Stop the damage!

The PSA has called for a moratorium on public sector restructuring until there has been an independent review of the costs and benefits.

restructuring“Most restructurings are costly and disruptive and typically do not deliver the projected performance improvements or cost savings,” the PSA told parliament in our submission on the State Sector and Public Finance Reform Act.

“Government is asking public servants to do more with less. Attaining this challenging target is made unfeasible by the state of near-constant restructuring that most public servants are experiencing.”

More than 3,000 public sector jobs have been lost since 2009. Added to this, the number of unfilled vacancies in the public service is approaching 4,000.

The effects are felt heavily in provincial New Zealand, particularly where manufacturing jobs are also disappearing, adding to the toll of misery and insecurity. Communities are losing people, many to Australia, while those left behind struggle to find alternative work.

Set alongside this picture of decline is a growing catalogue of restructuring failures and erosion of public services.


Catalogue of failure

Last year, more than 70,000 calls by taxpayers to Inland Revenue went unanswered during a 10-week period. PSA members had warned their employer of the risks of constant restructuring and staff cuts but their warnings were ignored.

The “civilianisation” process at Defence, which transferred 1,400 military personnel into lower-paid civilian jobs, was supposed to save $20 million and allow for more resources to be spent on the armed forces.   

Instead, large numbers of staff said “stuff you, we’re not staying”. Defence found itself unable to carry out normal functions. Ships couldn’t sail because of a lack of crew. The restructuring was slammed by the auditor-general who said it had been so damaging, the Defence Force had been undermined. Nor had the cost savings be achieved.

“We question the appropriateness of advising the Government that NZDF would civilianise 1400 positions . . . when NZDF had not worked out how many military staff it would need from 2015. Also, NZDF did not know how many civilian staff it needed and lacked a workforce strategy,” her report concluded.

Similarly at the Ministry of Foreign Affairs and Trade, a radical restructuring failed to achieve the estimated savings and inflicted immense damage on staff morale and the ministry’s reputation.

These restructurings were driven by government cost-cutting rather than to improve the efficiency and quality of services. Savings have been far outweighed by the damage to service, morale and staff commitment.

They highlight what can happen when poorly thought-through change is rammed through by chief executives at the behest of government ministers with little or no public service experience.

Richard NormanRichard Norman, senior lecturer at Victoria University’s School of Management, says it’s not untypical that the expected savings from job cuts fail to live up to expectations. “It’s like a building project, the promised cost savings somehow evaporate.



“From a system point of view, there’s a lack of understanding of the value of staff loyalty and commitment to the organisation. Where these are damaged, the impacts may not be felt until later, quite possibly after the chief executive who has done the damage has moved on.

“The loss of commitment has the greatest impact on innovation. Anything new outside the rule book is the first casualty of staff frustration and a begrudging work commitment. Staff don’t want to do anything new because they don’t trust their employer. It becomes patch protection.”   

Jim JonesThe damage to staff morale and commitment is something that Jim Jones, a PSA organiser in the public service, sees on a daily basis.

“It’s one of the more hidden results of restructuring and it’s now showing up in staff surveys: there’s a big drop in staff feeling engaged in their organisation. They are sick of perpetual change when there’s no proof it will create a better service for the public.

“They aren’t asked for their views, let alone listened to. Yet the people on the ground are the ones who deal with the public and, collectively, probably have the best knowledge of what makes sense and will deliver.

“But change continues to be rolled out from the top with poor communication and involvement of staff. That’s the weakness in the quality of decisions being made.”



Richard Norman says that restructuring has become almost an addiction in New Zealand’s public sector. As well as being driven by government budget cuts, there’s almost an expectation that an incoming chief executive will restructure.

“One of the big risks is the loss of knowledge as the new broom comes in, sweeps clean and has not been there long enough to understand the institutional capabilities that might be needed.”

Yet this is not to deny the need for change, he says. Compared with similar countries, New Zealand’s public sector has become highly fragmented and lacking in cohesion.

“We’re a small country with 300 public sector organisations in competition with each other, rather than finding ways to work jointly to get a collective result that might be more innovative. Restructuring to bring things back together would be a healthy trend,” he says.

The establishment of the Ministry of Business, Innovation and Employment is one of the few examples in recent years of organisational change for more cohesive services. But for staff suffering from change fatigue, it was yet another restructure.

Questions have hung over the new organisation and whether it’s a good fit with long-term benefits, or a short-term fix.


Workplace culture

Productive workplaces build success through respectful, two-way relationships between management and staff and a shared commitment to success. So far, none of the restructurings have set out to address the top-down workplace culture of public sector workplaces. Instead, they have eroded staff loyalty and commitment and undermined trust.

In a paper he co-wrote in 2011, Richard noted that organisational change should be subject to the same scrutiny as funding proposals for major capital works.  

“I think there needs to be a serious debate about this. Restructuring should not be done on a whim; the known costs need to be at the forefront, and not just money costs. What happened at Defence is a dramatic example of how organisations work on commitment and shared values – and what happens when those are trampled upon.”


This article is from the March 2013 issue of the PSA Journal. You can read back issues of the Journal by clicking here.