Public Sector Employment and Management Challenges for line ministries

1. Salary improvements must be fiscally sound Budget tradeoffs –Tradeoffs across ministerial portfolios –Tradeoffs across programs within your ministry ’ s portfolio –Tradeoffs across inputs within a particular program within your ministry ’ s portfolio Employment tradeoffs –Staff reductions & higher salaries vs. status quo & low salaries –Skill set reconfiguration

2. Sector reform proposals must be credible Fiscally sound –Ministry proposes reform with little or no net additional wage bill costs –Ministry ’ s proposal promises positive net present value of any employment restructuring Demonstrates the ministry ’ s willingness and ability to make tough tradeoffs –Tradeoffs across programs within your ministry ’ s portfolio –Tradeoffs across inputs within a given program Promises credible accountability for results –Budget impacts –Service quantity and quality impacts

3. Getting your staff to be productive requires a multi- pronged approach Salary increases are no panacea Merit-based personnel management practices are key Client “ voice ” mechanisms can be important, both in design and delivery, if they are actually used

Salary increases not a panacea Higher average salaries are not statistically significantly associated with better performance. Heavier reliance on performance bonuses is not statistically significantly associated with higher performance. Transparency and rules-based decisions in remuneration setting, coupled with a salary structure that offers career growth potential, probably provide a more cost-effective means of using remuneration to attract, motivate and retain qualified staff.

Merit-based personnel management practices are key Competitive recruitment and selection procedures Multiple screens involving different actors for major personnel actions (recruitment & selection, promotions, transfers, dismissals) Periodic personnel performance evaluations involving multiple screens by different actors Job valuation and classification procedures involving multiple screens by different actors Systematic monitoring of how well each of these procedures is functioning and making that evidence available to stakeholders, so that they can engage in informed debate about how well these various personnel management procedures are functioning.

Client “voice” mechanisms can help If client “ voice ” mechanisms are not used, they don ’ t impact performance, but if they are, they do. Need to be designed to encourage direct beneficiaries to invest their time and energy in making sure a governance reform effort works.

4. Cutting edge performance management reforms can be risky Performance management practices do not consistently increase entity performance in our client countries Bribery significantly increased in public entities who provided performance-linked incentives to staff in the Kyrgiz. Implications: Directly linking rewards to performance is likely to be risky in institutional environments in which basic rules and procedures required for merit-based personnel management are not firmly established.

5. Enlisting service delivery personnel (e.g., teachers, health care workers, other employees) in efforts to improve performance of public entities can: Convert potential reform roadblocks into reform allies; Help ensure better reform design; Reduce the risks inherent in “ cutting edge ” reforms; Enhance the odds of sustainability of reforms.

6. Devices for accomplishing these ends: Fear of threat of privatization if target for performance enhancement not achieved. “ Gainsharing ” of savings achieved through productivity enhancement. Introducing a peer-determined regime of “ performance pay ”. Introducing an employee evaluation process that is jointly designed and administered by management and staff. Negotiating jointly agreed severance formulas for those employees whose jobs disappear, rather than unilaterally imposing a severance formula.

References “ Understanding Public Sector Performance in Transition Countries: An Empirical Contribution ” ( UPSP%20final.pdf) UPSP%20final.pdf Review of literature on personnel performance management: dividual.htm#4 dividual.htm#4 Reid, Gary J “ Performance-Oriented Public Sector Modernization in Developing Countries: Meeting the Implementation Challenge. ” In Jos. C.N. Raadschelders and James L. Perry, eds., Research in Public Administration, v. 5. Greenwich, Conn.: JAI Press.