We saw some good old fashioned slashing and burning in the public sector last year. An incoming National government with a point to prove, a large and unsustainable current account deficit, and a recession combined together to stir the pot a little.

Minister of Finance Bill English said it best in September when he effectively put the frighteners into every grey-suited public servant in the land.

“We simply cannot afford to continue the public sector growth we have seen in recent years. We cannot escape this fact or wish away this constraint?.?.?.

“It’s about doing the things that work and stopping doing the things that don’t work. It’s about doing fewer things and doing them better.”

In the nine years from 2000 the number of public servants grew by 54 per cent.

The message is clear: It is no longer appropriate for the heavy and methodical gears of government to turn ever onwards at the same pace.

Effectively the public sector has been asked to do more, better – with less money and less people, and to do it smarter.

And they aren’t having a quick look behind the couch cushions for some silver coins either.

 The powers that be have said the strategy to cap numbers and salaries in the public sector will extend for the next three to five years. Many commentators have said we will never see anything like the number of public servants we had under the previous government. So this year and those that follow are an interesting time for those in the public sector, and an interesting time for those that work around it.

Brian Cowper is the newly appointed director of public sector at Hudson, one of New Zealand’s largest recruitment and talent management companies.He puts the situation bluntly.

“The current account deficit needs to be managed, that can only eventuate with a sinking lid. You’ve got the Minister of Finance saying that the public sector funding  for this year will be down to $1.1 billion. It was $1.4 billion.”

Cowper is newly appointed, but his role is also newly created – showing an increased private sector interest in public sector goings-on. General Manager of Hudson Wellington Peter de Boer says their increased focus on the public sector is in anticipation of both wider changes in the industry, and a shift in public-private sector relationships as the government strives to cut costs.

“The dust is starting to clear now, but the recruitment industry in New Zealand has changed,” he says. “The whole focus and strategy of the public sector is shifting – working with them creates the best of both worlds.”

So will this year be the year of the public-private servant? Possibly.

Cowper reiterates there are some interesting trends just about to reveal themselves. Like their friends in the private sector, public servants have been hibernating. It’s been a long winter. It’s human nature to want to hold onto your job once you see others losing theirs, so hardly surprising the 2009 Human Resource Capability Survey released late last year showed the largest annual increase in public service tenure since records began.

But with the green shoots of economic recovery now appearing, the winds are changing – people perceive there is more opportunity to change jobs. Here comes what Cowper predicts will be a kind of labour market musical chairs – everyone vies for the higher salary, better development opportunities, communication, and job reassurance once the music stops.

This upswing in mobility will be in part motivated by the mental situation many public servants currently find themselves in – disengaged and disassociated.

“When you go through tough times you have to increase employee engagement,” Cowper says. “Increasing your employee engagement when you are negotiating no pay increases and not rewarding performance as much as you would like to – it makes it extremely difficult.”

He says disengaged employees are also symptomatic of the fact that a large percentage of public sector managers have never managed through hard times – their lack of experience is compounded in the public sector because there is little left for them to give out as incentives.

This is all further complicated by the fact that the safety net of not replacing the people that leave is gone – because they simply haven’t been leaving. Cowper says where previously there was a cushion in budgets – money saved on salaries by not replacing staff, being spent on operations and service delivery – there is now only the bottom line.

“What it means is that people who haven’t had the experience managing in the tough times will find it even tougher because now they haven’t got the margin with which to work, and my recent conversations with some senior managers have confirmed that.”

Part of the government’s new strategy is an active encouragement of public sector innovation, which may sound like an oxymoron but considering the amount of attention they have given to it, it definitely is not. In the same speech he spoke of shaking things up, Bill English said his government would not only push innovation in the public sector, but would also accept the associated risks.

“This is fundamentally important because without innovation, we will not deliver better, smarter public services over the next five years.The government will support innovation – even with a risk of failure.”

Innovation is a concept Cowper says was never a high priority in the public sector.

“I don’t think it was stifled by the previous government, it certainly has never been encouraged as much as this government is doing so,” he says. “The government is encouraging innovative ideas, they are encouraging organisations to come up with something different and not be frightened to – not to experiment – but to innovate in a logical way.”

He cites the initiative to change the service delivery of Primary Health Organisations, and the establishment of the shared services board to save $700 million on back office functions as an example. “I think when you see some radical changes – like in health with the shared services approach to back office functions – you can see that it’s an innovative idea. It came from taskforces that looked at service delivery and then identified efficiencies.”

While there is no denying the recession has changed both the public and private sector forever, questions remain over what the long-term effects will be.

Cowper agrees nothing quite like what we have seen has ever happened before. We have experienced the regular ups and downs of the economic cycle but the collapse of banks and finance companies was a different story. As for the effect on the labour market, after 30 years of corporate and public sector experience, Cowper is capable of giving a pretty informed opinion about the future of the “complex beast”. He says the crossroads between the retiring baby boomers, many of whom lost significant portions of their investments in 2008 and 2009, and younger generations is an interesting space.

 “It is a unique period in history because you have got baby boomers that are coming up for retirement and you’ve got ageing workforce populations. There are some big questions around what happens now if the baby boomer generation want to hang on. What’s the effect of that? What’s the effect of it for the younger people coming through?” he says. “It is a small country, the effects could be quite large. People might start to pursue opportunities overseas; the economy in Australia has already started to lift.”

The recession seems to have thrown up more questions than answers, but as Cowper says, at least we know what we are facing.

Change is coming. Look busy.