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Seven perennial design challenges
Gary J. Reid The World Bank May 4, 2004
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Seven perennial design challenges
Big-bang reductions vs. institutional reforms aimed at improving priority setting and management Ensuring adequate planning of the reform effort Addressing sources of resistance Sequencing Targeting reductions Facilitating re-entry into the labor force for retrenched workers Making severance attractive and cost-effective
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Big-bang reductions vs
Big-bang reductions vs. institutional reforms aimed at improving priority setting Ensuring that policy objectives of the reform are met. Ensuring adequate establishment and wage bill control ( ) Anticipating all fiscal impacts Functional reviews ( )
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Big-bang reductions vs
Big-bang reductions vs. institutional reforms aimed at improving priority setting Ensuring that policy objectives of the reform are met (cont.) Reform of the budget process ( ) Reform of Cabinet decision-making processes ( )
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Big-bang reductions vs
Big-bang reductions vs. institutional reforms aimed at improving priority setting Ensuring that management objectives of the reform are met. Human resource management reform Reform of the budget process Reform of the Cabinet decision-making process Monitoring reform execution and impacts
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Ensuring adequate planning of the reform effort
Knowing all the legal constraints and implications Voluntary vs. involuntary retrenchments Conditions that must be satisfied for each Required steps for each Fiscal obligations by method of retrenchment Redress rights and
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Ensuring adequate planning of the reform effort
Anticipating all fiscal impacts Wage bill Severance costs Pension costs Social assistance costs (e.g., unemployment compensation)
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Addressing sources of resistance
Designing benefits into retrenchment actions Benefits to managers who make staff cuts Recognition Cash flow reliability Enhanced managerial authority One-shot budget infusions Promise of faring better in the normal budgetary process Benefits to staff who are retrenched Severance packages Redress opportunities
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Addressing sources of resistance
Designing benefits into retrenchment actions (cont.) Benefits to staff who are not retrenched More competitive salaries Better conditions of public service employment Enhanced intrinsic rewards of public service employment
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Addressing sources of resistance
Engaging affected staff (e.g., through working with unions) in the design and implementation of downsizing efforts ( ) Monitoring and publicizing progress and impacts ( )
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Sequencing Establish effective employment and payroll controls first in order to avoid backsliding (e.g., re-entry). ( ) Effective establishment control Post authorization Hiring authorization Effective salary-setting control Salary structure, including all components of remuneration Individual remuneration decisions
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Sequencing Improve salaries only after most retrenchment is completed
Incentive issues Cost issues Make easier employment cuts first Unfilled vacancies “Ghosts”
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Targeting reductions By attrition: Ease of implementation approach
Uniform, across the board cuts: Fairness/political feasibility approach By inducements: “Buy your reductions” approach By policy priority: Government priority-setting approach. By performance: Management approach
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Targeting reductions Engaging affected staff in the design and implementation of reduction targeting efforts Management Staff (e.g., public sector unions)
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Facilitating re-entry into the labor force for retrenched workers
Cash settlement (up front vs. stream of payments) In-kind benefits (health insurance, housing, etc.) Re-training Job-search assistance Helping retrenched staff to set up their own businesses Engaging affected staff (e.g., through working with unions) in the design and implementation of re-entry assistance programs.
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Making severance attractive and cost-effective
Credibility of severance promises is important (cash vs. promises) Prompt payment of severance benefits Cash vs. in-kind benefits Engaging affected staff (e.g., through working with unions) in the design and implementation of severance packages.
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