Friday 21 September 2018

Treasury Board

This week's column at Newsroom takes another look in at the problems at Treasury. A snippet:
'We're doing something about it'

Treasury’s response notes that Treasury has now put in place a work programme focused on economic capability, including training and developing existing staff and recruitment for economists.

But in the 2019 recruitment round for graduate analysts, while ten of fifteen had at least some background in economics, only four had at least Honours-level training in economics or finance. The recruitment process did little to distinguish candidates with an undergraduate minor in economics as part of another degree from those candidates with a Masters or Honours degree in economics.

And Treasury does not have any comprehensive way of tracking staff capabilities. It simply does not know if it is losing more trained economists than it is hiring. One wonders how Treasury would ever be able to tell whether it had succeeded in lifting its economics capabilities.

'Focus on the core business'

This matters. While a wide range of skills are required in policy analysis, Treasury’s unique role as lead economics advisor to the Government requires having substantial depth of economics capability. Treasury has to be able to apply a rigorous economic ruler across proposals coming from the other Ministries and to provide sound economic advice to its Minister and Cabinet.

That advice need not always be decisive, but it should always be reliable. And while that advice could often annoy Treasury’s stakeholders in other Ministries, they should not have reason to question Treasury’s competence in producing it.

Keeping all the stakeholders happy would be impossible. But doing a good job in Treasury’s core business is not. Treasury should focus on it.
I've been able to get a few things clarified by Treasury, with a few more yet to come under OIA. The blinded recruitment process for graduate analysts, at least for the most recent year, worked as follows.

Team managers told HR that they needed economists. So HR took all the applications and put them into two piles. Into the first pile went any application from someone with a minor in economics, a major in economics, an Honours degree in economics, a Masters in economics, and so on. Into the second pile went anybody without at least a minor in economics.

Then they ran a points sieve over the two piles. If you had a Masters in economics, you got 20 points. If you had Honours, you got 15 points. But there were points for a pile of other things as well. Strong Maori competence provided points. A pile of other things provided points, like their statement of interest in working at Treasury. Strong volunteer work gave 10 points. "Accolades" could give up to 10 points.

And then the highest ranked candidates would be able to get an interview.

See the problem? It's potentially a very flat payoff curve for training in economics, above a minor in economics, depending on how many points were available in all the other categories.

Getting a minor in economics is easy. There are thin routes through to a minor with next to no math and little theory. At Canterbury currently, that means Principles of Micro, Principles of Macro, a semester of intermediate microeconomics, one other 200-level paper, and one 300-level paper.

Honours and Masters is different. You have to take the more rigorous papers all the way up (or at least if you want to make it through with any decent grades), then do the more serious graduate coursework.

So I now have another OIA in checking on the points and categories. But it basically looks like HR there thinks economics can be picked up on-the-job by anybody with a minor in economics, so there's not much point in hiring folks with proper training.

Some teams, like the macro forecasting team, could put in more rigorous requirements for their group. But anybody not specifying that might be surprised by what HR considers to be an economist.

I again remember Frank Tay's piece in the inaugural issue of New Zealand Economic Papers explaining the minimum training prerequisites for professional economists in New Zealand:
Thirdly, I would stress a four-year full-time honours programme as the minimal "professional preparation for economists". I have in mind one which, in terms of depth of specialization in technical economics, falls between the level of the M.A. and Ph.D. courses recommended by H. R. Bowen, especially in the degree of theory, mathematics, statistics and economic history required.19 Obviously, this would violate the "depth and breadth" criterion of some teachers.20 But, unlike Professor Holmes, I believe this pedagogic conflict is real rather than potential and that a more effective solution than the "B-B variant" might be realised through the "Knight's Move". This consists in allowing students who have a first degree in the sciences and technology to sit, after a year's preparation, for a preliminary examination in economics equivalent to the Stage III level, say, in Macro and Micro economics, International Economics, Econometrics and Economic History, and then march straight into the Honours or Master's programme. True, such a scheme favours the Beta-plus and the more mature students, especially those with a substantial core of "Q" work behind them. However, a four-year Honours programme or the "Knight's Move" should give students a reasonably firm intellectual foundation for their own post-graduate professional development.
Emphasis added.

I hope that the OIA comes back showing I'm wrong. But Treasury's HR department being blind to the difference between a minor and Masters could explain at least some of the rot there. It cannot explain why the Chief Executive has allowed it to happen, but it can explain the hiring outcomes in the graduate cohorts, and it can explain why Treasury sees no need to track the outflow of trained economists relative to hiring.

I've also wondered how Treasury's Board has allowed this to happen. Any corporate board seeing these kinds of results would not be happy with the CE.

Yesterday, by complete coincidence, the Treasury and the New Zealand Initiative each announced a new addition to their respective Boards.

Livia Esterhazy has been Chief Executive Officer of WWF-New Zealand since May 2017. She has a strong professional background in marketing, brand and communications, including senior leadership roles with Clemenger BBDO (Managing Director 2015-2017), Assignment Group (Managing Partner 2012-2014) and Saatchi & Saatchi (General Manager 2009-2012). Her career has also included management positions with Kiwibank and the Commonwealth Bank of Australia. Livia Esterhazy is on the Board of Wellington Trails Trust and is a previous member of the Advertising Standards Board.
The New Zealand Initiative welcomes entrepreneur Stephen Jennings, CEO and Founder of Africa’s largest urban development company, Rendeavour, onto its Board of Directors.

“It is an honour to have Stephen join our Board,” said Roger Partridge, Chairman of The New Zealand Initiative. “Our mission is to create a more prosperous New Zealand for all New Zealanders. Jennings is a visionary international business leader and will bring valuable insights to the Initiative’s work.”

“I am delighted to be joining The New Zealand Initiative Board. The Initiative’s methodological, fact-based approach to policy is ideally placed to improve public understanding on many of the key challenges and opportunities facing New Zealand,” said Jennings.

Jennings is one of New Zealand’s most successful entrepreneurs. For more than 20 years, the Taranaki-born economist and investor has been living and working in emerging markets. A pioneer of capital markets in Central and Eastern Europe and Africa, he is responsible for more than $200 billion worth of investment into these regions.

As the leader of Africa’s largest urban development company, Rendeavour, Jennings now helps build city-scale developments in some of the fastest growing cities in Kenya, Ghana, Nigeria, Zambia, and the Democratic Republic of Congo. The developments include homes, offices, industrial areas, schools and hospitals and allow residents to live and work within their community without the burden of commuting across already congested cities.

Despite his long international career, Jennings has always maintained great interest in New Zealand. He shared his views on the future of New Zealand’s economy at a dinner lecture hosted by the Initiative in 2016.
It's awesome that Stephen's on board with us. 

Stephen Jennings' dinner address is embedded below.

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