Factors Impacting the Adoption and Operation of Corporate Governance Reform in Australian State Government Departments

Abstract

Corporate governance reforms are increasingly common in public sector organisations. Despite the scope of recent and ongoing public sector change, the processes used to adopt and operate public sector corporate governance reform are not clearly documented. In some cases there is evidence of reform failure. This study sought to identify and describe the variables associated with corporate governance change in Australian state government departments, particularly the factors that impact on the adoption and operation of reform. Concepts associated with scientific management (rational/technocratic influences) and organisational culture (political/cultural influences), and their impact on change, were combined to produce a framework that was tested in two phases. Phase one focused on the collection of qualitative data relating to corporate governance reform in the Victorian Department of Human Services. The second phase involved the collection of quantitative data from chief executives and senior executives in all Australian state government departments. The qualitative data collected in phase one was used to validate the conceptual framework which was then further tested using quantitative methods during phase two. Phase one and two findings were consistent with the conceptual model. In particular, a factor analysis of phase two results identified the adoption of change being influenced by leadership capability; external improvement drivers; internal improvement drivers; organisational politics; the capacity of an organisation to interpret knowledge; and changes in an organisation’s operating environment. The operation of reform was influenced by continuity of leadership; actions taken to embed change and build supportive attitudes to change; management of organisational politics; and the capacity of an organisation to understand change. The immediate implication of this research is the definition of a new model to manage corporate governance change. The rational/scientific and political/cultural factors identified by this project provide an integrated approach that can be drawn upon by change actors. It acknowledges the significance of the rational/scientific and political/cultural factors that come into play during corporate governance reform. This study has filled a gap relating to how public sector organisations go about making corporate governance changes and provides customised and practical recommendations for future corporate governance reforms in Australian state government departments. These include giving priority to corporate governance reform training (the research found that only around one in two senior officers had been trained in corporate governance reform) and further strengthening organisational leadership (leadership was identified as a critical factor at both the adoption and operation stages of corporate governance reform). This research provides new insight into understanding corporate governance change in an Australian public sector context and provides a model to more effectively manage future reform.