Section Four: Managing for Outcomes

This Document is Archived

Managing for Outcomes

The process of economic development is complex. The Ministry undertakes a wide range of activities to foster it. The strategic priorities are a management device aimed at focusing our effort on the handful of particular areas and issues where increased effort is likely to be most positive for growth.

For this reason, they do not represent the whole of the Ministry's activity. While not all of our work sits within the scope of the strategic priorities, all our work aims to enhance growth. The diversity of our contribution to promoting growth is reflected in the Ministry's 12 business outcomes, which are summarised later in this section.

Beyond the organisational focus of the business outcomes, there are also some important cross-cutting principles that influence the way we think about our work to achieve these outcomes. These include:

• designing policy and services in a way that fosters innovation;
• the need to promote economic development in a way that is environmentally and socially sustainable over the long term;
• being conscious of where policy and services need to be designed and delivered in different ways to be effective for particular population groups, such as Māori and Pacific peoples;
• considering the impact of the business environment on small business;
• following principles of good regulatory design; and
• ensuring that economic development activities are effectively aligned across key economic players by exercising our sectoral leadership role effectively.

Some of our outcomes are linked to or shared with other agencies. For example, for several years, the Ministry has had a shared outcome with the Ministry of Foreign Affairs and Trade and New Zealand Trade and Enterprise in the area of international linkages, and linked outcomes in the area of innovation with the Ministry of Research, Science and Technology. More recently, the Ministry has been developing a closer relationship with Statistics New Zealand to build better data and indicators across a range of activity that is important to the Ministry's growth outcome. This will improve the quality of the evidence base that we can use to develop more effective policy.

Contributing to Wider Government Goals

Our activities to promote economic growth and a supportive business environment need to be seen in the context of wider economic, social, cultural and environmental development objectives, because there are interdependencies between these different dimensions. For example, social cohesion is an important underpinning for economic prosperity.

More recently, there has been growing recognition globally of the need to consider and address issues of environmental sustainability. The Ministry is responding by focusing attention on the links between environmental sustainability and economic development, particularly in terms of innovation opportunities for New Zealand and the government sector's leadership role in promoting more sustainable practices through procurement and standard-setting.

Because of these interdependencies, the Ministry needs to collaborate and consult with other agencies to ensure that the total contribution of government agencies is greater than the sum of its parts. In particular, we need to take account of this wider context to ensure that policies are designed to be as effective as possible in contributing to growth, by tailoring our approach to the needs and characteristics of particular sectors. We need to be mindful of such themes that flow across the Ministry's work.

Some of our work contributes to Te Puni Kōkiri's outcome of Māori succeeding as Māori. The Ministry seeks to contribute to Māori economic development where it has the experience and expertise to do so. For example, certain characteristics of the Māori community and the structure of Māori businesses - such as tribal ownership of assets - may provide opportunities for a more tailored approach by the Ministry to certain applications of business regulation. The Ministry also works to reconcile the relationship between intellectual property and traditional knowledge.

Similarly, some of the Ministry's work contributes to the Ministry of Pacific Island Affairs' overall outcome of Pacific peoples adding to New Zealand's prosperity.

Improving Our Ability to Manage for Outcomes

The Ministry is continually sharpening its strategic focus. We want to concentrate effort and resources on the things that matter most for growth, as reflected in our major outcome and strategic priorities. This means we need to adapt our strategy over time to fit the changing external environment, and incorporate our evolving understanding about how we can best influence economic growth in New Zealand.

The strategic priorities have become embedded as a focusing device for our activities, and for the "strategic conversations" that help determine these activities. Each strategic priority has an agenda, setting out why the strategic priority is critical to achieving our major outcome, key issues or opportunities that need to be addressed, and the "vital" projects that we judge will make the biggest contribution. The strategic priority agenda contains the narrative that links our work to our major outcome.

Over the last year we have continued to improve our ability to identify and discuss the implications of emerging strategic issues, including through more systematic environmental scanning, evaluation and improving the inputs and social process around our annual strategy review. The knowledge and shared understanding we are gaining through these processes is enabling us to focus more sharply on the things that we judge will make the biggest difference. We will seek to develop a set of outcome indicators for each strategic priority.

Improving the quality of strategic thinking within the formal and informal strategy processes in the Ministry will remain our focus over the next few years. In particular, we are aiming to better integrate our internal strategy review processes with similar, cross-government strategy development so that each informs the other more seamlessly.

The Ministry's Business Outcomes

Our strategic priorities represent the main challenge for the Ministry and are the focal point of our strategy. However, our overall strategy encompasses a wide range of activities aimed at promoting growth, including activities that do not contribute directly to the strategic priorities, as well as activities that do.

It is therefore important for each functional part of the Ministry to understand how they contribute to a business environment that lifts productivity and prosperity, to have a clear direction for their own business level strategies, and to understand which other parts of the Ministry are working towards similar intermediate outcomes. Accordingly, our business outcomes are designed to both reflect and provide direction for the primary activities of the Ministry's different groups.

Innovation, entrepreneurialism and the ability to operate internationally are fundamental drivers of success and productivity improvement in firms of all sizes. Business success requires entrepreneurs continually to spot opportunities, and to produce and market innovative products that consumers want. The Ministry works on policies to help businesses build capability at both firm and sector levels, as well as improving the business environment so that it stimulates innovation, and improving connections between private and public sector research and development. We also help shape the environment for networks at firm, sector and regional levels that will foster greater levels of collaboration and knowledge transfer.

Outputs are provided primarily in Policy Advice and Sector Leadership - Firm Capability, Sectoral and Regional Development; and Policy Advice - Small Business.

Groups in the Ministry whose primary activities contribute to this outcome include: Firm Capability; Regional Development; Research, Evaluation and Monitoring; Sector Development; and Small and Medium Enterprises Policy. This outcome is linked to the Ministry of Research, Science and Technology's outcomes for the research, science and technology sector.

Intellectual property rights underpin innovation in New Zealand. By ensuring that people who generate innovative business ideas can benefit commercially from them, these rights provide incentives for continued innovation and invention. Innovation is also generated through access to knowledge and ideas, and building on the work of others. Legal protection for intellectual property must take account of all these factors by aiming to reward innovators, while also encouraging the dissemination of new ideas. The Ministry is responsible for intellectual property policy and also offers efficient intellectual property registration services to support entrepreneurial activity in New Zealand.

Outputs are provided primarily in Policy and Purchase Advice - Business Law and Competition Policy; and Registration and Granting of Intellectual Property Rights.

Groups in the Ministry whose primary activities contribute to this outcome include: Intellectual Property Policy; and the Intellectual Property Office of New Zealand.

Businesses can start and thrive, and consumers get a fair deal, when anti-competitive behaviour is restricted and firms compete for business in well-functioning markets under clear and transparent rules. Beyond sector-specific market regulation in the energy and ICT areas, which are covered under the specific outcomes below, the Ministry's work on competition policy aims to protect the competitive process so that it promotes innovation, investment, competitive prices and good business practice.

Outputs are provided primarily in Policy and Purchase Advice - Business Law and Competition Policy.

Groups in the Ministry whose primary activities contribute to this outcome include: Corporate and Competition Policy; and the Ministry of Consumer Affairs (through the "Empowering consumers" outcome).

Well-functioning and dynamic capital and financial markets are essential to the maintenance and growth of productive business activity, because firms need the right financial capital arrangements to innovate and become globally competitive. For these markets to work well, businesses need to have confidence in the rules and institutions that govern the investment environment. The Ministry works to ensure that capital and financial markets are regulated effectively and efficiently so they deliver a range of high quality and trusted capital products and services. We also investigate the ability of firms in New Zealand to access finance and work towards addressing any barriers where appropriate.

Activities under the Investment strategic priority contribute significantly to this outcome.

Outputs are provided primarily in Policy Advice and Sector Leadership - Firm Capability, Sectoral and Regional Development; Policy and Purchase Advice - Business Law and Competition Policy; and Policy Advice and Support on Consumer Issues.

Groups in the Ministry whose primary activities contribute to this outcome include: Financial Sector; Firm Capability; and the Ministry of Consumer Affairs (through the "Empowering consumers" outcome).

For markets to work well and support innovation, consumers need to have confidence in the products and services they purchase, confidence in the parties with whom they transact, and confidence in the market rules and institutions that govern their transactions. Without this confidence, they are less likely to participate actively in markets, or will spend time and effort protecting themselves against unknown dangers. The Ministry provides advice on a wide range of consumer issues.

Outputs are provided primarily in Policy Advice and Support on Consumer Issues.

The Ministry of Consumer Affairs, which sits within the Ministry of Economic Development, contributes significantly to this outcome.

Rapid and ongoing developments in information and communications services and new digital technologies have high potential to enhance the productivity of New Zealand firms, and our quality of life in general. Through the Ministry's activities relating to ICT, radio spectrum and firm capability, we are aiming to promote seamless and easy access to information resources, enhance the skills needed to utilise the resources and technologies available, and ensure the availability of ICT networks, particularly high speed/high quality-of-service broadband.

Activities under the Infrastructure strategic priority contribute significantly to this outcome.

Outputs are provided primarily in Policy Advice and Sector Leadership - Firm Capability, Sectoral and Regional Development Policy; Policy Advice - Communications; and the Management and Enforcement of the Radiocommunications Act 1989.

Groups in the Ministry whose primary activities contribute to this outcome include: Radio Spectrum Management; Radio Spectrum Policy and Planning; Telecommunications and IT Policy; Sector Development; and Firm Capability.

International connections enable growth. This is particularly true for New Zealand, because the domestic market is small and distant from global markets. The Ministry works closely with other agencies to coordinate New Zealand's regulatory environment more closely with those of our major trading partners and to promote stronger business networks. This outcome is shared with the Ministry of Foreign Affairs and Trade and New Zealand Trade and Enterprise.

Activities under the International linkages and Investment strategic priorities contribute significantly to this outcome.

Outputs are provided primarily in Policy Advice and Sector Leadership - Firm Capability, Sectoral and Regional Development; Policy and Purchase Advice - Business Law and Competition Policy; Administration of Trade Remedies; and the Administration of Part II Tariff Concessions.

Groups in the Ministry whose primary activities contribute to this outcome include: International Technical and Regulatory Coordination; Trade Remedies; Tariff Policy and Trade Rules; and Sector Development.

Tourism is an important contributor to New Zealand's economy and is an area that has significant growth potential. We aim to contribute to the growth of a high value, sustainable tourism industry by providing policy advice on improving the returns to the economy from tourism and addressing key environmental sustainability challenges and opportunities. We also develop research and core data to provide information to the private and public sectors to enable high-quality decision-making.

Outputs are provided primarily in Policy Advice - Tourism; and Policy Advice and Sector Leadership - Firm Capability, Sectoral and Regional Development.

The Ministry's primary contribution to this outcome is via the Ministry of Tourism, a semi-autonomous organisation within the Ministry of Economic Development. Implementation of the New Zealand Tourism Strategy is a key focus for the Ministry of Tourism and the New Zealand Tourism Board.

Local and global demand for energy will inevitably increase over time, putting pressure on our energy supplies. Pressure on the system will be reflected in higher energy prices. The challenge over the medium to long term is to meet New Zealand's energy needs in a way that maintains our way of life, economy and the environment. The Ministry is responsible for a range of energy-related activities, including advice on the overall direction of energy policy and performance of energy markets, the provision of energy statistics, and overall management of New Zealand's oil and gas resources.

Outputs are provided primarily in Policy Advice on Energy and Resource Issues; Management of the Crown Mineral Estate; and Energy and Resource Information Services.

Groups in the Ministry whose primary activities contribute to this outcome include: Crown Minerals; Electricity Policy; Energy and the Environment; Energy Information and Modelling; and Fuel and Crown Resources. Activities under the Infrastructure strategic priority contribute significantly to this outcome.

Crown resources for which the Ministry is responsible, such as the mineral estate and the radio spectrum, need to be managed and allocated to maximise opportunities for sustainable economic development, whilst recognising the need for the use of these resources to be managed sustainably. The Ministry advises on the management of a range of these assets and allocates rights to utilise them, taking into account the Crown's obligations under the Treaty of Waitangi. The Ministry also contributes an economic development policy perspective on specific natural resource issues, such as bioprospecting.

Outputs are provided primarily in Policy Advice on Energy and Resource Issues; Management of the Crown Mineral Estate; Energy and Resource Information Services; Policy and Purchase Advice - Business Law and Competition Policy; Policy Advice - Communications; and the Management and Enforcement of the Radiocommunications Act 1989.

Groups in the Ministry whose primary activities contribute to this outcome include: Crown Minerals; Energy and the Environment; Fuel and Crown Resources; Radio Spectrum Management; and Radio Spectrum Policy and Planning.

Confidence in the integrity of the New Zealand business environment depends in part on the effectiveness of rules that establish business accountability and promote responsibility, and the institutions and powers required to ensure effective monitoring and enforcement of these rules. Businesses, their managers and directors need to be accountable to their stakeholders. The Ministry is responsible for developing and administering a range of rules affecting the operation and governance of different types of corporate entity. Regulation both prescribes this accountability and ensures that shareholders have the information they need to hold managers accountable. However, in designing and administering these rules, we strive to strike the right balance between the need for corporate accountability and supporting entrepreneurs to be innovative.

Outputs are provided primarily in Policy and Purchase Advice - Business Law and Competition Policy; Administration of Insolvencies; and the Registration and Provision of Statutory Information.

Groups in the Ministry whose primary activities contribute to this outcome include: Corporate and Competition Policy; Financial Sectors; Business Registries; and the Insolvency and Trustee Service.

Auckland is the country's largest city and its greatest concentration of businesses and economic activity. It lies at the centre of the country's largest region and generates almost a third of New Zealand's wealth. The future economic health of Auckland is vital to the future economic health of the country as a whole, and Government has identified Auckland's development as a priority. The Ministry of Economic Development has led the creation of the Government Urban and Economic Development Office, co-locating Ministry staff with staff from within the Department of Labour, the Department of Transport and the Ministry for the Environment. The purpose is to provide advice to Government on a coordinated approach to Auckland's sustainable economic and urban development.

Outputs are provided primarily in Policy Advice and Sector Leadership - Firm Capability, Sectoral and Regional Development; Policy Advice on Energy and Resource Issues; and Policy Advice - Communications.

Other groups within the Ministry contribute to work on Auckland-related issues, including the Economic Strategy Branch, Energy and Communications Branch, and Regional Development. Activities under the Auckland strategic priority contribute significantly to this outcome.

Cost-Effectiveness of the Interventions the Ministry Delivers or Administers

This section outlines our approach to assessing the cost-effectiveness of the interventions that the Ministry delivers or administers.

The Ministry will continue to adopt strategies to ensure we can provide efficient and effective services to Ministers and third party fee-payers, within the resources available to us. To achieve this, the Ministry will:

• improve the efficiency of our own processes and systems to reduce costs to purchasers of our services;
• invest in people and systems to develop the skills needed to deliver;
• ensure our support structures are delivered efficiently and effectively; and
• ensure efficient decision-making around priority work and effective identification of financial implications and capital expenditure.

Therefore, the short-term focus is on prioritising operating expenditure and managing within budgets. The long-term focus is on examining ways to meet increasing cost pressures within relatively fixed revenue, while minimising the impact on our strategic priorities. Our business planning processes are intended to support this by:

• encouraging an approach that is driven by the Ministry's strategic priorities and outcomes;
• ensuring there is a clear attribution of costs across the outputs the Ministry provides; and
• developing and implementing processes around prioritisation of resources across the Ministry.

The Ministry undertakes a wide range of activities to foster economic development. In its diverse roles, the Ministry develops policy for implementation by other agencies, or through services provided by the Ministry, especially by the Business Services Branch.

Service Delivery and Enforcement

Government regulatory regimes require effective enforcement and service delivery systems. These, in turn, need to be supported by efficient, high-quality information systems. The Ministry runs the corporate and intellectual property registers and enforces the corporate governance statutes. Six business units in the Ministry deliver such services to both business and the public (for example, the Companies Office, the Intellectual Property Office and the Radio Spectrum Management Group). Each of these units provides registry and/or licensing functions in parallel with compliance and enforcement responsibilities.

A key objective of these units is to provide effective services to business at least cost. This, in turn, contributes to the Ministry's supporting goal of minimising transaction costs for consumers and businesses in domestic and international markets. The specific priorities for the next three years to achieve this outcome are:

• continuing to enhance the online services the Ministry offers and look at vehicles for new choices in service delivery, actively encouraging the use of low-cost channels and processes (for example, these can be measured by comparing the use of Companies Office electronic returns versus manual returns) and introducing new online licensing and registration facilities;
• reviewing annual fees to further simplify categories, removing fee differentials unrelated to administration costs and providing incentives for online payments;
• providing integrated services, with other government agencies, to small to medium enterprises via the internet. For instance, the joint Companies Office/IRD initiative allows someone setting up a new company to ask IRD for a tax number at the same time as they submit their application to the Companies Office; and
• offering increased access to Australian corporate information (through an agreement with the Australian Securities and Investment Commission) to New Zealand businesses, assessing opportunities for coordination with Australia in areas such as patent examination and trade mark and plant variety rights processes, or supporting mutual recognition arrangements for electrical product compliance.

The most recent Doing Business - Benchmarking Business Regulations survey issued by the World Bank Group (based on 2006 data) showed New Zealand ranked as second for ease of doing business (first in 2005). Areas where the Ministry has a part to play reported that New Zealand ranked third for starting a business (fourth in 2005), and 21st for closing a business (20th in 2005). Often, improvements in the Doing Business indicators proxy for broader reforms, which affect more than the procedures, time and cost to comply with business regulation among other things.

While the Ministry is not the only player in these processes and cost is not the only relevant metric, as an international benchmark, the survey provides some guidance on how cost-effectively the services of the Ministry are being provided. For example, the cost of setting up a business indicates that the cost indicator for New Zealand (as a percentage of income per capita) was 0.2 per cent compared to 5.3 per cent for the OECD as an average. Similarly for closing a business, the indicator for New Zealand showed cost (as a percentage of estate) was 3.5 per cent against an OECD average of 7.1 per cent, with a recovery rate (cents on the dollar) of 74 compared to an OECD average of 68.6.

Policy Interventions

Developing robust cost-effectiveness measures for the sorts of policy roles the Ministry undertakes is challenging. To do so requires a good understanding and analysis of:

• the net economic benefits of a set of interventions, especially in the development of economic strategy through to specific instruments, and assigning values to interventions where the effects are indirect and complex;
• the range of feasible options that may achieve similar outcomes and their impacts (for example, cost-benefit, risks and compliance cost implications); and
• how interventions will actually be delivered by other agencies, given that government agencies other than the Ministry of Economic Development are often responsible for operationalising policy direction and giving effect to it in their programmes and activities.

Given these challenges, the Ministry uses a monitoring and evaluation approach to support evidence-based policy development. This, is turn, serves to strengthen the overall efficiency and effectiveness of the interventions it implements or are implemented by other agencies. In particular:

• because evaluation activities help us to learn more about what works and what does not, evaluation results are important for presenting the case for the direction of economic development policy within government, and in explaining the approach more widely; and
• a number of the policy interventions are piloting approaches not previously used in New Zealand. Good evaluation enables these pilots to be refined, discontinued or more fully implemented. The process for doing this is through evaluation reports-back to Ministers after sufficient time has elapsed to test policy impacts and decide on policy refinement.

Regulatory Analysis

The Ministry also has the lead role in promoting measures to improve the quality of regulatory analysis and processes across government activity, combined with taking an overview of business compliance cost reduction. Ongoing policy development looks for alternative or better ways to achieve an outcome. These same principles are applied to the work and advice provided by the Ministry in the policy work it undertakes.

A key element in the policy development process is ensuring that appropriate rigour is placed on completing regulatory impact analysis (RIA). In 2006/2007 the Government agreed to changes to the RIA regime and the role of the Ministry's Regulatory Impact Analysis Unit. The changes emphasise the need for robust analysis, including quantification of costs and benefits where possible, identifying the full range of feasible options, high-quality discussion documents and assessing all the impacts of options. It is expected that, in conjunction with the implementation of the Business Cost Calculator (BCC), the enhanced RIA regime will result in more robust analysis within the Ministry and across the public service. The BCC, intended to be available later in 2007, will enable policy analysts to more easily, effectively and consistently calculate the costs to business of complying with proposed new regulations.

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