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Last updated: 25 October 2007
Building Better Governance
Part Three—Departmental Case Studies
Department of Industry, Tourism and Resources— case study two
How a large and diverse department undertook a thorough review of its corporate governance to assess, define and identify the effectiveness and transparency of the department and its operations.
The department
The Department of Industry, Tourism and Resources (DITR) aims to foster the increased prosperity of all Australians through internationally competitive and sustainable business in the local and the growing global environments.
The department does this through:
- enhancing the development of internationally competitive and sustainable business through excellence in policy formulation and implementation
- excelling in business programme design and service delivery
- remaining a respected source of knowledge through its understanding of the business environment and business networks.
The department has around 2 000 staff in its central office in Canberra, state capital cities and some regional centres.
The challenge
A clear and accountable corporate governance framework is vital to the department’s continuing efficient operation. The department has a strong and comprehensive governance framework including:
- key committees and information sharing forums (Executive, ICT, security, audit, portfolio managers, executive officers, strategic research, etc.)
- a performance measurement system
- an annual key stakeholders satisfaction survey (see separate case study)
- a strategic risk management system.
This framework has evolved over the years, adapting over time to meet changing needs. However, it was timely to undertake a review of corporate governance to identify areas of potential improvement, examine implications for future governance arrangements, and consider how the review findings could be used to improve the department’s approach to achieving its business goals.
The system
An external audit firm was commissioned to review the department to assess how its governance arrangements contributed to its overall performance and the delivery of its goods, services and programmes.
The review also sought to ensure the department’s governance meets the requirements of the law, regulations, published standards and community expectations of probity, accountability and openness.
The audit reviewed the department’s governance arrangements against current better practice and in particular the framework recommended in the ANAO Better Practice Guide for Public Sector Governance.
Specifically, the following areas were reviewed:
- leadership, ethics and culture
- stakeholder relationships (internal and external)
- risk management
- internal conformance and accountability
- planning and performance monitoring
- external conformance and accountability
- information and decision support
- the review and evaluation of governance arrangements.
What was done
The audit report made a number of key findings. On the positive side, it listed the department’s strengths as follows:
- having in place all the key components of corporate governance
- the ‘tone at the top’ as set by the Secretary was considered extremely positive, with a demonstrated commitment to high ethical standards, regular promotion of the APS Values and Code of Conduct, removal of ‘red tape’ and clearly delegating responsibility in a manner that allows managers to manage
- the Secretary set a strong and consistent tone for holding to account the department’s senior managers and staff through his personal actions and influence as well as through departmental policies
- the importance of accountability was found in numerous departmental documents, emphasising the importance of clear roles and responsibilities for all staff
- there were clear linkages between the strategic plan, business plans and operational/work plans
- there was an extensive range of controls in place in the department.
The areas on which the audit recommended the department could concentrate, and the actions the department has taken in response, are outlined below.
Overarching communication: The review suggested the department consider ways to better articulate and communicate the corporate governance arrangements while maintaining flexibility and responsive decision making.
The department has developed a framework for implementing a better communication strategy. Information on governance has also been included in the orientation programme for all new starters as well as the Middle Management Development Programme.
Committee roles and reviews: The review found there was limited understanding of what committees formed the governance structure, and the roles and responsibilities of some of the committees. Similarly, there were differing views on the contribution to corporate governance of the some of the committees. The department has since refocused some of its committees and better articulated their roles on the department’s intranet and in relevant training packages. Documentation formalising the governance structure has also been placed on the intranet.
The review also found that corporate governance arrangements had tended to be reviewed only as either part of a formal audit programme or when membership of committees changed, particularly the chair. The department has initiated regular reviews of the role and performance of its corporate governance committees as part of a planned and coordinated approach.
Strategic direction linked to strategic risks: Another finding was that the department’s strategic direction was not clearly linked to the strategic risks that it faced in achieving its objectives. The review recommended that, as part of the department’s annual strategic planning and budgeting process, the Executive Committee should develop a Strategic Risk Assessment based on the key risks derived from its Strategic Plan.
This issue has largely been addressed, via the development of a departmental Strategic Risk Framework which has been incorporated into all divisional and work unit plans and reporting frameworks.
Sharing operational and business knowledge: The review found that many of the senior managers interviewed were concerned that the management and operational information held within individual divisions and by individuals, particularly by some senior managers, was not used or could not be accessed by other divisions or individuals due to lack of knowledge, absence of opportunities to share the knowledge, or simply being too busy.
Information-sharing forums are now regularly scheduled for senior managers.
Comprehensive, multi-directional information channels: Another ongoing issue for most agencies is how to effectively move information and knowledge around a diverse agency, particularly with heavy reliance on division heads as the prime channel of communication up and down the organisation. The review recommended alternative channels needed to be developed or enhanced in order to ensure better two way communication.
A number of communication activities have been, or continue to be, implemented and enhanced. In addition, business planning meetings are scheduled with all SES and the Secretary. The Secretary (and/or Deputy Secretaries) attends all orientation and middle manager training courses.
Integrated risk management systems and planning frameworks: The department’s large range of plans also highlighted a weakness: the plans were not risk-based, they had been developed independently of each other, and there was no overall integration into a comprehensive strategic planning framework.
A new business planning framework has been implemented. This framework integrates strategic priorities, resource allocation, risk management and reporting into a structured framework which also flows down into individual performance planning and reporting.
Formal, consistent risk management processes: The review concluded that risk management needed to be better embedded in the department and a sustained commitment from the top would be needed to ensure that a risk management culture existed at all levels in the organisation. There was an imbalance between intuitive and formal risk management, with personal preferences rather than corporate protocols sometimes being followed, making it difficult to establish accountability.
The department’s current approach to risk management has been refocused to engage senior managers in the process of embedding an effective risk culture into the department, and to encourage a more systematic approach to risk management.
The department has dedicated additional resources and established a new Risk Management Section. A Work Unit Plan has been established and a number of key documents have been upgraded. Further, the Executive Committee and Internal Audit Committee have agreed to new procedures as part of the business planning process to embed an effective risk culture within the department.
Monitoring
The department will continue to monitor and improve those aspects of governance highlighted in the review. In particular, it will continue to monitor and review its internal governance committee structure to ensure that the commitees’ roles and performance remain aligned with departmental objectives.
Benefits
The corporate governance review will ensure the robustness that is a feature of the department’s governance strategy continues to be the foundation of its success. The department undertook the review knowing it had a good system, but knowing also there was room for improvement. It recognised that it needed to better align some of the structures and processes which had been developed over time.
Key messages
- Review corporate governance to highlight things you could do better (rather than highlighting things you are not doing well). By doing things better, you will be doing things differently and this may well take adjustment on the part of staff and on the part of those who deal with staff.
- An overwhelming factor in any corporate governance framework is the tone from the top. Commitment to leadership, ethics and culture is a critically important element of corporate governance. Another critical element of a robust and comprehensive corporate governance process is that the framework is led by—and inclusive of—the very top levels of leadership in the department. The Secretary and the Deputy Secretaries are the drivers and their active participation is essential to its successful operation.
