Last week I received a proof copy of an article written by the previous Public Service Commissioner, Andrew Podger. It purports to tell the readers ‘What Really Happens’ amongst department secretaries or, given that this is a highly personal account, Podger's particular perspective on that reality. ‘They are being dishonest or fooling themselves if they deny it,’ said Podger, seeking to pre-empt any defensive ploys on the part of those who continue to serve. It hasn't deterred me. I'm in denial.

It would have been more comfortable if I had kept that denial to myself. Responding to criticism is never easy but it is made very much harder when you have formerly worked with the critic. In earlier days, as close colleagues, we even argued some of these important issues privately. In many ways it would have been easier just to let the article go unremarked. I do not feel I can, not least because of the damage it's done to perceptions of the Australian public service. Indeed, before I was able to read the article, newspapers were headlining their take on Podger's exposé of secretarial failure.

‘Insider reveals how PM reins in bureaucrats’, ran the Mark Davis story in the Sydney Morning Herald on Tuesday (12 June 2007): ‘Manacling the Mandarins’, proclaimed Thursday's edition (14 June 2007). The same day The Australian ran Mike Steketee's story with the banner, ‘Telling them what they don't want to know’. It was a critique of ‘modern bureaucratic culture’, very loosely based on Podger's memories, in which secretaries no longer exhibited the traditional willingness to tell ministers what they need to know or, worse, purposefully kept unwanted advice from them. ‘Same old, same old’, I explained to Bronte, my staffy, during an unusually vigorous walk. Back home, comforted by a glass of red wine, I put pen to paper.

The alleged decline of public service leadership, upon which Podger reflects at length, is largely attributed by him to three factors: the manner in which secretaries are appointed (traditional), contracted employment for secretaries (introduced in 1994) and performance pay (instigated in 1999). Together these are argued to have had a detrimental impact on secretarial behaviour.

Let me first address the selection and appointment of secretaries. The Prime Minister makes a decision, based upon a written report from the Secretary of the Department of the Prime Minister and Cabinet (PM&C), who must also consult the relevant agency minister. The secretary may seek the advice of whom he wishes in preparing the reports and, at least in my experience, takes considerable account of the assessments he receives from the Public Service Commissioner (who, each year, conducts detailed discussions on succession planning with each departmental secretary). He also looks for possible contenders outside the APS: I note that John Mackay, CEO of ActewAGL, publicly indicated that he was on the short-list for appointment to Defence earlier this year.

In Podger's view the current legal requirements suffer ‘the risk that merit may play a minor role rather than the dominant one’. He is wary of the process. I say, look at the outcomes. On my watch the Prime Minister has selected as secretaries: Jeff Harmer – 10 March 2003; David Borthwick – 11 March 2004; Joanna Hewitt – 26 October 2004; Lisa Paul – 26 October 2004; Patricia Scott – 26 October 2004; Lynelle Briggs – 6 November 2004; Michael L'Estrange – 17 January 2005; Andrew Metcalfe – 18 July 2005; Nick Warner – 4 December 2006 and, most recently, Conall O'Connell – 7 May 2007.

I am sure that there are those who are understandably disappointed that they have not yet become a secretary. But I do not believe that an argument can be sustained that any of those chosen have not been highly credible and competent, with long experience of and commitment to public policy. Increasingly, and entirely on the basis of leadership capability, they are women.

I am not yet persuaded that this process should be modernised. I have talked with my counterparts in the UK and New Zealand about their more formal appointment processes and can see both advantages and disadvantages. However, I reject entirely the suggestion that if Podger had been given a formal role those selected would have been of greater merit.

Podger's ‘strong preference’ to involve formally the Public Service Commissioner in the selection process is problematic. In the Australian public service in recent years those who have served as Commissioner often go on to become secretaries. I did so. So did Helen Williams. Others will in the future. How could a Public Service Commissioner, harbouring ambitions to be considered as a secretary, not be hopelessly conflicted in the provision of advice?

Let me now deal with what are often but inaccurately referred to as contracts. Podger's conclusion, with which I am in complete agreement, is ‘that in the modern world the level of employment security previously enjoyed by senior public servants is simply not viable, nor justified’. Rather the problem, in his mind, is the fact that some secretaries now get only a three-year term rather than a five-year term. Things would be better, apparently, if everyone enjoyed five years.

I find it hard to believe that the length of the appointment has such a dramatic impact upon making secretaries more supine – not least because none of them, unlike the Public Service Commissioner, have a guaranteed term of employment (like the Ombudsman, the Auditor-General and the Commissioner for Taxation, the Commissioner may only be removed if both Houses of Parliament make a request to the Governor-General for removal on the basis of misbehaviour or incapacity, or if the Commissioner becomes bankrupt or insolvent).

By contrast, any secretary can be removed at any time. The only substantive difference between three- and five-year terms is the size of the payout if they are terminated early (because it is based upon a financial formula of one month's payout for each three months of the term unexpired, capped at twelve month's salary). Of course few secretaries are terminated before their period of appointment is concluded, and the majority have their initial terms extended. Most secretaries will end up heading another department over time. I've led three, been Public Service Commissioner and CEO of ATSIC.

The third issue is performance pay. This, too, in Podger's eyes, contributes to a culture of intimidation. Now I do not support performance pay with messianic zeal. I am unpersuaded that bonuses drive improved productivity or performance, although I do like the fact that those who exhibit superior or outstanding performance can have that recognised and rewarded. Pay can also play a very useful role in driving a stronger performance management regime.

What performance pay does not do, in my experience, is persuade secretaries to modify their behaviour. I can think of no secretary, including Andrew Podger, who made their advice less strident, hedged their bets or crafted their briefs more circumspectly in the hope of securing an extra five or ten percent performance pay at the end of the year. It's not credible.

Indeed I am not persuaded Podger truly believes it. After all, when he was Public Service Commissioner, he presided over a performance pay regime in his own agency. It was his decision, not somebody else's. He was not required by government policy to pay his executives bonuses. My question is simple: if secretaries can be persuaded to tone down their advice to their ministers because of their ambition to secure performance pay or fear of retribution, why were the Commissioner's senior executives not likely to feel similarly pressured in providing their advice to him? He wielded as much power in determining the future career and pay of his staff, as the minister does over a secretary. Probably more.

I would be more convinced of the system's failings if there was any evidence that the awarding of performance pay by the prime minister reflected political considerations. Podger, quite correctly, does not argue so. Indeed he is honest enough to admit that the year in which he was not awarded a bonus was as a consequence of significant administrative failings associated with the ‘Scan Scam’ and the ‘kerosene bath’ affairs. I can state, and he can confirm, that in every instance in which a secretary has received no performance pay it has been because of a failure of managerial competence or administrative capability.

Secretaries are answerable, responsible and accountable (under their ministers) for their departments. If there is organisational – as opposed to political – failure the buck stops with them. It is often tough but not unfair.

Podger's thesis is that bonuses inevitably ‘focus primarily on responsiveness to the government, and (are) coloured by immediate, media-fuelled issues.’ He makes it sound wrong and vaguely sinister. It's not. What he really means is that when inadequate administration becomes a public scandal (usually because a government program is being delivered inadequately or inappropriately) the secretary's leadership may not be warranted of sufficient standard to deserve a bonus for that year. To my knowledge political considerations have never figured. Indeed, as Podger correctly notes, the views that ministers hold of the performance of their senior officials is ‘almost without exception, devoid of a partisan assessment.’ Why am I not surprised that this significant conclusion failed to be picked up in the media stories?

At the heart of Podger's article lies a fundamental question. Noting that in the 1970s the public service was often perceived as being too powerful and independent, he asks ‘whether the balance has (now) shifted too far towards responsiveness and away from apolitical professionalism and its focus on the long-term public interest.’ Podger thinks yes. He feels that there is now ‘excessive responsiveness’ which he associates with politicisation. Podger believes I am ‘too simplistic’ in my contrary views. The feeling is mutual.

I am curious about how far is too far. Just what is the scale and nature of the responsiveness which might serve to undermine the Westminster tradition?

With respect to the provision of policy advice, I do not think that a secretary can ever be too responsive in the most fundamental of respects – that is, in accepting that it is the minister who has the responsibility to decide a policy. Of course I believe strongly that advice from the secretary should be robust and frank although, from my experience, considered and well-argued may prove to be far more persuasive. Such advice, however delivered, needs to be tempered by appropriate responsiveness to the directions set by elected government. It is the minister, not the secretary, who will face judgment at the ballot box.

In most instances ministers will not decide upon the detail of policy until they have received advice and, even when they think they know exactly what they want, they can often be persuaded to different approaches by accurate, comprehensive and thoughtful briefing. And in every instance, the ministers I have briefed, across the political spectrum, have accepted advice willingly even when it is at odds with or inconvenient to their position. They may be convinced by it: if not they will recognise it as a useful way to anticipate criticism. I would be surprised, but do not know, if Podger has had a different experience.

Similarly, I have never kept from a minister information which I think he needs to know, nor ever received a reprimand for providing it. The simple fact is that most ministers want to know when there is a potential problem, as soon as possible, and preferably with advice on how it might be addressed. Plausible deniability is implausible.

With respect to the implementation of policy, it is odder still to be concerned about responsiveness. In my mind the secretary should take pride in being responsive, using the full resources of the department to execute program on time, on budget and to government expectations and to deliver services as efficiently and effectively as possible. In this respect public service responsiveness should be extolled as a cornerstone of democratic governance, not a barrier to it.

So what, if any, are the limits to responsiveness? How far is unprofessional? When does the public service become politicised?

With respect to policy advice, it would be if the secretaries provided only the advice that they thought their minister wanted. I see no evidence of this. I read, for example, each of the coordination comments that departments provide to Cabinet on submissions. Two things stand out. First, there are often wide divergences of view across the agencies of the public service. Second, many of those views are not reflected in the decisions at which Cabinet, often after long discussion, arrives. The advice of ‘the public service’ is vigorously heterogenous. In various forms it nearly always informs ministerial discussion but its success varies. If the views put forward by public servants are designed only to provide what ministers want, it would seem that they are remarkably unsuccessful at gauging what is required. This is not the case. I may on occasion be disappointed that my department's advice is not taken, but I see it as an indication that the Westminster system is alive and well.

Responsiveness, in my view, only becomes over-responsiveness if secretaries fail to shoulder with integrity the considerable legal and ethical responsibility they have under their ministers – if, for instance, they agree to act without appropriation or beyond legal authority; fail to administer with respect for due process or fair practice; or break long-established political conventions in order to protect or assist their ministers. Over the last generation such instances have been rare and they are certainly not attributable to the mode of appointment, length of contract or level of performance pay.

I know my colleagues well. I see at first hand that different secretaries have different approaches to leadership; different views on public policy and different ways of working with and to their ministers. Even with commitment to collegiality, finding common ground between us is not always easy. In large part that's because we think that the policy issues that we argue about are important.

But on one aspect of our relationship, my perception of ‘what really happens’ is clear: I see no evidence of any secretaries who have become ‘too responsive’ or ‘too political’. I assert again what Andrew Podger finds unconvincing – integrity is a matter of capability, competence and character, not contract. When I leave the Australian public service I will do so knowing that its leadership is in reliable hands.

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    Dr Peter Shergold is the Secretary of the Department of the Prime Minister and Cabinet. A version of this article, which is a response to Andrew Podger, ‘What Really Happens: Department Secretary Appointments, Contracts and Performance Pay in the Australian Public Service', The Australian Journal of Public Administration 66(2):131–147, was originally presented as a speech to relaunch the University of Canberra's National Institute of Governance at Old Parliament House on 20 June 2007.