Many foreign appointments to leading public agencies have proved disappointing. Is that inevitable?

The discussion on the quality of economic advice, which we reported last week, has spilled over into a discussion about whether so many senior appointments should be of non-New Zealanders. Recall I discussed the failure to develop career paths within the New Zealand public service. A consequence has been that a surprising proportion of the top public servants are recruited from overseas. Even the just-appointed head of the Treasury, one of our most senior departments, is an Australian with, as, far as is known, little experience of New Zealand.        

Simon Chapple, director of the Institute of Governance and Policy Studies at Victoria University of Wellington (one needs to state the full name of the brand nowadays), argues that such appointees lack a deep knowledge of New Zealand’s history, society, culture and institutions. Michael Redell a commentator who retired from the Reserve Bank makes a similar point, A colleague of Chapple’s, Jeroen Van Der Heijden, who holds a chair in Regulatory Practice, argues that top positions are being filled by international talent because there is not sufficient local talent and that they will do a good job.

This is a variation of the generic manager argument, that managers need not know much (or anything) about what they are managing, even when the managed involve deep professional skills. In this case it is being argued that while the manager may need professional skills, those skills need not require much attention to the context in which they apply.

New recruits from overseas often make assumptions about New Zealand which reflect where they came from rather than the local reality. There are numerous examples; I give but two. A newly-arrived lecturer in politics thought that the Maori kingship had been around as long as the English one. Misleading one’s students about the nature of Maori politics may, however, not be as serious as the newly-arrived Treasury official who proposed that the butter quota to the EU should be auctioned off, which is what high economic theory suggests. Wiser heads understood that the exposure of what the quota was worth would have compromised our trade negotiations with the EU.

Given time, new arrivals usually learn about these sorts of mistakes. But there can be deeper ones. Much of my intellectual life has been a struggle of applying the standard economic models to New Zealand. Models make implicit assumptions which do not apply everywhere.

The standard macroeconomic models are largely developed by American economists. An obvious difference is that the American economy issues the international currency – the US dollar. How often do we hear people – rarely economists – advocating New Zealand creating money as if it were the international currency, blind to the difference between the standard theory taught in first-year economics courses and reality?

There are other important differences. The New Zealand economy is more open than the US one but because of our size we do not get the same feedback from export sales if we expand our economy. Moreover, especially in the farming sector, our short-term responses are sticky to a change in demand. A manufacturing-based export economy is much more responsive; it is the implicit assumption in the model.

Market size also matters. When it was proposed to break Electricorp up into a number of independent generating companies, the American experience was cited. It turned out that the typical size of an US electricity generator was similar to the whole of Electricorp. Given economies of scale the experience of a multitude of competing Electricorps is quite different from breaking one of them up as we have done. In any case, our dependence on hydroelectricity rather than thermal generators means that the production conditions are different. No wonder our electricity sector, once a pride, is now a grumble.

Overseas visitors can be arrogant. One flew in and applied an American method to calculate the poverty line. She did not bother to consult locals, who would have told her that twenty years earlier the method had been rejected by the Royal Commission on Social Security as inadequate and arbitrary, and that other methods had been developed. She flew out leaving behind a measure which seems to have been the basis of the vicious 1990 social security benefit cuts. She got a published paper while, over the years, perhaps a million New Zealanders have suffered severe poverty because of the miserable living standard she chose.

That does not mean all foreign appointments are a disaster although a surprising number have been. In a discussion on successful heads of government departments only one name came up; the current Commissioner of Inland Revenue. Naomi Ferguson, is doing a great job of modernizing our tax operational delivery and providing a clear mandate for improving  tax policy. Previously though, she had worked for three years as a Deputy Commissioner. (In fairness, while listing the disappointing external Chief Executives, numerous disappointing New Zealanders were also recalled. Perhaps the SSC has not been very good at making appointments, full stop.)

Ferguson is an example of a phenomenon seen when we discussed postwar university heads. Many will think that a successful vice-chancellor is an oxymoron but Frederick John Llewellyn is as close as you can get to an exception. However, the British academic had been a professor of chemistry at Auckland University College before he became VC at Canterbury University College. Another exception was Colin Maiden but he was a New Zealand graduate who worked for General Motors before returning to New Zealand as Vice Chancellor of Auckland University.

The lesson then, is that you can bring in chief executives from overseas but they need New Zealand experience before taking over the top job. Perhaps we have been lucky with those people. Too often overseas appointments prove to be second-raters who have come here because they cannot get the preferment they think they are entitled to where they live.

The point is that New Zealand is not a scaled-down US or wherever. Chapple is right. We do have particularities of history, society, culture and institutions. It is easy for the arrogant second-rater to misunderstand them.

But even the first class will struggle with some of our particularities – as we do ourselves. Take the role of Maori and Maoritanga in New Zealand. Despite making a small contribution in my book Heke Tangata I am continually surprised by developments and have not been able to find any overseas examples that are particularly helpful. (As a social scientist I dislike saying a social phenomenon is unique but this one may be.) Few commentators seem to have really grasped the issues and most present a nostalgic piety laced with political correctness. Answers may have to wait until things evolve further but it would be great to have a better steer.

Were I the chief executive of any institution which touched on these issues, I would, of course, have a mihi and a kaumatua. But I would know that was not enough. There are deep changes going on in the texture of New Zealand society which my agency would find challenging. Had I come from outside, even with three years of experience at a lower level, I would still find the Maoritanga outside my experience and headspace.

To repeat, it is arrogant to think that history, society, culture and institutions are irrelevant. Generic management cannot cope.