Hong Kong Housing Authority and Housing Department

Mr President, Ladies and Gentlemen,

I was particularly pleased to receive your invitation to speak over lunch because I know you to be an active and interested professional association. I also know that many of your members are closely connected with the work of the Housing Authority. I only hope that after such a splendid lunch you still have the stomach for a dose of corporate reform.

Introduction

Large organisations tend to attract attention simply because they are large and intrusive. Large public sector organisations inevitably also attract the criticism that they are cumbersome, inefficient bureaucracies unwilling to accept the need for change. You are familiar with the caricature. So let me start by placing two points firmly on the public record.

First, I am very proud to head the Housing Department, the executive arm of the Housing Authority. It is a department with a remarkable history of overcoming seemingly impossible difficulties, starting with the emergency re-housing of refugees in the fifties, and continuing with the problems thrown up by successive waves of unplanned and unpredictable migration. Its 15,000 staff include many of Hong Kong's unsung heroes and heroines.

They deal daily with the task of clearing land for development. They must exercise the wisdom of Solomon in judging competing claims for priority re-housing. In estates all around the territory, they are on call, expected to play the role of manager, maintenance man, arbitrator, welfare officer and public relations person as occasion demands. In the planning, development and design area, they have an enviable record of squeezing incremental improvements to living space and estate environments out of budgets which keep construction costs at half those of the private sector. They march, as they have always marched, to a relentless drum beat pounding out of an office on Upper Albert Road : more, better, faster. Their contribution to Hong Kong's stability and prosperity in the post-war period deserves recognition. I repeat, I am proud to have the privilege of working with them.

The second point which I would like to put on record is that the reforms on which the Housing Department has embarked are entirely voluntary. They started a couple of years ago in the form of a number of unrelated initiatives, ranging from some process re-engineering to experiments with out-sourcing services. These sparked off a wider introspective examination of corporate culture, and led to collective agreement on our vision, mission and values. These are advertised in the material which I have taken the liberty of distributing and were adopted by the Housing Authority, in endorsing the Management Enhancement Programme (MEP) at the beginning of this year.

Our vision is to be the community's pride as a professional team striving for continuous improvement in the provision of public housing and related services. What I would like to do today is to describe for you the key elements of this collective endeavour, where we have got to so far, what work is in hand, and what we are looking at for the future.

I will arrange my remarks under four broad headings : corporate planning and strategy; service delivery; culture and human resource management; and communication. However, I would like to introduce these with a few more general thoughts about the need for reform and conclude with some thoughts on the subject of corporatization.

The Need for Reform

All organizations, whether private companies or government departments have to be aware of the environment in which they operate. If that environment changes, they too must change. If they do not then they either cease to function effectively, or they simply become irrelevant. Government departments are no exception to this rule.

This is all the more so with Housing Department, because in common with other government agencies, better education, higher incomes, rising expectations and political change have all impacted on the work of the Housing Authority. Less obvious and more subtle has been the impact of the gradual, but increasingly rapid transformation of tenants into owners. Twenty years ago, all the Housing Authority's customers were tenants. Today one in four is an owner. I will return to this point. I mention it now because this change in the nature of our customers is so very fundamental.

Corporate Planning and Strategy

The period of introspection which I mentioned earlier surfaced a number of problems and frustrations. Careful study by a team of consultants pointed to problems inherent in the old structure, to diffusion or confusion of responsibility, to difficulties of communication across this very large department, to lack of coordination between some divisions and so on. Many of you will recognize these as the classic symptoms of an organization which has grown too fast under the pressure of demands and events. However, it required a series of in-house workshops, which started at the end of last year and involved all members of the directorate, to agree on initial improvements?

As part of this exercise, we went back to basics, asking fundamental questions about the role of the Housing Authority, the Housing Department's relationship to the Authority, the relationship of both to central government, about roles and responsibilities, about what we do, and about why and how we do it, and, following on from all of this, about the sort of organizational structure which would best enable us to meet the challenges of the next ten years.

Now, the Housing Authority is financially autonomous. It is, nevertheless, entirely dependent on the Government in two important respects. First, it takes broad policy direction from the Government. Second, it is dependent on Government for the provision of that vital resource, land. The Housing Authority is thus the Government's principal agent for the delivery of public housing. Government sets general production targets. The Authority undertakes to meet these subject to land being made available in a steady and sufficient stream.

However, the Authority should also be responsible for ensuring that it makes the most of land provided by Government. That is, it must do its best to build to the maximum permitted density, its designs must be cost effective from the point of view both of construction and maintenance, and the use it makes of each site should make economic sense. In most cases, we have succeeded on the first two counts, but, with the passage of time questions do need to be asked on the third. And questions also need to be asked about the manner in which we manage our properties, about the services we provide and about why we are still involved in some of the peripheral activities which history has foist upon us.

In shorthand you could say that we need to take a more business-like approach and this is reflected in the new structure we have chosen. Our key activities are now clearly divided into four core business activities: development and construction; allocation and marketing; management and maintenance; and commercial properties. Each is the responsibility of an independent Business Director - this new, unbureaucratic title was chosen to reflect the business-like approach we expect them to adopt. They are responsible to an Executive Board chaired by myself - no change of title here - and comprising my two deputies together with the Finance Director and the Director Corporate Services.

Over the coming year, the Business Directors will be working to develop business plans in respect of their activities. At the end of this process, the Authority will be able to take a much more focused view of all that it does, and for the first time, individual officers at all levels within the department will have a clear idea of their financial as well as their operational responsibilities.

The Executive Board will be serviced by a small Corporate Strategy Unit. This unit will be responsible for pulling together the business plans into an overall corporate plan, developing strategic initiatives, ensuring coordination between business plans and tracking progress. It will also have responsibility for ensuring that development projects are put to the Authority on the basis of proper viability studies.

None of this should be taken to mean that the Housing Authority is about to change from provider of a wide range of subsidized services to profit-seeking corporation. It does mean, however, that the provision of subsidies in particular areas will be the result of conscious and informed decisions rather than something which happens by default or for odd historical reasons.

Service Delivery

Earlier on I mentioned frustrations. Nowhere were these frustrations more evident than among front-line staff in the estates. Whether you talk to housing managers and maintenance surveyors, or estate assistants, artisans and guards, you hear much the same sort of complaint : that responsibilities are not matched by authority, that coordination between sections of the department is poor, that training is inadequate, that support from headquarters is lacking, and that office equipment is antique and general working environment unsatisfactory.

Through all of this runs one vital common thread and that is that while customer expectations are continuously rising, some of our staff feel that they are not able to provide the quality of service which they want to provide. This inevitably finds its counterpoint in the frustrations and complaints of our customers. No surprise, therefore that this was one of the first areas to be tackled under the MEP, starting two years ago with a major overhaul of the minor maintenance systems. These are now similar to those operated by the major utilities. Reports of defects can be made over the phone and are all logged onto a computer network, with a simple questionnaire approach designed to identify specific problems ahead of home visits. It has been very well-received.

At least as well-received has been the establishment of the Estate Management Advisory Committees (EMACs). These are appointed committees of estate residents who work with the Housing Manager in charge of each estate, advising him on matters ranging from performance of cleansing contractors to expenditure on minor improvement schemes. By the end of this year there will be an EMAC in every estate.

Twenty-five years experience as a bureaucrat have convinced me that where inefficiencies exist in the delivery of a service, ninety-nine times out of hundred the fault lies not with the quality of the staff but with the way they are organised or the delivery systems employed. (Certainly, in Housing Department's case, the quality of our staff has been the key to our success in the past.) Also ninety-nine times out of a hundred it is the man or woman at the sharp end, at the very front of the front-line who can tell you what the problem is and where the solution lies.

Coincidentally, it was almost twenty-five years ago that the newly formed Housing Authority took a decision to separate the management and maintenance functions of the Housing Department into two divisions. Given the increasing sophistication of buildings under construction, it was felt that this was necessary. Certainly, that decision allowed the development of a dedicated team of highly skilled professionals, with a collective expertise which is probably unique in Hong Kong. However, the separation has gradually over the years resulted in one unforeseen consequence.

Ask the men and women at the front line in the estates today, and they will tell you what it is. When things go wrong, they are the ones who have to face the angry tenants, and the media. Yet they lack the authority to ensure that things are put right quickly and efficiently. The maintenance contractors do not take their orders from the estate managers. They listen only to the maintenance surveyors and their staff. Much of the time cooperation works well. Sometimes it does not and it is these occasions which give tenants a bad impression and estate staff indigestion and sleepless nights.

The reform of the minor maintenance system and the establishment of the EMACs have gone a long way to improving things on the ground. The bringing together of the management and maintenance divisions under a single Business Director will also help. However, we still need to take one more step and that is to ensure that whoever is in charge of a particular estate has authority to match his responsibility. That is why next week, 1 June, we will launch an experiment in the western New Territories in unifying district maintenance and management teams.

We may not get it right first time. The whole idea of the experiment is that we test different approaches on the ground before selecting the model to follow elsewhere. But it is important that we tackle the problem sooner rather than later. As I noted earlier, the character of our customers is changing. Inevitably, this transformation of tenants into owners will gather momentum as we build more subsidized homes for sale, sell some of the existing rental flats to tenants, and encourage and facilitate home ownership through subsidized loans, flexible mortgages and other such means.

The change will affect our relationship with our future customers quite fundamentally. Bluntly, if we cannot provide management and maintenance services to their satisfaction and at a price which they are willing to pay, they will hire someone else instead. Inevitably, this is unsettling for staff of the department. It is, however, something with which staff at all levels of the department must come to terms in focusing efforts to improve the efficiency and quality of our services. It is therefore a recurring theme in our on-going dialogue with staff representatives on future challenges.

In talking about improvements to service delivery, I have concentrated on management and maintenance because that is our most obvious interface with the public. But the planning, design, development and construction of the flats our customers live in is also a key service delivery process. In the past, it has also been a source of both external complaint and internal frustration.

We have been tackling the former by involving customers more closely in the design of accommodation, and through major improvements to our quality assurance systems. The internal frustration relates to the increasing complexity of the planning, development and design processes and these have been the subject of a rigorous Business Process Re-engineering study. Implementation of the recommendations flowing from this will start shortly and should result in a system which is more flexible and efficient, which provides clearer budgetary control, and which gives professional staff more responsibility and more scope for individual initiative and recognition in project management.

Which brings me conveniently to the third of the MEP "pillars": Which brings me conveniently to the third of the MEP "pillars": culture and human resource management.

Culture and Human Resource Management

When staff of the department adopted the vision and mission statement I referred to earlier, they also adopted three core values reflecting the corporate culture they wanted to develop. They chose the '3 Cs': caring, customer-focused and committed. A key aim of the MEP reforms is to provide an environment in which this sort of corporate culture will flourish.

One of the things which happens when responsibility becomes diffused in an organisation is that delegation tends to suffer. Decisions which could be taken lower down the organisation get pushed or pulled into the centre. This has two side-effects. Decisions take an unnecessarily long time and, because staff are unable to exercise their individual initiative, job satisfaction withers and customer service rapidly deteriorates. Thus the structural and process reforms all aim to clarify responsibilities so that decision making can be pushed back down as close to the ground as possible. This is key to the spirit of the MEP.

But the MEP reforms are not just about instructions from headquarters. Clarification of responsibilities and downward delegation will not work if the staff in the front line do not have the tools for the job. We need staff at all levels in the department to question what they do, why and how they do it, and to tell us what they need if they are to do it better, whether it be training, equipment or changes to procedures.

As part of this, a programme of office refurbishment is well underway and has been welcomed by staff and customers alike. At the same time, our human resource managers are engaged in a thorough review of training needs, with particular emphasis on the needs of junior front-line staff and minority grades. To this end development of a department-wide Human Resource Management plan is well underway.

I attach particular importance to this aspect of the reforms. In any organisation a certain amount of inter-grade rivalry is inevitable, but taken to extremes it is unhealthy and can result in wasted talent. Housing Department embraces some 91 grades, many of them specialist professionals. There is no shortage of talent in any of the grades. If anything has been lacking in the past it has been a conscious effort to cultivate non-professional competencies. Again our human resource managers are now working to develop core competencies so as to ensure that all grades have an equal opportunity to rise through the ranks.

I also think it important that we look for ways to broaden the experience of our best and brightest early on in their careers in order to prepare them for the management roles which they will ultimately inherit. While recognizing the need to ensure the availability of authoritative professional advice at the directorate level, I do not believe that senior directorate posts should be reserved even notionally to a particular professional discipline. A more open directorate would encourage individual merit, and I firmly believe that this is the direction in which we should move.

Communication

Communication is always a challenge for a large organisation. The subject is worth a chapter all of its own. However, allow me to mention briefly only three aspects of what we are doing.

On the Information Technology front, most of our key activities are now fully supported: finance and accounting, tenancy and application records, maintenance and production programmes and so on. What needs to be done is the integration of the major stems. This is essential for ensuring the flow of up-to-date business data and is under active planning.

Communicating with our customers is no less important for us than any business, and several big strides have been made in recent years. I mentioned earlier the computerisation of the minor maintenance system, and the setting up of EMACs. Last year we also published a guide which sets out comprehensively and in plain terms the rights and responsibilities for all our customers, be they owners of Home Ownership Courts, Domestic Tenants, Commercial Tenants or applicants.

As regards communicating amongst ourselves, I mentioned in my opening remarks that I have been talking with junior staff representatives. In fact I have been talking both formally and informally with staff associations at all levels. I regard this as essential, particularly while these wide-ranging reforms are under consideration or being implemented. Not unnaturally, when changes are proposed some uncertainty is created and individual grades look to the defence of their members interests in terms of posts and promotion opportunities. These discussions will therefore continue, but they are not the only avenue of communication and we will be looking for others to complement them, such as newsletters, open forum discussions and roving MEP ambassadors drawn from all parts of the department.

Corporatization

Finally, I would like to say a few words about "corporatization". For most civil servants this word conjures up the wholesale conversion of a government department into an independent body not subject to normal civil service rules and regulations and offering non-standard packages of remuneration and benefits. Examples include the KCRC and the Hospital Authority. So let me start by saying that I do not see the Housing Authority following their example.

However, I do believe that the Housing Authority should continuously examine the work it does and the services it provides with a critical eye. I do believe that we owe it to our customers to examine all means of providing our services more efficiently. We already contract out many services. The cleansing of estates is one example. Maintenance contracts is another. The hiring of consultant architects and quantity surveyors to do some work on our behalf are others.

We have also privatized some of our management functions. For example, we have contracted out the management of our car parks and some of our commercial centres. More recently, following an experiment, the Housing Authority decided that the management of all new estates would be contracted out to Private Management Agencies.

Given rising costs, it is essential that we look for ways of improving not only the quality of our services but also the efficiency with which we deliver them. Some services might be better delivered by non-government agencies. An important part of the work of the Business Directors under the MEP will be to examine all aspects of the department's work to see how they can best be improved. As part of this they will examine whether particular functions might be better performed, or services better provided if they were contracted out, or even carried out by a corporation established under the Housing Authority for this purpose. There are several examples of how this has been successfully accomplished elsewhere including in Singapore and we will certainly be looking at their experience to guide us.

However, I must stress that contrary to some reports which you may have seen, no decisions have been made to corporatize any part of the Housing Authority or its functions. The process of examination, exploration and assessment is going to take some time and I do not see the department approaching the Authority for guidance on these matters before early next year. Were the Authority to decide that corporatization was appropriate for any part of its work, formal consultation with affected staff lasting at least a year would then be required under the existing civil service rules.

Conclusion

In closing, let me refer back to the core values adopted by my staff under the MEP, the '3 Cs': caring, customer-focused and committed. I would urge that for internal purposes they add a fourth. My fourth 'C' stands for curiosity. I hope at our corporate culture will always be a questioning one, that staff at all levels will take it as part of their duty to query why we do what we do the way we do it and to ask the question: what if we did it differently? A better tomorrow depends on.

Thank you.