Crown entities: New expectations, new opportunities

Principal Consultant Joanna Collinge has led and supported Crown entities across the motu, and she’s passionate about the value they create for the people of Aotearoa. Joanna argues here that new government expectations for boards of Crown entities in how they work with monitors could be a catalyst for better monitoring relationships.

In April this year, in its new “Enduring letter of expectations for statutory Crown entity boards”, the Government upped the pressure on these boards to work well with their monitoring departments. The letter made clear that something that used to just be good practice – having a constructive and transparent relationship with the monitor – is now basically a requirement.

My own experiences of Crown entity monitoring relationships have run the gamut from unproductive fault-finding through to a much more responsive, problem-solving approach. What I learned is that if each side can approach the relationship with a mind to appreciating the interests of the other, both sides benefit. The new requirement for boards to specifically foster that kind of relationship could be a useful additional impetus towards more collaboration and understanding.

Moving from “set and forget” monitoring to constructive collaboration

Historically, performance monitoring of Crown entities has been criticised as a "set and forget" exercise. Monitors have often provided only a passive kind of assurance based on agency reports, missing opportunities to influence and support Crown entities’ performance in a collaborative way.

This has led to frustration on both sides, with Crown entities seeing little value in the relationship, and monitors struggling to fulfil their assurance role.

Success here depends on building mutual trust. A monitor needs a nuanced appreciation of the Crown entity’s context and progress, and the entity needs to be confident that in being open and transparent with the monitor, as it’s now required to be, the monitor will receive this constructively.

To create this environment, regular opportunities for engaging with each other and building the relationship are crucial. A great example of this that I saw was a Crown entity leading a major government reform programme. The board invited the monitor to review draft papers and to attend agenda items relating to the reform. The board benefitted from having the monitor’s perspective feeding into its decision making, and the monitor had a better appreciation of the risks and challenges the board was managing.

PSC guidance for monitors includes monitoring frameworks – the Crown entity can help the monitor tailor these generic frameworks to the entity and its real work

Developing a monitoring framework – together

On the monitor’s side, an important early step in fostering a stronger relationship can be to involve the Crown entity’s board in developing a monitoring framework.

The Public Service Commission has some useful guidance for monitors, including some sample frameworks and prompting questions, but it’s all necessarily generic and needs to be tailored to each entity. For monitors, getting the Crown entity itself involved in producing the framework can help a lot with this tailoring.

Collaboration here can create a mutual understanding of areas of risk, where the monitor can act as a “critical friend”. It also helps the board in its role as the first monitor of the Crown entity’s performance, supporting it to provide relevant information in its own reporting to the minister.

The “how” of developing a monitoring framework

The two sides should together approach “performance” not just as about delivering products and services, but as also taking in dimensions such as how well the Crown entity engages and works with its stakeholders, and how well it manages risks and the important public resources entrusted to it.

The framework should identify some areas of shared focus in performance reporting, which could include things like key shifts that are needed, or significant risks the Crown entity is currently managing.

Joanna Collinge has seen monitoring relationships from different sides, having both led Crown entities herself and advised them and government monitors as a consultant

Roles and responsibilities are clearly set out in the PSC guidance, but there’s an important opportunity here for joint work on the monitoring framework to dig down further. This should include agreeing on a programme of formal engagements between the board and the monitor, and also protocols for how the monitor will engage responsively with the board chair and the Crown entity’s senior executives.

Working together on problems that persistently undermine performance

When I’ve seen the monitoring relationship work well for both sides, it has often been through practical activities that support not just work in the Crown entity to produce results, but also work on the entity to address persistent underlying organisational issues that are holding it back.

The PSC values this approach. Its Performance Improvement Review Programme (replacing the old Performance Improvement Framework) now takes a wider view of the factors that can get in the way of good performance.

In one stand-out example from my experience, an independent Crown entity (ICE) and its monitor responded to a change in the entity’s founding legislation that provided for appointing board members who brought lived experience of the communities that the entity served. That kind of direct experience is vital, but it doesn’t always come with experience of governing an organisation. In this case the monitor responded by supporting the ICE to develop and run a governance capability programme. With a shared understanding of this capability gap, the monitor and entity were able to work on it together.

Monitors need to balance accountability for independent Crown entities – like our Climate Change Commission – with respect for their independence

Balancing independence and accountability

All Crown entities have some degree of independence from ministerial influence, but, as my colleague Natasha Kuka discussed back in March this year, there’s a difference in monitoring those entities that are subject to ministerial direction and government policy, and monitoring independent Crown entities (ICEs), which are not. 

Many independent Crown entities are established to maintain and strengthen our democratic system by providing independent advice or protecting and advocating for the rights and interests of people in New Zealand – for example, the Climate Change Commission and the Human Rights Commission. Their monitoring agencies need to find the appropriate balance between independence and accountability.

The monitor needs to work with the ICE to agree on performance measures that reflect its independence. For example, for an independent inquiry I worked on we weighted the performance assessment criteria to the quality and effectiveness of outputs and services, rather than to the choice of focus and the final recommendations.  

On its side, the ICE needs to ensure it can always communicate a clear evidence base for its independent decisions. It also needs to pay particularly close attention to managing risks, so that its independent decisions aren’t undermined by potential criticism of its organisational performance.

Good news for assurance and performance

Working collaboratively isn’t easy, and will never be entirely smooth. But if both monitor and Crown entity can develop better shared understandings of what needs to go right and of how to make this happen, this can only be good news for both assurance and performance.

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