Fran O'Sullivan on business
Business analysis and comment from Herald columnist Fran O'Sullivan

Fran O'Sullivan: No diplomatic immunity from McCully

Chief executive John Allen's attempts at restructuring have outraged diplomats in the Ministry of Foreign Affairs and Trade. Photo / Mark Mitchell
Chief executive John Allen's attempts at restructuring have outraged diplomats in the Ministry of Foreign Affairs and Trade. Photo / Mark Mitchell

Foreign Minister Murray McCully is poised to send a firm direction to Mfat boss John Allen to refocus his ministry's strategic priorities.

The elite foreign affairs ministry has been in an uproar since Allen tried to enforce regime change on the diplomats one month ago.

The one-month consultation period is over and McCully will make his own expectations clear in a public letter to Allen which is expected to be released today.

That letter will direct Allen to undertake an ambitious rethink of the ministry's diplomatic footprint so that critical resource is redeployed towards New Zealand's strategic interests.

These are the growing markets like China, Asean, India and the Middle East.

The Foreign Minister is strongly concerned that Allen's restructuring has been fashioned as a savings-driven strategy instead of a strategic shift to ensure that delivering on New Zealand's trade and economic priorities becomes the ministry's major priority.

It is now obvious that Allen's management change boffins have taken a "cookie cutter" approach to the restructuring process.

The original proposal does not herald a big shift in resource to those growing markets. In some cases like China where Cabinet ministers are leading multiple missions this year, there has been a reduction in resource. The upshot is a basic cut-and-trim across all posts with scant attention paid to real on-the-ground differences around the world.

One example: What is the point in directing New Zealand's ambassador to China to recruit local staff to service the embassy, when Beijing insists all foreign diplomatic posts must contract such services through the relevant Chinese Government organisation?

Nor is there any point employing outsiders to undertake consular work in China, when the Chinese Government recognises only accredited diplomatic staff performing in these roles. Nor is there any point in telling the local consul in Shanghai to go to meetings in a self-drive car. Surely, somebody in the leadership team knows how inefficient that would be?

These are the elementary issues. But even though there are experienced diplomats in Allen's senior leadership team, no one seems to have had the moxie to point out to their boss that the boffins' blueprint is a risible nonsense.

McCully is not letting the fiscal hammer off.

He expects Allen to cull more European posts than simply the Warsaw and Stockholm embassies.

He also wants Mfat to look at culling posts in Rome, The Hague and Madrid and servicing them out of a Brussels-based diplomatic hub.

McCully reckons substantial cost savings of $10 million to $15 million annually could be achieved by this, particularly if a "very expensive property" in Paris which entails $5 million in capital charges is also put into the mix and a more sensibly resourced post is established.

Such steps would give greater financial headroom to redeploy resource to the growth markets.

Since McCully returned to Wellington from his high-profile visit to Burma he has been donkey-deep trying to quell the incipient rebellion within Mfat's ranks. Not only has he been meeting daily with Allen and/or other members of the ministry's senior management team to ensure that the changes give effect to the Government's policy objectives, but he has also been taking direct soundings from key ambassadors like Jan Henderson who is New Zealand's High Commissioner to India.

It has got so emotionally charged that the heads of mission have been called to a meeting in Wellington at the beginning of next month to get some commonality on the way forward. Many of them have been struggling to hold on to key staff since jobs were put up for grabs and a signal given that overseas allowances would be drastically cut.

Ironically, what is now under consideration is giving the heads of mission more autonomy to deliver on the Government's objectives.

But McCully will also insist that the ministry does move to promoting on merit. This is one of his own key political objectives as he wants to embed what he calls a "culture of merit".

He reckons that as the purchaser of the ministry's services he is entitled to get deeply engaged with the scope of the restructuring. But he can't run the operational side.

When Allen took up the job in July 2009 there were strong expectations he would quickly shift the ministry's focus to the growing markets. Regime change was implicit. If the shift was to be done in an environment of zero budget increases then it was implicit that some posts would close.

Promotion was to be on merit rather than length of service and the ministry's arteries unclogged so that talented younger diplomats got a go at the key jobs.

This was reinforced by McCully himself in a speech to the Institute of International Affairs last year.

But it is obvious that Allen has cocked up.

Contrast what some insiders are now calling "sturm und drang"with the smooth management transition which has been under way at NZ Trade and Enterprise. Both Allen and NZTE boss Peter Chrisp come from the private sector. Allen was NZ Post CEO and Chrisp an international executive with Norske Scog before taking up their respective roles.

Chrisp's refocusing exercise has been logically and sequentially organised. Most of the senior team are new appointments. It has been a textbook change process.

But despite stacking his senior leadership ranks with a corporate "change agent", an HR manager, a communication specialist and a capability manager, the Allen-led structural change process has been a complete mess.

Professional diplomats are chaffing at Allen's reliance on what they term his "NZ Post boarding party" over the views of the experienced senior diplomats within the ministry and the overseas-based heads of mission.

Allen's top tier does still include experienced diplomats like deputy secretaries Chris Seed and David Walker and Gerard van Boheme. Deputy secretary Amanda Ellis runs development. But the other roles are firmly in corporate management (Phil Goulin), human resources (Julie Townley), principal capability adviser (John McArthur), communications (Viv Beck) and David Skilling, who is Allen's senior adviser on strategy.

Among the former NZ Post personnel are Beck, change agent Paul Bell and Allen's EA Amelia George.

Mfat has been leaking like a sieve since Allen unveiled his grand restructuring plan.

What gets up the diplomats' noses is the reputed $250,000 salary that Skilling is being paid for a part-time role that is said to involve as little as working one week out of six for Mfat. If the figures are correct that is equivalent to $1.5 million on an annualised basis for a position in the senior leadership team. Skilling has no diplomatic or international affairs experience. It rankles that the job - which long-term diplomats regard as part of their own core competence - was not advertised.

There are other inanities, such as a series of open-ended appointments made within the ministry's top tier.

More details will become clear when McCully's letter is published.

He is likely to cut Allen some slack.

But Mfat's chief executive is going to have to eat some awful humble pie.

- NZ Herald

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