Constraints to public sector performance

Nick Manning

Manager

Public Sector & Governance Unit

Latin America and the Caribbean

Castries, St. Lucia, Nov 2 2009

How do we overcome those constraints?

SummarySome perspective – not bad performers

Part 1: Public sector wide challenges

Foundations for a stronger performance orientation are there - underused

Part 2: Organizational challenges

Centralization is striking

Part 3: Staff management challenges

Selection, retention and motivation

Part 4: Conclusion

Decentralize probably

Just start – there’s a chance of a virtuous circle

Important to maintain some perspective

Source: World Development Indicators (2009). Data circa 2006-07.

Health services performance and expenditures are similar to similar countries’ standards

WORSE SERVICES

MORE SPENDING

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

OECD Upper middle income Latin America OECS Small Caribbean States

Hea

lth

Expe

ndit

ure

(% G

DP)

Births attended by skilled health staff (%) Improved sanitation facilities (%)

Non low-birthweight babies (%) Health expenditure (% GDP)

Same story for education services

Source: World Development Indicators (2009). Data circa 2006-07.

Higher spending levels than other upper middle income countries, higher performance

MORE SPENDING

WORSE SERVICES

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

OECD Upper middle income Latin America OECS Small Caribbean States

Pupil-teacher ratio, primary (amount below OECD Benchmark)Repetition rate, primary (% below OECD Benchmark)Public spending on education (% GDP)

OECDBENCHMARK

VALUES

Part 1: Public sector-wide challenges

• OECS countries have the foundations and are taking some early steps

• But could do more

Foundations and early steps to improve performance

But could do more: public management could look like this

•Budget is rewarding programs that have performance monitoring arrangements•Budget approvers (ie legislature) get adequate amount of information (just enough, relevant, not overwhelming).

• Planning and Approval stage

•Adequate information to inform managers' decisions during budget execution, accompanied by an accounting and costing system that assigns costs to program outputs and activities•Modest delegation arrangements to key managers to assume responsibility for program priorities•Over-arching high-level set of performance measures

•Implementation stage

•Ensure confidence in the accuracy and the validity of performance information•Performance evaluations that provide ex-post information on deliveries to inform budget and managerial decision-making•Staff appraisals for senior staff - consistent with the high level measures for the organization

• Audit and Evaluation stage

Source: World Bank (2009). Global Experts Team Note: Improving Performance.

1. Strongly centralized managerial decision-making

2. Even more centralized Human Resources Management

Part 2: Organizational challenges

Strongly centralized managerial decision-making

Source: World Bank (2001). OECS Institutional and Capacity Review.

Extent of Political Micro-management

Government level which is approached by Senior Civil Servants when a government action is needed…

• The role and powers of autonomous Civil Service Commissions (staffing, promotions & discipline, pay levels) are constitutionally entrenched in most Commonwealth countries since independence

• Amending the constitution has proved very a high hurdle to clear for small countries (Singapore and Malta made progress)

• Changing the Commission perspective by appointing more managerialist commissioners has been helpful

• Further corporatization and agency creation

• Delegation has been very limited, so far.

Strongly centralized HRM

1. Attraction of required human capital

2. Retaining good staff

3. Motivation

Part 3: Staff management challenges

Selection• Do we overstate the need to avoid political involvement?

• Political micro-management or favoritism clearly disastrous – but trust in senior appointments is key

• Political involvement in senior appointments in the OECD is tightly circumscribed – but is more than is usually conceded.

Source: OECD (2007). Performance-based arrangements for senior civil servants.

Retention• Retaining good staff is the single largest driver of performance

within the public sector. • Retention is affected by:

Predictability in remuneration: encourages competent staff to remain in a secure position

(OECD: base salary and benefits are 95% of total compensation)

Adequate compensation, terms and conditions vis-à-vis market levels for similar positions

In decentralized hiring, agencies can use their specialized knowledge to better “adequate” labor conditions for new openings.

Other drivers: job security, prestige, reputation.

Source: OECD (2007). Performance-based arrangements for senior civil servants.

Motivation

• Keep targets simple• Contracts are psychological and not legal devices

• Limited usefulness • Some emerging ingenuity in using time-limited

“mandates”• Performance pay is a very modest contributor to

performance• Challenge: implementing effective staff performance

appraisal systems in small states

Source: OECD (2007). Performance-based arrangements for senior civil servants.

1. Some decentralization to units and to managers is essential

2. The best way to improve performance is to start

Part 4: Conclusion

Some decentralization to units and to managers is essential• Centralization of HRM decisions to Public Service Commissions leaves

little room for effciency1:

Slow recruitment processes on which managers have little control prevent them from:• Hiring staff quickly when they need• Staff appointed by the PSCs not matching unit’s needs

Centralized promotions and most disciplinary system: 2001 survey shown that this system is perceived as “cumbersome and ineffective”.

• PSCs embody a critical constitutional principle of merit

• But they provide a paradox:2:

When weak, “they fail to protect political interference” When strong, “they tend to undermine managerial duties of senior public

officers”

. Sources: (1) World Bank, 2001. OECS: Institutional and Capacity Review of the Core Public Sector. Report 21844.(2) CARICAD, 2008. Report on the 1st Regional Conference of Public Service Commissions and

Commonwealth Secretariat, 1996. Redrawing the Lines.

The OECD has gained little trust from public sector performance improvements

• An unimpressed public - little return in terms of increased trust from all the OECD effort expended on improving service delivery

• Why didn’t it work? – Theories: This might be a consequence of the growth of entitlement cultures

within the OECD Or might be a corollary of managerialism/new public management

o Erosion of values?o Unsettled political/administrative boundaries?o Too much change – continual revolution?o Low public servant morale?o Undermining of confidence in official statistics?o A loss of personality?

The OECS is at a different point on the trust/distrust curve to the OECD

• Performance improvements may have a bigger political bang for the buck in the OECS than in the OECD: OECS citizens have not experienced the same increase in the

coverage and quality of public service provision - and so have not acquired a sense of entitlement.

Managerialism is less damaging as the public service was a less respected institution

Marginal improvements in performance in OECS are more noticeable to citizens

• Consequently, increasing performance in OECS might have a distinct political pay-off

• An initial step to increasing performance is having reliable mechanisms to measure changes in performance

OECS governments might gain more trust from performance improvements than the OECD did

• More trust in government means tougher decisions can be taken• Short term performance gains can allow deeper reforms that lead to

longer term performance improvements• Succesful public sector reforms have been incremental, giving small but

firm steps

The big prize – the virtuous circle

• Improved public sector management

• Improved public sector performance

• Improved trust in

government

• Difficult decisions

more possible

We know that governments can create a temporary improvement in popularity

Can they produce a longer term improvement in trust in government?