Exploring issues about regulation: policy and operations (also known as chalk and cheese)

One of the perennial issues faced by all those involved in regulation is the way ‘policy’ and ‘operations’ work together – or not. Most discussions I am involved in on this topic indicate that there is a significant degree of dysfunction in this relationship. That is the case whether the discussions are with policy or operational people, and no matter which agencies they are from.

In this article, in a summary and simple fashion, I will touch on some of the potential contributors to the dysfunction in policy and operational relationships, and how the Government Regulatory Practice (G-REG) initiative is seeking to alleviate this, to some extent at least.

The dimensions I will cover are the issues of structure, the ‘set and forget’ approach that can be a feature of regulatory policy development, and the fundamental differences between policy people and operational people.

First, a brief description of policy and operations functions, for the purpose of this article.  In plain language, the policy function is where advice is developed about whether and how to regulate something, using what functions and powers, for what purpose and by what organisational form.  Once decisions are made based on this advice, laws are passed which provide for operational functions to be put in place.  The laws typically specify to one degree or another what the operational function should achieve, and the powers and tools it has to do it. Modern laws are doing this more than in the past. For some background to this, the article Governing the regulators – applying experience discusses how the roles of regulators are specified in law.

Structure

Operations functions are typically placed in a new agency or an existing agency based on a ‘machinery of government’ analysis as part of the policy advice (1). This determines the most appropriate organisational form and place for the work concerned. The operational function (agency) is then where the functions, powers and tools are exercised to achieve the purpose.

In short, two models exist – integration or separation between policy and operations. 

Integration in one organisation:

  • policy and operations are in the same ministry or department (for example, gambling regulation in the Department of Internal Affairs, or immigration regulation in the Ministry of Business, Innovation and Employment).

Separation between organisations

Separation has two variants:

  • policy and operations are in different ministries or departments (for example censorship regulation where the policy function is in the Ministry of Justice and the operational function is in the Department of Internal Affairs)
  • policy is in a ministry or department and operations are in a crown entity or independent board of some form.  There are three forms of crown entity with varying degrees of independence from government – crown agents (like Maritime NZ, with policy in the Ministry of Transport); autonomous crown entities (like the Broadcasting Commission , with policy in the Ministry of Culture and Heritage); independent crown entities (like the Privacy Commission, with policy in the Ministry of Justice).  There are various forms of independent boards (like the Plumbers Drainlayers and Gasfitters Board, with policy in the Ministry of Business, Innovation and Employment).

Why separate policy and operations?

The basis of the separation approach can be explained in part by the State sector reforms of the 1990s.  The quality of policy advice was one of the drivers for separation; another was concern about capture of policy by operations. Graham Scott (2) explained this as follows:

“Policy advice was separated from the operational units responsible for the administration of that policy. In practice, administrative agencies are expected to provide advice and their practical experience is valuable, but it was seen as undesirable to have the Government’s advice on policy and resources coming primarily from parties with a direct interest in the service delivery.”

Another issue that can support separation from agencies that develop policy, who are directly responsible to Ministers, is the need for independence in operational regulatory decision-making, as discussed in a previous article – Exploring issues about regulation: politics and regulation

“The idea is that regulators should apply the law, regulations, rules and bylaws without fear or favour, to achieve the desired objectives. It’s self-evident that having politicians – who rely on support from constituents to be elected and re-elected – making or influencing decisions about specific regulatory cases isn’t a good idea.” 

Although, having said this, such independence can be achieved by establishing statutorily independent functions within integrated agencies. By way of example, the Secretary of Internal Affairs has statutory responsibility for regulatory decision making under the Gambling Act 2003 and can appoint gambling inspectors who also have statutory powers and functions.

Is structure relevant to dysfunction?

Those who operate as part of the separation model will often suggest that separation is a significant contributor to the dysfunction that exists between policy and operations.  On the face of it, that seems logical. Having said this, even in an integrated model there will inevitably be structural separation between policy and operations at some level (team, group, branch or division).  In addition, as noted above, discussions I have had with policy and operational people across both organisationally separated, and integrated, policy and operations models highlight the same dysfunction challenge.  It is necessary to look past structure for significant causes of dysfunction.

The ‘set and forget’ approach

Possibly an influential factor that underpins the dysfunction is what the New Zealand Productivity Commission described as the ‘set and forget’ approach to regulation making in its review of Regulatory Institutions and Practices. The Commission noted that (3):

“the regulatory system isn’t flexible enough. We have a “set and forget” mentality… until something goes badly wrong. Government spends a lot of time thinking about new regulations, but not nearly enough about how effective and necessary the existing stock of regulation is.” 

Fundamentally, this is a product of government/political priorities and resources.  Put simply, governments usually have agendas around change and ‘new’ things – so there can be little time and resources for policy functions to work on improving existing regulatory regimes and systems. This often sets up difficulties in the relationship with operational functions who will be closely aware of and involved in, on a day-to-day basis, the problems of implementing regulatory regimes that are no longer fit for purpose.  With the pace of technology change and growing expectations on agencies to respond, policy functions’ inability to prioritise resources to things that matter to operational functions can contribute to dysfunction in the relationship.  Unless operational functions maintain a strong focus on gathering information about what works and what doesn’t, and communicate that effectively to policy functions, it is extremely difficult for the policy functions to advise government about the priority and benefit of spending scarce resources on fixing what is already in place – compared to doing new things.

Policy and operational people are different

Without delving into this aspect too much, we probably all recognise that policy and operational people are ‘different’ – perhaps in the way architects and builders are different. Ways of highlighting the difference might be to say that, while policy and operational people have capabilities relevant to each other’s work, their preferences may be different.  Policy work is more about concepts and design, and policy practitioners are not usually engaged in applying the results of their work. This means they inevitably don’t have the same information and influences that operational people have.

Operational work is more about shaping and undertaking activities that deliver on concepts and design. Operational people are not usually engaged in working up the concepts and designs. Their work is shaped by ‘what the words mean’ as written in the laws and regulations that express the concepts and design.

Having a preference for doing one type of work or the other is neither good nor bad, and some people may be able to easily work in both worlds, but (perhaps as a generalisation) there are significant differences between the drivers and characteristics of people that work in policy and operational roles.  And differences typically create challenges in communicating and developing understanding.

Addressing the dysfunction

The Government’s Expectations of Good Regulatory Practice (4) highlight the importance of the policy and operational functions within regulatory systems working together effectively.  The Government Regulatory Practice initiative (G-REG) has a programme of work intended to support these expectations. That is the Regulatory Stewardship (5) programme.  It has developed guidance to support good engagement between policy and operational functions; and supports a peer-learning programme that brings policy and operational people together to discuss and add value to regulatory programmes and initiatives being conducted within regulatory agencies.

It starts from the perspective that regulatory stewardship is a responsibility of both regulatory policy and operational functions and acknowledges that it is critical that all those involved in a particular regulatory system have a shared understanding of the system and the role they play within it.

It provides practical ways of overcoming what I have described as the dysfunction between policy and operations. All those involved in regulatory policy or operations should find the guidance, in particular, helpful in engaging constructively.

Check out the G-REG website to find information about this important topic and more general information about what G-REG does.

By necessity, the issues discussed in this bite-sized article are addressed at a very high level. Got any comments or questions?  Feel free to raise them by commenting on this article.

Keith Manch

This post was written by Keith Manch, the Chief Executive and Director of Maritime New Zealand. He has worked in the public sector since 1977 and brings extensive leadership experience in a number of policy and operational senior leadership positions in regulation, compliance and response.

August 2019

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