was found to be more focused on the structure of Government (e.g. websites for each portfolio/agency/program/etc.) and not focused on end-user needs.

The DTA established the role called ‘Service Manager’ that forms part of the Digital Profession. This role (based off the UK GDS approach and other similar models in the private sector) sought the position of Service Manager to be a Senior Executive responsible for the “whole end-to-end user experience” across government, even spanning across agency silos. This was also reflected in the framework released by OECD in the OECD Framework for Digital Skills and Talent.

To better structure Government to operate effectively as ‘one aps’, it is recommended that ‘Service Managers’ (or Life-Event Journey Managers) be identified and assigned from across the Australian Public Service, who will have decision making powers and authority to work across agencies and organisational silos. This would combat Conways Law and hold Public Sector officials responsible for the entire end-user journey.

While Service Managers would help combat siloed nature of Government services, it would be equally important to also ensure that innovation, including lean approaches in testing hypotheses are adopted and supported.

Service Managers would play a key part in ensuring services/products across the APS are joined up and better meet user needs. Importantly, these Service Managers will be measured on the success of end-to-end life journeys and collaborate broadly across the APS and other local/international jurisdictions. Service Managers may even replace (or support) existing Senior Responsible Officials (SROs). Refer to Appendix C: Service Management for more information.

Recommendation 4: Australian Public Sector Agility Review

The importance of public sector agility in Australia has been highlighted in recent times in papers such as the APS Review Final Report (2019), which called for a "agile, innovative and efficient" APS and the APS Workforce Strategy 2025 (March 2021) which identified the need for agile ways of working.

Recently, there have been significant initiatives undertaken by other nations specifically aimed at improving agility (i.e. US, UK, Canada, UAE, Denmark, Italy, Japan, Singapore and others). Many having the purported aim to be in a better position for the post-pandemic world (e.g. Agile Nations 2020).

Research conducted by the DTA regarding the various different public sector agility approaches (including from: OECD, World Economic Forum, PMI, Accenture, Deloitte, PwC, Gartner, McKinsey and others) was presented at the Digital Summit 2020 (Agility Accelerator session) and subsequently reviewed by DTA agile experts and reviewed by agency representatives in the APS Agile Champions Group. The resulting framework (see Attachment A: Government Agility Model) highlighted that achieving agility is not a single method or framework, it’s rather a complex system with elements which can either support or hider agility. Elements span organisational values, cultures, structure, processes/procedures, leadership, policy and other elements.

Whilst some progress has been made within the public sector, many are constrained by existing organisational structures, governance, funding models and approach to risk that hampers and hinders progress.

Australia today sits behind other countries in terms of agile practices and project delivery. In the 2018 DTA DIA survey, Government agencies self-identified that they had low level of organisational agility, currently behind UK, US, Germany and others. However agencies identified a future state wanting to become ‘leaders’ in this space.

According to PMI, Australia also consistently ranks as the worst performer globally (against all other continents and countries) in terms of annual project waste ($133m per $1b waisted). While this represents broader than Government alone, Australian Public Service can help lead the way in terms of being an exemplar. One of the key areas for improvement identified by PMI was ‘organisational agility’ (PMI Pulse of the Profession, 2020).

Transitioning to more lean and agile organisations however is not easy. From research conducted as part of the Digital Service Standard (DSS) review (2019-2020), feedback from Government agencies and outcomes from the APS review indicate that many transitions to agile ways of working fail to gain traction due to (among other reasons):

Traditional governance approaches (e.g. traditional PMO governance, reporting, approval processes),

Organisational structure (e.g. deep hierarchy, siloed teams),

Culture (e.g. command-and-control, risk adverse)

Funding models (e.g. ICT Investment Process),

Focus on ‘big-bang’ digital and ICT projects, and others.

“Traditional governance, funding and procurement models incentivise large one-off change programs, rather than more flexible and agile delivery models.” (APS Review, p. 146)

Failing to adopt more lean and agile practices is not an uncommon phenomenon. In the state of agile survey, many agile transformations fail due to similar issues. Doing “more agile” or more teams using agile methods will not enable agility – a more holistic approach is required. One where common pain points and issues can be addressed to enable agility across the APS.

For example, ‘Funding Models’ is identified by the Agile Champions Group as a top critical issue for Government to address (namely the current ICT Investment Process). This is also highlighted in the APS Review Final Report (Dec 2019) and the Governments Response (Dec 2019) which called for “effective agile funding models to support digital projects” (Recommendation 36. Today, investments tend to be focused on “big bang” multi-year initiatives which is a major barrier to agility, as scope is fixed upfront and critical assumptions typically not tested until programs are rolled out – at this stage there is little room to pivot as pollical capital has been largely spent. In the US this was recently identified also as a key issue:

“The federal government annually spends more than $90 billion on IT. However, federal agencies face challenges in developing, implementing, and maintaining their IT investments. All too frequently, agency IT programs have incurred cost overruns and schedule slippages while contributing little to mission-related outcomes.”

The need for a more holistic and comprehensive approach to APS agility has risen in recent years as a result from large scale adoption of agile practices across the APS and its flow on influence with broader strategy & policy. Other nations have addressed this through major initiatives focused on agility.

It is recommended that Australian Government mobilises a taskforce which will have the mandate to explore public sector agility across the different levels of Government. The taskforce could, for example, explore if Australia should consider sign-up to the OECD/WEF ‘Agile Nations Charter’ and/or other initiatives. Importantly, the taskforce would investigate what principles, standards and/or guidance can be developed to help support and foster agility. This would include topics such as the structure of Government, funding models, governance, leadership, culture and other topics.

Similar to the approach undertaken in the U.S. and other nations, it is recommended that the taskforce consists of agile experts with representation across the APS. A collaborative effort with industry (e.g. Australian agile experts, Agile Alliance organisation, etc.), academia (e.g. ANZSOG) the public sector (e.g. APSC and DTA) and also international organisations (e.g. OECD, WEF) is recommended.

Appendix A: Government Agility Model

Appendix B: Agile Champions Group

The Agile Champions Group was established in November 2020 and includes agile leads (e.g. head agile coaches or those responsible for leading agile practice within respective agencies) who typically report to CxO levels. The group has had active participation since its inception with the following member agencies:

DTA,

PMC,

AusTrade,

APSC,

Home Affairs,

Finance,

Health,

Defence,

Services Australia,

NBN,

Australian Taxation Office,

Department of Industry, Science, Energy and Resources (DISER),

DAWE, and

DESE

Appendix C: Service Management

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