System wide regulatory and customer transformation: Sludge reduction with Heritage NSW

Andrei Turenko: It's time to move on now to our second presentation. We are pleased to have Alex Galassi and Elizabeth Owers join us today to explain what we mean by sludge in government, and how behavioural insights can be embedded at scale to improve efficiency, inclusiveness and fairness in public services. Alex is a manager at the NSW Behavioural Insights Unit and works closely with agencies across New South Wales to reduce sludge. Elizabeth is the acting Executive Director of Heritage New South Wales. Heritage New South Wales’ goal is to work with people in New South Wales to protect, celebrate and manage state heritage. Over to you, Alex.

Alex Galassi: Thanks so much, Andrei. It's a pleasure to be here joining from Gadigal land today. Elizabeth and I will be sharing some of the highlights from this year in sludge reduction in NSW, with a particular focus on the value of sludge reduction in transforming regulation. Elizabeth will be speaking about how this worked at Heritage NSW and how she's used sludge audits at an agency-wide level to make regulation easier to navigate and boost productivity.

But first, we will reflect on how we got here. Some of you may have attended previous BI Connect sessions where we've presented on how we've used sludge audits in NSW and these have been a really great foundation for the work that we've done this year. So just as a bit of a recap, we have our method and our sludge scales.

The sludge scales are really where the behavioural science comes into sludge reduction. It helps us understand the impact of sludge at an interaction level. So how those interactions that people have with government can impact how easy or difficult it is for them to do so. We've also conducted more and more sludge audits, over 110 now, to help grow our understanding of how sludge works and of course reduce it while doing so.

The more sludge audits we do, the more that we learn. We've also looked at how we can have more and more public servants conducting sludge audits, and we've done this by providing a sludge finder tool, and also guides to help them do that, as well as training through programs like the sludgeathon and Sludge Academy, which have really applied programs where people learn how to do sludge audits and then use sludge audits to reduce sludge as they do so.

These activities have really given us as a strong foundation of sludge and sludge reduction in New South Wales. And this year, what we've really tried to do is build on that. I'm going to speak about three of the ways that we've done this for the next half an hour or so.

First, we've looked at ways to make it easier for people to do sludge audits. We've also conducted a benchmarking exercise, which is really exciting. And you'll hear from Elizabeth about how we've taken an agency-wide approach to reducing sludge in regulation.

OK, so first up, making sludge audits easy. We've learned from the sludge audits that we've done, and the sludge audits that we've worked with people across NSW to conduct, is that sometimes it is a little bit difficult for people to get started. And what we've always told ourselves is that we need to make sludge reduction easy. It can't be sludgy. We need to practice what we preach. So we decided that we needed an easy entry point into completing a sludge audit. So lowering the burden of entry into the world of sludge.

So, we developed Sludge Finder Mini, which is this very simple one page way of doing a really rapid sludge audit. We've  used Sludge Finder Mini in a range of different contexts. We've used it in workshop settings to teach sludge audits, but also in leadership forums. In both of these settings, it's been amazing to hear all of the “ah ha” moments where people, by just using Sludge Finder Mini - which is a relatively simple one page process, they look to the person next to them and say “I can't believe that we ask our customers to complete this many steps and that it takes this long just to access this simple service”. I think the reason it does this is that despite being so simple, it gets people to start thinking behaviourally, to really step out those behaviours and look at that ease of the interaction and how long it takes people, and then understand the impact that this has for people interacting with government.

OK. So second, this year we've also done something that we've been wanting to do for a while now, which is benchmarking. So we know that sludge audits give us really rich data into the time, the cost, the effort, the accessibility of individual services. We saw that there was opportunity to use these metrics and compare them across similar services. We were conducting multiple sludge audits on the same process in different contexts.

We saw that there could be three main benefits of this. Firstly, it means that service owners can share the insights on what good looks like. By conducting multiple audits, if we say something is done really well in one service, a person who runs a similar one can see what they're doing and similarly as they make improvements, they can learn from each other as to what works. Second, we can see where sludge impacts people most, across similar services, so where there tend to be pain points that come up again and again, in the same point in customer journeys. And then finally, it helps us make informed choices. So we can make trade-offs about where it might be reasonable to have a time impost. Or where it might be reasonable to have something that's maybe a little bit more difficult and then make informed choices about where we should reduce sludge as a result of that.

So we really wanted to do this benchmarking. What we did was a sludge-a-thon, on complaints. We had ten teams from across NSW government all conduct sludge audits on their complaint management process. We had representation from across the sectors in health, education, communities and justice and more. They all conducted these sludge audits in tandem, so they were all able to share insights as they did so and develop solutions together as well.

Looking at the results of these sludge audits and the solutions they implemented, through this benchmarking we found a couple of common themes.

First, we saw across the complaint management processes that internal sludge tended to have an impact on the end user. So internal sludge meant sludge for the customer. And that was because inefficiencies not only meant that there were long wait times while government did things kind of behind the scenes, it also impacted the staff experience. The staff maybe felt frustrated that they weren't able to provide the user with the experience they wanted to, because they themselves had to navigate these really complex internal processes.

We also saw that the experience of waiting, was something that came up time and time and again, in pretty much every one of the 10 audits. That experience of waiting, meant that there was an impact on people in terms of site costs as well as time and of course ease. That then meant that we could use techniques like operational transparency to kind of boost and reduce the impact of that wait time.

Finally, the other interesting thing we saw was that there were differences across some of the complaint management processes. Which then meant that they needed to make sludge trade-offs. For example, some of the processes that people looked at, kind of had two customers at the same time. They had, for example, the person who was making the complaint and then they also had the subject of the complaint, who sometimes was an employee. If you think about teachers or health professionals and they needed to consider the impact on both the person making the complaint and the subject, and so needed to think about how the sludge or the impact was kind of distributed over the process and make trade-offs because of that.

These were just three really interesting findings, and there's more that we're uncovering as we go and as teams implement.

The other thing that I wanted to draw your attention too, was on the right-hand side of the slide here, I've got some of the benchmarking that we've done in terms of time. We looked across the 10 processes and identified a couple of common points. Things like submitting a complaint form, waiting, etc. We looked at the average across the 10 processes. Which was interesting, but then we looked at the range of time for each of those points. It was really interesting to see that there was quite a wide band. What that meant was that teams with, you know, a high time, could look at the teams where it was relatively quick, and learn from them, or decide actually in this case it's reasonable for it to take this amount of time. So that was really interesting as well, and we're continuing to go back and dive deeper into the data too.

OK, finally this year we were really interested in the impact of sludge in regulation. Now obviously there's a known connection with sludge in efforts to remove red tape in regulation and boost productivity. We also know that there's great lessons from behavioural science and how to manage compliance, and so we've naturally conducted a lot of sludge audits aiming to reduce sludge in regulation. I think we're at over 30 sludge audits so far relating to regulation. We know a little bit about how sludge plays a role and where it tends to come up.

First, taking lessons learnt from these sludge audits that we've done, we can see that sludge is sometimes put into a process to mitigate risk. Things like making an application form really difficult to complete because we want to make sure that people don't get through a process who might not be eligible. That doesn't necessarily mitigate the risk that we're trying to manage. It just makes it more difficult for everyone.

Secondly, complex compliance can actually lead to non-compliance. By making compliance really difficult to understand, by making the process really challenging, it means that people are either going to not understand what their obligations are, or they might find workarounds and therefore be non-compliant.

Finally, and I think we all probably know this, that regulatory processes and systems tend to be designed for the regulator rather than the person navigating that process. When you consider the fact that more and more, especially if you consider small businesses, there are piles of multiple layers of regulation. Having to navigate all of those, and all of the complex terminology, makes things really difficult.

Now there's some of the insights that we've learned from the audit that we've done. But then luckily, because we've done these audits, we've managed to have an impact in reducing sludge in regulation and simplifying it and making regulators more productive as a result. You can see, some of the examples on the screen now. These have all come about by reducing ambiguity, removing unnecessary steps, and making it easier to understand what you need to do to comply.

Because of this impact and this overlapping nature of regulation, we saw that there was a really good opportunity to take an agency wide approach to sludge reduction. So how can we partner with a regulator to have all of their processes, or one by one their processes, audited with a sludge audit? Ww were lucky to have an agency partner already who'd done some great work in sludge reduction who wanted to do just this, in Heritage NSW, so I'll hand over to Elizabeth now who'll talk you through what they did.

Elizabeth Owers: Thanks Alex. You can go through the next slide for me, please.

At Heritage NSW, we're responsible for identifying, protecting and regulating heritage across NSW. This includes historic places, Aboriginal sites, landscapes, events, it can be very broad, but really the things that matter most to the people in New South Wales. Our job is to make sure these important parts of our shared history are looked after properly, managed in a way that's respectful, that's consistent, and that's legally sound. We work with a lot of different stakeholders, councils, developers, heritage owners and custodians, community groups, peak bodies, consultants, government agencies, and then there's a long list after that too. But put simply, we help conserve what's most important from the past, so it can be understood, valued, and enjoyed into the future.

Next slide, Alex.

So why did we need to change? Put simply, the way we were operating was not keeping pace with what people needed from us. In 2022, we were delivering 40% of our heritage permits on time. Our KPI was 90%. Our staff were tired, they were burnt out, and we really needed to modernise our business, to meet customer and community expectations and really to enable sustainable high performance. So we started with structural changes. We reorganised our business, by focusing teams on specific functions rather than doing a bit of everything within a geographic location. We established a customer service unit, to make sure we started to put customer needs at the core of our decision making and our service design. We focused on giving our staff the right tools they needed to do their job well, and we invested in technology to drive productivity.

After two years in 2024, we started hitting that 90% KPI, which was great, but it really wasn't telling the full story. We knew that more work was needed. We knew we had inconsistent processes. We knew we needed to communicate better. We were still maturing our customer service capability and mindset, and staff burnout was really still an issue. This meant there were delays, there was frustration, there was high costs for our staff, our customers and for the communities that we serve.

So really the KPI performance was not sustainable. We had to look at doing something differently. We also knew that we had a pipeline of work coming down over the next few years and of course, for those of us who are in government, a tight fiscal environment which constantly demands more with less.

The long term change really depended on us cleaning up our business practices. We knew we needed to change, not to just tweak things, but transform how we regulate to make it easier, faster and more focused.

So we turned to sludge audits. I'd seen this work done in other parts of government and wanted to bring this methodology and mindset into Heritage NSW. Initially we banged on the door of our friends in the Behavioural Insights Unit and largely demanded a spot in the ever popular NSW Government Sludge Academy. We missed out in the first go, but I think after constantly kind of nagging and making it very clear that we wanted to be in, we ended up getting in the in the next year.

As Alex flagged beforehand, we completed our first sludge audit on our concurrence and referral pathways and for those who don't know planning speak, it's when local councils refer development applications to us for advice on heritage matters.

Following that initial sludge audit, we knocked 41 hours off our processing time. This is really important for us with the focus on housing, every minute counts in the work that we're doing and how quickly we can get things out of the door. And really importantly, we had the evidence to be able to justify the investment that we put into what would be a relatively small technology change. It meant that two of our staff moved out of manual processing and we were able to automate that process to get that saving.

This success gave us confidence, some might say a little bit too much confidence, and we thought we'd charge ahead. Go to the next slide, Alex. We asked the Behavioural Insights Unit to help us scale up and together we built the Heritage NSW Sludge Academy, delivering sludge audits and scale across the whole government agency.

We made six teams out of our staff and they took part. Each chose a process to audit and attended master classes covering everything from how to run a sludge audit, to how to implement solutions. So you can see on the slides here, how we structured that.

They also had mentors, some from the Behavioural Insights Unit and some with staff within Heritage who had participated in that first sludge audit process. They helped the team stay on track and reach their goals.

And most importantly, each of those six teams were a mix of staff across the business, not just the staff who did that work every day. We did this on purpose to challenge thinking, to challenge bias, preconceived ideas, and to really get an outsider's view on how our processes were operating.

One of the most powerful moments during this process actually came through in the graduation ceremony. It was hearing one of our staff who does Secretariat work for us, present the results of the State Heritage Register nomination process -a completely different team that they didn't interact with at work. This staff member attempted to nominate an item for the State Heritage register themselves and despite working for Heritage NSW, so naturally having ability to access information more, they found it nearly impossible to navigate the process. It was one of those moments that kind of stopped the room, and people sat back and really listened. At that point, they digested it. I think it was one of the big turning points for our agency. Even turning those who really didn't like the term sludge audit. They could step back and see the impact that this work was having.

And importantly, whilst the Sludge Academy process was about improving how our customers interacted with our services, like their services that we were auditing, for me it was really about changing our mindset and how we operate within Heritage NSW. But also giving our staff a new skill, and a new way of thinking that they can apply in their everyday work, whether it's with Heritage NSW or in roles that they have after that.

This is why we invested in the train the trainer program. Again, it was about delivering greater impact beyond the immediate audits, so that staff built those skills and could run audits themselves. These staff are now helping others apply that method in their BAU work. Next slide, Alex, please.

In just three months, we completed 6 audits. We've since expanded that to 11 audits, and we have another seven currently underway. We now have a baseline of how long things take when people are interacting with Heritage NSW. How difficult they are and where the barriers sit for both customers and for staff. We now have the data and information that really helps us to focus our efforts.

Honestly, are we a little bit overwhelmed with all the changes that we could make? Yes, there is a lot that can be done, but we know that we don't need to do everything at once. We're focusing on the work that delivers the most impact that will create the most change, and knowing that over time we can incrementally make those changes.

But just as importantly, we've seen a shift in culture. The term sludge audit comes up nearly every day at Heritage NSW now. Continuous improvement is now seen as part of our role of being a good regulator, not just the nice to have. We have a long way to go, but we know how to get there. Skip to the next slide.

So what works? Why did this work? I think there's a few things that really fit into why this program has been working for us.

Firstly, sludge audits were made a priority in Heritage NSW. We didn't stop talking about it. It was seeing your leadership within the organisation consistently doing that. We've even gone to the point of building it into our staff’s ‘My Talent’ plans or performance plans for each year. We made the time for staff to prioritise this work.

We have really good visibility of how it was being progressed, where things were going off track, and making sure it was a collective responsibility to get audits back on track when they weren't. Also, senior leaders were turning up in each of the workshop sessions, sometimes announced and sometimes unannounced, just to make sure that things are going on and making sure that the team saw that their work was being seen across the organisation.

Coordination is really key to what we've been able to do. We wouldn't be able to have gotten the 11 audits done so far without having a central team in the business that's brought the program together. That doesn't mean that they're doing all the work, but they're kind of making sure all parts of the business are moving through the process and know what to expect and how to get there.

We're also looking at this holistically in terms of the results. We're not looking at 11 different audits. We're looking at where the similarities are across the different audits -   like how Alex was talking about the consistent themes that come through. So that when we move into implementation, or we started some of that now, but next year in particular we're going to try and solve multiple problems or issues at one time, rather than doing everything separately.

Our partnership with the Behavioural Insights Unit really has been core to this. We brought in the experts, but we also played to our strengths. The Behavioural Insights Unit built the program, provided the content, provided the sludge audit tools, etc, that Alex was talking about before in the guidelines. But we at Heritage NSW, we know our customers best, and we know our services best. Being able to bring those two things to the table, I think it's forced each of us to look at things differently. But to also make sure that we're getting the best product moving forward, the best outcome.

And again, the method itself, the sludge audit and the sludge finder tool gave us a really clear and practical way to identify friction, boost productivity and also identify those things that are most important for the customer moving forward.

So, in terms of what is next for us, the next 12 months is really about implementing the change that we're seeing. We've gone through the audits, we know what we need to do, we’ve started moving into implementation. By the end of the year, we should really have that program of work implemented.

We're building sludge audits into our regular service and process reviews. We're updating our tools and our guidance based on what we learn. And really, we're getting into a rhythm of making sure that we're getting customer feedback constantly and using mini sludge audits every day through our work. But we're very keen to collaborate and share our learnings and knowledge with other parts of government or anyone else. So please just reach out if there's anything that we can share. Back to you, Alex.

Alex Galassi: Thanks, Elizabeth. It's been such a joy working with you and your team. The other bonus for us is that in conducting so many sludge audits and really committing to it, Heritage have become like super users of our tools and our method and provided really great feedback. The value of the partnership has been that we've been able to provide the tools to Heritage and that's been able to complement what they know about their processes, but then they've provided a lot of feedback to us about how we can improve and maximise the benefit of the tools that we use. And Heritage has obviously been leading the way in NSW and we know and we've seen from Elizabeth, how that's worked in their organisation. We've also been seeing it work elsewhere in places like Births, Deaths and Marriages.

What this shows is that you don't need to be a behavioural scientist to have a sludge reduction approach. We really encourage more organisations to pick these tools up and use them.

Which brings me to your call to action. We would really love it if more agencies, in multiple jurisdictions, took on a sludge reduction approach. So these are some tips that you can use to champion sludge reduction in your agency.

• Firstly, conduct routine sludge audits across the services and projects that you're running.
• Sludge audits can fit nicely into an existing behavioural insights project. You could wrap it up into an understand or discovery phase and use it to get a better understanding of what the barriers and enablers are to your target behaviour.
• Conduct routine sludge audits to track improvements as well, so conducting follow up sludge audits.
• Use and add to the NSW government sludge scales. Currently we've got around 33 sludge scales that cover the most common types of interactions with government. But we really would love to grow these and also improve the existing ones. If you're using the sludge scales and you're finding that a particular type of interaction isn't covered, let us know, build on it, and develop your own sludge scales.
• Invite sludge spotting from service users. How great would it be if we could have citizens telling us where the sludge is, so that we could fix it then and there with a sludge audit?
• And then finally, a bit of a blue sky dream, would be a coordinated approach across multiple jurisdictions with more benchmarking. Tell us what services you might like to conduct a sludge audit on, through benchmarking and potentially we could get something going with a cross jurisdictional Sludge-a-thon, that benchmarks a particular service.

So thanks everyone, I'm looking forward to hearing from you and what we can continue to do about reducing sludge as a behavioural insights community. Thanks, Andrei.

Andrei Turenko: Thank you, Alex, and thank you, Elizabeth. I really enjoy hearing about sludge busting, sludge audits every now and again, because every year it seems you folks go from strength to strength and there's like more agencies doing it, more process being reviewed. So congratulations.

And congratulations to Heritage NSW for really being champions of this. It's great to see we do have a few questions from the audience. I have a few questions. I just wanted to, on that last slide you had Alex, you mentioned contributing to the New South Wales

Sludge scales. Are you looking for just input on the New South Wales services, or were you looking for any jurisdiction to contribute to that?

Alex Galassi: No, any jurisdiction. So other jurisdictions have contacted us and let us know that there was something missing, and have developed their own sludge scales that we've then had permission to use in NSW. So you know, if we can all kind of grow and learn with each other, and add to those. That would be fantastic.

Andrei Turenko: We did have a question from the audience, which I thought was interesting for this specific context. Do you have a definition of sludge? Like what do you mean? Would you consider what is in and out of scope of that sludge definition?

Alex Galassi: Yeah, it's a good question. And certainly we're flexible in the use of the term depending on the audience that we're discussing it with. So when we talk about sludge, it's the unnecessary frictions that prevent people from accessing what they'd like to access. And that could be things that mean it takes longer than it should or makes it more difficult, or means that there's a psychological burden imposed and, as I said, we don't always use sludge, so we could use red tape. We could use burden, administrative burden, friction. It's just anything that makes it more difficult than it should be to reach a goal in an in an equitable way.

Andrei Turenko: Fantastic. I had a question for Elizabeth. Now that the Heritage New South Wales Sludge Academy is over, what is your vision for how the work will continue going forward?

Elizabeth Owers: Yes. So it'll never be over. The Academy will never be over, it will live on. But yes, the work. The focus for us really is that implementation piece. We know it's really the beginning, but for me it's how do I make sure that team - and I've spoken a lot about burnout - making sure that we have enough capacity to take on extra work, which we'll have over the next year. So my focus is on how do I implement it in a safe way, but a really practical way. So for us it's going through that prioritisation, looking at what is going to have the largest customer impact, what is the kind of low hanging fruit as opposed to the more complex things and how do we structure them into a pipeline so that we're getting and seeing change quickly and effectively. This then frees up capacity to keep pushing through the process. So there's a bit of a strategy in terms of the implementation piece going on. But for me, I want to know that in 12 months’ time, if we're having this same conversation, that our customers are having kind of a very different experience with us, you know, than what they would have in the past.

Andrei Turenko: Fantastic. I do have another audience question, and I will paraphrase it a little bit here, so apologies for that. But the question is largely to do around the benefits of AI and AI being introduced into service delivery as an aid tool. So the question relates to do you have any views on how we can harness the benefits of AI in service delivery without alienating the people who rely on us?

Alex Galassi: Yeah, it's a good question. And in fact, when I said that other jurisdictions have developed scales to complement the sludge scales, Finland have developed a sludge scale to look at how easy or difficult it is to interact with an AI chat bot, wich I thought was interesting. It's reflective of the fact that that's more common. I think in balancing the benefit of AI with the kind of human connection and the value of there being a face to face option is just to make sure that when you're reviewing the results of a sludge audit, just because it's faster to use the AI option, it doesn't necessarily mean that that's more equitable. So in reviewing the results of a sludge audit, it isn't always let's remove this, let's go with this because it's faster. It's about making those trade-offs.

With considering ease, equity, and different customer groups.

Elizabeth Owers: And just to add to that one too, Alex, like from an operational point of view, when we're looking at implementation too, a big thing that's come up is the way that we communicate with people and the letters and templates that we're using. We're actually using AI to support us in being able to do that at scale very quickly. So it's more back of house thing than front of house. My big focus is on customer service and having a human at the end of the phone is incredibly important. So I think it's the smart use of AI in the places where you can get the impact without losing the human element as a government service provider. That is, that is pretty gold.

Andrei Turenko: Fantastic. Thank you. Thank you once again Alex and Elizabeth for your time and that is fascinating work. Unfortunately, that is all the time we have for questions right now. We will now have a short break and be back in about 10 minutes at 3:05 when my colleague Cale Hubble will lead the panel discussion. We'll see you soon.