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This section outlines initiatives to build the Ministry's capability so it can realise its vision. The Organisational Development Strategy has three key aims: building an integrated organisation; making the Ministry an employer of choice; and developing its leadership capability.

This section also describes the Ministry's approach to managing risks which could jeopardise achievement of its strategic priorities, business environment outcomes and operational services.

Our Vision for the Ministry of Economic Development

Long Description of "Our Vision for the Ministry of Economic Development"

Larger version of "Our Vision for the Ministry of Economic Development" [76 kB GIF]

Organisational Development Strategy

Three elements of the Ministry's vision will drive our organisational development strategy over the next three years. Our commitment to leadership, building an integrated organisation and being an employer of choice are crucial to achieving our strategic priorities and business environment outcomes.

We have also taken into account the State Sector Development Goals, and our part in building a system of world-class professional state services serving the government of the day and meeting the needs of New Zealanders.

We will commit resources and managerial effort to develop our people, process and system capabilities to achieve these goals in the short and medium term.

Leadership: Strengthening Our Leadership Role

With regard to the economic development agenda, we seek to lead in partnership with the key economic players to achieve our strategic priorities. We seek to contribute to the State Services Development Goal of Co-ordinated state agencies and ensure that the total contribution of government agencies is greater than the sum of its parts.

As our Leadership Strategic Priority explains, we need to work with and influence other agencies by articulating the Government's economic transformation agenda and its implications for their work. We will deepen our capability to influence and assist other agencies to align their work with this agenda.

Working in partnership with others requires us to be good listeners, responsive to the needs of business, local communities and local government. We must be able to build and maintain effective on-going working relationships. We need to have a clear, shared understanding of the outcomes we are working towards, so we can articulate them to others.

Key Action Points

We will:

• Enhance our ability to foster effective working relationships by ensuring cross-Ministry support for the vital projects in the Leadership Strategic Priority. Our primary focus will be on projects which build our capability to maintain effective relationships with Crown entities and ensure strong leadership of the economic transformation agenda across the state sector.
• Build our understanding and use of our economic development policy system. This is key to establishing the critical competencies and requirements for effective delivery of one of our core business systems. Work on this system will help to deepen our understanding of key knowledge and skills required at each stage of the policy analysis process so that we can more effectively target our learning and development activity. The outcomes from this project will shape the work on other parts of the Organisational Development Strategy.
• Continue dialogue with stakeholders on the economic transformation agenda. Our managers and staff need to converse confidently with external audiences, including state agencies, business and local government, about what matters for economic development. In addition to our day-to-day dealings with stakeholders, this dialogue will be conducted through a targeted relationship management programme, including speeches, briefings and selected conference attendance. We will develop information packages, presentations and tools (such as our on-line newsletter Business Update) to assist staff with this task.
• Inform our understanding of business and the economic challenges New Zealand faces, through initiatives such as industry visits, secondments and regular engagement with business. The strategic leadership team will continue to support the Industry Insite programme and other forms of business engagement involving spending time with business and business-related organisations. This enables our senior managers to understand economic development issues from a business perspective, and to hear first-hand how government agencies can best interact with business. This programme, and similar activities, will be extended to a broader range of staff. The aim is to deepen our overall understanding of the external business environment.
• During 2005/2006, the Ministry established the Government Economic and Urban Development Office (GEUDO) to build our understanding and ability to respond to the challenge of making Auckland a world-class city. We took a leadership role in establishing the office and have co-located with three other central government agencies working on economic development. This team will work to develop effective policy initiatives reflecting the economic development needs of business, local government and other Auckland stakeholders. To ensure the success of this initiative, the Ministry will support the GEUDO office to develop its capability. The short-term focus will be on ensuring the clarity of the work programme, the effectiveness of its stakeholder engagement and the clear definition and monitoring of success measures.

Working Together: Building an Integrated Organisation

Our vision is to harness our combined expertise as an integrated organisation. We also are committed to analysis and open debate and to adding value to others' work. We constantly strive to do things better and add value to the work of others. We seek to contribute to the State Services Development Goal of Excellent state servants by developing a strong culture of constant learning in the pursuit of excellence.

The Ministry works across nine portfolios to deliver on the Government's economic development agenda. To be effective, we need to ensure all parts of our organisation work together to a common purpose. We will continue to align our internal structures, systems and processes with our strategic priorities and business environment outcomes.

We continue to build our understanding of the strategic issues underpinning our decision-making and advice to government. To help build that understanding, we will deepen the dialogue we have with a range of stakeholders. We will also continue to test our understanding of the drivers of economic development. This testing comes through our dialogue with Ministers and other learning activity such as research and evaluation. To take leadership of the Government's economic transformation agenda requires our managers to be articulate and influential with others, both internally and in the wider community. Training and support will assist them to be effective in this role.

Key Action Points

We will:

• Continue to build an integrated approach to our strategy, planning and review systems to allow informed management choices around short- and long-term focus and priorities. This work focuses both on the formulation and execution of strategy. We remain committed to enhancing and streamlining our strategy and planning processes and, where appropriate, developing our supporting systems so that we have a centralised and accessible repository of all activity and research. We will continue to refine planning and budget systems and processes, so we can prioritise and effectively manage risk. We will further develop processes for regular review of progress against our plans. Finally, we will continue to undertake new and varied ways of communicating our strategy internally and will monitor levels of staff understanding.
• Increase investment in the strategic thinking capability across the Ministry, via appointments to chief adviser roles, creating a working paper series, knowledge sharing activity, particularly across communities of interest, and a focus on how we inform our "economic development thinking" as a core element of the policy/learning system. This work will be underpinned by our research and development activity to ensure that we have a richer understanding of what will achieve sustainable growth. Our research and development programme will focus on deepening understanding of the factors that will ensure the success of our strategic priorities. To achieve this, we will develop the research skills of our staff and create stronger linkages with external groups that can assist with this work.
• Further develop a knowledge-sharing culture and supporting systems, so we can promote internal knowledge sharing, co-operative learning and effective production of outputs. Integrating knowledge across the Ministry's various work units and Votes will lead to better integration of advice to Ministers, ensuring a consistent focus on the Government's economic transformation agenda.

Employer of Choice: Developing Our Skills and Expertise

Our vision is to be an employer of choice for talented and committed people. We aim to maintain a culture of excellence, personal development, enthusiasm and mutual support that attracts and retains talented and enthusiastic people. In doing so, we contribute to the State Services Development Goal of Employer of choice, ensuring the state services are attractive to high achievers with a commitment to service.

The Ministry aims to recruit, retain and develop talented people with skills in economics, law, policy analysis, commerce, research, corporate support, economic development and other relevant disciplines. We seek to build an organisation of experienced and capable individuals who understand economic development and the role government and business play in growing our economy, and who have the interpersonal skills to effectively work with others. We need to be attractive to new staff and able to develop the talents of our current staff.

To make the most of our existing skills base, we need to offer targeted development opportunities to enrich the individual in their role and assist us to deliver on our strategy and outcomes. Our approach to organising and managing work needs to allow staff to build and utilise a portfolio of skills and experiences. In addition to professional development, we offer targeted management development programmes to equip managers with the skills needed to build the capability of our staff.

Key Action Points

We will:

• Continue to develop our leadership management skills with a focus on developing individual managers' practical management skills and ability to lead and influence others. We will achieve this by more clearly articulating the manager role, providing assessment tools, focusing on training, and building our managers' interpersonal and feedback skills. We will continue emphasising the importance of the performance management system and development plans.
• We will build systems and processes to develop high-potential staff, sharpening the processes we use to target the development of staff in roles to grow and maintain the required functional and interpersonal capabilities. To do this we will offer specialised targeted development for staff in technical roles, relevant to their work responsibilities, which increases their skills and ability to produce effective outcomes for the Ministry and motivates them to continue to invest their knowledge and experience with us. We will seek clearer statements of our development requirements from our planning processes, provide increased support from our human resource professionals to managers, to assist employee development planning, and provide a clearer framework for utilising whole-of-organisation training initiatives and measuring the impact of our learning and development activity.
• Focus on investing in and extracting greater value from key systems which support managers to effectively manage the organisation's performance. Our focus in the next three years will be on our management information systems, IT infrastructure, "fit for purpose" accommodation and facilities, and core HR systems (performance management, remuneration and recruitment).

Risks to Achieving the Ministry's Outcomes

Why Assess Risk?

Effective strategy development, planning, prioritisation and review are all core parts of the Ministry's approach to managing risk. Given the diverse range of activity the Ministry is responsible for, it is essential we prioritise the critical things that will make the biggest contribution to improving growth in New Zealand. We need to continually refine the activities under our five strategic priorities and ensure that these are adequately resourced.

As our goals and objectives are identified, so too are the risks to achieving them and the most effective risk treatment methods. Accordingly, we work to ensure that our planning processes incorporate risk profiling, and that the Ministry's structure and systems promote risk management at all levels.

The Ministry's Risk Framework

In our strategic and business planning process, we identify and review the key risks to achieving our outcomes. For each key risk, we develop specific risk management strategies. We allocate accountability to senior managers for the management and mitigation of these risks. As part of our operating review process, we monitor those risks at both strategic and operational levels.

While the Ministry is constantly seeking to anticipate risks, to avert them or to mitigate their effects, we also seek ways to encourage intelligent, calculated decision-making, where judgement is exercised and opportunities for innovative solutions are pursued. We do not want risk management to be a brake on innovation.

In our policy work, risks are identified and managed through excellence in analysis, peer review, and understanding the main challenges facing the New Zealand economy. We seek to ensure that the policy analysis process identifies relevant risks and ways of managing them. For our operational activities, the Ministry identifies and manages risk through project planning, operating review, and review of projects, audits and risk profiling.

We will continue to strengthen the use of our operating review systems, so we more efficiently and effectively monitor our performance and priorities across the Ministry. We will manage our audit programme to cover systemic, process and project risk.

The identification and management of risks is an iterative process. While the Ministry has a risk profile and is implementing a process of quarterly reviews, the majority of the Ministry's risks are managed through strong management systems, for example, knowledge sharing, performance management and operating review. These systems build on the strategy and planning frameworks and provide a basis for refining strategic priorities and business plan activities at all business levels. This ensures alignment with strategic priorities and cascades down to the business plan level, so that well-informed decisions can be made. These systems focus on providing managers and staff with tools to better identify and manage their risks.

The way in which the branch risk profiles inform the Ministry-wide risk profile, and therefore the strategic debate, is illustrated in the diagram below. The Ministry faces different types of risk, each requiring a different treatment.

[Figure 4: Ministry-Wide Risk Profile]

Long Description of "[Figure 4: Ministry-Wide Risk Profile]"

Policy Advice

The following risks could threaten achievement of the Government's and Ministry's strategic objectives in relation to advice on policy options:

• risk of inadequate policy advice in areas that could lead to systemic failure of key economic development settings;
• risk of underachieving relative to the Government's expectations, because of a failure to achieve organisational focus on priorities for policy development; and
• shortage of capability in the employment market to meet the needs of the Ministry.

The development of the core skills of our staff and managers will be critical to ensuring these risks are addressed. Building our economic development policy capability through recruitment and internal development will also ensure that comprehensive, timely and appropriate advice is offered to government.

Service Delivery

Operationally, the Ministry must also manage significant risk potential, in areas such as:

• failure of technology systems in the delivery of on-line services;
• effectiveness of our internal management systems;
• failure of individuals to meet the standards of behaviour expected of public servants and Ministry employees; and
• failure to prepare for incidents outside the Ministry's control (e.g. natural disasters).

The Ministry manages these risks through clear expectations of behaviours that support the Public Service and the Ministry Codes of Conduct, an emphasis on the Ministry's values, emergency preparedness, business continuity planning and well-managed contracting with suppliers.

The Ministry will continue to refine its strategies to ensure we can provide efficient and effective services to Ministers and third party fee-payers, within the resources available to us.

We will continue to strengthen our strategic and business planning processes to address risks through improved direction setting, accountabilities, capability building and knowledge management strategies across the organisation.

Accountability for the alignment of strategy, planning, operating review and risk systems is assigned to the Deputy Secretary, Organisational Development and Support. This role has the delegated authority to ensure that the appropriate systems are designed and used.

Good risk management also requires good management information. The Ministry is introducing new management information systems to ensure that managers have easy-to-access up-to-date financial and personnel data.

Ministry of Economic Development Organisational Chart

Long Description of "Ministry of Economic Development Organisational Chart"

Larger version of "Ministry of Economic Development Organisational Chart" [56 kB GIF]

Printable version of "Ministry of Economic Development Organisational Chart" [1284 kB PNG]

Printable version of "Ministry of Economic Development Organisational Chart" [422 kB PDF]

Financial Summary

In 2006/2007, the Ministry expects to earn $59.748 million (GST exclusive) in revenue from the Crown and $42.318 million (GST exclusive) from other purchasers of the services it will supply under the 18 departmental output classes detailed in this report. The Ministry expects to incur expenses of $107.890 million (GST exclusive) in providing these services.

The Ministry expects to incur a deficit of $5.824 million in 2006/2007.

In addition, the Ministry administers the following non-departmental (GST exclusive) appropriations:

• Output classes across six Votes (Commerce; Communications; Consumer Affairs; Energy; Economic, Industry and Regional Development; and Tourism) totalling $331.903 million for services supplied by the Commerce Commission, Securities Commission, Accounting Standards Review Board, Takeovers Panel, New Zealand Trade and Enterprise, Electricity Commission, New Zealand Tourism Board, New Zealand Citizens Advice Bureaux, and local and national delivery organisations for economic, industry and regional development programmes.
• Appropriations across five Votes (Commerce; Communications; Energy; Economic, Industry and Regional Development; and Tourism) totalling $120.597 million for regional development programme initiatives and grants, subscriptions and other expenses.
• Five multi-year appropriations of $185.892 million for the five-year period 2004/2005 - 2008/2009. These appropriations reflect:
  • a multi-year appropriation in Vote: Communications totalling $19.267 million over a four-year term between 2005/2006 to 2008/2009 for digital strategy initiatives;
  • three multi-year appropriations totalling $120 million in Vote: Energy over a 3-5 year term between 2004/2005 to 2008/2009 to provide for non-operating and maintenance security of supply costs relating to the Whirinaki reserve generation station, purchase of demand side management and reserve energy production, and for the acquisition of seismic data in New Zealand's offshore petroleum basins; and
  • one multi-year appropriation in Vote: Economic, Industry and Regional Development totalling $46.625 million, applying over a three-year term between 2004/2005 and 2006/2007 for advice and grants to help regional partnerships to identify, develop and implement sustainable economic growth strategies.
• Capital investments totalling $35.480 million (GST exclusive) to New Zealand Trade and Enterprise ($1.870 million) for development of the business (biz) portal website, to New Zealand Venture Investment Fund Limited for the Seed Co-investment Fund ($8 million) and the Venture Investment Fund ($25 million), and to Sprint International New Zealand ($610,000) for the provision of text phones and relay services for hearing- and speech-impaired people.

The Ministry is responsible for making payments for the services supplied within appropriation under non-departmental output classes and for other expenditures on behalf of the relevant Vote Ministers. Each non-departmental output class provider is directly accountable to the responsible Minister for its performance. The Ministry is responsible for managing and monitoring contracts with non-departmental output class providers on behalf of the responsible Minister.

The Ministry expects to collect $257.949 million of Crown revenue in 2006/2007, with the major portion coming from levies on electricity industry participants and energy resource levies and royalties.

Details of how the non-departmental appropriations will be applied appear in Parts B1, B2, C2, D and E of Votes: Commerce; Communications; Consumer Affairs; Energy; Economic, Industry and Regional Development; and Tourism, in the Estimates of Appropriations for the Government of New Zealand for the year ended 30 June 2007.

Financial Highlights

The most significant movements in budgets between 2005/2006 and 2006/2007 are explained below.

Revenue Crown

Revenue Crown forecast to be earned for departmental outputs is forecast to reduce by $1.370 million, mainly reflecting the following:

• the phasing of implementing a regional statistics programme where more funding was provided in 2005/2006;
• the phasing of funding to develop mechanisms to give national guidance on network infrastructure under the Resource Management Act 1991;
• one-off funding provided in 2005/2006 for research to develop a blueprint enabling Small and Medium Enterprises (SME) to enter export markets using e-commerce, and for growing and sustaining SME in New Zealand policy work;
• higher funding provided in 2005/2006 for travel costs in support of WTO negotiations and bilateral CEP/FTAs;
• the phasing of funding between years to run the tender process for KiwiSaver, and providing input into the policy and legislative processes;
• one-off funding provided in 2005/2006 only for the Tourism Offshore Marketing Baseline Review; and
• one-off funding provided in 2005/2006 only for the development policy phase of the Local Authority Tourism Infrastructure Grant Scheme.

These changes are partly offset by the following forecast increases resulting from:

• increased costs associated with the administration and management of new proceeds of crime orders by the Official Assignee and to respond appropriately to the increasing complexity and risks associated with these orders;
• increased responsibilities to ensure that providers of KiwiSaver products comply with statutory minimum standards and that investors in KiwiSaver products are adequately protected;
• funding for co-ordination of public sector activity related to the hosting of the 2011 Rugby World Cup; and
• a phased increase in funding for enhancing policy and research in the Tourism portfolio.

Other Revenue

Other revenue forecast to be earned for departmental outputs is forecast to reduce by $5.140 million, mainly reflecting the following:

• the transfer of functions of the Electrical Workers Registration System to the Department of Building and Housing from 1 September 2006;
• one-off increase in 2005/2006, mainly due to marginal cost increases relating to the increase in statutory registration activity;
• one-off increase in forecast revenue associated with holding the 2006 New Zealand Petroleum Conference; and
• forecast increases in 2005/2006 relating to demand-driven increases in permit applications.

These changes are partly offset by the following forecast increases:

• the forecast introduction of new levies associated with the implementation of the LPG safety regime; and
• forecast marginal cost increases and associated revenue relating to trade mark and patent applications.

Output Expenses

Output expenses are forecast to reduce by $6.528 million, mainly reflecting the expense side of the non-forecast related revenue changes referred to above.

Forecast Net Surplus/(Deficit)

The Ministry's net deficit is forecast to reduce slightly ($18,000) mainly reflecting the forecast impact of a long-term strategy to reduce memorandum account balances administered by the Ministry.

Memorandum accounts are operated in Registration and Provision of Statutory Information, the Registration and Granting of Intellectual Property Rights (both in Vote: Commerce), Administration of the Radiocommunications Act 1989 (Vote: Communications), the Motor Vehicle Traders Registration activities (Vote: Commerce and Vote: Consumer Affairs), and Administration of Gas and Electricity Regulations (Vote: Energy).

Further information on how the Ministry is working towards reducing surpluses further are outlined in the Forecast of Memorandum Accounts Balances statement that forms part of the forecast financial statements.

Equity

Taxpayers' Funds are forecast to reduce during the year by $583,000, due to the transfer of the Electrical Workers Registration functions and net assets to the Department of Building and Housing from 1 September 2006.

Additional capital is also forecast to be provided, totalling $8.322 million, to fund the forecast deficits noted above in the memorandum accounts operated in Registration and Provision of Statutory Information (Vote: Commerce), and Administration of the Radiocommunications Act 1989 (Vote: Communications).

The following diagram represents the contribution each Vote makes to the Ministry's total departmental output class appropriation base:

Long Description of Diagram Representing the Contribution Each Vote Makes to the Ministry's Total Departmental Output Class Appropriation Base

Departmental Capital Expenditure

(To be incurred in accordance with section 24 of the Public Finance Act 1989)

The forecast capital expenditure for the 2006/2007 financial year reflects both the replacement and/or upgrade of existing assets, including the further development of registry databases, to assist the Ministry to deliver on its programme of work.

The profile of the Ministry's capital expenditure programme reflects the Ministry's need to ensure that all necessary capital expenditure is undertaken to protect its capability, ensuring that priority goes to those that meet its overall strategic objectives.

The Ministry will continue to adopt processes which:

• ensure capital is directed to highest priorities across the Ministry and we gain benefits from rationalisation where possible;
• ensure that capital is invested in areas that meet the medium- to long-term objectives associated with building a learning organisation;
• develop strategies well in advance to address forecast capital requirements; and
• integrate effective capital planning into Ministry-wide priorities and strategies.