What Really Happens: Department Secretary Appointments, Contracts and Performance Pay in the Australian Public Service



This account of the practice in the Australian Public Service (APS) for appointing department secretaries, using contracts and rewarding for performance, is based on my own experience in being appointed, reappointed and not reappointed, and in receiving and not receiving performance pay. It also draws on my experience as Public Service Commissioner in assisting with appointments and performance pay of secretaries. I also discuss weaknesses in the current system, and the drift to ‘politicisation’.

I was first appointed as a department secretary at the end of 1993 after 25 years in the APS including 15 years in the Senior Executive Service (SES) in three different portfolios (Social Security, Finance and Defence). I was secretary of three different departments (Administrative Services, Housing, and Health, some of which went through changes in name and responsibilities during my tenure) before being appointed as Public Service Commissioner from the beginning of 2002. I retired from the APS in June 2005.


Under the Public Service Act 1999, the prime minister appoints department secretaries after receiving a report from the secretary of the prime minister's department who must first consult the relevant minister (section 58). In the case of the appointment of the secretary to the prime minister's department, the Public Service Commissioner must provide a report to the prime minister (section 58(2)).

This particular process has essentially applied since 1984. Under previous legislation, appointments were made by the Governor-General, but the government through the prime minister has always had considerable discretion in the appointments. Under the 1999 Act, merit is the over-riding factor for employment decisions in the Australian Public Service below the level of secretary (section 10(1)(b)), but the prime minister is not legally constrained by the merit principle in appointing secretaries. Nevertheless, recent Australian tradition has been for the prime minister to consider closely merit in reports provided by the officials advising him, while taking into account personal factors including the views of the minister on how well the candidates might work with the government and the minister concerned. Most secretaries are, and always have been, career public servants. Over the years, however, there have also frequently been one or two whose politically-aligned views almost certainly contributed to their appointment – a degree of ‘politicisation’ has always existed.

This Australian tradition contrasts with practice in New Zealand and the UK. In New Zealand, secretaries are in fact employed by the State Services Commissioner who appoints them after an independent merit process.1 In the UK, the prime minister must take the advice of the Civil Service Commissioners, at least where an appointment to the civil service is involved, and they apply a strictly merit-based approach.

The Australian legislation only provides a framework for appointment of secretaries. When I was first appointed Secretary of the Department of the Arts and Administrative Services in 1993 under the 1922 Public Service Act, I had no contact with Dr Michael Keating, Secretary of the Department of the Prime Minister and Cabinet (PM&C) (1991-1996), until after the decision was made. He subsequently informed me that he had kept his own counsel and had not consulted other secretaries about his advice, but had consulted the relevant minister, Bob McMullan. Keating had systematically built up a close understanding of the secretary-feeder group, the deputy secretaries in the APS, through continuous discussions with secretaries.

I was conscious, however, of deliberations amongst a number of ministers, and they with their secretaries, during at least three months prior to my appointment. My own minister, the Minister for Defence, Senator Robert Ray, spoke to me on several occasions to let me know I was under consideration and that my standing with the Defence industry was a particularly positive factor. My secretary, Tony Ayers, also kept me informed of ministerial deliberations, not only relayed from Minister Ray but also, I suspect, from the retiring Secretary of the Department of the Arts and Administrative Services, Noel Tanzer. Dr Allan Hawke, recently appointed to the prime minister's office after having been a fellow deputy secretary at Defence, also rang me on several occasions to advise that the Prime Minister, Paul Keating, intended to discuss secretary appointments in Cabinet, and when this was likely to occur.

Speculation about candidates appeared in the press about two months before the appointment, and my name was mentioned amongst others. I have no doubt the journalists concerned did not get any information from Dr Keating, and I certainly did not respond to the one or two calls I received, but it is unlikely their stories were based entirely on idle speculation: there was clearly informed discussion going on amongst ministers (and most probably some of their staff) and some well-placed secretaries, and the journalists had probably been able to access some of that.

Minister McMullan's office also contacted me about a month before the appointment and asked me to meet the minister. I did so and he used the press speculation to explain the meeting: he wanted to meet each of the people mentioned, to find out more about them, in case the Prime Minister did consult him. He intimated that he knew nothing about the process, and he might not be asked for a view.

Interesting points about the process under the then Prime Minister, Paul Keating, were that:

  • • formally, his department secretary (Michael Keating) did advise the Prime Minister after consulting the relevant minister, and the Prime Minister took the decision;
  • • the Prime Minister took the matter to Cabinet for consideration, and several ministers participated in the discussions (I was later advised by Minister Ray), so that the decision had a collective flavour;
  • • there were also discussions for several months prior to the Cabinet meeting amongst a number of ministers about possible candidates, and a few secretaries, that were far more than idle speculation;
  • • these discussions almost certainly went beyond the question of the merit of potential candidates, notwithstanding my reputation as an apolitical career public servant: they concerned my perceived capacity to work with the government and the minister; and
  • • at no stage was I invited to apply for the job, or indicate interest, or go through any formal assessment process.

Dr Keating's method was, indeed, to keep his own counsel on these matters. He did not systematically follow a predecessor's (Mike Codd) practice of always consulting the Public Service Commissioner. He did, however, use secretaries meetings and Management Advisory Board projects to help in succession management, and to strengthen his capacity to advise on appointments.

Three months after my first appointment, I experienced a somewhat more truncated process that did not involve any substantial discussion in Cabinet. I was contacted while in a restaurant at lunchtime by Dr Keating who was in Darwin en route to Asia with the prime minister. I took the call in the kitchen as that was where the restaurant had the telephone (pre-mobile phones). The call was along the following lines:

Brian Howe, the Deputy Prime Minister, wants you to be secretary of his new department (Housing and Regional Development). I have discussed this with the Prime Minister on the plane and he agrees. You will be contacted by Mr Howe who wants to talk to you about arrangements, but you are to tell no-one until the decision is announced in a few weeks.

I was flattered but taken aback, and suggested that the decision might be worth more reflection as I was just getting on top of the current job: perhaps we could discuss the appointment further when he and the prime minister returned from overseas.

Listen to me, Andrew. The Deputy Prime Minister wants you to head his new department. The Prime Minister agrees. There is nothing else for you to consider. You will be contacted shortly by Mr Howe. You are to tell no-one.

And so, four weeks later, after just a few months in my first secretary position (technically two positions as ‘the Arts’ were transferred from the portfolio shortly after I arrived), I became Secretary of the Department of Housing and Regional Development.

It was an enjoyable role, allowing me to draw on my extensive social policy experience earlier in my career prior to joining Defence. But again, no-one asked me about my preferences, nor involved me in any way in the appointment decision.

Two years later, the Howard government was in office. About three months before the elections, Dr Keating invited me to discuss administrative and personal questions in the event of a change of government. His (correct) assessment was that a Prime Minister Howard would not retain Housing and Regional Development as a separate department. Apart from canvassing the administrative options, he sought my views on where I might be placed in that event. I appreciated this frank discussion of career options, the first since I became a deputy secretary. I mentioned in particular social security and finance, making clear my preference for the former.

One week after the election of the Howard government, Dr Keating rang me. It was again a brief call with no room for discussion. It went something like this:

This is the first pleasant call I have made this morning. I am pleased to tell you, you will be appointed secretary of the Department of Health and Family Services. Dr Wooldridge will be your Minister. The announcement of the Ministry and secretaries will be made in the next few hours.

I thanked him, but added my surprise, as we had never discussed Health.

I always had you in mind for Health. I haven't time to talk about it now, I've got a lot of other calls to make, but your's is the first pleasant call today.

The post-election process of appointing secretaries is different to the process of filling posts from time to time because of vacancies that arise. There is the ministry to be settled. The two sides of politics differ in their approach to deciding on the ministry, but the head of the prime minister's department likes to see secretary appointments made simultaneously with ministry appointments. This limits consultations and negotiations within the ministry about secretaries, and takes advantage of the reduced capacity of newly promoted ministers to press for a favoured candidate as secretary. It is more firmly a prime ministerial decision, not a collective one, notwithstanding that each minister is still required to be consulted on his or her departmental secretary.

The process was similar in 2001 after the election where Mr Howard won a third term in office. I was about one year into a second contract as Secretary of the Department of Health (by then, ‘Health and Aged Care’) and not expecting a change. But Minister Wooldridge had retired, and there was to be a new Health Minister, Senator Kay Patterson. This time the call was from Max Moore-Wilton, the Secretary of Prime Minister and Cabinet since 1996. It was along the following lines:

inline imageDr MICHAEL KEATING
Secretary, Department of the Prime Minister and Cabinet, 1991-96
Shortly after the Howard Government took office he telephoned Andrew Podger to inform him he would be appointed secretary of the Department of Health and Family Services. It was his ‘first pleasant call’ that morning.

The Prime Minister will announce the ministry and departmental secretaries later today. The Prime Minister wants you to be Public Service Commissioner. As your current contract in Health was to have run out in two years time, a three year contract as Commissioner will in fact extend your career by a year.

There was an unstated ‘so be grateful’ tone in the conversation. Moore-Wilton had earlier tried to limit more severely my contract at Health (see further below). I expressed surprise and some disappointment, but there was again absolutely no room for negotiation (including on the terms of the contract).

Moore-Wilton had discussed public service matters with me from time to time so he knew of my strong interest in the field, but, like most secretaries, he viewed the Commissioner as a lesser job than a department secretary. I knew that he regarded this as a demotion, so I was initially disappointed. But I also regarded the position of Public Service Commissioner as very important, and one that I could strengthen. Moreover, after six years in Health, I could hardly object to a move.

I therefore told Mr Moore-Wilton that, despite my disappointment, I was a loyal public servant and accepted the Prime Minister's decision and would put every effort into the new role.

As Public Service Commissioner, I gained a much clearer picture of the processes of appointment. I was, however, only directly involved in two appointments during my nearly three years in the job: replacing Moore-Wilton when he resigned as Secretary of the Prime Minister's Department, and advising on a new Secretary of the Transport Department when Moore-Wilton declared a possible conflict of interest shortly before his resignation to take up an appointment as manager of Sydney's international airport.

Notwithstanding the limited formal role of the Commissioner in secretary appointments, my predecessor, Helen Williams, had extended a process begun by a predecessor to develop a file on deputy secretaries, and other SES officers, whose secretaries considered they had serious potential for future appointment as secretary. This file, based on discussions with each secretary each year and including curriculum vitae, built on the somewhat ad hoc succession of management discussions amongst secretaries in earlier years, including proposals to rotate some deputies either to better position them for advancement or, at least, to refresh those too long in their current roles. I understand Williams provided a copy of the file each year to Moore-Wilton.

During my time, I developed the database further, with two sets of data: one on people and one on positions. The first included a CV and an assessment of each deputy or equivalent officer and of any other SES officer the relevant secretary believed should be known to me and to the Secretary of PM&C as a potential future secretary. The CV information was provided by the individual concerned, while the assessment was made by the relevant secretary, often with my own remarks added. Access was strictly limited to myself and the Secretary of PM&C. Some secretaries provided the individual concerned with a copy of their assessment, and sometimes the individual signed this off and added their own comment which was included in the database.

The second data set identified all agency head positions (not only secretary positions), when they were next expected to need filling (or refilling), any views on the way in which the appointment might be made (for example, whether the position should be advertised), possible candidates, and comments on their suitability. The views were from the portfolio secretaries concerned, supplemented by my own comments.

These data sets were updated regularly and I generally met with each portfolio secretary at least once every two years for detailed discussion. From time to time, a session was set aside at a Secretaries Retreat to allow each secretary to advise on the strengths and weaknesses of deputies and others, with other secretaries invited to comment if they had had direct and recent experience working with the person concerned. These sessions, managed under agreed rules of fairness and evidence as well as of confidentiality, helped me to calibrate the data and assessments I held.

Dr Peter Shergold (who succeeded Moore-Wilton as Secretary of PM&C in 2002) encouraged me to enhance the information, further drawing on advice we received when speaking to ministers about the performance of their secretaries (see further below). I would always ask, as an indicator of the management performance of the secretary in terms of succession planning, the minister's views of the deputies and other SES and their capacity to step up in future. The views expressed were sometimes most insightful. They were also, almost without exception, devoid of a partisan assessment. The relevant minister's direct experience of the capacity of a deputy and their confidence in them has, I believe, helped one or two appointments that might have faced hurdles based on less informed perceptions amongst ministerial advisers of candidates' ability to work with the government.

Notwithstanding this considerable database maintained by the Commissioner, neither Moore-Wilton nor Shergold directly sought my views on specific appointments. They were not legally obliged to, and perhaps Prime Minister Howard's desire for tight control precluded any more involvement of the Commissioner.

In the one case where I was statutorily required to provide a report – the appointment of a new head of PM&C – I discussed with Moore-Wilton before he left how best to do so. He highlighted the requirement under the Act for me to consult the Prime Minister before formally reporting to him. If I wished to present options, as I indicated I did, he suggested I do so ahead of the consultation, which is the approach I took. The eventual formal report, following a brief discussion with the Prime Minister, did not need to canvass candidates who had been considered in the earlier minute I sent. I felt I had met the spirit as well as the stipulated requirements of the legislation in canvassing possible candidates for the Prime Minister in writing and indicating my views about their merit, while subsequently providing a more succinct report after consulting him.

I am not aware of the appointment practices used by either Moore-Wilton or Shergold. But I remain wary about the current legal requirements, and the risk that merit may play a minor role rather than the dominant one. There is a danger that the written report, after consultation with the minister concerned, may simply reflect the decision about to be taken.

Involving the Commissioner as well as the Secretary of PM&C would make it more likely that the reports the Prime Minister receives contain written advice on the merits of candidates, while not limiting discretion in reaching a decision.

There is also a strong case for widening the recruitment base beyond senior members of the APS and the occasional state public servant or leader of a non-government organisation. More frequent advertising of positions, particularly more specialist positions in charge of statutory authorities, would improve understanding of the potential market for senior government positions, and could be complemented by occasional discussions amongst Commonwealth and state commissioners and/or heads of first minister's departments.


The values of the Australian Public Service these days are embodied in the Public Service Act. They include both being apolitical and professional and being responsive to the elected government. The tension between these values has always been there, but a series of measures has been taken over the last 20 years to increase the emphasis on responsiveness, the most recent being introduction of contracts in 1994 and introduction of performance pay for secretaries in 1999.

The contract arrangements were introduced by the Keating government. Earlier, the Hawke government had amended the then Public Service Act to clarify that department secretaries (no longer ‘permanent’ heads) were to manage their departments ‘under the minister’; and would be appointed to particular positions for five years (at that time, not with strict term appointments – they could expect to continue as secretaries, but not in the identified department for more than five years).

The contract arrangements were introduced shortly after my first appointment as secretary. I did not favour them and I wrote to both my minister and Dr Keating saying that I felt the change would fundamentally change prevailing practice, with the risk of undermining the apolitical nature of the APS. In particular, I feared that the end of a five year term would be viewed by governments as an opportunity to make a new appointment in line with their political preference, rather than as a reminder to move the secretary to fresh challenges as a way of rejuvenating and cross-fertilising the secretary pool.

I was not alone. Two secretaries decided against signing up (and receiving a 20% pay increase as compensation for loss of tenure), both arguing along similar lines. One also had a known political affiliation that might prove a serious risk should there be a change of government; the other was head of a small department likely to be abolished at any time. Both proved correct about their particular risks.

At least one other secretary was not offered the pay increase on the spurious argument that he had no tenure to give up given impending age retirement within the next five years. I always felt this was shabby treatment of a remarkably good secretary with years of substantial achievement (later, he was allowed a more modest pay increase).

But I, along with all the other colleagues, signed up. Why? Dr Keating convinced me with the following succinct argument:

  • • as no-one appointed in future would have the option, what is the point of you not signing up? Why are you so different?
  • • if you think not signing up will protect your security of tenure, you are wrong; there is no guarantee of continued employment now; and
  • • the only advantage in not signing is that a redundancy payment under the existing provisions might be higher, but the pay in the meantime will be lower.

The common perception was that we took the money and ran. Perhaps. But not doing so would not have made one iota of difference. The die had been cast.

The term ‘contract’ is a misnomer. There is no negotiation involved or tailored provisions. The rights of the secretary are very limited, the government being able to terminate the ‘contract’ (more precisely, the letter of appointment) at any time for any reason,2 the only compensation being a pay-out formula (one third of the pay for the outstanding contracted term, up to a year's pay).

The change of government in 1996 confirmed that the contract system was genuinely a new world. Six secretaries lost their jobs directly after the 1996 election, including one of the two who did not sign up in 1994. (Evidently, Keating's call to me about my appointment to Health had followed six difficult calls to advise others that their employment was being terminated.) The message was clear: tenure had gone, and the threat not only of non-renewal of a contract but of early termination was real.

The contracts in 1994 were all for five years (except for two who chose three year contracts). My move in 1996 to Health was on a new five year contract, as were all the other new contracts at that time. Towards the end of 2000, Max Moore-Wilton raised the question of a new contract with me. As set out further below, he had previously questioned my performance and raised the possibility of early termination of my contract. But he knew my minister had full confidence in me and wanted me to stay on. He offered to recommend to the Prime Minister a two-year extension, with the clear intention not to recommend any further appointments after those two years. While I accepted that another five years in Health was probably not sensible as it would mean Health having the same secretary for ten years, I had previously suggested the possibility of a five year contract in such circumstances with the clear understanding of a sideways move within the period. That option was certainly not entertained on this occasion.

I discussed the matter with Dr Wooldridge, and he agreed to press for a three year contract. That had the personal advantage for me of taking me to age 55 and access to an early retirement pension should there be no new appointment.

The decision to give me a new contract of three years was made one week before my five year contract finished in March 2001. While the minister conveyed to me a month or more beforehand his confidence that I would be given such a new contract, I was uncertain given Moore-Wilton's previously stated preference that I not continue to be a secretary at all. The others with contracts ending in March were also given one week's notice of whether or not they would be reappointed (if any were not to be reappointed, this meant no payout at all as well as no notice).3

I was one of a number whose five year contracts were ending in March 2001, as many began their current five year contracts in March 1996. Those kept in their current portfolios were given three year contracts. And some who were moved, or had moved earlier in their five year term, were also offered only three year contracts.

Thus began an important new development, the use of three year contracts. The legislation allows for contracts ‘up to 5 years’ (section 58), but the expectation of incumbents (and probably almost all senior public servants and informed observers) had been that everyone would be on five year contracts unless for personal reasons they chose otherwise. Since 2001, up to half the contracts have been for three years. In some cases, the decision can be rationalised on the basis of sensible mobility, such as, in my own case and that of others appointed to continue in a position beyond five years. But that rationalisation wore thin under any analysis of who was on three year or five year appointments. Several favoured secretaries had five year contracts extended by five years in the same department; several who moved to new departments were given only three years; and, increasingly, new secretaries were given only three year contracts.

Max Moore-Wilton attempted to explain the ‘rules’ on one occasion at a portfolio secretaries meeting where most felt strongly that the shift to three years was not consistent with either good management practice or a professional, apolitical public service. The explanation was that three year contracts were appropriate in the case of extensions in the same department, people moved within the period of their current contract (so that a new three year contract would almost certainly take them beyond the five years of their current contract), and new secretaries whose performance might be more closely monitored. He said the process was also intended to stagger the dates of completing contracts to allow easier management of secretary movements. The evidence only partly reflects this explanation as there are clear exceptions.

A better explanation is that there are favoured and not so favoured secretaries, and that the prime minister favours closer control and greater flexibility in managing the senior echelons of the APS. Indeed, Moore-Wilton conveyed the views of some senior ministers to us in dismissing the suggestion that he recommend five year contracts in future, along the following lines:

Why should secretaries get five years when we have a maximum of three years?

It was apparent that appreciation of the importance of continuity in an apolitical, professional public service was not widespread amongst the highest echelons of the elected arm of government.4

A particular case in point is the position of Public Service Commissioner (PSC). Like secretaries, the PSC is appointed for ‘up to 5 years’ under the legislation (section 45). Unlike secretaries, the PSC cannot be dismissed by the government without agreement of the Parliament (section 47) and the PSC has significant statutory powers and independence (sections 41-43). The assumption of everyone, I believe, before 2001 was that the PSC would be appointed for five years consistent with the statutory independence involved. Williams was appointed PSC for five years when she moved from the Department of Immigration in 1998.

As mentioned, I was appointed PSC in January 2002, after the 2001 election. Williams agreed to vacate the position having been offered a new departmental secretary position (as head of the Department of Communications, Information Technology and the Arts). Her new contract was for three years only. Perhaps more significantly, my appointment as PSC was also for three years only.

Max Moore-Wilton made it clear when offering me the position that it would be for three years, noting that this would effectively extend my current contract by a year. There was no room for negotiation. The independent Public Service Commissioner would now be a three year appointee. My successor, Lynelle Briggs, was also appointed for three years.

In the two instances when, as PSC, I advised on secretary appointments, I recommended five year contracts. In both cases this advice was accepted. In the case when I provided advice in the place of Moore-Wilton who acknowledged a possible conflict of interest, the incumbent secretary had been in the position three years, wanted to be reappointed, and had performed competently. On the Moore-Wilton explanation of the prevailing policy, a new three year contract would have applied. Yet my advice for a five year contract, based on the principles I believed in, was accepted. I can only speculate that the push to three year contracts came as much from the then Secretary of PM&C as it did from the Prime Minister. That said, secretary appointments since Dr Shergold replaced Moore-Wilton have also, more frequently than not, been for three years.

As an aside, I discovered after taking office as PSC that secretary appointments were not notified in the Gazette: they were announced in a press statement by the Prime Minister, but without any mention of the period of the contract. I took the decision in 2002 to publish such details in the Gazette.

The move to contracts for department secretaries in the APS has been more than matched in state and territory governments in Australia. In all jurisdictions, department secretaries are on contract, and in most cases the contracts are for three year terms (even, apparently, where elections are four yearly rather than three yearly). None have five year terms. In most jurisdictions, Senior Executive Service members (those in the second or third levels immediately below secretary) are also on term contracts, and in some jurisdictions those appointments are subject to approval by the minister or premier or cabinet.

In the APS, SES appointments are made by the agency head concerned, and are subject to certification by the PSC as to the merit process applied; by law, ministers may not direct such employment decisions. It is up to the agency head to decide whether appointments will be contracted for a term, or be continuing. Most of the SES are in continuing jobs. This presumably reflects the view of agency heads in the APS that they have sufficient flexibility without large numbers on fixed-term employment, and that continuing employment provides their agencies with the skills and motivation they require to meet their objectives.

This suggests that the push in the other jurisdictions for term contracts for the SES, as well as at secretary level, is driven primarily by political views, not management judgment.

inline imageHELEN WILLIAMS
Public Service Commissioner, 1998-2001
As Public Service Commissioner she proposed criteria to guide performance appraisal of department secretaries: contribution to whole-of-government priorities; support for the minister; management of the department; leadership; and upholding and promoting the APS Values.

Accordingly, it also suggests more risk of politicisation of the professional, apolitical public service.

Performance Pay

Performance pay for the SES, and for less senior public servants, was initiated in the APS in the late 1980s. It has been a hotly debated topic in terms of its contribution to organisational performance but, while it did not apply to department secretaries and was managed within the public service independently of ministers, the issue of any possible impact on a non-partisan professional public service was not significant.

In early 1999, the Howard government introduced performance pay for department secretaries (and certain other agency heads not required by law to act independently). The conditionality of the payment, like the loss of tenure in 1994, provided the key argument to the Remuneration Tribunal to enhance the remuneration package for secretaries at a time when wage restraint policies might otherwise have precluded a pay increase notwithstanding any substantive case for it. The Remuneration Tribunal agreed to payments of up to 15% of the total remuneration package, subject to assessed performance.

Again, there was widespread unease amongst secretaries about the proposal though a few strongly favoured it and others accepted it as the only means of achieving the pay increase they considered was well justified. Much of the debate was about who would decide the performance payment, and how. A senior secretary expressed the concerns of many at one portfolio secretaries meeting, along the following lines:

How will someone be rewarded for rightly doing something a minister doesn't like (or rightly not doing something a minister wants)? And how will someone be penalised for not doing something they should have (or doing something they should not have done)?

It was made clear to us that ministers would not accept a Canadian-style approach where a committee of secretaries effectively assesses the performance with the prime minister signing off the assessments. Department secretaries working ‘under the minister’ and appointed by the prime minister would be assessed by the prime minister with substantial input from the relevant minister. The Prime Minister did, however, agree that the Secretary of his department, and the Public Service Commissioner, should jointly advise him on the performance of secretaries, with the PSC alone advising him on the performance of his own secretary.

In line with the shared view of secretaries, it was agreed that the process should not be prescribed too closely, but some general guidance given to help ensure sufficient robustness and objectivity. Secretaries were encouraged to develop with their ministers some clear understanding of the priorities for the (coming) year, with a focus on those matters requiring the personal attention of the secretary (not just the agency's budget plan or corporate plan); the PSC also reminded secretaries each year of their statutory responsibilities under the Public Service Act and the Financial Management and Accountability Act in particular; secretaries were asked towards the end of the year to provide a self-assessment to the Secretary of PM&C and the PSC, and to discuss that with their minister; the Secretary of PM&C and the PSC would meet each minister to discuss the self-assessment; and the two would provide a short report, including a recommended assessment, to the prime minister. Performance pay could be at one of three levels: zero; 10% of the relevant remuneration package; or 15% of the package.

Helen Williams as PSC suggested the following criteria as a guide: contribution to whole-of-government priorities; support for the minister; management of the department; leadership; and upholding and promoting the APS Values. Most secretaries followed these criteria closely in their self-assessments, but some did not. Initially, reports to the prime minister did not closely follow these criteria.

Prior to introduction of performance pay, there had been a highly informal process of reviewing secretary performance in 1998 that caused considerable angst amongst secretaries. This was the so-called ‘Lemon Hunt’, an exercise initiated by Max Moore-Wilton that was intended by him to remove secretaries (the ‘lemons’) he considered were not performing sufficiently well. I was amongst that number.

Moore-Wilton asked to see me on some administrative orders matters relating to the scope of the very large Health and Family Services portfolio. We had worn some very major budget cuts in 1996 and 1997 across health, aged care and child care programs in particular and the political reaction had been substantial, placing a lot of pressure on the ministers in the portfolio and on the department.

The conversation, however, did not dwell for long on this issue. I was told that the prime minister was concerned about the performance of some secretaries which, if it did not improve, would lead to termination of their contracts. I was one of the prime targets and, unless I lifted my performance greatly, my contract would be reviewed before the end of the year.

I was more than a little surprised. I knew my more traditional approach to the public service was not favoured by Moore-Wilton, and our different personalities meant I did not seek out his company as some others did. But in both 1996 and 1997, the Prime Minister had singled out my portfolio minister and my department as having shown the greatest cooperation of all portfolios in helping the government meet its budget objectives, and to do so with policy proposals of long-term public benefit. His comments were endorsed warmly by both the Treasurer and the Minister for Finance.

Moore-Wilton's stated view, however, was that the portfolio needed a manager, not a policy adviser, and that I was not performing adequately. This explanation did not satisfy me either, and I subsequently sent him a letter detailing my rejection of his assessment. In November 1998, at a surprise 50th birthday celebration for me, and after considerable press comment on the ‘lemon hunt’, a supportive letter from Minister Michael Wooldridge was read out: ‘Working closely with you since March 1996 has been a great pleasure for me, and I am very much looking forward to continuing to do so this term of government’.

The ‘lemon hunt’ eventually fizzled out, with no contract terminations.

In the first round of formal performance assessments for 1998-99, I prepared a self-assessment, structured around the criteria suggested by the Public Service Commissioner and a minute I had sent to the minister at the beginning of the year setting out my understanding of his priorities for me. I discussed the assessment with the minister, albeit briefly, as I did not think he felt particularly interested in the process. He considered I had performed well, he had every confidence in me, but he also mentioned that I was not a favourite of Moore-Wilton. He made clear he would support my being assessed as deserving a performance bonus. Subsequently I was advised by Moore-Wilton and Williams that the Prime Minister had decided I had performed at a level warranting a bonus of 10%.

The following year I was not so fortunate. Two incidents led to extensive media criticism and political difficulties for my two ministers. The first, known as the ‘Scan Scam’ following Minister Wooldridge's use of the term, involved a number of radiologists speculating on a budget new policy proposal to widen Medicare payments for MRI scans, taking advantage of inside information during pre-budget consultations. The Auditor-General investigated the circumstances and did not rule out the possibility of confidential information being provided improperly, and criticised the department for not adequately managing risk in the development of the budget measure, including the risk of conflict of interest during our consultations. He also criticised the department's record-keeping, particularly of meetings with the radiologists including a key meeting with the minister. The minister withstood a series of sustained attacks in the Parliament, and I and my officers faced many days of questioning before a Senate committee.

I accept some responsibility for the incident: we had been naïve in our dealings with the radiologists. On the other hand, a number of the radiologists proved to be untrustworthy and greedy. Moreover, the budget measure we had developed achieved its purposes of extending access by the Australian community to an important new technology, and doing so in a financially affordable way. A more cautious approach might have avoided the scandal, but would almost certainly have also delayed introduction of a beneficial reform. The minister survived, but with some enduring political scars. I strongly believe he did nothing improper in the budget process but, like the department, he must (and does, I believe) accept responsibility for being a little naïve.

The second incident was the infamous ‘kerosene bath’: the department's overseeing of nursing homes came under enormous media and parliamentary attack following one home's practice of bathing some residents suffering from scale insects in water with added kerosene. There was evidence the department, and the newly established Aged Care Standards and Accreditation Agency, had been slow to respond to complaints and reluctant to impose sanctions on homes not meeting required standards (new standard requirements had been announced to come into force a year later, giving homes time to invest in the necessary improvements). The particular home in question had not met various existing requirements, but some residents and their families strongly opposed sanctions while others berated the government and the department for not closing the home. The department's eventual decision to close the home and move the residents was taken with television cameras and reporters jostling for pictures and interviews. It was a media circus, and a parliamentary focus for a year or more.

My second minister, the Minister for Aged Care, Bronwyn Bishop, came under sustained attack in the Parliament and I, with the officers from the aged care area, attended Senate committee hearings over many months. Again the minister survived, but again with enduring political scars. She was critical at the time of the department's capacity to service her needs in the Parliament, a criticism strongly endorsed by the Prime Minister's Office which became closely involved in the parliamentary and media tactics.

Again, I accept there were deficiencies in the department's oversight of the homes. It is nonetheless true that we were on the path towards establishing a much stronger accreditation regime, and a balance needed to be drawn between acting firmly on lapses in standards, and giving homes time to improve quality by new investments. Looking back, I have no doubt standards did improve significantly during this period as a result of the government's initiatives and the department's efforts, but media and parliamentary attention helped in marshalling strong public demand for more action, even if it was often unfair to us. I also accept that the department struggled at times to meet the minister's demands for information and briefing, though this stemmed as much from problems in her office, and her style, as from departmental weaknesses.

It was against this background that my own performance was assessed. Not surprisingly, the political perspective was unlikely to give much credit for the longer term benefits of the measures being introduced nor for achievements in other program areas such as primary health care or private health insurance, or in management or in leadership. The obvious political damage was paramount, and the department's apparent contribution to that, and its inability to meet all the demands of embattled ministers to contain the political damage, was no doubt a major factor in any assessment of my performance. In any event, I was not awarded a bonus that year.

A year later I regained the 10% bonus, though I suspect this took some persuading to acknowledge the work we had done to sort out the problems in aged care and to initiate and implement reforms to private health insurance in particular, and to set aside the enduring memories of political troubles the year before.

My personal experience shaped the approach I subsequently took as Public Service Commissioner. Moore-Wilton took a very pro-active stance in the assessment process, contributing as much as listening in our discussions with ministers, and charging me mainly with preparing the documentation. It was very clear that the first two criteria dominated the assessments: contributing to whole-of-government priorities and supporting the minister. Even on these, Moore-Wilton often led the discussion and at times I wondered if ministers felt they were being assessed, rather than giving assessments of their secretaries.

Nonetheless, I was keen to ensure the criteria on management, leadership and upholding and promoting the APS Values were addressed seriously. I therefore asked ministers in our discussions their views on aspects of each of these I felt they could comment upon knowledgeably. On management, I asked about the quality of the secretary's senior team, and whether the minister could see a successor amongst them. On leadership, I asked about the standing of the secretary amongst the portfolio's stakeholders such as business leaders, state governments, professional groups and academics. On the APS Values, I asked if the secretary had the courage to give the minister advice he or she did not really want. In drafting the reports to the prime minister, I also included, as part of the last criterion, the secretary's record in contributing to APS-wide forums on public administration such as Management Advisory Committee projects and APS Commission reviews.

By the second round of assessments, I was more confident in making judgments and debating points with Moore-Wilton. I checked Auditor-General reports to see if there were serious weaknesses in management, and I took into account material gathered by the APS Commission for the State of the Service Report prepared by the PSC under the Public Service Act, section 44. I also pressed harder where there were questions of leadership and cooperation across the APS. I changed the format of the reports to include assessments against each of the criteria, and to separate the minister's recommendation from the recommendation of the head of PM&C and myself. Nonetheless, the reports and our recommendations were substantially shaped by ministers' views, as the system is designed to do, reinforcing the principle of ministerial control of the bureaucracy.

The third round I participated in as commissioner was with Dr Peter Shergold. His style differed greatly from Moore-Wilton's. He relied more heavily on me throughout (even leaving some interviews with ministers to me when he was not available), and gave more weight to the criteria relating to management, leadership and APS Values. He also listened more attentively to ministers at the meetings, and was most interested, for example, in their views of the department's senior team. In this round, a sixth criterion was added, on implementing government decisions. This followed concern expressed by both the Prime Minister and Cabinet of problems, including delays, in implementing government measures (this had also led to other action such as the establishment of an Implementation Unit in the PM's Department).

Ministers' interest in the process varied. Some were very interested and keen to discuss matters in some detail with Moore-Wilton or Shergold and myself. Others were less interested, seeing the process as a chore, but nonetheless necessary in order to do the right thing by their secretaries. Several were quite incisive about strengths and weaknesses of their secretaries, while others could not distinguish between their own political aspirations and the duties of a secretary. One or two appeared a little intimidated, particularly by Moore-Wilton.

Prime Minister Howard always took the process very seriously. He had read the reports closely before we met him, and he discussed each secretary's report in turn, passing over more quickly those reports with which he agreed entirely. On others, he would test our comments and seek clarification of ministers' views. I recall vividly his response when I remarked that not giving a particular secretary a bonus one year would send him a serious message. He said quite firmly that this is precisely what the system was about: if the prime minister's decision doesn't send a message, there is no point having the performance assessment system.

It was evident that the criterion concerning responsiveness to the government dominated in the final assessment, but it was also clear that the Prime Minister considered all aspects of our reports on secretaries. On one occasion, the prime minister deferred a decision on a secretary until he had considered more carefully a comment I had made. He rang me subsequently to tell me the decision he had taken.

Each year most secretaries received the 10% bonus, with a small number receiving 15% and a smaller number receiving none.

Notwithstanding efforts to strengthen the process, and notwithstanding the need for secretaries to receive feedback from ministers and the prime minister on their performance, there are legitimate concerns about providing performance pay to secretaries. My experience as both assessee and adviser to the assessor is that a single measure of performance translated into a bonus will inevitably focus primarily on responsiveness to the government, and be coloured by immediate, media-fuelled issues at the expense of possibly more important factors such as building organisational capacity and developing and implementing reforms of longer term public interest.

My advice was, and remains, that performance pay for secretaries should be abolished; in fact, however, it has been strengthened, with the maximum bonus increased to 20% (around $60,000) of total remuneration.

Concluding Observations

The Australian approach to appointing secretaries and maintaining their performance has always allowed considerable discretion to the prime minister. In practice, merit has dominated and the vast majority of secretaries have been and are career public servants with proven performance in policy advising and/or program management. But equally, in almost every era since Federation in 1901, there have been some whose political alignment undoubtedly contributed to their appointment and progress.

Balancing the values of responsiveness and apolitical professionalism is a perennial issue in public administration, and there is no golden era where the balance was evidently right. There has always been debate about excessive responsiveness or politicisation, or excessive independence or lack of accountability.

The shift in the last 25 years has been substantial, however, steadily increasing political oversight and expectations of responsiveness by the bureaucracy to the elected government. Apart from the changes to secretary arrangements outlined in this article, there has been the steadily increasing role of ministerial advisers who are not bound by the APS Values of being apolitical and impartial, and are not accountable to Parliament; in addition, government communications have become more and more closely managed politically, impacting on the independence of the public service.

In some respects this shift was overdue, the balance before the 1970s having arguably favoured the independence of the public service at the expense of the democratic requirement of responsiveness to the elected government and, through ministers, accountability to the Parliament and the public. Moreover, the increasing pervasiveness and power of the media has required a professional response from the politicians that inevitably involved attempts to gain closer political control of the bureaucracy.

The question now, however, is whether the balance has shifted too far towards responsiveness and away from apolitical professionalism and its focus on the long-term public interest.

Dr Shergold has defended the current APS against criticism of politicisation, stating, for example, that courage to provide frank and fearless advice is a question of character not of contract5 . That is too simplistic for me. In his book on the mandarins, Patrick Weller notes6 that many of the secretaries he interviewed felt that the loss of tenure may have affected the advice some secretaries provided, but not in their own case. That is disingenuous in my view.

As Prime Minister Howard told me, if the (performance pay) system did not send messages, then there was no point in the system. Likewise, no doubt, the system of contracts has impacted on secretary behaviour. All secretaries are affected, and they are being dishonest or fooling themselves if they deny it. They will hedge their bets on occasions, limit the number of issues on which to take a strong stand, be less strident, constrain public comments, limit or craft more carefully public documents and accept a muddying of their role and that of political advisers. To some extent, there has always been an incentive to please; and public servants have a tradition of caution and anonymity, relating to their role to protect the public interest and to defer to politicians particularly in the public arena. But the political messages to secretaries today are more explicit, and secretaries are, I believe, more cautious in avoiding disputes with ministers and in ensuring any public image of themselves is aligned with the government's position. This is not to suggest a significant lack of courage, but to acknowledge the reality of the incentive framework that has purposely been put into place.

The notion of responsiveness is itself complex. To whom was I expected to be responsive – the minister or the prime minister? In law, the minister is the boss – secretaries are responsible to them and they to the Parliament. But the prime minister has always had the power to appoint secretaries, so in the end secretaries are also beholden to the prime minister. The developments of the last 25 years have added to the power and authority of the prime minister. And, importantly, the prime minister is advised by the head of his department, and all secretaries are mindful of the authority of the Secretary of PM&C. (By contrast, in the past, central administrative authority was shared by the secretaries of PM&C and Treasury, together with the Chairman of the Public Service Board.)

I recall under Labor, Minister Brian Howe once saying that he felt I was more concerned to respond to Dr Keating than to serve him. There was an element of truth in this, in part because my impression was that the Prime Minister wanted me to constrain some of the left wing inclinations of Minister Howe (or, at least, his political advisers) on public housing and city planning, and in part because the two Keatings had some whole-of-government agendas in the areas of housing and regional development (namely to extend micro-economic reform and to improve inter-governmental relations) that they wanted me to pursue. I was always highly conscious that, fundamentally, Minister Howe was my boss. But my current and future appointments were primarily in the hands of the Prime Minister and his key adviser. Their enthusiasm for micro-economic reform certainly strengthened my resolve to advise Minister Howe on reform measures in the housing area in particular. The content of my advice was not affected, but the strength of it could have been. And, of course, in 1996 with the new Howard government, former Minister Howe had no influence on my future while PM&C Secretary Michael Keating certainly did.

There was also at times a tension in my loyalties to Minister Wooldridge (and my other ministers) and my obligations to the prime minister and his secretary, Moore-Wilton. Minister Wooldridge often expressed concern about the risk of the central agencies taking control of the health agenda, giving primacy to theoretical financial issues without understanding the practical realities of the health system or appreciating the expertise of health professionals (he had written a thesis on this precise issue under the Fraser government in the late 1970s). He was also acutely aware of the influence of Moore-Wilton, including over my own future. This goes some way to explain his defence of

inline imageMAX MOORE-WILTON
Secretary, Department of the Prime Minister and Cabinet, 1996-2002
When asked about his presence at the prime minister's election night party in 2001, he said what he did in his own time was his own business. Had Labor won the election he would have offered his resignation to prime-minister-elect Beazley. The prime minister-elect's chief of staff would work with officers of the Department of the Prime Minister and Cabinet to organise a smooth transition, administrative arrangements order, and secretary appointments.

me as his secretary because, while he wanted me to cooperate with the central agencies, I was not to be beholden to them or their ministers. I suspect he saw criticism of me, therefore, in part as criticism of him and his policy priorities. His (and my own) approach to resolving this tension was to work hard to keep on the front foot, developing proposals to improve the health system while meeting budgetary imperatives that more than matched any ideas from Finance or PM&C. For most of the period we succeeded but, as mentioned, when implementation of some of our proposals went awry, we were quickly blamed: no-one will ever know the problems that would have arisen from the alternative measures suggested by the central agencies. And, of course, when Wooldridge retired, there was no doubt in whose hands my future lay: Prime Minister Howard and his secretary, Max Moore-Wilton.

So what is my view now of the system that has emerged in the APS? I support the right of the prime minister, as head of the government, to appoint department secretaries, and to take into account their perceived capacity to serve the government and the relevant minister. I believe, however, we can no longer rely so heavily on convention to ensure merit dominates and apolitical career public servants are most commonly appointed. The statutory requirement for a report from the Secretary of PM&C is not sufficient, particularly if that person is himself politically aligned. My strong preference is to require a report from the Public Service Commissioner as well.7

On contracts, notwithstanding my unease at the time they were introduced, I accept Dr Keating's arguments. This is not only a pragmatic acceptance that tenure disappeared a decade earlier and that reintroduction of permanency will never be supported politically, but a broader acceptance that in the modern world the level of employment security previously enjoyed by senior public servants is simply not viable nor justified. Permanency can be an obstacle to change and to organisational agility. But the risk of excessive responsiveness, or ‘politicisation’, does need to be addressed primarily through a return to five year contracts as the norm, and an expectation that satisfactory performance, professionally assessed, will lead to new or extended appointments, encouraging maintenance of a largely career public service including at the very top. Similarly, early termination of contracts should only follow reports and advice by the PSC and Secretary of PM&C, and should not occur with a change of government without consideration of such reports (at the very least, this might ensure a reasonable period post-election during which ability to work with the new government and new minister can be properly tested).

I would also prefer to see performance pay for secretaries disappear. A feedback process is warranted, but there are too many problems involved in ensuring that a single rating, backed by a bonus payment, reflects more than the degree to which a secretary supports the minister and whole-of-government priorities. If there is to be a performance pay system, the current Australian arrangements are probably as robust as could be established in this country: the concerns I have cannot be addressed by further modifications, but only by dropping the system altogether.

A common element in the re-balancing I would like to see is the strengthening of the role of the Public Service Commissioner. He or she should be regarded as the professional head of the public service, with the Secretary of PM&C seen as the operational head, responsible for marshalling the resources of the public service to meet the needs and responsibilities of the government.

This became most clear in a discussion I had with Moore-Wilton after the 2001 election, and after I became PSC. I said to him that I felt his attendance at the Prime Minister's election night party was inconsistent with his obligations to uphold and promote the APS Values including being apolitical. He firmly rejected my view, saying what he did in his own time was his business and did not affect the carrying out of his duties. I asked him what he would have done the next day had the Labor Party won the election. He replied that he would have met the prime minister-elect, Mr Beazley, and offered his resignation as secretary of PM&C.

‘And?’, I enquired.

‘And what?’, he said.

‘Who would then advise the new Prime Minister on the smooth transition into power, on the administrative arrangements order, and secretary appointments?’

Moore-Wilton said that I was naïve, that Mr Beazley would rely on his chief of staff, who would work with officers in PM&C. To me this was unsatisfactory and corrosive of the apolitical and professional character of the APS. A new prime minister must be able to turn to one of the most senior professional public servants to advise on transition issues. If the secretary of PM&C does not have a new prime minister's confidence, it is not right that he must rely on a deputy in PM&C. The best approach is for the secretary of PM&C not to be so politically aligned as to so lose the confidence of a new prime minister even to assist in the handover. Any risk in this regard might be managed by also formally involving the PSC in the process of appointing departmental secretaries, reflecting the PSC's role as professional head of the public service.

Consistent with this role, the Public Service Commissioner should be on at least a five year contract, and should preferably be an experienced agency head who has already earned the respect of secretaries and has their confidence in advising the prime minister on appointments and terminations (and performance pay if retained).


  • 1

    The previous State Services Commissioner told me the process nonetheless involved consultation with the minister concerned, and that he would regard his appointment of a secretary as a success only if a constructive relationship between the secretary and the minister was achieved.

  • 2

    The High Court, in Barratt versus the Commonwealth, confirmed the power of the government to terminate the appointment of a secretary on the grounds of lack of confidence of a minister, whether or not lack of confidence was well founded.

  • 3

    At that time, compensation was only payable in the event of early termination of an appointment (at one third of the outstanding period of pay up to a maximum of one year's pay). In 2006, a change was made to allow three months' pay in the event of non-renewal of a contract.

  • 4

    Sadly, in the Barratt case, Counsel for the Commonwealth also showed lack of understanding of the role of secretaries and the public service, referring explicitly to prevailing arrangements as ‘Washminster’, and comparing secretaries to ministerial advisers and judges' associates. See John Nethercote, ‘Barratt not a courtier’, Canberra Times, 18 August 1999.

  • 5

    Peter Shergold, ‘“The Need to Wield a Crowbar”: Political Will and Public Service’, Dunstan Oration, Adelaide, 7 April 2005; also repeated in ‘Pride in the Public Service’, Speech to the National Press Club, Canberra, 15 February 2006.

  • 6

    Patrick Weller. 2001. Australia's Mandarins: The Frank and the Fearless? St Leonards, NSW: Allen and Unwin, 17.

  • 7

    In his AJPA article on the Children Overboard case (‘In the wake of “A certain Maritime Incident”: Ministers, Advisers and Departments’, AJPA, Vol. 62, Issue 3), Dr Keating argued in favour of a committee of senior secretaries and one or two external people to advise on appointments and terminations. My view is that the key person who should be involved, in addition to the Secretary of PM&C, is the PSC who should be regarded as the professional head of the APS. I would not object, however, to also involving the Secretary to the Treasury or some other senior secretary.