Change for the Worse

Change for the Worse

Handled badly, even the best-intentioned organisational change program can tear the heart out of an organisation, and no amount of technological innovation will help"We might end up with an organisation of delinquents. They [the executive] wonder why Finance is leaking like a sieve. People are doing it because they are stunned by what's happening. They're doing it out of desperation. There's a lot of things that Finance could do to make things very difficult for the government - turn off the pay system . . ." (Administrative officer 10/11/97)"The department is sending mixed signals. I used to love working here; loved the work and the people; felt I was doing a service, protecting the taxpayers' interests by keeping some agencies from spending heaps of the taxpayers' money. Now everyone's dead scared in this joint. Frank and fearless advice - that's all gone." (Senior officer 24/10/97)When the incoming Howard Government appointed a new departmental secretary, who set out to transform the Department of Finance into an innovative and flexible high-performance organisation, at least one academic says the results for human capital and knowledge management were all but disastrous. The new executive was determined to make Finance a model of public sector reform, with a certified agreement that pushed the envelope on matters like flexibility and performance rewards. At the same time the department was pushing a spiral of downsizing, restructuring and new systems implementations that drove the entire organisation and its culture to the limits. There was widespread agreement that if Finance was to meet the challenges posed by the public sector reform program, and particularly its role in overseeing its implementation in other agencies, it would need all the considerable skills and collective corporate knowledge of its staff. Yet senior management was being pushed to achieve staff reductions in a harsher, more quantitative environment, where maintenance of knowledge-based activities had to be juggled against the need to achieve short-term cost savings.

As a result, former public servant and academic Dr Karin Geiselhart says Finance inadvertently ended up impoverishing trust, well-being, security and participation among public sector staff and dramatically undermining the possibility of innovation, particularly knowledge management. At the same time IT outsourcing, applied as it was without integration or opportunity for internal participation, set up a spiral of "deprofessionalisation" and loss of skills and professional knowledge.

Geiselhart says it's a graphic illustration of the fact that while computerised communications can potentially introduce a nirvana of organisational democracy, they'll never live up to that potential unless the right leadership, culture and values are transmitted from the top. "Computerisation can only reflect an organisational culture, never transform it," Geiselhart says. Indeed, she says computer systems become a metaphor for the organisation, as her experience in Finance makes clear.

Geiselhart's two-year study tracked Finance's use of computer-mediated communication as it underwent arguably the most turbulent change period in its history. The study, made for her PhD thesis, didn't set out to examine organisational change. Instead, she wanted to find out whether IT could return a democratic dividend, yielding not just greater internal efficiency but better internal governance. Along the way she discovered that high levels of internal social capital and feelings of ownership of change are a precious but highly fragile commodity, easily eroded. Nor will people participate in knowledge-sharing initiatives when they distrust their leaders.

Feel the Fear

The incoming Liberal government was determined to accelerate public sector reform. Finance in its policy coordination role became a key player in three major strategies affecting public sector organisational change and internal technology use. These were the outsourcing of most information technology functions, the move towards accrual accounting, and the changing industrial relations environment. At a time of great insecurity and widespread redundancies, many officers in the public sector felt under threat, uncertain of where change was heading. A sense of victimisation followed. "Don't you live in this town? Can't you feel the fear?" asked one of Geiselhart's public sector informants. These changes were accompanied by a shift in articulated values.

"In March '96 the terror set in. All references to social justice were replaced by references to market forces in Cabinet submissions." (Consultant and former public servant 28/1/98" The fear hit Finance as hard as anywhere else, and provided a stark contrast to the atmosphere that had existed before the new government took power.

In early 1996, before the reform push accelerated, there'd been a strong sense of energy, commitment and optimism running through the Department of Finance. While change was clearly needed, most members of staff recognised and were happy to support that change, and there were high levels of participation and feelings of ownership in helping to shape the change process. Participation on the many electronic bulletin boards was high. These were seen not only as a means of speedy communication, but also contributors to staff morale and social cohesion and as a means of giving staff input into corporate policies. Interest and participation in the ongoing Future of Finance project and proposed Knowledge Networks was keen and the uses of interactive technology reflected a degree of industrial democracy. People were proud of their department and their roles.

Dr Geiselhart says that by the end of her study period, Finance - by then merged with the Department of Administrative Services to become the Department of Finance and Administration - was a deprofessionalised, deeply demoralised department.

The more socially oriented bulletin boards had gone all but silent, people were preoccupied with keeping their jobs, there were vastly increased levels of cynicism about the organisation, and a great deal of what can only be called sorrow and sadness. The people end of knowledge management had been swept under the carpet of a new desktop suite, reflecting a much narrower focus on efficiency, presumably the automatic result of an "upgrade".

At the same time, the whole-of-government directive on information technology outsourcing presented an extra challenge for those who sought to coordinate systems which were complex, diverse, and evolving, while encouraging communication flows. Geiselhart says outsourcing was applied without integration, with few opportunities for internal participation and little formal recognition of the contribution IT staff had made to the department. On the day IT was handed over to the outsourcer, staff held a "wake" in the park.

"There were some chilling words that came out of some of the informants [over outsourcing]. Some of them were absolutely heartbreaking," Geiselhart says. "Someone in an area well placed to know about what was happening on that human resource level said the feeling coming from the executive was: ‘you're out of here now and we'll step over you if we see you in the street'.

"Even though there had been all kinds of things done on a formal basis to give staff career counselling and guidance and that sort of thing, I think it was the things that were unsaid that hurt the most. Someone said: ‘It's the rites of transition. It's the acknowledgement that this was a very important part of the organisation - that was sadly missing'."

Thus was what Geiselhart describes as "the delicate thread of internal social capital", unravelled. The problems continued after Geiselhart's work was finished, with the ill-thought-out introduction of performance surveillance software (promoted by a poster saying: Smile if you're performing!) that gave staff the sense that all trust had vanished. A new culture of devaluing staff input added to the impression that they were now working under a totalitarian regime, while many staff felt there was no longer any real scope for individuality or creativity.

"You can't have formal open communications and an impersonal monitoring system put in place at the same time," Geiselhart says. "Performance software is really the ultimate in surveillance. That someone could have made that poster and thought that that was a good way to promote it, shows the gap between the rhetoric and the reality of what was happening on the ground.

"People were so profoundly unhappy that some people on a certain scale raised the issue of sabotage."

Mutiny on the Desktop

There's no doubt the changes did spur at least subtle and trivial forms of rebellion. For instance, staff felt insulted and demeaned by the imposed uniformity of the new desktop, which denied staff the chance to change even the desktop colours or background screen saver. The Commonwealth Crest beamed down, impersonal and benign, as wallpaper on every desk. While some staff grumbled, others found ways to circumvent it.

Noting that "Imposing the same backdrop on people has nothing to do with productivity" and "You do not win the loyalty of people by treating them like little children, one officer developed a way of tricking the system by saving a scanned family photo as "crest.bmp" in the required location. Geiselhart says his glee at finding some small way to rebel was palpable.

But she says the real concern such attitudes raises is the worry that they reflected a wider malaise. Could there be a link between that savage erosion in morale and the February 1999 exposure of an $8 million fraud against the department? Did the same problems underlie the failure of Education Department staff to receive their pay from Finance in March the same year, ascribed to a computer problem described as a "combination of human error and a breakdown in communication"?

Geiselhart doubts that anyone can ever know without undertaking a detailed study to determine the relationship between the internal communications processes and management and safeguard systems. On the other hand, she says, both situations are highly suggestive. "The question that arose in my mind during the latter part of the study was what happens when a public sector organisation tears its heart out?" Geiselhart told CIO. "I mean they can't go broke, and somehow things get done; but I think the fraud against the Commonwealth that came out in 1999 was a concern."

Democracy Undermined

When Geiselhart's study began, staff in Finance showed high degrees of both self-organisation and participation in internal departmental governance, including the Future of Finance project and later the Knowledge Networks. The former was aimed at integrating the department's fragmented bureaucratic structures in the interests of improving performance by breaking down "stovepipes" of communication and accountability, which allowed information and decision making to flow upwards but not laterally or downwards.

"The Future of Finance was part of a set of initiatives that really tried to pull people out of their little boxes and get them communicating," Geiselhart says. "It was a form of creative endeavour within the organisation, because it was a large and complex organisation, still is."

Much productive energy was also focused on information management issues, with prolific deliberation on the existing information infrastructure. Staff contributed to internal social capital and complex learning through the bulletin boards, e-mail, and the emerging intranet. Geiselhart says the uses of interactive technology corresponded to a degree of industrial democracy. It also reflected underlying staff and management values largely consistent with the public's understanding of the role of a public sector agency in a democratic society.

As the values driving the department shifted towards non-participatory globalising values, the departmental hegemony strengthened central control and interactive systems became progressively more instrumentally focused on narrower performance measures. Decisions about IT and its internal uses were made at the top, in conformity with national patterns and ideology.

"Even at the instrumental level, implementing information technology change requires balancing organisational culture, technology and business process, and working with internal stakeholder needs to maintain commitment," Geiselhart says.

"Changes in Finance's use of interactive technology reflected wider organisational changes and value shift . . . as the values shaping the behavioural attractors became more closely aligned with those of the dominant national and global players, positive feedback loops emerged which favoured compliance rather than participation, individual gain over collective benefit and instrumental approaches.

"These were manifested in specific policies such as outsourcing, downsizing and risk minimisation, [and] also in the ways individuals felt they could communicate."

The executive justified such measures as efficient and cost-effective, part of the outcomes-focused reforms. They also saw the approach as pluralistic, freeing individuals from the constraints of bureaucratically imposed rules. In reality, imposing the policies from the top eliminated the cultural prerequisites for creative contribution. As a result, negative feedback was dampened, and staff ability to provide internal checks and balances was diminished.

"Together with their potential for improving transparency and accountability, electronic interactivity can foster democratic communication processes. In Finance the potential of these systems to facilitate reflection, double-loop learning, or consensus on goals and values was increasingly neglected," Geiselhart says.

"Rather, Finance followed a pattern of use of IT typical in government agencies, where a ‘more is better' approach to information technology leads to increased dependence on systems without a corresponding organisational shift from hierarchy. This was seen in the weak commitment to information management, the lack of attention to the developmental potential of the new desktop, the diminishing social role of the bulletin boards, and failure to acknowledge or assess the innovations of the budget coordination teams."

The result was great cynicism about due process, and the exodus of highly qualified staff. Geiselhart says evidence from Finance was unequivocal that the organisation became less democratic in its internal decision-making processes. This was reflected in the way interactive technologies were used by staff, and by neglect of wider information management issues that would have made the need for participatory communication explicit.

Participation in internal decision-making declined in many areas of the department, or became limited to shallow consultative processes that allowed the real power to exist elsewhere - a well-documented pattern in narcissistic organisations.

"When you can get people to actually step outside and reach out to each other . . . that kind of participation is a very, very precious thing for an organisation," Geiselhart says, "a kind of internal social capital building and internal creativity and consensus building and support."

"But people will not contribute in a situation like that if they don't have faith in their leadership and a certain amount of trust. And that's what happened when the Future of Finance and the Knowledge Networks initiatives vanished along the way -people turned away. They said: ‘We contributed in good faith, and now something else is happening that we're not part of.' One of them said ‘people won't contribute again; they won't get stung again on that'.

"So then you can only have the kind of forced contributions that are a kind of outside compliance, when internally it's not really there."

The message is simple. Corporations that act like bad parents to their staff cannot expect and will not get the kind of loyalty that they need in order to get by in the world.

Know Your Values

For CIOs Geiselhart says the message should be that it's vital to not only fully understand the prevailing culture before introducing new systems, but also to consider the underlying values the organisation would like to have as it seeks to achieve its goals.

"The reality is you can never rely totally on the machinery and the systems to give you the full answer. You can do survey after survey probing staff satisfaction. But unless there are other factors in place - like a robust social network and people having the time and space and the support to do things that aren't formally part of their contract - you'll fail," Geiselhart says.

"It's the picking up of the corporate garbage, in effect, the emptying of the corporate bins, the little niceties of people feeling secure and supported, and the little kindnesses being done, that support open communications."

A Different Perspective

CIO contributing editor Sue Bushell offered DOFA the opportunity for a right of reply. She received the following response:

Dear Ms Bushell

The Department notes and thanks you for the opportunity for a right of reply should you choose to publish an article based on Karin Geiselhart's study.

The interpretations advanced by Karin Geiselhart are hers, and the unattributed quotations are inconsistent with the views of most persons' (sic) working within the Department. Moreover, the material on which she bases her views is approximately 3 years old and out of date.

We therefore choose in this instance not to enter into a debate.

For these reasons we will refrain from commenting further.

Yours sincerely

Alastair Hodgson

Acting Secretary

26 May 2000

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