Chapter 6: Experiences of Bureaucratic Reform in New Zealand Ministry of Agriculture and Fisheries (MAF)

Introduction

The preceding chapters discussed why New Zealand introduced wide ranging economic reforms, how these impacted on agriculture, and the role, planning and management of change in the New Zealand Public Service. This chapter discusses restructuring in MAF, our experiences, the effects these have had on New Zealand agriculture, and the key lessons we have learned.

This chapter reviews:

(a) how the changing needs of farming and bureaucratic reforms caused MAF to change from providing virtually all the services required in agriculture to a department of State whose purpose is to provide advice on policy and make market mechanisms work better; and

(b) how the reforms and reducing government costs affected a major New Zealand government organisation.

History of New Zealand Ministry of Agriculture and Fisheries

There has been a Department of Agriculture in New Zealand from the time colonial settlers started farming at the turn of the century. Initially, government inspectors were appointed for the control of weeds and animal pests in sheep and cattle. In 1890 a Minister of Agriculture was appointed. Soon after, a Department of Agriculture was formed to collect and distribute information on farming and to promote the welfare of the farming community. At this time inspectors were renamed instructors, and plant and animal research began.

The department continued to grow on the basis of science, plant and disease inspection and quarantine services, and farm advisory services. Initially, there was little emphasis on policy advice. Economic analysis and policy advice were added later. Fisheries joined in 1972.

Ministry of Agriculture and Fisheries Before the 1984 Reforms

Prior to the beginning of the reform process, the Ministry of Agriculture and Fisheries (MAF) was a large department of State with approximately 5,600 staff in 10 divisions (refer to figure one). Most of the divisions were divided into regional units covering separate areas in both the North Island and the South Island.

Up to 1984 MAF was involved in providing a wide range of services to agriculture, as well as providing policy advice to government. The main activities were:

  • agricultural research - carrying out research into all aspects of pastoral farming and orchard production and processing;
  • and certifying activities - inspecting food products and certifying them safe and wholesome and suitable for export;
  • standard negotiations - negotiating export/import and quarantine standards;
  • and diagnostic services - providing laboratory and diagnostic testing services for plant, animal and fish diseases, and for food quality safety, and conformity with specifications set by purchasers;
  • control activities - surveillance of the health status of plant, animal and fish populations, inspecting and eradicating unwanted plant, fish and animal diseases;
  • control activities - undertaking border protection and providing quarantine services to keep New Zealand free of unwanted pests and diseases;
  • disease and pest response - containing and then eradicating any unwanted new plant or animal pests that may pass border barriers;
  • extension - providing free advisory services to farmers and orchardists;
  • disaster response - responding to climatic disasters and helping farmers and farms recover;
  • and policy advice - supplying advice to government on the state of New Zealand farming and its role in the economy; and proposing appropriate regulations;
  • money to farmers/growers - providing money on favourable terms through Vote Agriculture through the Rural Banking and Finance Corporation (a separate department of State). The aim was to encourage more farm production;
  • government support programmes - administering government subsidy schemes as well as disaster relief programmes. Government's aim was to encourage agricultural production to earn more export income;
  • on producer/marketing boards - representing government on statutory organisations; setting domestic production quotas and prices for some products;
  • irrigation schemes - managing irrigation schemes to provide irrigation water to farmers;
  • - providing policy advice and research and resource management of both freshwater and ocean fisheries, enforcing government regulations;
  • and accounting functions - including ownership of research farms and offices, "delivery" of subsidy and support funds, collection and distribution of levies.

At this time, MAF was providing most of the services needed in agriculture for both international trading and domestic production. All the activities were funded by government and industry paid nothing. MAF had staff in virtually all farming centres in New Zealand. Each of the ten divisions were divided into head office and regional groups.

The hierarchical, divisional/regional structure made co-ordination of common or related functions difficult in any one region. On the other hand, it was very well structured to have particular policies put into smooth operation in all regions (i.e., over the whole country). New functions arising that did not "fit" any one of the 10 divisions were poorly handled (e.g., environmental concerns). There was a high ratio of managers to workers because separate groups of managers were needed for the head office and each region for each of the 10 divisions. Accountabilities were not clear and the costs of running MAF were increasing each year. Activities were not well co-ordinated with other government departments also serving agriculture.

Reasons why Changes to MAF were Needed

MAF was the first government department in New Zealand to go through major bureaucratic change. Initially, the changes were based on a strategic assessment of the changing needs of agriculture due changes in New Zealand farming. MAF also anticipated many of the eventual requirements of State sector reform. MAF took early initiatives rather than waiting for change to be mandatory. The purposes of the change were:

  • reduce the cost of running MAF as a government department to:

- to reduce government's fiscal deficit, i.e., reduce the cost of government to the taxpayer. MAF was committed to reducing its own costs to farmers;

- increase the efficiency of MAF as a department; and

- to gradually withdraw MAF from the delivery of a wide range of services which could be done better by the private sector, i.e., government had to stop doing things its citizens could do better themselves.

  • clarify the purpose and role of MAF:

It was clear that there were both public benefits (i.e., benefits which accrued to the country as a whole rather than to a particular organisation) and private benefits (i.e., benefits to an organisation or individual). The objective was to make MAF a more market-led department to better meet the needs of clients and to treat government as the major client.

  • was seen as an important means to encourage efficiency and clarify MAF's purpose. User-pays was seen as an important way to introduce contestability and to test satisfaction with MAF's services. Users had the options to either go elsewhere for the service or negotiate a lower price.
  • need to make MAF accountable for its results rather than activities was very important. This meant that the government had to state what it wanted to purchase, what it wanted from MAF, and how much it was willing to pay. This provided transparency and was useful in assisting co-ordination between departments.
  • order to achieve the preceding objectives, MAF needed freedom for its managers to manage. This meant that improved management systems were needed, particularly financial and information systems to allow performance monitoring. MAF moved early to introduce Management by Objectives and accrual accounting procedures rather than traditional cash accounting. Where MAF was involved in user-pays, MAF needed the ability to earn revenue and re-invest it in providing new or more services.
  • initiated a change in philosophy from "hands-on" inspection of products to "hands-off" quality assurance, and eventually to support industry's own total quality improvement systems. This meant reducing inspection activities and passing the responsibility to industry organisations to undertake quality management practices themselves. MAF then only had to perform audits of performance data in order to satisfy that standards were being met. It had, of course, to be able to respond to poor performance, enforce standards and penalise companies that did not remedy poor practices. MAF maintains final control over standards and undertakes to see they are met.
  • imposed a requirement for a clear separation between policy advice activities and delivering services. Those who made the rules could not deliver services to meet those rules and vice versa. The argument was that departments might develop unnecessary rules which only they could enforce as a means to keep their own staff employed (i.e., to capture the benefits).
  • recognised that it had a hierarchy of "clients":

- Government itself (through the Minister);

- the agricultural industry; and

- organisations and individuals.

Knowing who our clients are allowed MAF to establish what our clients want, and how much clients are willing to pay for a particular service.

Current MAF Structure and Purpose

MAF is now structured in five main business groups (excluding Agriculture New Zealand is which soon to be privatised). The current structure is shown in figure two.

MAF's Vision is: "Adding value to agriculture and fisheries."

MAF's Mission is: "To contribute to the Government's agriculture and agricultural and fisheries objectives for enterprise development, growth and profitability, sustainability, market access and agricultural security."

Corporate Contract and Purchase Agreement

Based on government's outcomes, MAF negotiates outputs with the Minister. An annual Corporate Contract and Purchase Agreement is negotiated for outputs, level of funding, and performance standards.

MAF's Current Outputs

MAF's current outputs are:

  • advice and facilitation - policy advice to government on international trade issues, market output, the efficiency of the processing sector and the state of farming in rural communities. Facilitation means helping the private sector adopt government policy objectives.
  • government grants - for natural disaster relief, rural counselling and membership subscriptions to international agencies.
  • agricultural security, quality assurance and pest management strategies - negotiating international and national standards and trade access, and auditing delivery programmes to see that standards are met.
  • welfare services - advice and law on animal welfare and ethics and auditing industry performance.
  • inspection and quarantine - control of quarantine risks at New Zealand's border and post-entry quarantine.
  • and disease surveillance and services - monitoring animal and plant health status and reporting on New Zealand's disease status.
  • and disease emergency response procedures - maintaining a capability to respond to serious pest and disease outbreaks which could threaten New Zealand's agricultural industries and exports.
  • assurance services - delivering market access quality assurance systems; mainly in meat inspection (industry funded, non-contestable).
  • management services - developing systems designs, providing training analysis and diagnostic services and endpoint monitoring for export and domestic food producers (industry funded, fully contestable).
  • consultancy services - providing farm and orchard consulting services; input to MAF Policy (fully commercial - to be privatised by August 1994).
  • policy advice - advice on the management of commercial fisheries and implementing a quota management system for marine fisheries.
  • fisheries stock assessment - researching the status of fisheries populations for quota management.
  • and monitoring fisheries management activities - administration of the fisheries quota management system.
  • of fisheries policies - enforcing compliance with fisheries management laws.

Clearly, MAF has changed from an operational department delivering a wide range of services to an organisation which now provides advice on policy matters and how to make the market work better. MAF no longer has any government funded delivery activities. About 1,200 ex-MAF staff were transferred to Crown Research Institutes. MAF now has 2,400 staff, an effective reduction of 40% on pre-reform numbers. About 1,000 of these staff inspect meat in meat export works.

The number of managers has been reduced. MAF has sophisticated financial and business management systems. Financial and non-financial audits on MAF's performance are carried out annually by independent auditors.

MAF has a Corporate Contract and Purchase Agreement with government. In turn each business group has a group contract and each work unit has a work programme. All staff have individual work programmes and objectives.

Major Changes in MAF's Role Have Occurred

The major changes in role are:

  • quality assurance, other than that required by government itself, is now user-pays. About half is fully contestable. MAF still sets industry standards, but MAF Quality Management is purely a commercial delivery agency funded by industry. This approach has seen a reduction in actual inspection activities and costs due to competition and introducing user-says and user-pays. Government's role is to set standards and to audit performance to make sure those standards are met.
  • science activities have moved out of MAF to ten independent and discipline based Crown Research Institutes. Government still provides funding for public good science, but does so in a contestable way. Each CRI has to compete for funds for contestable projects and enter into contracts let by the Foundation of Research Science and Technology. CRI's are also able to negotiate research contracts with commercial organisations for private good research. In this way industry has an opportunity to buy the research it needs. This approach has made science much more focused on what farmers and industry want done.
  • has commercialised its agricultural extension activities. Government no longer funds any agricultural extension activities in New Zealand. This has meant that Agriculture New Zealand operates as a commercial consulting organisation in competition with private agricultural consultants. Farmers and growers now have to pay for the advice they need. This has reduced the number of farmer clients, but has focused the consulting activities on meeting farmer needs. Initially, paying for services was not well liked by farmers, but is now regarded as being more efficient.
  • no longer provides any privately appropriable services. It no longer sets any quotas or prices (other than the fisheries quota management system); it has no price support programmes to administer, and government no longer lends money to farmers.

MAF has retained the core government service roles of policy advice, setting quality assurance standards, international negotiations, emergency management and administration of a small number of grants.

Lessons from MAF's Experience in Managing Bureaucratic Change

The way MAF managed the bureaucratic changes are presented in a separate case study. However, the key lessons are:

  • an organisation is stressful. People generally don't like the uncertainty associated with change. They need a lot of support. They become concerned about their futures and job security.
  • takes a lot longer than anticipated. Changing an organisation's structure is the easiest bit. Changing the way people think and behave (i.e., organisational culture) much longer.
  • is costly, as new systems and often new skills are necessary.
  • managers and staff who were competent in unwanted skills are often casualties of the change process. Specialist skills are needed to manage the change process. But often the skills needed in the new organisation are different from those in the old organisation.
  • is vital to establish the purpose for an organisation based on who the client is and what the client expects. Formalising the purpose and expectations in an agreed contract is useful.
  • planning is very important. It provides the direction and pathways for change. It also provides a meaningful way to involve staff in the determination and attainment of the desired end point.
  • needs high quality leadership. Leaders must communicate a clear vision. Leaders need senior management support to establish new or improved management systems and practices.
  • is necessary to prepare staff for change and then to equip them for change by training them in management practices. This provides them with the tools to set and achieve objectives based on result (not activities).
  • is very important. Staff need to know what is happening, why it is happening and how it will affect them. Rumours are very destructive. It is important to keep key industry contacts informed so that they understand the need for the change and how it might affect them.
  • uncertainty of change distracts an organisation. An organisation becomes more inward looking during the change process. This temporarily reduces an organisation's outputs.
  • New Zealand, MAF changed at the same time as agriculture itself was going through significant changes. This reduced MAF's ability to assist the industry at a time when the industry had a great need.
  • found the best approach was to:

- research the future through strategic planning;

- identify the appropriate MAF response (i.e., purpose);

- select clear objectives;

- concentrate on producing outputs rather than inputs (activities);

- involve staff in the process as much as possible; and

- communicate developments within MAF and to the agricultural industry.

Key Lessons from New Zealand's Experience

  • traditional government activities can be delivered by the private sector.
  • government as a client sharpens the effectiveness and efficiency of government departments.
  • improve efficiency, delivering results is more important than carrying out activities.
  • for results needs more sophisticated financial and non-financial planning, monitoring and reporting systems than does administering activities.
  • is stressful and must be well-managed.
  • takes longer, is more costly than expected, and temporarily reduces outputs.
  • will require new skills and capabilities, and some staff and senior managers will no longer be needed.

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Contact for Enquiries

Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND

Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
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