The Centrelink Experiment: Innovation in Service Delivery (Australia and New Zealand School of Government (ANZSOG))

Centrelink was established in 1997 as part of the Howard government's bold experiment in re-framing social policy and re-shaping service delivery. Centrelink was the embodiment of a key tenet of the Howard vision for public service: a specialised service delivery 'provider' agency separated from the policy functions of the 'purchaser'. Carved out of a monolithic Department of Social Security, Centrelink was established along 'business lines' operating 320 service centres and delivering payments to 10 million Australians. Although enjoying 'monopoly provider' status, the organisation was required to deliver services to many different clients on behalf of its 'purchasing departments' (up to 25 in total) under the terms of quasi-contractual service agreements. It was meant to demonstrate a greater level of both transparency and accountability for the administration of payments amounting to over $60 billion of Commonwealth expenditure. For many years there was a real 'buzz' around the Centrelink experiment and staff and clients were generally enthusiastic about the transformation. However, after around eight years, the experiment was reined in and Centrelink was placed under closer ministerial direction and under a new managing department. The experiment continues, but its trajectory reflects the different pressures impacting on such dedicated 'services delivery agencies'. John Halligan, Professor of Government at the University of Canberra, is a foremost Australian expert on public sector governance and has published extensively on the evolution, form and behaviour of the public sectors in Australia and overseas. This volume is the culmination of an exhaustive empirical study of the origins and experience of 'the Centrelink Experiment'. I commend this book to researchers, policy practitioners and students with an interest in policy innovation, change management and the realpolitik of public sector reform. John Wanna, Sir John Bunting Chair of Public Administration, The Australian National University The Centrelink Experiment 1 Table of Contents 7 Professor John Halligan 11 Preface 13 Acknowledgments 15 Introduction: Centrelink as a field of study 17 Why Centrelink? Organisational distinctiveness and challenges 18 Organisational imperatives for a new agency 19 Changing management and policy environments 20 Public sector reform: new public management and beyond 20 Policy environment of social welfare developments 22 Engaging the external environment 22 Implementing new service delivery models 24 Leading and managing major change 25 Transforming a large organisation 25 Leading change 26 Overview of book 27 Balancing conflicting imperatives 27 Chapter coverage 28 1. Designing a delivery agency 31 Explaining organisational innovation 31 From traditional bureaucracy to new delivery options 32 The Department of Social Security and the two-network question 32 Delivery modes 33 Policy ideas and options 34 One-stop shops 34 Trends in service provision and diffusion 35 The agency trend internationally 36 Impetus from a new government 37 Anticipating the new government’s agenda 38 Interpretations: opportunities, events and personalities 40 Translating the concept 40 Conclusion 42 2. Centrelink’s development 45 Concept and responsibilities 45 Organisation, staff and funding 47 Administrative imperatives 48 Developmental stages 50 Creation and establishment (1997–98) 50 Consolidation and design (1998–2000) 53 New service delivery model (2000–02) 59 Review and redesign (2003–04) 62 Conclusion 63 3. Strategies and management structure 65 Formulating strategies for Centrelink 66 Planning and building the strategic framework 67 Precursor: DSS planning 67 Centrelink phase one, 1997–98 68 Consolidating corporate strategies, 1998–2003 71 Consolidation and growth, 2001–06 72 Extending the planning 74 Balanced scorecard for reporting performance 75 Management structure 76 Transition from the DSS 77 Designing new structures 77 Reviewing Centrelink’s strategic planning 79 Conclusion 82 4. Leading and managing change 83 Leading transformational change 83 Agents of change and their roles 84 Leadership and philosophy of change 85 Leading organisational change 87 Vision and strategies 87 Aligning organisational structures and the guiding coalition 88 Changing organisational culture 91 Strategic human resource management 94 Integrative leadership 95 Learning culture and the virtual college 96 Culture and change 96 5. Reinventing service delivery 99 Challenges and constraints in a customer focus 100 Customer satisfaction 101 Creating a service culture 102 Understanding customer attitudes 103 Designing the delivery structure 104 Phase one: service integration 104 Phase two: one-to-one service approach 107 Phase three: life-events model of service delivery 108 Phase four: re-engineering 110 Customer access through IT and channel management 111 Channel management: extending and managing customer access 114 Assurance and accuracy 117 Customer relationships 121 6. Governance 123 New governance arrangements 123 Centrelink board 125 Phases 125 Board’s role 126 Committees 127 Relations between the board chairman and Centrelink's CEO 128 The board members 128 Composition of board and departmental secretaries 130 Challenging the government on IT 131 Reciprocity in the relationship with the minister 132 The fate of governance 135 7. Relationships with client departments 137 Bases of relationships 137 Central relationships 138 Department of Family and Community Services 139 Department of Employment and Workplace Relations 140 Central agency: Department of Finance and Administration 142 Relational issues 143 Roles in the DFaCS–Centrelink relationship 144 Interface 147 Funding and the price of services 149 Transaction costs of managing the relationship 151 Changing client relationships: purchaser–provider to alliance 152 Interpretation 153 Purchaser–provider 154 Conclusion 156 8. Entrepreneurship and challenging boundaries 159 Constraints on and opportunities for positioning the agency 159 Policy innovation by an executive agency 161 Positioning within the Public Service 164 Establishing limits on the one-stop shop 164 Gateway to the welfare system 165 Competing for business 165 The contestability of Centrelink’s core business 165 Extending the client base 167 Community engagement 168 Conclusion 169 9. Lessons from Centrelink’s formative years 171 Centrelink concept of delivery agency and government design 171 Romancing the agency concept: how design decisions were made 171 Agency positioning for innovation and opportunities 173 Environmental change and the impact of integrated governance 174 Core relationships 176 Redefining client relationships 176 Customer-led service delivery 177 Governance models 178 Overall lessons and significance 180 Responding to tensions and conflicts in models 180 The role of transformational leadership 181 Centrelink’s significance 182 Epilogue: Back to the future 185 Centrelink in transition 185 Corporate governance 187 Internal governance 189 Internal structure 192 2006 and beyond 195 Appendix 1. The study 199 Original questions and objectives 199 Interviews, 2001–04 199 Appendix 2. Social welfare developments 201 1997 201 Work for the Dole program 201 1998 201 Youth Allowance 201 Job Network 201 Mutual obligation policies 201 1999–2000 202 Welfare review 202 2000 203 Family assistance changes 203 Job Network second contract 203 Rural Transaction Centres 203 2001 204 Welfare reform implemented through Australians Working Together 204 2002 204 Australians Working Together implementation 204 2003 205 Job Network third contract 205 Australians Working Together 205 Appendix 3. Strategic directions 207 Appendix 4. Comparing strategic directions 209 Appendix 5. CEO lessons 211 Appendix 6. Tables 213 Appendix 7. Roles of DFaCS and Centrelink in Business Alliance Agreement 2004 215 Bibliography 217

Centrelink was established in 1997 as part of the Howard government's bold experiment in re-framing social policy and re-shaping service delivery. Centrelink was the embodiment of a key tenet of the Howard vision for public service: a specialised service delivery 'provider' agency separated from the policy functions of the 'purchaser'. Carved out of a monolithic Department of Social Security, Centrelink was established along 'business lines' operating 320 service centres and delivering payments to 10 million Australians. Although enjoying 'monopoly provider' status, the organisation was required to deliver services to many different clients on behalf of its 'purchasing departments' (up to 25 in total) under the terms of quasi-contractual service agreements. It was meant to demonstrate a greater level of both transparency and accountability for the administration of payments amounting to over $60 billion of Commonwealth expenditure. For many years there was a real 'buzz' around the Centrelink experiment and staff and clients were generally enthusiastic about the transformation. However, after around eight years, the experiment was reined in and Centrelink was placed under closer ministerial direction and under a new managing department. The experiment continues, but its trajectory reflects the different pressures impacting on such dedicated 'services delivery agencies'.

John Halligan, Professor of Government at the University of Canberra, is a foremost Australian expert on public sector governance and has published extensively on the evolution, form and behaviour of the public sectors in Australia and overseas. This volume is the culmination of an exhaustive empirical study of the origins and experience of 'the Centrelink Experiment'. I commend this book to researchers, policy practitioners and students with an interest in policy innovation, change management and the realpolitik of public sector reform.

John Wanna, Sir John Bunting Chair of Public Administration, The Australian National University