Under the existing system, prisons, community probation and rehabilitation and reintegration each has its own processes, infrastructure and staff.
"This creates replication of work, is inefficient and has resulted in an overly layered structure,'' Mr Smith said.
The existing system was inefficient and did not give senior managers the accountability or authority they need to make decisions locally, he said.
"The proposed structure would see one combined service group established in each region and a proposed fourth region created in the lower North Island.''
Following a consultation process, recruitment and re-assignment were expected to to take place in June and July, with staff starting new roles from August this year.
The proposed structure will save $10 million in employee costs compared to the 2012/13 financial year, said a Corrections statement.
Consultation with affected staff started today