2015 Four-year Plan Guide

August 2014

ISBN: 978-0-478-40960-4

Treasury:2890576v11

Contents

Part A: Overview

1. General Information

1.1What is a Four-year Plan?

1.2 What is the process?

1.3What is the scope of Four-year Plans?

1.4What is happening with Four-year Plans this year?

1.5What does a good Four-year Plan look like?

1.6 How will they be used?

1.7How does it all fit together?

2. What’s New?

2.1 Key changes this year

2.2 Greater ownership by departments

2.3 Greater alignment with Performance Improvement Framework (PIF) and the
strategic intentions processes

2.4 Stronger evidence of collective impact and action

2.5 Flexibility to account for this year being an election year

3.Information to know before starting your Four-year plan

3.1Financial basis

3.2Sensitive information

3.3Supplementary resources

3.4Other planning documentation

4. Process and Engagement

4.1 Agreeing agency-specific approaches to Four-year Plans

4.2 Engagement and support from central team on the Four-year Plans

4.3Engagement with Ministers during the development of Four-year Plans

4.4 Relationship between the Budget process and 4YPs

Part B: Components of the Plan

Four-year Plan Components

ANNEXES

Annex 1: Workforce Capability, Capacity and Costs Information

Annex 2: Supporting financial information

Annex 3: Asset management and investment intentions

Annex 4: Key Assumptions and Resilience

Annex 5: Crown Entities

Annex 6: Anticipated funding requests

Part C: Considerations for developing plans

Introduction

Checklist/Central team feedback questions

Regulatory Planning Expectations

Property Management Guidance

Information and Technology Guidance

2015 FOUR-YEAR PLAN GUIDE 1

Four-year Plan

Part A: Overview

August 2014

2015 FOUR-YEAR PLAN GUIDE 1

PART A: OVERVIEW

1. General Information

This guidance, refreshed from last year, is a core resource available to assist agencies in producing their Four-year Plan. It has three parts:

  1. Overview – useful for all those involved in developing a Four-year Plan.
  2. Components of the Plan – provides a template for what should be included in the Plan.
  3. Considerations for developing plans – provides more detail on the questions and expectations that the central team have when engaging in and providing feedback on the Plans; including expectations regarding regulatory plans, property management and ICT.

1.1What is a Four-year Plan?

Four-year Plans (hereafter referred to as 4YPs) are designed to provide an integrated view of an agency’s(or sector’s) medium-term strategy. They set out what the agency is seeking to achieve and how it plans to achieve this. It sets out how the agency intends to address the challenges facing the delivery of its strategy, including how it will manage within existing funding levels.

4YPs support the Government’s decision-making around priorities and allocation of resources.

1.2What is the process?

Four-year plans will be in two stages this year:

  • Stage 1: Draft 4YP due (20 November 2014). These will be a ‘state-of-play’ 4YPs for incoming Ministers which areprepared and signed off by the Chief Executive, and will represent the position prior to engagement with the incoming Minister(s).

New policy initiatives will be collected separately, with the bids identifying consistency with and any implications for the 4YP medium-term strategy.

  • Stage 2: Final 4YP due (post Budget decisions – by Budget day or as soon as practicable thereafter). Final 4YP, with the strategic intentions endorsed by the Minister, need to be lodged in CFISnet.

1.3What is the scope of Four-year Plans?

Agencies are encouraged to consider how best to reflect the sector(s) they are in. For some this may mean developing a Sector 4YP that covers all the components of a 4YP, for some this may mean developing a common sector strategic direction with the other components of the 4YP being agency specific, and for others this may mean referencing how the agency contributes towards sector objectives and works with others in the sector through the document. If a Sector 4YP is developed then all agencies in the sector and all of their activities need to be visible in the Sector 4YP; in particular in the financial and workforce elements of the plan. In the rest of this guidance document the term “agencies” should be taken to read “agencies or sectors as appropriate”.

Agencies should talk to their central agency team on what approach to take. One thing agencies will need to consider in determining how to structure their 4YP is the whether they also intend to use the strategic intentions component of the 4YP as their published strategic intentions (see section 1.7).

Where a department is funding a Crown Entity through its Votes then the 4YP needs to cover the Crown Entity as well. This could be achieved along the lines mentioned above or through specific reference to the Crown Entities in the agency’s 4YP. At a minimum the 4YP needs to provide an overview, from the monitoring agency’s perspective, of the strategic intentions of the Crown Entity; how the Crown Entity contributes towards the government’s priorities and cross-agency initiatives; an overview of the financial situation; and risks to the achievement of the Crown Entity’s strategic intentions.

All Votes administered by Departments should be included in a 4YP. All appropriations, both departmental and non-departmental are included in the scope.Benefits and other unrequited expenses and borrowing costs should be excluded, unless agencies consider there is specific merit to including these.

There is also an expectation that plans will reflect the stewardship expectations on Chief Executives that now exist as a result of legislation changes.4YPs should provide a complete view across the next four years of your agency’s strategy and plan for delivery. We recognise that for some agencies a 4YP may be a partial view of a longer-term strategy. Any major risks around sustainability beyond the four year horizon should be identified.

1.4What is happening with Four-year Plans this year?

This guidance outlines a number of changes (see section 2 for more detail) to the 4YP process and expectations. These changes have been driven by the feedback we have received, our evaluations of last year’s plans, our ambitions for the next set of plans, and the fact that this is an election year.

Our ambitions for this year are:

  • 4YPs become the key strategic planning documents for agencies, with stronger links to Four-year Excellence Horizons and providing the strategic intentions for publishing and tabling in Parliament – see sections 1.7, 2.2 and 2.3.
  • There is stronger evidence of collective impact and action, including agencies indicating how they plan to take a citizen focus and population-based approach to service delivery.
  • The approach and process is flexible to support post-election briefings and Budget 2015 requirements (see section 2.5).
  • Stronger feedback loops are provided to agencies from central agencies, Result leads, and functional leads (the central agency team).
  • 4YPs provide greater investor confidence in an agency’s ability to deliver its strategic direction, including contributing towards the Government’s priorities, within its baselinesin the most effective and efficient way (“investment ready”).

1.5What does a good Four-year Plan look like?

Good 4YPs are the product of good planning and strategic conversations held within and between agencies. They provide insights into these conversations; in particular where these conversations have landed.

What a 4YP will look like will vary for each agency depending on its particular strategy, what challenges it is facing and where it is at on the strategy cycle. This guidance document sets out the core components that should be included in a 4YP along with a number of Annexes that must be attached.

How your agency sets out the main body of your 4YP is up to you, but each 4YP should:

  • set out a compelling narrative on what your agency is seeking to achieve and what it will do to achieve this – this could simply summarise your agency’s existing strategic intentions if this is the most up-to-date articulation of its strategy
  • set out how the agency is drawing from and responding to its Four-year Excellence Horizon
  • set out how your agency will organise itself to deliver on its strategic intentions over the next four years and demonstrate that it has thought through the challenges in doing so, including highlighting any key decision points, trade-offs and actions arising from key functional areas (eg, workforce, finance)
  • demonstrate how your agency will contribute towards achieving the Government’s priorities; including the Better Public Services (BPS) Results
  • demonstrate, where relevant, how the agency is better targeting efforts and improving services for citizens and business; including being able to identify the agency’s customers and the characteristics of the customers that are relevant, and how the agency is using information to take a more evidence-based and solution-focused approach to its set of interventions
  • demonstrate how your agency is engaging with its sector. In some cases this might be through a shared sector strategy and in other cases how the agency is working with the other agencies in its sector (both within and outside of government)
  • demonstrate, where relevant, the actions your agency is taking that will contribute towards achieving the leadership strategies/objectives for ICT, procurement and property
  • provide evidence that your agency can manage within its existing funding levels over the next four-years and sets out the key decisions, trade-offs and actions that are required for it to do so
  • demonstrate that the agency understands how it is delivering value for money and what its cost drivers and pressures areand how it will manage these, including how it has/will identify its lowest priority activities or any poor performing activities
  • indicate how the agency will monitor its performance against the 4YP (eg, through the inclusion of deliverables, milestones, measures or a dashboard of key performance metrics).

A good 4YP provides a succinct overview of an agency’s plans to deliver its strategic intentions. A 4YP is not a mechanism for setting out your agency’s bids for new resourcing although it should identify cost pressures and options for managing these. A more detailed set of questions that central agencies will use to engage and provide feedback on 4YPs are set out in the Part C of the Guidance.

1.6How will they be used?

4YPs have a range of uses for agencies themselves, for Ministers and for central agencies, Results leads and functional leads.

For agencies, 4YPs will provide:

  • a framework for pulling together and integrating the different planning processes that are taking place within agencies
  • a way of telling an integrated story setting out what the agency wants to achieve and what it will do to achieve it
  • a platform for engaging with Ministers, central agencies, Results leads and functional leads to profile their medium-term strategy and plan, and to set out the key decisions and trade-offs facing the agency
  • the strategic intentions story that can be published and presented to Parliament
  • a base for reference and performance monitoring.

4YPs will be used by Ministers:

  • to confirm that agencies are clear on their direction, and are organised to deliver over the medium-term within baselines
  • to understand agencies’ strategy and proposed actions in relation to government priorities (eg,delivering the BPS Results; progressing Canterbury Rebuild;supporting the strategies/objectives for ICT, procurement and property; and taking a citizen and population-based approach to service delivery)
  • to review the priorities, performance, pressures and risks of agencies
  • to highlight the strategic choices, options and opportunities that Ministers can progress
  • as a basis for forward decision-making, including the allocation of resources
  • toinform the setting of indicative new spending intentions and priorities for Budget 2015 and beyond and to assess the relative value of new initiatives in comparison to existing funding.

4YPs will be used by central agencies, Results leads and functional leads

  • to understand what agencieswill do to achieve Government priorities and objectives and then as a basis to monitor the performance of the agency in achieving these
  • as a basis for conversations to understand and support agencies to deliver on these priorities, and to manage related resource pressures and challenges (including opportunities, risks and pressures relating to Crown entities monitored by the agency)
  • to identify and inform advice and decisions at the agency level and whole of system level, such as workforce interventions (where a number of agencies are identifying similar workforce pressures) and opportunities and intentions to deliver or use shared or common capabilities
  • to support advice to Budget Ministers during the Budget 2015process on whether they can have investment confidence in agencies (are agencies “investor ready”?) andthe relative value of investment proposals from an all of government perspective
  • to develop an understanding of how Chief Executives are meeting their stewardship responsibilities and as an input into Chief Executive performance management.

1.7How does it all fit together?

By their very nature, 4YPs are snapshots of where an agency or sector is at on its strategy cycle. They should be an output of the strategic planning process that an agency has in place and reflect the key strategic decisions and trade-offs an agency has made or is proposing to make in order to deliver its strategic directive.

Figure 1 on the following page sets out the relationship between the major strategy and planning documents that feed into and come out of an agency’s strategic planning process.

The 4YP should be at the centre of the strategic planning process. It draws from a number of inputs such as Four-year Excellence Horizons,Result Action Plans, all-of-government (AoG) strategies, Sector Strategies and the BASS report. The 4YP is the place where the different elements of how an agency intends to deliver its strategic direction(such as what regulation it intends to introduce or change, what workforce, capital and ICT is required, where and how the agency will deliver its services) come together and the key decisions, trade-offs and actions are reflected.

Depending on where an agency is at on its strategy cycle, it will either have its strategic intentions already published and still relevant(given agencies are now only required to produce strategic intentions at least every three years unless there is a significant change within that period) or it will use the 4YP process to revise these.

It is expected that the draft 4YPs due in November will be based on (and simply summarise) the agency’s existing strategic intentions unless the agency is in the process of revising its strategic intentions. Post election, agencies can engage with their new Minister on the priorities of the Minister and the incoming government, and what these mean for the agency’s 4YP. Being an election year we anticipate that most agencies will need to revise their draft 4YP, including their strategic intentions, in light of these priorities and subsequent budget decisions.

The 4YP process has been designed so that agencies can structure the front part of their 4YP so that it can be used to meet the requirements in the Public Finance Act 1989 (for these requirements see Agencies that structure their 4YP in this way will be able to subsequently use the front part to fulfil their requirements to publish and present their strategic intentions to Parliament.

2015 FOUR-YEAR PLAN GUIDE 1

PART A: OVERVIEW

2015 FOUR-YEAR PLAN GUIDE 1

PART A: OVERVIEW

It is expected that agencies will draw on their PIF Four-year Excellence Horizon when developing their 4YP. This is a strategic narrative written by the Lead Reviewers as a way for an agency’s senior team to understand and stay ahead of emerging opportunities and respond to unexpected issues. It is an aggregation of the dialogue between the Lead Reviewers and the people they engage with throughout a PIF review. If you have not received a Four-year Excellence Horizon (or will be doing one in an upcoming PIF review) your 4YP will be an important input into creating the Four-year Excellence Horizon.

Box 1: What is a Four-year Excellence Horizon?

A Four-year Excellence Horizon is a distillation of the few critical performance shifts that an agency needs to make to be successful for New Zealand in four years time. It does this by focusing on four areas: Environment, Business Strategy, Operating Model and Change Capability.

When done well a Four-year Excellence Horizon gives chief executives, senior leaders and Ministers clarity about the most important issues an agency is working on to lift performance, plus a sense of what the agency will look like when it is achieved.

The first Four‐year Excellence Horizon was published in March 2012. Every PIF review since then includes a Four-year Excellence Horizon, including follow-up reviews. Further information on the Four-year Excellence Horizon is available at

A 4YP, that is informed from a Four-year Excellence Horizon should:

  • be consistent unless there are material changes since the timing of the FYEH
  • demonstrate how the 4YP contributes to achievement of the Business Strategy, Operating Model and Capabilitycomponents of the FYEH
  • provide options for delivering the Four-year Excellence Horizon within baselines.

2.What’s New?

2.1 Key changes this year

The 2014 Election, the quality of last year’s 4YP, and feedback provided from agencies has led to some changes to the timeframe, content, structure and process of 4YP. The key changes to 4YPs this year are:

  • 4YPs will primarily be departmental documents
  • greater alignment with the Performance Improvement Framework (PIF) process
  • the process has been designed so that the strategic intentions in the front part of an agency’s 4YP can be used to meet the requirements in the Public Finance Act 1989 for strategic intentions to be published and presented to Parliament
  • the process has been split into two stages with draft 4YPs due on 20 November and final 4YPs due post Budget decisions – by Budget day or as soon as practicable thereafter
  • inclusion of a highlights component in the 4YP to identify how the plan has changed from the previous year, how implementation of the existing plan is going and key points from the new plan
  • separate standalone Annexes on ICT, property or procurement are not required as they should be integrated within the 4YP. The key elements to be considered with respect to these areas are set out in section 2.4 and in Part C
  • the workforce costs information has been expanded to ask for more detail on the different drivers of costs
  • a refocus of the risk information section towards on the key assumptions underpinning 4YPs
  • greater clarity in regards to the information requested on Crown Entities, including a requested separate annex that provides a short (ideally 1 -2 pages) summary on each Crown entity that is funded by non-departmental appropriations
  • inclusion of regulatory planning expectations into the 4YP process (see Part C)
  • Budget initiatives are not being submitted with the draft 4YP. The timing of the Budget initiative process will be determined following engagement with the incoming government
  • inclusion of a checklist on key questions to consider in developing and reviewing 4YPs and the more detailed expectations regarding regulatory plans, property management and ICT.

More guidance on the required content of the Four-year Plan is outlined in the Part B of this Guidance.