Practical Lessons from New Zealand's Reform Efforts

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As the New Zealand experience with government reform demonstrates, comprehensive and fundamental change is possible in a relatively short period of time. Careful planning, observes Graham C. Scott in IMF Occasional Paper No. 140, Government Reform in New Zealand, can contain the risks associated with change. Scott served as New Zealand's Secretary to the Treasury from 1985 to 1992. From this vantage point, his Occasional Paper provides a broad review of the reform process, including 12 lessons for countries seeking to implement similar reforms:

* Recognize the Problem. For reform to occur, there must be a broad realization that a problem exists, general agreement on a solution, and a strong commitment to pursue this solution despite the inevitable obstacles. Some analysts have argued that only serious crises spawn real change, but New Zealand's experience suggests that ideas and political and bureaucratic leadership can also effect change.

* Solve a Sequence of Real Problems. The political reality is that grand designs rarely excite politicians. Keep the end-point in sight and avoid inconsistencies, but emphasize the solution of a sequence of real problems to secure early payoffs and political support.

* Political Commitment Is Necessary at Key Points. New Zealand's reforms relied on the leadership of the finance minister and other key authorities. They steered the necessary legislation through the government and parliament, and at other critical junctures conveyed their support to the top management of the civil service. Legislation, although not strictly needed, provided clarity of purpose, a philosophy, and a technical basis to sustain changes over time.

* Leadership from Heads of Departments Is Essential. Since opportunities to frustrate reforms abound and passive leadership undercuts momentum, the active leadership and commitment of heads of departments and central agencies are crucial.

* Do Not Relax Central Controls Too Soon. Legislation provided departments a two-year period to make the transition from detailed input controls to outputs and finally to free them from most controls. The government was thus able to deal individually with departments and appraise their readiness to remove input controls.

* Change Management Requires Particular Skills. New Zealand's reforms enabled managers at all levels to change the way they manage staff and resources, and to be more responsive to clients. The three phases of change management...