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Last updated: : 25 August 2003

Embedding the APS Values

Supporting evidence-International and Australian experience

Since the 1980s, organisations have sought faster response rates, more tailored outputs and increased productivity. Progressively, this search has been linked to calls for increased flexibility in management systems. In the public and private sectors, detailed prescription and instruction-based management have had to be replaced by generalised guidance from management and responsive judgement from employees.

Values provide a flexible and yet comprehensive form of guidance to direct employees' decision making in new and continually changing circumstances. A corporate decision to shift from management by instructions or management by objectives to management by values is associated with the need for managers to become leaders and facilitators and to implement flatter structures. In good practice cases, the increased flexibility that flows from the use of devolved powers is balanced with increased accountability. (Corporate Leadership Council 1998 and 2001a)

Because they can underpin a range of activities, organisational values remain meaningful despite operational and regional differences, and apply across organisational structures. At the same time they are immediately meaningful to each employee, and capable of making sense of diverse activities and behaviours. For this reason a fully integrated values-based framework has an immense capacity to shape the overall culture of an organisation. (Dolan & Garcia 2000)

The guiding values identified by particular organisations can vary considerably for either operational or other reasons, focusing for example on effective service delivery or product innovation. Clearly, there is scope for considerable variation between public and private sector organisational values, just as there is variation in the ways in which organisations use values to underpin their activities. It is critical to note, however, that in the private and the public sectors ethically based values have been shown to have a differential and positive effect on employee performance and commitment.

Ethics affect performance

International and Australian research links organisational ethics with high levels of employee performance and the capacity to attract and retain staff (Vogl 2001). For example, a recent study of 1500 randomly selected workers from the private and the public sectors in the United States found that more than three-quarters of all employees said that their organisation's concern for ethics and doing the right thing was an important reason why they continued to remain with their current employer.

The study also found that the modelling of ethical behaviour by organisational leaders, supervisors and co-workers was positively related to outcomes such as employees being more satisfied with their organisations overall, and feeling less pressure to commit misconduct. Relatively few differences were found in ethics perceptions between employees in the government, for-profit, and not-for-profit sectors. (Ethics Resource Centre 2000)

Australian research conducted by the Independent Commission Against Corruption (ICAC 1998) found that the ethical tone of an organisation impacts on efficiency and effectiveness, decision making processes, staff commitment and job satisfaction, staff stress and staff turnover. The research also determined that strong, clearly stated values could guide people through choices, so that making ethical decisions was the path of least resistance. On the basis of these findings it was argued that making ethical practices a priority was not just about functioning with integrity or being credible; it was also about optimising the efficient functioning of an organisation.

In a New South Wales-based study of 15 organisations (seven local councils and eight State agencies) an emphasis on ethical behaviour was found to be associated by staff with the perception that the senior executive cared about the organisation. This, in turn, was related to a greater employee respect for the senior executives and direct supervisors, and a feeling of being valued in the organisation. Supervisors who were perceived to care about the organisation were also perceived as allowing their staff to make their own decisions and, importantly, as encouraging new ideas. (ICAC 2000)

Most recently, Professor Lynn Sharp Paine of the Harvard Business School has pointed to a range of drivers motivating companies around the world to become more attentive to their stakeholders and more concerned about the norms that guide their behaviour. Among the beliefs of the managers and executives she interviewed are that high ethical standards are correlated with better financial performance, building customer trust, and attracting and retaining the best employees. Paine suggests that business ethics need to go hand in hand with a viable economic model because the financial pay-off from ethics is dependent upon a number of factors including the time frame for return on investment, the economic return required and the specific values in question.

Paine argues further that the ethical commitments of an organisation should contribute to greater employee engagement and creativity. She reports research showing that:

trust, helpfulness, and fairness in rewarding creative work are associated with higher levels of work-group activity
employees are more likely to support management decisions that have been reached through a fair process
employees are more likely to engage in discretionary behaviour to benefit the organisation if they trust their supervisors to treat them fairly and perceive that the organisation operates fairly
employees look for integrity, competence and leadership in their bosses
employees are more likely to take pride and feel ownership in their organisation when they perceive top management to have high credibility and a coherent set of values
employees are more likely to share knowledge and learn from one another in an environment of mutual trust and respect
members of an organisation are more likely to share sensitive information when they have trust and confidence in one another
partnerships between manufacturers and retailers are more profitable when they are based on high levels of mutual trust. (Paine 2003)

The role of leadership

Because values-based decision making is intended to operate flexibly, values statements and formal codes of conduct are unlikely to have and retain meaning within an organisation if senior management does not actively model them. Indeed, without a supportive organisational leadership and culture, values-based systems can become inoperable. This is confirmed by research, which consistently concludes that the maintenance of a meaningful values-based framework is critically dependent on constant adherence to the values by the organisation and its managers in all actions (Corporate Leadership Council 1998).

Because the CEO is the embodiment of an organisation's values, he or she has to be seen to live them. This is because those who are watching, particularly other senior managers, are likely to do what the CEOs do even if it is in opposition to what the CEOs say. Alignment or misalignment of leadership behaviour and organisational values exerts a powerful influence on the way people behave and on their willingness to embrace new strategies. Researchers have found that the high-performance companies that they studied were instinctively aware of this. CEOs in these companies saw their most important task as ensuring that the values were understood and lived by the top 100 or 200 managers, and that those managers accepted their responsibility for reinforcing the values within the organisation (Goldsmith & Clutterbuck 1998).

Research conducted in Australia (Soutar McNeil & Molster 1994) confirms the findings of international research that the behaviour of managers and in particular senior executives is far more influential on staff behaviour than is formal policy. ICAC notes that this research found that fifty-nine per cent of respondents said they had faced ethical conflict in their workplace in the past five years. The greatest source of this conflict for middle managers was senior management. Another interesting finding was that senior managers perceived informal organisational variables to be the most powerful influences on ethical decision making (ICAC 1998: 22).

While senior managers found informal policies most influential on their behaviour, 'middle managers... perceived formal organisational factors to be critical' to their own decision making (ICAC 1998: 22). In particular, this group relied on the hardwiring of values into procedures and systems when confronted by pressures to conform to organisational behaviour in conflict with their personal beliefs.²

Clearly, differing forms of guidance support different groups of employees at different points in an organisation, especially where organisational leadership and formal values are out of alignment. What this suggests is that consistency in the handling of organisational values is critical, from senior leadership which shapes organisational culture, to a robust ethics infrastructure which supports middle managers in their decision making. Critical elements of such an infrastructure include sound ethics management systems, specific prevention techniques and effective accountability and enforcement mechanisms.

Integrating values in organisations

Even with leadership support, values need to be managed strategically and be integrated into the work of an organisation for the benefits to be realised. As Goldsmith and Clutterbuck put it:

High performing companies get people to do the right thing with the minimum rules, by having a few, powerful values that drive decision making and thinking. But values on their own are like a flywheel without a shaft-they need to be attached to the engine of the organisation for their power to be released. (Goldsmith & Clutterbuck 1998: 147)

Implementing values is not a discrete activity of individual employees or groups of employees. It should not be seen as the responsibility of either the corporate area, or the discrete areas responsible for particular types of values-based decision making. Values need to be integrated into the agency so that they become second nature for employees. Jack Welch, the former CEO of General Electric, suggests that:

the benefits of core value statements, like most good ideas, do not derive from their benefits or novelty, but rather from the skill with which they are integrated into the organisation's policies and practices. (Corporate Leadership Council 2001a: 10)

Paine also argues strongly for the integration of values into an organisation. She suggests that values are not just a management tool or a special type of management system that runs parallel to other systems:

When we speak of company "values" and "value systems" we are talking about the beliefs, aims, and assumptions that undergird the enterprise and guide its management in developing strategies, structures, processes, and policies. They constitute an organisational "infrastructure" that gives a company its distinctive character and ethos-its moral personality. (Paine 2003: 193)

Values for the public sector

While the link between ethical and effective organisational performance has broad-based relevance, it has been identified as critical to public service organisations. These organisations are paid for by the public; the programs they manage are paid for by the public; the services they provide are public services; and the powers public servants administer are entrusted to them by the public through their government. The government and the public expect their interests to be addressed through the prudent management of government resources and the impartial administration of public policy.

Community notions of what the public interest is and how it is taken into account by the government and the public service manifest in public comment on the integrity, efficiency, accountability and transparency of public administration. These aspects of public administration directly affect community trust in public servants. In turn, that level of trust affects the credibility of democratic governments and, in the long run, the economic viability of national markets. This, as the OECD has observed, is the point at which ethical and efficiency considerations intersect:

Citizens expect public servants to serve the public interest with fairness and to manage public resources properly on a daily basis. Fair and reliable public services inspire public trust and create a favourable environment for businesses, thus contributing to well-functioning markets and economic growth (OECD 2000: 1).

Noting that confidence in government and public institutions in many countries appears to be declining, the OECD points to the questions this raises for their perceived legitimacy. Moreover, it notes that these questions of legitimacy spill over into perceptions of trade and economic reliability, as 'the further development of international economic relations, including trade and investment, demand high recognisable standards of conduct in the public service' (OECD 98: 1). As noted by O'Keefe, this observation is supported by research from the World Bank, which shows that unethical behaviour can cause the growth rate of a country to be 0.5% to 1% lower than in a similar country in which there is ethical behaviour.3

Values in a changing public sector

Identifying core values is the first step to establishing a common understanding of the behaviour expected of public office holders. All OECD countries publish a set of core values for guiding their public servants in daily operations. These are drawn from substantially the same sources: social norms, democratic principles and professional ethics. As a result there is considerable commonality between core public service values identified by member countries. They generally include:

the definitions of values and professional standards to guide personal and professional behaviour covering probity, integrity and responsible financial management
policies on disclosure of conflicts of interest, use of official confidential information, fairness, equity and merit
recognition of the multiplicity of duties and respective accountability to the executive government, to public sector employers, to professional bodies and to the broader public interest (James 2003: 98).

While values such as impartiality, merit selection, equity, high ethical standards and accountability have been widely regarded as core to the public sector, national public service value sets have been revised in recent years. This revision has been driven by global and technological pressures combining to force governments around the world to be more resultsoriented, more flexible and agile, more responsive to customers and government, and more innovative in the use of technology.

Since 1995, more than one-third of OECD countries have updated their core public service values, and further reviews are still being done. This has resulted in new values being added to reflect the increasingly results-based public service culture. In the course of these revisions countries have also chosen to re-emphasise traditional values while giving them a modern context. The eight most commonly stated values in OECD countries are set out in Figure 1.

Figure 1

Chart: The eight most frequently stated core public service values in OECD countries

SOURCE: (OECD 2000: 12)

Values for the Australian Public Service

Australia has been no exception to these trends. Since federation, the Australian Public Service has been mindful of the requirement to account for the use of public money and to comply with the values of public service. However, while the required standards of conduct have been clearly set out in legislation since 1900, articulating the Values in their present form was not considered important until the 1980s.

Like other OECD public sectors, state and federal public services then began to reposition themselves to respond to the new environment. This led to an increased focus on service delivery, and on managing for results. The Commonwealth public service downsized, devolved responsibility, increased workplace flexibility and grew a network of outsourced providers and contractors. During this process it acquired the features of a number of governance types- procedural, corporate and market-oriented (Considine and Lewis 2003). This new environment focused attention on the role of values as a guide to behaviour and decision making.

In Australia as elsewhere, there were arguments that in the changing economic environment public service values should be expanded beyond those traditionally accepted as the basis for an apolitical Service. The first official articulation of the Values was provided in the Management Advisory Board publication, Building a Better Public Service:

These values or principles have traditionally stressed the centrality of merit-based staffing, probity and integrity, efficiency, and loyalty to government while providing frank and fearless advice. More recently, additional emphasis has been placed on the need for responsiveness to governments, managing for results and improving accountability. These changes do not imply any retreat from traditional values. Rather, the new and the old should reinforce each other. (Management Advisory Board 1993: 4)

In 1994 the Public Service Act Review Group expressed similar views, believing that a new Public Service Act should be built around these principles and values. The work of the Management Advisory Board and of the Review Group heavily influenced the APS Values articulated in the PS Act five years later.

Balanced application of the Values

In theory, the APS Values and the Code of Conduct should provide a basis for ongoing continuity and consistency of management for the APS even while it continues to operate in an environment of constantly changing social and political circumstances. In practice, though the framework is stable and likely to remain so, its application is not. While global factors drive the need to achieve efficiency and effectiveness, public sector leadership must drive the need to maintain high levels of ethical conduct. For this reason the OECD advises that governments need to ensure that ethics is placed centre stage in the reform process, along with the goals of economic efficiency and effectiveness. Unless this is done, reliance on values to replace the work formerly done by detailed prescriptive rules exposes the system to risk:

.It is important to ensure that gains in efficiency and effectiveness are not achieved to the detriment of ethical conduct. New ways of carrying out the business of government are creating situations in which public servants need to be highly attuned to ethical issues, and where there may be few guidelines as to how they should act. Reforms involving decentralisation of power to organisations at sub-national level, devolution of responsibility and greater managerial discretion, increased commercialisation of the public sector and a changing public/private sector interface place public servants more frequently in situations involving conflicts of interests or objectives. (OECD 1998: 1)

In Australia as elsewhere, these stresses appear at all operational levels. At a system-wide level, devolution has the potential to undermine effective whole-of-government management. Broadly, it puts at risk the concept of public service as a whole and, with it, notions of the public interest and the values that have traditionally supported it. At an agency level, the State of the Service Report 2001-02 identified particular risks and pressure points associated with changes in the nature of employment, conflicts of interest, record keeping and fraud prevention and outsourcing. Common tensions that have been identified in personal ethics include:

divided loyalties between ministers, public service managers and the public
incompatibility between private ethics and impartial exercise of duties
private benefits derived from public decisions
observance of instructions or actions which might compromise due process
administration of actions which are outside statutory responsibility, or compromise good financial management of a public sector agency (James 2003: 98).

While each of the APS Values is inherently desirable and widely accepted, tensions such as these will inevitably arise in their application. Overemphasis on one Value or group of Values can have the effect of actively undermining others. Further, the intersection of the Values is not stable. Rather, it is subject to stress of ongoing reform, changing circumstances, changing government priorities, and changes of government itself. The appropriate balance between competing alternatives is likely to shift as circumstances change. Consistent and conscious effort may be required to find and continue to find the right balance between Values. In these circumstances organisational leadership is critical to sustaining a workplace culture that supports a values-based public service.

Generally, APS ethics and standards of conduct have been high. However, it is clear that the pressures of the new operating environment and modern management approaches adopted in response to that environment need to be managed deliberately:

the bureaucratic shape of its organisation needs to continue to develop, and the culture that shapes its operation needs to adapt, but through these processes of change it is imperative that its underlying ethos be preserved. (Shergold 2003)

2 Such pressures were found to be most likely to arise in connection with situations involving concealing information/providing information for public scrutiny; lack of concern for the long-term effects of decisions and actions; unfair treatment of individuals (ICAC 1998)

3. Research based on the Transparency International's Corruption Perception Index shows further that a rise in corruption levels from very low (e.g. Singapore) to very high (e.g. Mexico) is equivalent to raising the marginal tax rate by over 20% (O'Keefe 1999: 27-28).

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