\V/ -P 'Q 5 9 WORLD BANK TECHNICAL PAPER NUMBER 259 C)c-ob erqy- Civil Service Reform in Latin America and the Caribbean Proceedings of a Conference Edited by Shahid Amjad Chaudhry, Gary James Reid, and Waleed Haider Malik '~ maL RECENT WORLD BANK TECHNICAL PAPERS No. 188 Silverman, Public Sector Decentralization: Economic Policy and Sector Investment Programs No. 189 Frederick, Balancing Water Demands with Supplies: The Role of Management in a World of Increasing Scarcity No. 190 Macklin, Agricultural Extension in India No. 191 Frederiksen, Water Resources Institutioiss: Some Principles and Practices No. 192 McMillan, Painter, and Scudder, Settlement and Development in the River Blindness Control Zone No. 193 Braatz, Conserving Biological Diversity: A Strategyfor Protected Areas in the Asia-Pacific Region No. 194 Saint, Universities in Africa: Strategiesfor Stabilization and Revitalization No. 195 Ochs and Bishay, Drainage Guidelines No. 196 Mabogunje, Perspective on Urban Land and Land Management Policies in Sub-Saharan Africa No. 197 Zymelman, editor, Assessing Engineering Education in Sub-Saharan Africa No. 198 Teerink and Nakashima, Water Allocation, Rights, and Pricing: Examplesfrom Japan and the United States No. 199 Hussi, Murphy, Lindberg, and Brenneman, The Development of Cooperatives and Other Rural Organizations: The Role of the World Bank No. 200 McMillan, Nana, and Savadogo, Settlement and Development in the River Blindness Control Zone: Case Study Burkina Faso No. 201 Van Tuijl, Improving Water Use in Agriculture: Experiences in the Middle East and North Africa No. 202 Vergara, The Materials Revolution: What Does It Meanfor Developing Asia? No. 203 Cleaver, A Strategy to Develop Agriculture in Sub-Saharan Africa and a Focusfor the World Bank No. 204 Barghouti, Cromwell, and Pritchard, editors, Agricultural Technologiesfor Market-Led Development Opportunities in the 1990s No. 205 Xie, Kuiffner, and Le Moigne, Using Water Efficiently: Technological Options No. 206 The World Bank/FAO/UNIDO/Industry Fertilizer Working Group, World and Regional Supply and Demand Balancesfor Nitrogen, Phosphate, and Potash, 1991/92-1997/98 No. 207 Narayan, Participatory Evaluation: Tools.for Managing Change in Water and Sanitation No. 208 Bindlish and Evenson, Evaluation of the Performance of T&V Extension in Kenya No. 209 Keith, Property Tax: A Practical Manualfor Anglophone Africa No. 210 Bradley and McNamara, editors, Living with Trees: Policiesfor Forestry Management in Zimbabwe No. 211 Wiebers, Integrated Pest Management and Pesticide Regulation in Developing Asia No. 212 Frederiksen, Berkoff, and Barber, Water Resources Management in Asia, Volume 1: Main Report No. 213 Srivastava and Jaffee, Best Practicesfor Moving Seed Technology: New Approaches to Doing Business No. 214 Bonfiglioli, Agro-pastoralism in Chad as a Strategyfor Survival: An Essay on the Relationship between Anthropology and Statistics No. 215 Umali, Irrigation-Induced Salinity: A Growing Problemnfor Development and the Environment No. 216 Carr, Improving Cash Crops in Africa: Factors Influencing thze Productivity of Cotton, Coffee, and Tea Grown by Smallholders No. 217 Antholt, GettingReadyfor the Twenty-First Century: Teclnical Ch1ange anid Institutional Modernization in Agriculture No. 218 Mohan, editor, Bibliography of Publications: Technical Department, Africa Region, July 1987 to December 1992 No. 219 Cercone, Alcohol-Related Problems as an Obstacle to the Developmenit of Human Capital: Issues and Policy Options No. 220 Kingsley, Ferguson, Bower, and Dice, Managinig Urban Environmental Quality in Asia No. 221 Srivastava, Tamboli, English, Lal, and Stewart, Conserving Soil Moisture and Fertility in the Warm Seasonally Dry Tropics (List continues on the inside back cover) World Bank Technical Paper Number 259 Civil Service Reform in Latin America and the Caribbean PROCEEDINGS OF A CONFERENCE Edited by Shahid Amjad Chaudhry, Gary James Reid, and Waleed Haider Malik The World Bank Washington, D.C. Copyright © 1994 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing October 1994 Technical Papers are published to communicate the results of the Bank's work to the development community with the least possible delay. The typescript of this paper therefore has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. Some sources cited in this paper may be informnal documents that are not readily available. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. 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The complete backlist of publications from the World Bank is shown in the annual Index of Publications, which contains an alphabetical title list (with full ordering information) and indexes of subjects, authors, and countries and regions. The latest edition is available free of charge from the Distribution Unit, Office of the Publisher, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from Publications, The World Bank, 66, avenue d'Iena, 75116 Paris, France. ISSN: 0253-7494 At the time this paper was prepared, Shahid Amjad Chaudhry was a division chief in the Public Sector Management Division of the Technical Department in Latin America and the Caribbean Region. Gary James Reid is a fiscal economist in the Public Sector Modernization and Private Sector Development Division, Country Department III, and Waleed Haider Malik is a public sector specialist in the same Division, Country Department II. Library of Congress Cataloging-in-Publication Data Civil service reform in Latin America and the Caribbean : proceedings of a conference / edited by Shahid A. Chaudhry, Gary J. Reid, and Waleed H. Malik. p. cm. - (World Bank technical paper ; no. 259) ISBN 0-8213-3041-1 (alk. paper) 1. Civil service-Latin America-Personnel management-Congresses. 2. Civil service reform-Latin America-Congresses. 3. Civil service-Caribbean Area-Personnel management-Congresses. 4. Civil service reform-Caribbean Area-Congresses. I. Chaudhry, Shahid A., 1945- . II. Reid, Gary James. III. Mahik, Waleed H., 1957- IV. Series. JL962.Z13P443 1994 350.1'0098-DC20 94-35275 CIP CONTENTS Foreword vii Abstract ix Contributors and Participants x Overview I Gary J. Reid and Waleed H. Malik Part I Keynote Speakers: Reviewing Civil Service Reform and Its Role 7 1 Civil Service Reform and Economic Development 9 S. Shahid Husain 2 Civil Service Reform in Developing Countries 11 Ibrahim F. 1. Shihata 3 Civil Service Reform in Africa: Cultural Context 14 Abdul Magid Osran 4 Civil Service Reform: The African Experience 18 Mamadou Dia 5 Public Bureaucracies in Developing Countries: Ten Paradoxes 22 Moises Naim 6 Civil Service Reform in Japan 26 T. J. Pempel 7 Selected Discussion Points 33 Moderator: Shahid A. Chaudhry Part II Overarching Issues 37 8 Public Sector Human Resource Management in Latin America and the Caribbean 39 Gary J. Reid and Graham Scott 9 Administrative Reform in Developing Countries: Some General Observations 82 Ibrahim F. 1. Shihata 10 Public Sector Retrenchment and Severance Pay: Nine P-opositions 97 Ishac Diwan CONTENTS Part III Adjusting Staffing Levels and Upgrading Compensation 109 11 Downsizing the State: The Argentina Experience III Pablo Antonio Fontdevila 12 Downsizing: Jamaica's Experience, 1992-93 116 Marie Slyfield and Paulette Morgan 13 Compensation Upgrading in Caribbean Public Services: Comparative Needs and Experience 120 Richard Kitchen 14 Pay and Employment Issues in the Brazilian Civil Service 128 Hglio Zylberstajn 15 Selected Discussion Points 136 Discussants: Gary J. Reid and Ishac Diwan Part IV Recruiting and Retaining Personnel and the Higher Managerial Ranks 141 16 Senior Civil Service in Argentina: Creating an Elite Managerial Corps 143 Oscar Oszlak, with Ernesto Gantnan 17 Spain's Experience with Recruiting and Retaining Qualified Personnel 156 Joan Prats-Catala 18 Administrative Reform Program: The Case of Bolivia 158 Alberto Leyton 19 Selected Discussion Points 166 Discussants: Arturo Israel and Nelida Gruber Part V Strengthening Institutional Capacity to Manage Human Resources and Building Managerial Accountability 169 20 Administrative Reform: The Case of Mexico 171 Alejandro Carrillo Castro 21 Strengthening Government Capacity to Manage Human Resources: The New Zealand Experience 172 Graham Scott 22 The Brazilian Experience of Administrative Reform 180 Nilson Holanda iV CMVL SRVIC R[Ci OFM IN LAT'I AMEFICA AND THE CARIBBEAN 23 Efforts to Improve Executive and Managerial Performance in the U.S. Government 183 Ben Burdetsky 24 Chile's MIDEPLAN: A System for Programming and Evaluating Social Policy 191 Alvaro Garcia Hurtado 25 Selected Discussion Points 195 Discussants: Mike Stevens and Mauricio Camps Part VI Role of the World Bank in Civil Service Reform 197 26 Selected Discussion Points 199 Moderator: Shahid A. Chaudhry Part VII Background Papers 203 27 Culture Change in the Singapore Civil Service 205 Jon S. T. Quah 28 Civil Service Reform in Africa 217 Clay Wescott 29 Civil Service in Mexico 230 Mauricio Camps and Carlos Noriega Curtis 30 The National School for Public Administration: An Experiment in Forming Management Teams 236 Gileno Fernandez Marcelino 31 The Reform of Argentina's Federal Tax Administration Office 242 Constancia Tiboni 32 The Impact of Sociocultural and Govemance Factors on Institutional Reform 245 Thakoor Persaud and Waleed H. Malik 33 Transforming the State: Issues in Public Administration Reform in Poland 251 Barbara Nunberg and Luca Barbone CONTENTS V FOREWORD A large, interventionist state apparatus, promoted in the Inadequate training for enhancing the quality of public past to achieve rapid economic development, has consis- servants. tently manifested weakness in its basic function of good * Constraints that reduce competitive pressures in hiring governance. This weakness has been aggravated by the and promotion of personnel. fiscal austerity that accompanied the economic adjust- * A legal framework that does not clearly define the role ment efforts of the 1980s. No longer can the state afford and mission of institutions. to devote much of its time and energy to performing a role - Budgeting procedures that do not hold program manag- for which it is poorly endowed-that of economic entre- ers accountable for the performance of their agencies. preneur-while neglecting the provision of good govern- * Expenditure (including payroll) monitoring and con- ment. In order to support and encourage sustainable and trol systems that do not ensure transparency as well as equitable development, Latin American and Caribbean compliance and performance accountability. governments are striving to achieve not only a smaller - Management and employee incentive systems that fail state but a stronger one, characterized by greater func- to reward good performance and sanction poor perfor- tional autonomy and improved service provision. This in mance. turn requires a major reform effort focused in areas such The World Bank's interest in civil service reform as public sector management, accountability and trans- stems from its concern about the sustainability of the parency, the building of a legal framework for develop- development efforts it supports in borrowing countries. ment, and enforcement of the rule of law. Many of the programs the Bank and other development Civil service is a tool that governments use to design, institutions and governments finance are at risk because formulate, and implement public policy and discharge of the lack of implementation capacity of recipient gov- government functions. A good civil service-for good ernments. government-is consistent in its policies, limited in size, The purpose of this conference volume is to provide strong, efficient, and effective. It fosters an enabling envi- an overview of human resource management problems ronment capable of promoting sustained economic and and strategies for solving them. The review of problems social development and institutional growth. Civil service concentrates on indicators-as well as causes-of poor reform-improvement in the management of public sec- human resource management in the public sector. The tor human resources-typically involves several elements evaluation of strategies considers the prerequisites for including carefully planned downsizing, upgrading com- and key elements involved in solving these problems, pensation packages, improving the recruitment and reten- with particular attention to sequencing issues and ways tion of employees, strengthening institutional capacity to of ensuring seamless integration of the elements of the manage human resources, and creating better checks on reform strategies. The volume is also meant to serve as a the exercise of managerial authority and accountability. reference on the state of the art of public sector re- In Latin America and the Caribbean indicators of source management and on civil service reform experi- poor civil service management include high levels of ences to date in Latin America and the Caribbean and public employment, low ratios of salary compression, other regions. high ratios of support staff, rapid turnover in the mana- I hope that this report will help governments, practi- gerial ranks, and high ratios of personnel expenditures. tioners, researchers, and World Bank staff in their devel- Poor management capacity is the product of such defi- opment of future civil service reform programs. ciencies as: * Inadequate monitoring of resources and agency perfor- Sri-Ram Aiyer mance. Director, Technical Department * Personnel policies and practices that cannot compete Latin America and the Caribbean Region with those in the private sector. World Bank, September 1994 FOREWORD Vii ABSTRACT The papers collected in this volume were presented at the Recruiting and retaining personnel, particularly in the World Bank Conference on Civil Service Reform in Latin higher managerial ranks. America and the Caribbean (LAC), held on May 20-21, * Strengthening institutional capacity to manage human 1993, in Washington, D.C. This regionwide conference, resources and improving managerial authority and ac- the first in a series planned by the LAC Technical Depart. countability. ment Public Sector Modemization Division, was intended The overall goal of the conference-expanding the to promote the flow of ideas among researchers and prac- flow of ideas among the practitioners and researchers and titioners in the civil service and public sector human Bank staff-was supported by commissioned studies and resource field in Latin America and the Caribbean and at reports that provided views of the state of the art of civil the World Bank. service reform. The conference's format allowed each One of the principal challenges facing Latin Ameri- theme to be explored at some length, first by the authors, can and Caribbean countries today is the appropriate then through comments from invited discussants, and fi- role of the state in a post-adjustment era and, more spe. nally, through floor discussions. cifically, the role of the state in reforming the civil ser- The purpose of this conference volume is to provide an vice. The civil service reform conference addressed the overview of human resource management problems and need to identify effective strategies for improving the strategies for solving them. The volume is also meant to capacity of govemments in Latin America and the Car. serve as a reference on the state of the art of public sector ibbean to manage their human resources effectively and resource management and on civil service reform experi- efficiently. It focused on these themes: ences to date in Latin America and the Caribbean and other * Reviewing civil service reform and its overall role in regions. It is hoped that the paper will be useful to govemr economic development. ments, practitioners, researchers, and World Bank staff in * Adjusting staffing levels and upgrading compensation. their development of future civil service reform programs. ABSTRACT iX Contributors S Shahid Husain The World Bank, United States Luca Barbone Arturo Israel The World Bank, United States The World Bank, United States Ben Burdetsky Richard Kitchen The George Washington University, United States University of Bradford, United Kingdom Mauricio Camps Alberto Leyton Direcci6n General de Planeaci6n Hacendaria, Mexico Ministry of Finance, Bolivia Alejandro Carrillo Castro Gileno Fernandez Marcelino Permanent Representative of Mexico to OAS, Secretariat of Planning, SEPLAN, Brazil United States Waleed Haider Malik Joan Prats-Catala The World Bank, United States ESADE, Spain Paulette Morgan Shahid A. Chaudhry Ministry of Public Service, Jamaica The World Bank, United States Moises Naim Carlos Noriega Curtis Carnegie Endowment for International Peace, Direcci6n General de Planeaci6n Hacendaria, Mexico United States Mamadou Dia Barbara Nunberg The World Bank, United States The World Bank, United States Ishac Diwan Abdul Magid Osman The World Bank, United States United Nations Development Programme, United States Pablo Antonio Fontdevila Public Service Secretariat, Argentina Oscar Oszlak University of Buenos Aires, Argentina Nelida Gruber Oficina Central de Personal T. J. Pempel University of Colorado, United States Nilson Holanda Administration and Institutional Development Institute, Thakoor Persaud Brazil The World Bank, United States Alvaro Garcia Hurtado Jon S. T. Quah MIDEPLAN, Chile National University of Singapore, Singapore X CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Gary J. Reid Anna Haines The World Bank, United States Akhtar Hamid Robert Hindle Graham Scott Louis Hobeika Former Secretary of the Treasury, New Zealand Malcolm Holmes Albert Howlett Ibrahim F. 1. Shihata Tariq Husain The World Bank, United States Noriko Iwase Deane Jordan Marie Slyfield Devesh Kapur Government Administrative Reform Program, Jamaica Xenia Kazoli Gillian Kettaneh Mike Stevens Suresh Khosla The World Bank, United States Nitin Kibe Ian Knapp Constancia Tiboni Roberto Laver Tax Directorate, Argentina Haeduck Lee Frans Lengler Clay Wescott Anat Levy United Nations Development Programme, United States Linda Lowenstein Peter Ludwig Helio Zylberstajn Donna Macisaac University of Sao Paulo, Brazil Anil Malhotra Katherine Marshall Antonio Martin del Campo Participaiits Caroline Mascarell Shirley Matzen Dipak Mazumdar The World Bank Luis Jose Mejia Martha Molares Oladipupo Adamolekun Richard Moore Lani Azacon Mohua Mukherjee Debbie Bateman Alberto Musalem Cecilia Briceno Ronald Myers Barbara Bruns Dominique Panier Krishna Challa John Panzer Sayeeda Chaudhry Chris Parel Amadou Cisse James Parks Gerardo Corrochano Rita Parrilli Emesto Cuadra Rojerio Pinto Roberto Cuca Cora Pownall Roberto Cucullu Martha Preece Delbue De Meyer Rosa Puech Michaele De Nevers Martin Rama Subhash Dhingra Pauline Ramprasad Isabel Emerson Manuela Rangel Shahrokh Fardoust William Rees Lean Fian Konrad Ritter Alice Galenson Ivan Rivera Maurice Gervais Kingley Robotham Fredrick Golladay Malcolm Rowat Gloria Grandolini Julian Schweitzer CONTRIBUTORS AND PARTICIPANTS Xi Shekhar Shah United Nations Development Programme Katrina Sharkey Lyn Squire Jose Osorio-Cruz Prince Taylor-Lewis Clay Wescort Charles Thomas Alain Tobelem Other Thelma Triche Zafiris Tzannatos Alejandro Aratia, Venezuela David Varela Luis Antonio de Souza Cordeiro, Brazil David Vetter Enrique Fosil, Ecuador Cynthia Villanueva Joao Paulo Peixoto Machado, Brazil Denise Von Gersdorff Abel Obando, Honduras Kyaw Wai Winston Rudder, Trinidad and Tobago Rabindranath Sivanand, Guyana Inter-Arerican Development Bank Alberto Valdes, Bolivia Claudio Ansorena Special thanks are due for assistance in organizing the confer- Hector Avila ence and with publication of the proceedings: Ibrahim F. 1. Edgar Ayales Shihata, Sri-Ram Aiyer, Malcolm Rowat, Mamadou Dia, Christina Biebesheimer Robert Lacey, Mike Stevens, Barbara Nunberg, Donald Carlos Cordovez Winkler, Rita Parrilli, Ishac Diwan, and Kyaw Wai. Marta Julia Cox Jaime Fernandez Thanks are also due to Ana Maria Wackenfeld, Ana Beatriz Jacques Roumani Iraheta, George Lambiris, and Ruth Wade for logistical and Carlos Valencia research support with the conference; and to Meta de Coquereaumont, Alison Strong, Katrina Van Duyn, and Organization of American States Rachel Sengers for editorial and publication support. Luis Danin-Lobo Francisco Viera Xii CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN OVERVIEW Gary J. Reid and Waleed H. Malik The papers collected in this volume were presented at the bean to manage their human resources effectively and World Bank Conference on Civil Service Reform in Latin efficiently. It focused on these themes: America and the Caribbean (LAC), held on May 20-21, * Reviewing civil service reform and its overall role in 1993, in Washington, D.C. This regionwide conference, economic development. the first in a series planned by the LAC Technical Depart- * Adjusting staffing levels and upgrading compensation. ment Public Sector Modernization Division, was intended * Recruiting and retaining personnel, particularly in the to promote the flow of ideas among researchers and prac- higher managerial ranks. titioners in the civil service and public sector human - Strengthening institutional capacity to manage human resource field in Latin America and the Caribbean and at resources and improving managerial authority and ac- the World Bank. countability. Through these conferences, the World Bank-and The overall goal-expanding the flow of ideas among the Bank's Latin America and the Caribbean Regional the practitioners and researchers and Bank staff-was sup- Office in particular-seeks not only to disseminate cur- ported by commissioned studies (see the section on rent knowledge about economic development but to fur- overarching issues) and reports (see the section on studies ther the understanding of the new challenges the region and background papers) that provided views of the state of faces. One such challenge is the appropriate role of the the art of civil service reform. The conference's format al- state in a post-adjustment era. As the debate has fo- lowed each theme to be explored at some length, first by the cused more specifically on the state's role in reform of authors, then through comments from invited discussants, the civil service, legal and judicial reform and the decen- and finally, through floor discussions. An open roundtable tralization of govemment have received increasing at- discussion permitted the sharing of views on the role the tention in the Latin America and the Caribbean World Bank can play in assisting the countries of the region Region's institutional review. The Region, concemed in dealing with human resource management issues. with the changing imperatives in promoting economic The conference received tremendous attention. Par- development, seeks to share the issues and concerns ticipating were representatives of fifteen countries-in- World Bank staff members face in dealing with new cluding Argentina, Bolivia, Brazil, Ecuador, Guyana, Hon- problems, expose Bank staff to recent developments and duras, Jamaica, Mexico, New Zealand, Spain, Trinidad experiences in state reform, and improve collaboration and Tobago, the United Kingdom, the United States, and among practitioners, researchers, and the Bank. It is Venezuela-as well as members of the intemational de- hoped that these conferences, and the dissemination of velopment community from the United Nations Develop- their proceedings in conference volumes, will contribute ment Programme, the Inter-American Development Bank, to this objective. and the Organization of American States-and several The civil service reform conference addressed the World Bank staff members. The conference successfully need to identify effective strategies for improving the ca- demonstrated that seminars can be a powerful instrument pacity of govemments in Latin America and the Carib- for enhancing borrowers' receptivity to reform. OVERVIEW Reviewing civil service reform resort; policies such as those guaranteeing automatic hir- ing of graduates; and rigidities in pay and employment and its role systems. As a possible reform program he outlined the following elements in this sequence: elaboration of a clear In his opening remarks, S. Shahid Husain, Vice President, role for the civil service; rationalization of procedures and Latin America and the Caribbean Region, emphasized that systems; and finally, implementation of the program. He this was an opportune time for a conference on civil service also suggested that civil service reform programs should reform in view of the fundamental changes that have taken have three main objectives: to improve staff performance, place in the region and the challenges that lie ahead. He to reduce the fiscal burden to the state, and to raise the identified as the fundamental problem facing the region prestige of the civil service. today the govemments' lack of capacity to provide services In his keynote remarks, Abdul Magid Osman, Direc- that only they can provide-the outcome of years of ex- tor, Public Sector Management Group, United Nations pansion of the state. He explained that from the 1950s to Development Programme, shared the UNDP's experience the 1970s the region experienced a continuous expansion with civil service reform projects. He stressed that culture in the number of state employees and in the states' activi- and history should be taken into account in designing civil ties, as the govemments became involved in commercial service reform programs, particularly in Africa. He pointed activities. The result of this expansion was an inefficient out that although the need for reform in Africa was clear apparatus that placed tremendous demands on public re- on economic grounds, historical and cultural factors have sources, as well as a lack of public confidence that these impeded success. He emphasized that the problem in Afri- resources were used well. He emphasized that although in can countries is the deep-rooted legacy of colonialism, recent years many countries have initiated broad govern- which promoted discretionary hiring practices and ment reforms to improve economic performance-address- clientelism-features that have persisted even after inde- ing external debt problems and undertaking massive re- pendence. Too much attention has been given to the state form of the state, including reducing the size of central as a tool for reform-and to reform based on technical govemments, increasing reliance on the private sector for solutions without regard to popular participation. Mr. goods and services, and beginning to decentralize govem- Osman recommended that if the reform process is to suc- ment-institutional capacity remains weak and requires ceed, it must be based on the strengthening of civil society urgent attention. He suggested that in dealing with this through closer integration between the state and the other crisis of the state, civil service reform-involving the estab- social and political forces that recognize regional cultural lishment of durable civil service structures that rely on and historical realities. He also announced that the UNDP merit, competition, and stable expectations and the provi- was ready to work with recipient states and the donor com- sion of improved training and better compensation for civil munity to identify new approaches to civil service reform. servants-should be seen as an important tool in achieving In his keynote address tracing the experience of more economic development. This broadening of human oppor- than fifty civil service projects supported by the Bank in tunity by improving the state's capacity to provide quality Africa, Mamadou Dia, Division Chief, Institutional Ca- social services is essential if govemments are to enhance pacity Building Division of the Africa Technical Depart- their relevance to the population. ment, stressed the need for a govemance approach to civil In his keynote remarks, Ibrahim F. 1. Shihata, Vice service reform programs. He described the governance ap- President and General Counsel and Secretary General, proach as an operational process consisting of a first, up- International Center for Settlement of Investment Dis- stream phase, assessing a country's institutional environ- putes, emphasized the need for a systems approach in civil ment to determine the country's patrimonial profile-high, service reform. He briefly described the issues faced by low, or medium, based on its social, cultural, and political civil services in developing countries and the main ele- complexities, followed by a prescriptive phase to determine ments of civil service reform. He also stated that there the nature-comprehensive, enclave, or hybrid-of the was increased realization in the Bank that without effec- reform package and the lending instrument. He suggested tive government administration, economic reforms are that the proposed governance framework would greatly seriously handicapped. Surplus employment, cost over- increase the effectiveness of future civil service reform pro- runs, and poor performance were cited as the most severe grams because it directly addresses the complexities of the symptoms of administrative dysfunction affecting devel- patrimonial administrative environment. These complexi- oping countries. These symptoms arise as a result of many ties, which seriously impede the performance of public sec- conditions, including the political expectation of many tor institutions, include lack of accountability, lack of the people that the state will always act as an employer of last rule of law, a patrimonial salary regime, a crippling regula- 2 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN tory burden on the private sector, distorted resource allo- relatively small size, its low cost of operation, its ability cation, and bureaucratic budget management. to attract and retain high-quality personnel, the intensity As a user and an observer of civil service systems, of competition among its staff, its high prestige through- Moises Naim, former executive director of the World out the country, its flexibility in adjusting to social Bank and Senior Fellow at the Carnegie Endowment for needs, and the frequency of its administrative reforms, International Peace, presented a list of ten paradoxes, or including downsizing. T. J. Pempel, Professor at the Uni- ten observations about these regimes, in his keynote pre- versity of Colorado, sketched the links among these at- sentation: tributes. He argued that the ongoing administrative re- * The more powerful, more active, and more interven- form efforts and the government's cap on personnel and tionist an agency appears to be, the more inefficient and budgetary expansion have had positive effects (rather weak it is. than undermining efficiency and morale) by enhancing * The more overstaffed an agency is, the more over- the quality, loyalty, and performance of the country's whelmed it is by requests to do things for which it lacks civil servants. He highlighted several lessons from the necessary resources and capacity. Japan's experience for countries planning to undertake * The more rules and regulations, the weaker an agency's civil service reform. First, an outside agency should be control. used as initiator and arbiter of the reform effort. Second, * The higher the responsibility an individual has, the less government agencies should be allowed discretion in authority that individual has in terms of use of resources achieving broad reform goals. Third, ministries and agen- for performing functions. cies should be treated fairly in budgetary allocations and * The weaker a government's interagency coordination personnel assignments. Fourth, administrative reform is, the more likely it is to adopt policies that depend on should be institutionalized, with downsizing and pri- interagency coordination. vatization as a permanent feature. And fifth, psychologi- * The state appears to attract and assign the most tal- cal motivating factors should be used as incentives for ented public servants to the easier jobs, not the tough enhancing the performance of public servants. ones. * Staff turnover rates seem to be inversely proportional to Adjusting staffing levels and hierarchical levels. - The decentralization of government, which is moti- upgrading compensation vated by two different forces-managerial and govern- ment forces-is in the short run weakening the state's Pablo Antonio Fontdevila describes Argentina's initiative capacity to deliver public services. to downsize the public sector in the late 1980s through * Despite the opportunity to learn from experience, insti- such measures as hiring freezes, forced early retirement, tutions tend to repeat mistakes. and decentralization. The country's bold strategy to reduce - Among all the efforts to get prices right (under macro- inefficiencies in the public service was prefaced and sup- economic programs), one price has been forgotten-the ported by the national reform plan that continued to run price (salaries) paid to public servants in charge of getting concurrently. The national reform, which included priva- the prices right. tization, rationalization of pay structures, and strengthen- To tackle some of the problems implicit in these ing of management, absorbed some of the shocks created paradoxes, Mr. Naim suggested using one or a combina- by the socially and economically disruptive process of tion of several options: first, a technocratic approach- shrinking the public sector labor force. looking at numbers and statistics in developing an appro- Jamaica's civil service reform program, described by priate framework; second, an economic incentive MarieSlyfield and Paulette Morgan, was builton initiatives approach-injecting competitive pressures by bringing already being taken in three focus areas: corporate plan- public sector salaries closer to private sector salaries; and ning and budgeting, restructuring, and budget reduction. third, a political approach-identifying the political de- As in Argentina, hiring freezes and downsizing were key terminants of the problems and assessing political com- strategies, and both supported the overall restructuring mitment. Before concluding, he emphasized that the path and the reduction in expenditure. Special provisions were of reform would be very difficult and that strong theoreti- made for employees who lost their jobs through downsizing. cal frameworks would be needed to guide policymakers Against a backdrop of broader administrative reform through the maze of institutional reform. strategies, English-speaking Caribbean countries have tar- The Japanese civil service is widely recognized for its geted compensation upgrading in their civil service re- efficiency and effectiveness, reflected in several traits: its form. Richard Kitchen describes this effort as the Carib- OVERVIEW 3 bean's response to highly competitive salaries in the pri- glects other professional skills. Motivation is low among vate sector, the resulting low retention rate among senior senior professionals because the hiring system quickly managers, the substantial numbers of poorly skilled pro- pushes them to the highest positions (within ten to fifteen fessionals, and an "overemployed" junior labor force. But years), leaving them with little incentive for improve- he also names the price governments often must pay to ment. Compensation, although lower than private sector increase compensation: downsizing, forced early retire- salaries, has not yet had an adverse effect on performance ment, and liberalized pension policies. because the benefits of civil service employment outweigh Helio Zylberstajin attributes a problematic aspect of the deficiencies in compensation and retention has not Brazil's public sector work force to the country's laws and yet become a problem. Ms. Prats-Catala prescribes inno- its Constitution. He argues that because the Constitution vative hiring and promotion measures as a means for allows the public service to hire personnel outside of the preventing and alleviating possible problems. traditional government hiring system, political patronage Alberto Leyton points out that Bolivia's 1985 reform has become a key feature in Brazil's public work force. At program encountered difficulties in establishing its hu- the local level political patronage accounts for as much as man resource policies because the state bureaucracy di- 40 percent of the staff. recting the reform was itself subject to inconsistencies. In the discussion session following the above presen- Routine functions were assigned to state-funded workers tations, the discussants divided the responsibilities for in the bureaucracy, while the more critical task of ex- commenting on pay and employment systems. Gary Reid, ecuting the reform was delegated to foreign-financed who looked at pay issues, emphasized the need to link technical experts whose unique status enabled them to public sector salaries to private sector salaries. Ishac circumvent those policies. Mr. Leyton suggests that Bo- Diwan, in addressing adjustments to civil service staffing livia needs to go beyond this administrative dilemma to levels, stressed the need to focus carefully on two aspects: establish objectives, instruments, and financial means of compensation schedules in downsizing and the role of achieving reform. compression ratios in attrition. He argued that there was In the discussion session that followed the presenta- a need for innovative severance mechanisms and con- tion of these papers, the discussants commented on the tracts, and suggested that reform programs should use issue of recruiting and grooming higher civil servants. voluntary separation as the primary means of downsizing. Arturo Israel stressed the need for highly qualified tech- He also suggested that governments should not choose nocrats to manage economic and sectoral policies and between retrenchment and attrition but should instead regulate the private sector. Although this may mean cre- sequence them in a manageable way. ating a select group-a cadre-in the public sector, he suggested that in many developing countries the potential Recruiting and retaining benefits of this measure outweigh the undesirable side effects. Using Venezuela as her focus, Nd1ida Gruber sug- personnel gested that there was a need for professionalization of the public sector, which can be achieved through civil service Oscar Oszlak's paper describes Argentina's successful strat- reform that takes a long-term view, is permanent, and is egy to upgrade performance standards in its civil service. In nationally motivated (with no outside involvement). 1984 Argentina launched a program to develop a core of highly trained senior professionals capable of providing Strengthening institutional managerial and trouble-shooting services across govern- ment institutions. The program, which selected partici- capacity pants on a highly competitive basis, provided incentives to attract university graduates who were otherwise dissuaded This section begins with a paper by Alejandro Carrillo from joining the civil service because of poor salaries and Castro in which he admonishes Mexico's public adminis- the likelihood of political interference. The program prom- tration system for not having made a concerted effort in ised salaries comparable to those in the private sector and civil service reform. Regrettably, he notes, any reform 'immunity" from host institutions' internal bureaucracies. that has occurred has been a by-product of broader politi- Joan Prats-Catala cites the selection, lack of motiva- cal and administrative changes. tion, and compensation of higher-level civil servants as Graham Scott's paper describes measures that New some of the problems in Spain's public sector. The selec- Zealand implemented to create a functional framework in tion process, which targets graduates competing in public which government institutions could achieve their long- examinations, guarantees technical competency but ne- term objectives. The reform increased the salaries of the 4 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN chief executives of government departments to levels com- parable to those in the private sector and gave them more Role of the World Bank authority in hiring, in management, and in controlling de- partmental finances. At the same time, however, depart- In this discussion session, moderator Shahid Chaudhry ments were required to comply with stricter accounting provided an overview of the World Bank's past Latin and reporting procedures and to pay keener attention to American and Caribbean involvement. He initiated the output. The success is the more noteworthy because, al- discussion by announcing the intended objectives of the though the government directed fewer resources to depart- conference: to gain insight from Latin American and Car- ments following the reform, their output did not decline in ibbean colleagues on current civil service reform issues, to quality or volume and, in some cases, it even increased. develop a network among these colleagues and the World Nilson Holanda segments the development of Brazil's Bank, and to receive guidance on appropriate areas of public administration from 1936 to the present into three World Bank involvement in issues of civil service reform. stages. The second stage, following a period in which the authoritarian government viewed reform as a tool rather Bak p than a product, benefited from Decree-Law 200. This ackgroun papers legislation reflected Brazil's decision to give central insti- tutions the responsibility for coordinating different facets For the benefit of participants and to stimulate discussion, of public administration amid increasing decentralization. background papers were commissioned for the confer- This approach to reform was overshadowed by political ence. These present a wide range of background issues issues after 1985 (the third stage) and lost ground because and concerns relating to human resource management in of the revision of the Constitution. Holanda expresses the public sector. The studies (chapters 8-10) provide an confidence that the current revision of the Constitution overarching review of human resource management-but will return the public administration system to one char- they also look in some detail at policies and practices acterized by decentralized responsibilities. around the globe. Ben Burdetsky tells how the U.S. public administra- Gary Reid's paper offers recommendations on long- tion system, in an attempt to reduce costs and increase term strategies for fundamentally restructuring the civil efficiency, has adopted strategies commonly practiced in service systems in many Latin American countries to cor- the private sector. He describes some of these strategies, rect the counterproductive policies and practices that including the management-by-objective system, merito- impede efforts to recruit and retain highly qualified em- cracy pay systems, and total quality management tech- ployees and to motivate these employees to perform. The niques, along with the mixed results they have produced. paper also offers a variety of recommendations for im- The success of reform, the author argues, is related to the proving human resource management capacities in the level of support and the quality of managerial capacity at short term within the existing legal framework of most the top of the public administration system. Latin American countries. These recommendations ad- Alvaro Garcia Hurtado describes a tool used by dress salary restructuring as well as other core personnel Chile's public sector to strengthen its ability to evaluate policies, such as recruitment, promotion, and employee and implement social programs. This tool, MIDEPLAN, performance reviews. was part of Chile's strategy for increasing the govemment's Ibrahim F. I. Shihata's paper discusses the experience capacity to set goals, to plan and monitor progress effec. of developing countries that have recently undertaken tively, and to introduce into govemment institutions the comprehensive economic reform programs. It then re- concept of social responsibility. views the principal problems afflicting civil administra- Following the above presentations, discussants Mike tions in most developing countries and presents a number Stevens and Mauricio Camps shared their views on key of solutions that have been applied in similar situations. ingredients of successful civil service reform. Mr. Stevens Ishac Diwan's paper focuses on how a judiciously cited three critical needs: maintaining strong commit- designed severance mechanism and a sequence of wage ment during the process, relating civil service reform to adjustments and layoffs can help reduce agency costs. other reforms in the country, and maximizing the link The nine propositions he provides to improve public sec- between civil service reform and budgeting. Mr. Camps tor retrenchment and severance pay are based on three emphasized (based on Mexico's experience) the need to types of imperfections: information rents, adverse selec- create a management culture-for example, by adopting tion, and free-riding. the total quality management system as a means of en- The background papers (chapters 27-33) focus mainly hancing the public sector's efficiency. on success cases, reform strategies, and lessons from Ar- OVERVIEW 5 gentina, Botswana, Mexico, Poland, and Singapore. They The program, which sought to create responsive manag- attempt to pinpoint the factors contributing to successful ers even within the constraints of the system, failed for reform, citing improved human resources, better manage- several reasons, including poor leadership, the lack of a ment controls, and factors external to the reform program coherent doctrine, the isolation of the institute from other that affect the civil service reform agenda. institutes and research facilities, and the image of the Jon Quah relates how Singapore transformed its group of managers as a "preferred core." public sector from one undermined by corruption to a Constancia Tiboni singles out reform in Argentina's productive sector whose personnel and services com- Tax Administration Office as a case in which reform has pared favorably with those of the private sector. The begun to achieve its objectives. This agency departed improvements resulted in part from extensive legal from Argentina's broader public sector reform program by changes that increased transparency and accountability resorting to methods other than downsizing to deal with and put the public sector under public scrutiny. The overemployment. Reformers negotiated legal reforms with improvements also resulted from the government's strat- the workers' union to tighten promotion and recruitment egy to reduce the incentive for corruption by raising pay procedures, implemented an intensive training program, and making corruption a high-risk, low-return option for provided compensation for those leaving the public sec- civil servants. tor, and increased the compensation curve. Clay Wescott highlights the role of attitudinal factors Thakoor Persaud and Waleed Haider Malik high- and the enabling environment in the success of reform in light the significant changes in the role of the World Bank Botswana. The reform's effectiveness was ensured through over the past few decades with respect to its development widespread approval gained through community meetings assistance strategy. The evolution of the development and publicity, the long-term vision used to guide its strat- model is the result of lessons learned from project experi- egy, and the effectively managed delivery of public ser- ence, of world events, and of an increased awareness that vices. A powerful legal system and a merit-based human growth and development are intricately linked by non- resource program eliminated corruption within the sys- economic elements that cannot be ignored without nega- tem, one of the more disabling characteristics of public tive consequences for the system. Although progress has sectors around the world. been made in addressing institutional deficiencies in de- Mauricio Camps and Carlos Noriega Curtis describe veloping countries, the authors stress that a comprehen- reform in Mexico as coming in the wake of government sive framework that provides for sociocultural and gover- restructuring and the release of government-owned enter- nance factors is required if institutional reform, including prises to the private sector by the early 1980s. Civil service civil service reform, is to succeed. reform therefore involved not only human resource re- Barbara Nunberg and Luca Barbone discuss Poland's form, but also restructuring of the state and its role. Thus, political transition in the post-communist period, analyz- personnel changes were supported by institutional reorga- ing the various options and strategies that might be uti- nization and consolidation of various ministries, as well as lized to transform the country's public sector. The reform by training and improved wage packages aimed at setting process was intended to consider the issues of public pay the stage for improved management systems. and employment, external coordination, and decentrali- The human resources component of Brazil's public zation and public administration management, in that sector reform agenda is described by Gileno Femandez order, and the authors discuss each in the light of Marcelino. The author details Brazil's attempt to develop Poland's emerging political situation. The discussion's a cadre of effective mid-level civil servants through the usefulness lies in its evaluation of the different possibili- formation of a specialized public administration institute. ties at the outset of reform. 6 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN PART I Keynote Speakers: Reviewing Civil Service Reform and Its Role I Civil Service Reform and Economic Development S. Shahid Husain I would like to welcome all of you to the World Bank, to the tip of the iceberg. Many countries have been engaged this conference on Civil Service Reform in Latin America in a massive reform of the state-countries as varied as and the Caribbean. In our view here at the World Bank, Argentina, Bolivia, Chile, Mexico, Uruguay, and, more this is a particularly opportune time for this conference in recently, Colombia, Ecuador, Jamaica, Paraguay, Venezu- view of the fundamental changes that have taken place in ela, and other countries of Central America. The funda- the region in the past decade and the issues that lie ahead. mental element in this massive reform has been, of course, I would like to describe briefly the changes that have taken the reduction of the state itself through a cutback in place in Latin America and the Caribbean over the past expenditures, a cutback in the number of employees, a decade, particularly toward the end of the decade; our view substantial reform of public enterprises, and, in some coun- of the future and the issues that lie ahead; and the implica- tries, a massive attempt at divestment, particularly in tions of these issues for the civil services, administrations, Argentina, Chile, and Mexico. and institutions in the countries of the region. Simultaneously, there has been a movement toward Let me start by saying that what we saw at the begin- decentralization of government. This movement was the ning of the decade, starting around 1982, was not just a result of the awareness that the central apparatus had debt crisis. It was not even just an economic management become too big and was retarding the development of crisis. It was a crisis of the state, This crisis of the state was lower levels of government. Therefore, countries as varied the result of forces that had been in the making for de- as Colombia, Mexico, and others are engaged in a sub- cades and, of course, the result of the extemal environ- stantial process of divestment-divesting activities in so- ment. What we saw during the 1 950s, the 1 960s, and the cial sectors to state and local governments, along with the 1970s was a continuous expansion of the state and of its financing for these activities. activities. There was increasing regulation, and the state So, there have been three basic trends in domestic touched practically every sphere of life-every sphere of management: first, the reduction in the size of central activity. And economies became increasingly closed, not governments; second, privatization and, thus, increasing necessarily closed to ideas, but certainly increasingly insu- reliance on the private sector not just for the provision of lated from the international economic environment, and goods, but in many cases for the provision of services, from international trade because of the policy of import such as electric power, ports, and toll roads; and finally, substitution. the beginnings of decentralization of government. Along This expansion ended in a fundamental crisis of the with these changes there has been in many cases a revi- state, which, burdened by its large size and extensive sion of the entire regulatory framework. And in some activities, lacked the financial resources to meet its day- cases where there has been a substantial divestment of to-day obligations. The result was a very inefficient appa- monopolies to the private sector, in such areas as tele- ratus that put tremendous demand on public resources, communications and electric power, a new regulatory and a lack of conviction among the population that these framework has been adopted. Where the regulation of resources were well used. private activity had been particularly extensive, what is The events of the past ten years have at least partially taking place is essentially the restructuring of the state. reversed this situation. A number of countries have re- In my view, what has happened in the past ten years solved their external debt problems. But that was merely is the beginning of the process. Some of the easy work has CIVIL SERVICE REFORM AND ECONOMIC DEVELOPMENT 9 been done-the work on macroeconomic and external years of the crisis. We need to ask what the role of the trade issues-but the more difficult task still lies ahead. state is in this-a question that goes back to the issue of The reduction in the size of the state does not imply that the capacity of institutions. The fundamental goal is to the state should be weak. The functions that remain in broaden human opportunity, even where some of the the hands of the state must be performed effectively and basic reforms, such as land reform, cannot be undertaken efficiently. In my view, the leaner state must be a very immediately. Thus, the state will have to improve its strong state. The worst thing that could happen is that, at delivery of social services. By improving the quality of the same time that the size of the state is reduced, its social services, and by investing its resources in these capacity to provide social services and perform regulatory services, it will build the capacity of its institutions. and other functions is reduced. That is clearly not what A second issue is the need to increase the available the reform of the state should be about. fiscal resources for these services. This brings me directly A fundamental problem in Latin American and Car- to the question of civil service and civil service reform. ibbean countries, and probably in many other developing Typically, the countries of Latin America have not countries, has been that as the state expanded and its had career civil services, except Chile, Mexico and per- resources were spread thin, its capacity to provide the haps Costa Rica. Other countries have had a very vola- services that only government can provide was substan- tile structure, with career civil service typically only in tially weakened. That remains a fundamental issue. foreign offices. Thus, if there is to be policy continuity, I travel a great deal to the countries of Latin America. and if institutions are to be improved, then a part of the Typically in a country, I meet with people in the Ministry civil service reform must be to establish a durable and of Finance in the morning and with people in the Minis- permanent civil service structure, based not on political tries of Education and Health, the environmental organi- nominations, but on merit, competition, and stable ex- zations, and so on in the afternoon. pectations. The difference between the morning and the after- A second part of the civil service reform must be to noon is like the difference between night and day. In the improve training, not just in social services, but in other morning, I come across some of the ablest people in the aspects of government. In the Latin American and Carib- country, people with tremendous experience in substan- bean countries, people are brought into government with tial issues; in the afternoon, I come across some of the very little experience in the issues that they are required weakest people in the government. My point is that de- to deal with. spite the broad change in government, there is a funda- Finally, the issue of compensation needs to be ad- mental issue of capacity, there is a fundamental issue of dressed. Inflation has taken a heavy toll on the compensa- institutions, and there is a fundamental issue of priorities. tion of public servants; many must take two, three, or If the state is going to establish its relevance for the even four jobs just to make ends meet. Now that the people, it must do so by improving the quality of the number of civil servants has been reduced in many coun- services that it provides and that touch the lives of the tries, governments need to consider improving the quality people, particularly the poor people. of compensation in order to attract and retain high-qual- One of the unfortunate aspects of the Latin Ameri- ity people in the civil service. can economies is the poor distribution of income and These are just a few words about some of the issues assets. A study that we have done in the World Bank that we see as critical in civil service reform. I have no shows that not only is the distribution of income very doubt that in the course of the next day or two, much skewed and adverse in the Latin American countries, more light will be shed on such issues by people who are particularly in Brazil and Venezuela, but that in many of more competent in this area. I would like to thank you the countries income distribution has worsened in the again for coming. I0 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN 2 Civil Service Reform in Developing Countries Ibrahim F 1. Shihata I would like to welcome you to the World Bank's Confer- into account is doomed to be overtaken by these same ence on Civil Service Reform in Latin America and the factors in the future. Caribbean. At the Bank, we are beginning to realize that Among the intemal factors, most come under the without effective govemment administration, structural heading of personnel management. For instance, many adjustment programs and other economic reform initia- countries have adopted inappropriate policies for recruit- tives are seriously handicapped. I choose to link economic ment, such as the automatic hiring of graduates. Career and administrative reforms not because I work in an insti- development policies often are rather elementary and tution concerned with economic development, but be- link promotion prospects to seniority rather than to per- cause I believe that development is one indivisible whole. formance criteria. Rigid policies on wages and compensa- A country's income is not likely to increase, for example, tion have constituted a fiscal drain on the state because while poor institutional conditions continue to exist. Even governments have been unable to adjust wages. Perhaps if that were to happen, it would not represent real devel- as damaging has been the secondary result-their contri- opment but transient wealth without sustainable roots. bution to the failure of the civil service to attract and In my presentation today I will look briefly at the retain the most qualified and committed people for the types of problems faced by civil administrations in devel- job. Less easy to discem and define among the internal oping countries and then outline the elements of a reform problems is the general philosophy of the civil service, in program. other words, the image the institution has of itself. Pub- lic administrations in many developing countries have Problems faced by developing failed to develop a professional ethic of political neutral- ity and a service-minded approach to their relations with country CivIl services the public. It is these intemal factors that have contrib- uted most to the low quality and inefficient performance You all know the most serious symptoms of administrative of public administrations. dysfunction: surplus employment, cost overruns, and poor performance. Some of these are the result of external An approach to civil factors, some of internal factors, but most are the result of a combination of both. service reform I am referring to three principal extemal factors. First is the increasing number of young people joining the labor The principal elements of a comprehensive process of force. Second is the poor economic growth rate, which reform are, first, the elaboration of a clear vision of the means that the formal labor market cannot provide these role of the civil service and, based on this optimal role, young people with jobs. And third is the political expecta- the development of a comprehensive reform plan; second, tion of many people that the state will always act as an the rationalization of rules and regulations for the civil employer of last resort. Together, these three factors have service; third, the design of modern management systems; led to surplus employment in the civil service. It is impor- and fourth, the implementation of the program. tant to note that they cannot be resolved rapidly, yet any First, we need to define a comprehensive strategy. reform program that does not take these external factors This begins with a rethinking of the role of the state CML SERVICE REFORM IN DEVELOPING COUNTRIES I I generally. Development theory at present firmly supports * A financial system for budgeting and expenditure, which removing the state from the day-to-day running of the includes budget planning and preparation, the control of economy and allowing market forces to take over many of expenditures, and a tender and contracting system. the old responsibilities of the state. Although this is a * An accounting and auditing system, which ensures sound rather vague notion, it can be refined. For the civil ser- financial auditing. vice, it means retrenching the state from the provision of * Modem central personnel managerent systems. These certain services, now best left to the private sector, and it would include a strategic planning system at the ministry or means streamlining the ministries and regulatory agen- agency level to forecast future staffing requirements over cies, particularly those responsible for the oversight of the a period of, say, five years-and the consequent job re- economy. (For the state enterprise sector, it means less classifications and specification of inputs-and to avoid a active participation of the state in the economy by limit- buildup of surplus staff, and a personnel recruitment and ing state enterprises to the provision of utilities and cer- nianagement system to recruit and promote qualified staff, tain sectors of national interest.) Once the role of the particularly to high-level positions. This system may differ leaner state has been defined, the mechanics of the new as to the degree of centralization of the personnel func- government need to be worked out, along with a plan to tion. It appears that systems with some degree of central, achieve this goal. This is what I mean by a comprehensive ization are more appropriate for developing countries gen- reform framework: a plan that outlines the specific reform erally. Another system would be a human resources measures needed, illustrates the linkages between them, management system, which ensures that the required skills and explicitly relates the relevance of short-term mea- will be made available and will be developed continuously sures to long-term goals. through training programs designed to broaden experi- It is important that the reform effort have the full ence and improve efficient performance, and through re- commitment of the political leadership. Bank experience location programs. Finally, a control and oversight system has shown that effective implementation depends initially would monitor staff performance and provide rewards and on the active participation of the most senior members of sanctions based on the efficiency of performance. government. It is also important for the civil service man- The main objective of these management systems is agement and rank and file to be involved in the process, to ensure sustained and efficient staff performance and to establish domestic ownership of the program. the achievement of the civil service's goals, as defined in The second step is a legislative effort. It involves the general strategy. rationalization of existing policies and rules and imple- The fourth and final element of comprehensive re- mentation of new legislation, to the extent necessary for form is the implementation of the reform plan. This should the introduction of the reform program. For instance, the begin with a determination of the numbers of employees administrative laws that regulate the intemal workings of and kinds of skills needed in each ministry and agency. the civil service, such as personnel regulations, might This should then be followed by a survey of the work force need to be amended to allow for the downsizing effort and (age, grade, position, and the like), including a determi- to install flexible personnel management practices that nation of the skills available. The next step is to imple- are geared toward the recruitment of high-quality em- ment the elements of the reform program, including in- ployees and that will, in terms of compensation and pro- stallation of the modern management systems that, by motion, reward efficient performance. The other set of now, have been modified to fit local needs and are ready rules and policies that will need to be overhauled are for use. Such reform measures would have three objec- those the civil service is charged with implementing. These tives: to halt the increase in the size of the work force, to range from foreign investment laws to the issue of build- reduce its financial burden on the state, and to revamp ing permits. the work force so that available skills and staffing levels The third element of a reform process is the design meet the service's needs, all within the scheme of a new of systems and programs that are appropriate to the service-oriented, professional, developmental bureaucracy. needs of the new administration. The most successful of I can suggest a number of measures to control the size these systems have been based on private sector manage- of the work force. These include a freeze on new hiring ment approaches and have benefited from the flexibility and salary increases, the elimination of automatic hiring gained and from the more up-to.date systems in use. programs (for example, of graduates), the enforcement of These include: retirement age, and the elimination of ghost workers. * A modern data collection and dissemination system, which Voluntary exit programs may be introduced at this stage. ensures accuracy and includes rules governing the confi- These need to be carefully designed to minimize the dan- dentiality of information. ger of adverse selection, that is, the most efficient workers 1 2 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN leaving first because they most readily find alternative The third and final goal is the most important, and employment in the private sector. One way to avoid this the most difficult to achieve. It is the elusive goal of would be for the employer to retain a veto right. Another changing sometimes monolithic institutions into lean design issue for voluntary exit is the size of the compensa- and responsive administrations committed to develop- tion to be paid to exiting workers. Of course, the principal mental and social goals. In some countries this will re- aim is to minimize the fiscal burden on the state. As a quire a radical transformation in the values and tradi- final measure, involuntary retrenchment measures might tions of the institution, in others merely a revival of be implemented. In view of the enormous human and dormant professional ethics. Specific measures that can political costs frequently associated with these programs, help are personnel management systems modeled on great care must be taken in their design. those prevalent in the private sector, which encourage The second goal of a reform program is cost-cutting, efficient performance and reward accordingly. Other that is, the reduction of the financial burden on the state. measures aimed at raising the prestige of the institution This will be partly achieved by the decrease in the size of might also help attract better-qualified candidates for the work force. It can be further effected by introducing management positions. Performance-based criteria the modern personnel management and auditing systems should be introduced not only into wage and compensa- prepared in an earlier phase of the reform process. For tion determination, but also into promotion and career instance, the restructuring of existing wage and compen- development. In some environments, it might be more sation policies might help both to reduce the wage bill and appropriate that these criteria be group-determined to improve the performance of the work force. rather than individually based. CIVIL SERVICE REFORM IN DEVELOPING COUNTRIES 13 Civil Service Reform in Africa: Cultural Context Abdul Magid Osman The need for civil service reform especially for the allocation of resources. Poor resource allocation is considered one reason for the unsatisfactory economic performance of the African continent and, in Civil service reform may be defined either in a restricted this area, it would not be realistic to expect the market to sense as the reorganization of public service management substitute for government. or, broadly, as the human dimension of administrative * The second need is for minimal basic services, such as reorganization-to deliver public services more efficiently health and education. and effectively. - The third need is for better govemance through greater For this seminar, we will use the broad sense. Civil accountability, transparency, and public participation, service reform should be considered a way to ensure the which requires a civil service that can relate to the various implementation of policies that provide for the well-being social groups. of the population through sustainable economic and so- Although civil service reform is associated mainly cial development. The reform is a necessary-but not with staff reduction, it involves much more. Let us look sufficient-condition to ensure development both in in- briefly now at the historical and cultural background terventionist states, such as Malaysia and Singapore, and against which these reforms are taking place. in states whose policies are less interventionist, such as Botswana or Hong Kong. Historical and cultural Economic and social development require three con- ditions: background • Stability in the sense of respect for the rule of law. * A climate of freedom that gives economic agents in the Although the historical and cultural background of each public and private sectors enough leeway for decision- country is different, certain common elements deserve making. (Business decisions are, unfortunately, very sen- special attention. sitive to political conditions and, above all, to the uncer- It should be stated at the outset that this historical tainty of erratic government policies.) perspective does not imply fatalism. Instead, it demon- * Assurance of a certain macroeconomic stability. (In strates that political factors have impeded success so far. Botswana, for instance, the stability of fiscal and mon- Conflicts between tribal groups and the play of special etary policies has played an important role in the country's interests often preclude any concerted attempt at reform. economic success.) Many of the problems African countries face are Unfortunately these conditions are not in place in most of rooted in the legacy of colonialism. It is accepted as fact Africa. that pre-colonial African societies had a code of con- If there is an active private sector, however, sustained duct, albeit unwritten, that provided guidelines for the economic and social development requires that govem- behavior of their leaders. African societies also had in- ment provide even more: stitutionalized mechanisms for control and for popular * The first requirement is an infrastructure network. Even participation, even though such participation was lim- if infrastructure operations are assigned to the private ited to certain social groups. This arrangement corre- sector, the government will always bear responsibility, sponded to feudal societies on other continents, particu- 14 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN larly in Europe, where popular participation was re- struggle for independence gave the elites who assumed stricted to certain social classes. power a legitimacy to govern. Leaders emerged from the Furthermore, pre-colonial African societies had struggle against foreign domination. Except in Namibia highly decentralized political, economic, and social activi- and Zimbabwe and some earlier cases in British Africa, ties. Centralization was introduced with colonialism, the process of handing over power was not followed by which by definition presupposed an omnipresent state elections. Under these circumstances, the governing elites and a structure of vertical domination. The participation felt no responsibility to be accountable. of nationals was violently suppressed. The state became The inherited system of administration is artificially an instrument of domination and humiliation, alien to maintained through technical assistance. If technical assis- African society. It comprised foreigners and a few nation- tance were fungible, the volume of assistance would be dra- als at the middle level, referred to as the "assimilated," matically reduced without prejudice to national capacity. who, even after independence, were rejected by the popu- In many cases, government is used as an instrument lation. There was no possibility whatsoever of popular for the enrichment of individuals and related ethnic participation, and the model of decentralization was abol- groups. This is an elegant way of referring to corruption. ished. Against this background in which tribal chiefs were Corruption is detrimental to reform, but its eradication is used as instruments of the colonial power for pacifying the not a precondition for progress. In many cases countries populace, it is no surprise that African countries have not that have corrupt, elitist governments still manage to developed a culture of management; their access to man- achieve notable economic and social development. agement organs was denied. Obviously, however, corruption-and, above all, After independence African societies began to ques- capital flight-form a terrible scourge. Capital flight tion the role of government. The need for national capac- badly hurts the chances for sustainable development. ity-building moved to the center stage of international The striking feature of corruption is the impunity with cooperation only when economic and social crises be- which it is practiced and the appropriation by public came intolerable. But we must bear in mind that the officials of all instruments of power-means of commu- "new" public administration was wholly based on the co- nication, courts, and public administration-which cur- lonial model, and the role of the new administrators was tails economic freedom and predictability. The fight only to maintain the existing system. Maybe no other against corruption cannot be the explicit centerpiece of solution was possible in the absence of experienced man- any civil service reform, but reform should increasingly agers. Gradual decentralization should have been adop- expose, punish and thus curb corruption through the ted-as it was in Botswana-but this gradualist approach improvement of systems. was seldom used. Post-independence public administrations replicated Why government should introduce the lack of accountability of the colonial administration, set up to dominate and oppress. The colonial administra- civil service reforms tion had, however, a high degree of accountability to hierarchical superiors who, in some cases, were in the We would like to believe that government has decided to colonial metropolis. This feature has taken the form of be accountable, transparent, and open-economically and clientelism in post-independence administrations. politically-and establish a system based on the rule of The system had some measure of openness and eco- law. By this logic, government decides to promote civil nomic transparency only where the colonial bourgeois service reform, having become aware that better gover- population was large and had different economic interests nance and civil service are needed to make the best use of than those of the African populace. These differences available public resources. forced the administration to serve as independent arbiter In Latin America these are often the operative mo- on behalf of the colonial bourgeois. But usually the system tives, but, unfortunately, the same is not true of Africa. had neither transparency nor economic and political open- There, reforms are associated with structural adjustment- ness toward nationals. After independence-and in the as a condition of structural adjustment or because the absence of a large national middle class that could de- donor community has concluded that full implementa- mand, at least, economic transparency and openness- tion of structural adjustment requires development of a post-independence African administrations exhibited broader national capacity, of which civil service reform is even less transparency. an important component. The initial enthusiasm and mobilization of the people Because there is often no political consensus favoring was not used to promote popular participation. The civil service reform, many reform programs: CIVIL SERVICE REFORM IN AFRICA: CULTURAL CONTEXT 1 5 * Are limited to the management of human resources- bureaucracy becomes more accountable and more inde- controlling budgets for state personnel and defining ad- pendent. And as the bureaucracy becomes more indepen- ministrative and technical careers. dent and, above all, accountable to the judicial system, * Lack the commitment typical of the early stages be- the influence of special groups can be gradually reduced. cause it fades when the conditionalities have been met or However noble, the separation of power from the the composition of government changes. accumulation of wealth will, in our view, be impossible to * Lack continuity and depth because national manage- achieve until some conditions are met internally-apart ment officials are either absorbed in project manage- from pressures by donor countries. One condition is build- ment-hired for that purpose by donors-or they are ing national capacity in technical, administrative, legal, simply unmotivated and choose to "abandon" the civil and political fields. service and even the country. This is why the professionalization of managers and The inability to retain good national managers un- technical cadres-including in the judicial field-and the dermines national and intemational efforts and drains introduction of a system of merit are so important. These resources for reform programs, which then become measures do not in themselves guarantee greater trans- unsustainable. Even in countries such as Zimbabwe, which parency or even greater accountability to the public that has wage levels that are relatively high for the region, uses the services. But their introduction is a precondition some institutions have a turnover of qualified staff of for better public administration. The measures also help more than 30 percent. This is the case at the University of to enlarge the middle class, improving the prospects for Harare. And at the University of Lusaka, several depart- better governance. ments do not have even one professor native to Zambia. Although the creation of a professional class is not This situation is not limited to universities, but affects enough, it enables civil society to be more demanding- other institutions, some of which have direct responsibili- for citizens to defend their own rights, not merely through ties for the management and implementation of economic the ballot box. The demand for greater accountability, adjustment-as in Mauritania and Mozambique. transparency, and legality does not arise from an abstrac- The desire to secure implementation of their projects tion, nor is it imposed from outside. It results from social and programs leads many donors to provide technical assis- pressures and the need to reduce the arbitrariness of mon- tance. In some countries, the situation has become so ab- archs or governments. It arises because groups have dif- surd that the amount spent on technical assistance is three ferent interests and strive to protect those interests. times greater than the total wage bill for the public sector. Professional associations and trade unions have al- To resolve the problem of compensation for civil ser- ways had ways of communicating their concerns to gov- vants, domestic and external constraints must first be over- ernments and of demanding explanations about processes come. Donors are reluctant to grant budgetary assistance, and procedures. Such organizations systematically push for fear ofcorrupted elites and increased dependency. Gov- for greater openness and fairness, and thus greater ac- emments are reluctant to widen the gap between the high- countability. But none of this pressure exists in Africa. est and lowest salaries-preferring the shortsighted solu- Political parties do not represent different social groups tion of retaining managers with inducements that make it and there are no other politically oriented organizations. difficult or impossible to introduce a system of merit. Gov- So the question is, what, besides riots, can force govern- emments often prefer to recruit foreign technicians be- ments to be concerned about performance and about cause it is easier to find international financing for expatri- their reputations with regard to the population? ates than to budget allocations for hiring nationals. Too much attention has been given to the state as a Some of the donors' fears are justified. Simply in- tool for reform. Reform in Africa cannot depend only on the creasing wages of national managers cannot produce the introduction of new techniques, on a bureaucratic elite, or desired change, especially without other, more substan- even on a large and dynamic private sector. The process tive measures to improve public sector performance. must be based mainly on the strengthening of civil society Regarding corrupted elites, when the state becomes through closer interaction between the state and other so- the primary source of wealth-building, wealth-seeking be- cial and political forces-such as professional associations, comes the main preoccupation of the political class-and trade unions, nongovemmental organizations, and commu- public servants are not immune to this process. So how nity-based organizations. Moreover, the bureaucratic elite can we create a class of managers that can resist the and the private sector will only strive toward reform when influence of special interest groups associated with the they operate in a society that can control the bureaucracy parties in power? There is absolutely no doubt that when and demand of it greater transparency and respect for legal- the accumulation of wealth is separated from power, the ity-or for the values established by popular convention. 1 6 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Modemization does not have the luxury of centuries cally), and an increased role for nongovemmental orga- to unfold, as it did in Europe. At the same time, modem- nizations. ization cannot take place only on the surface. Above all, it should not be imposed from outside. The process must Conclusion have its roots in an intemal dynamic based on popular traditions, which continue to be transmitted through gen- erations, and constitute an element of pressure for change, The United Nations Development Programme is ready to for greater transparency of procedures, for a bureaucratic cooperate with the recipient states and donor community elite that is more accountable, for a private sector that is in the search for new altemative approaches to civil ser- more sensitive to the national interests, and for greater vice reform. respect for legality, even when it means a system of values The foregoing description may appear excessive, be- rather than legal instruments as such. cause in the final stages of colonialism-particularly after More important, this process must create a dynamic the Second World War-the colonial powers did make in which the population-and not the donor community, an effort to improve basic services and to promote na- as too often happens-will be the main protagonist in its tional participation. But the colonial period was much development. For example, technical assistance has in- longer than the past thirty years of "repentance." sisted on the accountability of extemal flows toward the I wish to stress that we do not intend to question the donors, but that has not resulted in a strengthened na- role played by structural adjustment programs in the intro- tional capacity for creating a system that is accountable to duction of reforms, many of which have been genuinely the people in the country. national. We recognize the merit of structural adjustment The integration of civil service reform into a larger programs in producing radical change in attitudes. A few process-the strengthening or re-creation of the civil years ago, it was impossible to conceive of policies that society-has tremendous consequences. Without inte- today are widespread, such as exchange rates determined gration, initiatives and new systems cannot be sus- by market forces or the primacy of the private sector over tained. This larger process must include redefinition of the public sector in production. Structural adjustment has the govemment's role, reform and strengthening of the given a new dimension to the role of govemment and judicial system, decentralization (horizontally and verti- revealed the need for more far-reaching reforms. CIVIL SERVICE REFORM IN AFRICA: CULTURAL CONTEXT Civil Service Reform: The African Experience Mamadou Dia The advantage of being the fourth speaker is that it gives impacts were substantially less than expected. In a sample me the privilege of building into my presentation some of of fifteen countries with retrenchment, eight recorded the key elements brought up by the previous distinguished increases in their wage bills (for example, Senegal). Even speakers. From Vice President Husain my presentation among those registering reduced wage bills, severance would capture the need for civil service reform to be seen payments generally drained the budget substantially, of- as a way of dealing with the crisis of govemment; from ten exceeding or equaling the short-term savings from Vice President and General Counsel Shihata I would pick downsizing (for example, Ghana). up the need for a systemic approach to civil service reform; TALs also showed relative success in the delivery of and from Dr. Osman, that culture and history should be technical inputs to solve short-term physical implementa- taken into account in designing a civil service reform pro- tion and technical problems. However, the resulting over- gram in Africa. These three themes will resonate through- reliance on substitute technical assistance (long-term ex- out my presentation, which could be titled "The Need for patriate advisers) was ineffective in building long-lasting a Govemance Approach to Civil Service Reform." and self-sustaining institutional capacity. The major cause of these failures is that civil service reform programs, and SALs and TALs, have generally ignored the macro- institutional or macrogovernance environment and its impact on civil service efficiency. In many countries of Sub-Saharan Africa (SSA), develop- ment efforts are threatened by the ineffectiveness of the The patrimonial administrative civil service. This crisis assumes more significance when the civil service is required to play a central role in plan- environment in Africa ning and managing fundamental changes in the economy as part of structural adjustment programs. At the end of After independence, most successor regimes supported 1991 there were fifty-seven Bank-supported operations in the concept of a strong central government that would Africa-Structural Adjustment Loans (SALs), Technical ensure economic equity to all citizens. Without the nec- Assistance Loans (TALs), and Social Dimensions of Ad- essary checks and balances, this resulted in the emer- justment (SDA)-related projects. gence of highly centralized and all-powerful patrimonial With SALs, the Bank focused on two key compo- states characterized by: nents: retrenchment to reduce the wage bill; and reform * Lack of accountability. In most African countries with of pay and employment policy to create incentives for single-party (and even some with multi-party) systems, greater efficiency and productivity in civil service. With the state generally emphasizes exercise of power and con- TALs, it focused on building institutional capacity and trol rather than service to the civil society. Three institu- on the physical implementation of projects and reform tions that could provide checks and balances and en- programs. hance accountability-legislatures, interest groups, and Results have been mixed. Regarding retrenchment, the mass media-are also significantly weak. the gross figures indicate a considerable downsizing effect. * Lack of the rule of law. The courts in African countries But on the qualitative side, both the fiscal and efficiency are by and large dependent on the executive branch, and I 8 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN thus, generally placed within a ministry or department of lending instruments suitable to a country's profile. De- justice. Furthermore, laws which generally were formu- pending on the patrimonial profile, three alternatives lated during the colonial period are not deeply rooted in could be considered: the comprehensive institutional ap- the popular understanding. Finally, it is common practice proach for countries on the high end of the patrimonialism in many SSA countries for the makers and enforcers of scale; the enclave technical approach for countries on the laws to consider themselves above the law. low end; and a hybrid of the previous two approaches for - Patrimonial pay and incentive systems. In the patrimonial countries in between. state, political and personal loyalty are rewarded more than merit. Politicians and bureaucrats use the state to Comprehensive institutional approach reward themselves and their supporters. Public bureau- cracy thus becomes a very attractive form of employment The aim of the comprehensive approach is to effect the and a source of bureaucratic rents-hence the resistance structural and functional changes needed to correct patri- to retrenchment programs. monial distortions in the institutional environment, the * Disabling regulatory burden on private sector development. incentives framework, and the performance of core gov- The combination of the patrimonial state and the absence ernment functions. The different components of the re- of the rule of law puts the average entrepreneur at the form are those described above in the analysis of the mercy of the political elite and of bureaucrats. Thus, patrimonial environment. Sectoral Adjustment Loans entrepreneurs use their wealth either to buy into the elite (SECALs) would be used to support the above reform. echelons and thereby gain access to rents-becoming ac- The comprehensive approach would be appropriate not complices or fronts for bureaucratic capitalism-or to only for a country that is on the high end of the protect the wealth. patrimonialism scale (for example, Zaire) but also for a * Distorted resource mobilization. The patrimonial system country starting anew (Eritrea). The major benefit is the leads to tributary and regressive tax and customs systems building of long-lasting and sustainable institutional ca- that spare the rich and powerful (through exemptions, pacity in the public sector. The major drawback is that evasions, and so on) and drain the poor. Studies indicate the approach tackles complex and difficult issues-incen- that the developmental impact of improved resource mo- tives, institutional reform, governance-that will take a bilization and tax administration is far greater than the long time to resolve. traditional retrenchment program included in the SALs, and that it comes at a substantially lower social and Enclave technical approach political cost. In one example, the loss from the regres- sive policies amounted to 9 percent of gross domestic In countries with a low patrimonial profile, problems ham- product (GDP). pering civil service efficiency are more managerial and * Bureaucratic budget management. Despite the existence technical than environmental. Patrimonial distortions are of economic and financial allocation criteria, budgetary either nonexistent or are being resolved. The aim there- authorizations and appropriations, as sanctioned by cabi- fore is to build and reinforce organizational, managerial, nets and legislatures, generally reflect the relative power and technical capacity to improve the performance and of the bureaucratic elite rather than the economic priority productivity of existing institutions. Botswana provides a of funded programs. Serving the military and vocal inter- good example of a successful enclave. A variation on the est groups takes precedence over supporting important enclave approach is the removal of tax and customs ad- economic projects and programs. ministration from the civil service. Tax and customs ad- ministration becomes the function of an independent The civil service reform package agency or authority, managed by nationals who are not civil servants, but rather are contract employees whose pay and conditions of service are linked to performance. Design of a reform program that would take into account This approach has been adopted in Ghana and Uganda. the above issues would be in two phases. A first, upstream A similar enclave operation is being prepared in Cape phase would focus on assessing the institutional environ- Verde. Free-standing TALs constitute appropriate lend- ment to determine the patrimonial profile of a country; ing instruments in this case. Loans should include perfor- high, low, or in-between. This phase would be most ap- mance evaluation systems, however, to link employment propriately addressed as part of the upstream economic and pay to merits. and sector strategy work. A second, prescriptive phase Unfortunately, the enclave approach has sometimes would determine the nature of the reform package and been used in environments with patrimonial distortions. CIVIL SERVICE REFORM: THE AFRICAN EXPERIENCE 19 The purpose was to build fences to insulate organizations The enclave component would focus on the produc- from the distorted institutional environment in order to tion aspects of service delivery. The approach would be implement specific donor-financed projects; to carry out to shift production and management responsibilities specific core government functions (such as customs); or from the public to the private and other (volunteer non- to ensure the delivery of specific public services. The governmental organizations [NGOs]) sectors, rather resulting enclave entities take the form of donor-financed than to build fences around ad hoc enclave organiza- project management units (PMUs); public enterprises; tions. This would be more in line with the redefinition of management contracts with expatriate exports (for ex- the role of the state, with more focus on provision and ample, DGTEX in C6te d'lvoire, French management of less on production. In contrast to the donor-driven en- Air Afrique); and even direct tutelage by bilateral donors clave approach, the institutions and staff used for the of certain key government economic or financial func- management and delivery of public services should be tions, in exchange for their assistance (for example, cus- local rather than expatriate (AGETIP in Senegal, Ethio- toms). The common denominator in all the above en- pian Airlines). Cost recovery through users fees would clave entities is that they are completely donor-driven be built in to reduce dependence on donors and to en- and donor-dependent-and unsustainable. Ethiopian sure long-term sustainability. The resulting hybrid ad- Airlines, which by all accounts is Africa's leading airline, justment operation would therefore include two major is an interesting exception. It provides quality service components: that compares favorably with international standards, * A sectoral adjustment component to support the removal despite an unfavorable macroinstitutional or macro- of patrimonial distortions in the institutional environ- governance environment. A major difference is that it ment, creating an enabling and accountable institutional relies on local management instead of a transplanted ex- infrastructure for improved performance of targeted core patriate team. government functions. Improving targeted core govem- These contrasting examples of the enclave approach ment functions will require structural changes in the role lead to two conclusions. First, with regard to enclave of the state and its key institutions, rendering it more institutions that are donor-driven and that rely on donor responsive to, and less oppressive of, the public interest; assistance for their effective functioning, the short-temi functional-behavioral changes, through alterations to benefits do not really constitute a solution to the institu- the induction and incentive systems, linking them to tional capacity-building problem of the borrowing coun- performance; and technical-managerial changes to re- tries. Second, with regard to the successful endogenous move distortions in the performance of core govemment enclave institutions, it would be necessary to distill the functions. main lessons from this experience with a view to adapting * A technical assistance component to facilitate the use of them for use in other contexts. the private sector, local communities, and voluntary orga- nizations (NGOs) for the delivery of public services Hybrid approach (health, education, agriculture, and so on). This could include contracting out or management contracts. This The last approach is applicable to countries with an aver- could also include technical assistance to help implement age patrimonial profile. It builds on the strengths of the the adjustment component. preceding comprehensive and enclave approaches, with a few twists. The comprehensive component would be bot- Government commitment and participation tom-up instead of top-down. The starting point would be the identification of one or a few core government func- It is clear that the outlined changes are likely to shift the tions that are critical to the improved performance of burden and costs of the reform to the elite, who were the economic and public sector management, but that are not main beneficiaries of the patrimonial state and its accom- performing well (for example, resource mobilization). The panying spoils and rents. As a result, government commit- assessment phase would analyze the macrogovernance ment to such reform programs is likely to be strong only in and other structural root causes of this poor performance new regimes that have just come to power (through demo- and recommend an appropriate reform program. Recom- cratic or other processes) and that will be looking for ways mended changes in the macroinstitutional environment to distance themselves from their predecessors. Regimes or in macrogovernance, and in pay and employment, that have been in power long enough to benefit from the would then be considered-as a means to achieve im- patrimonial system are likely to resist the reform. In these proved performance in the targeted core government func- cases commitment must be fostered through forceful le- ;ns, not as an end in themselves. veraging from donors. 20 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Sequencing that focuses on only one or two components, will depend on where the administrative profile of the country fits on The design, development, and implementation of the pro- the scale of patrimonialism. The ultimate goal is to move posed administrative adjustments operations will clearly be away from a patrimonial bureaucracy where the emphasis is a labor-intensive and long-term process. This raises the is- on control and the exercise of power as instruments of ex- sue of sequencing and comprehensiveness. Clearly, the change, to an administration where emphasis is on the de- choice of a comprehensive program that covers all three livery of services needed for development and on providing levels of reform, or a more scaled-down, hybrid program rewards or sanctions that reflect merit and performance. CIVIL SERVICE REFORM: THE AFRICAN EXPERIENCE 21 Public Bureaucracies in Developing Countries: Ten Paradoxes Moises Naim Civil service reform is one of many burning issues in those few simple and relatively modest changes that pub- development that are long on diagnostics and short on lic bureaucracies are capable of implementing. Outside prescription. It is often quite easy to identify public bu- pressures, resources, and change agents have often been reaucracies that are not working and to note how such powerful catalysts for positive reform. The point is that defective public sector organizations hinder development prescriptions about civil service reform have to be based and perpetuate poverty. However, good ideas about how on a deeper understanding of the determinants of public to upgrade devastated bureaucracies are much more sector malfunction in developing countries than we seem scarce. Increasing salaries, recruiting better people, fight- to have today. ing corruption, enhancing training, tightening controls, The performance problems of public bureaucracies improving accountability, installing a merit system, de- result from a complex blend of political, economic, cul- centralizing, streamlining procedures, privatizing, or even tural, and organizational factors, thus limiting the effec- "reinventing govemment" are some of the good ideas tiveness of solutions that are inspired by only one of these that, if effectively implemented, could improve perfor- facets but ignore the others. For example, eliminating mance in the public sector. Unfortunately, in many devel- political influences in the recruitment and promotion prac- oping countries, such means of reaching utopia-that is, a tices of a public hospital may be a necessary condition for more efficient government-are themselves utopian. improving its performance. But without also changing the In most developing countries, public sector organiza- hospital's organizational culture, increasing its resources, tions have been so severely damaged by decades of abuse, and overhauling and modernizing its standard operating neglect, congestion, and corruption that many have great procedures and managerial practices, depoliticization difficulty performing the tasks for which they were cre- alone is not enough. It may even lower performance. ated. In some cases, their "core" tasks tend to be simpler Conversely, making more money available for a pub- to perform than those that are commonly prescribed as lic hospital without making sure that the additional funds solutions to their organizational problems. Upgrading the will not be appropriated to unions, private vendors, and capacity of an institution often requires more skills and the web of small groups that under the protection of resources than those needed just to run it. politics manage to steer decisionmaking in their favor, For example, establishing career plans, restructuring, would also be useless. The same holds for managerial or streamlining operations may indeed upgrade these insti- prescriptions that fail to take into account how the absurd tutions. But the impediments to the successful adoption of and wasteful managerial practices often found in public such means are so enormous that they make such solutions bureaucracies are rational responses to the political, cul- no less utopian than the ends at which they are aimed. tural, and economic environment in which the organiza- Writings on civil service reform in developing coun- tion has to operate. tries often suffer from this "utopian-means," offering pre- scriptions that, while obviously good ideas that merit at- Ten doxes tention, are typically very difficult to implement. A good para idea that is very difficult to implement is, after all, not that good an idea. This should not be taken to mean that The search for novel and useful approaches to upgrade proposals about civil service reform should be confined to the public sector will have to incorporate explanations for 22 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN some of the recurrent paradoxes that are common to ingly difficult, throughout the 1970s and 1980s they en- almost all of Latin America's public bureaucracies. The acted more and more policies whose implementation- following ten paradoxical characteristics of the region's and success-crucially depended on interagency coordi- public sector offer interesting avenues for further explora- nation. The less governments are capable of coordinating tion into the nature of the problems. themselves, due to weak interagency coordination or al- The first paradox is the debilitating effect that ex- most nonexistent central coordination capacity, the more pansion of the state has on state power. For decades, prone they seem to be to adopt policies that are depen- Latin American states sought to improve their perfor- dent on interagency coordination-sharing information, mance and that of their public sector by expanding their closely monitoring each other's functions, and effectively scope of activities and through constant additions to the taking their interdependencies into account in their list of tasks for which they were directly responsible. Con- decisionmaking. trary to their intentions, this rapid and intense diversifica- The sixth paradox is that the state seems better able tion effectively weakened the public sector. This phe- to attract and assign talented public servants to the easier nomenon is now well documented. The social debacles jobs than to the tough ones. It is easy to get a competent that resulted from public sectors that were too busy man- public administrator to manage a state-owned enterprise, aging steel mills, airlines, and hotels to pay adequate for example, but difficult to get a competent person to attention to health or education have been well analyzed. work in the Ministry of Education or Ministry of Health. The second, closely related paradox is that, often, Thus, throughout Latin America there is a great contrast the more overstaffed an agency is, the more congested it between the heads of the ministries of finance or economy, tends to be. Many agencies seem to suffer from a chronic or the chiefs of state-owned enterprises, and the people in incapacity to offer timely and adequate responses to the charge of the most crucial and difficult tasks of providing needs of the public. Such congestion is frequently dealt education, health, and social services. with by increasing staff size. But adding staff seldom re- It is easier to be successful as the president of a state- sults in more operational slack. Such agencies are nor- owned company than as the head of a municipal garbage mally overwhelmed by requests to do things for which collection department. Again, this has a great deal to do they lack the necessary resources and capacity. with the lack of proportion between authority and re- The third paradox is that the more regulations, rules, sponsibility. The president of the state-owned enterprise and legal frameworks-reglamentos, in Latin America- has more resources, people, tools, and institutional back- there are, the less control there is, and the weaker that ing than the manager in charge of collecting garbage in a control tends to be. The system is, of course, more rigid, Latin American city. but at the same time, easier to undermine. In the quest to The seventh paradox is that turnover rates seem to control corruption, the public sector has been burdened be inversely proportional to hierarchical levels. The higher by so many controls and restrictions that its operating in the hierarchy an individual is, the greater the probabil- capacity has been severely impaired. At the same time, ity that he or she will have a short tenure. There seems to such excessive controls are rarely effective as tools to be a dual system in which turnover is much higher at the reduce corruption. the upper and middle levels than at the lower levels. The fourth paradox is that the higher the responsibil- The eighth paradox relates to the decentralization ity of an individual, the less authority he or she has. The that the Latin American and Caribbean region has been lack of proportion between responsibility and authority is undertaking, along with the rest of the developing world often appalling. By authority I mean not only power, but and even the post-communist states. Decentralization in the resources and tools that people need to perform their Latin America is happening in different stages and is functions. This issue is related to congestion and to the driven by two different forces-managerial and political. increasing inability of many of the region's public institu- Managerial decentralization occurs when, after analyzing tions to achieve the goals for which they were originally a public function, it is decided that the way to improve created. An audit of Latin American public agencies would capacity and performance is to decentralize. Although probably reveal that a large number of them cannot, for a this measure is often valid and effective, it is also fre- variety of reasons, effectively perform their central tasks. quently hampered by faulty implementation. Typically, a Tragically, there is evidence that this incapacity is more new organizational chart is drawn. Then the logo, institu- frequently found in agencies charged with delivering the tional symbols, titles, and job descriptions of the organiza- public services more intensely utilized by the poor. tion are changed. And the illusion of a new organization The fifth paradox is that, although governments have is created. But out in the field and in daily operations, the been finding the coordination of their activities increas- organizational culture continues exactly as it was. In fact, PUBLIC 8UREAUCRACIES IN DEVELOPING COUNTRIES TEN PARADOXES 23 altering pattems of behavior and routines that people The point then is that although decentralization may have been following for years, and for which in many have positive political and administrative impacts, it is cases there are powerful-and implicit-political and eco- difficult to implement. In the short run countries may see nomic motives, is very difficult. the performance of their public bureaucracies decline as a As a consequence of the periodic attempts at decen- result of badly implemented decentralization programs. tralization, the region has highly fragmented public sec- The ninth paradox is that despite ample opportunities tors. Truncated decentralization episodes have left orga- to learn from past experiences, public organizations, nizations with organizational charts that blend old overburdened with repetitious tasks and problems, tend to organizational forms with various changes implemented repeat mistakes. There is much evidence that public organi- in successive decentralization efforts-resulting in a hy- zations in the region, and probably elsewhere as well, suffer brid that no one had planned. These organizations can be from profound learning disabilities. In order to understand likened to an old house in which once you start peeling what causes the public organization's impaired learning the paint off the wall, you discover several layers reflect- capacity, it is important to go beyond denouncing it. ing different attempts to remodel and modernize the The tenth and last paradox is what I have referred to house. Similarly, once you peel away the layers in most as the paradox of the forgotten price. One of the main public agencies in the region, you find different organiza- goals of the macroeconomic reforms and attempts at eco- tional charts-the results of different attempts, begun as nomic liberalization that are taking place around the world new governments and new managers came in, to give new is getting the prices right. These reforms aim at setting an life, new meaning, a new name to the organization. Each exchange rate to reflect market realities, getting the prices attempt at reform is superimposed on the previous one. right for goods and services, and getting the interest rate And many reform attempts are abandoned halfway right. But there is one price that people pay little attention through because conditions have changed or the person to-the price paid to those in charge of getting the rest of who initiated them has left his or her position. Normally, the prices right. organizational changes take much longer than the tenure The background materials for this conference pro- of those responsible for them. vide useful statistics on wage compression in the civil The other force driving decentralization-one that is service and the lagging salaries for higher-level public more recent and much more intense and important-is servants. Reforms have worsened salary conditions in the political. Many countries around the world, including in public sector. Historically, there has been a gap between Latin America, are moving toward a new federalism. Every public and private salaries, but reforms have wrenched region and city has constituencies seeking greater autonomy open that gap. Economic reforms increase opportunities from the traditional center. This movement toward decen- in the private sector and therefore increase the demand tralization and regionalism has been rapid as a result of the for managers, thus pushing up their salaries. At the same deepening of democracy in the region. Democracy always time, reforms in the public sector call for fiscal austerity, increases participation and the need for people to have a which tends to erode salaries, since inflation is normally greater say at the local level. As a result of these changes, the higher than wage adjustments. So, at the same time that region is moving away from a highly centralized national reform creates all sorts of incentives in the private sector and administrative organization to one that is much more for competent managers, it inhibits salary opportunities decentralized and in which power is in the hands of gover- for competent managers in the public sector. nors, mayors, councilmen, and city officials who have been directly elected by the citizens of that locality. Conclusion In the long run, decentralization is bound to have a positive net effect, but there is increasing evidence that in the short run it is weakening the capacity of the state to As noted above, there are three general ways of tackling deliver public services. There is increasing evidence, for some of the problems implicit in these paradoxes. The example, that the decentralization of educational services first is the managerial-technocratic approach: if there is decreases their effectiveness in the short term. It is easy to salary compression, analyze it, look at the statistics and imagine that this is also happening in other areas. Decen- the comparators, and develop an appropriate framework tralization does, of course, have consequences for the to correct the distortions. The second approach, which fiscal aspect of reform; the experience of Brazil in this for lack of a better name can be called the economic respect is well known. The decentralization of public fi- approach, is driven both by fiscal considerations and a nances there has made it difficult to bring the country's preoccupation with competitiveness, and the need to in- fiscal stance under control. ject more competition into private and public sector sala- 24 clwil SE['VICE RLiORMtJ114 AT'N AMeRICA1ANP rFIE CARJBBEAN ries and labor markets. The third is the political ap- reform. To undertake this kind of institutional reform- proach, which essentially asks what the political determi- and here I will indulge in some "utopian-means" prescrip- nants of the problems are and what determines whether tions-it is important to begin to attract more talent to there is the political will to achieve effective reform in activities related to civil service reform, not to mention a the public sector. desperate need to upgrade the quality of the agencies in To conclude, it is perhaps useful to note several charge of public sector human resources. issues that will concern us in the future. 1. is easy to This approach will not be sufficient, however, if more predict that in the same way that the mid- and late 1980s and better knowledge does not become available. And and early 1990s became the era of macroeconomic re- more and better knowledge will not become available forms and economic shocks in Latin America, the late unless: (1) the managerial-technocratic approach, the eco- 1 990s and beyond will be the era of institutional shocks nomic approach, and the political approach to these prob- and institutional reforms. As is often noted, the easy part lems are integrated; and (2) greater efforts are made to has been accomplished. The decree-driven reforms that develop more comprehensive frameworks and more reli- have been carried out nearly everywhere were politically able instruments to deal with these problems. This, in turn, traumatic and socially painful, but administratively very will depend on a coherent, systematic, and sustained effort easy; all that is needed to devalue the exchange rate or at consciousness-raising-convincing our govemments liberalize prices is the stroke of a pen. that investment of effort in macroeconomic reforms will be To upgrade education or improve the delivery of wasted if similar effort, talent, and funding are not invested health care services will require a much more complicated in the institutional reform of the state. And this will process of reform. We have hypotheses and some experi- require attracting and retaining the best talent available to ence in this area, but we lack strong theoretical frame- deal with the complex tasks on which all the states in the works that can guide us through the maze of institutional region will embark in the coming years. PUBLIC BUREAUCRACIES IN DEVELOPING COUNTRIES: TEN PARADOXES 25 Civil Service Reform in Japan T J. Pempel The Japanese civil service has consistently demonstrated there has been a series of more visible, periodic efforts to several traits that make it an appealing object of study to examine and reorganize the civil service, efforts that fit administrators in other systems. Several attributes de- more traditional definitions of administrative reform. serve highlighting. The Japanese civil service has con- tinuously attracted high-quality personnel. Japanese civil Annual constraints on servants generally perform at high levels of competence throughout their civil service careers, and their activity agency spending pattern is characterized far more by action, initiative, and creativity than by inaction, inertia, and routine. The annual budget limits set by the Japanese Ministry of Japan's civil servants enjoy high prestige throughout the Finance (MOF) provide one of the most important con- country, and competition for civil service positions is trols on Japan's administrative and civil service costs. The intense. MOF has been able, throughout most of the postwar In addition, the Japanese civil service is widely recog- period, to establish and maintain limits on the total na- nized for the efficiency with which it performs its func- tional budget and on the annual budget requests of each tions. It is frequently seen as among the most powerful agency. and effective organizations in Japani and as a major con- Japan's constitution provides that the cabinet pre- tributor to the nation's internal cohesion and its long- pare the national budget. But in accord with the Finance term economic growth, although there is some disagree- Law, and in practice, the MOF performs most budgetary ment over its specific contributions. work and oversight. Japan's budgetary process runs on an Perhaps most intriguing about the Japanese civil ser- annual cycle. Just after the beginning of each fiscal year vice, however, particularly in the light of its high quality, (April 1), Japan's agencies and ministries are required to is its relatively small size,z its generally low cost of opera- lay out their budgetary requests for the next fiscal year. tion, and its frequent administrative reforms, including What is most important about this process for our pur- downsizing. poses is that each agency must keep its requests within As I will attempt to demonstrate, there is a connec- total spending limits set by the MOF and may not re- tion among all of these attributes. The continual reform quest an increase that exceeds a percentage that the measures, and the fairly constant efforts to limit the size of MOF specifies. the civil service, have led far less to defensiveness and Once these broad outlines are submitted, generally in self-protective adherence to routine by Japanese civil ser- September, officials from each agency must defend their vants than to self-confidence, esprit de corps, and willing- proposed figures before the MOF's Budget Bureau and its ness to work with exceptional vigor. Rather than under- budget examiners on a line-by-line basis. Further negotia- mining efficiency and morale, administrative reform has tions follow, including some that involve elected officials, enhanced them. but the end results rarely stray far beyond the MOF limits. Two characteristics of Japanese administrative re- From 1960 to 1964, the MOF set generous limits. form deserve particular attention. First, the annual Japa- Agencies were permitted to request up to 50 percent nese budgetary process builds in an ongoing, inconspicu- more money for the next budget year than they were ous process of reform by agencies and ministries. Second, currently receiving. In 1965 the permitted increase was 26 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN reduced to 30 percent, and from 1968 to 1975, with one limits; how these limits are met is left primarily to the exception, it was 25 percent. agencies themselves. Japan's strong economic growth, at 10 to 11 percent This approach plays effectively to the deeply en- or more annually, made these generous annual increases trenched sense of agency solidarity and loyalty that per- possible and also made it easy for the MOF to meet them vades the civil service. Virtually all high-ranking civil through the natural growth in tax revenue. Yet the limits servants spend their entire careers within a single agency allowed the MOF to control the expansion of the budget (with occasional temporary detachments). As a conse- of each ministry and agency and, thus, to control the quence, an individual's principal loyalty is to the overall budget and ensure, until 1965, a balanced budget. agency-rather than to such abstract principles as "an The cap for budget increases was tightened further effective civil service" or "fiscal responsibility." And be- during the second half of the 1970s, to about 15 percent, cause of their long tenures, agency officials are in the best and since then, the restrictions have been vastly more position to know their agency's most (and least) pressing stringent as part of the much broader administrative re- needs and roles, and thus where to expand and where to form effort. During most of the 1980s and early 1990s the cut in order for their agency to remain within the overall MOF cap on requests for budget increases has generally MOF guidelines. been about 1 to 2 percent a year, and for several years it was zero or slightly negative (Kato 1991, table 2.1). Periodic administrative The Ministry of Finance adheres quite tightly to its outer limits on budget requests. An agency whose budget- reform programs ary needs for a program or programs would drive its bud- get beyond the MOF cap must therefore identify other In addition to the ongoing MOF oversight of ministries activities that it is willing to cut back within the MOF and agencies through fiscal controls, the Japanese civil limits. The budgetary process thus compels each agency service has been subject to periodic national reform mea- to continuously reassess its missions, organization, and sures on several occasions. The first such effort during the personnel use at least once a year. The tight budgetary postwar period involved the imposition of reforms by the constraints go a long way toward overcoming any ten- American occupation forces. Because the changes were dency among agencies to expand their activities and bud- induced by an external agent, they are not easily repli- gets without reassessing the value of past or ongoing ac- cated in most "normal" situations and therefore will be tivities. Japan's budgeting process has made certain basic treated only briefly. At the same time, the reforms were administrative reforms automatic. congruent with, and have been paralleled by, subsequent The process works for two related reasons. First, the domestic initiatives. In this sense the occupation reforms Ministry of Finance has long had, and continues to main- at least deserve mention as an early element of the set of tain, nearly absolute control over the basic outlines of the norms and goals that have pervaded Japanese reform ef- budget, including the annual budgetary cap. Japan's forts over the past four decades. The other two efforts, elected officials have traditionally been willing to defer to begun in 1961 and in the early 1980s, were initiated and the MOF on budgetary matters. Thus, the Ministry of implemented by the Japanese government but were com- Finance serves as an outside policeman, effectively forc- patible with many of the occupation reforms. ing agencies to continually assess and streamline their roles, missions, and spending patterns.' That the impetus U.S. occupation reforms for reform comes from the outside makes the reform more palatable. Furthermore, because the MOF applies the Broad reforms of the Japanese civil service were under- annual budget cap equally to all agencies, it creates an air taken under the U.S. occupation (see Pempel 1987). of fairness and nondiscrimination that contributes to the Following the initial structural changes, the Americans agencies' acceptance of the cap. unleashed a substantial and somewhat separate effort at Second, the details of implementing agency budgets systematic downsizing that was ultimately implemented are left to the agencies. Ministry of Finance officials are by the Japanese government. The proposed downsizing quick to discuss options for policies, personnel utilization, was part of a larger effort to reduce government expen- and budget allocations with agency officials, but they ditures at a time when Japan's economy was only begin- rarely seek to impose specific programmatic solutions that ning to recover from the devastating effects of the war would involve expanding program A at the expense of and inflation was rampant. Personnel costs had soared program B, or cutting bureau C to allow for an expansion between 1931 and 1951 as the number of personnel in of bureau D. The MOF simply sets the outside budgetary Japan's national government jumped from 591,000 to CIVIL SERVICE REFORM IN JAPAN 27 1,400,000 and personnel in the prefectural and local Among other things, it was charged with helping to stem governments increased nearly fifteenfold, from 90,000 to the increases in personnel that had begun almost immedi- 1,300,000. ately after the occupation reforms had been enacted. It The reforms targeted about 30 percent of the bureaus was also charged with encouraging the Japanese minis- in each agency for elimination, along with some 300,000 tries to take advantage of new innovations in technology government positions. The most substantial cuts came in and management that had been adopted in the private the National Railways Corporation, the postal services, sector. The council also undertook reforms designed to and the National Telegraph and Telephone Corporation. encourage administrative flexibility, simplify procedures, The proposed cuts conflicted with protective provisions and improve coordination among govemmental agencies. of the existing civil service regulations. To bypass the Most of the council's proposals were directed toward the protective legislation, the government set legal limits on civil service as a whole rather than individual ministries the number of personnel that each agency and ministry or agencies. could employ. As a result, the process was highly contro- The council made a wide range of proposals. Many versial and widely seen as unfair and politically motivated were adopted, but many more foundered for lack of sup- by those who lost positions, and by the public sector port from both the civil service and the broader society. unions more generally. Of the measures that were carried out, several warrant For our purposes, at least two things about the U.S.- special attention. The first proposal accepted, in Septem. initiated actions are noteworthy. First, a substantial ber 1964, was to freeze all vacancies for an eighteen- downsizing took place despite the countervailing pres- month period. Agencies were required to file quarterly sures of civil service regulations and the then strong pub- reports listing their vacancies with the Director General lic sector union movement. Second, an important tool in of the Administrative Management Agency. Any excep- making the changes possible was the establishment of tions to the policy against filling vacancies had to be legal limits on the number of personnel that each govem- approved by the Director General.4 ment agency could hire. The second step had an effect In 1966 and 1967 the freeze was expanded, and by similar to that of the annual budget increase caps: it the end of 1967 some 15,000 vacant positions had been allowed agencies to determine their own priorities in per- created. About half of these were allowed to be filled to sonnel use and organization within strict, externally de- meet new needs, for a net savings of about 7,500 positions. termined limits on totals. The freeze was hardly popular in the civil service, but The agency-by-agency cap on personnel prevailed it enjoyed a degree of support because it was evenhanded until the late 1960s. Throughout this time, it worked with regard to all agencies and it achieved reductions against any broad national personnel shifts and made it without explicit dismissals (in contrast to the controver- difficult to respond to changing needs by, for example, sial firings under the occupation-initiated policies). And reducing the number of government personnel in agricul- because the freeze required agencies to meet their chang- ture so as to expand the number in science and technol- ing priorities through internal reorganization and reallo- ogy. But the reforms in the 1960s replaced the individual cation of existing personnel, it met the objective of pre- caps with a more comprehensive law fixing the total num- venting expansion of the civil service. ber of national government personnel and allowing agency A shortcoming of the freeze on positions, however, numbers to be fixed through the simpler process of an was that vacancies and reallocations could not be easily ordinance, building far more flexibility into the system. utilized across ministry lines because of the laws fixing the number of personnel for each agency. To overcome this The "first" administrative reform effort shortcoming, the Law Concerning the Number of Person- nel in Administrative Agencies (the S6teiinh6) was In November 1961 another major administrative reform passed in 1967. This law simply limited the total number effort began at the initiative of Prime Minister Ikeda. of government personnel and allowed the use of much With the support of all political parties except the Japan more easily adjusted government ordinances to allocate Communist Party, Ikeda created the (First) Provisional the national quota among agencies and ministries, consis- Council on Administrative Reform (sometimes known as tent with changing social needs. At the same time, when FPARC), an external advisory body overseen by the Ad- the law took effect, the personnel strength of each gov- ministrative Management Agency, which was then under ernment agency was fixed at the number it had following the Office of the Prime Minister. the freeze of vacancies, institutionalizing the reductions. The council, which met for three years before issuing The law fixed the total number of nonmilitary govem- its final report, was given a broad mandate for change. ment personnel at just over 506,000 (exclusive of em- 28 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN ployees in public corporations, who made up an addi- Administrative reform in the early 1980s tional 340,000). Another important element of the reform was the Japan's most ambitious reform efforts are those that began cabinet's decision in December 1967 to eliminate one in the early 1980s. These were linked to efforts to reduce bureau from each of the government's main agencies or sharply Japan's growing reliance on deficit financing and ministries. Which bureau to eliminate was again a deci- to reinforce the country's commitment to small govern- sion left to each agency. The measure was considered ment and to market incentives. Until the 1970s Japan's irrational because it removed a bureau from each agency government expenditures (including both local and na- regardless of its size, and it completely disregarded chang- tional govemment agencies) had been stable, at about 20 ing social needs and how these might be reflected in percent of its gross national product (GNP), but during different agencies (japan, Gy6sei Kanri linkai 1968, pp. the 1970s they expanded to nearly 35 percent of GNP. 56-57). Yet it was widely accepted in the bureaucracy, The bond-dependency ratio rose sharply in the mid-1970s, again primarily because of its evenhandedness and be- and massive debt-servicing costs became an accepted part cause the important implementation decisions were left of the annual budget.6 to the agencies. The measure led to a reduction in the The key instrument advancing Japan's administra- number of central govemment bureaus from 120 to 102. tive reform was the Second Provisional Administrative Still another feature of the reform was the automatic Reform Commission (SPARC), created by then Director 5 percent cut in each agency's personnel over the period General of the Administrative Management Agency (and 1969-71. These cuts were achieved almost exclusively later Prime Minister) Nakasone Yasuhiro in March 1981. through retirement, death, and other forms of natural Picked to head the SPARC was Doko Toshio, a business attrition. All the positions cut went into a central "posi- elder who had earlier served as chairman of Japan's most tion pool" from which agencies needing additional per- powerful business lobbying group, the Federation of Eco- sonnel could request supplements to their existing per- nomic Organizations (Keidanren). Doko's austere life- sonnel structures. The agencies had to compete for the style and reputation as a man of high moral character positions with all other agencies, however, and all agency lent particular credibility to his role and frequently left requests were evaluated in comparative terms. About half his critics open to charges of selfishness and lack of con- of the pooled vacancies were reallocated to meet new cern for the national well-being. Staffing the commission needs. The automatic cuts led to a total reduction in were many close allies of Nakasone, which gave it added personnel of about 2.5 percent and a substantial realloca- political clout. Throughout the commission's delibera- tion of authorized personnel among agencies. tions, both Nakasone and Doko provided particularly A series of modifications during the 1970s expanded valuable assistance in promoting its goals and deflecting some of these measures, generally through further reduc- its opponents. tions in the allocations of personnel to individual agencies The commission met over a three-year period, during and their movement to the central personnel pool. These which time it issued five reports containing proposals on measures not only curtailed the increase in national gov- reform. It encouraged the implementation of its proposals emment personnel, but cut the total number of personnel while it was still in session, a strategy that allowed it to from nearly 900,000 in 1967 to 887,000 in 1983, a reduc- continually assess the acceptability of its proposals, and to tion of some 12,300 people.5 adjust its positions and proposals to the changing re- Virtually all government agencies saw some reduc- sponses of the media, the government, and the public. tion in their personnel during this period. Several areas The commission's first set of proposals, issued in July had substantial increases, however, such as national uni- 1981, focused on fiscal measures, including reductions in versities and national hospitals, and new agencies were government subsidies, in personnel and govemment ex- created, including the Environmental Agency, the Land penditure, and in the number of public corporations. Its Agency, and the Natural Resources and Energy Agency. second set of proposals targeted a rationalization of the Among the agencies losing substantial numbers were the government approval process. In July 1982 the commis- Ministries of Agriculture, Forestry and Fisheries, and Con- sion issued its third set of proposals, which outlined a struction, and the Prime Minister's Office. comprehensive philosophy of administrative reform. The Thus, capping the total number of civil servants did philosophy called for the establishment of a Comprehen- not prevent the Japanese government from accommo- sive Administration Agency and the privatization of many dating changing social needs. It met those changing public corporations. The fourth report described tasks to needs through internal reallocation rather than simple be completed after the commission finished its term. And expansion. the fifth and final report laid out the commission's basic CIVIL SERVICE REFORM IN JAPAN 29 philosophy and set out guidelines for maintaining ongoing Perhaps the most important contribution to the insti- administrative reforms in a host of areas, including agri- tutionalization of administrative reform in Japan has been culture, energy, science and technology, education, diplo- the publicity given to the efforts of the SPARC and to macy, and taxation.7 later reform efforts. There appears to be a widespread The commission's reports made rather sweeping pro- public commitment to maintaining a relatively small civil posals. But some pertain specifically to administrative re- service and to regularly examining the inner workings and form. First among these are their proposals for fiscal re- the overall rationale of the civil service. Administrative form aimed at reducing the national deficit. Central to reform will likely continue to be a regular item on Japan's deficit reduction was the zero growth ceiling for the na- political agenda. tional budget initiated in 1982 (see section on annual spending constraints). Under the aegis of administrative Administrative reform and civil reform, the growth rate of expenditure in the General Accounts Budget was reduced to 1.8 percent in fiscal service quality 1982, to 0 percent in fiscal 1983, and to -0.1 percent in fiscal 1984 (Itoh 1993). In the introduction I suggested that Japan's ongoing ad- Several other reforms were also instrumental in the ministrative reform efforts and its cap on personnel and deficit reduction. First, a 3 percent national sales tax was budgetary expansion have had the somewhat surprisingly introduced, a step that was pushed by the Ministry of positive effect of enhancing the quality, loyalty, and per- Finance and endorsed by the political leadership. formance of the country's civil servants. Assessing such Second, in 1984 parts of the Prime Minister's Office characteristics as quality, loyalty, and performance is ob- and the Administrative Management Agency were com- viously both complex and subjective. But at least the bined to form the Management and Coordination Agency. outlines of the links of these characteristics to administra- This new agency gained oversight responsibility for a range tive reform efforts can be sketched. of managerial and administrative reform activities at the One logic of bureaucratic power suggests a material- level of the national government. It has since acquired istic imperialism model: agency heads seek to expand responsibility for instituting the ongoing administrative their budgets, the number of personnel they control, and reform efforts. any other tangible resources. According to this logic, Third, a series of privatizations took place. These power is contingent on an expansion of the material re- involved several of Japan's largest (and costliest and most sources controlled; the happy bureaucrat is the one whose inefficient) public corporations, including the Japan Na- material resources are expanding.8 tional Railways UNR), Nippon Telegraph and Telephone The Japanese experience suggests a very different (NTT), and the Japan Tobacco and Salt Corporation. logic. As material resources become scarce, those who Fourth, the public pension system and the health control them become more powerful and gain greater insurance program were overhauled. These reforms made psychological satisfaction and greater status. In Japan, important contributions to reducing the national deficit because there are relatively few senior civil servants, hold- and slowing the increase in government expenditures. ing a senior government position adds to one's personal The public pension reform consolidated a variety of pen- prestige. Tight competition for positions and promotions sion programs into a two-tiered plan that combined a prevails in the Japanese civil service. Thus, merely getting basic minimum government pension for all citizens with a a position carries with it tremendous psychological re- wage-related supplementary pension. ward. So does being promoted earlier than one's col- In addition to any inherent merits they might have leagues and competitors, which conveys a message that had, the privatization of public corporations and the sim- an employee's superior perceives him or her as being of plification of the health insurance and public pension greater quality. Good performance throughout one's ca- programs went a long way toward reducing the demand reer ensures quicker promotions, better career positions, for more government personnel. and, ultimately, a better post-career position.9 These re- Beyond such measures, the commission reaffirmed sults are not without material rewards, but far more sig- the principle that "there should be no recruitment of nificant are the rewards in administrative power and psy- people to perform tasks and projects which are suitable for chological gratification. consignment to the private sector..." and the country's Meanwhile, the rigid MOF limits on annual budgets broad commitment to the goal of strictly controlling the and on personnel expansion stimulate vigorous competi- total number of employees Japan, Provisional Commis- tion within agencies to retain personnel and other re- sion on Administrative Reform 1984, p. 121). sources, which in turn leads to harder work and a greater 30 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN sense of mission. And the limits on total growth in gov- agencies; and the MOF's annual budget caps, set equally ernment personnel build in competition among agencies for all agencies. that further contributes to creativity in the civil service. * There is a need for some discretion in reallocating The personal and interagency competition in the Japa- positions among agencies. This was shown most clearly in nese civil service introduces many attributes of the mar- the pooling of vacancies during the 1960s. By allowing ketplace. But the system's material stakes are relatively agencies to compete for the vacancies, the government limited; the psychological reward structure is primary. was in a position to reallocate personnel numbers from There is a reinforcement mechanism that works agencies whose missions were decreasing in importance to throughout this process. Attracting high-quality individu- those whose missions were increasing in importance. als with a strong work ethic, a dedication to national * Psychological incentives are an important motivating service, a capacity for deferred gratification, and a willing- force. The continued appeal of a civil service career to ness to be satisfied with psychological rather than mate- some of the country's most talented university graduates, rial well-being helps fuel and reinforce the power of the despite frequent downsizings and caps on budgetary and entire reward structure. But the process feeds largely on personnel expansion, suggests that administrative reform itself. Once such individuals are in place and in competi- and quality performance and personnel may be mutually tion with one another, and once the entire civil service is reinforcing. infused with such a reward structure, administrative re- * It is important to institutionalize administrative reform forms of the type Japan has made can have a positive, and to integrate the goals of downsizing and privatization rather than a negative, role in improving the quality of as permanent features of the entire civil service. It is far the civil service as a whole. It is impossible to imagine easier to implement administrative reform once a positive such a system working in any positive way if the primary track record of reform and of fairness in its implementation motivation for an individual to join the civil service is has been established. In Japan this has clearly depended simply to acquire a stable, undemanding job, long-term heavily on a political and economic system that is deeply security, and a lucrative government pension at the end. committed to the principles of small government and the private sector. At the same time, the Japanese experience Lessons shows that such principles are not incompatible with effec- tive and personally rewarding public service. The Japanese experience with administrative reform of- Note fers several lessons. - An outside agency should be the initiator and arbiter of reform efforts. This was made clear in several cases: the 1. For most of the postwar period, there have been roughly Ministry of Finance's control over annual budget caps; fifteen to twenty candidates for each senior civil service posi- the U.S. occupation forces as the agent of personnel cuts tion; during the late 1970s and early 1980s there were more than in the late 1940s and early 1950s; the first and second thirty candidates per job, with a high of 42.7 reached in 1978. administrative reform commissions; and especially Doko 2. Japanese government employees accounted for 7.9 per- and Nakasone a ste keyagentsof reform inand thpea midO cent of total employment in 1990; this compares to 15.5 percent and Nakasone as the key agents of reform in the mid- for the United States, 19.1 percent for the U.K., 22.6 percent for 1980s. France, 15.2 percent for Germany, and 30 percent or higher for * Agencies should be allowed discretion in achieving the Scandinavian countries (OECD 1991, p. 74). broad reform goals. Again, the annual budgetary limits 3. This point is made by Reid (1992) with regard to the demonstrate this point. So too did the requirement in the Chilean case. mid-1960s that each agency cut a bureau, with the choice 4. See "On Strengthening the Policy to Keep Vacancies of bureau left to the agency. Another example is the series Unfilled," Cabinet decision, September 4, 1964, Ministry of of mechanisms under which agencies were required to Finance. make 5 percent personnel cuts but allowed to reallocate 5. It is important to note that while the number of national personnel intemally in accordance with their determina- government personnel shrank, there was a parallel expansion in tions of the relative importance of competing roles and the number of local government officials, from 1.8 million in tions of the relatve Importance of competig roles and 1958 to 2.5 million in 1970 to more than 3 million in 1977. missions. Many "less critical" national activities and programs were de- * It is important to treat ministries and agencies fairly. volved to local governments, allowing the national government This was demonstrated through several reforms: the re- to concentrate on higher priorities. quirement that each agency, large or small, cut one bu- 6. AccordingtothejapaneseEconomicPlanningAgency's reau; the application of the freeze principle equally to all Yearbook of National Account Statistics, as cited in Noguchi 1987 CIVIL SERVICE RFFORM IN JAPAN 3 l (p. 196), debt servicing costs rose from 0.12 percent of GNP in Japan, Economic Planning Agency. Various years. Yearbook of Na- 1966 to 0.39 percent in 1970 to 0.62 percent in 1974 to 1.56 tional Account Statistics. Tokyo: Govemment Printing Office. percent in 1978 to 2.94 percent in 1982. Japan, Gyosei Kanri linkai. 1968. Gy6sei kaikakunogenj6 to kadai 7. For the complete report, see Japan, Provisional Com- [Contemporary Situation and Problems in Administrative mission on Administrative Reform 1984. Reform]. Tokyo. 8. An important articulation of this logic can be found in Japan, Provisional Commission on Administrative Reform. 1984. Niskanen 1971. The Fifth Report on Administrative Reform-The Final 9. In Japan most civil servants retire from govemment in Report. Tokyo: Institute of Administrative Management. their early to mid fifties and then go on to careers in related Kato, Junko. 1991. "Tax Policy in Japan." Ph.D. thesis. Yale fields. Government agencies take primary responsibility for University, New Haven, Conn. most post-career placement. As a result, the jobs individuals Niskanen, William. 1971. Bureaucracy and Representative Gov- are capable of securing are closely linked to their talents as emment. Chicago: Aldine/Atherton. civil servants and to their agencies' evaluations of their com- Noguchi, Yukio. 1987. "Public Finance." In Kozo Yamamura parative worth. This structure provides an important incentive and Yasukichi Yasuba, eds., The Political Economy of Japan. to employees to work diligently and maintain loyalty to their Vol. 1. The Domestic Transformation. Stanford, Calif.: Stan- agencies. ford University Press. OECD. 1991. Public Management Development, Annex II. Paris. Pempel, T.J. 1987. uThe Tar Baby Target: 'Reform' of the Japa- References nese Bureaucracy." In Robert E. Ward and Yoshikazu Saka- moto, eds., Democratizing Japan: The Allied Occupation. Itoh, Mitsutoshi. 1993. 'Administrative Reform in Japan." Pre- Honolulu: University of Hawaii Press. pared by the Economic Development Institute (EDI) for Reid, Gary J. 1992. "Civil Service Reform in Latin America: the World Bank's Project on Japan's Civil Service and Lessons from Experience." LATPS Occasional Paper Series Economic Development. 6. World Bank, Washington, D.C. 32 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Selected Discussion Points Moderator: Shahid A. Chaudhry Mr. Chaudhry thanked the morning's keynote speakers Japan and not elsewhere? What other factors determine and welcomed comments in the next twenty-minute open the success of this approach? It is hard to predict what the discussion period. consequences of this approach will be in a specific na- tional context. A. Aratia: I will use as a takeoff point for my comments Second, the issue of outside agencies. External multi- Professor Pempel's theme: lessons to be leamed. One lateral agencies are wonderful catalysts, disseminators of lesson seems to be the importance of psychological moti- comparative experiences, and so on. And governments vators-certainly one of the reasons for the success of the are constantly creating separate entities charged with re- Japanese experience. Another lesson seems to be the use- forming the public service and the state-there is hardly a fulness of an outside agency as a catalyst for change, for country that has not had several presidential commis- getting the reform process off the ground. I wonder sions, blue ribbon commissions, charged with such re- whether there isn't a conflict between these lessons. It form. The problem is that after the first impulse toward seems to me that unless there are motivating elements change these entities often become part of the bureau- within the system itself, civil service reform activities will cracy, and once they become permanent they lose some of remain ad hoc interventions prompted from time to time their effectiveness. Perhaps it is important when involv- by outside agencies. ing an outside agency to limit its tenure. T. J. Pempel: I think I am stealing a point made by Mr. A. M. Osman: In Viet Nam economic adjustment and Shihata when I say that in addition to having an outside the move to a market economy are giving rise to govern- agency as the behind-the-scenes force, it is essential that ment and political perception of the need to change the the agency being reformed have a psychological commit- role of the government and reform the civil service. The ment to and involvement in that reform. The Japanese realization has grown internally, and this is important. experience has shown the efficacy of giving reforming Once this basic understanding exists in a country the agencies a great deal of autonomy in internal restructur- dialogue with multilateral agencies and donors can be ing, budgetary allocations, promotions, and so on. more productive. But when the progression is reversed- that is, outsiders telling a country how it must reform S. Chaudhry: To go a step further, what about the role of without there first being an awareness in the country of multinational agencies or donors in civil service reform? the need for reform-then it becomes very difficult. So How meaningful or relevant are these interactions? multilateral donors must be patient enough to build this internal consensus. M. Naim: First, on the psychological dimension of civil servants, it's hard to argue against the notion that little M. Dia: This is essential. Without commitment, without will be achieved unless the social status of civil servants is ownership, you cannot have success with civil service increased. You do this by recruiting talented young pro- reform or any macropolicy reform. There is really no fessionals early in their careers and giving them a lot of tradeoff between leveraging and ownership. opportunities to do things. But this raises questions. For In the selection of countries for reform programs, it is one thing, how do you do it? And why has this worked in important to have a country where there is some type of SELECTED DISCUSSION POINTS 33 political disruption, where you can build on new govern- tators. This raises questions about program design, costs, ments that are disassociating themselves from the old. It and measuring results. How does the new, qualitative goal is difficult to build commitment among people benefiting of building commitment square with the old, quantitative from the status quo. There has to be a challenge to the goal of achieving measurable results-numbers of projects, system. This has been the case in Zambia, Mali, Madagas- transfers of resources, maximization of inputs? How can car. The key element is building the process workshops you measure the building of commitment, which may take and the iterative process. The program and the process a long time? have to go together. I think this is a challenge-and a cost-we have to accept. Our ultimate objective is the impact we can T. J. Pempel: It is interesting that the Japanese civil have on civil service reform, not the maximization of service is able to get the best and the brightest. There is inputs or transfer of resources, and we have to keep something about public service in Japan that makes it a firmly in mind that an essential part of reform is build- very desirable thing to do. I don't know whether this is ing that commitment. This is new for us-we are in the true in other countries. I'm not even sure all other coun- design stage. I think in a few years we will be able to tries seek out the best and the brightest. offer some insights. The Volcker commission asked organizations like Phi Beta Kappa, Beta Gamba Sigma, and Pi Alpha Alpha (the S. Chaudhry: I would like to ask Dr. Osman to comment public administration society), as well as honor students, on the issues of political will and good governance, and what they felt about public service and what would prompt how they are related. them or keep them from choosing careers in public ser- vice. It was clear that the vast majority of these best and A. M. Osman: The issue of commitment is a tricky brightest had no interest in public service. Reasons they business. You can do all the workshops, you can attract gave were the nature of assignments, the kinds of chal- the presidents and the ministers, and the question re- lenges they would be given, and the opportunities for self- mains: how will you maintain the commitment? In some fulfillment-salary was way down on the list. There is developing countries the list of pressing issues on the something in how the public service is perceived that agenda is so long. .. . It is very easy to get the initial works against getting the best and the brightest to enter commitment, even from the president's or prime it. I think it's a problem not only in the United States but minister's office. And we tend to believe that by having worldwide. consensus at that level we have guaranteed success. But we find out that it is not enough. The workshops are not S. Chaudhry: Recent debate in the World Bank has enough. You must build in a system of accountability. centered on issues of governance. I would hope that in Sometimes, however, we build in external accountabil- our discussions on civil service reform if an aspect of ity-toward the donor community and multilateral agen- governance or economic management or the status of cies-but not internal accountability, which is essential civil society comes up, we would flag it as an important to continued commitment. We are looking for ways to issue. I know from experience that it is possible to focus solve this problem, because all too often, we think we too much on purely technocratic solutions. have commitment, we have a letter from the president, I would just pose Dr. Dia a brief question. In the and four or five months later we find the commitment is context of internal, top-down reform, what has been the not there. African experience? S. Chaudhry: Before we break I would like to ask Dr. M. Dia: At the beginning World Bank efforts in civil Naim to give us a final word. He comes from Venezuela. I service reform were focused mainly on fiscal stabilization have always been intrigued by the fact that every time I as a linkage with IMF programs. The degree of leveraging have visited Venezuela all the ministers, and all the top- from donors was quite high. I think that is now coming level civil servants, have changed. This happens every six back to haunt us. Countries have spoken of our revolving or nine months! How does one reconcile the desire for door policy, the waterbed effect. They have found ways to stronger democratic governments and better-qualified subvert reform because they were not committed to it. leaders in Latin America with such political realities? So we've learned that program design has to be al- How does this political instability square with the goal of most an indigenous process, with the Bank and other achieving a more professional civil service? Can you give external organizations participating as partners and facili- us your thoughts on that? 34 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN M. Naim: Two factors in Venezuela's recent history ex- The second factor has to do with the fact that Ven- plain the volatile situation you have described: oil and ezuela only achieved democracy after suffering a string democracy. Oil generated a lot of income and hence a of dictatorships during most of the 1970s. Politicians buffer that spared politicians and society from having to were willing to make all sorts of concessions to preserve be concerned about achieving a more effective state appa- democracy, and they had the oil money to finance those ratus. Affluence and abundance do not coexist well with concessions. They didn't have to deal with the hard efficiency, effectiveness, and productivity. choices and complex tradeoffs policymakers usually face. SELECTED DISCUSSION POINTS 35 PART 11 Overarching Issues 8 Public Sector Human Resource Management in Latin America and the Caribbean Gary J. Reid and Graham Scott Public sector human resource management policies and felt dissatisfaction and frustration both with the perfor- practices in many Latin American and Caribbean (LAC) mance of public agencies and their employees and with countries need significant improvements. Conversations the legal and institutional framework that appears to un- with professionals and managers within core government dermine individual efforts to manage public agencies and ministries in many Latin American countries reveal deeply their employees effectively. Overview Most Latin American public sectors are bedeviled with This litany of concems about the structure and per- counterproductive civil service policies and practices that formance of civil service systems in many LAC countries impede their efforts to recruit and retain highly qualified highlights the need to take significant steps to restructure employees and motivate them to perform to the best of their and energize those systems. Accordingly, this study offers abilities. Low levels of compensation, especially for posi- two distinct types of recommendations. First, the study tions demanding greater skills, undermine efforts to recruit offers recommendations on how these systems might be and retain qualified employees. Excessively rigid procedures fundamentally restructured, dramatically altering their ori- and practices impede the ability of public managers in LAC entations from that of controlling inputs (personnel ac- to significantly affect the performance of their employees. tions) to that of holding managers accountable for the Such rigidities may be found in policies and practices gov- performance of those inputs in the production of the eming promotions, assignment of salary upgrades, as well as agency's outputs. Since such fundamental change is likely the transfer, demotion, or release of non-performing em- to be difficult in the short run, the study also offers a ployees, sometimes including constitutional guarantees of variety of recommendations for improving human resource job tenure except in the event of gross malfeasance. management capacities within the existing legal frame- Finally, the institutional structure within which pub- work found in most LAC countries. These latter recom- lic sector managers must operate in LAC often is so full of mendations address salary restructuring as well as various red tape and overlapping responsibilities that it is extraor- other core personnel policies, such as recruitment, promo- dinarily difficult to take any significant actions, let alone tions, employee performance reviews, and so on. effectively manage complex programs and large numbers of employees. Ex ante audits of all expenditures prior to Fundamental restructuring authorization create long delays in both managerial ac- tions and compensation of vendors, thereby both under- mining the ability of those managers to obtain services Civil service systems in virtually all LAC countries are from the private sector and causing them to face prices for designed to prevent mismanagement. The key feature of those services that have been increased to reflect the such systems is their focus on controlling input (person- uncertainty regarding when and if payment will be re- nel) usage. This is reflected in centralized pre-control of ceived and the expected lags between service delivery and such things as expenditures, employment slots, hiring, receipt of those payments when they are forthcoming. firing and promotions actions, salary scales, salary adjust- PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 39 ments, employee performance review procedures, and so consistent relationship with the opportunity costs of work- on. These centralized prercontrols over human resource ing in the public sector. Those salary regimes rely upon management decisions are intended to prevent managers technical rather than economic criteria for assigning base from making bad decisions-to prevent managers from salaries. Because of this, they cannot ensure a consistent employing too many people, staffing their units with the degree of competitiveness between public and private sec- wrong occupational or skill mix, hiring unqualified per- tor salaries across types of positions. This is true for the sons, paying unjustifiably high or unfairly low salaries, proposal by the Presidential Commission for Reform of promoting persons for the wrong reasons, and so on. the State (COPRE) for assigning managerial salaries in An alternative to a civil service system built around Venezuela's public sector and the newly adopted salary central controls over inputs is one built around holding scale for the National System of Public Administration managers accountable for the outputs their units produce. (SINAPA) in Argentina's public sector-among the most Under this latter alternative, central authorities (for ex- sophisticated to be found in Latin America. The poor ample, the Minister of Finance) and the top management functioning of the public salary regimes is evident in the of an individual line agency must agree ex ante on what widespread dissatisfaction expressed by civil servants, po- outputs that agency will produce during a given budget litical appointees, and even private sector executives cycle and what will constitute satisfactory evidence of the aware of salient features of them. quantity and quality of outputs produced. Such a perfor- Public sector salaries need not equal their private mance contract between the head of a line agency and sector counterparts-because of the greater tenure pro- the central authorities also identifies the overall budget tection usually afforded public sector employees than pri- envelope available to that agency. While management vate sector employees in LAC and because of the weak may also be subject to various additional procedural and fiscal position of most LAC govemments. But if a simple other constraints (for example, non-discrimination re- rule is to govern the setting of public sector salaries, a quirements in hiring, public notification requirements reasonable recommendation would be that public sector when positions are to be filled, and so on), these are kept salaries should bear a uniform relation to those available to a minimum in order to allow management sufficient for comparable private sector positions. Such a policy autonomy to materially affect the quality of personnel would provide two important advantages. First, it would employed and overall agency performance. In exchange focus the debate about the appropriate level of public for this autonomy, management is (1) required to periodi- sector salaries upon the single most important determi- cally provide the evidence of agency performance stipu- nant of the competitiveness of those salaries; namely, the lated in the performance agreement, and (2) subject to opportunity costs (that is, domestic private sector wages rewards and penalties on the basis of the agency's perfor- for comparable positions) to public employees of working mance compared to what was promised in the perfor- in the public sector. Second, it would provide a simple, mance agreement. objective, measurable basis for setting salary differentials within the public sector; namely, in proportion to differ- Reform within an existing entials found in the domestic private sector. legal framework Salary supplements When such fundamental restructuring of the human re- The equity and transparency of salary policies in most source management framework proves infeasible in the LAC countries is compromised by the proliferation of short run, a variety of more modest devices can be found salary supplements. Except in Trinidad and Tobago and for enhancing competitive pressures in core personnel in Honduras, salary supplements account for a significant policy areas, including salary setting and salary adjust- share of total public employee compensation-as much as ments, tenure protection, recruitment, promotions and 84 percent of total compensation in Argentina, 80 per- career planning, employee performance evaluations and cent in Uruguay, 74 percent in Chile and 32 percent in training. Venezuela.' Interestingly, although some of the supple- ments-for instance, household supplements-bear little Salary structure or no relationship to employee productivity or job de- mands, many supplements are linked to these factors, Data reported in this study provide striking evidence that even if only crudely. the salary-setting regimes that typify LAC public sectors The primary problems raised by salary supplements fail to assure that public sector compensation bears a are not so much their proliferation as the reduced trans- 40 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN parency of salary setting procedures and their outcomes monopolies-such as designating a single agency to pro- and the lack of accountability for their impacts upon vide all training or to handle recruitment-undermine agency performance. Accordingly, the following recom- competitive pressures. Policies that restrict competition mendations are suggested: for public employment slots in other ways-for example, * Allow discretionary salary supplements only when man- prohibiting recruitment for a position or restricting the agers responsible for assigning those supplements are held recruitment pool to internal candidates-reduce the accountable for the performance impacts (upon their competitive forces required to assure that the public sec- units) of their assignment of those supplements. tor has access to the best employees it can afford to hire. * Strengthen personnel and financial information sys- Guarantees of the right to career advancement and iron- tems to ensure capacity to provide reliable and timely clad tenure guarantees dramatically undermine the com- reports on the pattern and impacts of salary supplements. petitive pressures that can be brought to bear on public employees to perform well. Employee evaluation proce- Salary policy enforcement capacity dures that create strong incentives for evaluators to as- sign virtually all employees the same, highest rating in- Three factors often undermine the ability of central au- exorably undermine efforts to reward employees on the thorities to enforce centrally mandated salary policies. basis of performance. Trivial investment in training sends The factors are the strength of the incentives for line a signal that the institution does not value skills and agencies and their managers to circumvent those policies, reduces the attractiveness of public sector employment- the ease with which managers can circumvent the poli- makes it less competitive. Failure to hold agencies and cies, and the risks of being detected and punished for their managers accountable for their employees' perfor- noncompliance, mance or their own resource allocation decisions, includ- Incentives to circumvent salary policies are strong ing how well they target their training resources, also because of the inability of typical public sector salary undermines the system's ability to impose competitive scales in Latin America to assure a consistent and com- pressures on managers. petitive relationship between public and private sector These anticompetitive consequences of civil service salaries for comparable positions. In Venezuela, El Salva- policies and practices can be avoided. The experience of dor, and Uruguay, the avenues for circumvention of sal- agencies such as the Superintendencia de Valores y ary policies are ample and varied and appear to represent Seguros and the Superintendencia de Bancos e Insti- those available in many LAC countries. The methods tuciones Financieras in Chile and the Banco Central de include a multiplicity of salary supplements, the capacity Venezuela demonstrate that public agencies can enhance to generate new job titles without effective checks by competitive pressures on the civil service. This can be central authorities, the ability to promote employees with- done, for example, by recruiting from external as well as out timely and effective review of such promotions by an intemal sources, eliminating de facto or de jure promo- independent body, and the possibility of hiring some em- tion guarantees, eliminating monopoly control over par- ployees outside the career civil service (for example, al- ticular elements of the human resource management sys- lowing fixed term or fixed price contracts for personal tem, and so on. services) without adequate means of holding those man- agers and their agencies accountable for the performance Tenure guarantees. To protect public employees from of such employees or the unit for which they work. Weak excessive political pressures, civil service systems in LAC capacities for personnel and compensation monitoring, typically provide strong tenure protection to career civil such as those found in Trinidad and Tobago, Venezuela, servants. In Argentina, Chile, El Salvador, Guyana, El Salvador, and Uruguay, appear to be typical among Trinidad and Tobago, Venezuela, and Uruguay, and un- LAC countries, thereby significantly reducing the risks doubtedly many other LAC countries, the vast majority of faced by line agencies and their managers who circum- public employees are career civil servants who can be vent centrally imposed salary policies. removed only for severe disciplinary infractions. When Ecuador recently prepared a plan for civil service reform Other core personnel policies and practices at the municipal level of government, the cornerstone of the proposed reform was just such tenure guarantees. Less If core personnel policies are to elicit effective and effi- frequently, career civil servants can be dismissed in the cient performance by public sector employees, they must event of a major restructuring of the agency within which be designed to enhance competitive pressures throughout they are employed-for example, in Guyana and Venezu- the personnel system. By contrast, policies that create ela-although this power is rarely employed. PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 4 1 The drawback of such tenure guarantees is, of course, Employee performance evaluation. Employee evalua- that employees covered by them need do no more than tion systems in many LAC countries fail to force manag- avoid committing severe disciplinary infractions-such as ers to reliably sort their employees on the basis of perfor- consistently refusing to show up for work-to retain their mance. The typical employee performance evaluation positions. If such guarantees are coupled with poor or system in LAC poses the following perverse incentives to nonfunctioning procedures for linking employee rewards managers charged with evaluating the performance of (for example, assignment of tasks, responsibilities and their employees. Because those managers can confer ben- managerial authority, annual salary increments, training efits on their employees (namely, salary increments and opportunities, promotions, or other awards or bonuses) to improved prospects of promotion) without facing any performance, such employees will have little incentive to negative consequences for themselves or their agency (for proficiently execute their assigned tasks. Only personal instance, a loss of resources) by bestowing high perfor- pride in one's work remains as a possible motivator under mance ratings on their employees, they have strong in- such circumstances, and that too is likely to be compro- centives to give high ratings to all employees. Conversely, mised when the more self-motivated workers find their if they give an employee a low rating, they stand to gain efforts undermined or compromised by the indifference of nothing tangible (since their own salaries, promotions their less self-motivated colleagues. and other rewards for performance do not depend upon Tenure protection in most LAC countries is granted how accurately they appraise their own employees' perfor- to those employees whose job demands are least suscep- mance), while they run the risk that the poorly rated tible to being distorted by political pressures-namely, employee might either file a complaint (which could harm non-managerial employees-while the positions least the manager's own performance review by his superior) or likely to enjoy tenure protection are precisely those most simply undermine the performance of his unit by slacking susceptible to political pressures-namely, higher man- or even actively sabotaging the unit's activities. In short, agement, such as positions of "exclusive confidence." systems such as the SINAPA system in Argentina and the Venezuela is perhaps the clearest example. This arrange- system prescribed in the Nuevo Estatuto Administrativo in ment couples all the drawbacks of tenure guarantees with Chile encourage evaluators to assign all employees the few of their benefits. A wiser policy would restrict tenure same rating, rather than to reliably sort them according to guarantees to those employees whose positions require a their actual performance. regular exercise of judgment that could be readily com- Some employee evaluation systems found in LAC do promised by political pressures-namely, management and reliably sort employees according to their performance. highly skilled professionals. Administrative and other cleri- Both the simple, subjective procedure employed by the cal personnel and semi-skilled and unskilled labor need Superintendencia de Seguros y Valores (SVS) in Chile and not be provided tenure guarantees. the elaborate, objective procedure employed by the Banco Central de Venezuela (BCV) appear to reliably evaluate Recruitment, promotions, and career planning. Many employee performance. These procedures force evaluators LAC countries restrict competitive recruitment proce- to rank order employees, rather than to simply assign them dures and pools to entry level positions and higher level to pre-specified performance rating categories, thereby management. At the same time, promotions policies of- forcing mangers to discriminate among employees. More ten, either de facto or de jure, are based primarily or important, evaluators in these agencies are in turn evalu- exclusively upon seniority. Career civil service recruit- ated on the basis of the overall performance of their units, ment and promotions policies in Chile and Argentina and they can influence that performance by how accu- provide the clearest examples. These restrictions under- rately they rank employees-two factors that strengthen mine the competitive pressures that can be brought to their incentives to reliably evaluate and rank employees. bear upon existing public employees seeking promotion. These conditions are precisely the reverse of those found The experience of agencies such as the Superinten- in most public sector employee evaluation systems in LAC, dencia de Bancos e Instituciones Financieras and the in which evaluators know that their safest strategy for both Superintendencia de Seguros y Valores in Chile, as well protecting themselves and their agency is to assign all as the Banco Central de Venezuela, illustrate that employees the same high rating. The latter scenario exists opening recruitment at all levels to the competitive under the SINAPA performance evaluation procedures in pressures of external candidates and preventing promo- Argentina, those found within Venezuela's core civil ser- tions from being based primarily or solely on seniority, vice and those prescribed in the Nuevo Estatuto can significantly improve the quality of a public Administrativo in Chile. The former appears to exist in the agency's personnel. SVS in Chile and the BCV in Venezuela. 42 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Training. Training provides an important opportunity resource allocation decisions. Pre- and post-training for public sector personnel systems to both augment the skills tests are unheard of. Nor is employee performance attractiveness of public employment and improve the ca- on the job monitored in ways that permit assessment of pacities and performance of their personnel. Unfortunately, whether training allocations actually improve employee human resource management practices in most LAC coun- performance. But most telling is that managers are nei- tries fail to take advantage of this opportunity for at least ther rewarded for improving their units' performance three important reasons. First, govemments in LAC under- through their use of training, nor penalized for their use invest in training. Venezuela's central govemment devotes of training resources that fail to yield performance im- less than one-half of one percent of its personnel expendi- provements. tures to training, or roughly one-third the fraction spent by Finally, training rules often create a state-run or state- that country's private sector employers. The same is true in sanctioned monopoly for providing training to current or Chile and appears to be typical in many LAC countries. potential public employees, thereby undermining the com- Second, personnel management systems fail to hold petitive pressures that could be enlisted if training were managers accountable for the results of their training contracted on a competitive basis. Introduction This study is intended to show how to improve the perfor- And restrictions on labor mobility may undermine the mance of public employees by establishing positive com- productivity of the public sector work force by reducing petitive pressures to encourage them to carry out their employees' incentives to perform. responsibilities effectively and efficiently. The study approach The literature Unlike most of the literature on civil service reform, this Assessments of public employment or civil service prob- study looks at the behavioral antecedents-a few key lems typically identify symptoms as problems and then policies and practices in civil service structures in LAC recommend that the symptoms be eliminated. These in- that are pivotal to performance. These include compen- clude employment levels, instability (tumover rates or sation and the means by which compensation levels for average tenure), salary compression, and the ratio of ad- specific positions are set, recruitment policies and proce- ministrative to line staff or of service delivery to adminis- dures, promotion practices, employee performance re- trative personnel. Two problems plague such assessments view procedures, annual salary adjustment determina- and recommendations, however. First, although it is rela- tion, training, tenure guarantees, and occasional tively easy to identify outliers along any particular dimen- attention to policies governing the use of personal ser- sion of public employment-incredibly high public em- vices contracts and related arrangements to circumvent ployment levels, strikingly high turnover rates, tiny salary pay and employment constraints that apply to the career compression ratios, inexcusably high administrative-to- civil service. line staff ratios-it is extraordinarily difficult to identify The approach is not comprehensive; no attempt is and defend a context-specific optimal magnitude for each made to provide ready tabular summaries of the incidence such dimension. Second, recommendations that the symp- of particular policies or practices in any of these spheres. toms be changed generally fail to address the underlying Nor are the authors able to rigorously test empirical hy- causes. Thus, for instance, a common response to shock- potheses regarding how particular human resource man- ingly high turnover rates among public employees is to agement policies or practices affect the performance of call for tenure guarantees, restrictions on hiring to speci- human resources in the public sector; it was not possible fied positions from outside the civil service, and guaran- to gather systematic data over time for a given agency or tees of the right to advance up the civil service career across similar agencies in different countries measuring ladder. But these prescriptions fail to address the underly- performance. Such data would be required to estimate ing causes of high tumover rates, provide only temporary econometric models of the determinants of the perfor- relief, and can have debilitating side effects. Moreover, mance of human resources, in which human resource high tumover rates are not necessarily a bad thing. They management policies would constitute an important sub- may reflect an efficient and competitive labor market. set of the explanatory variables. PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 43 Instead, given the data constraints, the study sorts offers concrete suggestions as to how to substantially packages of public sector human resource management strengthen human resource management policies in many policies and practices on the basis of the agencies' reputa- LAC countries. This can be done where a government is tions for effective human resource management and then willing to take steps that are technically straightforward, proposes an analytic framework that can explain these but politically somewhat more difficult. No suggestion, reputational differences and point out concrete ways to however, requires politically impossible steps, such as the improve the human resource management by public agen- firing of large fractions of their public employees. cies in Latin America. Four sections follow. The first section proposes a strat- As already noted, the hypothesis that best explains egy for fundamental reform of the typical legal and institu- the differences in human resource management reputa- tional framework governing human resource management tions encountered in the public sectors of the countries within the public sector in many LAC countries, while the examined here is that the more thoroughly a human following two sections identify improvements that could resource management system takes advantage of and en- be made in the typical existing institutional framework hances competitive pressures on all agents in the system, without requiring major changes in the legal framework. the more effectively and efficiently it performs. In short, The next section examines compensation-setting policies just as competition improves the functioning of private and practices in detail. The following section considers the markets, it improves the functioning of public sector la- remaining core personnel policies, including recruitment, bor markets. promotions, annual salary adjustments, employee perfor- The main contribution of this report is to use this mance reviews, tenure guarantees, and training. Brief at- simple framework and hypothesis to illustrate why some tention is also given to contracting for personal services as public sector human resource management policies and a device for circumventing many of the previously dis- practices work and others don't-yielding bloated, ineffi- cussed personnel policies. The final section summarizes cient, and ineffective bureaucracies. In addition, this study findings and recommendations. Fundamental Restructuring Public sector human resource management policies and * Low public sector salaries are uniformly viewed as a practices in many Latin American and Caribbean coun- principal deterrent to the recruitment and retention of tries need significant improvements. Conversations with highly qualified and motivated employees, especially professionals and managers within core government min- among the professional and managerial ranks. istries in many LAC countries reveal deeply felt dissatis- * Rigid salary-setting rules and procedures, coupled with faction and frustration both with the performance of extremely weak capacity to monitor and enforce those public agencies and their employees and with the legal rules, are widely suspected both of further undermining and institutional framework that appears to undermine the public sector's capacity to compete with the private individual efforts to manage public agencies and their sector for highly qualified employees, and of causing pub- employees effectively. lic sector managers to find innumerable creative means of * Levels of public employment are widely believed to be circumventing those constraints. excessive among all but the managerial ranks. * Other important civil service policies-for example, * Tenure protection afforded public employees within the requirement of competicive hiring procedures the Carrera Administrativa or its equivalent is blamed (concursos)-also appear to be widely disregarded-a prac- both for undermining employee performance incentives tice that both reflects the inability of those civil service and for disabling efforts to downsize public agencies even systems to function as intended and undermines confi- as tightening resource constraints reduce the capacity of dence in those systems. LAC governments to support so many employees. * Such widespread circumventions of salary-setting and * The absence of such tenure protection for most top hiring rules and procedures, including the practice of managerial employees is often believed to be crippling the employing contratados to circumvent hiring and salary managerial capacity of many public agencies. constraints, are also credited with undermining confi- * Powerful public sector labor unions are blamed for pos- dence in both the machinery of government and the civil ing significant obstacles both to downsizing efforts and to service itself. creating more flexible and effective incentives for em- * Requirements that all organizational units within the ployee performance. public sector undertake annual performance reviews of 44 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN each of their employees also often appear to be either wrong occupational or skill mix, hiring unqualified per- generally disregarded or executed in a way that fails to sons, paying unjustifiably high or unfairly low salaries, discriminate between high-performing and low-perform- promoting persons for the wrong reasons, and so on. ing employees, thereby undermining any ability to link The logical extreme of this civil service model would either training to identified skill deficiencies or promo- eliminate all discretionary managerial authority over per- tions to performance. sonnel actions. Pre-specified and centrally determined " The inability of governments to provide timely, reli- rules would identify precisely what positions could be able, consistent, transparent and complete information filled, what salaries could be paid, and the like; while all identifying actual employment and remuneration levels individual personnel decisions such as hiring, promotions covering all types of public employees and all forms of and firing would be made not by line managers but by remuneration also appears to be undermining the cred- central authorities. Such an arrangement would prevent ibility of both those governments and their civil service line managers from abusing their authority simply by elimi- systems, as well as their ability to manage those systems. nating that authority. It would also prevent line managers The difficult task, of course, is to identify the precise from managing. Information costs would prevent such a changes that are required. It is convenient to take two system from efficiently tailoring human resource manage- separate cuts at this task: one proposing a strategy for ment actions to particular personnel and labor market fundamental reform of the typical legal and institutional conditions. Such efficient tailoring requires the sort of framework governing human resource management within detailed, context-specific information that can be moni- the public sector in many LAC countries; and the second tored and assessed most effectively by line managers. identifying improvements that could be made in the typi- No Latin American civil service system achieves this cal existing institutional framework without requiring extreme a version of central control over input usage major changes in the legal framework. Accordingly, this decisions. Instead, those systems typically include both section briefly sketches a strategy for shifting the basic explicit and implicit grants of managerial discretionary orientation of the public sector human resource manage- authority over personnel actions. For example, while ten- ment framework from that of preventing mismanagement ured positions are rationed centrally, managers can often to that of fostering efficient management by increasing circumvent those constraints either by hiring consultants competitive forces within the public sector. The remain- or by defining a position that does not readily fit any of ing sections examine means by which the existing legal the existing pre-defined civil service positions. The fact and institutional framework could be modified in less that such exercises of managerial discretion are either sweeping ways but with the same end in view; namely, authorized or tacitly condoned probably reflects a combi- increasing competitive forces within the civil service in nation of determined efforts by line managers to wrest order to strengthen the capacity to effectively manage some discretionary authority from the plethora of central human resources. controls, coupled with either tacit or explicit recognition on the part of central authorities that managers need to The status quo: input controls to be able to exercise some personnel management authority if they are to effectively manage their human resources. prevent mismanagement But within personnel management systems in which input usage is controlled while the effectiveness with Civil service systems in virtually all LAC countries are which outputs are produced is not, any relaxation of the designed to prevent mismanagement. The key feature of controls over input usage brings with it important risks. such systems is their focus on controlling input (person- Managers who can exercise greater authority over the nel) usage. This is reflected in such things as centralized human resources at their disposal can, if they choose, pre-control of all expenditure decisions, centralized as- abuse that authority if they are not held accountable for signment of employment slots, centralized pre-approval of the outputs they are supposed to produce with those hiring, firing and promotions actions, centralized imposi- human resources. They can overstaff or hire unqualified tion of salary scales, centralized pre-approval of salary personnel simply to keep politically important clients sat- adjustments, centralized specification of details of em- isfied. They can dispense wages, promotions and other ployee performance review procedures, and so on. These perquisites on the basis of favoritism rather than em- centralized pre-controls over human resource manage- ployee performance and the like. These risks are well ment decisions are intended to prevent managers from understood by the public as well as by public managers, making bad decisions-to prevent managers from em- politicians, heads of finance ministries, heads of central ploying too many people, staffing their units with the personnel offices-in short, by all affected parties- PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 45 throughout LAC. And since the managers of most public Second, it requires that those chief executives be given agencies in LAC are not held accountable for the effec- much greater discretion in the management of the re- tiveness with which they produce outputs, it should come sources at their disposal; that is, the control emphasis must as no surprise that those managers are rarely granted shift from inputs to outputs. Third, a distinction must be significant discretion over resource management deci- drawn between 'the outputs of services a department pro- sions-humnan, financial or other. duces and their outcomes, or success in achieving social goals" (Scott and Gorringe 1989, p.82). Managers are to be An alternative: output accountability held responsible for producing outputs, while responsibility for deciding which outputs to produce in order to achieve to foster effective management desired outcomes or social goals is to rest with the politi- cians. As Scott and Gorringe note, "the performance of An obvious alternative to a civil service system built bureaucrats [is to bel judged on whether they produce the around central controls over inputs is one built around outputs of services agreed to, and whether they do so holding managers accountable for the outputs their units efficiently. Politicians [are to bel judged on whether they produce. Under this latter alternative, central authorities buy the right services to achieve social goals like wealth, (for example, the Minister of Finance) and top manage- justice and the relief of suffering" (Scott and Gorringe ment of an individual line agency must agree ex ante on 1989, p. 84). Finally, the system of financial accountability what outputs that agency will produce during a given is to be "based on accrual accounting of inputs and on budget cycle and what will constitute satisfactory evidence output measures" in order to improve incentives for effi- of the quantities and quality of outputs produced. Such a ciency within the sector (Scott and Gorringe 1989, p.82). performance contract between the head of a line agency and the central authorities also identifies the overall bud- Making the transition to get envelope available to that agency. While management .1. may also be subject to various additional procedural and output accountablinty other constraints (for example, non-discrimination re- quirements in hiring, public notification requirements The transition from an input-oriented to an output-ori- when positions are to be filled, and so on), these are kept to ented framework for goveming both financial and human a minimum in order to allow management sufficient au- resource management poses its own set of challenges. tonomy to materially affect the quality of personnel em- These include: creating incentives for affected agencies ployed and overall agency performance. In exchange for and their employees to support the transition; and speci- this autonomy, management is (1) required to periodically fying and monitoring outputs. In addition, to create in- provide the evidence of agency performance stipulated in centives for the transition, it may prove useful to allow the performance agreement, and (2) subject to rewards dual personnel management regimes to coexist during the and penalties on the basis of the agency's performnance transition. compared to what was promised in the performance agree- nient. This alternative has been successfully implemented Creating incentives in New Zealand (see, for example, Scott and Gorringe 1989; Scott, Bushnell, and Sallee 1990; McCullough and A successful transition requires that key affected parties Ball 1992; Bushnell and Scott 1988). fulfill their revised responsibilities. Accordingly, incen- As explained by Scott and Gorringe (1989), this out- tives must be created for each of those key affected par- put-oriented approach requires four basic types of changes ties-managers and their agencies, public employees more in the framework governing public management, including generally, and core input-control agencies whose man- management of human resources. First, it requires that dates will be significantly revised. chief executives "be made more directly accountable to ministers for the output and efficiency of their depart- Agency managers. In the transition to an output-ori, ments" (Scott and Gorringe 1989, p. 82); that is, that they ented personnel and agency management framework, commit their agency ex ante to providing particular levels managers face significant transition costs and risks. They of services of a specified quality within a given budget must clearly specify the outputs for which they will be period, provide reliable evidence of their agency's perfor- held accountable. They must reorganize and restaff their mance in producing those services, and be subject to both agencies to effectively and efficiently produce those out- personal and agency-level rewards and punishments on the puts. Even so, their budgets may shrink. They may be basis of the demonstrated performance of their agencies. subject to penalties for poor performance. To make it 46 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN worth their while to shoulder these transition costs and gime. To overcome such reservations, it is important both risks, it is important to provide these managers with con- to clearly define the revised mandates of these agencies crete incentives. Perhaps the most significant incentive is and to provide them with technical assistance for the the increase in their authority over personnel and finan- transition process, including strengthening their post- cial resources that is available to them when they satisfy evaluation capacities. all the requirements imposed upon them by the output- One device that can facilitate the creation of these oriented framework. In addition, they can be offered a transition incentives is to strengthen the input-control hu- specified portion of the revenues they generate from im- man resource management regime-making it more diffi- proved cash management; for example, all earnings from cult to circumvent its constraints-at the same time that their cash accounts in excess of a benchmark level of agencies are given the option to switch to an output-ac- earnings set by central authorities (for example, the Min- countability personnel and financial management regime. istry of Finance or the Central Bank) on the basis of Strengthening the input-control regime should decrease its average daily cash balances and expected market interest attraction relative to the output-accountability regime. rates. And, of course, effective and efficient production of Management is then offered the option of switching to the the promised outputs can lead to larger contracts (that is, output-accountability regime; that is, of gaining greater an increased budget) in subsequent budget periods. managerial autonomy in exchange for providing account- ability for the outputs it produces. This strategy requires Public employees. Public employees face risks of job that the legal framework governing the civil service be losses, reduced job security and penalties for poor perfor- revised to permit individual agencies to shift their personnel mance. Good managers, who will have greater latitude in from civil service status to a status that more nearly paral- personnel actions than under the input-control framework, lels-or is identical to-that of private sector employees. can counter these risks by providing better working condi- tions, including better salaries and training, performance Identifying and rnonitoring outputs bonuses, more challenging work assignments, and so on. Agreements negotiated between the management of a Core input-control agencies. Core input-control agen- given agency and central authorities determine both the cies, such as the central personnel office and the control- key outputs to be produced during a given budget period ler general, may easily view a transition to an output- and the evidence by which compliance with that agree- oriented management regime as a threat. Because of their ment will be assessed at the end of the budget period. historical mandate to exercise pre-control over personnel Management remains responsible for monitoring output and fiscal actions, they may distrust a switch to a regime in accord with the terms of the agreement. This process that shifts the locus of control from inputs to outputs. makes it possible to hold agencies and their management They may also view such a change as a threat to their accountable for the effectiveness and efficiency with which authority. These reservations will be compounded by the they produce contractually specified outputs. At the same degree of uncertainty regarding their mandates under an time, it saddles the political process with responsibility for output-oriented personnel and financial management re- deciding how much to produce of which outputs. Reform within an Existing Legal Framework: Compensation Public employee compensation systems in LAC vary con- An inconsistent relationship between siderably in their details, yet some features are widely shared. Three key aspects of these systems are worth skull levels and compensation examining: an inconsistent relationship between skill lev- compared with the private sector els and compensation relative to private sector compara- tors, salary assignment based largely on non-economic Those seeking to reform civil service employee compensa- criteria, and weak enforcement of centrally imposed sal- tion in Latin America face systems marked by an inconsis- ary-setting restrictions. tent relationship between public sector salaries and their The first part of this section shows the current symp- private sector counterparts. Base salaries are-without toms, the second shows how-and posits why-they have apparent exception-assigned using technical criteria, developed, and the third discusses why the symptoms rather than on the basis of the opportunity costs faced by have been difficult to correct. current or potential public employees or worker produc- PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 47 tivity. The same is true, generally, for salary supplements. Tobago, permanent secretaries receive only about 64 per- These inconsistencies are apparent in data from Trinidad cent of the compensation of a chief executive officer in and Tobago, Uruguay, Chile, Venezuela, and Argentina. the private sector. In Uruguay, trades workers in the Data from Trinidad and Tobago and Uruguay reveal public sector earn about 94 percent of what journeymen public sectors that tend to increasingly undercompensate earn in the private sector, while a division director in the their employees as responsibility levels and skill require- public sector earns only 37.5 percent of what a manager ments rise (see tables 8.1 and 8.2). For instance, while a earns in the private sector. (Salary comparisons for these computer operator makes roughly 125 percent as much in two countries, especially for Trinidad and Tobago, are the public sector as in the private sector in Trinidad and among the most meaningful in this report, because the TABLE 8.1 Trinidad and Tobago: public versus private sector annual salaries (dollars) Public sector remunerabon Position Base salary Allowonces Total remuneration as percentage of privote sector Managers Public: Permanent secretary 25,852 4,941 30,793 Private: Chief executive officer 32,471 16,002 48,473 63.53 Public: Chief planning officer (grade 68) 23,726 1,101 24,827 Private: Administrative director 27,346 4,947 32,293 76.88 Public: Chief technical officer (eng. grade 68) 23,726 1,101 24,827 Private: Top engineering execubve 23,753 7,574 3 1.327 79.25 Public: Director of fin. and accounts (grade 65) 20,349 1,101 21,450 Private: Finance manager 21,176 6,353 27,529 77.92 Professionaltechnical Public: Chief engineer (grade 62) 17,839 1,101 18,940 Private: Chief engineer 28,376 6,447 34,824 54.39 Public: Admin. officer, level V (grade 61) 17,269 1,101 18,370 Private: Operations manager 18,353 S,224 23,576 77.92 Public: Accounting exec. level II (grade 58E) 14,931 1,101 16,032 Private: Chief accountant 20,471 3,660 24,130 66.44 Public: Cost accountant 11,384 1,101 12,485 Private: Cost accountant 20,154 3,677 23,83 1 52.39 Public: Accountant level II (grade 35G) 11,384 1,101 12,485 Private: Accountant 15,529 1,412 16,941 73.70 Public: Computerprogrammer 12,449 1,101 13,550 Private: Computerprogrammer 11,118 1,117 12,235 110.75 Public: Computer operator level Ill (grade 39C) 10,478 1,101 11,579 Private: Computer operator 8,888 359 9,247 125.22 Administrative/support Public: Clerk level IV (grade 30C) 8,945 1,101 10,046 Private: Senior accounts clerk 8,550 1,085 9,635 104.27 Public: Clerk level I (grade 14) 4,947 1,101 6,048 Private: Computer data entry clerk 6,459 542 7,001 86.39 Blue collar Public: Foreman grade I (class 1) 7,540 1,101 8,641 Private: Production foreman 10.296 1,859 12,155 71.09 Private: Shift supervisor 10,933 1,395 12,328 70.10 Lowest public sector wage rate (14 year old boys and leamers, skilled, and semiskilled; class 54) - - 4,193 Lowest private sector wage rate (minimum wages order, 1991) 1,814 - 1,814 231.15 - Not available. Source: For private sector (except minimum wage figures), Price Waterhouse, 1992. For public sector, Republic of Trinidad and Tobago, 1992. 48 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN TABLE 8.2 comparisons could be made more reliable if the public and Uruguay: public versus private sector private sector comparators were more specific. annual salaries In Venezuela, the average public sector managerial (dollars) salary equals about 16 to 67 percent of private sector managerial salaries, depending on the level of managerial Public sector position in the private sector (table 8.4). Average profes- remuneration as sional and technical salaries in the public sector range Base Total percentage of between about 27 and 71 percent of typical professional Position salary Allowances remuneration prrvate sector and technical salaries found in the private sector-de- Manogers pending again on the skill and responsibility level of the Public: Division director, 4,275 2,253 6,528 private sector comparator. Public sector administrative Private: Manager - - 17,402 37.5 I and support positions receive, on average, between about Professional/technical 27 and 84 percent of various private sector comparators; Public: University trained while semiskilled public sector labor receives between 48 professional 5,607 612 6,219 71.37 and 74 percent of the wages earned by private sector Tessnical- 613 4,148 4759 comparators. These comparisons could be more accurate Private: Section chief - - 8,71 5 if the public sector figures reflected positions that could Administrativel suppor be matched to the available private sector occupational Public: Administrative 2,994 613 3,607 89.98 categories, rather than simply identifying averages for Specialized 2,860 613 3,474 86.66 broad public sector career paths. Auxiliary 2,304 705 3,009 75.07 In Argentina, top-level managers governed by the Private: Qualified 1.428/73 salary scale earned only 24 percent of the salary technician - - 4,009 of a chief executive officer in the private sector-or about Blue collor 74 percent of a director of budget and finance in the Public: Trades 2,010 750 2,760 private sector (table 8.5). Public employees located at the Private: Foreman - - 7,139 38.66 modal category within the 1.428/73 salary scale eamed Joumeyman - - 2,931 94 18 Worker - - 2,202 125.35 between 24 and 51 percent of plausible private sector Memorandum comparators; while those at the bottom of that salary National minimum scale earned between 53 and 89 percent of private sector prvatel 658 secretaries or receptionists, respectively. As with the Chile - Not available. data, these comparisons could be made more meaningful Note: Privatesectorsalarydataarefromjune 1989. PublicsectordataareforJuly 1989. if specific positions in the public sector-instead of the Allfiguresconvertedto 1992 U.S. dollars(U.S. consumer price index)forcomparabilIty. a. As reported in World Bank 1991, table M-20. less homogeneous salary grade groupings-were used to b. Based on normal minimum wage less the workers' contribution to social security. make these comparisons. Source: World Bank 199 1. A recent World Bank study provides additional evi- dence on differences in public versus private sector sa- data allowed reasonably close matching between specific laries for a particular subset of positions: teachers public and private sector positions.) (Psacharopoulos, Valenzuela, and Arends 1993). Public In Chile, top-level public sector managers earn be- teacher salaries ranged between 65 and 16 percent of tween 63 and 70 percent of the average for chief execu- private sector comparators near the end of the 1980s in tives and general managers in the private sector, while twelve LAC countries (see table 8.6). mid-level public sector professional and technical staff In sum, although public sector salaries often fall be- earn between 27 and 135 percent of the overall average low those available in the private sector in these LAC for professional and technical workers in the private sec- countries, this phenomenon is not uniform across coun- tor (table 8.3). Mid-level administrative and support per- tries or types of positions-and is often marked by wide sonnel in the public sector earn between 17 and 61 per- variation. Although more precise data could help with cent of the overall average compensation for administra- many of the comparisons, the variations in the relation- tive positions in the private sector. The higher ratios in all ship between salaries for comparable public and private these cases apply to public sector employees governed by positions likely would still hold. The negative relationship the fiscalizador salary scales and the lower ratios reflect between the ratio of public to private salaries and levels of public employees governed by the less generous unified responsibility and skill requirements is quite noticeable in salary scale. (Fiscalizador positions handle finances.) These the Uruguay and the Trinidad and Tobago data, and to a PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LAT;N AMERICA AND THE CARIBBEAN 49 TABLE 8.3 Chile: public versus private sector annual salaries (dollars) Public sector remuneration as Total percentage of Position Base solary Allowonces remuneration private sector Managers Public: Top political appointee (grade A) 4,415 18,236 22,651 70.36 Top civil serv. director (grade IB) 4,066 16,282 20,348 63.20 Civil service, middle manager (grade 9) 2,446 7,670 10,116 31.42 Lowest professional manager (grade 18) 1.223 2,804 4,028 12.51 Private: Chief executive and general managers --- 32,195 Professionalltechnical Public: Top-level professional (grade 4) 3,478 11,692 15,170 134.91 Mid-level professional (grade 13) 1,798 5,215 7,013 62.37 Bottom-level professional (grade 23) 872 2,196 3,068 27.29 Private: Professional!technical - - 11,245 Administrotivpesupport Public: Top-level administrative (grade 9) 2,446 2,415 4,861 61.55 Administrative/support(grade 17) 1,321 1,723 3,045 38.54 Administrative/support (grade 25) 762 1,053 1.815 22.97 Bottom-level administrative (grade 31) 553 771 1,324 16.76 Private: Administrative - - 7,899 Blue collar Private: Specialized employees - - 6,830 Specialized laborers - - 4,319 Nonspecialized - - 3,437 Service workers 3,316 - Not available. Note: All salary figures are 1990 year-end figures converted to 1992 U.S. dollars (U.S. consumer price index) for comparability. Source: For pubkc sector, Escala Unica de Sueldo 1990; tor private sector, Instituto Nacoonal de Estadtsticas. less obvious extent in the Venezuela data. Senior civil to bear a consistent relationship with the opportunity servants in all those countries regularly point to low mana- costs faced by current or potential public employees. Two gerial salaries as a key impediment to their ability to staff basic steps are used to assign base salaries to positions. higher managerial-level positions with qualified persons. First, each position is classified according to some set of As noted earlier, the inconsistent relationship of com- criteria. Second, each classification is assigned a base pensation for public sector positions compared with their salary using some additional set of criteria. Although both private sector counterparts in most LAC countries grows tasks are important, assignment of a salary is crucial, out of the use of technical-instead of economic-crite- because it determines whether any systematic relation- ria for salary setting. ship will exist between public salaries and their domestic An understanding of the two key processes-setting private sector comparators and thus how competitive pub- base salaries and assigning salary supplements-examined lic sector positions can be compared with employment in here helps clarify the inevitability of the inconsistencies the private sector. between public and private sector compensation. Venezuela. The Comisi6n Presidencial para la Salary assignment based on Reforma del Estado (COPRE) in Venezuela recently pro- posed a very sophisticated methodology for classifying non-economic criteria managerial positions and assigning salaries to them (Viera 1992a). Although the proposal is more elaborate and Setting base salaries sophisticated than most, its structure captures the basic elements and design of these systems as they exist through- Procedures in all LAC countries reviewed in this study out most of LAC. virtually guarantee that public sector base salaries will fai! The proposed Venezuelan salary assignment system so CVIIL SEFRVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN TABLE 8.4 Venezuela: public versus private sector annual salaries (dollars) Public sector remuneration as Total percentage of Position Base salary Allawances remuneration priate sector Managers Public: Minister/executive director 9,753 11,654 21,407 29.54 Private: President 49,694 22.780 72,474 Public: Sectoral director general 8,201 6,635 14,836 42.38 Private: Director of finances 25,052 9,954 35,007 Public: Unit chief 6,319 3,909 10,228 53.40 Private: Director of internal audit 12,737 6,415 19,152 Professzonal/technical Public: Top prof./ech., grade 32-10 9,356 2,866 12,222 105.83 Private: Chief systems analyst 8,562 2,986 11,549 Public: Mid-level prof./tech., grade 24-5 5,493 1,682 7,175 97.61 Private: Internal auditor 5,568 1,783 7,351 Public: Bottom prof./ech., grade I5-I 3,145 963 4,108 90.48 Private: Computer operator 3,448 1,093 4,541 Administrative/support Public: Top administrabve, grade 26- 10 4,726 1,448 6,173 63.41 Private: Executive secretary, bilingual 7,344 2,392 9,735 Public: Middle administrative, grade 14-5 2,329 713 3,042 54.81 Private: Cashier 4,178 1,373 5,550 Public: Bottom administrative, grade I - 1 1,120 343 1,463 Private: Receptonist 2,382 724 3,106 47.10 Blue collar Public: Semi-skilled labor 1,491 995 2,485 50.55 Private: Chauffeur 11 3,723 1,194 4,916 Note: All salary figures in annual U.S. dollars, converted at an exchange rate of 66.85 Bs.l$US. Source: For private sector, decree 2.039,1992; Escala de Sueldos y Pnmas para Cargos deAlto Nivel, Organismos de la Administraci6n Publica, Oficna Central de Personal, 1993; Republica de Venezuela. For public sector, Encuesta de Compensacin 1992. has two steps: classifying positions and assigning salaries plexity of thought processes required, extent of au- to them. tonomy, and discretion that must be exercised) Position classification consists of specifying: - Technical and managerial knowledge and capacity * Title required for the position, including key indicators of * Functions and purpose of the position such knowledge and capacities, such as formal edu- * Responsibilities cation and experience. * Managerial responsibilities (for example, magni- While this level of detail is perhaps greater than is tudes of budget, personnel budget, value of equip- found in many other position classification systems in the ment, numbers and types of employees supervised public and private sectors, the categories are typical: title, directly and inidirectly) functions, responsibilities, and skill requirements. * Institutional responsibilities (formal relations that Salary assignment is accomplished by giving weights the holder of the position is responsible for maintain- to the position responsibilities and skill requirements. The ing, inside the agency and across agencies) Venezuela proposal first rank orders a subset of the re- * Policy and program responsibilities (external pub- sponsibilities and skill requirements identified in the posi- lic policy or service effects of the unit managed by the tion classification exercise and then assigns salary incre- holder of the position) ments across rankings along each given dimension of 5, * Skill requirements 20, or 25. The proposal ranks skills along two dimensions * Complexity of demands placed on the holder of (conceptual and technical and integrative), and identifies the position (types of challenges to be faced, com- seven ordered levels of conceptual and technical skills PuBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 5I TABLE 8.5 TABLE 8.6 Argentina: public versus private sector Latin American countries: teachers' annual salaries mean earnings as a percentage of a (dollars) comparator group Public sector (percent) remuneration as Country 1979 1989 Bose Total percentage of Position solary Allowances remuneration private sector Argentina 93 75 Bolivia 74 65 Highest-ranking positions Brazil 92 88 Public: Max.: Escalaf6n Peru - 88 1 .428173 Uruguay 109 78 (cat. 24) 10,842 39,797 50,639 Colombia 137 165 Private: Chief execu- Costa Rica - 133 tive oflicer - - 210,035 24.11 Chile - 121 Director of Ecuador - 124 administration Ecuas _ 14 andfinance - - 101,603 49.84 Honduras 310 14I Director of bud-Vezul1312 get and finance - - 68,803 73.60 Venezuel 130 109 Director of personnel - - 50,596 100.08 - Not available. Source: Psacharopoulos. Valenzuela, and Arends 1993. Modol positions Public: Mod.: Escalaf6n 1.428/73 descriptions have been drawn up, it has two drawbacks. (cat. 16) 2,591 6.236 8,828 First, the 5, 20, and 25 percent salary premiums for each Private: Chief financial analyst/planner - - 36,143 24.42 step up one of the job classification dimensions are arbi- Chief accountant - - 32.370 27.27 trary. The document justifies these increments by citing a Personnel neurophysiology "law of the minimum threshold of human manager - - 25.946 34.02 perception" (the Weber-Freshnner law), which asserts t' -t Senior systems analyst - - 25,326 34.86 humans cannot distinguish changes in stimuli of less than Budget,financial 15 percent. Supposing both that such a claim is true and analyst - - 17,354 50.87 that it applies to salary increments (as opposed to changes Lowest-ranking positons in stimuli the measurement of which, unlike salaries, is not Public: Min.: Escalaf6n reported to be the subject of the experiment), it remains 1.428rt3 (cat.1) 1,807 4,904 6,710 entirely unclear where the 5, 20, and 25 percent figures Private: Secretary - - 12,648 53.05 came from-none of them reflecting the 15 percent figure Receptionist - - 7,564 88.72 that was used to justify a fixed, arbitrary premium for move- - Not available. ment up rankings along a given dimension. Note: All salary data based on September 1991 data converted (U.S. consumer prce More fundamentally, however, this technical method- index) to 1992 U.S. dollars for comparability. Source. For public sector, Ministerio de Economia. For private sector, Informe de ology for assigning salary differentials across positions pro- Remuneraciones. Anual. vides no means of assuring that salaries so assigned will bear a consistent relationship with the opportunity costs and five additional ordered levels of integrative capaci- faced by workers who might fill those positions. This ties. In addition, the proposal ranks responsibilities along methodology could only by accident yield a salary scale (1) managerial and (2) policy and program responsibili- that rewards responsibility or skill requirement increments ties. Seven levels of managerial responsibilities and four by the same fraction that they are rewarded in the private levels of policy and program responsibilities are identified. sector across all responsibility or skill requirement levels. Integrative capacities rankings carry 20 percent salary To illustrate, although an increment from level 1 to level increments, conceptual and technical skill rankings carry 2 of the managerial responsibility scale brings a 25 percent 25 percent increments, managerial responsibility rankings salaty increment, as does an increment from level 2 to carry 25 percent salary increments, and policy and pro- level 3, it is entirely possible that an increment from level gram responsibility rankings carry 5 percent premiums. I to level 2 would receive a 25 percent increment in the Although this procedure provides a ready methodol- private sector, while an increment from level 2 to level 3 ogy for assigning salaries to positions once the position could expect a 40 percent premium. If no fixed relation- 52 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN ship holds with the private sector, this salary scale will those different skill and responsibility levels. Instead, the underminc the ability of the public sector to staff those increments have been constructed to achieve a pre-speci- positions whose salaries happen to fall further below their fied compression ratio. private sector counterparts (level 3 in thc hypothetical example) than do other public sector position salaries Other salary scales. The COPRE and SINAPA sys- (level 2 in the example). tems' lack of a consistent relationship with the opportu- nity costs of labor is not unique. The complexity and Argentina (SINAPA). The same flaw can be seen in transparency of the procedures for establishing base salary Argentina's recent revision of its public sector base salary scales vary across countries, but all countries examined in assignment policies under its new Sistema Nacional de this study suffer from this shortcoming because they rely Profesi6n Administrativa (SINAPA). The SINAPA posi- upon technical rather than opportunity cost factors to con- tion classification procedure and salary assignment algo- struct their salary scales: rithm is very similar to the proposed Venezuelan proce- * In addition to SINAPA, Argentina's previous and other dures. Positions are classified based on responsibilities and public salary scales (the previous salary scale covering skill requiremcnts, including both task demands and level core personnel in the central government under decree of autonomy demanded by those tasks. On the basis of 1.428/73, as well as those still governing teachers, various thirteen responsibility categories and seventeen skill cat- public enterprises, the judiciary) are also based on techni- egories (eleven task demand categories and six autonomy cal considerations, rather than opportunity costs. level categories), cach position is classified into one of six * Existing central government salary scales in Chile, El possible levels, labeled A through F. Each position classi- Salvador, Guyana, Honduras, Trinidad and Tobago, Uru- fication has five salary grades (base through 4) (see tables guay, and Venezuela are based strictly on technical con- 8.7 and 8.18) . Base salaries are computed by multiplying siderations. (Throughout this section "central government the appropriate cell index by the current period multi- employee" denotes people employed in central govern- plier, thereby allowing ready adjustment of the salary scale ment agencies subject to the governing civil service stat- to reflect factors such as inflation or a policy to increase tire. In Venezuela, this set includes seventy-one central salaries across the board. Salary increments along the government agencies, although some employees within horizontal axis of that salary scale are attained on the those agencies are exempted from the Ley de Carrera basis of the employee's history of annual personnel perfor- Administrativa-for example, uniformed military person- mance evaluations, while vertical movements (across lev- nel, teachers, and university administrators.) els) within the salary scale are achieved by meeting the * Trinidad and Tobago is currently employing a consult- position-specific responsibility and skill requirements for a ant to revise its civil service salary scale. The approach higher-level position and being promoted to it. being taken is very similar to the Venezuelan and Argen- The index magnitudes were constructed to ass' ,e tine approaches described above. Points are to be assigned that the ratio of the salary of the highest-paid to the to various dimensions of position descriptors and those lowest-paid employee covered by that salary scale (the points are to be used to rank order positions. Salary differ- compression ratio) would achieve a pre-specified magni- entials are to be assigned so as to assure that the overall tude-in this case, 10.5. The particular pattern of across- salary structure will exhibit a normal distribution. The level and across-grade salary increments were constructed assignment of points and the imposition of a particular to assure 9 percent increments for each grade step (hori- functional form on the overall distribution of salaries are zontal movement in table 8.7), while satisfying this over- TABLE 8.7 all requirement of a compression ratio of 10.5. Prelimi- nary versions of the SINAPA salary scale imposed 50 Argentina: SINAPA salary scale, percent increments for promotions across levels F through June 1991 C and 60 percent increments for promotions between Level Bose grade Grade I Grade 2 Grade 3 Grode 4 levels C and A. The more recent version which was - adopted under Decree 994/91, relinquished this incre- B 606 660 720 na. na. ment simplicity to achieve the overall compression ratio c 408 444 484 527 n.a. of 10.5 (the overall compression ratio in a preliminary D 260 296 322 351 382 SINAPA salary scale proposal was 10.28). E 150 164 178 194 212 Assignment of salary increments on the SINAPA F 100 109 119 130 141 salary scale has nothing to do with differentials in the n.a. Not applicable. Source; Sistema Nacional de Profesion Administrativa (SINAPA), Annex I to Decreto opportunity costs faced by employees holding positions at 1 994/91, Argertina. PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 53 based on or reflect technical considerations rather than sations and fringe benefits attach to such things as longer opportunity costs. Such a system cannot assure that sala- work weeks (thirty-six, forty or forty-eight hours, rather ries for all positions will bear a consistent relationship than the thirty-hour base), full-time dedication and rep- with opportunity costs. resentation expenditures, night work, unhealthy occupa- tions, seniority, being a member of an organized house- Assigning salary supplements hold (hogar constituido), family allowance, and so on (World Bank 1991).z Although some of these situation- Salary supplements are a significant fraction of many pub- specific compensations obviously are tied to the demands lic employees' compensation in the typical LAC coun- placed on the worker-for example, the bonuses for work- try-as much as 84 percent of total compensation in ing more than the thirty-hour base and the unhealthy- Argentina, 80 percent in Uruguay, 74 percent in Chile, occupations premiums-many have no obvious link to and 32 percent in Venezuela. The above reported shares job demands; they reflect, instead, equity or special inter- of total compensation accounted for by salary supple- est considerations. In addition, in practice these situa- ments in Argentina, Uruguay, and Chile reflect maximum tion-specific compensations narrow the range of compen- shares-possible or observed-in the existing salary struc- sations. The seniority premium, a fixed premium per year ture, while the shares reported for Venezuela and Trinidad of service, inexorably raises the remuneration of more- and Tobago are averages based on salary scale data and senior employees, regardless of their performance or the actual expenditure data reported in annual budget docu- demands of their positions. The premium for members of ments. To put this in perspective, although the maximum an organized household is inversely proportional to the share of total compensation that can be accounted for by wage level, thereby partially counterbalancing the wage supplements in Uruguay is 80 percent, the observed aver- pyramid embodied in each of the salary scales. The family age is only 20 percent. So, salary supplements as a portion allowances are fixed premiums per child. of compensation appear to be higher in the former three The situation-specific compensations account, on av- countries than in the last two. Data limitations prevented erage, for roughly 20 percent of central government em- reporting precisely the same measures for all five coun- ployee compensation and can easily exceed 80 percent of tries. Although such supplements sometimes better link an employee's total compensation.3 Given their large share public sector salaries to economic factors-to counteract of total compensation and the fact that many of these the fundamental flaw of the technical algorithms used to benefits bear no relation to job demands or employee per- assign base salaries-they also tend to reduce the trans- formance, it is not surprising to find that actual compen- parency of salary determination and can yield arbitrary sation packages vary less across employment grades (lev- salary assignments. els within the salary scales) than do the base pay rates In Uruguay, for instance, public employee wages con- found in those salary scales. For instance, in the absence sist of a basic wage, defined by the applicable personnel of all situation-specific compensations, the overall ratio of roster escalaf6n, plus any of more than fifty situation- highest to lowest salaries-the compression ratio-in the specific compensations and fringe benefits. The compen- central administration stood at 13.2 (table 8.8). When TABLE 8.8 Uruguay: potential weekly pay compensation comparisons in the central administration, July 1989 (dollars) Base pay Pay including three special bene,fts Clossificatjon Minimum Maximum Ratio maxlmin Minimum Maximum Ratio moxlmin University-trained professional 157 1,143 7.3 190 1,211 6.4 Technical-professional 134 858 6.4 170 926 5.5 Administrative 88 651 7.4 128 719 5.6 Specialized 88 205 10.2 128 964 7.5 Trades 86 144 7.4 127 706 5.6 Auxiliary services 94 165 4.0 135 450 3.3 Overall 86 1,143 13.2 127 1,211 9.5 Note: Minimum compensation including benefits assumes no seniority, while rmaximum compensation including benefits assumes 30 years of seniority. The three benefits are seniority, established household, and child care. AlI figures reflect potential compensation packages rather than actual remunerations received and assume a 40-hour work week and 4.29 weeks per month. Figures are monthly compensations expressed in U.S. dollars based on the july 1989 exchange rate of 611 1.2. Source: These comparisons are taken from World Bank 199 1, tables Vl- 12 and Vl- 14, pp. 84-85. 54 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN three of the most significant of these situation-specific TABLE 8.9 compensations are included-seniority, established house- Venezuela: central government personnel hold, and health care-this ratio is reduced to 9.5. Within budget, 1992 job descriptions reserved for university-trained profession- als, the base pay compression ratio was 7.3, but this ratio Percentage of falls to 6.4 when these three benefits are included. These Personnel Amount total (less data and the details of the salary-setting provisions in expenditure category (boliores) collective contracts) Uruguay's public sector reveal a public pay-setting policy Total personnel expenditures 105,889,578.318 that could be made more transparent and more clearly lesscollectivecontracts 88,868,463,107 100.0 linked to the quantity and type of work being performed Base salary 60,528,484.459 68.1 by eliminating or curtailing the use of many of the situa- Permanent empioyees 58,687,912,457 66.0 tion-specific compensations. Temporary employees 1,840,572,002 2.1 Salared employees 691,163,816 0.8 Like Uruguay, many LAC countries-such as Argen- Wage employees 1,149,408,186 1.3 tina, Chile, and Venezuela-allow a wide variety of salary Premiums 8,006,264,882 9.0 supplements. Trinidad and Tobago, on the other hand, Premiums for senionty, relies little on salary supplements. performance, education 3,329,094,597 3.7 Other premiums 4,677,170,285 5.3 Overtime and related compensations 9,799,789,702 11.0 Venezuela. In Venezuela, salary supplements repre- Annual bonuses 5,501,338,410 6.2 sent almost 32 percent of budgeted personnel expendi- Aid contributions to personal tures on public employees not covered by collective con- savings and retirement plans 5.032,585,654 5.7 tracts in the 1993 budget, and 40 percent for those covered Percentage of I 11 . I I n A . .r. Collectivecontracts ~~~~~~~Amount collective contract by collective contracts (see table 8.9). Moreover, a signifi- Collective contracts ' ~~~expenditure categories (bolivares) expenditures cant fraction of those salary supplements are not clearly Colective cotrics 17,01,1r,21 00.0 linked to the quantity or quality of work supplied by an Collective contracts 17,021,115,211 100.0 Total wages 10,208,712,133 60.0 employee. Only 3.7 percent of personnel expenditures Bonuses and other compensabons 6,812,403,078 40.0 were explicitly allocated as "premiums for service," de- Source Woldd Bank data. spite the fact that such "premiums" are allowed to aug- ment base salaries by up to 80 percent for professional Military salaries consist of a base plus four categories staff and up to 60 percent for technical staff. Up to almost of supplements-allowances, seniority, residency, and 39 percent of allowable service premiums could simply special premiums. Combined, these supplements dwarf reflect seniority, while the maximum salary supplement the base salary. Base pay accounts for, on average, resulting from an employee's performance evaluation can- roughly 16 to 23 percent of total compensation (see table not exceed 21 percent of base salary-or roughly 26 per- 8.10); while allowances account for 24 to 34 percent, cent of allowable premiums for service. Although over- seniority accounts for 2 to 32 percent, residency accounts time accounts for another 11 percent of budgeted for 24 to 20 percent, and special premiums are roughly 15 personnel expenditures in Venezuela, non-performance- to 21 percent.5 linked salary supplements appear to account for approxi- A similar yet more complex picture emerges when mately 11.9 to 20.4 percent of total personnel expendi- the salary scales covering many other central govern- tures in Venezuela in 1993, exclusive of employees covered ment employees are examined. As of 1988, for instance, by collective contracts. Performance-linked salary supple- while escalaf6n 1.428 had been designed to cover most ments appear to account for between 11.5 and 20.0 per- central government employees, at least 17 other wage cent of such expenditures.4 regimes covered employees in various central govern- ment agencies and more than sixty types of salary supple- Argentina. Argentina's salary supplements are also ments existed. This plethora of salary scales and supple- typical of LAC countries. Although each salary scale that ments contributed to increase variations across agencies governs personnel compensation in the central govern- in total compensation accorded identical positions and ment carries its own set of salary supplements, two ex- to compress the salary structure. To eliminate these wage amples illustrate the significance of such supplements in distortions, the government issued decrees 2.192 and determining total compensation-the military salary struc- 2.193 in 1986. These provided salary enhancements on ture and the D.L.1.428 salary structure, which covered the technical grounds designed to counteract the salary com- lion's share of central government employees until replaced pression introduced by the existing salary supplements. recently by the SINAPA salary structure (discussed above). To illustrate, in March 1991, salary enhancements based PUBLIC SFCTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 55 on decree 2.192 in the Instituto Nacional de Tecnologia 12 percent for lower positions. Supplements reflecting Agricultural Agropecuaria (National Institute of Agri- government program priorities-including program pri- culture Technology) were 342 percent of base salary (in- ority, exclusive dedication, investment dedication, and cluding dedicaci6n funcional) for employees at the top of regional adjustments-accounted for 10.2 to 19.6 per- the INTA salary scale, 126 percent for those near the cent of total compensation. Seniority factors (time in middle of the scale, and only 61 percent for those at the position and seniority), in turn, accounted for between bottom (Republic of Argentina, Ministry of Economy). 1.4 percent and almost 4.0 percent of total compensa- These enhancements accounted for 21.1 percent of total tion. A productivity factor could account for around 7.7 reported compensation for a prototype top-level em- to 9.2 percent of total compensation for these positions. ployee in INTA, 23.2 percent for a prototype mid-level Other supplements accounted for another 20.9 percent employee, but only 13.9 percent for a prototype employee of total compensation, on average, including 18.7 per- at the bottom of the salary scale (see table 8.11). Total cent dedicated to providing meals to employees. In short, enhanced base salary, including all position-linked salary salary supplements account for a sizable fraction of total enhancements as of April 1991, accounted for 27.2, 41.6 compensation under both of these typical salary regimes and 36.8 percent, respectively, of total reported compen- in Argentina. While a sizable fraction of those supple- sation for these three prototype employees. Salary supple- ments appear to be linked to levels of responsibility and ments other than these position-specific enhancements skill requirements, a large portion would appears to have accounted for 72.8 percent of total reported compensa- little to do with such factors: the 18.7 percent of salaries tion for the prototype top-level employee, 58.4 percent attributable to meals. for the middle-level employee, and 63.2 percent for the prototype employee at the bottom of the salary scale. Chile. Chile's set of salary supplements is perhaps as Salary supplements reflecting level of responsibility and extensive as that found in Argentina. Salary supplements job demands-for example, whether the position-holder held a university title, level in the hierarchy, and TABLE 8.11 whether the position was a scientific, technical or super- Argentina: salary components in Instituto visory position)-accounted for almost 30 percent of to- Nacional de Tecnologia Agropecuaria, tal compensation for the highest position, but only about April 1991 (percent) TABLE 8.10 ^ . .,. , ~~~~~~~~~~~~~~~~~~~~~~~~~~~~Highest-ranking Modal Lowest-ranking Argentina: military salary components as Compensation position position posiaon percentage of gross salary, October 1991 component (grade A I-15) (grode EI-Io) (grade C2-4) Enhanced salary base 27.2 41.6 36.8 Base Seniority Residency Speciol Base salary 2.5 7.3 9.2 Position wage Allowances premium premium premiums Functional dedication 3.7 Special benefit 1 1.0 13.8 Lieutenant general 15.9 23.8 31.7 13.9 14.7 Ait. 4, D.2.192/86 21.1 23.2 13.9 Majorgeneral 16.0 24.0 31.2 14.0 14.8 Brigadier general 16.3 24.4 30.1 14.2 15.0 Salary supplements 72.8 58.4 63.2 Colonel 16.8 25.2 27.7 14.7 15.5 Responsibility/ob demands, 29.6 12.5 12.1 Lieutenant colonel 17.7 26.5 23.9 15.5 16.4 Govemment program priority5 10.2 1 5.7 19.6 Major 18.7 28.0 19.7 16.3 17.3 Productivity 8.0 7.7 9.2 Major 1 8.7 28.0 19.7 1 6.3 17.3 ~Seniority factorsc 4.0 1.7 1.4 Captain 19.8 29.7 14.9 17.3 18.3 Other supplements 20.9 20.9 20.9 First lieutenant 1 20.6 30.9 11.4 18.0 19.1 Meals 18.7 1 8.7 18.7 First lieutenant 2 21.3 31.9 8.6 18.6 19.7 Household/domestic benefit 1.0 1.0 1.0 Second lieutenant 21.9 33.0 5.5 19.3 20.3 Miscellaneous' 1.0 1.1 1.1 Sergeant major 17.1 25.6 26.5 I5.0 15.8 Total compensation 100.0 100.0 100.0 Sergeant pdncipal 17.9 26.8 23.2 15.6 16.5 Sergeant adjunct 18.7 28.0 19.7 16.4 17.3 Note: Supplementsfor Law20.340/73, meals, and miscellaneous are imputed atagency Sergeant l 19.4 29.1 1 6.5 17.0 1 8.0 averages, and hence are estimated as constant average percentages across position prototypes. AlI other figures reflect position prototype compensation levels. Sergeant 20.6 31.0 1 1.3 1 8.0 19.1 a. Position and function, university title. hierarchy compensation, and supplemental Corporal 1 21.5 32.3 7.6 18.8 19.8 Law 20.340/73, which provides salary enhancements to stimulate scientific, technical, Corporal 22.2 33.4 4.4 19.4 20.6 and supervisory functions. Volunteer 1 22.7 34.1 2.3 19.8 21.1 b. Prority program, exclusive dedication, investment dedication, regional adjustment. Gendarme 22.2 33.3 4.5 19.4 20.5 c. Time in position, seniority. d. Undesirable assignments, eradication, Funci6n SCD. cash shortages. Source: Word Bank data. Source: World Bank data. 56 CiVIL SER/'ICE REFGRM IN tTIN MlJf R CA AND THE CKIJBBEAN exist for, among other factors, handling cash, having to Honduras. Honduras is also an exception to the pat- visit clients as part of one's job, overtime, change of resi- tern of heavy reliance on salary supplements. The central dence, travel expenses, seniority, possession of a profes- government salary scale in Honduras includes 39 grades sional degree, asignacion familiar y mnaternal (family and and 22 steps in each grade-858 cells in total. Salary household allowances), and D.L. 3.551 (Chile 1980b), increments across steps and grades are, as noted above, which provides additional compensation on the basis of fixed by simple technical criteria, which, of course, results professional qualifications and responsibilities. in salaries bearing no consistent relation with opportunity These salary supplements can be divided into three costs posed by private sector labor markets and faced by categories based on personal characteristics of the em- current or potential public employees.8 Despite this weak- ployee or his or her personal situation that have nothing ness, the Honduran salary structure includes only a single to do with the quantity or quality of work performed or salary supplement option, namely, eligibility for below- skills required for the position; based on job demands, the market mortgage loans-an arrangement that undoubt- responsibilities or skill requirements of the position; and edly favors workers nearer the top of the salary structure, related to performance, reflecting the quantity or quality who are more likely to be in a position to purchase rather of work performed. Those reflecting personal characteris- than rent their housing. tics appear to be fairly limited in magnitude. These in- clude change of residence and asignaci6n familiar y mater- Assessment of salary scales and supplements nal. Change of residence compensation is restricted to one month's salary, while asignaci6n familiar y maternal is The information reported above illustrates two important part of the basic social security system. Similarly, perfor- aspects of salary-setting practices in most LAC countries. mance-related supplements appear to be insignificant. First, both base salaries and total compensation fail to bear Overtime in each and every program is limited by the a consistent degree of competitiveness with domestic pri- budget law each year. Aside from this, performance-re- vate sector comparators. Second, the plethora of salary lated salary supplements do not appear to play any impor- supplements, which could be employed to correct distorted tant role in Chile's central government. base salaries, do not appear to do so. Instead, coupled with Salary supplements reflecting job demands, on the weak accountability for performance, those salary supple- other hand, are sizable. 'The largest of these are supple- ments make salary-setting practices less transparent and ments resulting from D.L. 3.551, which account for 9.4 to less subject to competitive tests of their efficacy. 45.5 percent of total compensation in non-fiscalizador positions. Salary enhancement based on whether a posi- TABLE 8.12 tion is a fiscalizador position are also significant, account- Chile: unified annual salary scale ing for between 8.5 and 67.7 percent of total compensa- components, December 1989 tion. Total job-demand-related salary supplements range from 32.7 to 68.2 percent of total compensation for non- Total fiscalizador positions and between 38.4 and 73.9 percent Base Adjust- Supple- remuneration fiscalizadcreerror salary ments ments (US$ for positions responsible for financial transactions (see table 8.12; Chile 1989b).6 F/ Fiscalizadores 16.0 10.1 73.9 68,993 A Autordadesde gobiemo 19.5 13.I 67.4 58,136 i B F iscalizadores 18.9 12.9 68.2 54,825 Trinidad and Tobago. Trinidad and Tobago is an ex- IC jefes superiores de servicio 19.9 13.8 66.3 51.380 ception to this pattern. The only allowance available to IC Dir. sup. profesionales 21.2 14.7 64.1 48,311 central government employees-and, indeed, only to a IC Dir. sup. no profesionales 33.2 19.5 47.4 30,862 8 Fiscalizadores 22.6 19.9 57.6 37,371 subset who hold posts classified as "traveling"-apart from 8 Directivos profesionales 23.6 20.9 55.6 28,783 health and the national insurance scheme, is a transport 8 Profesionales 24.2 20.8 55.0 28,018 allowance of approximately $1,101 per annum.7 Aside 8 No profesionales 50.7 16.6 32.7 13,379 14 Fiscalizadores 29.3 19.9 50.8 19,922 from overtime, salary supplements in, for example, the 14 Jefaturas 34.7 18.2 47.1 12,308 Office of the President, the Office of the Prime Minister 14 Profesionales 25.6 20.4 54.0 16,685 and the Ministry of Finance and Economy accounted for 14 No profesionales 46.0 16.1 37.8 9,279 less than 2.5 percent of total personnel expenditures in 23 Fiscalizadores 47.4 14.8 37.8 4,129 23 Prafesionales 28.4 18.5 53.1 7,875 1989 (see table 8.13). Of these, roughly four-fifths (about 23 Noprofesionales 41.7 16.1 42.2 5,365 2 percent) reflect contributions to the national insurance 25 Fiscalizadores 47.7 13.9 38.4 2,975 scheme, leaving less than 0.5 percent of personnel expen- 31 No profesionales 41.8 15.2 43.0 3,397 ditures as variable salary supplements. Source: Chile 1989b. PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 57 TABLE 8.13 Trinidad and Tobago: personnel expenditure composition, 1989 Base salary, Naotional Office wages, and COLA Overtime Allowances insurance scheme Miscellaneous Office of the President 94.5 0.0 3.8 1.5 0.2 Office of the Prime Minister 91.6 6.2 0.1 2.0 0.0 Minister of Finance and Economy Comptroller of Accounts 97.5 0.2 0.2 2.1 0.0 Inland revenue 97.1 0.3 0.1 2.2 0.2 Customs and Excise Division 70.4 19.1 1.7 1.4 7.4 Overall average percentage 86.8 8.2 0.7 1.9 2.5 Average percentage net of Customs and Excise division 94.7 3.0 0.2 2.1 0.1 Source: Republic of Trnidad and Tobago. Auditor Genera), 1989. These patterns raise at least three important ques- Why then do top government officials throughout tions whose answers can help to identify practical steps for LAC routinely accuse the salary-setting policies based on improving both base salary-setting practices and the use of such salary scales of failing to assure equal pay for equal salary supplements. The three important questions are: work? The answer to this question turns out to also ac- * Why do LAC governments generally employ techni- count for the proliferation of salary supplements. cally based base salary-setting algorithms despite the fact that these algorithms cannot readily ensure equally com- Salary supplements. Under a salary scale such as petitive salaries across different types of positions? Chile's Escala Unica, created in 1974 (Chile 1989b), * Why do salary supplements proliferate in LAC civil Argentina's D.L. 1.428/73 salary scale (Argentina 1973) services, yet still fail to correct the disparities in competi- or Argentina's recent SINAPA salary scale, the salary tiveness of public salaries across types of positions? differentials between levels or grades are based on tech- * Why do salary supplements undermine transparency nical criteria that do not necessarily reflect skill- or re- and accountability? sponsibility-specific salary differentials observable in do- mestic labor markets. As a consequence, public manag- Base salary setting. The inconsistent relationship be- ers find that some of their available positions are rela- tween public and private sector base salaries is an artifact tively more difficult to staff than are others. If for in- of the technical basis typically employed to assign base stance, the technical criteria for assigning salary salary differentials across positions (see above). These tech- increments for job responsibility fall below increments nical criteria are employed to calibrate salary scales for two for those same responsibility differentials in the domestic basic types of reasons: horizontal and vertical equity, and private sector, pressures are likely to increase within the to prevent personal or political patronage or favoritism bureaucracy to augment the salaries of such positions. A from undermining either of these types of equity. complete revision of the salary scale could prove costly, When top-level public managers in LAC countries time-consuming, and potentially risky with regard to its are asked to suggest how base salary policies might be uniformity (its claim to fairness) and its fiscal improved, they almost without exception advocate not sustainability. Consequently, a politically more feasible only that base salaries be raised, but-equally important- response is likely to be the creation of a special "respon- that those base salary structures be updated so as to ensure sibility" enhancement or supplement. that positions with comparable responsibilities and skill An extreme version of such a response to a salary requirements receive comparable levels of pay and that scale that fails to reflect the opportunity costs of particu- compensation rises with responsibilities and skill require- lar types of positions is to proliferate salary scales, as ments. Salary scales that assign salary increments based on occurred in Argentina between 1973, when the D.L. pre-specified assessments of differences in responsibilities 1.428/73 salary scale was created, and 1991, when the and skill requirements address precisely this concern, re- SINAPA salary scale was imposed. For instance, among gardless of whether the increment assignments are based six of Argentina's salary scales in 1991, salaries for the on technical or economic criteria. Moreover, use of such highest-ranking positions varied by a factor of more than an objective algorithm for assigning base salaries ensures 2.2, while these varied by a factor of 2.9 among modal that personal or political patronage or favoritism will not positions and 2.1 among entry-level positions.9 Tellingly, undermine either horizontal or vertical equity. the core salary scale, escalaf6n 1.428/73, provides, with 58 CIVIL SFRVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN few exceptions,'° the lowest salaries among Argentina's mated descriptor coefficients can be employed as imputed salary scales. This is consistent with the suggestion that a weights for assigning salaries to each public sector position primary motivation in the creation of Argentina's plethora on the basis of its position descriptors. of salary scales has been the desire of the governmental These two methodologies are not novel in other ap- units to provide more competitive salary levels than were plications. Altemative 1 is known as the "comparables" allowed under the 1.428/73 core. Chilean officials respon- methodology when it is employed to assess housing values sible for administering the central government's Unified for such applications as identifying the taxable base for Salary Scale (Escala Unica de Sueldos) also noted, when real estate taxes or deciding how much to bid on a piece of interviewed, that they regularly face significant pressures real estate. Alternative 2 is simply an econometrically to convert individual agencies to the fiscalizador salary sophisticated version of the "comparables" methodology scale, which allows more competitive salaries than does in which market "prices" are imputed for each of the key the Escala Unica (see table 8.12). dimensions of the product being studied (for example, A scenario such as this is consistent with the data housing, labor services). A large body of experience and cited earlier on salary supplements. It also matches the literature exists on the use of both methodologies. casual empirical observation that the longer a salary scale Alternative 1, the "comparables" approach, is the has been in place, the wider is the variety of such salary simpler one to apply because it does not require econo- supplements and the greater is the level of audible discon- metric work. Its weakness is that it is sometimes difficult tent within civil service ranks about the fairness of salary to identify sufficiently comparable positions. But even setting. This scenario provides a plausible explanation for given this limitation, the approach can readily be used to why discontent with the "unfairness" of salary-setting poli- set average or base compensation levels for broadly de- cies under such technical-based salary scales is so wide- fined positions for which reasonable comparators can be spread, why targeted salary supplements proliferate under identified in the private sector. Finer salary discrimina- such salary scales, and why discontent mounts as the tions across positions can be achieved using, for example, variety of salary supplements increases. technical criteria, annual personnel evaluations, or mana- gerial discretion (managerial discretion can be used only if Base salary recommendations. Supposing this assess- managers are adequately held accountable for the perfor- ment correctly identifies the dynamic by which these sal- mance of their units [see below]). ary scales have failed to achieve the end for which they Alternative 2, the hedonic regressions approach, as- were designed-equal pay for equal work-how can the sures that any public sector position that can be described problem be corrected? along the same dimensions (responsibilities and skill re- To avoid corruption of salary setting, salaries offered quirements) deemed important by those designing the for all public sector positions must bear the same relation- salary scale can be reliably assigned a salary that reflects ship to their private sector counterparts-regardless of the wage those responsibilities and skills could, on aver- whether that is 40, 80 or 120 percent. But how can this be age, command in the domestic private sector. Its draw- accomplished? It cannot be accomplished on a priori back is that it requires considerably more sophisticated grounds, as the failure of the strictly technical approaches resources to implement. demonstrates. Instead, empirical evidence on salaries of- Both methodologies require regular updating with fered in the domestic private sector is essential. Fortu- reasonably current information on private sector labor nately, such data are often readily available (see above). market compensation levels. Fortunately, such data ap- Once such data are obtained, two obvious options exist pear to be readily available in many LAC countries. For for using them to guide public sector salary setting: instance, such data were readily obtained from private * Alternative 1. Match public and private sector position sector firms who monitor private sector salaries in Argen- descriptions and require that salaries for all such matches tina, Trinidad and Tobago and Venezuela. Alternatively, bear the same relationship-each public sector position the government can itself gather such data. Comparisons must offer a salary that is the same fixed fraction of its reported above between public and private sector salaries matched private sector counterpart. in Chile and Uruguay are based, in part, on govemment * Alternative 2. Apply the same responsibility and skill re- survey data on private sector salaries. The data currently quirements position descriptors to private sector positions being reported by those government surveys do not al- and public sector positions. Then estimate hedonic price ways provide as fine a set of private sector position classi- equations on the private sector sample in which these de- fications as would be desirable, but it is obviously feasible scriptors are the right-hand-side variables and observed to enhance such surveys to assure that they do provide an total compensation is the left-hand-side variable. The esti- adequate level of occupational detail. PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 59 If either of these two empirically based methodolo- cult-to-decipher personnel, payroll, and expenditure ac- gies were used to set salary scales-and the scales were counts; and using grounds other than performance to updated regularly-the plethora of salary supplements in advance employees up the salary grades or steps. countries such as Argentina, Chile, and Venezuela could be significantly reduced. More important, the pressures to Risks create new salary supplements would be significantly di- minished. This should increase the transparency and fair- At issue are the risks of being detected and punished for ness of public salary setting. failing to adhere to centrally mandated salary policies. Central authorities can influence the odds of being de- Salary supplements recommendations. The primary tected through the quality and reliability of key financial problems raised by salary supplements are not so much and personnel information monitoring systems. The ex- their proliferation as the reduced transparency of salary- pected penalty depends on the enforcement capacity of setting procedures and their outcomes and the lack of key central administrative enforcement agencies such as accountability for their impacts upon agency performance. the controller general, the treasurer, the budget office, Accordingly, the following recommendations are sug- and any administrative courts. gested: Industrial countries rely on sophisticated, comput- * Allow discretionary salary supplements only when man- erized information monitoring systems in budgeting, ac- agers responsible for assigning those supplements are held counting, personnel, financial transactions, asset, facili- accountable for the performance impacts (upon their ties, and materials management. World Bank experi- units) of their assignment of those supplements. ence confirms that for developing countries attempting * Strengthen personnel and financial information sys- to set the stage for serious reform the capacity for inte- tems to ensure capacity to provide reliable and timely grated financial and resource management systems is reports on the pattern and impacts of salary supplements. key. (Nunberg 1990, 1991; Nunberg and Nellis 1990; de Merode 1991). Lending operations in Argentina, Bo- Weak enforcement of centrally livia, Brazil, Chile, Ecuador, Guyana, Jamaica, and Ven- ezuela have all supported strengthening of information imposed salary-setting restrictions systems in order to provide such capacity (see table 8..14). Salary-setting policies are, of course, never fully effective. Although these capacities are the backbone of any The extent to which individual line agencies and their system that effectively monitors and enforces such things managers will circumvent centrally mandated salary poli- as staffing levels and composition, compensation pack- cies will depend upon (1) incentives to circumvent those ages, and overall resource usage by line agencies, these policies; (2) means of doing so; and (3) risks of being capacities are often dangerously weak in the public sec- detected and punished for failing to adhere to centrally tors of many LAC countries. mandated salary policies. Trinidad and Tobago. The managerial capacity of the Incentives to circumvent centrally mandated salary policies central government of Trinidad and Tobago suffers from problems that are widely recognized by its managers. Per- The previous analysis of the inconsistencies and non- haps the two most important are, first, an inability to competitiveness of typical public sector salary regimes in reliably monitor key indicators of the government's re- LAC suggests that most line agencies and their managers source usage, the activities undertaken with those re- have strong incentives to circumvent the salary regimes. sources, and key outcomes of those activities and, second, a salary structure in which highly skilled public employees Means of circumventing salary policies earn only 50 to 70 percent of what they could command in the private sector, while very low-skilled public em- There are many ways to circumvent such salary-setting ployees may earn substantially more than they could ob- policies-for instance, by resorting to contracts for per- tain in the private sector (see above). Weak information sonal services, instead of hiring into the career civil ser- monitoring capabilities undermine the govemment's ca- vice; generating new position descriptions and filling them pacity to enforce any expenditure or employment con- with temporary appointments more rapidly than the cen- straints it might try to impose. The salary structure fur- tral personnel agency can review and appropriately clas- ther undermines this weak enforcement capacity and sify those new positions; maintaining unreliable and diffi- creates strong incentives in the line agencies to circum- 60 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN vent any constraints the government might try to impose This incapacity to monitor resource use and out- on staffing decisions. comes is illustrated by the recent Voluntary Termination The most fundamental weakness of the public man- of Employment Program. That program, which began in agement capacity of the central government is its inability 1989, and was followed by a freeze on all new hires begin- to reliably track the minimal information required to as- ning in 1991, resulted in 1,053 voluntary terminations, at certain just what government agencies are doing, the a cost of $9.3 million, or approximately $9,000 per separa- quantity of resources they are using, and what they are tion. Despite this, the government continues to budget accomplishing. The little expenditure information that is for large numbers of vacant positions in each agency. monitored is widely reputed to be unreliable, and it takes Furthermore, line agencies are widely suspected of filling inexcusably long periods before it is made available to many officially "frozen" vacancies by having underqualified those who could use it. This indictment applies with most existing employees serve as "acting" holders of those posi- force to the government's expenditure monitoring, in- tions. This maneuver sidesteps the normal hiring or pro- cluding its payroll system. It is widely believed by public motion process conducted by the relevant Public Service managers in line ministries and in ministries charged with Commission. These actions are also completely maintaining the institutional framework for managing unmonitored-the government has no systematic infor- human resources-including the Ministry of Finance and mation on the number of vacancies, the fraction of those the Ministry of the Public Service-that the payroll sys- filled by "acting" appointments or how long such "acting" tem is unable to reliably and in a timely manner enforce appointments endure. In short, the total absence of timely agency-specific ernployment and payroll constraints or and reliable information on vacancies and "acting" ap- employee-specific employment constraints, such as limits pointments prevents any arm of the government from on sick leave and annual leave. exercising effective control over this practice. TABLE 8.14 Selected developing countries: civil service reform elements Improve Undertoke Restructure Restructure information system diagnostic work Reduce employment employee incentives manogement incentives Latin America Argentina Argentina Argentina Argentina Argentina Bolivia Bolivia Bolivia Bolivia Chile' Brazil Costa Rica Chile Chile Jamaica Chile Haiti Costa Rca Costa Pica Peru Ecuador Jamaica Guatemala Dominica Guyana Peru Guyana Harti Jamaica Uruguay Hait Jamaica Venezuela Uruguay' Peru Other developing counties Bangladesh Bangladesh Benin Bangladesh Bangladesh Central African Republic Central African Republic Cameroon Benin Central African Republic Ghana Congo Central African Republic Cameroon Gambia, The Mali Gambia, The Congo Central African Republic Ghana Mauritania Ghana Gabon Congo Mali Senegal Guinea Gambia, The Gabon Mauritania Guinea-Bissau Ghana Gambia, The Senegal Mauritania Guinea Ghana Togo Niger Guinea-Bissau Guinea Turkey Senegal Laos Mauritania Uganda Sri Lanka Mali Niger Thailand Mauritania Sao Tome and Prncipe Togo Nepal Senegal Uganda Niger Sierra Leone Sao Tome and Principe Thailand Senegal Togo Turkey Tunisia Uganda Uganda Zaire Note Entries reflect World Bank-sponsored reforms dunng 1981-91, except those followed by an astensk (). which were done irndependently of the Bank. Source: World Bank. PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 61 Uruguay. The Government of Uruguay's capacity to higher but narrower band of salary grades (see table 8.16 enforce salary-setting rules is weakened by a proliferation and figure 8.1). Although the median in the distribution of salary supplements and job titles coupled with a weak of employees across pay grades in 1985 held a position in capacity to monitor the use of those supplements and pro- pay category 3, that median moved up to pay category 4 motions to those job titles. (The proliferation of salary by 1988 and to pay category 5 by 1990. It is readily supplements has already been documented above.) Re- apparent that central government employment has be- garding job titles, as of 1991 no fewer than 755 existed in come steadily less represented among the lower pay cat- the central government ministries, exclusive of the mili- egories and more concentrated in the higher pay catego- tary, teachers, police, judiciary, and foreign service (see ries. In 1985, for instance, 67 percent of central govem- table 8.15). Job titles are most numerous among the uni- ment employees were in the three lowest pay categories, versity-trained professional, administrative, and specialized while by 1988 only 32.5 percent were in the three lowest ranks, but are most concentrated in the technical profes- pay categories-and by the end of 1990 only 5.3 percent sional and "other" ranks, which have roughly one job title could be found in those pay categories. Although the for every nine employees. Job titles are least concentrated two highest salary categories accounted for 0.7 percent in the administrative and auxiliary services ranks, which of central government employment in 1985, their share have only one position title for every 36 to 37 employees. increased to 1.7 percent by 1988 and to 4.6 percent by It is an open question whether reducing the number the end of 1990-more than a 6.5-fold increase over the of job titles in the name of increasing transparency would five years. enhance, compromise, or leave unaffected the perfor- This compression of public employees within the mance of the employees filling those positions. The prolif- higher grades suggests that public managers in Uruguay eration of job titles could easily result from managers are employing grade and step increases to circumvent the seeking to tailor pay and screening requirements to the salary constraints imposed by a salary scale that is not markets in which they must search for personnel. In short, competitive with wages within the domestic private sec- the plethora of job titles may be a consequence of a rigid tor. The unwarranted promotions are possible because of set of salary scales, coupled with the more than 50 pos- a weak capacity of the central personnel office to enforce sible devices (situation-specific salary supplements) that promotions standards. can be used to augment the base salaries by carefully penning a job title and its attendant job description. Al- Venezuela. Evidence from interviews with government though some may decry the Byzantine picture that emerges officials in Venezuela points to important weaknesses in from this process, it does not necessarily follow that the the government's ability to reliably monitor and report on public employees hired in this context perform their tasks the level and composition of its work force and the full less efficiently than would those hired under a simpler and costs of the government payroll. Such ability is, of course, less readily circumvented civil service pay structure. essential. In addition, reliable, timely, publicly available Promotions and quarterly inflation adjustments have information on public employment levels and their costs is contributed to a worsening public sector wage structure. essential if citizensare to effectively hold their government Promotions have reflected seniority. With a fixed set of accountable for its activities and spending. salary grades and a stable set of employees, this has led to It appears that wage rates that can be offered for a gradual compression of employees in a progressively highly skilled positions in the public sector in Venezuela are considerably below their private sector counterparts. TABLE 8.15 In addition, the central government has attempted to Uruguay: position titles trim the public sector by placing restrictions on filling vacant slots within career civil service positions (planta). Number Number Positions So, a high-level public manager who wants to hire a high- Classification of titles of positions per title level professional or manager will be tempted to fill such a University-trained professional 169 2,795 16.5 position by contracting someone on a short-term con- Technical/professional 93 881 9.5 tract. This arrangement bypasses the normal review pro- Administrative 157 6,020 38.3 cesses and takes a while to show up in the government's Specialized 151 3,644 24.1 Trades 97 1,391 14.3 accountigrecords.Furthermore,pooriformationmoni- Auxiliary services 74 2,775 37.5 toring by the central government appears to permit re- Other 14 128 9.1 peated contracting of a given person, thereby making Total 755 17,634 23.3 such "short-term" contracts virtual long-term contracts. Source: World Bank 1991, tables VI- 15, p. 86. Although such contracts do not provide the non-salary 62 CIVIL SERVICE REFORM IN LATIN AMERICA AND THIE CARIBBEAN benefits available to career civil servants, a manager can FIGURE 8 I set a salary high enough to compensate for this omission Uruguay: Central government employees and be competitive with private sector remuneration for by salary category, 1985-90 comparable positions. Although this scenario suggests that such contrac- Cumultive frocson ofemployees tors (contratados) can provide an effective and sustainable i 0 ....0 means of circumventing central government constraints in order to improve agency performance, it is equally easy 0.8 to imagine that such circumventions might reduce agency 19 performance by providing politically useful sinecures or /1988' 1990 patronage-often referred to in Venezuela as "clientelist" benefits. Because of these risks, it is important to design 0.4 constraints, reporting requirements, grants of authority, 04 assignment of responsibilities, and managerial incentives that encourage the performance-enhancing types of mana- 0 2 gerial maneuvers reflected in the first scenario, while dis- couraging the performance-compromising types of mana- 0 ' ' gerial behavior reflected in the second scenario. In 1 2 3 4 5 6 7 8 9 10 Venezuela, whether one or the other scenario occurs ap- Solory cotegory pears to depend almost excltsively on the morals and objectives of managers, rather than on existing govern- Personnel records are created by each operarional ment policies or practices. unit (ministries and autonomous institutions) and by the Directorate of Personnel Administration in the Ministry El Salvador. In El Salvador, the central government is of Finance. Operational units typically devise their own unable to monitor and control the number and composi- unique employee identification codes. No common code tion of authorized positions, to control expenditures on identifying an employee exists across all agencies. Conse- employee compensation, and to assure compliance with quently, it is difficult, if not impossible, to link personnel constraints on public employee hiring decisions-for in- records from one agency with those from another agency. stance, quality constraints as well as restrictions on rehir- This weakness poses a number of problems for the govern- ing people who have enrolled in the public employment ment. First, it is impossible to control multiple-position retirement incentive program created by decree 111. holding or greater-than-full-time employment in the pub- lic sector by a single employee. Second, it is impossible to TABLE 8 16 enforce the five-year ban on holding a public sector posi- Uruguay: Central government employees tion after accepting a voluntary retirement package under by salary category, 1985-90 the decree 111 voluntary retirement program. Third, it is _______________________ ___- impossible to construct a personnel information system Employment structure (percent) capable of tracking employment histories for purposes of Salory category 12/31/90 4/29/85 2/29/88 facilitating human resource management efforts. At a 3.2 0.6 0.8 minimum, the government needs a reliable means of link- 2 28.0 2.9 1.0 ing information on any given public employee with infor- 3 35.8 29.0 3.5 mation from any other sources on that same employee, 4 15.3 25.1 10.4 regardless of the employee's position or operational unit, 5 S.6 21.8 50.3 6 4.9 10.4 11.4 or whether the employee's public sector work history is 7 2.6 3.7 9.6 continuous. 8 2.0 2.0 4.5 9 0.4 /.7 2.4 Chile. Chile is unique among LAC countries in its 10 0.9 1.1 1.5 11 0.7 1.7 4.6 capacity for management and reform. At the time that Total 100.0 100.0 100.0 sustained public administration restructuring efforts be- Note. The lowest salary category (l) ranged as high as US$9 I as of 4/29/85, but only gan in Chile, that country already possessed two of the as high as US$69 by 12/31/90 The highes. sa!ary category (I I) began at US$731 as three key aspects of such capacity: information and tools. of 4/1 9/85, but its minimum had dropped to US$4 2 by 12/31/90. All salary figures h c are real monthly U.S. dollar eqLiivalents at the 1 2/90 exchange rate of 1,551 4. Chile's capacity to reliably momtor public employment Source: World Bank 1991, table VI-7, p. 77 and resource use in its various ministries and to enforce PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMFRICA AND THE CARIBBEAN 63 centrally determined policies was-and still is-unri- Because of the inability of typical public sector salary valed in LAC. scales in LAC to assure a consistent and competitive rela- Chile's effective monitoring and enforcement capac- tionship between public and private sector salaries for com- ity allowed the government to impose enforceable, bind- parable positions, most line agencies and their managers in ing personnel constraints, while the lack of typical civil LAC face significant incentives to circumvent salary poli- service job protections in Chilean law throughout most of cies. The avenues for circumvention in El Salvador, Ven- the retrenchment period assured that ministries had ad- ezuela, and Uruguay are ample and varied and appear to equate authority to make mandated cuts. Other countries represent those available in many LAC countries-includ- contemplating programs to achieve reductions in force for ing a multiplicity of salary supplements, the capacity to maintained central government functions must, then, first generate new job titles without effective checks by central establish a solid monitoring and enforcement capacity. authorities, the ability to promote employees without timely and effective review of such promotions by an inde- pendent body, and the possibility of hiring some employees Summary outside the career civil service (for example, allowing fixed- These illustrative assessments of the weak capacity of term or fixed-price contracts for personal services) without many central governments in LAG to enforce centrally adequate means of holding those managers and their agen- imposed salary-setting restrictions highlight importt .cies accountable for the performance of those employees or imposedsalary-setting restrictionshighlightimportantles- their unit. Finally, weak personnel and compensation sons. In particular, they illustrate the importance of three monitoring capacities, such as those found in Trinidad and factors: the strength of the incentives (potential benefits) Tobago, Venezuela, El Salvador, and Uruguay, are not line agencies and their managers have to circumvent sal- ary-setting policies, the means available to circumvent atypicaleamongsLAG countries, thereby significantly re- them, and the risks of being detected and punished for duigtersslnaecesndhirmaesfcen nocmplance. attempting to circumvent centrally imposed salary policies. noncompliance. Reform within an Existing Legal Framework Hiring, firing, promotions, annual salary review and ad- agencies have managed to differentiate themselves from justment decisions and the assignment of responsibilities the others. and training are core tools for personnel management. The hypothesis that sets apart inefficient from effi- Although the base salary scale, including all the non- cient civil services is competitive pressures. LAC civil ser- discretionary salary supplements, set important limits on vice systems with reputations for inefficiency and ineffec- the ability of line agencies and their managers to offer tiveness have policies that undermine competitive competitive compensation packages to their personnel, pressures in the public sector labor force. The few ex- the policies governing hiring, promotions, and other re- amples of public sector agencies or personnel systems with wards to employees within those constraints are pivotal reputations for efficiency and effectiveness, on the other determinants of the capacity of management to effec- hand, include a wider variety of personnel policies and tively harness the human resources at its disposal. Judging practices that increase the competitive pressures faced by from the nearly universal condemnation that is heaped managers and the employees they manage. Examples of upon the civil service in most LAC countries, it would personnel policies and practices that reduce competitive appear prudent to begin with the working hypothesis that pressures are: these core personnel policies and practices are generally * Procedures that guarantee job tenure not well designed. * Restrictions on recruiting to positioni froni untsitde the In line with this, this section first summarizes the civil service typical pattem of such core personnel policies and prac- * Recruitment procedures that ensure nionopolistiL co0n- tices found in the countries examined for this study, with trol over recruitment and employee selection an eye to identifying features likely to account for the low * Promotions procedures that in effect maike seniioiitilw, esteem in which the civil service is held. The section then major determinant of promotions focuses on a few public agencies with widely recognized * Employee performance evaluation systems t Jwi discomIr- reputations for effective management of their human re- age-or threaten retaliation to-evaluators who asslgll sources, with an eye to identifying why and how these low performance ratings to employees who periormi 64 CIVIL SERVICE REFORM IN LATIN AMERICA AND1111 ARIIMII \N poorly-employee performance evaluation systems driven tive Statute, Title 11, Para. 1, Art. 15). Lateral entry is by competition among budgetary units for salary enhance- permitted only when people meeting minimum skill re- ments rather than creating competition within individual quirements are not available in the civil service (ibid). So, program units for personnel resources it is virtually impossible to hire to position; thus, competi- * Employee performance evaluation systems that are not tion for available positions is minimal. On average, staff used, for whatever reason-for example, they are too quality is probably compromised by this restraint of trade. rigid, too elaborate, too complicated, or have no means to induce the designated evaluators to reliably execute their Promotion. Competition for vacant positions is re- mandate strained further by the policies goveming promotions. A * Rules that create a state-run or state-sanctioned mo- promotion is, by law, granted to the agency employee- nopoly for providing training to current or potential pub- among those who meet minimum skill requirements for a lic employees vacancy-whose employment rank (salary grade and step) * Rules that fail to hold managers accountable for the most nearly equals without exceeding that of the available results of their training resource allocation decisions slot (New Administrative Statute, Title II, Para. 4, Arts. * Allocations of training resources that are not competi- 48-54). Because the evaluation system that determines tive with those available from private sector employers employment rank fails to sort personnel by performance * Compensation levels that fail to link compensation to (see below), promotions are, in effect, based on seniority. the opportunity costs faced by current or potential public employees Personnel evaluation system. The New Administrative * Periodic (for example, annual) salary adjustments deter- Statute (Chile 1989c: Title II, Para. 3, Arts. 27-47) pre- mined by factors other than performance, such as seniority scribes a personnel evaluation system for all civil servants, * A lack of systems that provide information on person- but it is so elaborate, rigid, and reflective of military crite- nel decisions, usage, and performance and enable admin- ria that officials from several ministries claim that virtu- istrators to summarize and evaluate those decisions and ally no agency uses it. The little evidence available on the their consequences system's use reveals that virtually all employees received * A lack of systems that provide information on program- the top rating. Both outcomes should ccme as no surprise specific costs, thus making it difficult or impossible to once one is familiar with the rules governing the system. evaluate the cost-effectiveness of programs and personnel Perhaps the most significant rule governs the grounds on uses. which an employee may be dismissed on the basis of poor performance evaluations. The statue provides four overall Typical patterns of core personnel performance rating categories: distinction, normal, condi- tional and deficient. An elaborate system of assigning policies and practices points for each of five dimensions (loyalty, tact, ability to get other employees to perform effectively, training and Chile efficiency and dedication) virtually guarantees that every employee who at least shows up at work regularly and Although Chile's public sector made impressive strides does not actively sabotage the agency's activities will be in downsizing, privatizing, and decentralizing between awarded a rating of normal or distinction, because all 1974 and 1990, it has not made similar progress with its employees begin with enough points to place them in the core personnel policies. Core personnel policies, proce- normal ranks and can fall below that rating only by incur- dures, and practices in Chile's central government min- ring "demerits." That these evaluative dimensions reflect istries, intendencias (provincial governments), and criteria more obviously applicable to military personnel gobernaciones (local governments), including the central- than to many other civil service positions is, perhaps, not ized and decentralized public services established under terribly surprising, because the military drafted these each of these three authorities, are governed by the New guidelines. This undoubtedly contributes to the reluc- Administrative Statute (Chile 1989c). Those core per- tance of many agencies to apply them. sonnel policies include a multitude of provisions that Managers, who are assigned the task of evaluating significantly undermine competitive pressures in the employees, know that should their evaluations place an civil service. employee in the conditional category more than once in five years, the employee will face a significant risk of being Recruitment. Hiring from outside the civil service is dismissed (see below). A rating of deficient is cause for allowed for entry-level positions only (New Administra- dismissal. Furthermore, managers face no penalties for PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 65 giving high ratings, but do face the risk of creating ill will an absence of information on the targeting and outcomes and possibly outrage among their employees if they give of such "voluntary" training precludes the government or low ratings, because of the risk of dismissal. More specifi- any independent body from reliably assessing the effi- cally, because line managers face no negative conse- ciency with which these resources are allocated. The gov- quences for themselves or their agency (such as using up ernment does not finance basic education and degree limited salary funding) from bestowing high performance programs as training-except limited funding for gradu- ratings on their employees, they have strong incentives to ate training in specialized fields. give high ratings to all employees. Conversely, if managers give employees low ratings they stand to gain nothing Tenure protection. Members of the permanent civil tangible (because their own salaries, promotions, and other service have secure tenure. They can be dismissed only rewards for performance do not depend upon how accu- under one of three conditions: the agency within which rately they appraise their employees' performance). They the employee works is restructured (for example, because do, however, run the risk that a poorly rated employee of budgetary constraints) and the restructuring eliminates might file a complaint (which could harm the manager's the position; the employee receives a rating of deficient (4 own performance review) or undermine the performance on a scale of 1 to 4), or a rating of conditional (3 on the of the unit by further slacking or actively sabotaging the same 4-point scale) three times during any five-year pe- unit's activities. riod or twice in a row; or the employee is sanctioned with Thus, it is extremely unlikely that any employee will a destituci6n disciplinary action. Such a disciplinary sanc- be rated lower than normal. A performance evaluation tion can be imposed only if the employee fails to report to system that fails, as this system does, to sort employees on work for three consecutive work days without justifica- the basis of their performance undermines the ability of tion; participates in labor strikes against a public agency, the personnel management system to target rewards to commits acts of destruction against the public sector, or high-performing employees. As a consequence, annual incites to destroy or disrupt the activities of public agen- salary adjustments largely reflect time in position. cies; or is condemned for a criminal offense. A destituci6n sanction is surely extremely rare and certainly not a tool Training. Resources for training are extremely lim- for maintaining competitive pressures to perform. Given ited. To illustrate, in 1992 the central government allo- that the few agencies that perform annual employee per- cated less than 0.5 percent of its personnel expenditures- formance evaluations uniformly rate all employees as dis- roughly $28 per employee-to training activities within tinction (I on the 4-point scale), the use of poor ratings to the Secretariat of the Presidency and the Ministries of dismiss employees is nonoperative. Last, eliminating an Economy, Finance, and Education (see table 8.17). Al- employee's position through agency restructuring requires though no data on training expenditures by private sector payment of one month's salary for each year of service, up firms in Chile were available, comparable data in Venezu- to six months (New Administrative Statute, Art. 148). ela reveal that private sector firms spent 1.33 percent of Although this restructuring justification was surely heavily personnel expenditures on training in 1989-or almost used during the 1974-88 retrenchment, it is probably no three times the fraction that these four key ministries in longer widely used. Chile spent (Instituto de Estudios Superiores de Ad- Tenured civil servants constitute about 94 percent of ministraci6n [IESAI 1990). the authorized civil service positions (planta) in Chile's By law, training resources are allocated for three pur- TABLE 8.17 poses in Chile: to prepare workers for promotions, to correct skill deficiencies, and to reward high-performing Chile: Training expenditures, 1992 employees. Training for promotion is assigned, by law, according to position on the salary scale. Given the exist- TroTraining Trwining Trnmmsg expenditures expenditures as ing personnel evaluation system, training for promotion is expenditures as a percentage a percentoge allocated according to seniority rather than performance per employee of personnel oftotal or potential. Training to correct skill deficiencies for an Ministry (US$) expenditures expenditures employee's current position is to be assigned by concurso- Secretariat of the Presidency 1 1.72 0.23 0.074 for example, by examination. Regrettably, no data are Ministry of Economy 34.78 0.39 0.033 available on how well targeted such training is or whether Ministry of Finance 48.00 0.72 0.315 Ministry of Education 13.81 0.27 0.013 or to what extent it reduces skill deficiencies. Voluntary Weighted average 28.31 0.45 0.038 training is to be assigned by top-level managers based on Source: Leyde Presupuestos del Sector P6blico, Ao 1992 (Law No. 19 103). Rep"iblca evaluations of the merits of the candidates. Once again, de Chile, Ministerio de Hacienda, Direcci6n de Presupuestos. 66 CIVIL SERVICE REFORM IN LATIN AMERICA AND THF CARII;Iki AN central government, exclusive of health care positions." performance of public agencies (see, for instance, COPRE The balance of the civil service positions, 6.4 percent of 1989.) Although the explanation for Chile's apparently total central government employment, are positions of successful use of nontenured appointments in the higher "exclusive confidence" (cargos de exclusiva confianza)- managerial ranks is surely complex, perhaps an important political appointments. Holders of these positions serve at element of that explanation is the stability of the minis- the pleasure of the president or his representative; they ter-level appointments, which, in turn, shoulder the re- enjoy no tenure protection nor are their working condi- sponsibility for making the lion's share of the remaining tions governed by the civil service statute. These posi- nontenured appointments. Because ministers tend to hold tions of exclusive confidence include division chiefs and their appointments for a long time in Chile, even under department chiefs or their equivalents in the ministries or the post-Pinochet democratic government, so do their the regional ministerial secretariats, and also superior appointees. If this hypothesis is valid, it suggests that any chiefs, sub-directors, regional directors, and department advice about how deep nontenured appointments ought chiefs or their equivalents within the public services (Law to run within the public sector must be couched as condi- 18.834, Art. 7; see Chile 1989c). The planta also does not tional upon the stability of the highest-level political ap- include people hired under personal service contracts. pointments. Where cabinet-level appointments tend to These are limited by law to 20 percent of authorized civil endure, extending nontenured appointments to cover up service positions in each agency or program."2 to 5 or 10 percent of the public sector work force may still Chile's relatively heavy reliance on nontenured posi- yield positive net benefits; whereas in countries in which tions to fill many of its higher ranks raises the important cabinet-level appointees have expected half-lives mea- issue of the trade-offs that attend tenure guarantees. As sured in months, it may be necessary to restrict nontenured noted elsewhere in this study, tenure guarantees provide appointments to the top 0.1 percent or less of the civil one means of assuring a stable public work force. They service in order to attain positive net benefits from those also provide one weapon for protecting public employees appointments. from arbitrary dismissal for reasons other than poor per- A second risk faced by an increased reliance on ap- formance; for example, for "political" reasons. At the pointments outside the normal civil service recruitment same time, tenure guarantees dramatically reduce com- guidelines is that such appointments will be made on petitive pressures for existing public employees to perform grounds of patronage instead of performance qualifica- effectively and efficiently. An integrally related issue in tions. Two means of mitigating this risk are: (1) to subject Chile, as in most LAC countries, is that nontenured ap- such appointments to the same rigorous review process pointments through arrangements such as the cargos de required for tenured appointments; and (2) to make such exclusiva confianza circumvent the normal salary scale con- appointments (or a subset of such appointments) for fairly straints. In so doing, they provide a means by which the lengthy fixed terms, while shielding them from removal government can offer compensation packages more nearly from office except under the same sorts of extreme condi- competitive with those available in the domestic private tions as apply to Chile's civil servants. sector. Because of this, the option of hiring a significant portion of the government's managerial ranks under such Chile summary. Pressures for employees to perform nontenured terms can provide the government with an within Chile's central government are reduced by aspects important source of competitive pressures for recruiting of the central government's core personnel policies. Re- highly qualified employees and motivating them to per- cruitment policies eliminate competition for career civil form well. For such a device to achieve this end, however, service positions from private sector labor markets, except other means besides tenure guarantees must be found to at entry level. Employee performance review policies and assure the continuity of such appointments and to protect practices, coupled with the statutory requirement that the process by which such appointments are made from vacancies be filled by the next highest-ranking career civil being corrupted by patronage. servant in the office where the vacancy exists as long as Chile's experience in this regard is instructive. De- that employee meets minimum qualifications, result in spite the central government's fairly heavy reliance on promotions based almost solely on seniority. Employee political appointees, higher-level managers express few performance evaluation policies that create strong incen- concerns about their quality and reliability. This is strik- tives for line managers to not evaluate their employees or ing because in other countries, such as Venezuela, which to give them all the highest permitted rating rob the rely considerably less on such nontenured appointments evaluation process of its ability to sort employees accord- to fill the higher managerial ranks, the instability of those ing to performance. This, in turn, yields annual salary ranks is routinely decried as a major cause of the poor adjustment practices that award increases according to PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 67 seniority, rather than performance. Training resource al- * Each jurisdiction (for example, ministry or autonomous location policies fail to force managers to compete for institute) establishes a selection organ, consisting of three scarce training resources on the basis of the resources' members-human resource specialist, technical specialist ability to produce desirable outcomes. Tenure guarantees with expertise in the area for which recruitment is re- for the vast majority of civil servants further undermine quired, and a manager with the rank of national or gen- the ability of the civil service system to bring competitive eral director or the equivalent-plus an observer from any forces to bear on its career bureaucrats. relevant labor union. The one feature of Chile's civil service system that * This selection organ specifies job skill requirements, appears to provide some of the beneficial effects of com- selection criteria and their weights, and screening proce- petitive forces is its relatively heavy reliance on dures and identifies and recruits professional and techni- nontenured political appointments to many higher-level cal personnel required to conduct the recruitment and managerial positions. Given the relative stability of the screening. government's highest-level political appointees-minis- * Recruitment pools: ters-and an apparently relatively trustworthy recruit- * Levels C through E (middle to lower-middle ranks) ment and selection process for these appointments, this are subject only to searches in the jurisdiction-min- corps of appointees appears to enhance the functioning istry or Office of the Presidency-that has a vacancy. of Chile's public bureaucracy. * Levels A and B (upper ranks) are subject to a "general" search covering all civil servants Argentina (SINAPA). Executives (appointees at the level of national or Argentina's civil service system appears to have many of general director or their equivalent) and level F posi- the same problems as Chile's. tions (entry-level positions) are subject to an "open" search-that is, encompassing external as well as Recruitment. Argentina has undergone a number of intemal candidates. changes in its recruitment processes over the years. As This SINAPA recruitment regime has the advantage early as 1943, decree 16.672/43 established minimum re- of building safeguards against monopolistic control of the cruitment and screening guidelines, including minimum recruitment process by a single party, such as line manag- qualifications standards. These guidelines and standards ers-requiring instead that a selection organ be staffed by were apparently largely circumvented during the 1946- three interested parties. It has the disadvantage, found 55 Peronista period. The Civil Service Statute of 1957 also in Chile and Venezuela, of restricting the pool from (decree 3.577/57) reestablished the 1943 guidelines and which recruits can be drawn. Only top-level political ap- standards, while decree 10.115/59 ratified these stan- pointees and entry-level positions may be recruited from a dards, set forth a system of open public competition pool that includes qualified personnel available in private (concursos) for new positions, and created a unit sector labor markets. This looks very much like the Chile (Instituto Superior de la Administracin Puiblica) for model. Because the SINAPA system is new, the problem- monitoring recruitment activities and their results. Ap- atic effects of this restriction on the recruitment pool have parently, these competitive recruitment and screening not yet become apparent. There can be little doubt, how- procedures operated for roughly a decade. In the 1970s ever, that in the long run this restriction will lead to the and much of the 1980s little attention was apparently same reduction in the ability of the public sector to attract given to competitive recruitment and screening proce- qualified personnel as has occurred in other countries that dures. Reforms initially introduced in 1984 and ultimately have imposed similar restrictions-including Chile and enacted in 1987 aimed at re-imposing competitive re- Venezuela. It will also, as in those countries, spawn efforts cruitment and screening procedures. But by 1989 these by ministers and other people responsible for the effective reforms still covered only data processing personnel and functioning ofpublic agencies to circumvent these recruit- the Cuerpo de Administradores Gubernamentales, the ment restrictions. Such efforts can, in turn, undermine the latter of which is reviewed below. moral fabric of the civil service system. In 1991, the Sistema Nacional de la Profesi6n Administrativa (SINAPA) was created (Argentina 1991). Promotions. Procedures for advancement under the By March of 1992 the regulatory framework developed for SINAPA regime assure objectivity-protection from pa- SINAPA included a detailed set of competitive recruit- tronage-at the expense of competitive pressures. Pro- ment and screening procedures (Argentina 1992). Key motions are, by law, granted strictly on the basis of per- features of the procedures are as follows: formance evaluations and the type and quantity of 68 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN training received in the previous twelve months (see TAaLE 8.18 table 8.18). Each promotion requires two to four con- Argentina: SINAPA promotion secutive "outstanding" performance evaluations or three requirements to six consecutive "good" performance evaluations, plus ____ specific amounts and types of training. Although such a Number or Minimum set of objective criteria might appear reasonable, the re- consecutive rating in each Credits for sult of these criteria and the employee performance re- Level Grode evaluations evoluation training view procedures is very likely to be a promotions regime A 1 3 Outstanding INAP public that in fact assigns promotions on the basis of seniority A 2 5 Good management course rather than performance. This is because Article 42, 4 Outstandid g Yes 6 Good Title IV, Annex I of decree 993/91, establishing the B 1 3 Outstanding INAP public SINAPA system, requires that every civil servant obtain 5 Good management course a rating of "good" or better in each year's performance B 2 4 Outstanding Yes 6 Goad evaluation process in order to remain in the permanent c 1 2 Outstanding Managemeri iurs' civil service. Because the penalty for failing to attain a 4 Good "good" rating is severe-the loss of one's job-the agents c 2 3 Outstanding Yes who conduct those performance evaluations assign rat- c 5 Good c 3 ~~4 Outstanding Yes ings lower than "good" only under extraordinary circum- 6 Good stances.t3 In other words, virtually all civil servants can D 1 2 Outstanding Yes be expected to receive at least a "good" rating every 3 Good year. When this is coupled with the promotion criteria D 2 2 Outstanding Yes year. ~ ~~~~~~~~~~~~~~~~~~~4 Good (table 8.18), it follows immediately that promotions will D 3 3 Outstanding Yes be based on seniority. 5 Good D 4 3 Outstanding Yes Personnel evaluation system. SINAPA requires annual E 1 5 Good evaluations by an evaluation committee, whose member- 3 Good ship is to be determined by the Secretarfa de la Funci6n E 2 2 Outstanding Yes Piblica de la Presidencia de la Naci6n, which must in- 4 Good clude a member of the Civil Service Union (UPCN) as an E 3 3 Outstanding Yes 5 Good observer. The staffing of these committees by people other E 4 3 Outstanding Yes than an employee's immediate superior provides an im- 5 Good portant check on the tendency of employee performance F 1 2 Outstandirng No 3 Good evaluations to gravitate toward the upper ratings, but the F 2 2 Outstandmig No statutory requirement that a rating of "good" or better be 4 Good attained in order to retain one's status as a permanent F 3 3 Outstanding No civil servant severely compromises the ability of this pro- F 4 5 Good cedure to sort employees according to their performance. 5 Good Salary adjustments. One element of the salary adjust- Source Argentina 1991 Annex 1. ment policies forces employee performance evaluators to data on the incidence of such arrangcments arc available. sort personnel according to performance. Besides level Weak monitoring capacities make nsany officials con, and grade changes based on an employee's history of cerned about this issue. performance evaluations, training received (see above and table 8.18), and the various supplements employees may Training. The National Institute of Public Adminis- receive a bonus equal to one month's base salary plus any tration (INAP) was created by law 10.173/73, and given applicable supplement for executive or specific function responsibility for providing all training tor public employ- of the position for receiving an "outstanding" performance ees, including the course on upper-level management skills rating. But this bonus may not be given to more than 10 (curso de Alta Gerencia Publica), wlhiclh is required for percent of the employees evaluated (Decree 993/91, Ar- promotion to levels A or B. Once again, the government ticle 66, Title VI, Annex I). has created a monopoly-in this case for the provision of Use of personal service contracts to circumvent hiring training services-that undermines competitive pressures. and salary-setting restrictions may be significant, but no Although such a monopoly mnay prove cost-effective be- PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 69 cause of increased control over the production function, Recruitment. Hiring policies in Venezuela incorporate no such monitoring and evaluation of the national more competitive pressures than in Chile, but fall short of institute's cost-effectiveness has yet been undertaken. assuring that civil servants compete on equal terms with the private sector labor market for vacan.ies in the civil Tenure protection. As in virtually all LAC countries, service. Article 19 of the Ley de Carrera Administrativa job security protections have always been greater in requires that candidates for career civil service positions Argentina's public sector than in its private sector. Even be screened in three prioritized groups: current eligible the most basic regime (Regimen Juridico Basico, decree candidates in the agency in which the vacancy exists, 1.428/73, now being phased out by the SINAPA regime) current eligible candidates anywhere in the civil service, includes protection amounting to almost a lifetime job and eligible candidates from outside the civil service. Only guarantee, the detailed regulations making dismissals for if no qualified candidates exist in the first two groups can nonperformance all but impossible. To illustrate the an external candidate be considered, because Article 19 strength of these protections, an average of roughly 10 also guarantees the right to promotions to all tenured civil employees per year were dismissed for non pcrformance servants. So, although competitive pressures in the re- between 1984 and 1989, out of an average base of roughly cruitment process should be somewhat greater in Venezu- 300,000 per year-or roughly 0.003 percent per year. If ela than in Chile, they could be enhanced significantly by the 38 employees who were dismissed in 1984 for alleged drawing no formal distinctions between internal and ex- civil rights offenses in the previous military government, temal candidates in the selection process. rather than for nonperformance, are omitted, these fig- The recruitment procedures do include conventional ures are reduced to 21 dismissals, or roughly 3.5 employ- assignment of responsibilities designed to insulate recruit- ees per year-about 0.001 percent). ment from the exercise of monopolistic control over the outcome, which could harm the fairness and effective- Argentina summary. Recruitment policies protect ness in identifying the most competitive candidate. In public employees from having to compete with their pri- particular, although line agency personnel offices are re- vaLe sector counterparts for openings in all but the high- sponsible for advertising and for screening and identifying est and lowest ranks. On top of this, promotions to such a registry of eligible candidates, they must forward that vacancies, while nominally based on performance, in ef- list to the Central Personnel Office (OCP), which is re- fect are virtually guaranteed to reflect little more than sponsible for maintaining an overall registry of eligible seniority. The personnel evaluation system creates over- candidates for the National Public Administration. whelming incentives for evaluators to assign only the top Guidelines for these procedures are laid down by OCP. two ratings, because to do otherwise is tantamount to These registries include all candidates who passed the dismissal. Data on allocations of resources to training screening process, ranked by their scores and sorted into activities were unavailable, so it is not possible to assess three lists: career civil servants (seeking promotions), the government's commitment to investing in its em- former career civil servants (seeking reentry), and poten- ployees. The one training program that has received the tial new entrants. Responsibility for selection of the final most attention recently-the training program of the candidate rests with the president, cabinet, ministers, and National Institute of Public Administration for members the highest managerial authorities of the autonomous of the government's elite managerial cadre, the ad- agencies of the National Public Administration. This pro- ministradores gubernamentales-is a government-man- cess, then, counteracts the potential exercise of monopoly dated monopoly subject to no apparent regular review of power in the recruitment process by assigning elements of its cost-effectiveness. Tenure protection covers most gov- the recruitment and selection process to other actors ernment employees and mirrors protection found (line agency personnel offices, central personnel office, throughout LAC. In short, Argentina's core civil service and line agency heads). policies-even after the recent reforms-suffer from the Interestingly, a few avenues do exist by which line same pattern of anticompetitive protections typical of agencies might circumvent these carefully designed proce- many other LAC public sectors. dures and thereby wield monopoly power in hiring deci- sions. Should no candidate meet minimum qualifications Venezuela under tk screening procedure (concurso), a nonqualified person may be appointed on an interim basis, not to ex- Although Venezuela's system differs from those of Chile ceed six months. During this six-month period, the per- and Argentina in some details, the outcomes of the sys- sonnel office is obligated to administer the appropriate tems are similar. screening test. If no screening test is administered, the 70 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN provisional incumbent is automatically granted career sta- clearly feasible to alter weights to reflect management or tus. This provides a potentially important back door into policy priorities. the civil service. Similarly, new appointees are subject to a The results of these rankings are used as follows: six-month probationary period, during which their direct Employees are assigned to one of six ranges of evalua- superiors are required to evaluate them. Should a superior tion (three considered good and three considered poor). fail to evaluate an appointee during those six months, the * Employees are rank ordered. Then each unit decides appointee is automatically granted career status. Although how much bono (one-time bonus) to distribute to each the supervisor is subject to an unspecified sanction, this employee on the basis of this rank order. scenario does provide an avenue by which underper- * Compensaciones de paso de escala (that is, salary incre- forming new hires can attain tenure. ments to be added to the employee's base salary) are Thus, promotions in Venezuela are subject to some- determined by these rank orderings. what more competitive pressures than in Chile, but less * Finally, primas (salary supplements based on the annual than they could be. Civil servants are promised the right performance evaluation, whether the employee possesses to promotions on the basis of their ranking on personnel a university degree, whether the employee possesses a performance evaluations and training received (Ley de post graduate degree, years of experience, and training Carrera Administrativa, Art. 19; Reglamento General de received over the previous twelve months) are deter- la Ley de Carrera Administrativa, decree 1.378 [19821, mined, in part, by these rankings as well. Employees rated Arts. 146-7). Unfortunately, because compliance with excellent receive a prima equal to 21 percent of their base the personnel performance evaluation requirements ap- salary, while those rated very good receive a prima of 10 pears to be weak (see below) and resource allocations for percent of base salary. training are small, it is probably true that promotions are In addition, promotions (ascensos) are conditioned on governed largely by seniority, especially because seniority these rankings (see above). is specified as the tiebreaker criterion when merit and Aninual salary adjustments, then, include additions to training differences do not exist. the base salary and nonrecurrent bonuses. Each ministry The personnel evaluation system is elaborate, but ap- or other administrative unit receives a fixed sum in its pears to be rarely used to inform promotion and annual budget each year for the bonos. Base salary increments salary adjustment decisions. OCP is responsible for creat- and primas, on the other hand, are financed not by these ing a personnel evaluation system, which line agency per- discretionary funds but by budget growth. Consequently, sonnel offices are responsible for administering. OCP offi- just as in Chile, managers have strong incentives to assign cials report that thirty-four of the seventy-one agencies high performance evaluation scores to their employees, in subject to their authority currently use the personnel order to assure them access to the bonos, the com- evaluation scheme designed by OCP. Conversations with pensaciones de paso de escala, and the portion of the primas personnel outside OCP, however, suggest that the OCP based on those performance reviews. In addition, because personnel evaluation procedure is not widely used and is promotions depend upon those performance evaluations viewed as unwieldy. and because managers face no extra costs if they inflate The OCP employee evaluation system began in 1986 their staffs personnel evaluations but do run the risk of and was modified in 1989 and 1992. It began with fifteen upsetting their employees if they assign them low ratings, evaluative categories from which each agency was al- those managers have strong incentives to give all employ- lowed to select categories it deemed appropriate. Under ees very high evaluations. In short, the incentives facing the current arrangement, OCP fixes twelve categories evaluators when assigning performance ratings to their (with input from management in each government employees match those in Argentina and Chile. As a agency), from which each agency must employ three speci- consequence, it would be surprising to find much varia- fied by OCP and is free to choose five others from the tion in employee performance evaluations. This, in turn, remaining nine. Employees must be evaluated at least means that annual salary adjustments, as well as promo- twice a year, although some agencies do so as many as ten tions, will tend to reflect nonperformance criteria-espe- times a year. Along each dimension (category), four rat- cially seniority. ings (levels of assessed performance) are possible. Weights for each dimension are assigned by the person making the Training. Expenditures for training averaged 0.45 per- evaluation and can range between 1 and 8. These cent-with a median of 0.18 percent-of total personnel weighted rankings are summed to obtain an overall evalu- expenditures among the central government's ministries in ation, which is used to rank employees. Given the sepa- the 1992 budget (Venezuela 1992). In 1992, the spending rate explicit specification of weights and ratings, it is ranged from a low of 0.0013 percent in education to a high PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 7 1 of 2.69 percent in the Ministryof Development (Fomento). formance enough to counteract the disruptive effects of These figures compare unfavorably with the private sector, rapid turnover, brought on by the frequent turnover of which devoted 1.33 percent of personnel expenditures to the highest-level political appointees and their immediate trainingin 1989. The figures also compare unfavorably with subordinates-ministers and vice ministers. expenditures devoted to training in Venezuela's public Venezuela's civil service system encompasses at least enterprises, which averaged 2.85 percent in 1989 accord- four types of tenure according to the type of contract ing to a survey conducted by IESA (1990). under which a worker is hired (Ley de Carrera Ad- Although training is supposed to be assigned on the ministrativa, Title 1, Arts. 2-5): basis of, first, employee performance and promise for pro- * Career civil servants motion and, second, employee skill deficiencies in their * Political appointees (funcionarios de libre nombramiento current positions, there is no available evidence as to y remoci6n), including: whether the limited training resources are targeted ac- * Ministers, secretary general of the presidency, chief cording to these criteria. The little evidence available on of the Central Office of Coordination and Planning the targeting of training expenditures shows that in 1991 (CORDIPLAN), and the remaining functionaries of they were concentrated in narrowly defined skill areas similar rank designated by the president and the gov- (30.2 percent of all training expenditures) and in profes- emors of the federal territories sional and technical areas (51.4 percent), and in 1992 * Highest-ranking directors and administrators of the they were concentrated in training activities of short du- autonomous organisms of the National Public Ad- ration (roughly 55 percent in sessions of 8 to 20 hours and ninistration, the directors general, directors, judicial about 35 percent in training activities of 21 to 40 hours). consultants, and other similar functionaries of the Whether these concentrations are optimal is not clear. same rank in the service of the president, the minis- No systematic procedures appear to exist for evaluating tries, the autonomous organisms or the governors of the targeting or outcomes of training activities. the federal territories * High-level posts, primarily supervisory and mana- Tenure protection. Roughly 51 percent of Venezuela's gerial positions (extending down to division chiefs or 417,000 public employees in the seventy-one agencies their equivalent), but also all administrators and in- subject to the Ley de Carrera Administrativa in 1991 are spectors in the Customs Agency provided tenure protection (see table 8.19). Another 47 * Positions of confidence-a broadly defined cat- percent of those employees are wage laborers hired daily, egory that includes employees at all levels of respon- although union contracts covering the vast majority of sibility and skill whose functions include activities these wage laborers apparently make them virtually de such as auditing and inspection; valuation; process- facto tenured employees. ing of patents, trademarks, licenses, and exonera- Only 2.2 percent of the central government employ- tions; administration or custody of currency accounts ees did not enjoy substantial tenure protection. Of those, or documents through which the National Treasury roughly 4,000 were higher-level management employees (0.9 percent), while about 5,000 (1.2 percent) were hired TABLE 8.19 under individually negotiated short-term contracts. Venezuela: Public employment tenure Although nontenured appointments in the higher composition, 1991 managerial ranks in Venezuela are less than half as nu- merous, as a fraction of total employment, as in Chile, Employment stotus Number of employees Percentage tenured and nontenured officials in the public bureau- Tenured 211,574 50.8 cracy and officials of multilateral aid agencies who regu- Administrators 134,747 32.4 larly work with the government uniformly lament the Professionals 67,327 16.2 larly ~~~~~~~~~~~~ ~ ~~~~~Unclassified 9,500 2.3 disruptive effects of constant turnover among high-level Nontenured 8,998 2.2 managers in the public sector. As in Chile, the nonten- Higher management 3,919 0.9 ured appointments provide a vehicle for introducing Contracted 5,079 1.2 greater competitive pressures into the staffing process ToWal 4116445 100.0 by opening the recruitment pool to include people outside bytopenivil thervicruitmend pl c ntoinc e theunompleoutsite Note: Tenure composition based on 71 agencies subject to the Ley de Carrera the civil service-and by circumventing the uncompetitive Administrativa. salary structure imposed by the civil service salary scale. Source: Informe Estadistico: Distnbuci6n de Cargos y Costa de laAdministrocinr PWbico In Venezuela, however, it is not clear that these enhanced cionl, Ario 1991,11 Cuadro No. 16 (p. 47) (see Venezuela 1992), and infornmation provided by OCP offioals indicating that published measures of contract employment competitive pressures improve employee quality and per- appear to understate true levels by approximately 25 percent. 72 CIVIL SERVICE REFORM tN LATIN AMERICA AND THE CARIBBEAN (Fisco Nacional) confers privileges on taxpayers; and * The inability of many ministries to purge themselves of border control and the armed forces. This category redundant employees among the career civil service ranks also includes chiefs or equivalent positions respon- has tied the hands of management, greatly diminishing sible for procurement or disbursement; handling of their ability to manage their agencies. cash; treasury functions; regulation and control of * The practice of hiring persons into unclassified but payments; public relations and information; cryptog- tenured positions is suspected of sometimes providing a raphy, information systems, and reproduction; han- back door entry into permanent public employment sta- dling of confidential documents and materials; and tus for insufficiently skilled or credentialed people. labor procurement. Last, all positions within the Of- * Contractor arrangements are widely suspected of being fice of the Presidency are positions of confidence regularly abused; for example, rather than serving as a (cargos de confianza). means of obtaining specialized skills for specific, time-lim- * Contractors ited tasks, frequent renewal of such contracts is suspected * Day laborers. of providing a way to hire line personnel outside the tenure Although career civil servants enjoy life tenure, po- and salary constraints of the career civil service. litical appointees serve at the pleasure of the president or * Day laborer hiring is also widely suspected of providing his designated representative, consultants (contratados) potitical patronage and de facto job tenure, at least for the serve under fixed-term contracts with individual govem- duration of a given administration. ment agencies, and day laborers (jornalados) work only on * Job protection guarantees negotiated into many collec- daily contracts with individual government agencies. tive contracts have made it as difficult to adjust the levels It is not difficult to justify these four types of job of wage labor-47 percent of central government employ- tenure provisions that reflect differing demands on the ment-to changing needs for such labor as it is to adjust employees. Political appointees are the highest-level ap- the levels of administrative and professional staff. pointees who serve to link the agencies and the career Whether these concems are based in fact has not been civil service to the agenda of the current government. adequately addressed. But the widespread suspicions sug- The career civil service provides the permanent body of gest, among other problems, that the variety of tenure civil servants protected from the winds of political pa- protection available in Venezuela's civil service is not ap- tronage. Their loyalty should rest with either the overall propriately targeted. Managerial and many other ranks career civil service or the agencies within which their appear to be inadequately protected from the ever-chang- current and future careers lie. The consultants provide ing winds of political agendas, thereby undermining the an avenue through which agencies can hire persons with continuity and commitment to agency missions necessary unique skills for projects of fixed duration-skills which for effective management; permanent tenure appears to be it would be economically unsound to hire on a perma- too widespread in many nonmanagerial ranks, compromis- nent basis, since they are not required with enough fre- ing administrative efficiency; short-term contracting ap- quency to warrant such an employment arrangement. pears to be used to circumvent personnel policy constraints Finally, day laborers provide a similar flexibility for staff- rather than to avoid over-investing in transferrable human ing activities needing temporary infusions of large quan- capital skills that cannot be fully employed within the tities of readily available unskilled or semi-skilled labor. public sector; and spot market hiring of day laborers ap- In short, on its face, Venezuela's set of employment ten- pears to have relinquished its major advantage-day-to- ure arrangements answers well to the need for such ten- day flexibility regarding unskilled staffing levels. ure options to reflect the variety of demands placed on the public sector labor force. Venezuela summary. As in Chile, many aspects of the But when one speaks with managers or line employ- core personnel policies and practices undermine rather ees within Venezuela's central govemment ministries, one than enhance competitive pressures needed to improve does not hear praise for the ability of this employment performance in the civil service. Recruitment policies do system to match job tenure arrangements to labor market not limit the pool from which recruits can be drawn as conditions and work requirements. Instead, one consis- dramatically as in Chile, but the policy of ranking all tently hears concerns reflecting, among other things, its existing civil servants who meet minimum skill require- failure to tailor tenure protection to task demands: ments above any external candidates restrains the com- * Extreme instability among the ranks of the political petitiveness of recruitment. Furthermore, the reluctance appointees is severely undermining the ability of some of many line agencies to regularly undertake the employee ministries to manage their operations, especially agencies performance reviews mandated by OCP means that, in in the Office of the Presidency, such as CORDIPLAN. many agencies, seniority is the main factor in employee PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 73 rankings that play a pivotal role in decisions on the filling for its effective human resource management policies and of vacancies. In addition, managers who do conduct an- practices. Every aspect of their human resource manage- nual employee performance evaluations have incentives ment policies and practices introduces greater competi- to consistently give the highest ratings, thereby undercut- tive pressures than can be found in the civil service sys- ting the ability of that process to reliably sort employees tems reviewed above. according to their performance and foster competitive The precursor of SVS was created in May 1931 and pressures. Rules for allocating and monitoring the results was named something like Superintendencia de of training activities also do not appear to provide strong Sociedades An6nimos, Bolsas, Compafiias de Seguros. In incentives to allocate those limited resources efficiently. 1980 this entity was transformed into SVS, in part to Tenure protection-de jure and de facto-also ap- reflect the more general role being played by the agency in pears to undermine competitive pressures upon existing regulating securities and exchange markets-essentially employees to work effectively and efficiently. The exist- the same role as the Securities and Exchange Commission ence of some 4,000 nontenured higher-level manage- in the United States. SVS used to have 151 functionaries, ment positions, exempt from the recruitment pool re- but had 162 by 1992. Its total number of permitted posi- strictions that apply to career civil service positions and tions is fixed by law, as is the case with all other agencies from the noncompetitive salary scale governing the ca- of the central government."5 This is where the similarities reer civil service, does enhance competitive pressures end, however. within those nontenured ranks. But the extreme instabil- ity at the government's highest levels-ministers and Recruitment. Two key elements of recruitment in SVS vice ministers-seriously compromises the advantages of contribute to its success in hiring highly qualified workers. the additional competitive pressures among nontenured First, the recruitment pool is always the entire do- higher-level management by dramatically increasing mestic labor force. SVS advertises positions in newspa- turnover. Contract positions provide another avenue pers, at universities, and so on. They also seek applicants around the anticompetitive restrictions affecting the ca- through informal channels. Applicants submit resumes, reer civil service, but monitoring and accountabitliy which are screened by the immediate superior and other mechanisms are so weak that it is impossible to know members of a hiring committee. The top three candidates whether the use of contract labor for staffing the profes- are selected for interviews. After interviews, the top choice sional and managerial ranks enhances efficiency or is is forwarded to the General Secretary, who reviews the simply another form of patronage. files and decides. Second, SVS can recruit at any grade, unlike the Examples of successful public sector central government agencies governed by the New Ad- ministrative Statute. Furthermore, while anyone hired for human resource management a particular position is required to meet the minimum credential requirements, just as in agencies governed by Examples of successful public sector human resource man- the New Administrative Statute, the Superintendent is agement policies and practices in LAC are not numerous, allowed to exempt candidates from particular qualifica- but they do exist. The Superintendencia de Valores y tions standards whenever he can make a case that they Seguros (SVS) and the Superintendencia de Bancos e are qualified for the position. Instituciones Financieras (SBIF) in Chile and the Banco Central de Venezuela (BCV) and the Contraloria in Ven- Personnel evaluation system. SVS evaluates employees ezuela have reputations for effective and efficient person- informally, basing promotion decisions on informal pro- nel management policies and practices. An analysis of a cesses. This arrangement appears to be well-suited to few of these examples of effective human resource man- their situation-a small number of employees (162 posi- agement within the public sector can serve to highlight tions), relatively clear employee performance standards, how these units manage to harness competitive pressures and a highly mobile cadre of workers (see tables 8.20 and to enhance the performance of both their agencies and 8.21). their employees. Compensation. All employees' salaries are governed Superintendencia de Valores y Seguros by a salary scale for positions with financial transactions responsibilities (fiscalizador), which means that SVS em- The Superintendencia de Valores y Seguros (SVS) is ployees command salaries higher than for many of highly regarded among high-level civil servants in Chile Chile's public employees, but not fully competitive with 74 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN the private sector (talle 8.22). SVS partially compen- Training. Expenditures on training are set in the an- sates for these below-market salaries through its train- nual budget law. Approximately 70 percent of SVS's train- ing policies and through the skills development employ- ing budget is dedicated to highly technical training out- ees gain there. Rapid accumulation of human capital side the country-such as with the U.S. Securities and skills as an SVS employee appears to make SVS posi- Exchange Commission. (The law stipulates, however, that tions attractive enough to land bright, young workers, training funds cannot be used to finance work toward an who remain within SVS for relatively short times. Turn- advanced degree.) The heavy concentration of training over rates ranged between 8.6 and 13.0 percent in expenditures on external training reflects the need in that 1987-92 for SVS, while the average number of years of discipline to keep abreast of new developments through tenure at the date of departure was 1.3 years for the international seminars. The remaining 30 percent of the lower-ranking employees. Stability of SVS tenure is SVS training budget is spent for extemal training in Chile, greater among the higher-ranking employees. Employ- typically provided by Chilean universities. None is spent ees at grade 7 or higher average eight years of tenure at in-house. By relying on external providers for training departure. services, SVS can shop around for the best training pro- SVS is trying to obtain one privilege-held only by grams, rather than being stuck with the services of a the Superintendencia de Bancos e Instituciones Finan- single, monopolistic training services provider. cieras (SBIF)-that would enable it to supplement the In addition, if employees arrange to pursue a degree salaries it pays. SBIF by law is granted a fixed percentage outside the country, SVS will provide a percentage of the of fees (rentas) it levies on the banks and financial institu- employee's salary while they are enrolled, in order to tions it serves (Law 18.091, Art. 17). SVS has drafted a encourage such investments by their employees, in ex- report that identifies the costs of providing each service in change for an enforceable pledge (in writing) that the order to justifi a fee structure and convince the govern- employee will return to SVS for an equivalent number of ment to allow it to impose such fees and keep a percent- years of work after completing the degree program. SVS age of the revenues. claims that it has had no trouble enforcing this require- ment. They estimate that about three to four employees TABLE 8.20 per year have such leave-of-absence or partial-salary-com- Chile: Superintendencia de Valores y pensation arrangements. The funds for these arrange- Seguros: Employee turnover rates TABLE 8.22 Numberof Number of Tumover rate Chile: Superintendencia de Valores y Ye9r positions departures (percent) Seguros: Salary comparisons, 1987 ~~~~158 lB8 11.4 1988 162 1 5 9.3 December 1990 1989 162 21 13.0 1990 162 18 11.1 Percentage Percentage 1991 162 16 9.9 Gross SVS Percentoge of of EUS of EUS non- 1992 162 14 8.6 annual salary priovte sector fiscalizador fiscolizador Average 161.3 16.8 10.5 Grade (US$) comporator solary, salary Source: Republica de Chile, Superintendencia de Valores y Seguros. Top rank (I/l/IB) 27,410 85.1 98.1 124.9 TABLE 8.21 26th percenble (6/7/8) 16,922 77.9 101.3 143.7 Chile: Superintendencia de Valores y 48th percentile (12/12/15) 10,381 92.3 96.4 1 59.7 Seguros: Employees' tenure at departure 78thpercentile (18/20/25) 4,181 43.7 145.6 213.6 Years of tenure at date of departure Bottom rank Employee group Averoge Maximum Minimum (23/25/31) 1,703 21.6 136.2 119.3 Managers, grades 2-5 8.0 11.2 3.3 a. EUS Escala Unica de Sueldos. Professionals, grades 6-7 7.9 10,6 5.7 Note: Grades are matched by percentile in the distribution of grades within each salary Prof./Fiscaliz., grades 9-13 1.3 2.8 0.1 scale. Numbers in parentheses indicate the grade selected fromthe SVS EUSfiscalizador Overall, grades 2-13 4.2 1 1.2 0.1 and EUS nonfiscalizador scales, respectively. Private sector comparators are managers (top rank), simple average of manager and professional and technical (26 percent), Note. Simple regression of months of tenure on grade at date of departure reveals that professional and technical (48 percent), simple average of professional and technical tenure rises by 11.24 months per grade (standard error of 1.745; t-statistic of 6.44; and administrators (78 percent), and administrators (bottom rank). Rz 0.69). Source: Repiiblica de Chile, Superimtendencia de Seguros y Valores; Escala Unica de Source: Republica de Chile, Superintendencia de Valores y Seguros. Sueldos; Instituto Nacional de Estadisticas (for prnvate sector comparators). PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 75 ments come from SVS's salary budget. The percentage of tices. As with SVS, the key to the success of BCV's salary provided is determined by management on the basis personnel policies and practices appears to be that they of factors such as the costs to the employee of pursuing enhance competitive pressures in all aspects of the per- the degree, including travel, tuition and living costs; avail- sonnel system. ability of other funds; and an assessment of the potential performance improvements to SVS if that employee re- Recruitment. Like SVS, BCV is free to recruit to posi- ceives the proposed training. Training funds are allocated tion."6 Because of this, although BCV has an elaborate pro- by the Secretary General based on recommendations from cedure for screening internal candidates for promotion to supervisors. In addition, the superintendent allocates some vacancies, those internal candidates must also compete funds directly. against external candidates. Despite the gap between BCV salaries and those found in the private sector, top officials in Tenure protection. All employees are employees of BCV report that they are able compete effectively for top exclusive confidence (empleados de exclusiva confianza), candidates. BCV salaries are more compet:itive than in gov- which means that none has guaranteed tenure, thereby ernment agencies governed by the Ley de Carrera Adnmi- dramatically enhancing the competitive pressures on SVS nistrativa, but below those available in the private sector. employees to perform. The pressures are reinforced by the BCV officials attribute this competitiveness largely to the recruitment and promotions procedures, which, as noted attractive human capital acquisition prospects available to above, force existing employees to compete with external recruits. As with SVS in Chile, these attractive skills cn- candidates for promotions. hancement prospects result from an active and scrious training program and from on-the-job skills acquisition. SVS summary. SVS core personnel policies create considerably greater competitive pressures than exist in Promotions. BCV has an elaborate employce evalua- the regular civil service. Recruitment is more competitive tion system (see below) that feeds into its promotions in SVS, because all recruitment efforts canvass as large a review process. They maintain a registry of eligible candi- candidate population as possible and because hiring to dates based on the permanent employce evaluation files, position is permitted at all levels. Promotions are more which ranks all employees oni the basis of their annual competitive because of these recruitment policies and performance evaluations. Employees are considercd for practices and because guaranteed job tenure is not pro- promotion on the basis of this ranking-the top three vided. Compensation packages are more competitive- ranked employees are considered wheln an opening exists. compared with the private sector-than in the regular civil service. But this greater competitiveness comes not Personnel evaluation systern. The BCV has an cx- so much from the higher base salaries-because those are tremely complex employee performance review process. constrained by the fiscalizador salary scale the SVS must Annual performance evaluations are a weighted average use-but because of the heavy investments SVS makes in of monthly evaluations of performance and quarterly human capital acquisition among its employees. Further- evaluations of potential. Those evaluations are hased on more, because on-the-job experience at SVS confers mar- the following dimensions: ketable skills, it is easier for SVS to attract competitive * Results (productivity)-measured by six factors employees. Greater abiliry to match salaries to those in * Duties (compliance)-measured by six factors the private sector could further improve the competitive- * Potential-measured by eight factors. ness of the SVS in the recruitment market, as it does for Each of these three dimensions is evaluated on a short- the Superintendencia de Bancos e Instituciones term, medium-term, and long-term basis. Theni, the fac- Financieras; SBIF is allowed to supplement its base sala- tors within each dimension are combined into weighted ries with funds accumulated from some of its user charges. sums, which are recorded in a computerized record- This is, of course, facilitated by the insulation of the SVS keeping system, and these are combined inito an overall from the political pressures that often buffet line minis- performance evaluation and an overall potential evalua- tries in the central government. tion each year. Interestingly, despite the extraordinary complexity of Central Bank of Venezuela this system, and the substantial amoun1t of timc that motst be spent by managers complying with the requiremiienits for monthly and quarterly evaluations of all cmpeloyces, Like SVS, the Central Bank of Venezuela (BCV) enjoys a the system does appear to function-that is, these evalu- reputation for effective human resource policies and prac- ations do appear to be regularly completed and employed 76 CIVIL SERVICE REFORM IN LATIN AMERICAAND 111 CARIRRIAN in salary review and promotions screening decisions. This own salary-setting policies. Because the personnel evalua- contrasts sharply with the personnel evaluation practices tion system sorts employees according to their perfor- found in the SVS in Chile, which were quite infornal but mance, managers in BCV report that annual salary incre- apparently equally successful at ranking employees by per- ments reflect quality of employee work, instead of simply formance. The fact that two such different systems appear seniority. In short, BCV policies and practices on com- to be roughly equally effective suggests an important in- pensation-monetary and nonmonetary-assure that the sight: the success of an employee performance review bank is reasonably competitive with the private sector for system may be more dependent upon the institutional qualified employees and create detectable competitive culture within which it is embedded than upon the tech- pressures for employees to perform well. nical characteristics of that system. This is not to deny that technical features of an Training. BCV invests heavily in training, according employee performance review system are important. to BCV sources. Unfortunately, it was not possible to Rather, while certain technical features can undermine obtain data on precisely how large an investment the the effectiveness of any performance review system, it is bank makes in human capital annually. also probably true that there is not a single design of such systems that must always be employed to assure Tenure protection. BCV employees were covered by success, as is attested by the differences between the ap- the private sector labor law, rather than by the civil ser- parently equally effective practices in Chile's SVS and vice statute until 1991, when BCV was made subject to Venezuela's BCV. the civil service law. The key difference appears to be in An example will help to illustrate the point that regard to firing of employees. Under the old regime, BCV some technical features can fundamentally flaw personnel could fire at will, although such firings could be con- evaluation procedures. Personnel performance evaluation tested. Because the difference between firing with cause systems that do not force evaluators to rank order em- and firing without cause doubles the legally required sev- ployees cannot function well because they fail to accom- erance payments, BCV prefers to fire with cause. The new plish the key purpose of such a system, which is precisely organic labor law clarified this distinction. Now BCV has to rank order employees according to their performance. a Manual on the Application of the Disciplinary Regime, Consequently, systems such as the SINAPA system in prepared by its Human Resources Management Division Argentina and the system prescribed in the New Admin- (Central Bank of Venezuela 1992). This roughly fifty- istrative Statute in Chile, which encourage evaluators to page document tells how to prepare a case for firing an assign all employees the same rating, are useless precisely employee with cause. because they fail to separate the better-performing em- When pressed on whether the new labor law changed ployees from the rest of the pack. One device to force the incidence of firings at the BCV or the fraction of evaluators to discriminate between employees is to re- firings that are contested, BCV officials couldn't provide quire evaluations to rank order employees, rather than to data, but maintained that few employees have been fired- simply assign ratings; that is, require that no two employ- before or after the change. Tenure protection at the BCV, ees receive the same overall rating. In addition, it is im- which equaled that available in the domestic private sec- portant to provide evaluators with incentives to accu- tor, now equals the tenure protection afforded other pub- rately and reliably rank employees by performance. lic sector employees. Officials say that the revised law may Evaluators with a stake in the overall performance of the have made it easier to fire employees, by clarifying condi- agency and the ability to affect that performance by how tions under which an employee can be fired with cause. accurately they rank employees will have stronger incen- Any long-term effects of this change on the competitive- tives to reliably evaluate and rank employees than will ness of BCV's personnel system remain to be seen. evaluators who know that their safest strategy for both protecting themselves and their agency is to assign all BCV summary. BCV, like SVS in Chile, has person- employees the same high rating. The latter scenario exists nel policies that provide substantially greater competitive under the SINAPA performance evaluation procedures pressures on all agents in its sphere than can be found in Argentina and the New Administrative Statute regime within the more conventional civil service policies im- in Chile. The former appears to exist in the SVS in Chile posed by, for instance, the New Administrative Statute in and the BCV in Venezuela. Chile, the civil service law in Venezuela, or the SINAPA regime in Argentina. Recruitment is open for all posi- Compensation. BCV regularly obtains data on salaries tions, not simply entry level and top management. Pro- for comparable private sector positions as input into its motions are competitive as well, not an automatic right PUBUC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 77 conferred by seniority. The top three internal candidates Compensation is not on a par with the private sector. are considered, but must compete against external candi- This differential is partly mitigated by substantial training dates. Screening procedures appear to require input from opportunities in BCV and the opportunity to significantly numerous actors, reducing the risk of monopoly control of enhance one's skills on the job. Finally, tenure protection recruitment. The personnel evaluation system is complex, was, until 1991, identical to that in the private sector. but appears to assure that employees are sorted by perfor, Recent changes in the organic labor law have driven a mance. Furthermore, rank orderings from these evalua- wedge between BCV and private sector tenure protec- tions are a key input into promotions reviews, annual tion; and it remains to be seen how deleterious this change salary reviews, and assignment of training opportunities. will be over the long run. Conclusions and Recommendations Public sector human resource management policies and systems to function as intended and undermines confi- practices in many Latin American and Caribbean coun- dence in those systems. tries need significant improvements. Conversations with * Such widespread circumventions of salary-setting and professionals and managers within core govemment min- hiring rules and procedures, including the practice of istries in many LAC countries reveal deeply felt dissatis- employing consultants to circumvent hiring and salary faction and frustration both with the performance of pub- constraints, are also credited with undermining confi- lic agencies and their employees and with the legal and dence in both the machinery of government and the civil institutional framework that appears to undermine efforts service itself. to manage public agencies and employees effectively. - Requirements that all organizational units within the * Levels of public employment are widely believed to be public sector undertake annual performance reviews of excessive among all but the managerial ranks. each of their employees also often appear to be either * Tenure protection afforded career public employees is generally disregarded or executed in a way that fails to blamed both for undermining employee performance in- discriminate between high-performing and low-perform- centives and for disabling efforts to downsize public ing employees, thereby undermining any ability to link agencies even as tightening resource constraints reduce either training to identified skill deficiencies or promo- the capacity of LAC governments to support so many tions to performance. employees. * The inability of governments to provide timely, reli- * The absence of such tenure protection for most top aL!e, consistent, transparent and complete information managerial employees is often believed to be crippling the identifying actual employment and remuneration levels managerial capacity of many public agencies. covering all types of public employees and all forms of * Powerful public sector labor unions are blamed for pos- remuneration also appears to be undermining the cred- ing significant obstacles both to downsizing efforts and to ibility of both those govemments and their civil service creating more flexible and effective incentives for em- systems, as well as their ability to manage those systems. ployee performance. S Finally, the institutional structure within which public * Low public sector salaries are uniformly viewed as a sector managers must operate in LAC often is so full of principal deterrent to the recruitment and retention of red tape and overlapping responsibilities that it is extraor- highly qualified and motivated employees, especially dinarily difficult to take any significant actions, let alone among the professional and managerial ranks. effectively manage complex programs and large numbers * Rigid salary-setting rules and procedures, coupled with of employees. Ex ante audits of all expenditures prior to extremely weak capacity to monitor and enforce those authorization create long delays in both managerial ac- rules, are widely suspected both of further undermining tions and compensation of vendors, thereby both under- the public sector's capacity to compete with the private mining the ability of those managers to obtain services sector for highly qualified employees and of causing public from the private sector and causing them to face prices for sector managers to find innumerable creative means of those services that have been increased to reflect the circumventing those constraints. uncertainty regarding when and whether payment will be * Other important civil service policies-for example, received and the expected lags between service delivery the requirement of competitive hiring procedures and receipt of those payments when they are forthcoming. (cancursos)-also appear to be widely disregarded-a prac- This litany of concerns about the structure and per- tice that both reflects the inability of those civil service formance of civil service systems in many Latin Ameri- 78 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN can countries highlights the need to take significant steps exorably undermine efforts to reward employees on the to restructure and energize those systems. Accordingly, basis of performance. Trivial investment in training this study offers two distinct types of recommendations. sends a signal that the institution does not value skills First, the study offers recommendations on how these and reduces the attractiveness of public sector employ- systems might be fundamentally restructured, dramati- ment-makes it less competitive. Failure to hold agen- cally altering their orientations from that of controlling cies and their managers accountable for their employees' inputs (personnel actions) to that of holding managers performance or their own resource allocation decisions, accountable for the performance of those inputs in the including how well they target their training resources, production of the agency's outputs. Since such funda- also undermines the system's ability to impose competi- mental change is likely to be difficult in the short run, tive pressures on managers. the study also offers a variety of recommendations for These anticompetitive consequences of civil service improving human resource management capacities policies and practices can be avoided. The experience of within the existing legal framework found in most LAC agencies such as the Superintendencia de Valores y countries. These latter recommendations address salary Seguros and the Superintendencia de Bancos e restructuring as well as various other core personnel poli- Instituciones Financieras in Chile and the Banco Central cies, such as recruitment, promotions, employee perfor- de Venezuela demonstrate that public agencies can en- mance reviews, and so on. hance competitive pressures on the civil service. This The basic thrust of all the recommendations is to can be done, for example, by recruiting from external as increase the use of competitive pressures upon public well as internal sources, eliminating de facto or de jure managers in order to improve performance. Accordingly, promotion guarantees, and eliminating monopoly con- a fundamentally restructured civil service system should trol over particular elements of the human resource replace input controls with accountability for productiv- management system. ity; that is, reward management for cost-effectively pro- ducing agreed-upon outputs and sanction management Notes for failing to do this-as has been accomplished in New Zealand. This approach requires that managers be granted considerable autonomy over individual personnel deci- Significant contributions on background work for the study were sions-comparable to that enjoyed by managers of do- made by Patricio Castro. The study has benefited greatly from mestic private sector enterprises-in exchange for being the guidance and comments of Donald R. Winkler, Shahid A. held responsible for the effects of those decisions upon the Chaudhry, David Hughart, and Luis Jose Mejia. James Kuhn productivity of their units or agencies. assiduously prepared much of the data. Should such fundamental restructuring of the hu- 1. The above reported shares of total compensation ac- man resource management framework be infeasible in counted for by salary supplements in Argentina, Uruguay, and the short run, LAC govemmentsshuldresorttoavari- Chile reflect maximum shares either possible or observed within eth short run,cs LC gentsancing shoule presourts to al the existing salary structure; although rhe shares reported for ety of devices for enhancing competitive pressures in all Venezuela and Trinidad and Tobago are averages based on salary core personnel policy areas, including salary setting, re- scale data and actual expenditure data reported in annual budget cruitment, promotions, employee performance reviews, documents. To put this in perspective, although the maximum and so on. By contrast, policies that create monopo- share of total compensation that can be accounted for by supple- lies-such as designating a single agency to provide all ments in Uruguay is 80 percent, the average is only 20 percent. It training or to handle recruitment-undermine competi- is, then, not surprising that these shares are higher in the former tive pressures. Policies that restrict competition for pub- three countries than in the latter two. Data limitations prevented lic employment slots in other ways-for example, pro- reporting the same measures for all five countries. hibiting recruitment to position or restricting the 2. The information in this section on Uruguay's public recruitment pool to internal candidates-reduce the sector compensation practices comes largely from World Bank recrulment ool t mteral canloate-reoue tne 1991. competitive forces required to assure that the public sec- 3. See World Bank (1991) p. 83, wherein it is noted that tor has access to the best employees it can afford to hire "ilt]he combined effect of the established household and health Guarantees of the right to career advancement and iron- care benefits represents 43 percent of a minimum wage without clad tenure guarantees dramatically undermine the com- seniority in the auxiliary services job group; with seniority of 30 petitive pressures that can be brought to bear on public years, the combined social benefits can exceed 80 percent of employees to perform well. Employee evaluation proce- that minimum compensation." dures that create strong incentives for evaluators to as- 4. The lower estimate attributes all overtime and 12.5 sign virtually all employees the same, highest rating in- percent of actual service premiums to "performance-linked" sal- PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARIBBEAN 79 ary supplements. This assumes that the average performance 13. This hypothesis could be readily corroborated by ex- rating achieved by public employees was "very good" on a option amining data on the distribution of annual performance evalua- scale, with "very good" the second-from-the-top rating. The tions. Unfortunately, Argentine authorities were unable to pro- upper estimate attributes 75 percent of service premiums, all vide such data. overtime, and all annual bonuses to performance-linked salary 14. In addition, Title 1, Article 5, of the Ley de Carrera supplements. The 75 percent attribution assumes that all train- Administrativa (Venezuela 1975) explicitly omits from its cov- ing and prior education are performance-linked, but that 25 erage six categories of public employees, each of which is subject percent of service premiums are attributable to seniority (be- to a different set of labor laws. These include: tween twelve and thirteen years of service), which is assumed to * Employees of the national legislature not be performance-linked. In both cases, "other" service premi- - Employees of the foreign service, who are covered by ums and contributions to personal savings plans are assumed to their own body of labor law be non-performance-linked. * Employees of the judicial branch, the public ministry 5. Allowances were set at 150 percent of base wage; se- and the supreme elections council niority premium was two percent of monthly wage times the * Members of the national armed forces number of years served; residency premium was 35 percent of * National universities directors, academics, teachers, or monthly wage, and special premiums averaged 37 percent of researchers monthly wage, ranging from 10 percent for the Navy to 110 e Day laborers contracted within the national public ad- percent for the Gendarmerie. ministration, who are covered by the Labor Law. 6. "Escala Unica de Sueldos," as of December 1989 (Chile 15. Decreto Ley 3.538 (Chile 1980a) is their Ley Organica. 1989b). D.F.L. No. 411 (Chile 1981) is their administrative law. 7. All dollar amounts are U.S. dollars. 16. BCV personnel policies are governed by the Organic 8. Step within grade level receive fixed salary increments Labor Law (Venezuela 1991), rather than by the Ley de Carrera of roughly 4 percent per step. These are assigned at fixed Administrativa (Venezuela 1975). amounts within each usually five-grade range, and these incre- ments become progressively larger across those five-grade ranges. For instance, within-grade-level increments in the first RteIerences five grades are 15 lempiras per month (approximately US$33 per annum) or approximately 4.0 percent of the median grade- Argentina. 1943. Decreto No. 16.672/43. and-step salary in these five grades; grade-level increases in the . 1957. Decreto No. 3.577/57. second five-grade range are 25 lempiras; etc. At the top of the . 1959. Decreto No. 10.115/59. salary scale, step increments have reached 125 lempiras per . 1973. Decreto Ley No. 1.428/73. month (approximately US$277 per annum), which is still very . 1986. Decreto No. 2.192 and 2.193. near 4 percent of the median salary step in the grade 39 cat- . 1991. Decreto Ley No. 993/91. egory. Inter-grade salary increments are assigned according to a . 1992. Resolution No. 30 (March). similar algorithm. These rise from 10 lempira increments (per Bushnell, P., and Graham Scott. 1988. "Devolution and Account- month, or approximately US$22 per annum) across the lowest ability: An Economic Perspective." Paper delivered to the five grades to a 180 lempira incremnent (per month) between New Zealand Insritute of Public Administration Conven- the penultimate and top grades (approximately US$400 per tion on Public Sector Devolution and Accountability, July. annum). On a percentage basis, these increments rise from just Central Bank of Venezuela. 1992. Manual on the Application of shy of 4.9 percent at the lowest grade to 9.9 percent for the rise the Discipbinary Regime. Human Resources Management to the highest grade. Division. 9. The salary scales being compared include 1.428/73, Chile. 1980a. Decreto Ley No. 3.538 (December). Docente, Docente Universitario, Judicial, INTA, and Militar. . 1980b. Decreto Ley No. 3.551. 10. Only certain scientific and technical agencies consis- . 1981. Decreto con Fuerza de Ley (D.F.L.) No. 411 tently pay lower salaries than those provided by escalaf6n 1.428/73. (December). I1. This figure is calculated from 1989 data found in law . 1989a. Ley No. 18.827 (published in the "Diario 18.827 (1989a), which respecified the planta for every central Oficial" No. 33.459, 28 August). government agency in order to endow a large number of non- . 1989b. "Escala Unica de Sueldos," Ministry of Fi- tenured appointments made during the Pinochet regime with nance. tenured career civil service status. Health care positions were . 1989c.NuevoEstatutoAdministrativo, Ley No. 18.834 excluded from the calculations because of the difficulty of trans- (23 September). forming part-time positions to full-time equivalents. Comisi6n Presidencial para la Reforma del Estado (COPRE). 12. All personal service contracts are required by law to 1989. La Reforna Administrativa, vol. 6, no. I (Caracas, expire December 31 of each year. The annual budget law sets Venezuela). explicit limits by program on the number of persons and total de Merode, Louis. 1991. "Civil Service Pay and Employment expenditures allowed through such personal service contracts. Reform in Africa: Selected Implementation Experiences." 80 CIVIL SERVICE REFORM IN LATIN AMERICA AND1111 CI '\RI Bt \N Division Study Paper No. 2. World Bank, Institutional World Bank, Human Resources Development and Opera- Development and Management Division, Africa Technical tions, Washington, D.C. Department, Washington, D.C. Scott, Graham. 1993. "What's Wrong with Managerialism?" lnstituto de Estudios Superiores de Administraci6n (IESA). Public Sector 16(l):2-4. 1990. La Gesti6n de Recursos Humanos en Venezuela, 2nd Scott, Graham, and Peter Gorringe. 1989. "Reform of the Core edition. Venezuela: Hay Group. Public Sector: The New Zealand Experience." Australian McCulloch, Brian W., and Ian Ball. 1992. "Accounting in the Journal of Public Administration 48(1). Context of Public Sector Management Reform." Financial Scott, Peter, Peter Bushnell, and Nikitin Sallee. 1990. "Reform Accountability and Management (Spring). of the Core Public Sector: New Zealand Experience." Gov- Nunberg, Barbara. 1990. "Public Sector Management Issues in ernance 3(2). Structural Adjustment Lending." Working Paper No. WPS Venezuela. 1975. Ley de Carrera Administrativa, May 13. 217. World Bank, Country Economics Department, Wash- Viera, Ricardo. 1982. Reglamento General de la Ley de Carrera ington, D.C. Administrativa, Decreto No. 1.378, January 15. . 1991."Civil Service Management in Developed Ad- . 1991. Ley Orgdnica del Trabajo, May 1. ministrations: Guidance for Developing Country Reforms." . 1992a. "Sistema de Clasificaci6n y Remuneraci6n World Bank, Country Economics Department, Washing- de Cargos Gerenciales de la Administraci6n Publica Na- ton, D.C. cional." Proyecto PNUD-COPRE, Ven/89-506A-18-19. Nunberg, Barbara, and John Nellis. 1990. "Civil Service Reform Caracas. and the World Bank." Working Paper No. WPS 422. World . 1992b. Various documents identifying training ex- Bank, Country Economics Department, Washington, D.C. penditures within the central govemment. Central Office Psacharopoulos, George, Jorge Valenzuela, and Mary Arends, of Personnel. 1993. "Teachers' Salaries in Latin America: A Compara- World Bank. 1991. "Uruguay: Employment and Wages." Report tive Analysis." Policy Research Working Paper WPS 1086. No. 9608-UR (May). Washington, D.C. PUBLIC SECTOR HUMAN RESOURCE MANAGEMENT IN LATIN AMERICA AND THE CARISEEAN Administrative Reform in Developing Countries: Some General Observations Ibrahim F I. Shihata Like any other kind of reform, administrative reform, to ing from the International Monetary Fund and the be effective, must be based on an in-depth understanding World Bank.' of the conditions in the country undertaking reform. De- Economic reform or structural adjustment policies veloping countries face some similar administrative prob- were initially designed to solve macroeconomic problems, lems, however, and the experience of other countries is the most important symptoms of which are high inflation therefore useful to them. Administrative reform is espe- and balance of payments problems. They were also de- cially important for the many developing countries that signed to introduce other structural adjustments to set have embarked on economic reform. The effectiveness of economies on a new course of sustainable growth. Reform economic reform often depends on reform of the institu- measures usually included reducing public expenditures tions entrusted with implementing it-to prevent its be- and increasing revenues, providing scope for domestic ing held hostage by inept or corrupt institutions. and external competition, and allowing prices to reflect This chapter first briefly addresses the experience of the real economic value of goods and services. Other developing countries that have undertaken comprehen- reform measures aimed at improving the government's sive economic reform programs in the recent past. It performance in the provision of social services, and devel- then reviews the principal problems afflicting civil ad- oning the infrastructure and institutions needed for a ministrations in most developing countries and presents market-oriented economy, particularly in the financial a number of solutions that have been applied in compa- and banking sectors. rable situations. In countries that adopted structural adjustment poli- cies and pursued them without regressing, economic Recent economic reform growth rates started to increase a few years after the start of the program. The highest rates of economic growth can be experiences of developing countries found in middle-income countries that proceeded with their reforms on an accelerated schedule (World Bank Developing countries began the 1980s under extremely 1992a). Conversely, countries that did not adopt adjust- difficult economic conditions. The decline in the prices ment policies experienced extremely modest or diminish- of primary commodities, which constituted the princi- ing growth rates. Accordingly, the budget deficits of coun- pal exports of some countries, and the increasing exter- tries that achieved considerable progress in reforms during nal debt burden on others-at a time when govern- the 1980s declined-from an average of 5 percent of GDP ments continued to expand their economic activities- to 3 percent in middle-income countries, and from 8 per- led to budget and external balance of payments deficits. cent to 5.5 percent in low-income countries (World Bank Balance of payments problems, resulting in a substantial 1992a). Progress was also achieved in trade liberalization, rise in domestic prices and capital flight, became com- particularly in middle-income countries. The exchange mon in developing countries. Many developing coun- rate declined in real terms in both successfully adjusting tries became sources of substantial net financial trans- and nonadjusting countries, with a decrease in the gap fers to industrial countries. And many found themselves between the official and the black market exchange rates. with no alternative but to adopt stringent economic re- The countries that achieved the most success in re- form measures, most of which were supported by fund- forms were those that managed rapidly to reduce or elimi- 8, -1CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN nate budget deficits by adjusting unrealistic prices, reduc- dies or protection may collapse in the face of new com- ing subsidies, expanding the tax base, and improving tax petition. The existence of credit limits at the start of the collection. These changes were accompanied by the es- reform period may also increase the difficulty of financ- tablishment of realistic exchange rates and positive real ing new investments. interest rates while phasing in the liberalization of exter- Some countries have managed to achieve rapid in- nal trade. These bold steps resulted in macroeconomic creases in investment, such as Chile, the Republic of stability, which substantially enhanced the credibility of Korea, Singapore, and Thailand. In Mexico private in- the reform process and enabled governments to pursue vestors responded to the new situation after six years; in reforms of the capital and labor markets. These reforms some countries, however, such as Bolivia, there was vir- are essential to ensure a greater degree of flexibility for tually no response.3 This was also the case in countries market forces under specific and previously determined that retreated from the reform process after an initial rules. At the same time, they help in eliminating distor- attempt, such as Cote d'lvoire. Perhaps the difference tions in-or in privatizing-public sector enterprises to among these experiences lies both in the government's alleviate the heavy financial burdens that these enter- ability to generate confidence in its commitment to the prises often impose on the state and to improve the effi- continued implementation of the reform measures and in ciency of their operations. its success in improving the budget and balance of pay- The importance of pursuing a "second generation" of ments situations. Also important is the government's reforms soon became obvious to the countries that adopted continued investment in infrastructure and human re- structural adjustment programs. Second-generation re- source development, particularly education and health forms relate essentially to the creation of the most appro- care. Such measures as reducing government expendi- priate conditions for investment in general, and for pri- tures, privatizing parts of the public sector, and introduc- vate investment in particular.2 The countries undertaking ing changes in government institutions create widespread second-generation reforms sought to form solid economic, confidence in the seriousness and efficiency of the legal, and social institutions. They allowed the central govemment's effort.4 bank the autonomy it needed to resist the inflationary Countries that benefitted from the mistakes of others financing of the budget. They required commercial banks paid particular attention in designing their reform pro- and other financial institutions to operate in accordance grams to the integration, sequencing, and continuity of with regulations that would ensure their financial viability reform measures and took special care to prepare the under proper oversight. They introduced or strengthened public to accept the temporary sacrifices required so that a legal and regulatory framework characterized by stream- reform could be pursued without delay or retreat. They lined procedures and limited restrictions, especially with also sought to develop an appropriate environment for respect to firms entering and exiting the market. They the growth of private investment by pursuing second- established or reorganized relevant agencies to ensure the generation reform measures. Latin American countries correct implementation of essential regulations, to estab- that followed this strategy experienced far less increase in lish mechanisms for settling disputes without delay or unemployment and decline in production than expected. distress, and to enforce a new taxation system that would The new environment soon created opportunities for pri- curtail and effectively penalize evasion. And they strength- vate investment that investors seized after an initial pe- ened the administrative agencies responsible for imple- riod of hesitation. Moreover, the credibility of reform menting most of these reforms, and ensured that the programs increased as they became more comprehensive judicial system was sound and efficient. and their pace quickened. Public opinion responded fa- These second-generation reforms may initially en- vorably to reforms that were credible and serious, despite tail a reduction in investment, both in volume and as a subsequent economic pressures, but was suspicious of re- share of GDP, but their continued implementation can form steps that were hesitant and far apart. increase the level of investment over time. The length of Some developing countries-for example, African that period of time may depend on the initial degree of and Middle Eastern countries-have population growth economic imbalance and the depth and comprehensive- rates that exceed those in other developing countries but ness of reform measures. The initiation of reform creates economic growth rates that over the past few years have stress and uncertainty in the investment environment; been lower than the developing country average (table this usually results in an increase in the cost of capital 9.1). Many of these same developing countries suffer from (interest rates) and in the cost of imported capital goods higher unemployment rates and a worse income distribu- (due to a lower exchange rate). Existing investments tion. These factors increase the social cost of economic that depend for their profitability on government subsi- reforms and the associated political difficulties. But they ADMINISTRATIVE REFORM IN DEVELOPING COUNTRIES SOME GENERAL OBSERVATIONS 83 should not be regarded as obstacles to reform. On the ability to pursue long-term strategic planning and the contrary, to rid themselves of these problems, these coun- availability or efficiency of data collection and dissemi- tries have no altemative but to achieve high rates of nation systems, staff training, and capacity for evaluating economic growth through reform. and monitoring implementation. Achieving high growth rates requires primarily the Although this chapter focuses on administrative re- creation of an environment in which investments respond form and its technical aspects, a broader perspective is to new economic situations rapidly, which depends in essential. If structural disequilibria are not addressed, ad- turn on a balanced macroeconomic framework in which ministrative reforms alone inevitably have a limited ef- investors can be assured that their profits will not vanish fect. Moreover, some of the methods adopted as part of as a result of inflation. High growth rates also require civil service reform may be impractical or economically sound microeconomic conditions under which investors and politically costly in the absence of more comprehen- can be confident that their investments will be processed sive economic and social reform. The following sections without excessive restrictions and in accordance with price outline the typical problems faced by the civil service in a and wage systems that reflect the real value of goods and typical developing country. services, and that they can operate without major non- commercial risks. That is, there is a need for economic Surplus employees conditions that allow the expansion of investment oppor- tunities, for legal systems that protect ownership rights Most government agencies in developing countries suffer and enforce contractual obligations, and for government from surplus employees. This phenomenon is the natural and administrative agencies that enjoy a minimum degree result of one or more of the following factors: of stability and efficiency-hence the importance of ad- * A high rate of population growth that exceeds capital ministrative reform to the success of economic reform. accumulation and economic growth rates * A declining economic growth rate, a failure of central- Typical aspects of administrative ized planning to achieve its goals, and global economic recession, all leading to an increase in unemployment dysfunction in developing countries rates - An education system ill-suited to the needs of the labor Government bureaucracies in developing countries face market numerous problems. Some of the problems are the result * A political expectation that the state is the employer of of structural conditions that cannot be remedied by ad- last recourse ministrative reform alone. Others arise as a result of gov- * Social values that attach a high premium to personal ernment policy toward the civil service, including the relations and patronage in recruitment and promotion. nature of the decisionmaking processes, the efficiency of Each of these problems has a serious impact on hiring the institutions responsible for policy implementation, levels regardless of the administrative system. And solv- and the programs established by these institutions. Alle- ing them requires a long-term commitment on the part of viating these problems depends on the government's the reforming government. In all developing countries the civil service grew sub- TABLE 9.1 stantially between the early 1960s and the late 1980s. The Average annual growth in population and growth of public employment came in response to the GDP, by region, 1965-90 demand for services after decolonization, particularly in health and education, and to alleviate the unemployment Population GDP caused by stagnation in agriculture and the private sector.5 Region 1965-80 1980-90 1965-80 1980-90 The public sector continued to grow despite the downturn in global economic growth beginning in the mid- 1980s and Middle East and North Africa 2.8 3.1 6.7 0.5 the failure of many development programs to achieve the Latin America and the Caribbean 2.5 2. i 6.0 1.6 expected growth rates. Table 9.2 shows the high govern- Europe 1.1 0.1 - 2.1 ment employment ratios in several developing countries. Sub-Saharan Africa 2.7 3.1 4.1 2.1 During the same period the unemployment rate rose East Asia and the Pacific 2.2 1.6 7.3 7.8 South Asia 2.4 2.2 3.6 5.2 substantially in developing countries. In Middle Easter All developing countres 2.3 2.0 5.9 3.2 countries unemployment is extremely high on average, - Not available. - between 10 and 20 percent (table 9.3), and it is concen- i.orce; World Bank 1 992b. trated among young people. The high unemployment rates 84 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN contribute to the complexity of both administrative re- often resorted to recruitment systems that are inappropri- form and economic reform. ate to the absorptive capacity of the national economy or In addition to real surplus employment, some civil to the needs of the civil service; some systems, for example, service administrations carry on their employment rolls guarantee the appointment of graduates to civil service unfilled positions, ghost workers, and unnecessary tempo- positions. In many countries the education system has pro- rary and seasonal positions, as well as workers who are still duced graduates in several specializations and at low aca- employed even though they have reached retirement age. demic levels in numbers that far exceed the needs of the All of these "surplus" employees increase the payroll and national economy. A govemment guarantee to rectuit could be terminated without great political repercussions. graduates frequently results in long lines of graduates wait- ing to be appointed. After a wait of several years graduates Inappropriate recruitment and other personnel policies are appointed according to their seniority, regardless of merit. Mandatory service, whereby students who benefit Linked to the issue of surplus employment is the issue of from a state-financed education must repay part of their recruitment practices. Civil service administrators have debt through govemment employment, is another recruit- ment system that can lead to surplus employment, often to TABLE 9.2 the detriment of both the state and the workers. Ratio of government employment to total There are often extreme rigidities in the processes employment iri selected and policies relating to the recruitment, promotion, and employment in selected termination of staff. These are frequently subject not only developing countries, various years to the principle of seniority, but also to excessive legal guarantees and administrative and judicial control. Judi- Country Ratio of government employment to total employment cial review bodies are often more concered with the Latin Amencoa literal application of legal provisions than with exercising Argentina 2.6 Chile 2.3 Mexico 14.7 TABLE 9.3 Uruguay 7.8 Venezuela 17.2 Unemployment rates inselected Middle East' developing countries, 1989 Algeria 26.5 (55.7) Egypt 17.0 (30.2) (percent) Jordan 17.5 (44.7) Country Unemployment rate Morocco 6.3 (8.0) Tunisia - (23.4) Latin Amenca Yemen - (15.9) Argentna 6.7 Bolivia 8.4 Africa' Brazil 3.5 Liberia 16 Chile 5.9 Mali 33 Colombia 9.1 Nigeria 43 Costa Rica 3.2 Senegal 45 Guatemala 3.2 Zambia 37 Honduras 5.9 OECDd Mexico 6.4 Belgium 16.8 Panama 20.3 France 15.4 Paraguaya 6.3 Germany 14.6 Peru, 5.3 Italy 14.4 Uruguay 8.0 Portugal 9.9 Venezuela 5.1 Spain 12.3 Middle East United Kingdom 19.5 Algeria' 19.7 -Not available. Egypt 15.0 Note. Figures in parentheses are the ratio of public (government and publc sector) Jordanb i 8.8 employment to total employment. Morocco' 1 2.1 a. DataforArgentina, Chile, randUuguayarefor 1990, and excludeenterpnses, teachers, Tunisiac 16.4 the military, and municipal ard provincial public employment. Yemen' 26.0 b. Data are for 1984-90. c. Data are for 1981. a. Data are for 1990. d. Data are for 1987. b. Data are for 1991. Source: World Bank 1993; Venezuela 1989; Pissarides 1992; Lindauer 1988; and c. Data are for 1984. lunquera 1986, as cited in Venezuela 1989. Source: World Bank data. ADMINISTRATIVE REFORM IN DEVELOPING COUNTRIES: SOME GENERAL OBSERVATIONS 85 the flexibility required to ensure efficient performance. Wage compression is the reduction in the difference This has resulted in many ineffective employees attaining between the highest and the lowest salary paid by the high-level positions from which it is difficult or impossible administration, generally through greater increases in to dislodge them. It has also deprived the civil service of lower salaries and thus at the expense of the higher sala- youthful leadership and much-needed vitality. These ri- ries.' Wage compression makes it difficult for a civil ser- gidities can complicate administrative reform by limiting vice both to attract and to retain high-level staff. In some it to a review of the status of employees and their salary developing countries wage compression has increased sig- scales, and not of the policies and processes that ensure nificantly, as a result of a combination of factors, includ- efficient performance. ing trade union negotiations, equitv concerns, and egali- tarian socialist policies. Multiplicity of agencies and positions and inadequate At the same time, there has been an increase in delineation of functions supplementary financial benefits, under such misleading classifications as "incentives" and "duty allowances." Often a multiplicity of ministries and agencies are respon- Nonfinancial fringe benefits, such as housing, favor high- sible for a single sector. This results in policy inconsisten- salaried workers who need these benefits least and repre- cies and conflicting methods of implementation. The prob- sent an inefficient allocation of govemment resources lem is compounded by inadequate delineation or overlap (Lindauer 1988). These supplementary benefits have of the functions and mandates of these ministries and masked the real salaries paid to civil servants, particularly agencies. For example, there may be a ministry for the those in senior posts. They have also established expecta- economy and external trade, another for finance, a third tions that divorce an employee's entitlement to an incen- for planning, a fourth for international economic coop- tive or bonus from any improvement in his or her produc- eration, and a fifth for supply and domestic trade. This tivity or performance. proliferation of agencies seems to have resulted from a conviction that the optimal solution to any major prob- Shortages of employees and skills in certain fields lem is to create an independent ministry or supreme agency to deal with it. But it often leads instead to the Civil services, despite their large size and their surplus institutionalization of the problem and not its solution, at employment in many areas, often suffer from severe em- the cost of considerable effort and funds. ployee shortages in remote locations or in areas that have There has been a proliferation also in the number of to deal with substantial numbers of the public, with re- senior posts or, rather, in inflated titles inappropriate to sulting overcrowding and delays in performance. The the posts involved, as an indirect method of increasing employee shortages may be due to shortages of buildings salaries. This has resulted in a significant diminution of or equipment, to employees' reluctance to accept jobs in the standing and prestige of truly senior posts.6 remote locations, or to deliberate corruption. Wage compression and decline in real wages Lack of strategic vision Civil service salaries in general have declined and those of Countries often lack a strategic vision of the role of the senior officials have become compressed relative to the civil service-that is, a clear concept of the bureaucracy minimum pay. There has been a constant decline in the as a politically neutral institution with high professional real value of wages because wage increases have not been standards and as an administrative body assigned specific commensurate with inflation rates.7 This has led to low tasks to serve developmental and social goals.9 The civil employee morale and declining standards of living, and service, in accordance with such a vision, would act ac- many public employees supplement their incomes by cording to objective principles-in its decisionmaking moonlighting during working hours or collecting financial process, in its dealings with the public, and in its intemal considerations from the public for performing their normal procedures for recruiting, promoting, and terminating duties. Petty bribes are often viewed as a legitimate gratu- staff-and it would be governed by established control ity in functions that entail regular dealings with the public. and auditing systems. In many developing countries, The decline in real wages has also resulted in negligence or however, the role of the bureaucracy has expanded along poor performance, with the more qualified workers quit- with the role of the state, which has, in some cases, ting govemment service. All this has led to a substantial expanded at the expense of the private sector and of decline in the social status of public servants and to an individual liberties.'" Accordingly, the role of the civil inability to attract efficient and qualified workers. service has become barely supportive-sometimes hos- 86 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN tile-to the development process, and has been marked tural conditions, needs to develop a reform program that for the most part by restrictions and complexities as well responds to its own particular problems. as fierce centralization. In addition, the political neutrality of the civil service A clear strategy is frequently undermined by ethical conflicts. The prin- ciple of avoiding conflicts of interest has not been fostered The government should have a clear understanding of its in the civil services of many developing countries, and role in society, and in the economy in particular, and in some employees engage in activities that are inconsistent the light of that role determine the functions and duties of with the nature of their work or the requirements of their the civil service. If a state is committed to economic public functions. Examples include a civil servant holding reform, and to limiting its role in the production process, a managerial job in the government while retaining a seat it must restrain the paternalistic attitudes of govemment in the legislature, a position whose functions would in- and limit its intervention in all areas. This perspective clude oversight of government administrative operations; should shape the general approach to reforming the civil maintaining both a senior position in a government min- service and inform the determination of those functions istry and membership on the board of a company subject that the civil administration should be expected to as- to that ministry's oversight; and accepting gifts from per- sume or retain, those that can be left to the private sector, sons with whom the employee has official dealings. and those that the private sector could be assigned to undertake on a contractual basis with the oversight of the Inadequate infrastructure relevant public entity. A strategic vision with respect to the role of the gov- Many countries have given insufficient attention to main- emment and the civil service would help in designing a taining government buildings and to providing enough more rational model for the cabinet structure at the top of equipment and office supplies relative to the vast increase the system, including the number of ministries and their in govemment employees. This has created overcrowding mandates. This would reduce the areas of conflict in poli- in agencies that deal with the public, which forces indi- cies and decisions and ensure that responsibility is shoul- viduals requiring assistance to resort to intermediaries or dered in each ministry by a small number of undersecre- bribery. taries who, along with the minister, form a cohesive group capable of policy planning and implementation. General proposals and remedies In addition to defining the role of the civil service and of govemment, a strategic framework for the reform program is required. This framework would identify the Some or all of the problems enumerated in the preceding different elements of the program and the link between section may be found in a variety of combinations in them and establish a time frame for reform. The pace of different developing countries. It is therefore useful to the reform process may be found anywhere along a spec- consider solutions to these problems which have been trum ranging from radical, systemic transformation to slow, identified in the practice of countries, both industrial and incremental reform." Whatever the time frame elected developing, that have managed to improve the perfor- for the different elements of reform, a comprehensive mance of their civil service. framework is needed in which short-term measures are Downsizing (eliminating surplus employees) has fig- designed explicitly to support long-term objectives (de ured prominently in all administrative reform programs in Merode 1991). A long-term strategic perspective can also both developing and industrial countries, but it would be reduce the political difficulties resulting from the imple- a mistake to consider this as the core of administrative mentation of certain elements of a reform program, such reform. It is only one step in a country's reform program, as downsizing. Retrenchment may be more acceptable, which should be concerned with formulating a compre- both to the displaced workers and to the general public, hensive strategy for the fundamental functions of the civil when it can be placed within the context of a wider service in the light of that country's circumstances. The administrative reform program. Moreover, some of the reform program should determine the policies, systems, benefits achieved by certain programs (for example, re- and rules for the civil service, and for the reform program duction of the wage bill due to downsizing) can be main- itself, and work out a process of optimal organization and tained only if they are combined with other measures (for sequencing in implementing them. example, hiring freezes). The following proposals are only general. Each coun- The elaboration of a comprehensive framework for try, facing different political, economic, and socio-cul- reform assumes full commitment by the government, in- ADMINISTRATIVE REFORM IN DEVELOPING COUNTRIES. SOME GENERAL OBSERVATIONS 87 cluding both the legislative and the executive branches. policies and ideologies. The experience of many countries This is critical because reform is essentially a political shows that governments are better able to achieve their process relating to the scope and exercise of state pow- objectives by minimizing restrictions and creating incen- ers. Such a process requires a gradual but radical trans- tives. And participation in the process of rule-making by formation in inherited behavioral patterns and, indeed, a those subject to the provisions of the law eventually helps change in the public's perception of the role of the civil in the rules' sound application. Before submitting draft servant. Successful administrative reform has been char- bills or issuing public decrees and regulations aimed at acterized by active participation in the reform process by regulating a good or service, for example, it is therefore the head of state, followed by cabinet members and even- useful to set up organized forums for consultation with the tually the entire civil service.'2 A successful reform has producers, consumers, and intermediaries concerned. typically involved the participation of many officials in working groups that designed the new systems and over- Systems and programs saw their implementation. Commitment by the execu- tive and ownership of the reform program are critical Along with legislative and regulatory reforms, successful elements in the reform process, particularly for its long- experiments in administrative reform have relied on the term sustainability.I" Foreign technical assistance and installation of modern management systems in a number foreign models may be used to the extent that they are of areas. For this purpose, it may be sufficient to establish sensitive to the requirements of a situation.'4 Reform pro- the ground rules and the general guidelines and leave the cesses entrusted entirely to foreign consulting firms that details to be worked out by each ministry or independent produced ideal models and left them to the government agency. Such systems should be in keeping with the abili- to apply have rarely succeeded (Nunberg 1990). In some ties of those who will be managing them. They would situations, the involvement of a foreign aid agency or include the following: foreign consultants can provide useful legitimacy to spe- e A strategic planning system at the ministry or agency cific programs or, inversely, can provide a scapegoat for level that forecasts future requirements over a period of, government-directed criticism. say, five years, and the consequent job reclassification and specification of inputs, and that avoids a buildup of sur- Rationalization of policies and rules plus staff. i A modern data collection and dissemination system that A strategic vision for the role of the civil service does not ensures accuracy and includes rules governing the confi- evolve from a vacuum. It reflects the prevailing social dentiality of information. Disclosure of information is an culture and the political course adopted in managing the issue with which developing countries have been overly economy. Hence, administrative reform must be based on concerned, and its objectives and dimensions may need to a clear understanding of the policies that the state wishes be reviewed. to pursue, and not considered merely a temporary solu- a A decisionmaking system that clarifies the process for tion to crises. These policies need to be established clearly making decisions in a ministry or agency and ensures that in the process of defining the role of the civil service. such decisions rely on objective analysis rather than per- One of the principal functions of the civil service is to sonal preferences. ensure the proper application of the state's laws and regu- - A financial system for budgeting and expenditure that in- lations. Many developing countries continue to pursue cludes budget planning and preparation, the control of conflicting policies. Regulations are often complex and expenditures, and a procurement and contracting system. sometimes inconsistent. They tend to be numerous and * An accounting and auditing system that ensures sound diffuse, and difficult to comprehend not only for the public financial auditing. but for the employees responsible for implementing them. * A human resources management system that ensures that These conditions must be rectified before or at the incep- the required skills will be made available and will be tion of an administrative reform program, or the reform developed continuously by training programs designed to process will lose much of its usefulness. Weak implementa- broaden experience and improve efficient performance tion of laws and regulations, resulting in the flouting of and by relocation programs. rules and in corrupt practices, is common among develop- a A control and oversight system that monitors staff perfor- ing countries. An attempt to ensure respect for rules and mance and provides rewards and sanctions based on per- regulations might not succeed unless it is preceded by the formance. rationalization and simplification of the vast number of * A personnel recruitment and management system that is regulations enacted over the years pursuant to disparate effective in recruiting and promoting qualified staff, par- 88 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN ticularly to high-level positions. This system may differ in Several countries have adopted another approach to the degree of centralization of the personnel function."5 training senior employees. In addition to participating in Personnel recruitment and management systems with early training programs, a number of middle managers some degree of centralization have been more successful who have demonstrated special skills are selected to re- in certain developing countries than those without cen- ceive special training that qualifies them for senior posts tralization. Systems that have been successful tend to (along the same lines as the staffing system common in have been applied through effective coordinating mecha- the armed forces of most countries). Although this ap- nisms and to have allowed some delegation of authority, proach has not always been successful in industrial coun- within the parameters of central guidelines, to the person- tries, it has proven to be particularly useful in developing nel departments of administrative units, in accordance countries when the selection criteria are based on effi- with the importance of each function and the available ciency rather than on political or personal considerations. capacity in each department. This system requires lengthy, rigorous training in the skills Centralization of personnel management should not required for specific posts, flexibility in utilizing graduates mean, however, that the government applies civil ser- in different areas, and competitive salaries to ensure that vice procedures to public sector enterprises. Such enter- such managers remain in the service. prises should be allowed the same flexibility as private The main objective of these different management sector corporations, and their work procedures should systems is to ensure sustained and efficient staff perfor- be governed by the same rules that are applied to private mance and achievement of the civil service's goals. An- joint stock corporations. Moreover, centralization other objective is to guard against rigidity, or the transfor- should not preclude allowing administratively autono- mation of the civil service into an institution that serves mous units from applying their own staff regulations, the interests of its employees or constrains socioeconomic provided that this approach is objectively justified and development. In developing such programs, the more suc- that these units are subject to strict accountability and cessful experiments have relied as much as possible on auditing systems that prevent the unjustified expansion private sector management approaches, benefiting from of such exceptions. their flexibility and more up-to-date systems. Successful The recruitment system may differ also in the meth- reforms have also benefitted from the approach that gives ods of selecting candidates and in how much it relies on priority to quality of service and responsiveness to cus- closed-shop recruitment for technical, high-level, or sen- tomer requirements, relies in its treatment of staff on real sitive posts.)6 Some developing countries, such as the incentives rather than on administrative disciplinary ac- newly industrialized countries of Asia, have used closed- tion, and includes mechanisms for terminating weak per- shop systems to fill senior technical and management formers or redundant staff. posts as well as those involved with formulating public policy. For developing countries anxious to fill manage- Steps in implementing administrative reform programs ment positions, adopting some elements of the closed- shop system may be advisable. Such a system can be It is not enough for the govemment to have a clear faulted for supporting the position of the elite in society strategy of administrative reform and the systems and and the consequent failure to ensure equal opportunities. programs to be adopted by the civil service. The systems But the high-quality civil servants the system produces and programs cannot be implemented automatically. Their can introduce greater efficiency in, and enhance the pres- success depends to a large extent on the methods and tige of, government agencies (Nunberg 1992). And some efficacy of implementation and the sequence of steps that of the disadvantages of the closed-shop system can be are taken. A number of reform programs in which the mitigated by additional policy measures. For instance, a World Bank has been involved through structural adjust- number of civil services have experimented with a middle ment loans followed a sequence that started with course, relying essentially on a well-trained elite for se- downsizing the civil service through retrenchment of sur- nior posts while extending appointments to other indi- plus employees after quantifying the redundancy. Such a viduals who, although not recruited through the elite sequence may be appropriate if it is based on a clear stream, demonstrate efficiency and experience."7 Adopt- strategic vision and a consensus on the broad lines of the ing such a training system for cadres to occupy senior and reform program after the methods required to improve sensitive posts should not result in a lack of attention performance have been ascertained. The implementation being given to the quality of lower-level staff or the de- of such a program involves a number of operations that velopment of serious training programs for them should be undertaken in stages and initially in one impor- (Nunberg 1992). tant ministry, such as the Ministry of Finance. If it proves ADMINISTRATIVE REFORM IN DEVELOPING COUNTRIES: SOME GENERAL OBSERVATIONS 89 successful, the first operation could become a model and scale and matrix designed to prevent excessively wide a source of lessons for the other ministries. The following gaps between salaries in the civil service and those in steps may be recommended: public enterprises and private corporations. Supplemen- - Determine the number of employees needed for each tary remuneration that has lost its original purpose should specialization and function to enable the ministry con- be canceled, and the number of grades in the manage- cerned to perform its assigned functions in accordance ment structure may need to be reduced. And the wage with the administrative reform strategies and the opera- compression that has characterized salary scales in many tional systems agreed upon. This should preferably be developing countries should be alleviated by increasing carried out under the oversight of a committee that in- the gap between the highest and the lowest salaries. cludes responsible authorities from several ministries as One possible innovation is "broad banding," which well as individuals from outside the civil service. sets a range of salaries for each grade rather than a point * Carry out a survey of the civil service (age, qualifica- on a scale. Each band should cover a relatively wide salary tions, experience, grade, performance level),'8 review range that would permit salary increases regardless of the the functions performed, and assess comprehensive com- length of time spent in a grade-alleviating "grade creep" pensation (including allowances, incentives, and other problems-and salary differentiation according to perfor- benefits). mance. Each employee's grade under the new scale should * Reconcile the numbers and specializations needed with be determined on objective grounds, enhancing general those that exist by first taking steps to reduce the number confidence in the reform process. This grading exercise is of employees without resorting to summary dismissal. usually carried out by a committee formed mostly of indi- These steps could include freezing automatic graduate viduals from outside the agency concerned. The commit- recruitment;'9 pursuing attrition by not filling jobs that tee typically establishes a point system to measure, for become vacant; preventing moonlighting; prohibiting the each post, the know-how, the accountability, and the extension of employment for those who have reached problem-solving ability required, taking into account the retirement age (in exceptional cases, use could be made of relative demands of the different grades throughout the scarce expertise under temporary contracts); introducing civil administration to ensure equity. Salary supplements voluntary early retirement schemes with limited incen- for hard-to-find skills or locality pay to encourage staff to tives while reserving management's right to deny such move to remote regions might also be used to increase the retirement to retain the more efficient employees; and efficiency of the civil service. suspending automatic salary increases and promotions. Performance-based criteria should be introduced - Once these approaches are exhausted, consider if nec- into the determination of salary increases and promo- essary, the involuntary retrenchment of remaining surplus tions. In some cultures criteria based on the performance employees. Most civil service systems allow the govern- of groups (for example, the notion of the quality circle) ment unilaterally to lay off redundant staff, but in prac- may be preferred over those based on the performance of tice, governments do not take such action except in the individuals. case of individual dismissals. Terminating hundreds or Other complementary measures could be introduced thousands of employees simultaneously is a complex op- to foster the new values in the civil service and to infuse eration that is difficult to undertake without a number of dynamism in the work environment. This can be achieved appropriate safeguards to ensure its fairness and to miti- by providing opportunities for young employees to make gate its adverse effects. For this reason, this issue is ad- their way up the ladder, to receive ongoing training, and dressed separately in the next section. to benefit from technological advances at a pace that they Once the number of employees in a ministry or agency can keep up with and that is appropriate to the conditions has been reduced, the next step is to improve performance prevailing in the civil service. And keeping abreast of the and reduce costs. This requires implementing the func- experiences of other countries and innovations in man- tional reviews referred to in the previous section, focusing agement science is essential. on the functions assigned to the agency as a whole or to each position. At the same time, attention should be given Involuntary retrenchment of to streamlining legal procedures and approvals (rationaliz- ing the decisionmaking process) and implementing new surplus employees data processing, management, budgeting, accounting, training, and oversight and control systems. In many countries administrative reform has been accom- Also important is putting in place the correct incen- panied by the summary dismissal of large numbers of tives for improved performance, including a new salary employees-as many as tens of thousands at a time in 90 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Argentina, Ghana, and Poland, for example. Such large- grouped in a central agency able to maintain accurate scale dismissal has not only important human dimensions, data on their qualifications and experience. Only those but economic and political ramifications that must be within a few years-say, no more than three years-of carefully handled. It may also have a significant impact on normal retirement age would be forced to leave the civil the credibility and acceptance of the reform program. It is service, a process that would be repeated each year of therefore important that a government, before taking this the program-say, for five years. Some of the remaining step, be satisfied that the benefits in terms of improved employees would be redeployed to administrative units civil service performance are likely to outweigh the nega- that are short of staff in certain specializations, or to tive economic or political consequences. geographic locations with staff shortages. Other employ- The larger the number of surplus employees involved, ees could be offered the option of retraining, while con- the more likely that their dismissal, without generous and tinuing to receive their salaries, for positions in the for- prompt compensation, would give rise to new social and mal or informal sector; the govemment would assist in political problems, especially in developing countries that making the arrangements for the training but would not lack comprehensive unemployment benefits. Liberal com- conduct the training itself.22 Once the employees are ap- pensation for a large number of retrenched workers could pointed to their new posts, their government service easily exacerbate budget deficits (except in the rare cases would be terminated. in which a program is financed by external grants or long- Another option would be to help retrenched workers term loans that can be serviced without placing an oner- start up small-scale projects in the private sector with ous burden on future budgets).20 Substantially increasing financing from the banking system, particularly develop- the deficit through compensation payments may have an ment banks and external aid agencies, after which the inflationary effect that would deprive economic reform of workers' government.service would be terminated."3 Or one of its most vital accomplishments and that may have government service could be terminated immediately negative effects on the response needed on the supply against compensation made up entirely or partially of side-that is, increased investment. Moreover, increasing shares in profitable public enterprises undergoing an already high unemployment rate would aggravate so- privatization or of other income-generating assets. And cial tensions and jeopardize the stability needed to attract the program could permit the early retirement, for finan- additional investment. Thus, any government that must cial compensation, of as many additional employees, re- consider the involuntary retrenchment of a large number gardless of age, as budgetary considerations will allow of civil service employees needs to weigh carefully the each year. In all cases, a limit would be set on how long an requirements of fiscal and political stability against the employee could remain in the central agency without anticipated socioeconomic benefits of reducing the num- electing one of the options offered. And any such program ber of employees and improving performance. These so- must be implemented with extreme caution and tailored cioeconomic benefits can be quantified relatively easily in to the demands of the local labor and credit markets. the case of public enterprise reform, but they may be Public perception plays an important role in the suc- difficult to gauge in civil service reform. cess of involuntary retrenchment of redundant employ, The relatively low salaries of government employees ees. The benefits of retrenchment will dissipate quickly in most developing countries limit the financial burden of unless it takes place within a credible long-term frame- downsizing. The assumption is that each retrenched em- work. And its political acceptability may depend on the ployee would be paid compensation proportional to his or perception that it is being undertaken as part of a large- her rent, which is the present value of the difference scale reform program. Dismissal should be based solely on between his or her expected income stream while in pub- objective criteria, and any subsequent recruitment should lic sector employment and his or her expected income be based on real needs. In more general terms, the percep- stream in the best alternative employment. The compen- tion of govemment employment should be changed so sation payment should not exceed the present value of that it is no longer seen merely as a means of income the worker's expected salary payments between the date distribution, but as employment in which effective remu- of dismissal and his or her normal retirement date. The neration is given in exchange for essential services. goal would be to design a redundancy scheme that mini- Unless governments exercise due caution, the con- mizes the overcompensation paid to workers with low stant increase in population and graduates may bring about rents and retains productive workers.2" a resumption of the growth in the number of civil service It may be possible to avoid having to pay substantial employees, regardless of needs, leading to increased pres- compensation upon retrenchment through a number of sure on the budget and declining performance levels in means. For example, redundant employees could be the civil service. This in turn would undermine public ADMINISTRATIVE REFORM IN DEVELOPING COUNTRIES: SOME GENERAL OBSERVATIONS 91 confidence in administrative reform and, at the same sector development is well established. Civil ser- time, weaken the govemment's ability to effect credible vice reform may thus be assisted by Bank loans economic reform. both in the form of project or nonproject lend- ing. If such assistance is deemed by the Bank to Thel role of the World Bak be required for the implementation of economic reform and the promotion of investment and is provided at the request of the country, it obvi- The Bank began structural adjustment lending operations ously cannot represent an unauthorized interfer- in 1980 to support the balance of payments of countries ence in the country's political affairs. embarking on economic reform programs. The impor- tance of complementary reforms in other areas soon be- The World Bank has greatly expanded its activities came evident. Although the Bank had long-standing ex- in administrative reform in the past few years through perience in financing public sector projects in developing research and through the financing of reform operations countries, and in studying strategies for public sector re- in an increasing number of countries.4 form, civil service reform was not considered part of its mandate. But in the 1980s the Bank recognized that the Mechanisms for civil service reform financing success of economic reform in some countries depended on fundamental reform of civil administrations and, more The World Bank provides financing for civil service re- generally, of the systems of governance through which the form through several mechanisms: state manages its resources. * The Bank finances studies and other preparatory work In a paper on governance that I submitted to the needed for administrative reform and reform-related train- World Bank's Executive Directors in December 1990, I ing through grants under the newly established Institu- proposed that the Bank's work in support of adjustment tional Development Fund (IDF). The IDF is financed programs could include assisting borrowers in developing through the allocation of part of the Bank's net income.25 appropriate systems for managing their resources. But that * The Bank finances administrative reform studies and does not mean that the Bank may interfere in political operations through technical assistance loans under stan- matters that have no clear relationship to economic dard borrowing terms from the Bank or from the Interna- growth. Among the areas related to governance in which tional Development Association (IDA), which grants the Bank could offer assistance at the request of a member long-term concessionary loans to low-income countries. state, I argued, is civil service reform. In that paper I * The Bank provides balance of payments support to stated that: countries implementing agreed on reforms through struc- tural adjustment loans, sectoral adjustment loans, or loans The Bank has long been involved in institution to support civil service reform. The terms of adjustment building and human resource development and loans permit a country, once a loan agreement becomes is increasingly called upon to enhance its activi- effective, to withdraw part of the loan proceeds after ties in these areas. Concern for an efficient and presenting a certificate indicating that its imports within a honest civil service represents another aspect of given period exceed the amount of that portion of the this involvement. It is axiomatic that the effec- loan. A second (and in some cases a third) tranche of the tive management of a country's economy de, loan may be withdrawn by the borrower once it satisfies pends not only on the policies it follows but also the Bank that it has completed the reform measures agreed on the institutions which translate these policies upon and after it has presented another certificate con- into action. Support of civil service reform may cerning its imports. In such cases the loan is considered to in certain cases take the form of assisting a coun- finance the balance of payments (imports) and the coun- try in reorganizing its administrative structures try is free to use the amount received from the Bank for or studying its decisionmaking processes. It may that purpose, as well as the counterpart local currency even go into the restructuring of its entire civil generated as a result. service with a view to introducing efficiency or * The Bank provides loans for specific projects or sectors eliminating or reducing corruption in a situation which include an amount earmarked for financing the where the deterioration of civil administration reform of an aspect of the civil service related to the has reached unusual dimensions. The direct rel- project or sector concerned. In this case, administrative evance of a sound and efficient civil service to reform would be one of the project components financed the success of state enterprises as well as private by the loan. 92 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN World Bank loans do not specifically finance sever- gaining political acceptance for reform, but they have ance payments to retrenched govemment employees. The had only limited economic success. Thus, any new pro- Bank's purpose is to finance investments for productive grams of this kind need to be planned and implemented purposes, and, as a general rule, Bank financing is sup- cautiously. posed to be used to meet the foreign exchange require- * Such provisional solutions as external borrowing to top ments of projects. Under the Bank's adjustment loans, up the salaries of employees in a project or institution or however, the foreign exchange received by the borrowing earmarking foreign aid to increase staff salaries do not government enables it to generate counterpart local funds provide a sustainable solution to the problem of attracting that could be used for such purposes as financing sever- and retaining qualified staff. On the contrary, they may ance packages. The Bank presumes in such cases that delay the necessary long-term adjustments to policies, loan proceeds are spent on imported inputs and does not systems, and work programs for the civil service. question the government about the subsequent use of * Combining technical assistance and structural adjust- loan proceeds. ment lending is useful in financing administrative re- form. Technical assistance has a longer time frame, and Conclusions of World Bank studies structural adjustment loans, because they are larger and are usually linked to reforms in other areas, may have a World Bank studies of civil service reform programs in a gleater impact on the readiness of governments to imple- number of countries have arrived at some common con- ment reform. clusions about what contributes to the success of such - Despite the modest results of administrative reform programs (Nunberg 1990). The most important of these operations to date, it is useful for the World Bank to conclusions are as follows: continue to finance them in view of the importance of an * Partial reforms to reduce the size of the civil service and efficient civil administration to the success of develop- its costs have not been very successful. And it is futile to ment programs and socioeconomic reforms. increase salaries to widen the gap between the lowest and the highest salaries (salary decompression) in the absence Conclusion of longer-term reforms. * Administrative reform is essentially political, and its success hinges on the capacity and willingness of a This chapter emphasized the close relationship between country's political leadership to adopt the necessary mea- economic and administrative reform. And it argued that sures. Experience has proven that the political concerns developing countries can draw on the reform experiences raised by administrative reform are often exaggerated. of both industrial and developing countries in formulating Reform measures, including the substantial reduction of and implementing their own reform programs. surplus employment, have been adopted in a number of The chapter also argued that there is almost no vi- countries without great political distress, thanks to the able alternative to comprehensive reforms, which include absorptive capacity of private sector labor markets and formulating appropriate policies, establishing capable in- governments' sound practice of designing the programs in stitutions, and then tailoring programs and projects as consultation with employee representatives. In develop- may be required for implementation. The triad of policies, ing countries that have a high ratio of government em- institutions, and programs should be reflected in the legal ployment to total employment and a high unemployment and regulatory framework of each country in the form of rate, however, the social costs of implementing civil ser- simple, readily applicable rules and procedures. vice reform programs may be higher. A government undertaking administrative reform * Measures to reduce employment by methods less dras- needs first to establish an overall strategic vision of the role tic than involuntary retrenchment, such as voluntary exit of the civil service, and then, based on this vision, deter- mechanisms and early retirement schemes, have not led mine the most appropriate structures and functions for to substantial reductions in the number of employees and ministries. The government can then implement the re- thus may not be an effective alternative. forms in accordance with a comprehensive plan for radical * It is critical that the reform process gain a high degree transformation or incremental change, depending on its of credibility. Reform measures should be serious and implementation capacity. The plan should be executed evenhanded, not only to ensure the success of the reform based on reliable data and under the oversight of a central but to ensure public acceptance and sustainability. committee, with participation by civil service employees. * Programs to retrain and relocate redundant employees The chapter briefly reviewed the steps that lead to and to finance small businesses for them may be useful in successful administrative reform and the procedures that ADMINISTRATIVE REFORM IN DEVELOPING COUNTRIES: SOME GENERAL OBSERVATIONS 93 should be pursued in a specific sequence. It indicated 10. In many developing countries private enterprise has where within this framework the involuntary retrench- been regarded for two or three decades with a great deal of ment of large numbers of employees can take place, and suspicion. As a consequence, government employees have often the safeguards needed for such an operation. created restrictions and complexities for private investors and Finally, the chapter briefly described how the World applied restrictions with great vigor. Bank could assist developing countries with administra- 11. See Nunberg 1992, which relied on case studies of bank could assist developing countries with administra- public administration reforms in eleven OECD and newly indus- tive reform, especially as the Bank gains more experience trializing countries and situated these reforms along a continuum in this field-a field that it has only recently begun to see of change between two poles. Australia, New Zealand, Sweden, as a critical element of comprehensive and sustainable and rhe United Kingdom adopted the model of systemic, radical development. transformation while the Asian countries, Germany, and the United States took an incrementalist approach. Notes 12. Reform management, particularly as it moves away from cost-cutting to long-term strategies, needs the support of the political leadership, the management level of the civil ser- This chapter is based on an earlier paper by the author written in vice, and, for long-term sustainability, of the rank and file of the Arabic and presented to the First Arab Ministerial Meeting on civil service (de Merode 1991). Administrative Reform and Development, held in Cairo, Egypt, 13. See Dia 1992 for a discussion of the three elements on December 6-7, 1992. necessary for ownership-that the commitment of the political 1. For a discussion of the rationale for the Bank's adjust- leadership be broad-based and active, that the technical struc- ment lending programs and the elements of such programs, see ture be committed and instrumental in the reform process, and World Bank 1988 and 1990. that the program be easily quantifiable in order to be accepted 2. The World Bank's interest in the development of the by the local population. private sector led to the establishment in early 1988 of the 14. In particular, there is a need for appropriate technol- Private Sector Development Review Group. The report of the ogy; overly sophisticated systems may lead to delays in imple- Review Group surveyed the Bank's work in the field and pro- mentarion because of a lack of local institutional capacity. Great- posed a conceptual framework and recommendations for ex- est success has been found when technology is designed by panding the Bank's work. These recommendations led to the foreign or local consultants working together with the con- development of the Private Sector Development Action Pro- cemed personnel (see Nunberg 1990). gram. For a more detailed discussion of the Bank's efforts in this 15. Nunberg (1992) distinguishes two models for the or- area, see Shihata 1991. ganization of personnel policy and management. First, the cen- 3. For a discussion of the response of private and public tralized system coordinates the three functions of policy, over- investment to external shocks, macroeconomic adjustment, and sight, and financial control and often places them near the top structural reform, see Serven and Solimano forthcoming. of the hierarchy of the line ministry. This model shows a high 4. The link between an effective government bureaucracy degree of professional standardization and high political visibil- and a dynamic private sector has been noted in much of the litera- ity. Second, the decentralized model allows decisionmaking au- ture on the growth of East Asian economies. See, for example, tonomy for line managers within broad policy guidelines set by Sweden 1992, Porter 1990, Wade 1990, and Johnson 1982. the center. This model depends on sophisticated systems of 5. For a description of the process in the context of Afri- financial management in order to keep central control over can countries, see Lindauer 1988. running costs. 6. In Egypt, for example, there is a large number of officials 16. There are two principal types of recruitment systems. who are not ministers but who are nevertheless graded as minis- First, the closed, highly selective, hierarchical system, referred to ters and unofficially addressed as "Minister" and an even larger as the "mandarin system," can be found in a number of industrial number of officials graded and addressed as "Undersecretary" countries, such as France, Germany, and Japan. This system is whose functions have nothing to do with their titles. based on the principle of training outstanding students in special- 7. In Africa real wages have declined even after adjust- ized higher institutes (L'Ecole Nationale d'Administration in ment for nonfinancial fringe benefits. Se Lindauer 1988. France, for example), then appointing them to fill sensitive posi- 8. Wage compression is measured as the ratio of the basic tions, such as posts in the technical bureaus of ministries. These starting salaries of the highest skill categories to the basic start- cadres benefit from continuous training and can be seconded to ing salaries of the lowest skill categories. In Ghana the ratio was work in other departments or even in private corporations or as low as 2.5 to I in 1984, before the start of the economic international organizations for specific periods to acquire addi- recovery program. See Nunberg 1990 and Lindauer 1988. tional skills. They are then appointed to senior and sensitive posts 9. See Dia 1992 for a discussion of the need in certain once it is established that they are qualified for such posts. The African countries for the creation of a responsive and develop- World Bank operates a similar system called the Young Profes- ment-oriented civil service, particularly in the senior adminis- sionals Program. The success of this system is premised on the trative corps. creation of an elite cadre of civil servants whose positions afford 94 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN them high social status. Second, the more flexible lateral entry stricted to facilitating the access of entrepreneurial workers to system recruits directly from the marketplace, using competitive credit-for example, by subsidizing banks' transaction costs. In salaries to attract highly skilled applicants. This system, used in any event, credit schemes should be conducted in accordance Australia, New Zealand, and the United States, is intended to with sound banking practices; loans should be made only for produceabetterfitbetweenthepositionandtheemployee'sskills well-thought-out projects and to individuals whose success can and requires greater devolution of recruitment responsibility to be expected with a reasonable degree of confidence. line management (see Nunberg 1992). 24. Between 1981 andjuly 1991 thirty World Bank projects 17. The Council of State (Conseil d'Etat) in Egypt uses a included civil service management components. Eight of these comparable system in which appointment is limited to the top projects were in six Latin American countries, and nineteen graduates from the various Faculties of Law. Appointees are projects were in fifteen African countries (Nunberg 1992). required to have two higher diplomas before they are entitled to 25. The IDF is a US$25 million grant facility created by a a first promotion. The Council then assigns them on a rotating Board decision of June 16, 1992. During the first half of fiscal basis to the service of various departments and makes second 1993, the Bankwide Screening Committee set up to screen grant appointment opportunities available to them. It also allows sub- requests approved twenty-nine request for a total of US$8.2 sequent recruitment of others who have the qualifications re- million. Europe and Central Asia received 32.8 percent of the quired for technical posts. This approach may be marred in grant funding, followed by Africa (17 percent), South Asia (16.8 practice by the little attention paid to ongoing training and percent), Latin America and the Caribbean (15.4 percent), East external fellowships and by the linking of promotion almost Asia and the Pacific (13.2 percent), and the Middle East and exclusively to seniority in the job. North Africa (4.9 percent). Requests for IDF grants must dem- 18. The survey should be undertaken in the context of a onstrate that the activities to be financed by the grant cover long-term strategy to implement or upgrade a computerized upstream institutional development and capacity building. Ap- monitoring system. The results of such a survey would be eroded proved requests have been mainly in the categories of public quickly if they were not combined with such a system, given the sector reform and economic management. rapid entry and exit of employees (see Nunberg 1990). 19. Many developing countries that have frozen automatic References graduate recruitment have maintained their commitment to students already in training (see Nunberg 1990). 20. But the evidence in Svejnar and Terrell 1991 shows de Merode, Louis. 1991. "Civil Service Pay and Employment in that redundancy schemes have very high rates of return because Africa: Selected Implementation Experiences." World of the nonrecurrent nature of compensation payments as op- Bank, Institutional Development and Management Divi- posed to the recurrent nature of labor savings. sion, Washington, D.C. 21. For a discussion of the issues involved in the design of Dia, Mamadou. 1992. "Indigenous Management Practices: Les- redundancy pay programs and the optimal sequencing of the sons for Africa's Management in the 90s." Concept Paper. elements of these programs, see Diwan forthcoming. World Bank, Washington, D.C. 22. Government retraining programs for displaced workers Diwan, Ishac. Forthcoming. Public Sector Retrenchment and Effi- have shown uneven success. In general, existing training institu- cient Severance Pay Schemes. Washington, D.C.: World tions are not equipped to provide training for informal sector Bank. employment, and in most cases the administrative costs have ESCWA (Economic and Social Commission for West Asia). outweighed the minimal benefits gained. In Ghana, for example, Population and Labor Force Statistics. there was limited demand for the retraining programs offered by Junquera, Juan. 1986. EEC: The Public Service of the Twelve. the Programme of Actions to Mitigate the Social Cost of Adjust- Madrid: National Institute for Public Administration. ment (Nunberg 1990). The retraining schemes established in Lindauer, David L. 1988. "Government Wage Policy in Africa: Mexico seem to have been more successful, at least in helping Some Findings and Policy Issues." World Bank Research some groups of displaced workers find new employment Observer 3(1). (Revenga, Riboud, and Tan 1992). Revenga, Riboud, and Tan Nunberg, Barbara N. 1990. "Civil Service Reform and the World (1992) argue that the cost-effectiveness of retraining programs is Bank." Policy Research Working Paper 422. World Bank, linked to the length of the program and the overall state of the Washington, D.C. labor market. The success of programs is also related to strong - 1992. "Managing the Civil Service: What LDCs Can monitoring and evaluation systems. Learn from Developed Country Reforms." Policy Research 23. Credit schemes to enable displaced workers to start up Working Paper 945. World Bank, Washington, D.C. small businesses have not been very successful in practice Pissarides, Christopher. 1992. "Labor Markets in the Middle (Nunberg 1990). The schemes have rended to accumulate debt East and North Africa." and to upset the domestic credit market. Compensation pay- Porter, Michael E. 1990. The Competitive Advantage of Nations. ments may be generally sufficient as seed capital, but there is no Revenga, Ana, Michelle Riboud, and Hong Tan. 1992. "Mexico's guarantee that they will be used for that purpose. If domestic Labor Retraining Program: An Evaluation of Its Impact on credit markets are undeveloped, credit schemes could be re- Employment and Wages." World Bank, Washington, D.C. ADMINISTRATIVE REFORM IN DEVELOPING COUNTRIES. SOME GENERAL OBSERVATIONS 95 Serven, Luis, and Andres Solimano. Forthcoming. From Adjust- World Bank. 1988. Adjustment Lending: An Evaluation of Ten mrent to Sustainable Growth: The Role of Capital Formation. Years of Experience. Policy and Research Series 1. Washing- Shihata, Ibrahim F. 1. 1991. "The World Bank and Private Sec- ton, D.C. tor Development." In The World Bank in a Changing World. . 1990. Adjustment Lending Policies for Sustainable Washington, D.C.: World Bank. Growth. Policy and Research Series 14. Washington, D.C. Svejnar, Jan, and Katherine Terrell. 1991, "Reducing Labor . 1992a. Adjustnent Lending and Mobilization of Private Redundancy in State-Owned Enterprises." Policy Research and Public Resources for Growth. Policy and Research Series Working Paper 792. World Bank, Washington, D.C. 22. Washington, D.C. Sweden, Ministry for Foreign Affairs, Department for Intema- . 1992b. World Development Report 1992. New York: tional Development Cooperation. 1992. In Support of Asian Oxford University Press. Development. . 1993. "Public Sector Human Resource Manage- Venezuela, Presidential Commission for the Reform of the State. ment in Latin America and the Caribbean." Regional 1989. El Taniano del Estado en Venezuela. Study. Latin America and the Caribbean Technical Dc- Wade, Robert. 1990. Economic Theory and the Role of Govern- partment, Public Sector Management Division. Washing- ment in East Asian Industrialization. ton, D.C. 96 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Public Sector Retrenchment and Severance Pay: Nine Propositions Ishac Diwan Public sector restructuring operations sometimes cannot gated by the indexation and randomization of the sever- proceed without providing compensation to workers who ance offer. In extreme cases mandatory (and purely ran- stand to lose their jobs in the process. But like all public dom) programs become optimal. policies that require targeting, labor compensation * Free riding. Voluntary severance packages are prone to schemes face agency costs under conditions of incomplete coordination problems. The workers remaining in the information about workers'characteristics. This raises two restructured sectors may benefit more than society at issues: How can severance schemes be devised to mini- large from the operation, in which case workers exiting mize those agency costs? And how can reform programs under voluntary schemes would need to be compensated be devised that minimize the need for redistribution? The for giving up the extra gains. This leads to wasteful (or discussion in this chapter focuses on the first issue, but above-target) compensation, a problem that can be re- also has important bearings on the second. solved by reducing the wages of the remaining workers. For a severance package to compensate for the losses The issue of compensation gives rise to interesting of exiting workers, its value must be set proportional to considerations about the sequence and timing of wage the "rent" the workers receive by holding onto their pub- cuts and labor shedding that provide a rationale, based lic sector jobs. Because different workers are character- solely on distributional arguments, for implementing the ized by different rents, a uniform severance offer that does changes gradually. The last part of the chapter discusses not hurt the workers with high rents would allow the how gradualism can lead to improved targeting, for two workers with low rents to increase their payoffs. This reasons. First, a policy of attrition first generates volun- overpayment could be eliminated, and agency costs re- tary exit, thus allowing better targeting of compensation. duced, if severance offers could be tailored to each worker, And second, a rise in unemployment requires larger com- to compensate each according to his losses. This can be pensation because firing becomes more costly when it only partially achieved by proper indexation because, in takes place at a speed greater than that at which the labor general, workers' types cannot be observed with precision. market can absorb new entrants. But a judiciously designed severance mechanism and se- This chapter is organized around nine propositions. quence of wage adjustments and layoffs can help reduce It begins by describing the setup of the analysis. Through- agency costs further. out the chapter, the emerging principles are illustrated by The chapter's main findings rest on three types of drawing on recent experience with severance pay con- imperfections: tracts in industrial, developing, and reforming countries. * Information rents. To the extent that they cannot dis- criminate sufficiently, severance payments will overcom- Setu pensate some exiters. Exit schemes that offer workers a p choice among several exit options-as opposed to com- pulsory schemes-are then desirable because they lead to Let w denote the current wage and v the marginal produc- self-selection, which reduces information rents. tivity of labor in the public sector, and m the value of the * Adverse selection. Voluntary schemes can suffer from altemative market wage. In evaluating w and m, it is impor- adverse selection problems when they lead to the exit of tant to consider the total value of the current compensa- the most productive workers. These problems can be miti- tion, including explicit benefits, such as pensions, health PUBLIC SECTOR RETRENCHMENT AND SEVERANCE PAY NINE PROPOSITIONS 97 insurance, housing, and the provision of otherwise rationed The optimal response to negative shocks affecting goods, as well as implicit benefits, such as status, ease of productivity in the public sector generally entails both a shirking, access to profitable business opportunities, and reduction in wage schedules and layoffs. Here I examine job security. Some of these benefits are difficult to value. layoffs, assuming that wages have already been adjusted. I From the worker's perspective, the desirability of pub- assume for simplicity that the public sector's objective is lic sector employment depends on how compensation in to minimize total fiscal losses under the constraint that no the public sector, w, weighted by the perceived probabil- single worker can be hurt. The qualitative results are ity of default on job security, I - P, compares with com- more general, however. They are derived formally in a pensation in the private sector corrected for costs related companion paper (Diwan 1993) under more general as- to the unemployment spells associated with the unpro- sumptions about the socially acceptable level of expro- tected labor market (except in the section on free riding, priation and the objective of the public sector. P is set to zero in this analysis). The rent, R, that is created The loss involved in keeping a worker employed in by holding on to a public sector job is then given by: the public sector is denoted by L = w - v. An interesting (10.1) R = (I- P) (w - m) case for our purposes arises when L > 0-that is, when the marginal productivity of labor is less than the public The value of the severance package, S, that is needed to sector wage (v < w). In such circumstances layoffs with ensure that the income of a laid-off worker will not fall is compensation may be desirable if they are not too costly- given by: that is, as long as S < L. (10.2) SR Optimal level of exit in mandatory It is useful to express the net market wage, m, as a linear combination of the market wage, w, income received programs when unemployed, w., with w. < w., and the weights given by the probability of being employed at any moment in time Proposition 1. With perfect targeting and no un- when working in the unprotected labor market. Thus: employment, the golden rule is to dismiss all (10.3) mn = (I - d)wm + dw. workers who would be more productive in the (10.3) m = (1 - d)w,,, + dw~ private sector. Under imperfect targeting, the Under which conditions can the public sector workers' optimal level of exit is lower; it decreases with rents, R, be strictly positive? There are three types of the size of the overpayment (R - S) and the possibilities: extent of unemployment. * Public sector wages will exceed market wages when labor unions are more powerful in the public sector than Perfect targeting in the private sector. * There may be good reasons for the public sector to set In the extreme case of perfect information S can be set efficiency wages-that is, wages that are optimally above equal to R. In this case L < S as long as v < m. This implies market-clearing wages. Reasons for doing so include to that firing is profitable until the marginal productivity of provide incentives for greater effort; to provide workers in labor in the public sector and that in the private sector are high-risk locations an implicit insurance contract; and to equalized, by laying off workers who are more productive in reduce labor turnover and encourage workers to accumu- the private sector and retaining those who are more pro- late firm-specific human capital by guaranteeing long-term ductive in the public sector. In the extreme case of perfect employment with an increasing wage schedule over time. targeting the decision on whether to lay off workers is * Finally, w may be more than m (but not necessarily w.) unaffected by the value of the current wage, w, because w is because of unemployment that prevents exiting workers paid out anyway, whether directly, through wages, or indi- from finding a new job immediately. rectly, through severance pay S. The most attractive layoffs The existence of positive rents for some workers does arise in the activities that employ workers who would be not necessarily imply that wages are too high throughout more efficient in alternative employment, and not neces- the public sector. Instead, the public sector wage schedule sarily in the activities that experience the largest losses. is often compressed after a negative shock (on the optimality of this policy, see proposition 8). In these cir- Imperfect targeting cumstances some public sector workers (those with a nega- tive R) may find better altematives in the private sector Generally, different workers will have different rents, R, and exit voluntarily before retrenchment begins. because they have different characteristics. With hetero- 98 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN geneous workers, a uniform compensation package S will tory retirement (or "years of denied service," denoted by be fiscally costly because it must be set at a level that n) and the worker's discount factor (denoted by r). compensates the workers with the largest rents. Such a To reduce fiscal costs without hurting any exiting package will overcompensate most laid-off workers. worker, S needs to be indexed to the differences among Even with more sophisticated targeting methods, com- workers so that each can be compensated according to his plete discrimination is unlikely to be feasible, and S > R losses. This can easily be achieved for differences in w and will hold for some workers. Reforms are then con- in n. Severance packages almost always control for w by strained by fiscal considerations: the fiscal costs of offer- expressing severance pay as a multiple of current monthly ing compensation to all workers who are more produc- wages. To control for tn, however, S will have to be for- tive in the private sector would be too high. The higher ward-looking and proportional to the present value of the the overpayment, S - R, the more restraint in firing rents that would accrue to the worker if he remained in pays. This may well explain why most reorganization the firm for n periods.' programs attempt to relocate redundant workers to Many severance packages offer compensation based other occupations before considering severance pay, on years of service (or on both years of service and years even if this requires the provision of relocation expenses of denied service, as in the Bulumulla package).2 There and retraining. are several possible explanations for this. First, legally With imperfect targeting, the existence of unemploy- mandated compensation in labor contracts may be the ment at the outset of reform decreases the desirability of constraining factor. Second, more senior workers may be retrenchment. In the presence of high unemployment m more senior claim-holders in the firm, either because of is lower because it takes a longer search period, d, for laid- explicit last-in, first-out rules in employment contracts, off workers to find a new job. The public sector would or because of insider-outsider union behavior (when this have to compensate exiting workers for the high search is the case, I - P in equation 1 would be increasing with costs so that they are not hurt. seniority, implying that R also increases with seniority). The desirable size of severance pay generally will Third, years of service may be used as a proxy for age, differ from the compensation mandated under existing but severance packages often control for both age and labor contracts. Indeed, most severance packages offered years of service. in large reorganizations have been larger than the legally Other sources of heterogeneity are not as easy to deal mandated compensation pay (see, for example, Galenson with. For differences in d and in m, indexation is possible 1989 and Svejnar and Terrell 1991). The mandated, or ex because these variables can be observed in real time (only ante, severance pay schemes sometimes attached to labor when unemployment compensation schemes do not exist contracts are usually advocated to reduce labor turnover do severance contracts need to compensate exiting work- and to create incentives for the accumulation of firm- ers for the job search period). Perfect indexation to these specific human capital (see, for example, Lazear 1990). variables would lead to suboptimal search and work effort, however. Unemployment compensation programs reduce Indexation the incentives for displaced workers to find a new job quickly. These incentive effects can be mitigated when unemployment compensation decreases over time (for a Proposition 2. In the presence of heterogeneous survey of optimal unemployment assistance programs in workers the indexation of S to the differences developing countries, see Hamermesh 1992). Severance among workers allows the compensation of each payments can also be linked directly to the wage differen- worker according to his losses. This reduces the tial (w - m) once a new job has been found. But this fiscal cost of firing, and thus more firing becomes would create incentives to find a low-pay, low-effort job. desirable. Particularly useful is to index S to the An optimal solution, then, is to index only part of the public sector wage, job security, expected time severance pay to this differential, with the remainder fixed, needed to find a new job and size of the new or dependent on other variables.3 wage, gender of the exiting worker, and years of Further targeting gains can be made by indexing S to past service. observable "tags" that are correlated with workers' unobservable characteristics i. Four potential tags are oc- Different workers are characterized by different rents, R, cupation, location, age, and gender. The effects of the because they have different characteristics i = (w, d, P, first two tags are conceptually obvious, but the relations w., w.). When time is factored in, two additional vari- between the cost of exit and age and gender can be more ables matter: the worker's remaining years until manda- complex. Older workers usually receive more compensa- PUBLIC SECTOR RETRENCHMENT AND SEVERANCE PAY NINE PROPOSITIONS 99 tion, perhaps because they are likely to suffer the pain of not (R refers to information rents and S is netted out of reform without reaping much benefit (that is, if w is "indexable" characteristics). This allows a better match expected to increase over time, older workers will tend to between R and S, and S can be lower than in compulsory be characterized by a lower m). Older workers also tend to programs, yet achieve as many layoffs. have larger discount factors, r, and may be more averse to With heterogeneous workers, a voluntary severance risk. Finally, severance schemes may simply aim at prompt- offer with a value of S would generally elicit only partial ing a disproportionate number of older workers to exit (as exit. A worker would be willing to give up his current in early retirement programs), either because these work- wage and face the threat of unemployment when S is ers are unlikely to join the ranks of the unemployed or larger than his own rents R. The number of workers who because they generate larger losses during adjustment, will elect to exit in response to a uniform offer depends on perhaps because they are perceived to be less flexible. the distribution of R among the work force. To see this, Indexing severance payments to gender could also be rank all workers by ascending R. Workers who choose to useful in some circumstances, but this strategy does not exit given a uniform severance pay S are those with R < S. seem to have been used. The net effect of gender on rents The last worker to leave voluntarily will be characterized is unclear. To the extent that the private sector discrimi- by S = R, and his wealth will not increase beyond its nates against women more than the public sector does, it initial level. Workers on both sides of the distributions- will be necessary to compensate them more than men in exiting and remaining workers-will be left with some public sector divestitures. But liquidity-constrained young information rent (S - R), and the workers with larger R women may find that the severance payment is sufficient will choose to remain. The higher the value of S, the more to start a family, which may be why they first entered the volunteers will come forward. All workers will volunteer labor market. (This is reported to have happened during when S is set equal to the R of the worker with the highest the recent IBM retrenchment in the United States; see rents. Volunteers would tend to have small n and d, and Peach 1992). large r, P, w., and w. In sum, while indexation can help in distinguishing Voluntariness is not synonymous with a lack of ex- among workers with different rents, it is unlikely to distin- propriation. Rather, the advantage of offering workers a guish among them completely. As a result, compensation free choice from a restricted set of options (in the analysis schemes will be more costly than strictly necessary: to above, exiting with S, or remaining in the public sector at avoid unduly hurting workers with high rents means im- the new wages) derives from the information generated by proving the payoff for workers with low rents. These infor- such a scheme. Thus, rather than a guarantee of no ex- mation rents stem from the inability of the public sector to propriation, voluntariness should be seen as a means to discriminate given publicly available information; such in- spread the burden of reform as fairly as possible in the formation rents are likely to arise during major economic sectors being restructured (or in the least politically costly reforms, when heterogeneity can be significant. In the pres- way). The extent of expropriation is determined else- ence of positive information rents, welfare gains can be where, during the negotiation leading to the setting of the generated if additional information allowing the public post-shock wage and compensation schedules (it is also sector to discriminate more finely is made available. possible to index the extent of expropriation according to observable characteristics). Voluntary exit programs Many recent severance schemes in both industrial and developing countries have been voluntary. In some countries, such as Sri Lanka, state policy requires that Proposition 3. Voluntary programs can end up severance programs be voluntary. In other countries pro- being cheaper, because of their self-selection grams vary depending on the sector. In a study of public properties. sector retrenchment in the transport sector, Svejnar and Terrell (1992) report that five of the six countries re- Self-selection mechanisms can help reduce the costs of viewed had implemented voluntary schemes (Brazil, retrenchment under cc-iditions of imperfect information Chile, Ghana, Sri Lanka, and Yugoslavia, but not about individual workers' rents. Define a voluntary exit Mauritius). And two of those five countries (Chile and scheme with value S as the severance pay offered to Ghana), in addition to the voluntary programs to reduce volunteer exiters. The intuition for the desirability of redundancy in the railways, used mandatory programs in voluntary schemes relies on self-selection. Faced with an the ports. In Europe most restructuring programs have offer of value S, workers with sufficiently small informa- used voluntary severance schemes offering severance pay tion rents, R, will choose it and those with a large R will that exceeded the mandatory compensation plans).' In 100 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN the United States large corporations usually lay off work- conditions. The first is that the capital market is not ers under voluntary programs, presumably to avoid legal efficient, because if it is, the option with the larger problems related to discrimination.5 present value will dominate the other. The second is that workers with smaller rents are known to value one A menu of options of the options more. This may be the case for the work- A menu OI OptlOnlS ers with greater entrepreneurial skills because they are likely both to have smaller rents and to value liquidity Proposition 4. A menu of options can help achieve more than workers without an entrepreneurial bent (per- finer discrimination. Useful options are exiting, haps because positive net worth is a precondition for remaining at a lower wage, exiting with a subsidy access to an inefficient capital market). Entrepreneurs to the new employer, receiving cash or an annu- with these characteristics would prefer a cash severance ity, and exiting with a retraining option. payment with a small present value to an annuity option with a greater present value (taking default risk into Information rents are likely to remain with the offer of consideration).8 But cash offers may also be preferred by two options-exiting with compensation S or remaining workers who are liquidity-constrained for other reasons, employed at w-which would only halve the distribu- such as poverty. When investment leads to aggregate tion of rents. As the number of options offered in- externalities, it is useful to guard against overuse of sev- creases, however, the public sector can achieve a finer erance pay, restricting the cash option to workers with discrimination and, thus, a closer relation between S valuable projects and disbursing cash conditional on an and R. But such gains exist only when (1) the selection actual investment.9 of a menu item by a worker generates additional infor- A third potentially valuable option is the exit-with- mation about its rents R, and (2) the options offered retraining option (in contrast to retraining for relocation cannot be traded in a well-functioning market because within the public sector). But this option is valuable only the one with the greatest market value would simply when the training market is not competitive. Laid-off dominate the others. workers often lose their accumulated human capital. With imperfect compensation, not all the workers Those who seek retraining to increase their productivity who would be more productive in the private sector should in the new environment tend to end up with smaller rents be offered voluntary exit in exchange for a compensation R (because training increases their market wage m). By package. But these workers' shift to the private sector offering two options-SH,1 and S[ and training, with S,, > would clearly be Pareto-improving if it could be achieved SL-the public sector in effect commits itself to training at sufficiently low costs, without affecting the voluntary only those exiters who accept a package with a small exit program, and while respecting the P.C. Often, the severance payment. In doing so, the public sector is able offer of a subsidy to would-be-employers can achieve these to "tag" the workers with good learning abilities (and, three aims simultaneously.6 But to avoid creating moral thus, smaller rents)."0 hazard and preventing workers with higher R from exiting Interpreted in this way, the exit-with-retraining op- voluntarily with compensation, a subsidy scheme must tion is likely to be controversial. It can be argued that if ensure that the subsidized worker would not be able to the state has a monopoly on training services, it should command more than (m + w - v) in the marketplace. An exercise this monopoly independent of retrenchment. Or excellent example of a menu with a subsidy-to-employers it can be argued that the state should not behave as a option is provided by the "mandatory" Spanish govern- monopolist because the social benefits of increased hu- ment-backed severance program of 1985-88 (Lopez- man capital are likely to be higher than the social costs, Claros 1988). The program offered a restricted menu of creating a reason for public subsidies instead. three items: Other options whose inclusion in a severance pack- * Early retirement (chosen by 25 percent) age creates value are not easy to find. As a matter of * A cash severance payment plus unemployment com- policy, offering various benefits such as health insur- pensation for eighteen months (chosen by 40 percent) ance, life insurance, and outplacement services should * A guaranteed 0.8w with free retraining, and subsidies not be encouraged unless it generates useful informa- for firms that hire the worker permanently (chosen by 35 tion that can lead to finer discrimination. The private percent). sector can provide many of these services more effi- A second potentially useful exit option is allowing ciently and, although the public sector may provide oth- workers to decide whether to be paid in a lump sum or ers more efficiently, they need not be bundled with the in annuities.7 The procedure is meaningful under two severance package. PUBLIC SECTOR RETRENCHMENT AND SEVERANCE PAY NINE PROPOSITIONS 101 Retrenchment restraint in loses its best workers. This problem can be resolved in part by proper indexation of the sev. rance package (or voluntary programs the use of vetos) so that it is less attractive (or not offered at all) to the more desirable workers. Adverse selection Proposition 5. Restricting the quantity of exits becomes a less tractable problem in the presence of im- through voluntary severance leads to fiscal gains perfect observability of a worker's public sector produc- because compelling a marginal worker to exit tivity, v. The gravity of the problem depends on the rela- requires an increase in S, which affects the sev- tionship between productivity in the public sector and erance cost for all previously laid-off workers. that in the private sector, and on the resemblance-or lack of resemblance-between the private and public sec- What are the determinants of the optimal size of S in the tor wage schedules. To examine this, allow both w and v context of a voluntary layoff? Under perfect information, to vary according to type of worker and assume that fiscal losses are minimized when setting m = v. But in those variables are observed by the worker but not by the voluntary programs an increase in S leads to additional public sector. The adverse selection problem arises when exits and to an increase in the total cost of severance. As the first workers to exit-those with the smallest rents a result, the optimal strategy entails rationing exits, as in R-are also those who generate the smallest losses in the a typical monopoly case, to take into consideration the public sector. effect of the layoff of marginal workers on the total com- Unwanted "brain drain" will occur when the over- pensation costs. Some remaining workers will still gener- payment offered by the public sector is larger relative to ate losses, but laying them off through voluntary means the private sector wage for low-skill workers than for would lead to higher losses because all the previously laid. high-skill ones and productivity in the public and private off workers would need further compensation. sectors are positively correlated. A simple example illus- This strategy of "exploiting the slope of the demand trates the problem. Assume that the wage schedule in the curve" may not be consistent in some circumstances. In public sector, w, is simply flat, but that wages are perfectly such cases rationing exits is profitable only if the public correlated with productivity in the private sector-that sector can commit to such a policy for the future. This is, that v(i) = m(i) for all i. In this extreme case those who may not be credible because after a limited retrenchment would be the first to choose the severance package would operation is over, the public sector would benefit from be the most productive workers. The gains from the exit offering a second program to lay off the remaining redun- of the first workers will thus tend to be small or even dant workers. The second operation would have to occur negative, reducing the profitability of the operation. These at a higher severance value S2, because the remaining are restrictive circumstances, but they are not implau- workers are characterized by R > S1. But if a second sible. The private sector is generally more likely to index operation is expected to take place at S2, S2 would also compensation to skills, and the public sector is more likely have to be offered in the first round. Otherwise, workers to base pay on seniority. with low R would prefer to wait and exit at S2, rather The adverse selection problem would be small, than at SI, thereby increasing their information rent. Al- however, when productivity in the public sector and though a simple promise not to undertake a second re- that in the private sector are not correlated, either be- trenchment program may not be credible, the limited cause of differences in the skill mixes required or be- availability of external assistance for severance pay and cause of taste differences (public-service-minded people the fixed costs associated with such operations will im- versus profit-oriented people), which imply different pose some restraint. disutility for effort. The labor reallocation under these conditions might even represent a net social gain if "en- Adverse selection ergetic" individuals are relatively more productive in the private than in the public sector. In the extreme case self-selection would benefit the public sector-when pri- Proposition 6. Voluntariness becomes more costly vate sector wages are constant across types while public when adverse selection becomes a problem. In sector wages increase across types. Wages are unlikely to the extreme case, mandatory programs are pref- behave this way over the entire range of types, but may erable. over some subsets of types. When adverse selection is perceived to be an im- A potentially important disadvantage of voluntary exit portant problem, limited corrective action may be profit- programs is adverse selection, in which the public sector able. Vetoing the exit of workers deemed valuable is 102 CIVIL SERVICE REFORM IN LATIN AMERICA AND TIE CARIBBEAN useful, but such a strategy is helpful only to the extent negotiate larger wages after labor redundancy is reduced that the characteristics used to identify such workers are and the fiscal situation brought under control, leading to observable. Similarly, while wage decompression will a similar problem. Pure voluntariness under these condi- help lessen the problem and is generally desirable before tions may hurt all workers because the desirability of making voluntary severance offers, it is useful in address- efficiency-improving policies is eroded. The reasons for ing adverse selection only when it leads to changes in this inefficiency lie in the lack of coordination introduced wage schedules that increase the link between perfor- by complete voluntariness.'2 mance and pay. Is there a way to reduce the scope of this problem? The only mechanism that seems to stand up when Clearly, offering less than S' will not do. No worker will productivity is not precisely observable-and thus when exit if retrenchment is expected to be succeed, while all adverse selection is an intrinsic problem-is randomiza- would if it is expected to fail. So there is no equilibrium tion. Gains over a standard severance offer can generally in this case. The way to reduce the overpayment due to be achieved by designing a severance package with a free riding is to tax those workers who remain, with the high value so as to elicit a response from a large number tax set equal to the gain arising from the enhanced of workers, and then rationing the severance package probability of the firm's survival. To implement this tax through a lottery. By contrast, a non-random strategy it is sufficient to reduce the wages of the remaining will usually be suboptimal because it will lead to too workers (holding everything else constant). That wages many or too few exits. If S is set too high, too many may need to be reduced should not be surprising, at workers will want to exit, requiring new hires in the least for occupational categories with redundant labor. future (because of the concavity of the production func- But the important point is that the gains to the remain- tion). And firing and then rehiring is costly because of ing workers should be taken into consideration during the overpayment to exiters. But if S is set too low, only the negotiations on the overall wage adjustment re- the wrong type of workers will volunteer. Setting S low quired during restructuring. enough so that not all workers are interested in partici- Workers who have been promised a public sector job pating in the lottery amounts to partial randomization, in the future illustrate an extreme example of the free- which is desirable if it leads to the exit of a sufficient rider problem. In some countries all graduates are guaran- number of workers with large L's. The extreme case is teed a government job. But if their numbers exceed the one in which S must be very high to generate a positive job openings, they must queue on a waiting list. It seems response by such workers. Complete randomization then reasonable to expect that the further down a person is on becomes desirable, and the exit scheme loses all its the list, the lower the severance pay he or she is willing to voluntariness. accept to forgo the employment opportunity. In the nota- tion defined above, ic is sufficient to replace w by E(w), Free d the expected lifetime wage of the graduate in line. The rimg longer the expected waiting period, the smaller the ex- pected lifetime wage is. But because the expected waiting Proposition 7. It may be desirable to reduce the period becomes shorter as employed workers retire, the wage of those who remain employed if retrench- "value" of remaining on the list rises and with it the ment improves the value of their jobs. welfare of those in line. Increasing the welfare of those in line may be a desir- Voluntary exit schemes may also suffer from a "free-rider" able social goal. But excessive gains for certain segments problem when the remaining workers are able to internal- of the population may be socially undesirable because ize part of the gains generated by the retrenchment opera- they reduce what is left for distribution to the rest of the tion. For example, public sector firms may go bankrupt economy. In this context the worst case of free riding when they generate large fiscal losses in the absence of occurs when workers further up on the list are retired corrective actions, and become unable to meet their em- through a voluntary scheme, which increases the value of ployment obligation in the future. To the extent that remaining in line. To eliminate the list on a purely volun- reorganization increases the probability of survival (I - tary basis, the severance package must be the same for P), the expected payoff of the non-exiting workers would both redundant workers and workers in line. But this increase. In such circumstances workers will take into would lead to enormous fiscal costs. To reduce the costs account the higher probability of survival (1 - P') and it may be useful to offer less valuable exit options to those would not leave unless a high severance S' = (1 - P') (w - in line than to those already employed (that is, to index S m) > S = (I - P)(w - m) is offered." And unions can to seniority). PUBLIC SECTOR RETRENCHMENT AND SEVERANCE PAY NINE PROPOSITIONS 103 Gradualism or big bang An implication of this is that, with initial wage com- pression, wage adjustments become desirable at the time of retrenchment. The wages of some types of workers, Proposition 8. If downsizing the work force is usually the more highly skilled, may need to be increased required, it may be desirable to go through a to reduce turnover. In addition, if the initial adjustment is process of attrition before offering a severance characterized by a decline in hours spent on the job, it contract. may be optimal to increase the time spent on the job and to increase total wages while simultaneously reducing Often, the initial response to downsizing the work force hourly wages. takes the form of wage compression because of wage rigidi- Finally, by the time severance pay is offered, the ties associated with the need to cut the fiscal deficit. In the public sector would be characterized by extreme over- analysis above, it was assumed that the wage adjustment staffing. So exit programs, when they take place, will tend precedes layoffs. I now argue that this sequence of events is to be large. desirable, and that it is usually beneficial to allow time to pass before beginning layoffs. The reason is that as wages Proposition 9. When the labor market is charac- are reduced (at least in some occupations), the workers terized by congestion effects, slowing retrench- with rents small enough would exit voluntarily if no sever- ment reduces compensation costs. ance pay is offered. But they would not do so if they had a chance to exit with severance pay. When many such volun- Any meaningful analysis of the effect of retrenchment tary quits are expected (because wage reduction needs to be operations on unemployment has to both extend the analy- deep, or many workers have small rents), the optimal solu- sis to a dynamic general equilibrium framework and take tion may be to abstain from offering severance pay until into account the way in which the labor market functions." sufficient voluntary exits have been achieved, even though An interesting hypothesis that has recently received atten- this attrition phase imposes inefficiency costs of its own. Lion is the notion that increased unemployment causes How long should attrition last? Consider more care- congestion effects (or a duration dependence), implying fully a strategy that begins with attrition and then offers a that the probability of leaving the ranks of the unemployed severance package several years later. Workers with the at any moment in time decreases as the unemployment rate smallest rents have an incentive to move to the private rises (for a recent review of this literature, see Meyer 1990). sector even when they expect a severance package in the In this view the layoff of a marginal worker generates nega- future because they will benefit more from the higher tive extemalities for those already unemployed by compli- wages in the private sector. Thus, the waiting period cating their job search. In my notation the congestion hy- needed to generate voluntary exit must be long enough to pothesis means that the expected unemployment spell dur- make exit preferable to waiting for the severance pay for a ing transition is given by an increasing (and convex) func- sufficiently large group of workers, but not so long as to tion d(U), where U is the number of unemployed. The net lead to undue fiscal losses from the temporary employ- wage m(U) is then decreasing in U. ment of redundant workers. The return to some layoff Such a characterization of the labor market lends restraint is likely because the workers who exit voluntarily itself nicely to the definition of a transitory unemploy- under such a sequence of policies are also those who ment equilibrium during reform. It is easier to examine would retain the largest information rents if a severance the case with perfect compensation. We know that in this package was offered immediately. case, the public sector should offer severance S = (w - The discontinuity introduced by layoff restraint in m) U and allow exit until the marginal productivity of the initial adjustment phase has implications for the desir- labor is given by v = m(U). The public sector's layoff able first- and second-phase policies. It can explain the decision, E, is then indirectly affected by U because m emergence of wage structure inefficiencies in the period itself is decreasing in U. From an aggregate perspective, immediately after a negative shock (for a review of the the number of unemployed will be an increasing (concave evidence, see Horton, Kanbur, and Mazumdar 1991, and under our assumptions) function of the number of exiters, Stevenson 1992). For example, initial wage compression E (that is, U(E) is well defined with UE > 0). So, the makes sense under a strategy of layoff restraint, but wage extent of firing is determined by U, and U is determined reduction is limited at the lower end of the wage schedule by the extent of firing. To put it differently, when firing is by a minimum-wage constraint. Similarly, a reduction in fast, it takes laid-off workers longer to find a new job, and average hours worked per worker can be seen as a means the compensation needed increases. As a result, there is a of temporarily preserving job security while cutting costs. tradeoff between the speed and the cost of retrenchment, 104 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN and the public sector should retain redundant workers alternatives outside the public sector (at the new wages) longer if they must be compensated for long search peri- exit voluntarily. If necessary, the wage structure should be ods. This is particularly true when job switching is an allowed to become "compressed," even when this leads to inefficient process, when market wages w. are low (both temporary inefficiencies. After a period long enough to conditions arise when the supply response lags), and when achieve sufficient attrition, the second phase can start- the compensation system in the public sector is inefficient simultaneous adjustment of the wage schedule and layoff and leads to large information rents. of redundant workers. Wage adjustments should aim at In this framework the process of job switching will be increasing the compensation of scarce types of staff to- endogenously spread over time. After the initial burst of ward its "efficient" level (some hiring may also be needed firing that raises unemployment to U*, the economy will in staff categories that have been decimated). fire at the speed at which the labor market absorbs new At the same time a menu of severance benefit options entrants (which is itself dependent on U*). The size of from which workers can voluntarily choose should be of- the initial burst of firing depends on both U* and unem- fered (but workers should be retrained and redeployed, to ployment at the outset of reform, UO. When UO is initially the extent that it is cost-effective, rather than laid off). much lower than U* (as in Eastern Europe), a big bang When the efficiency gains generated by retrenchment are takes place initially. But when unemployment is high at partially captured by the workers who remain employed in the outset (as in the Middle East and North Africa), the the public sector (as occurs with waiting lines), it is also initial burst of firing will be small, or it will be delayed desirable to continue to reduce the public sector wage until unemployment falls sufficiently. schedule. The menu options should include voluntary re- Another set of concerns relates to whether the un- tirement, cash offers, annuities, retraining programs, and employment equilibrium that results is socially optimal. guaranteed wages backed by subsidies to new employers. Although it is true that it takes longer to find a job when The level of compensation for each option should be based U* is higher, in the aggregate, job switching is faster when on years of service, last wage paid, and years of denied layoffs proceed quickly. Thus, arguments that emphasize service (it may also be useful to reserve a role for age, the social costs of unemployment should be carefully con- gender, and the new wage). The formulas for the options sidered. But layoffs clearly reduce the welfare of those should be computed so as to make it desirable for workers to initially unemployed by increasing the congestion effect, exit even when they can expect a lengthy search before especially when the initial level of unemployment is low funding a new job, but not generous enough to improve relative to U*-that is, in the midst of a big bang. appreciably the current welfare of those who choose to exit. What are the policy implications? First, and because It is also useful to make it less desirable for workers in layoffs hurt the unemployed, the use of early retirement some occupations to exit, and to retain a veto power over programs (which minimize the effect of retrenchment on workers' choices. In some circumstances randomization of the labor market) and of severance programs conditional the severance program is desirable, and in extreme cases of on new investments (to create new jobs) may be desir- moral hazard-such as those that arise when there are able. Second, it is important to protect the unemployed long waiting lists for public sector jobs-voluntariness during transition, possibly by providing them with gener- would have to be restricted to workers with a certain level ous unemployment compensation.'4 If unemployment of seniority. The programs should remain open for several compensation schemes cannot be developed for lack of years to generate a sufficient number of exits. fiscal resources or because of institutional weaknesses, real reforms will have to proceed at a slower pace. Notes Conclusion 1. The Bulumulla package is a good example. This uniform package offered recently in Sri Lanka to all public sector employ- This chapter has covered a great deal of groiind. Thus, ees is based partially on Y (but also on seniority) according to the rather than summarizing the arguments that it has devel- formula S = (w end month) x (55-age) x (age/55) x (years of oped, it is more useful here to pull the various pieces service/30). See Fiszbein 1992. together to form a complete picture. 2. For example, the severance program mandated by legis- together tflation in the United Kingdom calls for a payment of half a week The chapter showed that the actions associated with per year of service for workers age eighteen to twenty-one, one restructuring and retrenchment operations should follow week per year of service for workers age twenty-two to forty-one a certain sequence. Inevitable wage cuts and attrition and one and a half weeks per year of service for workers age should come first to ensure that workers who have better forty-two to sixry-four. PUBLIC SECTOR RETRENCHMENT ANO SEVERANCE PAY NINE PROPOSITIONS 105 3. This type of scheme is offered in Czechoslovakia, where 13. A recent paper by Aghion and Blanchard (1993) does w -m is paid out for three months after layoff, 0.8 (w - m) for the this by providing a model of transition based on efficiency wage next three months, and 0.5 (w - m) for another three months, considerations. after which compensation is ended Uackman, Layard, and Scott 14. But if the unemployment compensation is provided to 1992). Another example is the voluntary program offered by the all the unemployed, old and new, S* falls and U* rises unless the British Steel Corporation in 1979 in which the compensation contribution of each firm to the compensation fund is propor- mandated by legislation was increased by 50 percent to bring the tional to the number of workers it lays off. total to a maximum of 0.9 (w - m) for 52 to 130 weeks (depend- ing on age at termination and other factors). See Kassalov 1985. References 4. For example, Galenson (1989) reports that a 1984 sur- vey of 2,000 British establishments found that 824 had reduced their work force the year before, 578 had used natural attrition, Alderman H., S. Canagarajah, and S.D. Younger. 1992. "Conse- 311 had redeployed their workers, and 289 had used early retire- quences of Permanent Lay-Off from the Civil Service: Re- ment, 162 voluntary schemes, and 206 compulsory programs (of sults from a Survey of Retrenched Workers in Ghana." which 102 fired those most recently hired). Large firms with Atiyas I., M. Dutz, and C. Frishtak. 1992. "Fundamental Issues strong unions used voluntary programs, and small firms with and Policy Approaches to Industrial Restructuring." Indus- weak unions used compulsory programs. See also Booth 1987. try and Energy Department Working Paper 56. World Bank, 5. See Lawrence 1988 on downsizing experiences in the Washington, D.C. United States during 1986-87, and the annual survey of the Atkinso, A., and J. Micklewright. 1991. "Unemployment Com- American Management Association. pensation and Labor Market Transitions: A Critical Re- 6. If the subsidy is large enough to guarantee a wage of w, view." Journal of Economic Lterature 29:1679-1727. the PC holds. For the private sector to pay such a wage, it must Boycko, M., A. Shleifer, and R. Vishny. 1993. "Property Rights, receive a subsidy at least equal to w - m. In turn, the maximum Soft Budget Constraints, and Privatization." subsidy that the public sector can provide while still improving Bulow, J., and K. Rogoff. 1991. "Sovereign Buybacks: No Cure its welfare is given by the loss (w - v) generated by those workers for Overhang." Quarterly Journal of Economics (June). if they remain in the public sector. Thus, the operation is desir- Feenstra, R., and T. Lewis. 1991. "Trade Adjustment Assis- able when m > v-that is, when those workers are more produc- tance: Welfare and Incentive Effects of Payments to Dis- tive in the private sector. placed Workers." NBER Working Paper 3071. National 7. A severance scheme offering these two options is the Bureau of Economic Research, Cambridge, Mass. Jamaican Railways restructuring in which the present value of Fiszbein, Ariel. 1992. "Labor Retrenchment and Redundancy the annuity was greater than the cash payment (Galenson 1989). Compensation in State-Owned Enterprises: The Case of 8. More generally, the payment of annuities has the added Sri Lanka." World Bank, Washington, D.C. advantage of controlling for the risk of early death, which is Foster, A., and M. Rosenzweig. Forthcoming. "Information Flows valuable in the absence of a well-functioning insurance market. and Discrimination in Labor Markets in Low-Income Coun- Annuities also allow better monitoring of whether a laid-off tries." World Bank Economic Review. worker is hired again. Galenson, Alice. 1989. "Labor Redundancy in the Transport 9. The Guinea voluntary departure scheme restricted the Sector." Policy Research Working Paper 158. World Bank, cash offer to those who had a project acceptable to a commercial Washington, D.C. bank (Galenson 1989). Gavin, Michael. 1986. "Labor Market Rigidities and Unemploy- 10. This interpretation of the retraining option is consis- ment: The Case of Severance Costs." Board of Governors tent with a program offered in 1979 by the British Steel Corpora- of the Federal Reserve Discussion Paper in International tion in the United Kingdom. In effect, this severance plan offered Finance. a choice between a package with retraining and a package with- Hamermesh, D.S. 1992. "Unemployment Insurance for Devel- out retraining on the following terms: 0.9 (w - m) for 104 or 130 oping Countries." Policy Research Working Paper 897. weeks (depending on age at termination), but for only 52 weeks World Bank, Washington, D.C. for those who take the retraining option (Kassalov 1985). Horton, S., R. Kanbur, and D. Mazumdar. 1991. "Labor Markets 11. That workers are rational enough to entertain such in an Era of Adjustment." Policy Research Working Paper considerations is attested to by the voluntary program in Ghana, 694. World Bank, Washington, D.C. which is based on last wage received. It has been noted that Jackman, R., R. Layard, and A. Scott. 1992. "Unemployment in there has been a rush of volunteers after each pay raise. See Eastern Europe." National Bureau of Economic Research, Alderman, Canagarajah, and Younger 1992. Cambridge, Mass. 12. The inabiliry to internalize gains in the presence of Kassalov, E.M. 1985. "Crisis in the World Steel Industries: asset markets is a well-known phenomenon. Two applications Union-Management Responses in Four Countries." Labor with important policy implications are the curse of the raider and Society 10(3):345-67. during a takeover (Grossman and Hart 1975) and the buyback King, E.M. 1990. "Does Education Pay in the Labor Markets!" boondoggle in the context of market-based external debt reduc- Living Srandard Measurement Studv Working Paper 67. tion (Bulow and Rogoff 1989). World Bank, Washington, D.C. 106 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Lawrence, A.T. 1988. 'Determinants of Work Force Reduction Peach, Sir Leonard. 1992. 'Parting By Mutual Agreement: IBM's Strategies in Declining Organizations." Academy of Man- Transition to Manpower Cuts." Personnel Management agement Review. (March). Lazear, Edward P. 1990. 'Job Security Provisions and Unem- Rosen, S. 1985. 'Implicit Contracts: A Survey." Joumnal of Eco- ployment." Quarter Jouwal of Economics 105(3):699-726. nomic Literature 23:1144-75. Leigh, Duane E. 1992. "Retraining Displaced Workers: What Stevenson, Gail. 1992. "How Public Sector Pay and Employ- Can Developing Countries Learn from OECD Nations?" ment Affect Labor Markets." Policy Research Working Policy Research Working Paper 946. World Bank, Wash- Paper 994. World Bank, Washington, D.C. ington, D.C. Stevenson, Gail, and Arvil Van Adams. 1992. "Youth Unem- Lopez-Claro, A. 1988. "The Search for Efficiency in the Ad- ployment in the Middle East and North Africa: Issues and justment Process: Spain in the 1980s." IMF Occasional Policies." World Bank, Education and Social Policy De- Paper 157. International Monetary Fund, Washington, partment, Washington, D.C. D.C. Svejnar, J., and K. Terrell. 1991. "Reducing Labor Redundancy Meyer, Bruce. 1990. "Unemployment Insurance and Unemploy- in State-Owned Enterprises." Policy Research Working ment Spells." Econometrica 58:757-82. Paper 792. World Bank, Washington, D.C. PUBLIC SECTOR RETRENCHMENT AND SEVERANCE PAY: NINE PROPOSITIONS 107 I PART III Adjusting Staffing Levels and Upgrading Compensation Downsizing the State: The Argentina Experience Pablo Antonio Fontdevila By 1989 Argentina's public sector presented all the symp- To effect the much-needed downsizing of personnel, toms of an oversized and bureaucratic organization, un- adequate and accurate employment information was es- able to generate policies and undermined by a chronic sential. This would provide the basis for creating a per- deficit. In addition, certain economic policies and legisla- sonnel system based on the best utilization of agents' tion had created in the public sector an environment skills, education, and training; developing incentive sys- where corruption-and even looting-took place. tems, both in terms of pay and promotion; and exploring The public service enterprises that had emerged dur- possibilities for utilizing efficiency compensations. It was ing the 1950s were obsolescent, with deficits in some also important to be able to identify personnel capable of cases of millions of dollars a day. And as public services executing reforms in the public administration, and of grew more inefficient, the personnel rolls continued to managing the public service once the main reform mea- swell and the economy continued to deteriorate. sures were taken. During the 1960s and 1970s the state becarne a ve- In the late 1980s two measures were taken to reduce hicle for solving the deepening social crisis, with public personnel levels. First, in 1987 a program of voluntary re- employment used as a means of putting the unemployed tirement was initiated. Nearly 10,000 public administra- back to work. By 1980 employment in Argentina's public tion agents retired under this program. The reduction sector had escalated to 780,000 agents, and would in- could have been greater, but retirement was refused to crease to about 900,000 in the next nine years. In addi- more than 6,000 agents for "service reasons." (Though it tion the number of public sector personnel in the provin- can be easy to do without administrative personnel, the loss cial and municipal states grew, increasing to some 750,000 of specialized personnel jeopardizes the quality of services.) agents in 1983, and to more than I million in 1989. Thus, The second measure was the adoption of a vacancy between 1983 and 1989 public employment countrywide freeze. This measure had a strong impact, particularly in grew by about 400,000 employees. public enterprises, whose work force has not grown since At the same time fiscal income dropped in Argentina the measure was taken. and there was a growing deficit in public sector finances. But these measures were insufficient because they Salaries suffered a similar deterioration, dropping to only left virtually unchanged a landscape marked by financial 3.1 percent of the gross domestic product (GDP) in 1989, crisis. from 5.8 percent of GDP in 1973. Accelerated changes occurred in the hierarchy of the The reform program salary structure, which was compressed dramatically from a ratio of ten to one between the highest and lowest salary classifications in 1960-70, to a ratio of four to one by the The state reform plan initiated by President Menem in- end of the 1980s. cluded as its main objectives: By 1989 a drastic restructuring of personnel and pay * Privatization of all state enterprises policies in Argentina's public sector was unavoidable. The * Decentralization of health and education services to Laws for Administrative Reform (No. 23.696) and Eco- the provinces nomic Emergency (No. 23.697) provided the necessary * Rationalization of personnel and pay structures in the legislation framework to confront the state reform. central administration DOWNSIZING THE STATE: THE ARGENTINA EXPERIENCE l l I * Elimination of superfluous state organizations as well as education and medical assistance personnel, to * Establishment of a policy for the overall strengthening the provincial jurisdictions. of management capability, to facilitate development of a One of the major obstacles to establishing goals for smaller but more efficient and ethical public sector. downsizing in these sectors was the lack of reliable statis- The Menem government supported a macroeconomic tics. For decades the primary indicators of personnel lev- strategy designed to eradicate hyperinflation and to els were line-item figures that did not permit differentia- strengthen public sector participation in the economy. tion between occupied and vacant positions. Nor did they permit reliable estimates of the number of agents em- Public enterprises ployed, because the calculations were done based on av- erage remuneration. This information should improve with In 1989, personnel in the state public enterprise sector the installation of reliable systems for collecting data in numbered 330,000. Downsizing in this sector was to be the provinces. achieved by transferring the enterprises to the private This caveat notwithstanding, it is estimated that sector. It was anticipated that the same number (330,000) 170,000 agents were transferred and consequently dis- of personnel would leave the public sector and be incor- missed from the state public service. But it should be ac- porated over a three-year period into future concession- knowledged that such relocation does not eliminate teach- ary enterprises. ers, doctors, paramedical staff, and administrative The most outstanding examples of downsizing were personnel in schools and hospitals from the overall rolls of in the state steel mill SOMISA, where around 4,000 jobs public agents; they simply fall under provincial jurisdiction. were eliminated (50 percent of the total); in Yacimientos Due to the lack of serious attention to personnel Petroliferos Fiscales, where personnel was reduced from needs, the provincial jurisdictions have yet to determine 35,000 to 11,000 agents; and in Fabricaciones Militares the level of adjustment to be applied in the field of educa- and Ferrocarriles Argentinos, where the downsizing is still tion and to develop a strategy for strengthening and im- in progress. The transfer of personnel to private or con- proving the quality of teaching. cessionary enterprises proved to be a nontraumatic proce- dure that, in general, guaranteed employment (in many Cutbacks in the central administration cases under better labor conditions) to former public sec- tor workers. A third strategy for public sector downsizing involved However, over-employment in some public enter- rationalization of personnel and pay structures in the cen- prises meant that they were not feasible candidates for tral administration, which includes all the executive min- privatization. Thus, voluntary retirement programs and istries as well as certain specialized or technical entities. dismissals were effected in companies with excessive per- The program identified the following successive steps sonnel. Compensation was agreed, based on current law (established by Decrees 435/90, 479/90, 1482/90, 1575/ in Argentina, at a ratio of a month's salary per year of 91, and 2476/91): seniority, plus one or two months for advanced notice. - Vacancy freeze Aside from this general guideline, incentives were offered * New regime of identifying redundancies that increased the indemnification by 20 to 50 percent in * Elimination of organizations order to encourage voluntary participation. The person- * Cutbacks on political posts nel reduction process was financed through the support of * Limits on temporary positions and service appointments international financial assistance programs as well as -Early retirement through state resources. * Voluntary retirement In summary between 1989 and 1992 about 180,000 *Redesign of administrative structures workers left public enterprises. It is estimated that by the * Reduction of work force end of the privatization process another 150,000 workers * New salary scales and administrative career path. will be transferred to the private sector. Dissolution of organizations. Under State Reform Law Decentralization of health and education services No. 23.696 and Economic Emergency Law No. 23.697, the executive dissolved organizations that duplicated the The second key strategy for reducing the number of pub- operations of others or that controlled economic activi- lic workers in state administration was the relocation of ties and deterred market liberalization. The sugar and health and education services to the provinces. This relo- mate (a kind of tea) regulatory organizations were elimi- cation included transfer of infrastructure and resources, nated, as well as the National Institute for Reinsurance, 1 12 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN the National Grains Committee, the National Meat Com- In retrenching this group alone, 20,430 posts were mittee, the National Institute for Equine Activities, and eliminated as of January 1, 1992. Because of the charac- more than a hundred other national and local offices at teristics of the affected personnel the social impact was the upper levels of public administration. insignificant. This is confirmed by the fact that only By law the dissolution of organizations made "avail- ninety-two of those retrenched registered for the training able" some 1,800 employees. The system of availability courses that had been established to incorporate them provides that the public official discontinue his or her into the tax collection organizations. service for six to nine months, after which, if not relo- cated, the official is released from employment and re- Retirements. Early retirement was applied to all public ceives his or her indemnification. In these cases the offi- officials with about two years or less of active service left. cial is prohibited from reentering the public administration This meant a reduction of 16,698 employees. for five years. Voluntary retirements, which totaled 22,962, were carried out in a manner similar to that described for public Cutbacks on political posts. The reduction of political enterprises, with the difference that university-educated posts was designed to set an example. With a view toward professionals were explicitly prohibited from participating. future personnel reductions, the govemment drastically reduced the number of state secretaries and Redesign of administrative structures. All national gov- undersecretaries. The secretariats were reduced from forty- ernment jurisdictions were required to present an organi- seven to ten, the undersecretariats from ninety-seven to zational chart that demonstrated compliance with: fifty-four (thirty-three in the ministries and twenty-one in * Consolidation of all administrative functions in one the executive). With time this measure proved to be national office excessively damaging to the govemment's policymaking - A maximum of three "lower-level" structures, that is, and was revised. The state secretariats increased to forty- national offices per secretariat, offices per national office, nine in 1993 and the undersecretariats to ninety-nine. and so on The executive branch has, however, issued a decree * Elimination of intemational cooperation areas and their banning further increases in the number of political posts. concentration in the respective chancellery's national office The creation of any new secretariat, undersecretariat, or * Consolidation of all areas with job overlap other office in public administration will require the elimi- * Thirty-four percent reduction of posts in the central- nation of a similar office. In the same spirit, slots for ized administration; forty percent in the decentralized; temporary advisers have been limited to four for each and maintenance of a ratio of one to three of support to ministry or state secretary and three for each professional staff. undersecretary. The govemment has also provided that To guarantee compliance with these rules the Execu- board members of decentralized bodies that have no ex- tive Committee for Administration Reform (CECRA) was ecutive tasks revert to ad honorem status. established. It included secretariats for the technical co- lt should be emphasized that there are fewer than ordination of the Ministry of the Economy, the Ministry 550 public officials in political posts in the whole of the of Public Works and Services, the Civil Service, Legal and state public administration-that is, only 0.2 percent of Technical Offices, and the General Secretariat of the the total number of employees. Presidency. The CECRA was to supervise and give tech- nical assistance to the restructuring program and to give Temporary personnel. Nonpermanent personnel was final approval to new structures. also eliminated by decree. This group comprised person- To accomplish this task, the Secretariat of the Civil nel whose temporary, discretionary appointments had lost Service called upon the support of the General Office Or- any justification after the completion of temporary assign- ganization, which is experienced in the design of adminis- ments. It is generally estimated that most temporary pub- trative structures. Furthermore, the civil service secretariat lic officials had their contracts extended for more than a provided a highly qualified team of around eighty officials year beyond the original appointment-and in some cases from the governmental administration corps to support in for more than five years. Also making this group a likely such tasks as public policy management. These officials target for cutbacks was the suspicion that it was composed were drawn from among the ministries and secretariats. of friends, relatives, and sympathizers of those in power- Besides improving organization, the reform of admin- a kind of political favoritism-and that most did not fulfill istrative structures also produced a reduction of 3,600 the requirements of their temporary employment because positions because of vacancies that were financed but not they had other jobs. occupied. It also eliminated about 23,000 unfinanced va- DOWNSIZING THE STATE THE ARGENTINA EXPERIENCE 13 cancies, which had accumulated through long-term freezes puter center-all dictated the need to change over the on filling vacancies and across-the-board, required reduc- public administration jobs register to a system that would tions in the work force. allow the transfer of information on magnetic tapes and The administrative reform implemented in the cen- accessibility from any organization. tral and decentralized administration generated a net re- Thus, a system of data collection for the budget has duction of about 86,000 positions; to this figure must be been created. It compiles all data for administrative person- added the roughly 210,000 personnel transferred with the nel, without including public enterprises (already privatized health and education systems to provincial jurisdiction. or franchised); and it will soon include official banking. Argentina's public sector has thus seen a decrease in core It is important to mention that the different public personnel from 550,000 employees to about 230,000. administration organizations were able to join SINAPA only after complying with the personnel reductions estab- Hurnan resources policy. The retrenchment of so many lished through the administrative reform decrees. public officials had to be compensated with a strategy for strengthening teams that would be involved in the cre- Reform of the provincial ation and implementation of public sector policies in ar- eas of nontransferable responsibility. administration Thus, the Secretariat of the Civil Service took on the responsibility of developing an integrated human resources Argentina's system of federal government has been in place policy for the public sector. And through the General since the enactment of its constitution in 1853. Alterna- Office of Public Sector Service (Direcci6n General de tions between constitutionally elected govemments and de Servicio Civil) and the Administrative Support Unit for facto govemments, and successive economic crises, have the Administrative Reform (UARA-Unidad de Apoyo a led to a kind of merge of the national and provincial gov- la Reforma Administrativa), formed by a small group of emments. This has led to the subtle centralization of many govemment administrators, it designed the National Sys- activities that originally had been decentralized. tem for the Administrative Profession (SINAPA-Sistema In 1980 the need for decentralization was confronted. Nacional de la Profesi6n Administrativa), whose basic The administration of schools was transferred to the prov- objectives include: inces-but without the transference of sufficient re- * Establishing a salary scale in keeping with the degree of sources. Parts of the drinking water services and drainage complexity of positions infrastructure were also transferred to the provinces- * Creating explicit selection mechanisms goveming entry again, without sufficient technical support. Thus, the into the civil service move tumed out to be a way to reduce expenses rather * Awarding promotions on the basis of training and per- than a true decentralization. This failed attempt at decen- formance evaluation tralization proved instructive. The transfer of schools ad- * Making job security conditional on performance evalu- ministration to the provinces has proceeded at a slower ation pace than the privatizations in order to allow an orderly * Offering special remuneration for executive duties per- absorption of the schools and teaching staff. formed In much the same way, and at the same time, na- * Conferring rewards for outstanding performance tional hospitals have been transferred gradually to the * Decompressing salaries to achieve a ratio of 10 to 1 provinces and municipalities. These shifts were done with from highest to lowest. the understanding that health and education services The establishment of SINAPA helped greatly in ob- should be administered at the provincial (and preferably taining precise information about the numbers of public at the municipal) level so as to afford users a measure of employees, at least in the central administration. direct control. The information SINAPA used as a baseline had been generated in a census initially taken during 1977; Current reform measures but keeping the data updated had grown more difficult with time. In addition this was information that had been manually processed or provided by duplicating computer- At this stage the reform process, as well as the downsizing, ized tapes from payroll centers. Developments in com- are far from complete. In a federal system such as the one puter science, the boom in personal computers, and the in Argentina, the administrative reorganization of the resulting reduction in the price of hardware-and, by provincial states is the most important step to ensure that contrast, the high cost of data processing in a large com- the reform process will continue. 1 14 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Therefore, the Secretariat of the Civil Service, But the greater problem is the rationalization of which participated intensively in the first stage of the employment in administrative offices and other decen- reform, is overseeing the incorporation of various prov- tralized entities. This process has high economic and inces into credit systems in order to improve the man- social costs. Current growth in the Argentine economy agement of state administration. In addition, technical does not permit rapid absorption of officials leaving the assistance from central administration staff is available public sector, and dismissals lead to a disproportionate for all measures necessary to the implementation of pro- increase of the informal economy and unemployment, vincial administration. and to excessive concentration of people in Buenos Reliable data systems need to be put in place to enable Aires. constant supervision of employment levels, both national The central government, by Decree No. 676/93, has and provincial/municipal. And established career develop- created an assistance fund for the provinces through the ment systems need to be implemented in the provinces, issue of a Bond for the Creation of Private Employment both to professionalize provincial administration and to (BOCEP). The fund, which is to help the provinces estab- create at the provincial level the capacity to offer instruc- lish voluntary retirement programs, is being financed with tion to the municipalities. These measures offer the only US$500 million gained from the privatizations. The prov- reasonable path to effective decentralization. inces are to repay this money, over a period of five years, Another issue remains in provincial reform: how to using 50 percent of the net savings in wages. The real deal with the provinces' bloated and unruly bureaucratic innovation introduced by BOCEP is that the former em- apparatus. During the 1980s public employment growth ployee who receives the bond can hand it over to a private in the provinces was explosive-on the order of 50 per- entrepreneur employing him, who can then immediately cent. In a deteriorating economy the state apparatus was obtain a loan from the Bank of Argentina to extend his becoming a safe haven from growing unemployment. This capital. The system is meant to facilitate, through a low- led to a growing budget deficit and to greater indebted- interest loan, the relocation of former public employees. It ness, which, in the context of an inflationary economy, is estimated that about 200,000 public officials from drove the provincial banks to bankruptcy. Argentina's twenty-three provinces, and from Buenos After the 1989 reforms and with the support of sig- Aires, will leave public employment through this volun- nificant growth in tax revenues, the majority of provinces tary retirement program. made adjustments, mainly in reducing recurring expenses. In most instances this permitted the provinces to balance Conclusions their accounts. Other transformation measures, still pending as of 1992, are being carried out with the support of the Secre- In conclusion it can be said that: tariat for Civil Service. Through bilateral agreements, a * Experience in Argentina has shown that it is possible to program for the modernization of the provincial public effect profound changes in the public sector, given the sector is under way. This program provides for: political will and the necessary capacity, and capitalizing * Privatization of public enterprises on previous experience. * Deregulation of professional and economic activities * Rationalization of the public sector is a complex, risky * Improvement of tax revenue collection process requiring the transformation-into a smaller, but * Modemization of the budget administration system more efficient form-of critically deteriorated economies * Strengthening of public management with a low capacity for absorption of labor. * Rationalization of provincial banks. * Dismissals have not only a high economic cost but an Technical assistance for the program is a cooperative adverse effect on the social situation generally. Such mea- effort of the Argentine government and the Intemational sures require complementary strategies. Bank for Reconstruction and Development (IBRD), which * An economic growth program must accompany the has already made a loan of US$370 million for this pur- state's efforts to rationalize employment. pose and is currently negotiating a similar loan with the * A more modest but more efficient state can only be government. achieved through an integrated strategy for strengthen- In the course of the provincial administrative reforms, ing public sector human resources, including moderniz- what has become the goal of personnel reduction? As a ing management techniques, offering training, improv- result of the privatizations under way, roughly 45,000 em- ing methods of entry selection, and providing economic ployees will move to the private sector in the provinces. incentives. DOWNSIZING THE STATE- THE ARGENTINA EXPERIENCE I 15 Downsizing: Jamaica's Experience, 1992-93 Marie Slyfield and Paulette Morgan This t:hapter examines the public service restructuring ment structure, by a distinguished committee of advisers; exere .e undertaken in Jamaica during the 1992-93 fi- and, of particular urgency, the move by the government nancial year. The chapter first highlights three related to reduce the burden on the 1992-93 budget. initiatives that provided the immediate context of the restructuring process-and that would have influenced, FPM project to a considerable degree, the nature of the process and the results obtained. The discussion then centers on spe- The FPM project activities being progressively imple- cific elements of the strategies pursued and the response mented in the ministries had special relevance for the to these strategies. In conclusion we comment on some of restructuring effort, particularly in the areas of corporate the helpful and hindering factors encountered in the planning and program budgeting. First, the introduction implementation process. of a corporate planning methodology is meant to assist ministries in defining more clearly their missions, objec- Context tives, and priorities; in identifying relevant programs and Context performance indicators; in developing appropriate admin- istrative structures for cost-effective program delivery; and Although administrative reform had been an important in developing management information systems for effec- feature of the Jamaican government's program since tive monitoring of program implementation. 1984, the updated policy enunciated in 1991 placed high Second, program budgeting involves introduction on the action agenda for the next three to four years of a methodology to assist with preparation of an infor- both a review of the role and structure of govemment mative budget based on clearly defined objectives and and intensification of efforts to modernize civil service expenditures of government programs, projects, and ac- management systems and practices. Supporting these ini- tivities. This, together with introduction of a standard- tiatives was a general commitment toward development ized program classification for similar activities under of a more market-oriented economy, with the govern- recurrent and capital budgets and appropriate adjust- ment withdrawing from commercial activities and re- ment in the financial accounting system, is meant to moving, as far as possible, restrictions on production and permit clear specification of the purposes of fund alloca- movement of goods and services. The public bureaucracy tions, easier identification of programs spanning several would be required to play the critical role of facilitating ministries, and clearer definition of priorities in allocat- this development and would have to be appropriately ing scarce funds. reorganized and staffed for more cost-effective provision At the time of the restructuring exercise, ministries of public services. were mostly in the earlv stages of applying the corporate Three major initiatives formed the immediate con- planning methodology, with a few having reached a rela- text for the restructuring exercise. These were the World tively advanced stage. As for program budgeting, four Bank-assisted Financial & Program Management Im- ministries had prepared their 1992-93 budgets in the provement (FPM) Project, ongoing since the 1991-92 program format, and five other ministries were preparing financial year; an April 1982 study and report on govern- to do the same for their 1993-94 budgets. 1 1 6 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Report on govermment structure as part of the overall reform. However, with the shorten- ing of the original timetable, this initiative provided the This study was the product of extensive consultation with single strongest push for urgent restructuring. private sector interest groups, unions, professionals, and voluntary social organizations. As such, the recommenda- Approach and response to tions may be considered to reflect public sentiment on such issues as the need for drastic restructuring of the govem- restructurilng ment apparatus. (As a point of interest, the appointment of the report committee followed shortly the announcement The political directorate provided leadership for this exer- of the government's decision to reduce the number of min- cise, with the process being closely monitored by a sub- istries from seventeen to fourteen, effective January 1992.) committee of the cabinet. Progress reports had to be pre- Conceming overall restructuring, the report recom- sented at the weekly cabinet meetings. mended starting with identification of priority structures, personnel, policy, and external relationships; next, it rec- Monitoring, participation, and communication ommended reduction of the number of ministries to the constitutional minimum of eleven. Further recommenda- The implementation process was the subject of weekly tions included decentralization of service delivery points; meetings of the Permanent Secretaries Board that focused procedures simplification and reduction of red tape; trans- on sharing problems and helping each other achieve the formation of management culture through training; re- best for their respective ministries. The process involved: duction in the proliferation of statutory/parastatal organi- * Review of programs zations and associated rationalization of the fragmented * Review of organization and restructuring personnel systems, including differential salary scales (as * Identification of posts to be abolished and persons to be between the central civil service, statutory bodies, and redeployed or separated other parastatals). * Abolition of posts. An advisory committee, including members of the Reduction of the burden on the budget Ministry of Public Service (MPS) team responsible for directing the program and representatives of the staff Commencement of the 1992-93 budget formulation pro- associations and unions involved, also met weekly to share cess was accompanied by directives from the Executive information and to identify problems arising at the opera- that short- and medium-term strategies be devised to re- tional level and ensure follow-up. duce the burden on the budget and improve efficiency in Emphasis was placed on special programs for per- the operation of govemment agencies in keeping with the sons who would be separated from their jobs. These in- government's commitment to reduce the budget deficit. cluded the active involvement of the unions, staff asso- Under the broad objective of ensuring availability of ciations, and the private sector through a steering funds for essential public services, the required short-term committee that would develop programs to minimize the strategies included: trauma of separation. Programs addressed the issues of * Implementation of a public sector recruitment freeze, job placement, counseling on personal coping skills, fi- effective January 1992 nancial problems, and career and job hunting/interview- * Continued review and implementation of service deliv- ing techniques. Guidance to ensure success in self-em- ery improvement initiatives in eight prioritized govem- ployment was also available. Special task forces were put ment departments: Inland Revenue, Customs and Excise, in place to ensure speedy processing of separation ben- Post and Telecommunications, Town Planning, Registrar efits and advances on pensions. A hot line-to provide General, Registrar of Companies, Registrar of Titles and information and take follow-up action-was put into op- Stamp Duty, and Transfer Tax eration. In addition, the media were used extensively as * Review of ministry program priorities to ensure appro- another method of communicating information to dis- priate alignment with the government's overall policy placed workers. priorities - Elimination of capital works projects not contributing Downsizing via severance payments to economic growth. The short- and medium-term budget reduction strat- The program began with the cabinet's approval of the egies reflected activities that had previously been planned following objectives: DOWNSIZING JAMAICA'S EXPERIENCE, 1992-93 1 17 * Identifying underutilized resources and eliminating re- work force that involved permanent as well as temporary duindant positions, nonessential programs, unnecessary employees. Payments to these employees are set under: work, duplication of administrative functions, and other * The Pensions Act. Employees who had permanent status admi-nistrative waste in the central government service and in some statutory * Increasing resources for essential programs, primarily organizations would benefit under Regulation 27 of the through the implementation of cost-recovery initiatives. Act, which makes them eligible for a pension for life as a The political directorate initiated the downsizing pro- result of abolition of office and/or reorganization of the gram through a cabinet decision approving the exercise. public service. Persons who had already attained the age An immediate frceze on recruitment was put into effect, of fifty-nine years and who would have been retired with exceptions in certain circumstances. through the normal process were not included in the The ministries were requested to review their mis- restructuring exercise. sion and objectives, including those of agencies falling * The Employment (Termination and Redundancy) Act. Em- under their purview, and to rationalize overlaps and du- ployees (permanent and temporary) of statutory organiza- plicatioins. Programs were put into priority order and tions not covered by the Pension Act would benefit under staffing levels determined for improved efficiency. Posts this Act. And temporary employees in the central govern- were then identified for abolition. It should be noted ment service would benefit under a resolution of the Act. that vacant posts considered essential in the revised or- The public service does not have the flexibility of ganization were retained, though in some cases not setting severance payments to reflect opportunity costs funded. Suitable officers were then identified to occupy facing targeted employees leaving the service and seeking positions being retained. employment within the private sector. In determininig which employees to release, the fol- The government service in Jamaica has always of- lowing order of priority was applied: fered a certain amount of security of tenure. Many who * Reemployed pensioners could have taken jobs in the private sector at much higher * Persons who voluntarily request early retirement levels of pay opted to accept lower salaries in exchange for * Tcmporary employees this security. However, the downsizing exercise has eroded * Contract officers. this security, and some employees whom the government This order was determined in accordance with Regulation service would have retained have resigned to take up 25 of the Public Service Regulations (1961), which allow private sector jobs. for the selection of the best officer to fill the retained post to effect greater efficiency or economy. Downsizing via attrition The actual selection of persons to be displaced was the responsibility of each ministry, which had to submit to In January 1992 a freeze was placed on all existing vacant the MPS reports reflecting posts to be retained or abol- positions and on any position that subsequently became ished and persons to be displaced. As for vacant but vacant. Unfreezing of any position had to be referred to essential posts, it was the responsibility of the agency the MPS, which would give its approval under certain wishing to fill the post to request that it be released, to conditions: provide justification for the critical need for the post, and * The post was essential to continued operation to advise whether it had been funded. * The post was to be retained in the revised structure of By survey it was determined that of the work force to the organization be affected in the downsizing exercise, excluding vacant * The post was funded in the budget. positions, a 20 percent reduction (for example, about It should be noted that there were essential areas 8,000 persons) could be achieved. This target was not that were exempted from the downsi. ing exercise, includ- achieved through severance and attrition during the pe- ing police and security, teachers, medical professionals, riod June 1, 1992 to March 31, 1993. revenue-earning departments, and town planning and Employment in the central government system is cen- land surveying departments. These areas were not, how- tralized in the office of the services commissions. This ever, exempt from the freeze, and here, too, operation of agency enforces nonreturn of officers who have been dis- posts had to have the approval of the MPS. placed. The statutory agencies can only be controlled by Persons who entered government service with the post allocation, operation of freezes, the integrity of their basic entry qualifications and who subsequently improved recruitment policy, and budgetary allocation. their academic background during their employment were The exercise ultimately meant a downsizing of the more likely to remain in the service. University graduates, I 18 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN on the other hand, used government employment as a Conclusion stepping-stone to more lucrative private sector jobs. Though it seems desirable, no estimation has been done on the rate of employment adjustment subsequent to the Downsizing on this scale in the limited time allowed could downsizing exercise. have resulted in social upheaval and possible loss of politi- While maintaining the freeze on recruitment, the cal support, given the relatively high rate of unemploy- commitment to reduction by attrition was also sustained. ment. The fact that this did not occur may be attributable Budgetary allocations for personal emoluments took into to a number of factors. First, the nature of the process was account vacancies that existed at the time the budget was highly consultative, involving the political directorate, being drawn up. (Critical vacant positions might be managers, staff, and union representatives. Second, the funded, but funding of the budget generally will depend logic of the corporate planning and program budgeting on expected revenue intake.) methodology, to the extent that it was operative in the ministries, might have sent a signal of rationality and Financing the program fairness in the process. These methodologies might also have assisted the more advanced ministries in reordering The Cabinet gave approval for the provision of 565 mil- their priorities in the face of the inevitable budget cuts. lion Jamaican dollars (Ja$565 million) for payment of Third, special provisions and facilities put in place by retirement benefits, retraining, and counseling. This was the government in partnership with the private sector pro- to be funded by revenue collected through the strength- moted the "human face" of the process. These included ening of tax administration and increases in user fees. placement services, financial assistance to start up eco- Reduction of expenditure was to be achieved mainly nomic projects, and accelerated settlement of separation by the recruitment freeze and budgetary allocation. No benefits. Public calls for reducing the size of the bureau- vacancy was to be filled by the Public Service Commission cracy had also become a regular feature of daily life. unless the MPS advises that the vacant position had been On the other hand, although the budgetary con- exempted from the freeze. straint provided a sense of urgency for the downsizing Ministries are being assisted in refocusing their pro- effort, there was not enough time to complete the neces- grams after restructuring and in identifying training needs sary groundwork to achieve the companion goal of in- for the remaining employees. Training is being provided by creasing efficiency, which in some cases had to be sacri- the College of Public Management or bought from other ficed. Additionally, the absence of an adequate human training institutions. This process is still in its early stages resource data base was an impediment to sufficiently in- and it is expected that economies in operation will quickly formed and timely decisions on personnel to be retained, be achieved through strong emphasis on training. redeployed, or separated. DOWNSIZING JAMAICA'S EXPERIENCE, t992-q3 1 9 Compensation Upgrading in Caribbean Public Services: Comparative Needs and Experience Richard Kitchen Civil service compensation is a global conundrum. The were prepared on the subject between 1942 and 1980 problem: the output of civil servants is generally not mar- (Priestly 1983). The impact of these reports was small, ketable; how, then, to attach a price to the labor that however. As Priestly commented: produces it? This distinguishes civil servants (and such other professionals as teachers or doctors) from private Since administrative investigation has been a sector employees, whose output is sold in (generally) com- marked feature of Jamaican public affairs over petitive markets. the past four decades, the question arises of as- There are two approaches to determine civil service sessing its impact and results. It becomes clear compensation. The first is the trial-and-error method of from the reports that the general outcome has seeing what salaries are required to attract and keep the not been impressive; civil service problems have required caliber of employee. This approach, however, proved stubborn and persistent in the perspec- tends to be ex post, and to work only at the margin of tive of time. Why this should be so cannot be employment. The second method is to use some form of explained solely on the basis of the reports. For comparability with the private sector as the yardstick for determining civil service compensation scales. Although FIGURE 13.1 arguments are made (notably by civil servants) for compa- Compensation and risk rability with the private sector, such exercises generally result in civil service compensation being set below that Expected compensaDon of equivalent private sector compensation.' Lower compensation for civil servants compared with the private sector is justified by drawing on capital market theory and the notions of risk and expected return. Civil ..- - - ' ' ' ., service employment offers more job security than does .......... ................. IV private sector employment. Private sector employees will ....... therefore require higher compensation for the greater re- _ dundancy risk they face. (They may also receive higher _ compensation to reward higher productivity and longer Zero-risk copensotion hours, but these are separate arguments.) Figure 13.1 depicts compensation per hour worked at a fixed degree of effort. 0 Risk Roman 1, 11, 111, and IV refer to different grades of employment. As the nsk of employ- History of civil service reform in mentincreasesfromzero, sodoestheexpectedcompensationpackage.Pnvatesecor employment carries vanous risks,depending on the sector. For example,employment that depends on an exhaustible network resource, such as mining, would be relatively the Caribbean high-risk. So too would certain kinds of contract employment and self-employment, which run the risk of unemployment at some stage. The civil service job, wih guaran- teed employment for life plus a pension, is nearly a zero-risk job. A possible measure Civil service reform (CSR) is not a recent phenomenon in of the risk of employment in the civil service may be the frequency of redundancies the Caribbean.' In Jamaica, for example, forty-five reports compared with the level o employment, for each grade. 1 20 ClVlt SER .C iE.OR'M1 I'l LATiN A!1EPICA AND T, lI CARIBBEAN example, the amount of detail given in the re- itself ... and resulted in persistently high vacancy ports about the actual implementation of reform levels in key posts in govemment ministries. As proposals is usually limited. (1983) the civil service deteriorated, the number of GOJ statutory bodies and public enterprises continued Around 1980 CSR gained new impetus. There was a to grow. Most of these bodies ... have been able growing belief that administrative performance was a key to raise staff salaries even while incurring finan- element in managing public resources and investments, cial losses, which served not only to weaken gov- and hence in the economic development process. In 1980 ernment finances but also to drain trained people CARICAD conducted nine top management workshops in from traditional ministries. the English-speaking Caribbean countries' and found that: In the larger economies CSR started in Trinidad and In all cases serious administrative obstacles to Tobago in 1986, and in Guyana about 1990. However, in improved performance were found, and there the smaller Organization of Eastern Caribbean States was a general consensus on the need for admin- (OECS) the process is still lagging behind. In a report istrative reform in order to achieve higher stan- produced for the OECS Secretariat, CARICAD (1991) dards of performance. (CARICAD 1981) analyzed the partial (and even comprehensive) reform efforts made in the 1980s, and developed a framework for A CARICAD Roundtable in 1981 took the discussion presenting future comprehensive administrative reform further, and found that the subject of incentives for admin- efforts in the OECS countries. Some member states are istrative change "was one of the most important areas of now introducing further reforms. discussion and one of the least examined and researched in practice." It called for "moving away from traditional meth- Civil service compensation in the Caribbean ods of rewarding seniority and stability and moving towards rewarding initiative and innovation" (CARICAD 1981). The most significant cases of poor compensation and de- At the same Roundtable, Armstrong "felt that to spur pro- clining real incomes in the civil service are in Guyana and ductivity and also to neutralize the drain of personnel away Jamaica, two countries that suffered periods of sharp eco- from the public sector, governments needed to look a little nomic decline in the 1970s and 1980s. Other countries, closer at the present conditions of service with a view to notably Trinidad and Tobago with its oil wealth, and bringing them on par with the private sector in the region" Barbados, have maintained a comparatively well compen- (CARICAD 1981). sated civil service. Among the smaller islands, compensa- Meanwhile, similar problems were being encountered tion practices have varied, but have included some cases in the larger countries of the region. The realization that of declining conditions for civil servants-in the Turks poor civil service performance hindered the implementa- and Caicos Islands, for example (Wood and Scutt 1992). tion of structural adjustments programs led the World Not surprisingly, considering the decline in compen- Bank to fund its first comprehensive administrative reform sation, both Guyana and Jamaica have experienced sub- program, in Jamaica.4 The World Bank (1984) noted that: stantial declines in civil service employment, notably in the professional and technical ranks. The number of un- Several major trends contributed to a severe filled posts has been substantial, and thus parts of the civil weakening of the civil service during the last service have been unable to operate effectively. The core decade. Compensation for managerial, profes- ministries-Finance, Public Service, and the Public Ser- sional, and technical (MPT) civil servants was vice Commission-have become ineffective, with a harm- severely eroded. During 1972 to 1982 the con- ful effect on line ministries, which are dependent minis- sumer price index (CPI) increased over 470 per- tries in the Caribbean.5 cent, over the same period salaries for the three Statistical data on the civil service in some Carib- highest professional grades in the civil service bean countries (table 13. l)-even though fragmentary- rose between 41 and 87 percent, while salaries for present a clear picture of low compensation for the mana- government-employed casual labor increased gerial, professional, and technical staff ratios (as indicated some 359 percent. This trend reflected an in- by low compression ratios), and occasionally high com- comes policy designed to reduce inequities in pensation at the lower levels. For comparison, table 13.2 income distribution, but had the effect of con- presents trends in compression ratios in four African coun- tributing to the exodus of experienced profes- tries, where the ratios had, in some cases, fallen to unac- sionals from the civil service or from Jamaica ceptable levels by the early 1980s. COMPENSATION UPGRADING IN CARIBBEAN PUBLIC SERVICES: COMPARATIVE NEEDS AND EXPERIENCE 121 TABLE 13.1 TABLE 13.2 Compensation indicators, selected Trends in salary compression in selected Caribbean countries, various years African countries, 1970-83 (ratios) Indicator Country Meosure Date Compression rato Guyana 6: 1' 1992 Percentage Trinidad and Tobago 8:1' 1992 chonge In salary Turks and Caicos 7:1 1983 cormpression Turks and Caicos 4:1 1992 Country/level 1970 1975 1980 1983 1975-83 Vacancy rate Trinidad and Tobago Medium' 1992 Malawi Guyana 28-45% 1992 Undersecretary/ Jamaica High' 1983 unskilled - 33.0 30.0 29.8 -9.7 Jamaica High' 1992 Nigeria Solanesd Permanent Professional Trinidad and Tobago 50-70 1992 secretary/unskilled 29.9 17.6 15.4 9.2 -47.7 Low grade Trinidad and Tobago 231 1992 Sudan High grade Guyana 20-30 1992 Deputy under- Low grade Guyana 50-66 1992 secretary/unskilled 13.0 13.1 10.8 8.3 -29.0 Personnel emoluments Turks and Caicos 44 1983 Zambia as a percentage of total Turks and Caicos 56 1992 Undersecretary/ recurrent expenditure Grenada 52 1992-93 lowest salaried 19.2 14.5 10.3 6.9 --52.4 a. The ratio of the midpoint of the monthly salary for the highest salary grade to the - Not available. mipoint for the lowest. Source: Lindauer, Meesook. and Suebsaeng 1986; Matahaba and others 1993. b. The ratio of permanent secretary compensation (base salary and allowances) to the lowest public sector wage rate (base salary only). The lowest wage is paid to fourteen- year-old boys and to leamers, skilled and semiskilled, dass 54. World Bank, was comprehensive; however, in this chap- c. Governments do not collec systemabc information on the number of unfilled vacan- Cies, nor on those filled by acting appointments. ter we discuss only matters of compensation.' d. Publicsectorswagesasapercentageofprivatetedorwages. In the 1970s civil service salaries had fallen substan- Source: Various unpublished World Bank and ODA documents. tially in real terms. From 1972 to 1982 the consumer In Haiti employment levels contrast sharply with the price index rose by 470 percent; over the same period large number of vacancies in other Caribbean countries. the salaries of the three highest grades rose between 41 An internal World Bank report (1987) noted that: and 87 percent, while the salaries of government-em- ployed casual labor rose by 359 percent. Many MPT- The official number of public employees is 32,400. grade civil servants left for the private sector or emi- The actual number, however, may be as high as grated, giving rise to a large number of vacancies, and 57,000. There is no current register of civil ser- ineffective administration. In order to strengthen admin- vants, at either the level of the Public Service istration, the govemment set up many statutory bodies, Commission or the individual ministries. .. . In offering salaries substantially above civil service grades addition, many officials have been paid both sala- in order to attract able people from outside the civil ries and "expenses." ... Frequently ... one bud- service. The result was a further exodus from the civil geted salary [is used] to pay two or more employ- service, this time to the statutory bodies, thereby further ees-because of their political connections-who weakening the civil service. Finally, civil service salaries are not expected to perform on the job, or, in- and recruitment came under pressure as a result of gov- deed, to appear at the ministry. Other common emment expenditure cuts inspired by IMF programs. practices include the payment ofsalaries to people The public sector then had two (or three) distinct tiers who do not exist at all, [with] the funds in fact of compensation: public enterprises and statutory bod- going to those politically favored. ies; and the civil service. But even the best-paid public sector posts tended to Experiences of compensatio. reform lag behind the private sector. Recognizing the large gap between the two groups of public sector employees, the govemment granted pay increases in 1983 and 1984 fa- Jamaica voring the MPT grades. For example, starting pay of permanent secretaries was increased by about 50 per- The administrative reform program (ARP) in Jamaica, cent, while salary increases for unskilled civil servants the first of its kind sponsored in the Caribbean by the were kept to around 25 percent over the two-year pe- 122 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN riod. Much of the cost was funded from savings realized Trinidad and Tobago by leaving vacancies unfilled following resignations and retirements. Public sector reform started under the NER government Another large, across-the-board pay increase was in 1986; the World Bank was an active player, but less so granted in 1985; and further special salary increases for than in Jamaica. The new government did not trust the MPT grades were introduced in 1986 in another attempt civil servants who had served the PNM governments over to reduce the imbalance in compensation between civil the previous thirty years and set up many new units, servants and employees in other parts of the public sec- staffed by contract officers who were paid more (but not tor.7 The eventual target-though not officially stated- substantially more) than existing civil servants. In the was to reduce the differential of other public sector em- civil service the government stopped merit increases, and ployees over civil servants to no more than 15 percent, cut public service salaries by 10 percent (see section on from a differential that was broadly thought to be about pay cuts, below). A Voluntary Termination of Employ- 50 percent. The Ministry of the Public Service (MPS) was ment Programme (VTEP) was introduced in 1989 to re- given the responsibility for monitoring and establishing duce the well-staffed civil service. However, salary cuts salaries throughout the public sector. To do this, the MPS meant that the private sector could easily pick off the best computerized pay data and conducted periodic surveys to civil servants; more than 1,000 left the service and the update the data. VTEP backfired. It was recently terminated. In spite of these (and subsequent) measures, com- Pay remains a delicate subject in Trinidad and To- pensation remains a key problem. Attempts are still being bago-the civil servants and their union maintain that made to move salaries in the civil service closer to those the government owes them money (the courts declared in the statutory bodies, where salaries remain significantly the pay cuts illegal, but the government simply did not (30 to 50 percent) higher than in the civil service. Pri- pay). Nonetheless, by Caribbean standards civil servants vate sector salaries generally exceed those in the statu- are well off. tory bodies.8 There are staffing problems in the civil service, though Salary increases have been partly financed by reduc- not nearly as severe as elsewhere. The VTEP resulted in a tion in the size of the civil service.9 Downsizing initially significant number of vacant posts at the upper and middle preceded compensation upgrading but is now being professional levels. As in Jamaica, vacancies have been implemented alongside improvements in compensation. filled by shifting underqualified staff on an acting basis. Improved compensation has allowed the civil service to Such appointments, which are not normally recorded or attract better-qualified candidates. However, as salaries approved by the Service Commission, amount to dis- are not competitive with the private sector (or even the guised pay increases, with a dilution in quality. statutory bodies), the civil service is still the employer of Civil service pay scales, including benefits and allow- last resort, except for those individuals with a very low ances, are too low at the high levels and too high at the low risk tolerance. levels. At the higher levels public sector managers receive The problem of retention in the civil service has still 50 to 70 percent of the compensation in private sector coun- not been solved. As career advancement in the civil ser- terparts, while at the lower levels compensation is more vice is still based on seniority rather than performance, than double that in the private sector. This means that low- high performers tend to get frustrated and leave. There level posts are attractive and employers cling to them. The appears to have been no attempt to introduce merit-based result is an imbalance in employment, with vacancies at pay or promotion systems, perhaps because such a move higher levels and excessive employment at lower levels. would face strong opposition from the civil service asso- The need for new salary scales is apparent, but the ciation. In the absence of this type of reform, improved fiscal position of the government implies that any adjust- salaries will not lead to improved efficiency. (However, ments in compensation should be fiscally neutral. One there is now a fast track for new graduates in the civil suggestion is that for all grades compensation should be service to make entry more attractive. The United King- fixed at 60 percent of the private sector equivalent, dom introduced a similar scheme some twenty-five to thereby implying a 40 percent risk adjustment factor for thirty years ago.) Moreover, there is a tendency for younger the private sector. Given the previous legal action and civil servants to avail themselves of training opportunities salary cuts, and trade union opposition, it seems that such offered by the civil service and then to leave shortly uniformity can only be achieved gradually, by freezing pay afterward for a job in the private sector.'° A civil service at the lower grades for some years. graduate (with a master's degree) was quite blunt: "The Another suggestion is to allow line agencies to offer ARP has nor solved the salary problem." salary enhancement to what they consider key positions COMPENSATION UPGRADING IN CARIBBEAN PUBLIC SERVICES: COMPARATIVE NEEDS AND EXPERIENCE 1 23 or staff-provided that such enhancement is self-funding, cent pay supplements, while the lower grades receive 30 that is, through employment reductions in the agency. percent. Selection for supplements was based on the diffi- Still another, more comprehensive, proposal is for an in- culty of recruitment for the posts and on the academic tegrated pay and personnel management system to com- qualifications and experience of the holder. Pay supple- bine (on computer) data on pay and personnel records, to ments thus reflected both market (for example, private ensure comparability of pay and qualifications throughout sector) salary levels and recruitment difficulty. the civil service." Individual ministries, CAs, and RAs recruit person- nel without approval of the Public Service Ministry or the Guyana Public Service Commission, and offer salaries higher than the official scale. Temporary staff are also hired at simi- The recent political and economic history of Guyana is larly higher rates of pay, or on contract. All these devices similar to that of Jamaica in the 1970s, although the distort the notion of a structured pay system. However, policies and economic decline in Guyana continued a they do compensate in an unstructured way for the inad- decade longer than in Jamaica, producing an even deeper equacies of the pay scales and provide a crude de facto, if decline in the public service. Administrative reform is not de jure, merit-based pay system. Nonetheless, it plays therefore a recent phenomenon-it started with a havoc with the budgeting of salaries and wages. UKODA-funded project in 1990, following the The current World Bank-funded Public Administra- government's announcement in 1988 of an economic re- tion Project, which is to reform the public service salary covery program. The project, which focused on the re- and employment structure, involves both salary increases structuring of ministries, resulted in a reduction of the and increasing the compression ratio (see table 13.3). number of ministries from eighteen to eleven. Excluding special appointments, the compression ratio The civil service in Guyana is characterized by low would rise from 6:1 to 10:1. The spreads between the salaries, high vacancies (especially in the MPT ranks), minimum and maximum within grades would also be in- and compressed salary scales. Between 1986 and 1991 creased substantially. The government has largely agreed real wages in the central government fell by almost 20 to implement the new salary structure. percent, with even greater deterioration in the MPT Under the new system, the total cost of public service grades. Salaries in these grades are particularly low, as employment would rise from $6.69 million'2 to $9.75 mil- indicated by a compression ratio of about 6:1. lion-an increase approaching 50 percent. This assumes a Moreover, civil service salary scales are extremely substantial filling of vacant posts. It is proposed that the low when compared with those in public corporations and increase be financed largely by an IDA credit over a four- the private sector. Average salaries for support staff and year period, plus some contribution from the IDB. In low-level technical staff in the public corporations are addition, a proposed recruitment program to attract quali- one-and-a-half to two times their level in the private fied staff both locally and from abroad is expected to cost sector. And senior civil servants can earn three to five another $1.8 million. times more in some public corporations, and even more in CSR in Guyana is at an early stage, and it remains the private sector. to be seen how it evolves. The direct refinancing of com- Because of low public service pay civil servants have pensation upgrading by IDA and IDB credit is something left the service, and, in numerous cases, emigrated. As a that was absent in, say, the case of Jamaica, and removes result, 35 percent of approved positions in the ministries the fiscal constraint on the govemment. It is probably are vacant, and 39 percent in constitutional agencies the realistic approach, given the weak state of the (CAs) and regional administrations (RAs). As in Jamaica and Trinidad and Tobago the govern- TABLE 13.3 ment, in an effort to upgrade pay and fill vacancies, has * a filled posts with "acting-up" staff not qualified for the Curr an pu, ent a p jobs. Also, staff in some ministries (Finance, Foreign Af- salary scales, Guyana fairs, and Office of the President) have received special (monthly solary at midpoint in grade, U.S. dollor equivalent) salaries and allowances outside the formal grading system. Grode Current Proposed This has led to unequal treatment of employees, causing Grade 1 31 39 resentment and a decline in morale. Grade 16 189 351 In July 1991 the government introduced a system of Special 440' 632 market supplements for key professional and technical a. Estimated. positions; selected higher-grade officials receive 50 per- Source: World Bank. 124 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARII1HI AN Guyanese economy, and of the government budget. vised that both pay and promotion should be merit-based, However, it does involve taking on debt to fund activi- and that pensions should be improved. (Currently, to ties that are not directly productive, which is perhaps qualify for a pension a civil servant must have served at unsound. It would be preferable to fund such activities least twenty-five years, although those taking early retire- from bilateral grants. ment at age 50 receive a pension if they have served ten years. A proposal to reduce the qualifying period from The Eastem Caribbean twenty-five to fifteen years is being examined. Broken service and study leave do not count for pension rights.) Various attempts that have been made at classification A major issue in St. Kitts/Nevis is the retention of good and compensation reform are summarized below. This people in the civil service; a good salary and fringe ben- section draws heavily on CARICAD 1991. Most reforms efits package is needed. have been internally driven with the notable exception of Grenada, where the World Bank and the IMF were Grenada. Grenada's civil service reform plans since influential. 1987 have emphasized downsizing, with plans for phased reductions of the 1,000-strong employment roll. Grenada St. Lucia. A UNDP project in St. Lucia undertook, has, relatively speaking, one of the largest civil services among other things, a job classification study for 1,700 in the OECS, with 52 percent of the 1992-93 budget civil service posts, which was completed in 1989. Since going to salaries. New personnel policy guidelines have 1991 the Department of Personnel has been trying to been developed and a reclassification/compensation plan merge the full public service into the new civil service has been tabled, in addition to new performance ap- salary structure. However, the measure has met with some praisal systems. resistance from unions and managers alike, and as of 1992 The Public Service Union is opposed to redundan- no progress had been made in implementing a merit pay cies, wanting downsizing to occur only though retirement system based on performance appraisal. and natural wastage. Civil servants, too, appear deeply suspicious of other aspects of the program, which remain Dominica. In the 1980s a range of CSR initiatives to be implemented. took place in Dominica; these have had little effect, how- ever, at least in terms of compensation and job classifica- Turks and Caicos Islands. A British colony, Turks and tion, although two of the projects (by CARICAD and Caicos Islands has suffered sharp salary compression in CIDA/ECEMP) focused on these topics. the civil service over the past decade, from 7:1 to 4:1. Poor retention rates and anecdotal evidence also suggest St. Vincent and the Grenadines. An earlier CARICAD a real decline in incomes over the period. However, wages plan for public service reform in St. Vincent and the and salaries currently account for 56 percent of the recur- Grenadines was followed in 1987 by a CIDA/ECEMP- rent budget. The current proposal is for "a pay reform designed administrative reform program aimed at overall programme which should aim to decompress the salary improvement of the public service. However, the human structure and reduce the percentage of recurrent budget resources management phase of the program was pursued on wages and salaries" (Wood and Scutt 1992). before the other components, leading to resistance by This implies a greater increase in salaries for the rank and file public servants who seemed to feel that the higher grades than for the lower grades and a significant reclassification/compensation exercise did not benefit reduction in numbers, presumably in the lower grades. them as expected. This is to be achieved partly by the privatization or con- Another comprehensive ARP is now being imple- tracting out of services, a reflection of the United mented, in a more structured and sensitive manner, but it Kingdom's current common practice of "market testing" is not yet clear what the outcome will be. exercises. Wood and Scutt (1992) also talk of "reposition- ing of public sector pay levels in relation to rates paid in St. Kitts/Nevis. Administrative reform has been slow the private sector." This is reminiscent of U.K. govern- to take off in St. Kitts/Nevis. Early initiatives were aban- ment policy toward its own public service-to shift people doned by the ministries and permanent secretaries be- from the public to the private sector in an effort to make cause of the 1989 election. The process started again in them more productive. However, the legendary ability of 1992. One of the main recommendations growing out of the U.K. civil service to resist change has been effective at the work of CIDA/ECEMP was to implement performance all but the lower levels, where contracting out and ten- appraisal and a limited system of promotion. It was ad- dering have been effective. COMPENSATION UPGRADING IN CARIBBEAN PUBLIC SERVICES COMPARATIVE NEEDS AND EXPERIENCE 125 Pay cuts 2. Nor is it a new phenomenon elsewhere. For a useful survey of thinking on administrative reform prior to 1980 see Caiden 1978. Although the emphasis is on compensation upgrading in 3. The nine countries were Antigua, the Bahamas, Belize, CSR programs, two significant examples of downgrading Dominica, Grenada, Montserrat, St. Lucia, St. Vincent, and St. can be cited. In one case-Trinidad and Tobago-merit Kitts/Nevis. increases were cut by 10 percent in 1987. The civil service 4. For detailed discussions of the World Bank-funded union took legal action, but although it won a decision program, see Kitchen 1989 and Mills 1990. that previous salaries be reinstated, the government con- 5. Line ministries in the Caribbean are those responsible tinued to pay 10 percent less. This 10 percent is still for individual sectors, such as education or public works. They legally payable, plus a further 2 percent increase awarded are distinguished from the core ministries (or agencies), the by the courts, which has never been paid. In the other Ministry of the Public Service, the Public Service Commission, case, the Barbados government also cut civil service sala- and the Ministry of Finance-which service the line ministries. case, the Barbados government also cut civil service sala- This distinction is widespread, although specific practice varies ries in 1991. Here too, the civil service association took from country to country. the case to court, but lost. 6. For a more detailed discussion, see Kitchen 1989 and Trinidad and Tobago and Barbados are probably the Armstrong 1989. two most affluent states in the English-speaking Caribbean. 7. Pay was not the only issue in compensation. Pensions The salary cuts came in periods of recession that followed administration was in a poor state, with payments due to many earlier periods of strong economic growth. The standard of retired civil servants far in arrears. An action team for pensions living of civil servants was good; indeed, one civil servant administrations was set up in 1984, and many of its recommen- expressed the view that in Trinidad the civil service was dations have been implemented. well paid even by developed country standards, and that 8. Some statutory bodies try to match private sector sala- the upper and mid-level grades lived quite omfortably. ries. For example, the Urban Development Corporation deter- mines its own salary increases, based on salary surveys of the Jamaica Employers Federation, and then has them ratified by Conclusions the Ministry of the Public Service (MPS). JAMPRO salaries are fairly competitive with the private sector, as are those of the Tourist Development board, even though it works through Civil service compensation in the Caribbean remains a per- the MPS. (The rationalization is that it eams foreign ex- sistent and obstinate problem. Even in countries such as change.) The salaries of the Planning Institute of Jamaica, Jamaica where a comprehensive administration reform pro- though, are substantially lower than those of the other bodies gram has been in place for a decade, the situation appears mentioned. to have improved little. The reasons for this vary from 9. For example, 700 white-collar redundancies have re- country to country. However, common problems include: cently been made in the civil service. This downsizing is un- - The lack of a systematic basis for establishing salary even, though. The Ministry of Agnculture is said to be largely devoid of staff, rendering it ineffective. scales in the civil service relative to those in the public 10. In some cases civil servants will break bonds. The enterprise (and statutory body) sector and the private problem is not just pay, but a lack of opportunity to use their sector potential. * Persistent fiscal pressure on governments, which works 11. Standard software packages can be purchased, rather against the establishment of systematic manpower plan- than designed from scratch, and tailored to the requirements of ning and pay the buyer. One estimate of the installation costs (to cover about * The strength of civil service associations and trade 100,000 employees) is US$3 million, and they could run as low unions as US$1.5 million. * Resistance by civil servants to comprehensive reform 12. All dollar amounts are U.S. dollars. packages and to merit-based pay * Political resistance to reforms because of concerns about Ref higher costs or increased independence of the civil service. Notes Armstrong, Aubrey. 1981. "Organizational Change and Perfor- Notes mance Improvement in the Public Scctor of the Conmmon- wealth Caribbean." In CARICAD 1981. 1. Comparability between the civil service and the private . 1989. A Strategic and Operationial Plani for ti ma.iarii- sector is in any case difficult to establish for many grades of civil can Administrative Reform Programme. New York: UNIDP' servants. Government of Jamaica. 1 26 CIVIL SERVICE REFORM IN LATIN AMERICA AND THF CAMRISSI AN Caiden, Gerald. 1978. "Administrative Reform: A Prospectus." African Public Administration. West Hartford, Conn.: International Review of Administrative Sciences XLIV (1- Kumarian Press/United Nations. 2):106-18. Mills, Gladstone. 1990. "The English-speaking Caribbean." In CARICAD. 1981. Final Report on the Roundtable on Administra- V. Subramaniam, ed., Public Administration in the Third tive Reform. Barbados: CARICAD. World. Westport, Conn.: Greenwood Press. CARICAD/UNDP. 1991. "Towards an Administrative Reform Priestly, Margaret. 1983. Administrative Reform Enquiries in Ja- Support Programme for the OECS Member Countries." maica, 1942-1980, vol. 1, Analysis of Key Issues, and vol. Draft report. CARICAD, Barbados. 2, Synopsis of Reports. Kingston: Administrative Staff Col- Kitchen, Richard L. 1989. "Administrative Reform in Jamaica: lege. A Component of Structural Adjustment." Public Adminis- Wood, David, and Fred Scutt. 1992. "Public Sector Reform: tration and Development 9:339-55. Turks and Caicos Islands." Overseas Development Asso- Lindauer, D.L., O.A. Meesook, and P. Suebsaeng. 1986. Gov- ciation, Washington, D.C. ernment Wage Policy in Africa: Summary of Findings and World Bank. 1984. "Report and Recommendations of the Presi- Policy Issues. World Bank Discussion Paper 1986-24. Wash- dent of the IBRD to the Executive Directors on a Proposed ington, D.C. Loan of US$4.5 Million to Jamaica for Public Administra- Matahaba, G., R. Baguma, and M. Halfani. 1993. Vitalizing tion Reform Project." Washington, D.C. COMPENSATION UPGRADING IN CARIBBEAN PUBLIC SERVICES: COMPARATIVE NEEDS AND EXPERIENCE 1 27 Pay and Employment Issues in the Brazilian Civil Service Helio Zylberstajn In recent years civil service reform has been addressed at statistical services covering employment. This made it the three levels of government in Brazil. But the efforts of impossible to compare civil service employment with the federal, state, and local public managers have failed to remaining formal sector. Instead, comparisons are made create a more rational and efficient civil service structure. between civil service and the whole formal sector, in- Instead, the delivery of public services and goods has cluding the civil service. But, given the fall in public deteriorated, becoming chaotic. sector revenues, the civil service today likely employs This chapter focuses on some issues related to the about 5 million, or 3 to 4 percent of the population failure of civil service reform in Brazil. In the first section, (table 14.2). recent figures on civil service employment and pay are Expansion of employment in Brazilian public admin- examined to identify trends and to compare public service istration has not been uniform across geographic regions, and total formal sector employment. The second section or levels of government. Macedo and Chahad (1990) and examines some recent legal and institutional changes and Saldanha and Maia (1988) observed that expansion was what they reveal about civil service employment. The most intense in the northeast and the north-the third section focuses on prospects and recommendations country's less industrialized and poorer areas-and at the for employment and pay policies. state and local government levels. In fact, the federal administration employs just 20 percent of civil servants Civil service employment and pay: (Saldanha and Maia 1988). These authors conclude that most of the recent employment expansion in the civil recent trends service has resulted from political patronage. Size of civil service employment TABLE 14.1 Ratio of civil service employment to total The most recent employment figures from Brazil's fed- population, Brazil, 197949 eral administration (1989) show that civil service em- ployment has grown systematically (table 14.1). In the Civil service Ratio of civil service 1980s, due to recession and economic stagnation, the Total population employment employment to total formal private sector was unable to create enough jobs Year (millions) (millions) population to absorb a growing work force. Macedo and Chahad 1979 118.6 3.1 .026 (1990) point out that expanded government took up 1980 121.3 3.3 .027 some of the slack. Public service employment increased 1982 126.9 3.7 .029 approximately 65 percent in the 1980s at an average 1983 129.8 3.8 .029 annual rate of about 5 percent. Civil service employ- 1984 132.7 4.1 .031 ment remains at low levels, however, compared with to- 1985 135.6 4.3 .032 tal population. 1987 141.5 4.9 .035 Unfortunately data are not available for the early 1988 144.4 5.1 .035 1990s. One consequence of the Collor administration's 1989 146.3 5.0 .034 civil service reform efforts has been the disruption of Source; Macedo and Chahad 1990, based on government figures. 128 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Employment regime sector. Finally, celetistas are covered by social security instead of by civil service pension systems. This means Political patronage influences the way civil servants are when celetistas retire, they do not burden local govern- hired. In principle, public employees should be hired un- ment budgets. der procedures specified in the civil service statute. This The proportion of local government CLT employ- means that once they are hired, they fall under the rules ment is larger in the south and southeast, the most devel- of that statute and become estatutarios. To evade these oped areas. Since civil service employment has grown at requirements, politicians hire civil servants under the pri- greater rates in the other regions, one may conclude that vate sector labor law (consolidation of labor laws, or CLT). CLT hiring is still popular through the country's munici- Those servants are known as celetistas. In 1989, the year pal administrations. of the last available survey by the Ministry of Labor, 41 percent of civil servants were under CLT jurisdiction. Age structure and schooling A second source of employment data figures pro- vided under Law 4923 show that 2.3 million civil servants On average, civil servants in Brazil tend to be older than had been hired under the private regime as of January private sector workers. For instance, 40 percent of civil 1993 (table 14.3). Of those, 62.5 percent work for local servants are 40 years or older, while this age group makes governments. The same source reveals that only 900,000 worked in state capital cities. Of those working for local governments, TABLE 14.3 only 10 percent (145,000) were hired by state capital cit- Employment of civil servants under ies. This means that a very large portion of CLT employ- private sector labor law (CLT), ment in the civil service is in small city governments. In by governmental level and region, short, for every 100 civil servants, there are 40 celetistas, Brazil, January 1993 25 of whom work for local administrations. Of these 25 celetistas that work for local administrations, 20 work for (number, percent) small local governments. So, the more decentralized the Region Total Federal Stote Local Other level of government, the less it is likely to hire estatutarios. Total The reason may be that by hiring celetistas, public North 131,421 44,643 43,707 43,021 539 managers achieve greater flexibility. Celetistas may be 100.0 34.0 33.3 32.7 .4 hired through more flexible procedures than esta- Northeast 693,349 85,587 194,850 412,912 3,984 tutarios. In addition, celetistas may be fired without 100.0 12.3 28.1 59.6 .6 cause, although firing is very rare in the Brazilian public South 415,054 51.732 53,630 309,692 3,840 100.0 12.5 12.9 74.6 .9 TABLE 14.2 Southeast 838,636 121,930 114.513 602,193 6,716 Civil service employment by employment oo.o 14.5 13.7 71.8 .8 basis and region, Brazil, 1989 Center-west 243,872 82,489 76,605 84,778 1,427 (number, percent) 100.0 33.8 31.4 34.8 .6 Total 2,322,332 386,381 483,305 1,452,596 16,506 Private sector Civil service 100.0 16.6 20.8 62.5 .7 Region Totol lobor lawv stotute Other Capital cities North 3 13,424 124,259 177,782 1 1,383 North 98,029 41,995 40,993 14,660 381 100.0 39.6 56.7 3.6 100.0 42.8 41.8 15.0 .4 Northeast 1,237,883 559,841 582,877 95,165 Northeast 327,520 77,688 191,025 56,824 2,383 100.0 45.2 47.1 7.7 100.0 23.7 58.3 17.4 .7 South 697,727 384,677 302,53 1 10,519 South 90,230 29,842 44,306 15,171 911 100.0 55.1 43.4 1.5 100.0 33.1 49.1 16.8 1.0 Southeast 2,205,916 763,346 1,188,726 253,844 Southeast 210,614 99,699 72.489 36,681 1,785 100.0 34.6 53.9 1 1.5 100.0 47.3 34.4 17.4 .8 Center-west 505,072 209,688 282,872 1 2,5 1 2 Center-west 176.669 78,392 75,824 21.694 759 100.0 41.5 56.0 2.5 100.0 44.3 42.9 12.2 .4 Total 4,960.022 2,041,811 2,534,788 383,423 Total 903,102 327,616 424,637 145,030 6,219 100.0 41.2 51.1 7.0 100.0 36.3 47.0 16.1 .7 Source: Ministry of Labor: RAIS- 1989. Source: Ministry of Labor; Law 4.923/65. PAY AND EMPLOYMENT ISSUES IN THE BRAZILIAN CIVIL SERVICE 129 TABLE 14.4 Salary structure Civil service sector and total formal employment by age group and region, Compared with the total formal sector, extensive experi- ence and better education do not produce a noteworthy salary difference for the civil servant. The pay structures (number, percent) for the two groups are similar (table 14.6). The only Workers Workers Workers'cage striking difference between the two groups is the large Region Totol under 40 40 and obove not defined number of civil servants with an undefined pay struc- Civil service ture: 13.9 percent, against 7.0 percent in the formal sec- North 313,424 207,721 103,030 2,673 tor as a whole. The highest proportion of non- 100.0 66.3 32.9 .9 respondents-in both the civil service and the total for- Northeast 1,237,883 720,010 507,822 10,051 mal sector-is in the northeast, 29.5 and 15 percent 100.0 58.2 41.0 .8 respectively. South 697,727 423,607 270,680 3,440 Two nonexclusive conclusions may be drawn: First, 100.0 60.7 38.8 .S the human resources administration of the civil service Southeast 2,205,916 1,259,249 939,009 7,658 may be unable to meet the annual Ministry of Labor 100.0 57.1 42.6 .3 reporting requirements. Or, second, public agencies may Cerner-west 505,072 327,865 175,992 1,215 consciously omit such data in order to prevent disclosure of salary information. Under either hypothesis the control Total 4,960,022 2,938,452 1,996,533 25,037 of . 100.0 59.2 40.3 .5 ofcompensation policies is, at best, precarious. Unless the 13.9 percent of civil servants with unde- Total formal sector North 904,372 676,668 215,249 12,455 fined pay structures are concentrated around some point 100.0 74.8 23.8 1.4 in the civil service salary structure, the formal sector and Northeast 3,733,136 2,623,517 1,076,588 33,031 civil service structures are similar. This reflects some un- 100.0 70.3 28.8 .9 derpayment for civil servants' higher human capital. It is South 4,165,822 3,150,385 991,480 23,957 possible that in more recent years underpayment has been 100.0 75.6 23.8 .6 aggravated by the financial crisis. Southeast 13,998,572 10,298,633 3,590,772 109,167 Historically the minimum wage in Brazil has been 100.0 73.6 25.7 .8 very low. It has remained around $40 to $60 per month.' Center-west 1,402,637 1,037,341 359,946 5,350 If the monthly wage equals $50, 42 percent of Brazilian 100.0 74.0 25.7 .4 civil servants make up to just $1,800 a year, and only 20 Total 24,204,539 17,786,544 6,234,035 183,960 percent make more than $4,200 a year (table 14.6). 100.0 73.5 25.8 .8 Those are not encouraging figures given that civil ser- Source: Ministry of Labor: RAS- 1989. vants include school teachers, police officers, doctors, and health care personnel. In early 1993, the monthly up just 26 percent of the total labor force (table 14.4). entry-level salary of a doctor in Sao Paulo-the richest Even in the north and center-west, regions of recent Brazilian state-was about $200, based on a four-hour population influx and economic expansion where the civil working day (Gazeta Mercantil 1993). For a nurse, the service population is younger than the norm for civil monthly entry-level salary was $220, based on an eight- service, civil servants as a group are older than the total hour working day. labor force. In sum, first, the civil service has grown in recent In addition to being older, civil servants, on aver- years, but is still relatively small compared with the total age, are better educated than private sector workers. population. Second, the laxity of public sector hiring ar- The proportion of civil servants with less than eight rangements is used to evade requirements of the civil years of schooling is 28 percent. Though this is a large service statute. As a result, public sector employment use proportion, it is smaller than in other sectors (table of the private sector labor law is expanding, mainly at the 14.5). On the other hand, 33 percent of Brazilian civil local government level. Third, civil service jobs require servants have at least some secondary school educa- more education and skills than those in the private sector tion, and 23 percent have some college education. This if the effectiveness of the public sector is to be improved. contrasts with the corresponding figures for the total Fourth, civil servants' pay levels are nonetheless very formal sector as a whole: 23 and 12 percent, respec- low-lower than pay levels for workers in the private tively. formal sector. 130 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Legal and institutional changes points to the low pay and poor morale of these civil ser- vants. For instance in Brasilia, low-level civil servants to- day work just four hours of a required eight-hour day. The In the past three years the federal Department of Admin- author (among others) has observed this. Salaries are so low istration, which manages the civil service, had four secre- that civil servants have to eam a second income to survive. taries. Similarly, frequent turnover occurs at the top lev- One inference may be drawn from a recent adminis- els of state and municipal government. The effect is a lack trative decision about salary adjustment for federal civil of continuity in policy-making and policy implementa- servants. At the end of the first quarter of 1993 there tion. Policies are adopted and discontinued before any was to be a general salary adjustment for cost of living. evaluation of their effects. After a highly publicized debate wich the federal admin- istration, the president selected a more generous offer Pay levels and morale which was supported by the departments of labor and of federal administration. He gave a general 33 percent in- Lack of coherent and permanent human resources poli- crease in base salaries. The other offer, recommended by cies, combined with extremely low salaries, have severely the department of the treasury, was for a general in- undermined civil servants' motivation and commitment. crease of 10 percent. The magnitude of these proposed Attitudinal and behavioral surveys among civil ser- increases suggests the dramatic fall in civil servants' pur- vants are rare in Brazil. Anecdotal evidence, however, chasing power. TABLE 14.5 Education level of civil service and total formal sector workers, by region, Brazil, 1989 (number, percent) Education completed Education level Region Totol Less than 8 yeors Up to 8 yeors Some secondory school Some college not defined Civil service North 313,424 86,082 54,931 1 10,670 53,727 8,014 100.0 27.5 17.5 35.3 17.1 2.6 Northeast 1,237,883 401,284 153,455 418,819 216,61 1 5,724 100.0 32.4 12.4 33.8 17.5 .8 S-outh 697,727 207,692 79,280 189,245 215.786 5,724 100.0 29.8 11.4 27.1 30.9 .8 Southeast 2,205,916 579,095 309,584 716,793 579,610 20,834 100.0 26.3 14.0 32.5 26.3 .9 Center-west 505,072 123,255 52,899 187,248 91,654 50,016 100.0 34.9 10.4 37.1 18.1 10.0 Total 4,960,022 1,397,408 650,149 1,622,775 1,157,388 132,302 100.0 28.2 13.1 32.7 23.3 2.7 Total rormal sector North 904,472 377,089 138,164 273,423 94,817 20,979 100.0 41.7 15.2 30.2 10.5 2.3 Northeast 3,733,136 1,682,489 425,726 1,075,022 441,820 108,079 100.0 45.1 11.4 28.8 11.8 2.9 South 4,165,822 2,144,438 575.861 881,594 511,333 52,596 100.0 51.5 13.8 21.2 12.2 1.3 Southeast 13,998,552 7.189,333 1,858,388 2,982,672 1,773,192 194,967 100.0 51.3 13.3 21.3 12.7 1.4 Center-west 1,402,637 541,426 178,077 416,873 187,444 78,817 100.0 38.6 12.7 29.7 13.4 5.6 Total 24,204,619 1 1,934,775 3,176,216 5,629,584 3,008,606 455,438 100.0 49,3 13.1 23.3 12.4 1.9 Note: Up to 8 years' counts first grade and following grades; some secondary school" includes secondary school graduates; some college includes college and higher-level graduates. Source: Ministry of Labor; RAIS- 1989. PAY AND EMPLOYMENT ISSUES IN THE BRAZILIAN CIVIL SERVICE 1 31 Decentralization and privatization To correct this situation, two kinds of policies may be used. One would transfer the lost revenues back to the The federal Department of Administration uses a very federal government. The other would transfer the burden centralized model to manage the federal civil service. At of delivering some public services to state and local gov- the state and local levels, each government manages its ernments. Apparently, the second solution has a large public employees. Many services are delivered at the fed- probability of being selected. This will not be a carefully eral level, including health care, college education, high- thought out decision, however. Instead, the choice may way construction and maintenance, federal police, profes- simply be the result of the central govemment's inability sional training, unemployment insurance, and social to manage its highly centralized civil service system. security and workers' compensation. State or local admin- For instance, the federal government has recently istrations deliver some of those services and others, such submitted a bill to the congress that would decentralize as public sanitation. the National Institute of Public Health. Under the bill, The 1988 constitution transferred a large share of civil servants in the federal public health system would be revenue from the federal government to the state and local transferred to state and municipal administrations. governments. However, there was not a corresponding At the same time, the public sector's inability to transfer of responsibilities to those two levels. So today, the invest and expand is opening many public services to federal administration has to deliver the same services it possible privatization. Highway building and maintenance, was supposed to deliver before 1988, with fewer resources. prison administration, basic education, and public trans- TABLE 14.6 Civil service and total formal sector pay structure by geographic region, Brazil, 1989 (number, percent) Pay as a multiple of minimum wage Region Totaf Up to I to 3 times 3 to 7 times More than 7 times Pay not defined Civil service North 313,424 42,234 121,995 55,198 54,992 39,005 100.0 13.5 38.9 17.6 17.5 12.4 Northeast 1 237,883 191,854 365,080 177,011 138,888 365,050 100.0 IS.5 29.5 14.3 1 1.2 29.5 South 697.727 46,800 318,435 182,358 109,528 40.606 100.0 6.7 45.7 26.2 ! 5.7 5.8 Southeast 2,205,916 135,243 696,961 690,415 470,721 212,576 100.0 6.1 31.6 31.3 21.3 9.6 Center-west 505,072 36,5975 123,374 110,935 203,350 30,816 100.0 7.2 24.4 22.0 40.3 6.1 Total 4,960,022 452,728 1,625,845 1,215,917 977,479 688,053 100.0 9.1 32.8 24.5 19.7 13.9 Total formal sector North 904,472 904,472 88,952 404,402 189,508 78,552 100.0 9.8 44.8 21.0 15.8 8.7 Northeast 3,733,136 523,621 1,615,424 575,81222 460,101 558,178 100.0 14.0 43.3 15.4 12.3 15.0 South 4,165,822 263.880 2,111,312 1,014,586 557,847 218,157 100.0 6.3 50.7 24.4 13.4 5.2 Southeast 13,998,552 814,315 5,771,521 3,930,183 2,742,872 739,661 100.0 5.8 41.2 28.1 19.6 5.3 Center-west 1,402,637 110,493 542,446 291,645 363,094 94,959 100.0 7.9 38.7 20.8 25.9 6.8 1,689,507 Total 24,204.619 1,801,261 10,444,125 6,001,734 4,266,614 100.0 7.4 43.1 25.0 17.6 7.0 Source: Ministry of Labor; RAIS- I 989. 132 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN portation are services being seriously considered for trans- This principle of job security is often cited as an fer to the private sector. obstacle to civil service reform. The claim is based on the arguable association between civil service reform and Effects of the 1988 constitution downsizing. Because it prevents downsizing, the argument goes, job security is incompatible with reform. The 1988 constitution has substantially changed some rules affecting the civil service.2 Retirement. The constitution's treatment of retire- ment has created serious problems for public finance. Executive branch competence. One of the most impor- First, the document kept length of service as the criterion tant changes in the constitution is the distinction that for retirement. Second, it established the equivalent of was made between the executive branch, on one hand, length of service acquired in the public sector. Third, it and the judicial and legislative branches, on the other, in confirmed the level of retirement pension in the civil terms of competence to decide about the structure of service at the level of the salary when last employed by federal administration agencies. According to the new the governr.ient. The combination of these rules is a strong constitution, the executive branch is the only branch that incentive for early retirement and cause for distortions. cannot independently decide how to structure itself. The Many civil servants, still in their productive life cycle, president must submit any decision on that matter to the may retire. Some retired workers are even rehired in a congress. By contrast, the legislative and the judicial different public sector job. branches are free to define the structures and functions of their agencies. Public sector unionism. Perhaps the most important change introduced by the new constitution was its exten- Equal pay for equal jobs. The 1988 constitution also sion to civil servants of the right to organize unions and to established the principle of isonomia-equal pay for equal bargain collectively. Before 1988 civil servants bargained jobs. This should apply to the civil service as a whole, at informally with public sector management through "asso- each respective level. Thus, civil servants in the federal ciations," organizations that unofficially performed the administration, working under the same job designation, role of unions. The labor movement in the public sector should get the same pay and the same treatment no mat- was growing rapidly, and strike activity was intense ter which government branch they work for. (Rodrigues 1992). Reflecting that reality, the constitution After five years isonomia remains just a principle. simply formalized the situation and allowed public sector Equal pay has not been established. Since salary differen- unions to legally perform their role. tials across government branches are large, and since at- Still, the formalization of collective bargaining has tempt toward equity should raise lower salaries to higher brought change. First, public sector unions have increased ones, adherence to isonomia would mean a large increase their density and their bargaining power. Second, they in personnel costs. For this reason, the constitutional goal have successfully brought some disputes to the labor probably will only be reached in the long run. courts. Although the labor courts are supposed to have jurisdiction over only private sector workers, the hiring of The single employment regime. Under the 1988 con- many civil servants under the CLT regime has enabled stitution, civil servants are to work under a single re- unions representing celetistas to submit disputes to the gime, the statutory one. This would mean that all labor courts. celetistas would have to become estatutarios. This goal Collective bargaining in the public sector in every has not been reached (see first section of this chapter). country is complex. Compared with the private sector, For local governments, the single statutory regime ap- public sector management is less able to resist union de- pears an elusive, remote goal. Transformation of mands. This is because the market mechanisms that affect celetistas into estatutarios would increase current per- the private sector take longer to work in the public sector. sonnel expenditures and create future burdens, such as Second, collective bargaining, when used to its limit in the retirement pensions. public sector, may be less than democratic. Through col- lective bargaining, a minority of civil servants may impose Job security and "availability." The 1988 constitution their interests on the majority of the citizenry (Wellington allows continuation of the practice of "availability" and Winter 1971). In Brazil, all this is aggravated by the (disponibilidade): civil servants who are considered redun- unions' right to take disputes to labor courts, 3o that dant are labeled "available." They continue making their judges' decisions can affect the allocation of public re. salaries, but need not report for work. sources normally determined by the government budget. PAY AND EMPLOYMENT ISSUES IN THE BRAZILIAN CIVIL SERVICE 1 33 Reflecting the complexities of this issue, the su- turnover among top public sector management. Enlisting preme labor court ruled against the right of collective union cooperation with civil service reform, however, will bargaining for civil servants. It is not yet clear how the require more cooperative attitudes among government constitutional right to bargain collectively, assured to and the unions. The unions are most likely to cooperate civil servants, will be combined with the resource limita- with reform if bargaining is decentralized and if there is tions, and with the need for the three branches of gov- competition within the union movement (Cutcher- ernment to remain autonomous. Gersenfeld, Bodah, and Patterson 1992). Both conditions may emerge in the Brazilian public sector in the near Prospects for pay and employment policies future. If unions see a change in attitude, they may view civil service reform as something that can benefit civil Current trends-outlined in the two previous sections- service. point to suggestions for the design of a successful civil Sixth, with decentralization and union cooperation, service reform in Brazil. private sector compensation policies could be introduced The first conclusion is that civil service reform should in the civil service-in particular, a performance-related be addressed from a long-run perspective. Recent experi- pay policy, which has been adopted by the civil services of ence has shown that there are no quick miracles to solve several countries in the OECD (Maguire and Wood 1992). problems created and aggravated during decades. This Since salaries are so low in Brazil, real salary increases means that reform is not a one-administration task. It should be a key part of the reform. Performance-related should, instead, be a continuous process negotiated by pay schemes could connect real compensation increases social actors and included in further reform of the consti- to performance achievements. rution. Additionally, performance-based compensation could Second, the success of civil service reform, particu- gradually replace salary supplements, which are more than larly the salary problem, will depend on a healthy and 50 percent of civil servants' pay. Salary supplements are growing Brazilian economy. This is not to say, however, often used as a device to circumvent salary controls and that reform should wait for stabilization. On the contrary, have no relationship to market conditions or job perfor- both should be addressed immediately. mance. By contrast, performance-related pay could intro- Third, in light of the size of the country and the duce a common interest in performance among manage- already existing trend to decentralize provision of public ment and employees. It would also be consistent with services, civil service reform should be simultaneously decentralization and promotion of competition within the considered for the three levels of government. If the civil civil service. service comprises just 3 to 4 percent of the Brazilian Civil servants may be willing to earn less pay than population, the main problem is not the size, but the their experience and education warrant in return for job distribution of the public work force among the three security. If this is correct, it may be that civil servants levels of government and across regions. Reform should prefer job stability to competition. In that case, public concretely consider transferring civil servants among lev- sector management should consider adopting perfor- els of government and among regions. Certainly this mance-related pay for groups rather than for individuals, should be a voluntary process. so that individuals will not feel threatened. Fourth, the possibility of privatizing some public sec- Seventh, civil service reform needs to address is- tor activities poses a new set of labor issues. For instance, sues related to retirement. Reform of social security, once some services are performed by private agents, it will also on the structural reform agenda in Brazil, should be possible to compare pay, performance, and working include some articulation with civil service reform. The conditions of public and private sector workers. Thus, fact that civil servants are older than private sector through collective bargaining and demonstration effects, workers means that retirement pensions will put in- compensation and other human resources policies in the creased pressure on public resources if a single statutory public sector may become similar conventions in the pri- regime is implemented. There is, however, a positive vate sector. side to this. There are increased opportunities to down- Fifth, connected with the reality that unions and size through attrition or to replace older workers with collective bargaining are in the Brazilian public sector to newly hired ones. stay (Mitchell 1988) is the need to foster union support Last, civil service reform will not be completed if it is for civil service reform. Public sector reformers should not accompanied by an aggressive policy to promote civil take advantage of the unions' permanence and long-term servant training and basic education. Although civil ser- prospectives to counterbalance the problematic constant vants are better educated than private sector workers, 134 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN their overall education levels are low. Because the civil Di Pietro, Maria Sylvia, ed. 1993. "Administracion Publica." First service labor force has achieved job security, and thus will draft of a paper with suggestions for reform of the Constitu- be in place for the long term, it is worthwhile to invest in tion in Brazil. Constitution Reform Program, University of improving existing human resources. Sao Paulo, Advanced Studies Institute. Sao Paulo. An educated and well-trained labor force should be Gazeta Mercantil. 1993. "Sidisaude Diz que Greve Atinge 35% the basis for improving the provision of public services. dos Hospitals." May 6, p. 8. Macedo, Roberto, and Jose Paulo Z. Chahad. 1990. "Public Sector Employment in Brazil in the 1980s." Paper prepared Notes for the World Bank. Washington, D.C. Maguire, Maria, and Robert Wood. 1992. "Private Pay for Public Work?" The OECD Observer 175 (April-May):2931. 1. All dollar amounts are U.S. dollars. Mitchell, Daniel J.B. 1988. "Collective Bargaining and Compen- 2. This section is based on the work of a group of special- sation in the Public Sector." In Benjamin Aaron, Joy M. ists in public administration led by Maria Sylvia di Pietro (1993), Najita, and James L. Stern, eds., Public Sector Bargaining. who are working in the program for constitution reform at the IRRA/Seires, 2nd edition. University of Sao Paulo. Rodrigues, Leoncio Martins. 1992. "A crise do sindicalismo no primeiro mundo." In FUNDAP, 0 direito de sindicalizacao do servidor publico e administracao publica. Sao Paulo. References Saldanha, Rosangela, and Rosane Maia Saldanha. 1988. Abrndo a caiza preta (estudo sobre a evolucao do emprego na admi- Cutcher-Gersenfeld, Joel, Mathew Bodah, and Terry Patterson. nistracao publica estadual e municipal). Ministerio do Tra- 1992. "Determinants and Consequences of a Mutual Gains balho (Brazilian Labor Department). Orientation Public-Sector Collective Bargaining." In IRRA, Wellington, Harry H., and Ralph Winter, Jr. 1971. The Unions Proceedings of the Forty-Fourth Annual Meeting. and the Cities. Washington, D.C.: The Brookings Institution. PAY AND EMPLOYMENT ISSUES IN THE BRAZILIAN CIVIL SERVICE 135 Selected Discussion Points Discussants: Gary J. Reid and Ishac Diwan The issues of civil service compensation and downsizing comperitive with what the person you would want to hire were taken up by this roundtable's invited discussants, might be able to get in the private sector. And that's a Gary Reid and Ishac Diwan. problem. The result of this "systematic" effort is a terribly unsystematic relationship between public and private sece G. Reid: Ishac Diwan and I have divided the responsibili- tor salaries. ties for commenting. I'll focus on pay and he'll focus on In the background paper I drafted for this confer- downsizing. The paper that raises salary issues most di- ence (chapter 8) 1 cite a number of comparisons of pub- rectly was just presented by Professor Kitchen and I have lic and private salaries by rype of position to illustrate a number of comments on that. how you get terribly unsystematic relationships. In Tri- Probably the most important thesis Professor Kitchen nidad and Tobago, for example, a permanent secretary put forth is that there is no systematic basis yet for estab- in the public sector makes about 63 percent what a chief lishing civil service pay scales-and that this is a niajor executive officer (a comparable position) makes in the problem. I agree that it's hard to see what systematic private sector. justification is behind civil service pay scales. Nonethe- On the other hand, although most of the tatios in less, I think a lot of civil service pay scales do have Trinidad and Tobago range between about 50 and 70 elaborate systematic bases. And I have an alterinative percent, some ratios get up to around 100 to 125 percent. proposal that I think makes sense. For example, if yoti compare a computer operator level 3 The sort of standard civil service pay scale that you in the public sector with the equivalent computer opera- run into in Latin America-and I don't think this is tor in the private sector you get a ratio of 125 percent. So atypical for most of the world-is set by what I call "tech- that is a littLe bit above what they can get in the private nical criteria." These follow the same distinction that sector. The comparisons may not be perfect but they are Moises Naim mentioned earlier about ways to set pay a lot closer than you get when you look at a scholar rank scales-technically, economically, or politically. For tech- 12 ins the public versus private sector because a scholar nical criteria, some office does detailed job descriprions rank 12 includes a nonhomogeneous set of positions. that include identification of skill requirements and re- There is often a systematic basis behind the salary-setting sponsibilities. These are sometimes in excruciating detail for rhese scholar positions, but, as I said, it's done in an and sometimes fairly casual. Every joh position is de- economic vacuum. scnibed and then-in the store elaborate systems-is as- I want to reconiuiend a differenit approach. The pub- signed points. In this way, salary increments can be deter- lic sector coniperes with the private sector for workers. If mined on the basis of the particular skills and it wants to land workers ofa particular quality it has got to responsibilities borne by a position. The positions are provide wages that are competitive with those available in described and are assigned numbers on the basis of the the private sector. The appropriate way to set a public scale, which then is used to assign a salary. sector salary is to look at private sector comparators for Unfortunately, this technical criteria is set in an eco- comparable positions and decide how much you and the nomic vacuum. It has nothing to do with the opportunity public sector can afford to pay, given that yout have to cost for the individuals you are trying to recruit into those staff all your positions. Once you have established the positions-and it may or may not yield a wage that is amount you can pay, having priced out a roll of possible 1 36 C V I SERI CE REiORs IN LATIN A11ERICA AND TaF CARMsEAN positions, you're going to make hiring decisions to pay phenomenon or, as he said, something you discover after that same ratio for every position. the fact rather than before. Compression ratios are, from Or, alternatively, if you want to make a concession to my point of view, irrelevant but we end of paying a lot of certain egalitarian standards, then you will specifically attention to them. We focus on compression ratios for allow that ratio to vary systematically across skill levels to two main reasons. First, they are easy to calculate be- reflect your egalitarian preferences. So, for instance, you cause it is easy to identify the top and the bottom of the might say at the lowest end we will pay 70 percent of what public sector salary scale. Second, a compression ratio is is available in the private sector and at the highest end we something you can put your hand around and say, this is will only pay 50 percent in order to assure a little more bad and we should change it. But, in fact, there is no quality in the public sector compared with the private optimal compression ratio. sector at the higher level. So that's an option. I don't think compression ratios ought to affect your The key point here is that there is an explicit link decisionmaking. You ought to be in the game of gathering between public and private sector salaries and any diver- private sector salary data so you can make the appropriate gence between the two is justified either on egalitarian comparisons. Those data turn out to be pretty readily grounds or on the grounds that the public sector can available. I had no trouble getting them in Trinidad, in afford to pay 100 percent; but, because we typically pro- Venezuela, in Chile, and in Argentina. I'm sure there are vide job security not found as often in the private sector, some countries where you can't get the information but we do not to have to pay as much. The portion that you it's not as hard as you might think and it is not very do not have to pay will vary with market conditions. expensive. There are private sector firms out there that What you can do is price it out and decide what the provide those sorts of services all the time because private public sector is willing to pay altogether and then main- sector firms like to have these comparisons for setting tain this fixed relationship. This is spelled out in detail in their own wages. my report if you want to see the rationale for moving into this type of system from the standard escalafon (scale) 1. Diwan: As many people have done today I should start based on technical criteria. with the buzz word. I am not a public sector specialist but If you're starting with the standard escalafon and you I'll try my best to discuss the papers we heard this after- want to move in this direction you will want to increase noon. I want to try to highlight two aspects of downsizing some salaries and maybe decrease other salaries. Instead that were discussed. The first has to do with compensation of cutting salaries, I would advise that you freeze salaries schedules in downsizing and the second with the role of at current levels, allow inflation to eat away the ones that compression ratios in attrition-and there I'll try to con- are too high, and continue to make increases in the ones tradict a bit what Gary tried to convince you of. that are below your target-until you finally get every- I'll try to stick to these two points, both taken from body at your target levels. That's a less painful way of the paper, "Public Sector Retrenchment and Severance moving in the direction you want to go. But if you're Pay: Nine Propositions" (chapter 10). When I started going to use that strategy, it's important that you have it writing the paper I wanted to call it Three Propositions, so spelled out explicitly in advance and that you set up let's hope I can keep to two points this afternoon. mechanisms to ensure that you will stick with it. I think On the first point, I will argue that it pays to develop you can establish a systematic basis for establishing civil more sophisticated severance mechanisms and more so- service pay scales along the lines that I just outlined. phisticated contracts, and to use voluntariness as a means I want to raise a subpoint to this: what should the to elicit self-selection. And there I want to draw on an relationship be between public and private sector pay? intuition that many Latin Americans have these days, Each country would have to decide the ratio it finds which is that reductions are complex, certainly the reduc- acceptable, and I can see the ratio varying over time tion options that we've seen. I want to argue that re- depending on how satisfied a country is with the quality of trenchment and layoffs are very similar to government civil servants it's able to recruit and the fiscal resources efforts to reduce not financial debts but other social li- available. Throughout all of this salary setting, it is obvi- abilities, such as job security. ously essential that you pay attention to the fiscal con- On the second point, I maintain that we shouldn't straints of the country; it would clearly be suicide if your think of choosing between downsizing and attrition. public sector could not afford raises. Rather, we should think of sequencing the two in a way Another question: optimal compression ratios. I'm that makes sense. Let me start with the first point. completely in agreement with Professor Kitchen that I want to argue that voluntary measures such as those compression ratios are, as I would call them, an epi- we heard about for Trinidad, Argentina, and other coun- SELECTED DISCUSSION POINTS 137 tries are useful. But first note that having these be volun- option for everybody they would have had to be much tary is not necessarily a commitment to not expropriate more generous. By the way, this option offered unem- worker rights. Rather, workers can be given a choice ployment only for eighteen months because, if it were between various options and still lose out. So it is impor- offered for longer, people would keep looking for a job rant to find ways to spread the burden as widely as pos- indefinitely. (There are, of course, other methods to ad- sible by eliciting information about the extent of the po- dress this last problens.) tential losses to particular individuals. Get them to pick The third option-the guarantee option-is a costly what is most valuable to them and, in so doing, minimize one. On the other hand, keeping those workers in the the fiscal cost-what needs to be given to them. public sector would also have been costly and this option, Instead of theorizing about this, maybe the best way when you think about it, pays only under one condition- is to mention a program that Spain offered between 1985 that the worker who exits is more productive in the pri- and 1988. The program was a manual of three options vate that in the public sector. If he or she is more produc- offered to workers in the public sector. At any time tive in the private sector then it certainly is a good deal for workers could pick one of the options. The first oprion the firm, the public sector, and the employee-since the was early retirement, a well-known option. It was chosen pie is bigger. The pie could be redivided between the by the end of the prograns by about 21 percent of those three in some useful way, and I think that's what the exiting service. The second option was a payment of guarantee option does. cash with employment compensation for eighteen A fourth observation: the program was opened for months after the time of exit. This was picked by 40 four years-a long rinse. This allowed workers to retire at percent by the end of the program. The third option was a certain speed. If they retired all at once, unemploy- a guarantee of 80 percent of the wage at the moment of ment would be too large; in a sense the value of these separation. The government was committed to pay options wouldn't be high enough. Keeping the program whatever subsidies were needed to private sector em- open for a long while allows exits to take place voluntar- ployers to hire these employees-and, in addition, this ily and, most likely, at a speed consistent with the rate at option had free retraining. These employees were re- which the market cats absorb new entrants as well as the trained and moved to the private sector. Of those exit- newly unemployed. And I think that is a key point in ing, 35 percent chose this option. building progranss. Now let's describe some of the characteristics of this A final observation: the thlird option offers only 80 menu. First, it is a voluntary choice with a restricted set of percent of the previous wage. We expect all three options options. Each worker picks what firs his or her needs best. to actually expropriate from workers about that amount- In a sense if the public sector knew exactly the character- 20 percent. Now if these workers also had the choice- istics of all workers, the public sector could have chosen and here they did-of staying in the public sector arnd if for each worker. It is the inability to collect that consplex public sector wages were not reduced, tsobody would set of information that makes this approach useful. In choose any of these options. It would be more valuable to terms of the options, early retirement is useful in many stay in the public sector. Therefore, to spread the bhrden respects. Ir minimizes the effect of layoff unemploynsent. of the program as widely as possible and to make this This is useful for various reasons: beyond the fact that program work, the remaining workers' salaries also have unemployment is not good, early retirement also reduces to be expropriated to some extent. This can be done the need to compensate other exitors who would have to through wage reductions but need nor be. It can be wait in line until they could find a job. The larger the through the enforcement of higher standards, which is unemployment rates, the harder it will be to find a job and what happened in this case. the nsore the job-seeking exitors will have to be compen- Finally I want to deal with the issue of adverse selec- sated. The early retirement option reduces that need. You non-or brain drain. In this program they refused tc allow would expect it to be quite generous because it reduces this-that is, the prograns was voluntary within well-de- the cost for the government of the other options. fined boundaries. There are other exanuples of complex The second option-the cash offer with unensploy- but useful schemes and these are along the lines of index- ment compensation-you would expect to be picked by ing payments to various characteristics such as length of the entrepreneurs. Those who need the cash to start a service, most recent wage, number of years of denied business, those who value the equity nsost. You wouldn't service, and so on. expect it to be picked by those who want guaranteed But let me niove on to my second point: the role of jobs; the cash would be too little an inducement for compression ratios in attrition. Here I want to think of them. If the government had wanted to offer only this attrition in its widest sense, not just freezing hires but also 138 CIVIL SERCE REnOuM- IN LTNMFRICA-AND THE CalBtEta allowing the wage schedule to compress-which occurs If public sector salaries are going down you would often-by not permitting wage increases and holding on expect many workers who are not enjoying large rents, to the minimum wage. This gives you a compressed wage those who have good opportunities in the private sector, structure over time. to exit voluntarily-because the alternative is not much I find this interesting for the following reasons. We worse. On the other hand, if you offer severance to every- observe wage compression often so we need to try to body who exits, these same people would wait to get the understand why we frequently see it taking place before severance pay and then exit. It makes a lot of sense to go downsizing and how efficient-or inefficient-that is. through attrition first to make sure some people exit with- What I want to argue is that it makes sense to start with out having to be paid severance-and offer the severance attrition, and after a few years, follow up with a sever- package later. Of course the cost is inefficiency due to ance package and wage decompression. The idea behind wage compression but at the same time you have a benefit this is simple. that could compenisate for this cost. SELECTED DISCUSSION POINTS 1 39 PART IV Recruiting and Retaining Personnel and the Higher Managerial Ranks 16 Senior Civil Service in Argentina: Creating an Elite Managerial Corps Oscar Oszlak, with Emesto Gantman "It is of course essential to the public service that funci6n ejecutiva [positions with executive responsibili- men of the highest ability should be elected for ties] in Argentina). the highest posts." (Northcote-Trevelyan Report The elite corps approach, patterned after France's on the Organisation of the Permanent Civil Ser- ENA model, has-to my knowledge-only been adopted vice, 1854) in Argentina. Members of this corps, the Administradores Gubernamentales (AGs), are recruited through a very In recent years Latin American countries have begun to strict, competitive system after a complex selection pro- pay renewed attention to the improvement of their hu- cess and a specialized training program. Upon entering man resources, particularly at the central administration the corps, AGs, who are assigned to various staff, consult- level. The new focus stems from the structural adjustment ing, and managerial positions in the public service, are policies adopted by most governments in the region, which responsible to both the Secretary of the Public Service have led to various forms of downsizing, including reduc- and the official in charge of the unit to which they have tions in levels of public sector personnel. been assigned. A lower number of civil servants-and the corre- A public sector-wide career civil service is a much sponding reduction in personnel expenses-allows gov- more costly and difficult system to implement. It requires ernments to create new employee and management in- a radical reduction in personnel levels, and sophisticated centives systems (Reid 1992), while introducing new rules management tools to deal with the new rules and proce- of the game regarding recruitment, training, evaluation, dures established under a meritocratic system. Bolivia is promotion, accountability, and employment stability. presently establishing a program of this sort; and Argen- Latin American governments have tried in several tina, under its Sistema Nacional para la Profesi6n ways to upgrade the quality of their civil services, includ- Administrativa (SINAPA), is following a similar course. ing establishing a few key positions, an elite corps, a public Finally, almost every government in the region has sector-wide career civil service, or an internationally funded, introduced, to a greater or lesser extent, a system that parallel consultants' network. employs outside specialists as consultants in middle- and The first method seeks to improve performance in top-level positions (even in high managerial positions), public management by relying on the critical role played through parallel contracting with intemational donor or by small strata of public managers-usually not exceed- financial agencies. In some countries, as the number of ing 5 percent of the total central administration staff- consultants has grown,' there have been problems of eq- assigned to key technical-cum-managerial positions uity, discrimination, conflicting loyalties, and sometimes (policy design, steering, and coordination positions, serious disruption of day-to-day activities, leading to a highly specialized functional or sectoral posts, and the search for more permanent solutions. like). In a way, this system is akin to the "Senior Execu- Argentina is probably the only country in the region tive Service" created in the United States under Presi- currently using all these methods to upgrade its civil ser- dent Carter, although it admits several variants in dif- vice. This chapter examines one of these systems-the ferent countries (for example, the 600 positions under Cuerpo de Administradores Gubernamentales (CAG)- the sistema de cargos clave [system of key positions] in order to assess the strengths and weaknesses of this originally proposed in Bolivia, or the 465 cargos con approach to civil service improvement. Almost nine years SENIOR CIVIL SERVICE IN ARGENTINA CREATING AN ELITE MANAGERIAL CORPS 143 have elapsed since this experiment was started-a period the bureaucratic culture, posing a severe challenge to which, though not long, is adequate for a preliminary most reform efforts. evaluation and possibly for drawing some lessons for simi- Under these circumstances, it is understandable that lar endeavors. The other institutionalized approaches (for reforming the state took mainly the form of long-term, example, career civil service and key positions) are still carefully designed initiatives intended to transform rigid too recent to assess their success, failure, or potential. organizational structures, improper behavior, and poor And parallel contracting of experts through intemational administrative practices over long periods of time. Among organizations is widely regarded as a nonpermanent, un- these initiatives, the creation of the CAG was probably desirable solution. This chapter describes the experience one of the best indications that administrative reform of the CAG, and considers those other civil service re- under the Radical Party government was geared toward gimes as part of its relevant context. technical, incremental, and long-run changes, instead of toward the swift, drastic transformations that occurred Democracy and public sector under the successor Peronist Party government. The CAG was seen as a way to bridge the century-old management upgrading politics-administration dichotomy. With the endless se- quence of military and civilian govemments, top public Ever since the times of Aristotle, merit has been a guiding managerial positions had been filled and refilled at the principle for selecting the most talented people to manage whim of short-lived incumbent regimes. Since the early public affairs (Hood and Jackson 1991). By and large, 1940s the average tenure in office of ministers, governors, programs designed to raise the standards of leadership and secretaries of state had been about one year. Tum- positions in government and business have invoked the over in top-level positions in the civil service was compa- principle of merit. Such was the case of U.S. President rable to this figure. Ineffectiveness was the natural com- Jimmy Carter, who reintroduced merit as a guiding prin- panion of this discontinuity. Professional standards in ciple of the Senior Executive Service created under his public management had little, if any, opportunity to take administration (Lynn 1981). root in administrative practice. However, there are certain political circumstances in By placing highly trained and motivated young pro- which the appeal of this principle becomes paramount. fessionals in key positions of government, a new breed of This was the case in Argentina after the Malvinas war, public managers would be disseminated across the bu- during the country's transition from authoritarianism to reaucracy, thus providing both a critical mass of experts democracy. The transition involved an extraordinary ef- and numerous focal points from which new cultural and fort to reconstruct the cultural and institutional fabric of professional pattems could be diffused. Argentine society. With the advent of the Alfonsfn gov- The philosophy behind establishing an elite corps ernment at the end of 1983, long decades of alternating was quite clear. It was not a matter of training new cadres political regimes, policy orientations, and public sector to do the routine work of govemment better, but rather of management styles came to an end. training them to do things not done before, and with a State reform during this transition period pursued totally new style. The professional profile of the future very limited objectives. Instead of dismantling the state AGs stressed a service orientation, a basic commitment to apparatus, there was still hope of improving its capacity solving the country's hard-pressing problems, and an un- and performance. Rising social expectations under strin- failing allegiance to democratic values. Openness, intelli- gent economic conditions meant there was more, not gence, and common sense-rather than previous exper- less, demand for state-provided goods and services. tise in highly specialized fields-were considered the Privatization carried the stigma of the military-inspired preferable background for these future agents of change. motto "shrinking the state means enlarging the nation," The new approach also aimed at solving a structural as well as negative associations with some ill-fated expe- problem: the absence of legislation allowing the creation of riences under military rule. Decentralization was still a positions subject to free appointment. Under the existing major step farther down a road on which rebuilding fed- rigid structural arrangement, there was a strict correspon- eralism and local governments stood as a priority. dence between directorships and directors: these function- Streamlining was rul'ed out: although the democratic aries could not be assigned to any other functions. Hence, government needed to bring highly motivated, loyal, and if the govemment wanted to make a political appointment dependable personnel into the civil service, stability in to fill a position of high responsibility, it was faced with a public employment was still considered a most valued dilemma: it would either have to dismiss the incumbent right. In turn, authoritarianism was heavily embedded in director, thus violating the constitutionally guaranteed sta- 1 44 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN bility of public employment; or create new positions and, were to embody this ideal. They were to act as agents of at the same time, displace the existing directors to "advi- change and as the source of a necessary cultural transfor- sory" posts. It was very difficult to find people who could mation. In due time, the corps would serve as a model to be meet the three required conditions: personal and political extended to the whole civil service. In Roulet's words, the trustworthiness, professionalism, and experience. AGs' importance derived not only from their mission but Insofar as the CAG attained a plural political compo- from their role as the new model of civil servant: people sition and a satisfactory level of training, the system would recruited because of their own efforts and merit, proud of permit future democratic governments to choose from working for the public sector, and imbued with a sense of within the corps personnel to fill certain positions on the mission, commitment, and esprit de corps (Roulet 1988). basis of personal or political affinity, while preserving the Members of the CAG would carry out planning, ad- spirit of administrative continuity (Groisman 1988). visory, steering, organizational, and high-level coordina- tion functions at all sorts of institutions of national public Creation of the CAG administration. The AGs would be assigned specific mis- sions and, upon completion, would rotate to further as- signments, thus affording exposure to new managerial The CAG was created on November 23, 1984 (Decree responsibilities and a broader experience in public service. 3687). The new legislation put into effect a system for As was pointed out at the presentation of the CAG selecting and training high-level civil servants, but the statute (Decree 2098/87), the corps would break the tra- ultimate goal of the new system was defined as achieving ditional distinction between political and administrative an overall change in the values, systems, and criteria preva- roles, acting as an interface between the two. Horizontal lent in the state apparatus (Groisman 1988). Looking back, mobility was intended to overcome the institutional dislo- the CAG was one of the pillars of the state reform strategy cation caused by administrative feuds. followed by the Radical Party administration.2 The recruitment of the first candidates was widely Soon after the democratic government was installed, publicized in the mass media. The operation was likened a mission of the Secretarfa de la Funci6n Publica (SFP), to the recruitment process for entrance examinations for headed by one of its undersecretaries, visited France to Napoleon's Imperial Guard (INAP 1985). The CAG was gather background information about the ENA system. intended to grow to and stabilize at around 1,100-1,300 The French government provided important assistance to agents-a number insufficient to replace all upper-level the mission, although the idea of imitating the ENA corps managers in the central administration (estimated at was discarded from the outset. about 8,000). As in the case of France, where the ENA had been A thirty-month program of instruction was designed created during the period of reconstruction after World for those candidates making the final cut, a number not to War II, Argentina undertook reform of its civil service at exceed sixty. This meant that the target of 1,200 agents the time it was confronting its deepest economic crisis would only be attained after at least twenty-five years. In and a difficult return to democracy. The new government August 1985, at the opening ceremony of the first found a demoralized bureaucracy, characterized by a gen- PROFAG, President Alfonsfn pointed out that the visible eralized evasion of responsibility. To impose new game results of the project would become apparent only in the rules on a state apparatus so heavily loaded with the very distant future. The full functioning of the CAG institutional and cultural remains of endless political re- would take place after the year 2000, meaning the over- gimes was considered an impossible task. whelming majority of the graduates would end up serving The reform program would require creation of a new future democratic governments instead of his own civil service regime, characterized by a transparent and (Alfonsin 1985). This was an explicit indication of the objective system of open competition and regular evalua- long-run character of the initiative, which, in this regard, tion, as well as by training activities at all levels. (Today's represented a major breakthrough when compared with SINAPA system, introduced by the Menem govemment, the traditional style and timing of previous administrative closely follows this blueprint.) reform projects. At the opening ceremony of the first AG training In sum, with the creation of the CAG, it was ex- course under the Programa de Formaci6n de pected that a critical mass of highly trained and motivated Administradores Gubernamentales (PROFAG), Jorge young administrators would start a chain reaction within Roulet-the first Secretary of the SFP-indicated that the public sector, which would lead eventually to the Argentina's public administration was in need of a new institutionalization of a new culture and style of public breed of civil servant-a servant of the country. The AGs management. The value attached to pluralism and profes- SENIOR CIVIL SERVICE IN ARGENTINA CREIAT.tG AN EU IE CAON R'oIS 1 45 sionalism was to be preserved by an open and competitive 60 percent in the total score of the candidate (70 percent system of examination and selection.3 However, the pos- in the second course); the remaining 30 percent of the sibility of AGs becoming politically active was not dis- score was derived from an oral interview with members of missed. On the contrary, it was even conceived that some the Board of the Instituto Nacional Administraci6n of them could act as "civilizers" of political parties. Fur- Publica (INAP). This interview was structured around a thermore, when the system became fully operational, it subject chosen at random from a prepared list, and served was expected that future govemments would place a siz- to assess the candidate's capacity for analysis, argumenta- able number of AG party militants in cabinet or other tion, and response in the face of unexpected stimuli. political positions (Stuhlman 1988). The final selection was govemed by the total number of vacancies established for each PROFAG class. A sepa- Selection of the AGs rate order of merit was set for civil servants and non-civil servants, with half of the vacancies assigned to each group. Upon review, the preparatory course was not found The successful completion of a study program-both theo- to be worthwhile and was abandoned in the third call for retical and action-oriented-was established as the only candidates. The training goal pursued by the course was means of entering the CAG. In order to take the PROFAG subordinated to the more critical goal, that of rigorous training course, candidates are rigorously selected through and appropriate screening in the selection process. Com- a process that includes two general examinations and a petition for scarce vacancies-only one-third of the can- series of interviews and psychological tests.4 didates were to be chosen for entrance into the real train- The selection process is designed to identify candi- ing program-introduced a level of stress that proved dates meeting the required standards and values: open- incompatible with the learning process. In addition, the ness, intelligence, common sense, strong vocation, demo- fact that sixty frustrated civil servants (of the 120 candi- cratic beliefs, and a problem-solving orientation. Prereq- dates to be eliminated) were doomed to return to their uisites for admission include Argentine nationality; a agencies after failing to pass the preparatory course be- maximum age of 35; meeting entrance regulations estab- came a source of despair and resentment. After describing lished by the Basic Statute of the Civil Service; and pre- some of these findings, an INAP report proposed a more vious graduation from a university after at least four years adequate methodology to complete this third stage of the of instruction.5 selection process (INAP 1987). The selection process begins with a test that includes A number of intellectual, axiological, and attitudinal exercises in language comprehension, general knowledge, variables were weighted in the newly established guide- and logical reasoning. A minimum score is established on lines. These included, for instance, the candidates' capac- the basis of the number of candidates. Those passing to the ity in terms of comprehension, reasoning, and oral and second stage must complete a case study over a fixed time written expression; their conception of social and political span. Each candidate receives a file containing various life in terms of allegiance to democracy and solidarity; sorts of documents, some of which are useful for the diag- their attitude toward change, decisionmaking, and team- nostic and problem-solving work required in the case study. work; their possession of a level of knowledge of the In the initial two calls, the first 180 candidates to sociopolitical reality sufficient to ensure that they could pass both tests were admitted to a three-month prepara- adequately consider the environmental constraints on tory course designed to fill any important gaps in their their work (INAP 1988). knowledge and various professional backgrounds. How- ever, these prep courses were also used as another stage in TABLE 16.1 the selection process. Candidates coming from the public PROFAG candidates, by class and service received a special leave of absence with full salary, performance but in certain cases, their superiors considered their appli- cation for the CAG competition a signal of disloyalty and Number of candidotes First Class Second Class Third Class even objected to or rejected the request for a leave of Total registered 2,491 840 2,506 absence. The rest of the candidates took the course with- Showed up at first test 1,596 553 1,614 out receiving any salary. Passed first test 838 321 405 The contents of the course varied in each case, and Showed up at second test 723 296 383 Passed second test - 184 180 133 included, among other subjects, modules dealing with Admitted to PROFAG' 60 60 75 law, methodology, economics, history, management, writ- a. Upon approval of prep course or series of tests and interviews. ten and oral communication, and so on. Grades weighed source AuAhors caculalionri based on data provided by the SFP. 146 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN TABLE 16.2 Distribution of PROFAG trainees by class, gender, and origin Male Female Class Civil service Non-civil service Total Civil service Non-civil service Total Total First 20 13 33 10 17 27 60 Second' 20 1 5 35 11 1 6 27 62 Third 26 28 54 5 16 21 75 a. Includes two invited participants. Source Author's calculations based on data provided by the SFP In line with these criteria, the new selection strategy represented group in the First Class, among participants included a questionnaire composed of closed-end ques- coming from both the public and the private sectors. In tions to evaluate academic qualifications; a half-hour in- the Second Class, accountants, administrators, and econo- terview with each candidate (after a thorough analysis of mists ranked first on the list, and in the Third Class, his/her curriculum vitae); group workshops to assess can- engineers and system analysts constituted the most sizable didates' capacity for team work; a written test to evaluate group of professionals. Beyond the relative predominance writing skills; and a psychological test to detect any pos- of one discipline or another, it is worth noting the widely sible pathologies. After this preparatory evaluation was varied professional profile of the future AGs. completed, a new interview and a second workshop were As mentioned, calls soliciting PROFAG candidates conducted before the final evaluation. were widely publicized in the mass media. Part of the pro- Table 16.1 contains statistical data on the various motion strategy consisted of mailing applications to all stages of the selection process, classified by class.6 The university graduates registered with professional boards. first observation is the striking difference in numbers be- Except for the Second Class, and despite the low rate of tween those who initially applied and those who actually test attendance already mentioned, the response was un- attended the first test (36 percent, 33 percent, and 36 usual. At the end of 1992, with only thirty vacancies of- percent in the three calls)-a finding that casts some fered-instead of the usual sixty-the number of appli- doubt on the strength of motivation of the massive num- cants reached 3,317, that is, more than 100 applicants for ber of applicants. The proportion of applicants showing every vacancy.7 up for the second test was higher. The admittance rate, In view of this massive response, The National Insti- based on the number of candidates who took the first test, tute of Public Administration decided to do a study to was 3.7 percent, 11 percent, and 4.6 percent in the three find out what motivates applicants to seek entrance to the calls. The sheer numbers attest to the extremely rigorous corps. An INAP survey conducted among the universe of and competitive nature of the selection process, and can applicants to the second PROFAG shows that 13.3 per- be considered a fair indicator of the high level of capacity cent had already tried to be admitted in the First Class. and potential required for admittance to the PROFAG. When asked open-endedly about their motives to become Table 16.2 presents a distribution of PROFAG train- an AG, 35 percent of the candidates indicated "profes- ees by sex, origin (public or privare sector), and class. sional interest" as the most salient consideration, fol- Among the male participants, those employed in the pub- lowed by "eagemess to debureaucratize" (25 percent), the lic sector ranged between 48 percent and 60 percent of "possibility of acquiring new knowledge" (15 percent), the total, while among female participants, the proportion "access to a stable job" (11 percent), a "desire to serve the varied between 24 percent and 40 percent, depending on class. Male students predominated over female, particu- TABLE 16,3 larly in the Third Class (55 percent, 56 percent, and 72 Average age of PROFAG trainees, by class percent, respectively). l .i. The average age in each class, shown in table 16.3, and orgi ranged between 29.5 and 32. Additional data on the com- Closs Civil servants Non-civil servants Total position of these cohorts by age may be found in table 16.4. With regard to academic background, absolute fre. Second, 33 3 I 32.0 quencies found among PROFAG trainees can be observed Third 30 29 29.5 in table 16.5, where the data have been classified accord- a. Includes two Invited participants. ing to Class and origin. Law graduates were the most well- Source. Author's calculations based on data provided by the SFP. SENIOR CIVIL SERVlCE IN ARGENTINA CREATING AN ELITE MANAGERIAL CORPS 147 country" (8 percent), and a "desire to consolidate democ- sense. As with butterflies, PROFAG trainees progress from racy" (6 percent) (Alvarez, Antelo, and Groisman 1985). a larval phase-election into the program-into a long Interviews recently conducted by the authors with a period of hibemation during which the candidate must group of AGs have also considered the question of moti- complete a thirty-month full-time program of instruction vation. Their interest in joining the CAG appears to have before officially entering the CAG. been threefold: (1) to try to improve the public bureau- cracy; (2) to take advantage of an opportunity for profes- Preservice training sional advancement; and (3) to find an honorable job. Although not mutually exclusive, these factors are in line Trainees are incorporated as nonpermanent personnel of with the findings of the previously mentioned survey. One INAP and assigned a salary currently estimated at of the interviewees indicated that, broadly speaking and US$920 a month. Those who already are public employ- on the basis of frequent talks with past classmates and ees are given a special leave of absence at their institu- present colleagues, finding a decent job could be consid- tion and continue to receive a salary. If the amount is ered the foremost motivating factor among non-civil ser- lower than that received by non-civil servants, INAP vants, whereas improving the state apparatus was the pays them the difference. predominant driving motive among civil servants.8 Although the design of the program has changed in each of the three PROFAGs offered so far, the main areas Elements in the CAG career path of instruction have remained almost unchanged: logic and mathematics, sociology and political science, economics, law, public administration, public policy and planning, The PROFAG is the chrysalis phase in the process of management technologies, and oral and written commu- becoming an AG. And it is so in more than a figurative nication. Foreign language courses are also offered. TABLE 16.4 Age and origin of AGs at the time of PROFAG training First Closs Second Clossc Third Class Age group Civil service Non-civil service Totol Civil service Non-civil service Totol Civil service Non-civil service Total 20-24 1 3 4 1 5 6 0 7 7 25-29 9 1 3 22 8 7 1 5 1 3 1 5 28 30-34 9 10 19 7 10 17 18 18 36 35and older I1 4 15 is 9 24 0 4 4 a. Includes two invited participants. Source Author's calculations based on data provided by the SFP. TABLE 16.5 PROFAG trainees by class, origin, and academic discipline First C/ass Second Class, Third Class Discipline Civil service Non-civil service Total Civil service Non-civil service Total Civil service Non-civil service Total Law 6 8 14 5 6 11 4 8 12 Economics 5 2 7 8 6 14 3 13 16 Political science and 3 3 6 0 4 4 1 3 4 foreign relations Sociology 2 1 3 1 3 4 1 0 1 Other social science 1 2 3 6 3 9 3 3 6 Engineerng systems 4 4 8 5 2 7 13 8 21 Architecture 3 2 5 1 5 6 1 3 4 Basic sciences 3 2 5 2 0 2 3 1 4 Agrarian sciences 0 4 4 1 1 2 4 2 6 Health 1 2 3 1 1 2 0 1 1 Secondary Level 2 0 2 1 0 1 0 0 0 a. Includes two invited participants. Source: Author's calculations based on data provided by the SFP. 148 CIVIL SERVICE REFORM IN LATIN AMERICAAND THE CARIBBEAN A group of AGs is presently designing a program of TABLE 16.6 instruction for the Fourth Class. As in the past, the pro- Years of service at different levels gram includes a six-month internship aimed at providing and steps trainees with firsthand experience of participating in rel- evant projects or activities of public institutions. An Level Step Maximum Minimum intern's performance is evaluated by a team composed of A 3 an outside well-known expert and a representative of 2 4 3 INAP's Internship Program. The final evaluation is made l 4 3 by this team and INAP's top authorities. B 3 4 3 Successful completion of the training program does 2 3 2 not provide any academic credentials. As the first Pro- l 3 2 gram Director put it, "the instruction is worth the value c 4 3 2 that will be attached to those receiving it; its prestige will 3 2 1 2 2 also be commensurate to that assigned to the future per- 1 2 formance of the trainees" (Groismnan 1988). - Not available. Of the 195 participants trained at the first thiree Source. Author's cakculalions based on data provided by the SFP. PROFAGs, only 173 were finally admitted into the CAG.9 Some abandoned the course because of family or personal TABLE 16.7 reasons; others made it to the end but decided to remain Distribution of AGs by salary level in their previous jobs, probably because their salaries were higher than the amount established for the first step of Level Salary (U.S. dollarspermonth) Number ofAGs the corps salary system; only a few participants failed to C4 3,580 95 pass the course.'" C3 3,380 68 Upon admittance into the PROFAG, participants C2 3,180 7 must formally declare that, if they successfully complete CI 2,980 the program, they will serve in the public administration -Not available. for at least six years. In case of early resignation, the AG Source Author's calculations based on data provided by the AG Coordination (SFP). must pay the government an indemnity of 50 percent of the latest salary received, multiplied by the number of mum and minimum periods of service. In all cases the months remaining until the six-year period is completed. difference between maximum and minimum lengths of The minimum years of service stipulation is intended to service is one year. If an AG exceeds the maximum period retain corps members for a period that at least guarantees of service at a given step and is not promoted, he/she is a minimum rate of return on the investment. subject to dismissal. Table 16.7 shows the distribution of AGs by level and Salary levels step. It can be observed that most members have already reached the upper two steps of level C. The system clearly Obviously, the salary received by an AG should be com- awards nearly automatic promotion by seniority. Unfavor- petitive with the level offered in the private sector for a able evaluations appear to be rare and, at worst, may pro- similar job. It should also be compatible with the salary duce a one-year delay in promotion. Until now, no case of hierarchy attached to steering, advisory, managerial, and removal from the corps has been registered. The distribu- upper-level coordination functions. Salaries depend on tion may lead to two different conclusions: either members grade level and step. The corps's statute establishes three of the different classes have a positive and homogeneous grade levels (A, B, and C) and three to four steps at each performance; or the evaluation system does not distin- level, but there is no relationship between grade level and guish the quality of performance well enough. the hierarchy of the functions performed. Promotion to a A comparison of the current salary levels of AGs" higher step requires a minimum period of service in the with salaries paid to similar personnel in the public ad- lower step and a performance score evaluation above the ministration and in the private sector is presented in table minimum established. Promotion to a higher level de- 16.8. Salaries considered for the public sector include mands not only meeting these requirements, but also com- only those paid to personnel that have been incorporated pleting training and development activities that are to be into the SINAPA and the Executive Position regimes. introduced according to Decree 2098/87. Table 16.6 de- These systems were created only two years ago and are tails the various levels, steps, and their respective maxi- still being implemented. When comparison is made with SENIOR CIVIL SERVICE IN ARGENTINA CREATING AN ELITE MANAGERIAL CORPS 149 salaries paid under the "dry escalaf6nes," (salary scales) lnservice training which still apply to a large segment of the bureaucracy but have not been included in table 16.8, AGs receive several With respect to promotion-related training, programs times the salary of the highest grade.2 have not been defined yet. The CAG Coordination Board Salaries fixed for Executive (or "critical") Positions is currently designing a permanent program of training. are higher than those paid to AGs. However, the monthly To date the AGs have tried to meet their own training salary for levels B and A of the CAG statute have not needs in accordance with their professional interests and been set yet. In 1994 many AGs will be promoted to level activities. Many have participated in seminars, work- B. Hence, their salaries might increase substantially. For shops, conferences, and courses offered by INAP, the their part, AGs receive higher salaries than officials be- University of Buenos Aires Master Program in Public Ad- longing to SINAPA, who must also be university gradu- ministration, and other institutions. A couple of AGs ates and perform similar organization, planning, and con- have continued their postgraduate training abroad. Ac- trol functions (Decree 992/91). cording to a recent report, ongoing training, updating of Comparisons with the salaries paid in the private knowledge and skills, and specialization seem to be the sector are more difficult, due to the wide disparities most valued goals of the CAG.'3 found in this market. The Price Waterhouse salary sur- vey shows that private sector top managers, in any func- Performance evaluation tional area, receive a much higher income than AGs. If we consider the middle-level managers, their salaries are Performance evaluation of AGs is critical for making comparable to those of AGs at the C4 level. However, decisions about promotions to higher grades or dismiss- analysts in the private sector, with several years of work als. If an AG receives a low score for two consecutive experience and a university degree, are paid a much years or five alternate years, or reaches a maximum pe- lower salary than the AGs. riod in a grade but is not promoted, he/she may be liable Although salary levels are important, a sense of voca- for discharge. tion seems to play a major role in motivating the AGs. Initially, the CAG statute required that evaluation Even without a required minimum period of service, our scores be given by the Secretary of the Public Service interviewees said that in order to induce them to move himself, on the basis of reports prepared by the CAG into the private sector, it would be necessary to at least Coordination and AG supervisors at post."4 This system double their present salaries. One of the AGs even claimed has been replaced by an Evaluation Board composed of that it was not a matter of salary: her main motivation was eight members, all of them AGs. Four of the members are the possibility of reforming the state apparatus. appointed by the Secretary of the Public Service and four However, salary level was indeed a major source of by their peers. The CAG Coordination is now responsible concern and lack of motivation when, at the beginning of for field monitoring of AGs' performance. Supervisors are 1990, the AGs' income dropped considerably. The AGs consulted and periodic reports from the AGs are obtained. Association was established at that time to collectively With this background information, the Board submits a represent its members in salary negotiations and other nonmandatory prescoring opinion to the Secretary of the welfare-related matters. Public Service, who is responsible for the final score. It TABLE 16.8 Levels of salaries for AGs and other comparator personnel (U.S. dollars per month) CAG SINAPA Executive positions Private sector Level Salary Level Solary Level Salary Position Salary C4 3,580 A2 2,660 1 4,900 Administration manager 7,767 C3 3,380 Al 2,464 11 4,400 Planning and control manager 8,901 C2 3,180 B2 1,820 III 3,900 Personnel administration manager 6,665 Cl 2,980 Bl 1,660 IV 3,400 Intemal audit manager 7,338 V 2,900 Department chief' 3,854 Senior intemal auditor 2,965 Management control analyst 2,246 Note: Salaries are in U.S. dollars per month. a. Average salary of department heads in general accounting, operations and management, recruitment, internal audit, budgeting, and economic-financial analysis. Source: Author's calculations based on data of the SFP, Decree 2807/92, 271 2,91, 21 29191, 15 12/92; and the Prce Waterhouse Salary Survey of February 28. 1993. 150 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN would be interesting to find out whether final scores differ The Justicialista Party government put into effect an from those assigned in the previous evaluation stage-or, ambitious state reform program. AGs found in this pro- put differently, to determine the extent to which the gram an opportunity to demonstrate their technical com- actual scoring attribute is in the hands of the AGs. petence. Some of them believe that, during the reform process, the corps has gained greater prominence and The CAGs first recognition from the political authorities. AGs have ful- e s lrs years filled a variety of worthwhile assignments, including: * Monitoring and evaluation of privatizations at the Min- The CAG began to function as a corps when the PROFAG istry of Economic Affairs First Class finished its training in January 1988. High * Technical assistance to provinces and municipalities expectations created during the instruction period-the * Mediation in the Deregulation, Decentralization, and result of frequent reassurances received from the political Destatization Program authorities about the elite character and the transcendent - Restructuring of several ministries and state secretari- mission of the corps-were soon adjusted to a new reality. ats of the central govemment As an AG put it, "after being the 'President's men,' the - Design of a computerized information system for man- 'top of the administration,' we simply became another aging organizational structures group of policy implementers." * Participation in the Administrative Reform Commit- Important changes that occurred in the political en- tees created in each jurisdiction of the public sector vironment may partly account for this change. The Radi- * Elaboration of the SINAPA system cal Party had experienced a heavy loss in the 1987 parlia- * Coordination and support of the Administrative Re- mentary elections. The government's economic plan had form Control Committee begun to meet with increasing difficulties. The antici- * Participation in thirty-one delegations of the SINAPA pated move of the capital city to Viedma-a project in Permanent Career Committee, representing the SFP which the AGs were expected to play a leading role-had * Performance of several advisory, project design, and been abandoned. Nonetheless, the missions assigned to managerial functions at institutions such as the National the AGs were carried out rather smoothly and the corps Grain Board, the Water and Sanitation State Company, began to be known throughout the public sector. the Central Bank, the Municipality of Buenos Aires, vari- Expectations about the AGs' role were much clearer ous ministries of the national government, and the Na- when the Third Class of PROFAG trainees started the tional Audit Board. instruction period. In 1989 the recruitment of the Fourth As the preceding list makes clear, the activity of the Class was suspended after the first test. The Radical Party AGs has been quite conspicuous. Nonetheless, the recall was defeated at the presidential elections and a change of of the PROFAG Fourth Class-made at the end of 1992- government had to be anticipated in view of the set a ceiling for admittance of thirty trainees. This means unmanageable situation created by the hyperinflation of that the original target of stabilizing the corps' size at May-June 1989. Initially, the new Secretary of the Public around 1,200 members has been dropped altogether. The Service was not very enthusiastic about the CAG. The AGs themselves believe that 200 corps members would be incoming political appointees looked upon the AGs with sufficient to do their job within the new state emerging distrust. "They believed we were all radicals," commented after the reform process. one CAG member. But in her opinion, the CAG's overall performance was decisive in maintaining the corps's legiti- Corps members in the field mate domain and dispelling unsustained preconceptions. The CAG soon came to be considered by the Secre- tary of the Public Service as a positive instrument for The assignment process attaining political goals. Nonetheless, the new authorities decided to discontinue the PROFAG training program. In The assignment process begins with a request for technical their view the civil service regime introduced by the newly assistance from a state institution. The application form adopted SINAPA system, with its emphasis on perfor- distributed by the SFP includes a list of assistance modali- mance evaluation and ongoing training programs, made it ties, such as central ministry advice, project management, unnecessary to increase the number of corps members. As program coordination, planning, monitoring and control, a matter of fact, the AGs were offered reclassification in normative reform, design of manuals and procedures, in- the SINAPA under a separate new grade system, but the formation systems consulting, modification and redesign proposal was rejected. of organizational structures, institutional diagnoses, and SENIOR CIVIL SERVICE IN ARGENTINA CREATING AN ELITE MANAGERIAL CORPS I 5 I organizational development. Decisions on applications are CAG: since an overwhelming majority of assignments are made by the SFP following a routine evaluation. If assis- in the advisory/implementation functions, it would ap- tance is granted, an interview is arranged between mem- pear that the original goal of assigning AGs to upper-level bers of the CAG Coordination and the requesting party, in managemerit positions has been reconsidered-or that order to reach an agreement on the desired profile of the this function has been taken over by the Executive Posi- AG (or AGs) to be assigned to the mission. A search is tions regime. then made among AGs who are about to finish their duties One way of judging the importance of the role played elsewhere, interviews are held with one or several candi- by AGs is by observing the organizational level to which dates, and a final assignment is made. they are assigned. The CAG Coordination shows a keen To the extent possible, assignments are made on the interest in assessing the strategic position of corps mem- basis of compatibility with the AG's professional interests. bers within an organization, assuming that it increases The final decision is made by the Secretary of the SFP, proportionately to the level of insertion. Tables 16.11 and based on the information provided by the CAG Coordi- 16.12 provide information on this subject for both cen- nation. To ensure rotation, regulations stipulate that no tralized and decentralized institutions. assignment can last more than three years. Conflicting loyalties Distribution of corps members A typical problem encountered in the assignment of corps members is double dependency. AGs are hierarchically Table 16.9 shows the assignments distribution of AGs by linked to the SFP on a permanent basis, while at the same institution. The largest proportion is found at the SFP, time, they are functionally linked to the institution to where their main duty is to implement policies made by which they are temporarily assigned. Members of the corps this institution. Even those agents assigned to provinces contend that "this work arrangement avoids both the and municipalities are commissioned to carry out pro- development of perverse routines and the possibility of grams originated at the SFP and INAP. AGs being trapped by the very organizational culture they Assignments can also be classified according to the are supposed to change" (Falivene and others 1992). In type of functions performed. Table 16.10 shows the num- addition, it is believed that it helps diversify their profes- ber of AGs in charge of substantive (that is, production of sional experience and create a generalist profile fitted to goods, services, and regulations) and support (operations multiple work situations. and management, human resources management, ac- counting, budgeting) functions, indicating how many of TABLE 16.10 them fill upper managerial or advisory/implementation Distribution of AGs by area of activity positions. The figures suggest a trend that seems to run and type of function, August 1992 counter to one of the main goals in the creation of the Type of function TABLE 16.9 Area of activity Management Advicefimplementation Distribution of AGs by institution of Suppor 2 52 destination, February 1993 Substantive 4 62 Note: An AG may perform more than one task in the same or in a different institution. Jurisdiction Number of agents Percentage Source: Author's calculations based on data provided by the CAG Coordination. Secretanat of the Public Sector (SFP) 67 39.4 Ministry of Economic Affairs 32 18.8 TABLE 16.11 Ministry of Health and Social Action 17 10.0 Distribution of AGs by level of insertion in Ministry of Culture and Education 14 8.2 Ministry of the Interior 12 7.1 the central administration, August 1992 Ministry of Labor 7 4.1 Ministry of Foreign Affairs 3 1.8 Organizational unit Numberofagents Presidency of the Republic 7 4.1 Legislative Power 4 2.4 Minister I On leave of absence 7 4.1 Secretary of State 44 Total 170 I X.0 Undersecretary of State 28 Directorship 3 a. Includes INAP, delegations of SINAPA, and INAP programs in provinces and munici. Total 76 palities. Source: Author's calculations based on data from GAG Coordinaton. Source: Author's calculations based on data provided by the CAG Coordination. 1 52 rIViL SE RV(CL RIFFORM IN LA I it, .MfRICA ANE3 THE CARIEBEAN TABLE 16.12 leaders may produce among trainees an exaggerated belief Distribution of AGs by level of insertion in about their true importance. This may or may not be true decentralized institutions, August 1992 of the AGs. They do consider themselves an elite corps, but probably not an elitist body in the pejorative sense of Organizotional unit Number of agents the term. They look upon themselves as a highly profes- Presidency 3 5 sional cadre of functionaries who defend their career, Board of Directors 16 training, and purview. Directorship 19 As to the latter, the new Executive Positions cre- Total 70 ated by Decree 2129/91 are seen as competition for the Source Author's calculations based on data provided by the CAG Coordination. corps, because they narrow the AGs' opportunities of occupying such positions in the future. However, many In practice, however, double dependency may become AGs believe that they could easily and successfully apply a source of conflict. Although it is not the rule, conflicts do for any executive post opened for competition within the arise in isolated cases, particularly when the implementa- new regime.'6 tion of SFP policies is at stake. Assignments tend to fall into one of two categories: those in which the task consists Summary of carrying out, at a given institution, policies formulated by the SFP; and those in which AGs are more directly concerned with policies made at the agency to which they The CAG is the only experience of upper management are assigned. In the first case, it is possible that at the training and creation of a critical mass of higher civil political level the two institutions are pursuing diverging servants that has survived successive political changes in goals, thus making the possibility of conflict greater. In the the Argentine government. On the average, and mea- second case, the SFP usually does not get involved and sured by any standards of comparison, the level of training conflicts are unlikely. In any case, AGs are continuously and the capacity of AGs is quite high, and their accom- reminded by the CAG Coordination about the "opera- plishments varied and substantial. The question is whether tional autonomy of the corps." Hence, in situations where the experience has been successful. the level of conflict between political goals becomes too The answer lies outside the scope of this chapter and high, the AGs involved are given a new assignment. must await a more thorough evaluation. Besides, the time To wind up the discussion on this point, it seems elapsed since the CAG started its normal operation is still that the Menem government is using the CAG to ex- too short to permit any conclusive opinion. Nonetheless, ecute policies made by the SFP itself, whereas the previ- it can safely be said that the role of the corps will not be as ous Radical Party government foresaw a more diversified important as was foreseen in the original project. It is technical role for the AGs. According to one inter- unlikely that its size will ever be more than 1,000 agents, viewee, "the SFP sees the performance of the corps in and it is hard to tell how frequently-if at all-new va- terms of its rate of political return: what is important is cancies will be opened in the future. not the technical aspect of the work, but rather the It appears that the positions filled by AGs in the possibility of monitoring and influencing policy imple- public sector will be mainly in the area of advice and mentation in other public institutions." implementation, rather than in management. The cre- ation of SINAPA and, especially, the Executive Positions Values and attitudes in the crs regime-with its emphasis on merit, competitive exami- Vausadatiecorps nations, and adequate pay-seems to limit the corps's prospects of being the unique source of top managers for After two years of training, the different PROFAG classes the public sector. The ascendancy of the Executive Posi- develop very close ties and strong feelings of solidarity. tions system may even mean that AGs are, to some ex- Upon entering the corps, these feelings are extended to, tent, cut out of management functions. and shared with, other peer members. Therefore, "a sense The CAG has gained certain prerogatives: its mem- of belonging" becomes generalized throughout the entire bers are solely responsible for the selection of new train- corps. Members are perceived by outsiders as a closed and ees, the coordination of the corps, and the preliminary elitist group. Their Association serves as "a home and a evaluation of AGs' performance. It seems to be an organi- club," to use an AG's expression."5 zation that virtually reproduces itself-not necessarily a In his well-known study on management ideologies, bad thing, in view of the competence and capacity of its Bendix (1956) observed that training activities for future members. And paradoxically, its independence may also SENIOR CIVIL SERVICE IN ARGENTINA. CREATING AN ELITE MANAGERIAL CORPS 1 53 signal a possible loss of status: any institution that is years for non-civil servants. The exception was made because of central to a political project is usually brought under strict the previous lack of opportunities for older civil servants. For the supervision by those in power. second call for candidates, the age limits were set at 44 and 39, Future research on the CAG experience should con- respectively. In the last call, the age limit for candidates coming sider a number of issues that have only been touched on from the public sector was 40. cursorily: perceptions about the AGs, role at the institu- 6. It does not include the Fourth Class, which is being cursorily: perceptions about the Ahs role at th e tit recruited at the time of writing this chapter. tions to which they are assigned; the extent to whilch their 7. The call for the Fourth Class was made in 1989 and intervention brings about effective changes in the organi- was suspended shortly after the first test. President Menem's zational culture of those institutions, through the transfer administration was not fully convinced of the usefulness of of new work styles and methodologies; the dynamics of maintaining the CAG. The competition was reopened at the double dependency, including possible benefits or frustra- end of 1992. tions; the role played by AGs within political parties; the 8. This is quite understandable, considering that civil ser- motivations of candidates entering the corps and the atti- vants already enjoyed stable employment. The salary level, how- tudes of corps members during service; and the legitimacy ever, should also be considered as a decisive factor. of the CAG in the context of an extended professional 9. As a result of the great interesr created by the PROFAG, civil service. many functionaries were invited to attend the courses without Whether the corps will become a key, energizing becoming members of the CAG. energizing 10. The CAG statute stipulates that non-civil servants element of public sector management, will be deactivated, who at any time abandon the PROFAG without justification are or will end up developing its own brand of bureaucratic liable to repay the government the amount of the salary received culture-akin to the entrenched bureaucracy it was meant over the number of months elapsed since the beginning of the to eradicate-is still an open question. In any case, moni- training program. toring the continuing operation of the CAG may be im- 11. Since categories A and B are still empty, salaries are portant for drawing useful lessons that can be applied to quoted only for the C level. comparable experiments in the future. 12. Before the creation of SINAPA, the highest category on the civil service register (24) was comparable to the A2 level of the CAG. The salary assigned to that category (includ- Notes ing bonuses for universiry degrees and twenty-five-years of se- niority) was less than that assigned to the lowest (Cl) level of the CAG (one-half during the hyperinflation of February- 1. In Bolivia, for example, more than 800 consultants, March 1989). representing about 7 percent of the total central administration 13. The report details some of the training activities AGs staff, are being employed under this system. 2. Jorge Roulet, one of the main intellectuals of the Radi- have participated in (Falivene and others 1992). cal Partyinth fiel of administrative reform, who would be- 14. There seems to be a certain degree of dissatisfaction coal Party In tne field of administratve reform, whvo would be- regarding the evaluating role played by political appointees. come Alfonsin's first Secretary of the Public Service, stated Several members of the CAG submitted appeals for review of during the presidential campaign that it was necessary "to im- scores received. One interviewee believed that leaving this prove the quality and capabilities of the higher civil servants" scoresponsibil. up tintei e reisksd tota lossgof (Roulet 1988). responsiblity up to poltical appomtees nsks a total loss of 3. It was maintained that the number of Radical Party objectivity. members or sympathizers in the ranks of the CAG was compara. bs. a jour tively small (Stuhlman 1988). pubhshes a Journal containing articles, technical information, 4. To ensure transparency and prevent any kind of inter- and reports on concrete reform experiences. It also organizes 4. T o ensure transparency and prevent any kind of inter- workshops and seminars for its members, ference or external influences in the selection process, tests were 16.kItois intering to it ourso designed to be completely anonymous. Each candidate Is sup- 1.I sitrsigt on u htsm G pcaie deige to be copetl annmos Eac cnIdt is su- In personnel selection have been responsible for developing tech- posed to carefully seal his/her test with a special sticker. The nical instruments applied in the selection and recruitment of identity of the author of each test is revealed in an open session, civil servants under the Executve Positions regime (Cambours once the previously evaluated exams are unsealed by a self- and others 1992). appointed group of candidates. 5. This latter requirement does not apply to permanent staff of the Federal, Provincial, or municipal public administra- References tion who can submit, as credits, a full secondary education and certification of having held for at least one year an executive position within the civil service not lower than director. The age Alfonsin, Raul. 1985. "Discurso de Apertura," In Discursos limit of 35 did not apply to candidates of the first PROFAG. The Pronunciados en la Apertura del Primer Curso de FormaciOn ceiling was placed at 45 years of age for civil servants and 40 de Administradores Gubernamentales. Buenos Aires: INAP. 154 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Alvarez, Omar, Marcela Antelo, and Martin Groisman. 1985. INAP (Instituto Nacional del Administraci6n Puiblica). 1985. Andlisis de la Segunda Convocatoria a Integ-rar el Cuerpo de "Carrera de Administradores Gubernamentales: Edi- Administradores Gubemamentales. Buenos Aires: INAP. toriales, Publicaciones, Notas, y Avisos Periodisticos." Bendix, Reinhard. 1956. Work and Authority in Industry. New Buenos Aires. York: John Wiley. . 1987. Proyecto de Selecci6n y Curso de Nivelaci6n para Cambours, Enrique, Alicia Cufiamo. Marcela lacovello, Maria los Ingresantes al III Curso de Formaci6n de Administradores lnes Martinez, Noemi Pulido, Maria Rodriguez Perez, Irene Gubernamentales. Buenos Aires. Soccone, and Fernando Subi Carbonell. 1992. Selecci6n de . 1988. Normativa del Cuerpo de Administradores Gerentes: Una Metodologia para el Estado. Presented at the Gubernamentales. Buenos Aires. IX Congreso Nacional de Administraci6n Publica, Lynn, Laurence E. 1981. Managing the Public Business: The Job of Mendoza, Argentina. the Govemment Executive. New York: Basic Books. Falivene, Graciela, Celia Gram6n, Dolores March, and Victor Reid, Gary J. 1992. "Civil Service Reform in Latin America: Piemonte. 1992. El Cuerpo de Administradores Guber- Lessons from Experience." LATPS Occasional Paper No. namentales: Inserci6n y Crecimiento en la Administraci6n Ptibli- 4. Prepared for United Nations Development Programme ca Nacional. Presented at the IX Congreso Nacional de (UNDP) Regional Workshop on Public Sector Manage- Administraci6n Publica, Mendoza, Argentina. ment Development in Latin America and the Caribbean, Groisman, Enrique. 1988. El Proyecto de Formacidn del Cuerpo de Santiago, Chile, March 23-25. Administradores Gubernamentales: Andlisis de una Experi- Roulet, Jorge. 1988. El Estado Necesario. Buenos Aires: Centro encia. Buenos Aires: Centro de Participaci6n Politica. de Participaci6n Politica. Hood, Christopher, and Michael Jackson. 1991. Administrative Stuhlman, Luis. 1988. "Entrevista: Los Administradores Argument. Aldershot, U.K.: Dartmouth Publishing Com- Gubernamentales, Una Innovaci6n?" Informaci6n Empre- pany. saria 18 (237):15-18. SENIOR CIVIL SERVICE IN ARGENTINA CREATING AN ELITE MANAGERIAL CORPS 155 Spain's Experience with Recruiting and Retaining Qualified Personnel Joan Prats-Catala Selection and retention of "higher" civil servants in R . . . Spain is a complex problem. The first question we Reuation of the lighest clvul service face is, what is the role of the highest civil servant? Spain's constitution (1978) makes an interesting dis- In Spanish, legal terminology does not exist for the con- tinction between government and administration. The cept "civil service." Nor do we speak of the civil servant. government-a purely political body whose authority The expressions that have currency in Spanish are comes from parliament-holds the executive power funcionarios publicos and personal laboral. Thus, the whole and as such guides the administration. The adminis- of Spain's public sector employment can be divided in two tration, on the other hand, is mostly a professional parts: funcionarios and laborales. (This is a common dis- body whose members are recruited and promoted on tinction in continental Europe.) Each of these categories the basis of merit; its authority is guaranteed by law, is subject to a different legal regime: administrative law but is subject to review based on its effectiveness and applies only to funcionarios, labor law to personal laboral. efficiency in the accomplishment of its tasks. Creating Standing outside this system are the "higher" civil an interface between government and administra- service employees, who fill public managerial positions in tion-between politicians and professionals-is a agencies, public enterprises, or other public organizations, third group of public servants who occupy the highest and who, unlike the funcionarios publicos, are not subject managerial positions. These positions are outside the to administrative law, but rather fall under the labor laws merit system. Position holders, who must be politi- that govern the private sector. These public managerial cally reliable, can be freely appointed and removed. positions are part of an open employment system. Position (This discretionary power to make political appoint- holders belong to a general category of managers compet- ments does not mean that appointments may be arbi- ing among themselves, regardless of whether they are cur- trary. It is generally agreed that people holding these rently in the private or public sector. Legislation and work. highest positions must have appropriate qualifications ing conditions that apply to them-and to their and, in fact, up to 70 percent of these positions are salaries-closely resemble private sector conditions. They filled by high-ranking career professionals in the civil are selected, promoted, paid, and fired more or less as service.) private managers are. Even though the civil service does The functions of this upper tier of professional civil not officially recognize these positions, it must be acknowl- servants vary widely. In some cases they may assist po- edged that in recent years there has been a tendency to litical directors in policy formulation or be involved in circumvent administrative law in search of this more flex- developing implementation strategies. Most of the time ible employment structure-a tendency that some inter- they are responsible for running specific administrative pret (and maybe misunderstand) as a simple evasion of the units, applying legislation, preparing legal drafts, and rule of law and the merit system. providing technical consultation. Thus, no generaliza- Operating in parallel with this semi-autonomous tion-such as that of, say, public managers-can ad- higher civil service, then, are the funcionarios publicos. equately describe the role of the highest civil servants, By law these funcionarios must hold all the higher posi- so diverse are their responsibilities. tions in any administrative areas that involve the exercise 156 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN of public authority. Thus, what have traditionally been ber of service departments. Normally, when there is a the most important administrative functions must remain vacancy, it is filled based on internal competition among as the preserve of the senior funcionarios publicos. the current members of the corps. (Corps members com- pete on the basis of their curricula vitae.) It is only the Selection of higher civil servants vacancy produced after the internal call that may be servants ~~publicly offered for open competition. Thus, entries into higher civil service are always at the bottom level and The Spanish civil service is organized in cuerpos defunciona- promotion in the ranks always occurs from within. Obvi- rios, that is, civil servant corps. Highest civil servants are ously, such a system appeals only to young graduates or to distinguished according to the corps they belong to. The members at the lower levels of their corps. Although selection mechanism is intended to fill, not a specific, va- merit might play some role in the awarding of promotions, cant position, but vacancies in a corps. Members of a corps it is clear this promotion process overlooks many civil together must fulfill the corps' responsibilities in the civil servants of high merit. service-regardless of how individual duties are allocated. A problem with the promotion process is that after Members of different corps, who are recruited and selected ten or fifteen years of service, every member of a higher separately, compete among themselves for control of impor- corps has reached the highest grade of his or her profes- tant administrative sectors and better-paid positions. sional career. This erodes motivation and distorts the Each corps selects its members on the basis of open organizational chart. Nonetheless, it does not affect re- public competitive examinations, mostly among young tention. On the contrary, under the current difficult university graduates who are able to devote two or more economic conditions in Spain, public employees are years to preparing for the exam. The candidate works seen as privileged, and even those who left their posi- long days under the guidance of a senior member of the tions are now trying to come back. Indeed, the chal- special, preparatory corps (who is paid to oversee the lenge for the general director of Spain's civil service is work of those competing in the examination). This prepa- in finding positions for people who are returning to pub- ratory system constitutes a kind of merit system-people lic employment. That there is currently no trouble with selected in this way are usually very competent techni- retention means either that higher public employees in cally. But critics argue that the system does not gauge Spain enjoy attractive working conditions or that they such qualities as innovativeness and interpersonal and are not competitive in the private sector. Certainly, sal- negotiating skills; that the process of preparation and ary incentives in private companies are higher than in examination guarantees only certain acquired knowledge, the public sector: public employees who have been in not the skills or raw ability required. And, in fact, a recent public administration for ten years find that they are doctoral dissertation has demonstrated that the Spanish earning only 60 to 70 percent of what their counter- system of selection guarantees open competition but not parts in private companies are earning. Why, then, is necessarily merit. Some suggestions have been made to there no retention problem in public administration? rectify the system's inability to assess candidates' skills Because salaries are not the only working condition that and abilities. The most important might be to switch from affects retention. the examination to requiring appropriate postgraduate The problem in Spain today is that the central gov- degrees and then making selections on the basis of skills ernment is not interested in addressing these systemic and abilities. This altemative would require cooperation problems of motivation and compensation. Some re- between the government administration and well-reputed gional governments, however, especially the govern- universities or schools (on curriculum, for example). In ment of Catalonia, are very concerned about the situa- keeping access to the service open and competition-based, tion. From the point of view of the regional govern- it should improve the merit system. At the same time, ment, civil service is an important factor in national some regulation of access will be required. competitiveness. So perhaps we need another kind of higher civil service-perhaps one patterned after that Promotion and retention of higher of another government. The key in any case is to build workable relationships among government, business, Civil servants and social agencies. This will require innovativeness and entrepreneurial public management-not qualities The career path of the higher civil servant is as follows. that characterize the traditional higher civil service I Each corps occupies positions at various grades in a num- have described. SPAIN'S EXPERIENCE WITH RECRUITING AND RETAINING QUALIFIED PERSONNEL 157 Administrative Reform Program: The Case of Bolivia Alberto Leyton Bolivia's administrative reform program, conducted in the The adjustment program proved to be extremely suc- context of the structural adjustment and implemented cessful in stabilizing the economy and in reducing internal through the introduction of a public service system for and external turmoil. By the mid- 1980s the trend toward public administration, constitutes one of the most impor- decreasing economic growth was reversed. The average tant chapters for the consolidation of the adjustment rate of growth rose from 1.2 percent during 1980-85 to process initiated in 1985. This chapter describes the na- 2.1 percent during 1985-87 and 3.1 percent in 1988. ture and scope of the Bolivian government's policies for Exports became the most dynamic element in economic administrative reform and institutional strengthening in growth, with an expansion of 18 percent between 1987 the field of human resources development within the and 1990. state's public administration. The inflation rate, which reached an average level of 1,585 percent during 1980-85, was dramatically reduced Background of economic crisis to an average of 22 percent in the past eight years. The fiscal deficit was reduced to 3.7 percent of the gross domes- tic product (GDP) in 1992. Between 1987 and 1991 a At the beginning of the 1980s Bolivia faced one of the policy for external debt renegotiation was started, allowing worst crises in its history. Ineffective macroeconomic mea- a stock reduction from 101 percent to 77 percent of GDP. sures, political instability, and institutional crisis were el- Beginning in 1990 financial indicators pointed to ements that, in a climate of social upheaval, led to acute noticeable improvement in the country's macroeconomic hyperinflation, which peaked in mid- 1985. performance. Annual inflation has been reduced to around 12 percent; public and private investment rates have Political adjustment shown signs of recovery; and GDP has grown on average about 3.3 percent annually, which, in the face of a steady That same year a radical stabilization program was growth in population of only 2.1 percent, suggests a rever- adopted, which included these important measures: ad- sal in the trend of declining per capita income. justing the exchange rate to real levels, increasing the price of public sector goods, and reducing public expendi- The public sector: problerns to be solved tures to affordable levels. Measures oriented toward broad market liberalization were started at the same time as the The severe economic, social, and political crisis that af- stabilization program. These included freely agreed inter- fected Bolivia until 1985 also affected its institutional est rates; elimination of controls on prices and the ex- structures, leading to administrative chaos in its minis- change rate; a lessening of restraints on labor force mobil- tries and affiliated agencies-bodies that were most par- ity, import levels, and capital flows; and elimination of ticularly vulnerable to political harassment and the break- subsidies on state goods and services. Programs to down of institutional structures. strengthen state economic measures were also introduced. Subsequently, as a result of the structural adjustment And reform of the structure and administration of the tax process introduced in 1985, these institutions proved un- system was undertaken to stabilize the financial situation qualified to fulfill their roles, which forced political au- and increase fiscal income. thorities, with international assistance, to use specialized 158 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN technical teams from outside the institutions during the state and society. Central to this change was the opera- adjustment process. International assistance thus came to tion of a free market, with less state involvement and have central importance in the adjustment program and greater public participation in economic matters. The its implementation in Bolivia. The principal institutions reforms involved the transformation of a protectionist responsible for economic management were assisted by state into a regulator state, and of a closed economy into foreign technical assistance programs and projects that a market economy with greater external openness. developed the guidelines for introducing adopted reforms. State reform in Bolivia has not been carried out in a These technical assistance programs evolved, how- comprehensive, integrated way. Rather, the reform has ever, to the point of becoming sources of financial sup- been piecemeal, with particular reforms carried out in port for public sector operations, causing distortions both accordance with the needs of individual sectors. The in administrative policies affecting human resources in four main areas of the public sector involved in the re- the public and in the existing pay structures. Thus, an form were (1) the public enterprise sector, which was approach that has proved vital in fulfilling structural ad- subject to privatization programs, market deregulation, justment tasks, and that is being studied in depth and and the promotion of private entrepreneurship; (2) the expanded to most ministries, also risks fostering a dan- state banking sector, in which measures were taken to gerous dependency that could prove counterproductive eliminate official financial institutions and to redirect in the future. banking functions formerly carried out by the state; (3) This is not to suggest that technical assistance projects the public services sector-the largest of the sectors- and, more generally, international assistance programs which includes public institutions in charge of health, have not fulfilled their role of giving advice and develop- education, sanitary infrastructure, roads infrastructure, ing tools and technologies consistent with specific objec- and the like; and (4) the state bureaucracy (figure 18.1). tives. Indeed, the systems, procedures, and mechanisms With regard to the latter, it is worth mentioning that it developed form the basis for the current operation of the is the administrative apparatus of the central govern. state. However, in the heat of putting these measures in ment, composed of the ministries and other governmen- place, institution-building and human resources develop- tal institutions, that is responsible for the main decisions ment were neglected, thus jeopardizing the sustainability having to do with state administration. This group, and continuity of the reforms. whose members are not significant compared with those of public service sector, is the key factor determining the The scope of structural reforms quality of state administration and operation. In this sense, it is in this sector that the establishment of a civil The main objective of the structural reforms under way service system-as proposed in the reform program- since 1985 was to modify the relationship between the will be centered. State reform is nothing less than the reorganization FIGURE 18.1 of all these areas of the public sector and the creation of a State reform in Bolivia new state institutional structure, reconfigured and with greater clarity about its role and participation in the eco- - - - - - - - - - - - - - - - - - - - - - - - - --- nomic, social, and political life of the country. This im- Public enterprises * Privatzation; deregulation I plies reshaping the state through a redefinition of its role; lubhc lervices DecentralizationI restructuring; improving the professionalism of its person- |Public services *DecentroiizaDon I I nel; and introducing new management technologies. The Stote finoncial sector Financial reforms sectorr civil service system to be implemented thus fits into the I framework of the administrative reform program. I Central public odministration Crvdi service system I … - - - - - - - - - - - - - - - - - - - - - Function and finance in the public sector Currently, the central administration is not setting policies State reform i for organizational structures or for human resources. On the contrary, improvisation and lack of coordination among public institutions prevails. The result is a split be- r- - - - - - - - - - - - - ^tween the routine functioning of the state bureaucracy and I Modem and efficient public sector I the decisionmaking processes that are concentrated in the I- - - - - - - - - - - - - - - I public authorities and their advisory technical teams. ADMINISTRATIVE REFORM PROGRAM THE CASE OF BOLIVIA 1 59 The state bureaucracy, financed with funds from the Currently, the state's central administration institu- national treasury and regulated by an obsolete regime inca- tions can be classified in two groups: those that receive pable of controlling and supervising public officials' perfor- support from foreign assistance projects (and consequently mance, wastes its time on administrative tasks of little rel- from qualified professionals) and those that adhere to the evance and looks as if it will be a permanent financial old structure of public administration. The dual system burden on the state, given the fact that there has been no produces discrepancies that impede the consistent appli- rationalization or streamlining of public employment. cation of Human Resources policies. As in other Latin american countries, problems in Table 18.1 outlines numbers and classes of public the operation of the state bureaucracy have deepened sector personnel-and their cost-as officially registered largely for these reasons: and approved under the 1992 Financial Law. * Low motivation of personnel, caused not only by low Using the classifications described under the state salary levels, but also by the nonexistence of an adminis- reform, table 18.2 redistributes public sector costs by pub- trative career development path that would serve as an lic enterprises, public services, state financial sector, and incentive central public administration. * Ineffective use of public resources, due to the lack of This new classification allows us to identify the evaluation of obtained results in relation to expenditures number of personnel in central public administration, * Corruption, which results from unnecessary steps in the by field of civil service-a group that represents only bureaucratic procedures imposed by the state, and from 6.7 percent of the entire public sector, but, as men- the discretionary power enjoyed by some officials tioned before, concentrates the most important 4 Hiring practices in which political imperatives take pre- decisionmaking areas in government management. In cedence over technical considerations. looking at the state's costs in employing this personnel, These and related problems have caused a decline in the it should be noted that only 8.7 percent of the re- quality of public services, prompting the need to transfer sources allocated for public sector remunerations is di- the main responsibilities for state management to consult- rected to the central bureaucracy-that is, just 1.6 per- ants financed by technical assistance projects. cent of the general budget for public expenses and 0.6 TABLE 18. I Public administration personnel, programmed for fiscal year 1992 Annual cost Annual cost Average monthly salory Institutional group Number of persons, (thousonds of Bolivian dollars) (thousands of U.S. dollars) (U.S. dollars) Central administration 125,524 428.659 11 1,340 74 Regional corporation 4,857 97,771 25,395 436 Departmental prefecture 397 2,152 559 117 Decentralized entity 9,703 105,528 27,410 235 Social security institution 9,972 142,185 36,931 309 Nonfinancial public enterprise 30,344 603,394 156,726 430 Nonbanking financial institution I .716 56,773 14,746 716 Banking financial institution 1.083 32,871 8,538 657 Total 183,596 1,469,333 381,645 381,645 a. Includes temporary workers. Source: Government data. TABLE 18 2 Public administration personnel, by institutional sector, 1992 Annual cost Annual cost Average monthly solary Institutional group Number of persons (thousonds of Bolivian dollars) (thousands of U.S. dollars) (U.S. dollors) Public enterprises 30,344 603,394 156,726 439 Public service' 138,209 648,065 168,329 102 State financial sector 2,799 89,644 23,284 693 Public sector administration 12.244 128,230 33,306 227 Total 183,596 1,469,333 381,645 381,645 a. Includes personnel in the heath, education, and security fields, and In other services that have been decentralized to departmental administrations. Source: Government data. 160 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN percent of the 1992 GDP. Table 18.3 gives a break- P o down of central public administration personnel by oc- Program reform objectives cupational classification. Another group of public officials is indirectly financed The overriding objective of the public sector administrative through international assistance that is earmarked for reform program is to recruit and retain the most qualified institutional strengthening and technical assistance personnel in the country's service. This means using an inte- projects and programs. grated system for organizational and human resources ad- Table 18.4 breaks down this foreign assistance-in- ministration. This in tum means adopting rational policies- cluding financing both for project personnel and for line for example, in hiring-rather than the politically motivated positions in executive institutions that are part of the policies that currently exist in public administration. central administration-by source of funding. This general objective can be accomplished by pursu- The fund of external financing for 1992-US$8.1 ing these specific objectives: million-shows a rising trend over the level calculated in * Downsizing the public sector. This will require determin- 1990-US$6.6 million. Overall average salary levels tum ing the ideal size of public sector organizational structures out to be 2.3 times greater than levels calculated in 1990, and staff, in accordance with the state's redefined role. reflecting the creation of a privileged professional group * Modernizing the public sector's operation. This will mean in public administration. achieving current standards of effective public adminis- It is clear that the management of financial re- tration, including transparency in procedures, responsibil- sources for the maintenance of public sector personnel ity for results, performance evaluation, and the introduc- has not been effective. Moreover, the reform policies tion of new technologies. that apply to the central administration budget are being * Restructuring the public service employment system. This circumvented as foreign assistance is used to fund the will mean establishing and maintaining professional stan- group of professionals that at present carry out the most dards and a clear structure that governs hiring, promo- important operational and administrative functions in tion, salary determination, the delineation of duties, and the public sector. the evaluation of performance. TABLE 18.3 Central administration personnel, by administrative function, 1992 Annual cost Annual cost Average monthly solory Occupotionol cotegory Number of persons (thousands of Bolivian dollars) (thousands of U.S. dollars) (U.S. dollars) Management 1,404 25,413 6,601 392 ProfessionalAtechnician 2,073 33,610 8,730 351 Administrative support 8,767 69,206 17,975 171 Total 12,244 128,229 33,306 Note Does not include temporary personnel, health and education personnel, security personiel, or personnel in self-governing posts. Source. Government data. TABLE 18.4 External financing for employment of public sector personnel, 1992 Annual cost Annuol cost Average monthly salary Source of funding Number of posts funded (thousands of Bolivian dollars) (thousands of U.S. dollars) (U.S. dollars) United States Agency for Intemational Development 288 9,826 2,558 738 World Bank 200 7,462 1,938 808 Intemabonal Development Bank 79 4,166 1,082 1,142 National treasury, counterpart funds 108 3,770 979 756 United Nations Development Programme 80 3,258 846 881 Switzerland 69 2,363 614 741 Holland 12 355 92 641 Total 836 31,199 8,109 Note: Data are estimated. Source. Government data. ADMINISTRATIVE REFORM PROGRAM: THE CASE OF BOLIVIA 161 Instruments for public sector . Qualification involves a more detailed analysis of the professional and personal resources of every ap- reform plicant. An interview is conducted to assess techni- cal and administrative capacities of each applicant. To achieve these objectives, a civil service system has Based on these evaluations, a short-list of candidates been created to restructure and integrate the three main is proposed to the second committee. fields under its jurisdiction: the administration of organi- * Selection of the best applicant on the short-list is zational structures, human resources management, and based on information gleaned in the previous two salary structure. steps. A second interview can be scheduled. If neces- sary, this selection committee can invalidate the pro- The administration of organizational structures cess, in which case it must be reinitiated. This com- mittee may not select an applicant who has not been Institutional structures should be designed according to included on the short-list. standardized criteria. Approval of an organizational struc- Because of a lack of judicial instruments to ensure ture should be made contingent on a definition of the the transparency of the process, international organi- responsibilities of the unit. A single manual for job classi- zations are requested to participate. The presence of fication will be used to define job responsibilities for the an extemal element helps preserve neutrality in the entire civil service. process. This manual will serve as a reference and will include * Service evaluation. This subsystem establishes instru- organizational charts, unit and division breakdowns, and ments to evaluate the performance of civil servants, par- numbers and ranking of positions. It will also provide an ticularly in terms of their efficiency. Uniform criteria analysis of positions within the institutions, including du- drawn from the qualifications code are to be used for staff ties and responsibilities, levels of authority, and minimum evaluation. Evaluations, which will be periodic, will de- requirements for filling these positions. termine whether the civil servant is retained. T Training and development. This subsystem comprises an Human resources management integrated set of policies, norms, and procedures for the training and development of civil servants. The objective The human resources management system of the civil is to develop personnel whose skills and abilities are ap- service will comprise four subsystems. propriate and up-to-date and who are motivated-for * Contracting. A contracting manual will establish guide- their own benefit and for that of the civil service. An lines for selecting and hiring staff. ongoing program of training will act as an incentive for Posts that have been approved for inspection into the retaining personnel in the civil service. civil service-and that are not filled by an incumbent in * Control or audit. This subsystem, which falls under the the public service-will be advertised as vacancies. (This jurisdiction of the civil service directorate, involves moni- will lend the reform program credibility.) Open public toring the correct application of the procedures and manu- announcements will be made to achieve broad participa- als already described. tion of the appropriate professional sectors. Selection of applicants is the responsibility of two Salary administration committees. One committee prequalifies and qualifies the applicants. This committee is composed of the per- Salary level is undoubtedly one of the most important son who is the supervisor for the position being filled, a elements in making public service attractive and in re- representative of the civil service directorate, and a rep- taining personnel. resentative of the international organization participat- The civil service system will establish a hierarchy in ing in the financing of the program. The second com- the salary structure, gradually making salaries comparable mittee makes the final selection. This committee is made to those in the labor market and reducing the differences up of a politically appointed official of the hiring insti- that currently exist between minimum and maximum sala- tution and a representative from the international orga- ries. This will provide incentives for sticking with a career nizations. in the public sector. . Prequalification consists of checking the educational There will be a single salary curve for the civil ser- background and experience of each applicant against vice. It will depend upon how jobs have been evaluated the minimum requirements outlined in the contract- and other technical criteria, and will be subject to peri- ing manual. odic revision. 1 62 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN The definition and approval of the salary structures staff. Salary levels have been determined based on a study will be required for the approval of the human resources that looked at equivalent positions/activities in the pri- budget. Salary levels will be set to reward both the indi- vate labor market. The hierarchical lineup of positions viduals' performance and the nature of the functions and salaries was designed to reflect management's author- performed. ity over operational and support functions-a measure typical of modem business organization, in which higher Costs and financing responsibilities rest with management. * Modemizing management. A more qualitative change in public service is expected to take place, including mod- A study to project the financing needs of the program has ernization of management procedures and the more effi- been carried out, based on an analysis of the three main cient use of public resources. This should lead to more program objectives: efficient administration and use of govemment resources. * Downsizing of the public sector. Although the reduction Considering the likely additional costs incurred in of the central administration is not an objective of this the application of programs we should expect greater bud- program, the restructuring of the institutions' organiza- get allocations to cover staff salaries in the new central tional structures will affect their size. The magnitude of administration. this reduction will be determined by evaluating each of The personnel policy necessary to achieve these goals the institutional structures. (It should be noted that re- requires a careful projection of the evolution of staff com- structuring consists not only of a reduction in staff but of position and of the wage bill over time. A transition an improvement in quality.) period of ten years has been projected, during which all Preliminary figures used for this study indicate that the civil servants will be incorporated into the new system central administration is made up of 72 percent adminis- and the current personnel system of the public sector will trative and support staff, compared with 28 percent tech- be eliminated. Three variables are used to calculate the nical and management staff-yielding a ratio 2:5 (five sup- financial projections: port staff for every two technical staff). The restructuring * Size of the staff. Reduction and restructuring of current process will try to alter this ratio to 3:2 (two support staff staff is foreseen. Table 18.5 shows a preliminary estimate for every three technical staff). Given these goals we esti- of the reduction process over a ten-year period. mate a total staff reduction on the order of 41 percent. - Salary structure. Table 18.6 shows a comparison be- * Establishing a hierarchical structure in the public service. tween the present and the new salary structure, broken The establishment of a hierarchical structure for positions down according to the aggregate occupational classifica- and pay in the public service will depend on a formula tions used in table 18.5. that strikes a balance between an affordable wage bill and * Cost of the wage bill. The third variable used to estimate a salary curve that maintains reasonable incentives for the cost of the program is the cost of the wage bill. Tables TABLE 18.5 Staff structure, under current system and new civil service system Staffing level Management Technical staff Administration and support Total Number of employees under current system 1,404 2,073 8,767 12,244 Number of employees in civil service 960 3,360 2,880 7.200 Percentage reduction 31.6 -62.1 67.1 41.2 Source: Author's calculations. TABLE 18.6 Aggregate salary structure, under current system and new civil service system Salary level Management Technical staff Administrotion and support Salary under current payroll system ($US/year) 4,702 4,211 2,050 Salary under civil service payroll system ($US/year)' 15,730 9,347 3,224 Percentage increase 234.6 122.0 57.2 a. Weighted annual salary based on the structure of the salary curve adopted and the estimate of the total personnel in every category or level. Source: Author's calculations. ADMINISTRATIVE REFORM PROGRAM. THE CASE OF BOLIVIA 163 TABLE 18.7 Evolution of the wage bill, under current and new civil service systems, ten-year period (thousands of U.S. dollors) WVage bill Management Technicol staff Administration and support Total Wage bill in the current system 10,752 14,220 29,279 54,251 Wage bill in the new system 21,301 44,301 13,098 78,700 Difference to be financed 10,549 30,081 16,182 24,448 Percentage increase 98.1 2 1 1.5 -55.3 45.1 Source Author's calculations. 18.5 and 18.6 were used since together they show how two growth rates of staff salaries are used: (1) 5 percent in much it costs the government to maintain personnel in the present system, with 3.5 percent corresponding to the the present as opposed to the new system. However, the devaluation of the dollar (currency used for the projec- wage bill evolves every year as adjustment policies are tion), and 1.5 percent to real average increase in staff introduced. It is thus more relevant to compare the result- salaries; and (2) 3.5 percent itn the new system, corre- ing wage bill at the end of a ten-year period. To this end, sponding only to the devaluation of the dollar, provided the graded salary structure does not require adjustments TABLE 18.8 beyond those that allow for changes in purchasing power. Total wage bill for both systems, ten-year Table 18.7 presents the resulting wage bill at the end of a period ten-year period, as well as the total amount needed to (thousands of U.S. dollars) finance the introduction of the system. The proposed reform presents three problems that Transition Technical Administration must be solved during a ten-year period to allow a suc- year Management s taff and support Total - cessful transition in the central administration from the Year 0 6,601 8,730 17,975 33,306 current system to the civil service system: (1) reducing Year 1 8,671 11,500 17,947 38,118 Year 2 10.837 14,428 17,843 43,108 staffunderthecurrentsystem; (2) incorporatingstaffinto Year 3 13.102 17,520 17,654 48,276 the new system; and (3) obtaining extra funds to finance Year 4 15.467 20,782 17,371 53,620 the wage bill under the new system. Year 5 17.935 24,221 16,984 59,140 If these two systems function simultaneously over the Year 6 18,563 27,843 16,484 62,890 Year7 19,212 31,655 15,857 66,724 ten-year period, the cost to the government will be as Year8 19,885 35,664 15,093 70,642 follows (table 18.8): Year 9 20.581 39,877 14,178 74,636 To determine the necessary annual financing for both Year 10 21,301 44,301 13,096 78,698 systems, and the proportion of that cost that exceeds the Source Author's calculations. current wage bill projected by the national treasury-and thus the necessary increases in this wage bill-a projec- TABLE 18.9 tion has been made, allowing for changes in fiscal rev- Projection of increases in the wage bill, enues that will result from growth in GDP and an increase ten-year period in public management efficiency. It was decided to use a (thousonds of U.S. dollors) model of exponential mathematical projection based on three significant elements: the total level of increase to Transition Technical Administration the wage bill to be reached during the tenth year year Management staff and support Total (US$24,447,936), the limit at year zero, and the curve Year I 0 0 0 0 point during the fifth year, concentrating more increases Year 3 1,831 5,223 -2,809 3,305 during the second half of the implementation period. Year 3 1.831 5,223 -2,809 ~~4,245 Year 4 2,352 6,707 -3,608 5,451 These antecedents allow the use of a model synthe- Year 5 3,020 8.613 -4,633 7,000 sized in the following mathematical function: Year 6 3,879 11,061 -5,950 8,989 Year7 4,981 14,204 -7,641 11,544 Y =Ae (x 2 Year 8 6,397 18,240 -9,812 14.825 B) Year 9 8,214 23,424 -12,601 19,038 . . Year 10 10,549 30,081 -16,182 24.448 where x = transition year y = increase for that year. Source: Author's calculations. 1 64 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN TABLE 18.10 TABLE 18.11 Available financing from the national External financing needs, civil service treasury: current wage bill and projected wage bill, ten-year period increases, ten-year period (th7ousands of U.S. dollars) .finoncia Percentaige of Transition requirements Percentage of cost of the Transition Technicol Administration Percentage year (thousands ofUS$) totol cost new system year Management staff and support Total oftotal cost Year 1 3,147 8.3 42.9 Year 0 6,601 8,730 17,975 33,306 100.0 Year 2 3,084 7.2 20.3 Year 1 6,931 9,166 18,874 34,971 91.7 Year3 5,476 11.3 23.2 Year 2 8,704 13,692 17,630 40,026 92.8 Year 4 7,687 14.3 23.6 Year3 9,473 15,329 17,999 42,801 88.7 Year6 9,633 16.3 22.9 Year4 10,376 17,318 18,241 45,935 85.7 Year76 9,26 14.7 19.1 Year 5 11,445 19,755 18,308 49,508 83.7 Year 7 8,316 12.5 1 5.0 Year 6 1 2,725 22,760 1 8,1 38 53,623 85.3 Year 8 6,609 9.4 10.5 Year7 14,269 26.488 17,652 58,409 87.5 Year 9 3,929 5.3 5.6 Year8 16,149 31,139 16,745 64,033 90.6 Year I0 0 0.0 0.0 Year9 18,455 36,967 1 5,284 70,706 94.7 Total amount required 57,147 - - Year 10 21,301 44,301 13,098 78,700 100.0 Noat applicablie. Soerce Author's calculations. Source: Author's calculations. The calculation of the constants A and B was carried creases during the ten years of introducing the civil ser- out based on the three main elements of the function (years vice. Table 18. 10 displays the total availability of resources 0, 5, and 10). The following expression was obtained: coming from the national treasury during these ten years- Kx - 2 the result of adding the current wage bill, adjusted annu- y =3,303,505e - ally, to the projected increases. where x = transition year It is apparent that the projected available resources wheinreaxse toransiti year. do not cover the annual staff costs for both systems dur- * increase fothatyear.ing the ten years (see table 18.8). Consequently, funding Based on this function, the annual increases to be intro- needs emerge, and external aid will be necessary to duced by the national treasury are estimated up to the cover them. The magnitude of the annual financing tenth year when the financing of the program is to be needs-US$57,147,454 over the ten years-and the complete. The projections, which have been made com- percentage that this represents with respect to the total patible with the macroeconomic model of the Bolivian cost of the civil service system each year, are detailed in economy, do not result in an increase in the fiscal deficit. table 18.11. The total increase in the wage bill, equivalent to US$24.4 The level of financing needed is even lower than the million, scarcely represents 0.3 percent of the GDP esti- current level of financing from donor organizations for mated for the tenth year and 0.6 percent of the expendi- institutional strengthening and technical assistance pro- tures budget for the public sector. grams. Thus, the reform program is financially viable, and Table 18.9 shows the projection of the annual in- its introduction imperative. ADMINISTRATIVE REFORM PROGRAM: THE CASE OF BOLIVIA 1 65 Selected Discussion Points Discussants: Arturo Israel and N6lida Gruber The issue for discussion-recruiting and retaining highly that prevent people from going immediately to the private qualified personnel-was addressed by invited discussants sector. Perhaps a system can be organized there. Arturo Israel and Nelida Gruber. We should not forget that the kind of expertise we need is what economists call a "tradable." The kind of A. Israel: It is difficult to comment on all these rich staff that should do this work is the kind of staff that can presentations-and within the ten minutes we have been easily get jobs elsewhere. So the dilemma is, what happens allotted-but I would like to pick up on a couple of in Latin American countries that cannot pay US$3,000 or points. One point has to do with the need for a minimum US$4,000 a month to attract and retain the kind of staff mass in the public sector of highly qualified technocracy; that is currently required in the public sector? that's what it comes down to. This is a corollary of the There are all sorts of solutions, none satisfactory. reform of the public sector and the changes in develop- Each country will have to find the least undesirable solu- ment strategies that we are following. tion. Inevitably, for many countries it will mean creating Shahid Husain said yesterday that it's not a ques- an elite in the public sector. It will mean differences in tion of the size but of the quality of the public sector. If salaries between that elite and the rest of the public you look carefully at the kind of functions that should be sector-something politically unsustainable in many abandoned and the kind of functions that must be cases-and it will mean a different functioning of the strengthened in the public sector, you conclude that political system. those that need strengthening are difficult functions that I think that an important task for many Latin require a high level of technical expertise and a network American countries may be to acknowledge the need of highly qualified people at the higher levels. We are for a highly qualified technocracy and try to get the talking about the capacity to manage economic and political establishment to understand that need and sup- sectoral policies and, in particular, the capacity to regu- port it. They would have to find ways that are viable- late the private sector. whatever their political context-to ensure that capac- One thing that worries me is that we have jumped ity is in place. into a private sector-oriented strategy in many countries, I think that in the broader context of governance, without thinking through the consequences for the public the role of the media in Latin American countries is sector and, in particular, for the capacity to regulate ad- particularly important. There is nothing easier to attack equately private sector activities. To do this requires first- than the existence of an elite or a group of people that class technical staff, and it requires staff that is capable of receives remunerations that are much higher than the dealing with the political establishment and of dealing average in the public sector. The remuneration or com- with, and maintaining its independence from, operators pensation package need not be solely monetary-and here at all levels of the private sector. the artistic and political parts of the solution come into This presents a dilemma for many countries in the play. There are honors, status, stability. Countries have region. The Argentine case is an interesting one. But in a different ways of compensating and making this a viable way it's special to Argentina, which can afford to pay solution-we have heard several interesting alternatives salaries that are not bad by international standards and discussed today. 166 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN My last point is that it's true that the best solution is no detailed studies of this or suggestions about tying pay an integral one, as in the Bolivian case. But I don't know increases to the efficiency and productivity of civil ser- whether all countries can wait for an integral solution- vants. Someone mentioned figures that put public sector whether they might not run into a vicious cycle in so pay at 60 or 70 percent of the private sector level. But we doing. The Brazilian case shows clearly that one precondi- have not discussed the basis for increasing public sector tion for doing something serious in civil service reform is salaries. Have we improved performance? Are we respond- to have an economic system that is working. What can be ing to the needs and demands of our communities? achieved in a highly distorted context? What can you do What we can feel happy about in our study of the about reforming the civil service when inflation is 20 civil service and its reform is that we are finally paying percent, 30 percent a month, with all the distortions that attention to human resources in the public sector. For come with that? I don't know. the first time, as far as I can recall-and I've been work- The vicious cycle comes into play because one of the ing for at least ten years as a civil servant-we have reasons for having a bad economic situation is bad man- made a serious analysis of this issue, at least in Venezu- agement of economic policies, bad functioning of the ela. Are human resources efficient? Effective? Have civil political system, and bad dialogue between technocrats servants worked for the right objectives and produced and politicians. One would imagine that if the conse- the right results? Is reform really a question of reducing quences of certain political decisions could be presented the size of the state? clearly to the political establishment-and were shown to As far as the improvement of management, I think go against their own objectives, no matter what the objec- there is a series of steps that is inevitable. I was happy to tives-perhaps things would be done differently. hear what Argentina has done. Their efforts point to the development of an elite corps of professionalized public N. Gruber: I'm going to speak as a civil servant here-as managers. But I wonder, what happens to the rest of the a direct actor in all the problems we've been discussing for civil servants? What happens to the rest of the career the past two days. I would like to comment specifically on agents who have a certain status? two points: first, the initiatives in the civil service reforms This is a dilemma throughout Latin America. We we've been talking about and, second, the profes- have a regulated group of agents that is statutory in most sionalization of public management. cases. They have a right to their jobs-their job stability is I believe that the initiatives and reform measures guaranteed. And then we have a group of public servants we've heard about and discussed have not offered a seri- at the very top. They are not required to meet specific ous analysis of the role of the civil service in Latin prerequisites for their jobs, nor do they have job guaran- America. Nor have they dealt with the need for a public tees. We presume they are competent, as Joan Pratts- sector that is responsive to the social needs of the com- Catala said this morning, but their performance is not munity. So I have my concerns. And I have heard others subject to systematic regulation or evaluation. here comment to the effect that we have neither coherent In Venezuela we are thinking of creating two types of policies nor a systematic approach to refomi. public administration. The possibility is still up in the air. When we speak of reforming the civil service, we What do we do with those civil servants who are in are talking about what we call state reform in Venezuela, charge of promoting reforms, formulating policies, and so which is both the transfer of competence and responsi- forth? And what do we do with the rest of the public bility to local governments and financial adjustments, administration, which is atrophied and inefficient? We such as a reduction in public expenditure. We immedi- have to support them-they are there. They are the ones ately consider the size of the state: the need to reduce who implement public policy. So there seems to be a the number of positions and to privatize companies- discontinuity there. something that is already taking place in many of our I believe the World Bank could give us a great deal of countries-and the need to eliminate vacancies. Some- support in the studies and surveys we need to be able to one yesterday said that savings generated by downsizing, reformulate projects and adapt solutions for the critical the elimination of vacancies, and early retirement plans issues coming up in our civil services. and other measures were insignificant and had little im- Yesterday we heard a discussion about external agents pact on public expenditure. In Venezuela we have found in the reform process: Who should promote the reform? this to be true. Who are the key actors? Who should carry out the re- Another problem we have touched on is remunera- form? And we heard mention of external multilateral tion-increasing salaries in the public sector. I have seen agencies. I must conclude that civil service reform-and SELECTED DISCUSSION POINTS I 67 this supports what Professor Zylberstajn said-must take one or two measures. Most surveys are simply placed in the the long-term view, must be permanent, and cannot be circular file or tucked away in desks. I think that unless we imposed on countries from the outside. can bring together the direct actors or leaders in adminis- In Venezuela we have observed the contradiction in trative reform-the institutions-and those who have spe- having a single institution entrusted with both state reform cific missions or tasks to carry out-the civil servants-we and administrative reform. State reform has been going on will fail. Unless civil servants participate in the process, for ten years in our country and, to date, has yielded only they will never be able to promote the reform. 168 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN PART V Strengthening Institutional Capacity to Manage Human Resources and Building Managerial Accountability 20 Administrative Reform: The Case of Mexico Alejandro Carrillo Castro Management of human resources in the public sector has fies, retests, and remodifies its own internal recruitment been a critical and unsolved problem in Mexico for most programs, incentives, and performance assessment poli- of its 172 years as an independent state. Although many cies. And, even though this might not be a bad way of in Mexico would be willing to draw up a list of perfor- doing things-particularly as compared with a rigid, overly mance problems in our civil service, few would be willing specific, and outdated system-it has not been possible to to suggest ways to solve these problems. On the contrary, judge the merits of this more decentralized system be- whenever a new political group or individual must assign cause, as mentioned, the reforms have not been imple- responsibilities within a specific public institution, depart- mented independent of other types of structural or politi- ment, or unit, it is not unusual to hear, "...since we don't cal changes in the public sector. know what Juan or Juana's abilities are... let's put him or This was true, for example, of the 1980s effort to her in charge of human resources management." And establish a more efficient control system for the more then Juan or Juana is expected mainly to avoid problems than 1,200 then-existing public enterprises; equally true with the public servants' union and to blindly follow what- of the program to privatize more than 80 percent of these ever instructions might be issued by the treasury. entities in the past five years, as part of President Although this is an oversimplification, it might help Salinas's state reforms. In both cases, human resources explain why in Mexico there is really no such thing as a management was considered a means to attain other ad- human resources management science or art that is sys- ministrative or political goals, not an important objective tematically applied to solve problems in the public sector, worthy of attention without regard to any other specific except for certain very specific areas such as the financial, reform program. foreign policy, and military sectors. Is this way of doing things a problem? After all, public Every major civil service reform that has been imple- administration should be a means to attain the political mented in Mexico has resulted from or been a part of goals a society establishes as desirable. But whenever the other major administrative and political changes in our only policy for solving human resources management prob- public sector structure or objectives. Perhaps this is be- lems is "cut everything in half," you are going to create cause effective human resources management has never more problems than you solve. been considered an important goal in itself-one that The main problem for Mexico, then, is that of recog- would merit a high-level, well-structured program backed nizing that human resources management is an area worthy by, say, a presidential committee or political party. This of individual study by political authorities at the federal, was true even in the case of the public administration state, and local levels-that it is not one element among reform program implemented from 1965 to 1982. many other priorities of administrative reform programs. So except for the centralized, vertical policies that Otherwise, we will continue to be governed by inef- guide and limit human resources management through- fective human resources management policies that have out the Mexican government-and the specific rules set been established in piecemeal fashion-policies that are for the foreign service and the military-every public often contradictory and shortsighted, with detrimental administration department or unit establishes, tests, modi- results for the public sector as a whole. ADMINISTRATIVE REFORM: THE CASE OF MEXICO 1 71 Strengthening Government Capacity to Manage Human Resources: The New Zealand Experience Graham Scott The major challenge ahead in reforming civil service in- from many sources, such as self-interested behavior by the stitutions in Latin America and the Caribbean is to im- agent, the costs of specifying, monitoring, and assessing prove human resource management so that it works more contracts, and the like. effectively and efficiently toward the underlying aims of In the private sector, agency cost analysis helps ex- the agency. This will require attention to difficulties in- plain the existence and scope of firms. People agree to herent in the specification and assessment of performance cooperate with each other in the production of complex in the public sector, and to incentives on managers to products and services, rather than being self-employed attend to the short-term priorities of elected officials at and attempting to contract at arm's length. The result of the expense of beneficial long-term outcomes. this association is lower agency costs. Thus, a long-term The general context for the reform involves exces- employer/employee relationship is one efficient solution sive levels of public employment, counterproductive hu- to the problem of agency costs in cases where the firm man resource management policies, and institutional produces products that cannot more efficiently be made structures that prohibit significant action and effective by piece-work contracts. management. Key elements of reform strategies to address Agency theory can provide powerful insights into these problems are: downsizing; improving compensation; problems in public administration. It is useful to think of recruitment and retention; strengthening institutional politicians as agents of the citizens who are their princi- capacity for human resource management; establishing a pals, and in tum of civil servants as agents of politicians as senior management corps; and ensuring accountability for principals. The problem of civil service reform is, there- the exercise of decentralized managerial authority. fore, a problem about the efficient contracting and the This chapter describes the reforms of government minimization of agency costs in the relationship between administration in New Zealand in the past eight years, the two. The problems emphasized in the conference focusing on how the fourth and sixth of the key ele- about difficulties in specification and assessment of per- ments-strengthening institutional capacity and ensuring formance, and distortion of incentives toward short-term accountability-were addressed. Results are evaluated and priorities, are classic agency problems, but are only two of lessons drawn. a very large set of issues that must be taken into account in a comprehensive approach to civil service reform. Theoretical underpinnings to The early thinking about civil service reform in New Zealand was influenced by agency theory and other as- public sector reform pects of modern institutional economics, including public choice theory. The literature suggested various solutions The challenge of managing human resources so that they to problems of institutional design. Standard solutions to work more effectively toward the underlying aims of a the problems of aligning the behavior of agents with the government institution can usefully be analyzed as a prob- interests of their principals are: clear definitions of perfor- lem in agency theory. Within this literature economists mance requirements; accurate performance evaluation; have analyzed the problem of minimizing the costs to the transparency about decisions and their results; careful principal of constructing arrangements that ensure that choice of agents; and performance-based incentives. There agents act in the principal's interests. These costs arise are also structural solutions that affect the allocation of 172 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN decision rights, the simplicity and clarity of objectives, heavy protection of industry, extensive subsidies, and a and the avoidance of capture of policy or regulatory func- distorted tax system, New Zealand was vulnerable to the tions by special provider interests. turmoil of the 1970s. In particular, New Zealand was very The separation of policy from operations, of funding slow to recover from the oil shock, which caused a mas- for public services from their provision, and of commer- sive drop in the terms of trade. cial from social objectives; the use of funding systems such While for two decades New Zealand had been diver- as vouchers, privatization, and contracting in; and the sifying both its products and its markets away from heavy development of internal markets-all are practical sug- reliance on bulk agricultural produce going to Britain, the gestions that arise from the institutional economic frame- degree of adjustment in the economy had been insufficient work. The influence of this theoretical perspective on the to permit as satisfactory growth rate. As a consequence New Zealand reform program, and some of its limitations, unemployment rose steadily from the late 1970s, and there are discussed in Scott and Gorringe (1989). was a buildup in domestic and foreign government debt. Other theoretical contributions to the New Zealand The fiscal deficit reached 9 percent of GDP in 1984. reform program came from finance theory in developing The attempt by the government to deal with the financial structures, balance sheets, and financial incen- problem through massive state-sponsored investment in tive programs for government commercial entities and energy-related industries turned sour when the world oil departments. Modern accounting theory was invoked to price collapsed, so that about $7 billion worth of debt, or solve some difficult problems in the design of new ac- 10 percent of GDP, materialized as a contingent liability counting conventions within the context of agency theory. on the government's balance sheet. The long history of Management literature was drawn on in a number of central control of the economy, tight regulation and pro- areas, particularly consideration of human resource man- tection, and rigid incomes policies had engendered a cul- agement issues. From these theoretical insights, and from ture of poor management in both the public and private practical necessities and political programs, came prin- sectors. There was concern over low levels of efficiency in ciples that underlaid policies of corporatization, the government, which owned and controlled organiza- privatization, and the reform of core government admin- tions producing 22 percent of GDP and more than a istration. In each of these areas there are features about quarter of gross capital formation. New Zealand's reforms-particularly in the core state In 1984 the Labour Government replaced the Na- sector-that are significant internationally. tional Government in office and launched a radical re- structuring of the public and private sectors. All quantita- The political and economic tive controls on imports were removed, tariffs were cut, a and economic ~~~10 percent goods and services tax was introduced, and a background of New Zealand's civil major reform of the income tax system to lower rates and service reform broaden the base were put in place. A rapid increase in the ratio of government revenue to GDP resulted. The deficit was also drastically reduced by the elimination of New Zealand's civil service reform arose within a particu- all subsidies to agriculture and industry and other cost- lar political and economic situation and was designed and cutting measures. implemented as a response to clearly identified problems. In the public sector all the major commercial func- Tlhere had been numerous previous attempts promoted by tions of government were converted to government- public officials to improve the quality of public sector owned companies incorporated under New Zealand's com- management, but it was not until the mid-1980s that pany law statutes, and the large subsidies that had been wider problems and objectives created the environment going to these loss-making government commercial de- in which a new initiative could be launched successfully. partments were eliminated. Some social services that had There was widespread concern over the poor eco- previously been provided through cross-subsidy inside nomic performance of the New Zealand economy, which these organizations were funded explicitly, for example, by the early 1980s had been growing for more than twenty rail passenger transport. years at an average rate 1 percent below the average of One of the effects of the corporatization of these the Organization for Economic Co-operation and Devel- government trading entities was very rapid improvement opment (OECD). After having been one of the wealthiest in efficiency and the exposure of a pattern of poor man- countries in the world in the mid- 1950s, its gross domestic agement and wasted resources. For example, the Electric- product (GDP) per capita ranking had slipped to twenty- ity Corporation cut the cost of production by 25 percent, second place. As a very advanced welfare state, with moved from loss to profit, and produced a real decline of STRENGTHENING GOVERNMENT CAPACITY TO MANAGE HUMAN RESOURCES: THE NEW ZEALAND EXPERIENCE 1 73 13 percent in the price of electricity. In the private sector the basic structure of the reform program can be seen the changes provoked a painful restructuring of New from a brief description of its significant features. Zealand industry with emphasis initially on cutting costs and improving management. Chief executives' contracts and performance assessments These events created an environment that led the government to seek similar improvements in the effi- Permanent tenure for the heads of government agencies ciency of core government activities. The public sector was changed so that apolitical chief executives were ap- management regime in place was failing and was overdue pointed for five-year terms. Their salaries were raised to for reform, as described by Pallot (1991). Key features of be in line with the private sector market rates for their the system were: skills, although political pressures have subsequently * A program-based budgetary system eroded this relationship. Their performance is assessed * A 10 percent discount rate in real terms as a minimum annually, and there are provisions for bonuses for good return for public sector investment performance and for removal for poor performance. Five * Rules about funding new programs from the savings years of good performance may result in a further contract from existing ones of three years being offered. The performance assessment * Detailed instructions about financial management for chief executives is done by the State Services Commis- * Tight controls over inputs sion, which places considerable weight on the views of the * Poor transparency relevant minister and also takes account of the views of * Conglomerate structures mixing policy, regulation, and other ministers, particularly since a modification was in- operations functions; incentives for budget maximization troduced that required chief executives to give due con- * Permanent tenure for departmental heads sideration to the collective interest of the cabinet. This • Poor incentives for good management. came about because there was some concern that chief A further impulse for reform came from the fact that executives were being motivated to concern themselves fiscal deficit problems persisted in spite of rapidly rising exclusively with their own portfolios and neglect the wider revenues, especially after the stock market crash, which interests of government. In the author's view this concern eroded the corporate tax base and contributed to a rapidly was exaggerated and was no less in evidence under the increasing demand for resources in social policy. It be- old regime of permanent tenure (Scott 1993). came imperative to design management systems that re- It has taken several years to develop a system for leased excess resources from administrative overheads and assessing the performance of chief executives that is ac- enabled an efficient targeting of social support toward ceptable to all parties, and there is still some development those in need, rather than the universal provision that to occur. Recent innovations have been to consult refer- had been a New Zealand tradition. ees, nominated by both the minister and the chief execu- Also in relation to social policy, difficult issues arose tive, who are in a position to comment on the perfor- about how to manage more effectively government pro- mance. A written performance appraisal is prepared; the viders of services in health, education, and housing- chief executive has an opportunity to comment, and those areas in which many of the advantages of the state-owned comments may be entered into the appraisal. enterprise framework that had been used for trading orga- nizations could be secured, but in which social policy Performance agreements objectives also needed to be provided for. Overlapping all these issues was a general mood for A performance agreement is prepared between each chief change and reform that pervaded the government and executive and his or her minister, detailing the services the community at that time Uames 1992). that are to be provided in the course of a financial year. These services are described as outputs and are based on Main features of the civil service the concept that civil servants are responsible for delivery of specified outputs to their ministers. Ministries in turn reform program are responsible for the outcomes-ultimately to the elec- torate. The performance assessment is done by reviewing The approach to the reform of New Zealand's public delivery of outputs as described in this ex ante perfor- sector is described in Scott, Bushnell, and Sallee (1990). mance agreement. The details of the financial management reform are re- In keeping with the theoretical insights described corded in Ball (1990), Ball and McCulloch (1992), Pallot earlier in this chapter, New Zealand's system places a (1991), and elsewhere. For the purposes of this chapter great deal of emphasis on prior specification of output 174 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN requirements and less emphasis on ex post assessments of suggested that focus on delivery of outputs leads to a loss performance indicators. The latter can, in the author's of subtle qualities of service that are important to the experience, be a costly, low-value overhead expense if public. There is debate about whether this is an inherent output requirements have not been clearly specified to tendency or can be dealt with through more cautious begin with. specification of quality in what is to be delivered, or, as a proxy for that, specifications about certain processes that Distinguishing purchase from ownership interests services should pass through in their production or deliv- ery (Scott 1993). A critical element in the definition of performance is the distinction between the government's interests in a gov- Transfers excluded from chief executive accountability ernment agency-as an owner looking for efficient use of resources invested, and as a purchaser looking for the Chief executives' accountabilities were confined to things delivery of agreed services. This distinction has proved they have control over; transfer payments and grants that powerful in encouraging ministers and officials to think they are passing on to third parties enter their perfor- about service delivery, on the one hand, and effective mance agreements only in that they are required to dis- resource use, on the other. It also facilitates consideration pense those funds efficiently. by ministers of alternative sources of supply of desired outputs, and their relative prices, and decisionmaking Freedom from input controls about resource use on a basis that is conceptually distinct from the question of how well a particular agency is being Chief executives were freed from almost all controls over managed. Budgetary discussions often involve proposals their inputs. They were given the freedom to buy and sell to shrink the balance sheet of an organization by with- assets within the department's level of capital. Under the drawing capital from it while expecting service delivery to Public Finance Act they are designated as chief financial be maintained through increased productivity. officers to ensure their liability for the finances under It follows from this conceptual distinction that ac- their control and are given extensive formal delegations crual accounting is essential to fully assess the ownership from the Minister of Finance through the treasury to interest and to accurately cost the resource use in pro- manage their finances. There are negotiated agreements ducing outputs. In New Zealand accrual accounting was between the treasury and the departments on significant simply a technique to support a wider regime, whereas in matters such as managing foreign exchange risk. Depart- some other jurisdictions it has been adopted simply on its ments are required to pay a capital charge levied on the own merits. The adoption of the purchaser/ownership net equity in the balance sheet at a rate that is negotiated distinction in accrual accounting also assists in dealing as appropriate to the department using the rough applica- with the problem of running down an organization for tion of the capital asset pricing model (with the default short-term results at the expense of long-term capacity rate being the government's cost of borrowing with a to deliver services. It also detects decisions that build up margin). Each department negotiates a cash injection costs for future periods, such as accrued pension liabili- profile for the year with a system of interest rate rewards ties, although in this particular issue the transition from and penalties for deficits and surpluses to the agreed pro- a central, unfolded pension plan for civil servants to file. All departmental banking is done with a single com- funded schemes accounted for in departmental balance mercial bank, and accounts are swept each night for sur- sheets is incomplete and still subject to further govern- pluses, which are invested by the treasury in the ment decisionmaking. overnight money market. This move alone saved $30 million in a year. Audited statements of service performance Parliamentary appropriations for outputs The Auditor-General audits not only the ex post state- ments of account for each department emerging from the The appropriation process operates on an accrual basis system, but also a Statement of Service Performance, with separate appropriations for resources for the purchase which comments on whether the services agreed to were of outputs, for injecting capital into the balance sheet of a delivered. department, and for transfer payments. There remains a One difficult issue that requires constant attention is parliamentary control of cash at the aggregate level. the specification of the quantity and quality of outputs in The resources appropriated to the departments in- the performance agreement. Critics of the system have clude costings of the outputs that have been agreed to in STRENGTHENING GOVERNMENT CAPACITY TO MANAGE HUMAN RESOURCES: THE NEW ZEALAND EXPERIENCE 175 the chief executive performance agreements. The law managers with regard to human resource management, requires these outputs to be summarized into broad classes, there is a general pressure from politicians reflecting pub- but the chief executive considers them in much finer lic views against general pay increases for public servants. detail in the budgetary process. The performance agree- For the past three years there has been no compensation ment of the Secretary to the treasury, for example, has provided in departmental budgets for funding any wage about 150 separate outputs costed. increases management might wish to pay. In the case of In the course of a financial year the Minister of Fi- the large and politically powerful unions the state services nance can agree to material changes in the allocation of commission is in charge of the negotiations, under broad funds between outputs and to the deletion and creation of political direction. outputs, so long as that is consistent with the priorities set In the case of education there are proposals-strongly by the cabinet and the budget cycle. However, the law resisted by teacher unions-to provide funds in bulk to restricts the transference of resources between broad out- schools that are managed by elected boards of trustees, put classes, which are specified in the Appropriations Act which would assume responsibility for human resource each year. As noted, however, the chief executive is free to management at the local level. Similar moves to decentral- spend the specified amounts of money on whatever inputs ize wage fixing in the health sector have been initiated. are thought necessary to produce the outputs efficiently. Under the old system there were appeal provisions against appointment processes and prohibitions that Chief executives as employing authorities blocked the employment of outsiders. Such prohibitions have all been removed. With regard to human resource management, the chief executives were established in law as the employing au- Performance infornation thority of staff under their control, whereas previously the state services commission had been the employer of All departments have installed some kind of perfor- all civil servants. The law also created the obligation to mance management system for staff training, develop- be a good employer and to be concerned with equal ment programs, and the like. The responsibility for these employment opportunities. There are also requirements is decentralized except at the senior management level, to be responsive to the principles of the Treaty of where a recent initiative has led to the creation of a Waitangi, which protects the interests of New Zealand's Strategic Human Resource Management Centre, which indigenous Maori population. Chief executives thus be- is to encourage competency-based approaches to person- came responsible for industrial relations negotiations nel development in order to train top public servants for and the establishment of complete human resource the future. management systems. A comprehensive system of financial and other per- Unlike the private sector, trade unionism in the pub- formance information was developed, which is reported at lic sector had always been voluntary, and in most depart- different levels of aggregation to different principals. The ments the management team became partly or wholly most disaggregated information is reported to the minister employed on personal contracts, even though some might associated with each chief executive. (An even greater still be members of the union. Departments became free level of financial and performance data is used for intemal to negotiate performance pay arrangements with staff who management purposes inside departments.) A recent in- still worked under collective agreement, including pay novation has been to develop the concept of the "pur- cuts for poor performance in some cases. The State Sector chase agreement," which is a fairly detailed account of the Act, which enabled these changes to a highly decentral- service delivery that is contracted for by the minister and ized wages system, was passed over the objections of the is available to the treasury, to other ministers, and to state sector unions. The government, on the other hand, central agencies in preparing the annual budget and in thought that the long period of trying to negotiate reforms considering longer-term financial planning. to the state sector labor market regime had fallen well At the next level of aggregation, information would short of arrangements that would permit the reforms to be available to the cabinet on an ad hoc basis to fumish achieve their objectives. additional information for its consideration in preparing One of the reasons for the reforms was that some key the budget. ministers had unsatisfactory experiences with the previ- For parliamentary appropriation, outputs are, as noted ously highly centralized system, which involved them per- earlier, aggregated to the output classes. There are homo- sonally in complex negotiations with state unions over geneous categories of outputs entered into the estimates the details of pay deals. While there is now freedom for document that accompanies the appropriation bill pre- 176 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN sented to parliament. This has produced far greater vol- ance, which had never before been possible. The whole umes of information on the required outputs of govern- government system would be able to gear itself to these ment institutions. This information is intelligible in terms priorities, and information would be available to assess of what is being delivered, rather than how much has whether services were being delivered as planned. The been spent on labor, capital equipment, and so on. For question of whether the service delivery was producing example, the New Zealand Defence Force has about sixty the outcomes the government sought in the first place pages in the estimates document compared with about six raises another set of issues involving the development of in the earlier format. strategy and the quality of policy analysis. Parliament is also presented annually with a corpo- rate plan for each department, which summarizes both Assessing the results the output and ownership plans that are scrutinized by parliamentary committees near the beginning of the fi- nancial year. During the year there is monthly monitoring The following comments assess the reforms with refer- by the treasury of expenditures on outputs, and investiga- ence to issues that were relevant to the executive, the tions of significant exceptions. At the end of the year a parliament, and beyond. full set of accounts and a statement of output delivery are It is not easy to judge whether parliamentary re- prepared, which are also scrutinized by parliament. straints on the executive have increased, although the At the highest level of aggregation a full set of ac- evidence does seem to suggest that it has and will increase counts consolidating the entire government is prepared in the future. The role of the increased information flows (New Zealand is the first country in the world to do this). in this regard is difficult to isolate from other influences. It These documents form part of the information base used is clear, however, that the key parliamentary committee to interpret the health of the New Zealand economy and that reviews the information regards it as an important its government-including such indicators as debt accu- improvement over previous procedures. The fact that mulation and the buildup of contingent liabilities. The there is far greater transparency about the utilization of government's financial assets and liabilities are managed resources in government departments has, in the author's in the total context of the government's overall balance experience, affected the incentives and behavior of minis- sheet in a manner analogous to a large private corpora- ters and departmental managers, even though they may tion. Note that the assets and liabilities managed by de- not actually be called to explain all aspects of the perfor- partments on behalf of the Crown are not in the depart- mance as reported. mental balance sheets, but are recorded in the Crown's The mechanisms for control of departments by min- consolidated balance sheet. isters demonstrably give them far greater potential control over services to be produced, resulting in the issuance of Comparability of performance inforrnation clear directions and changes of priorities. There are nu- merous examples in which ministers, having been pre- In order to facilitate the use of performance information sented with information about the services that were be- by principals at various levels, the system was designed to ing delivered for the first time, decided to discontinue facilitate comparisons of efficiency and effectiveness be- them. The contracting process between minister and chief tween government activities and between the govern- executive is, however, an interactive one, and although ment and the private sector. Cost accounting conven- the minister has the final say, the contract is appropriately tions adopted are from standard accounting practice. named an agreement. Government departments are required to take account of The budget process is far more transparent and or- depreciation, pay the charge on capital adjusted for non- derly than it previously was, and there have been signifi- payment of income tax, and also pay indirect taxes in the cant shifts in patterns of resource use, although it is diffi- same way as the private sector. Previous regimes had cult to attribute these to the financial management system involved ad hoc accounting conventions and hidden sub- alone. Many other forces were at work. sidies, which made comparisons almost impossible. With regard to improvements in efficiency of re- source use, more confident assertions can be made. It is Strategic plans linked to detailed outputs the judgment of many who have been involved that sub- stantial cuts in resources going to departments have not The whole system of accountability and performance as- resulted in deterioration of volume or quality of output, sessment was intended to enable the government to de- and in fact in a great many areas there have been im- velop and implement strategic objectives with some assur- provements in service quality. With the reforms staffinu SrRENGTHENING GOVFRNMENT CAPACITY TO MANAGE HUMAN RESOURCFS THE NEW ZEALAND EXPERIENCE 1 77 levels in the public service have dropped from 88,448 in aims to raise the quality of senior management in public 1986 to 36,374 in December 1992. service, ensure succession planning, and implement a com- The cash requirements for operating departments petency-based approach to human resource management were lowered by 3 to 4 percent in 1992. There have been generally at the senior level. no compensations for cost increases in three years, and Multiyear appropriations linked to medium-term busi- cuts on the order of 2 to 5 percent a year have been ness plans will emerge as the other developments mature. made in many activities. Reducing the ratio of govern- There are multiyear commitments in a number of areas ment expenditure to GDP was a strategic objective for already. the government, and it is clear that the financial man- Issues of strategic management, quality, and innova- agement reforms made a contribution to this. At the tion are the same for the public sector as for the private detailed level it is observable that there is much better sector, and the potential for improvement remains large. utilization of assets, particularly of working capital. The reforms have been widely accepted by ministers and Lessons to be learned and caveats managers. The latter, in particular, are unanimous in not wishing to go back to earlier systems. Most report that regarding their applicability to the new system has given them far greater control over other countries the management of their own operations and removed a lot of former frustrations. The National Party, on being elected in 1990, ap- The New Zealand experience is the most comprehensive pointed the former chief executive of IBM-New Zealand reform of central government administration in the world to review the reforms. He concluded that the reforms were to date. This comprehensiveness is due in part to the sound and that remaining difficulties should be addressed severity of the problems that New Zealand had to con- by pursuing the program more vigorously with improved front and the lack of reform in preceding years. The performance agreement specifications, better output defi- previous nontransparent system was part of the apparatus nitions, stronger incentives, and a heavy emphasis on up- for channeling assistance between particular groups-for grading the quality of top management in the public ser- example, the cross-subsidy between local and long-dis- vice through recruitment, training, and development. tance telephone calls. In the early 1980s a proposal by the The early evidence suggests that the aggregate infor- treasury to change one relatively minor footnote in the mation is a very valuable addition to the data needed for public accounts was rejected. effective macroeconomic management. The comprehensiveness of the reform and the speed with which it was implemented were an important part of Future developients changing the culture of management in the public sector, which was already under pressure as a result of precedents set in corporatized govemment activities and in the de- Because the system depends on the control of outputs, it regulated private sector. In addition the treasury was to- is crucial to keep the pressure on for really effective speci- tally committed to the reforms, and there was a bipartisan fication, taking account of subtle questions of quality and consensus in parliament that they should occur. There service delivery. The early output definitions were often were talented managers peppered throughout the public crude, and further work is necessary to refine them. The service who were deeply frustrated with the old regime innovation of the purchase agreement, which permits and keen to exercise more management authority and to more detailed scrutiny of what is being delivered, will be a lead the changes in their departments. Chief executives significant addition to the system. liked the idea of the removal of controls, but some tTied to Early emphasis was on the implementation of man- avoid the imposition of output control by seeking vague agement systems, but New Zealand has now reached the definitions of outputs. One even sought to have a major point where the dialogue between managers and their govemment agency responsible for only one output, which principals in central agencies will focus more on the stra- would have meant no control whatsoever. Some ministers tegic positioning of the department in terms of the objected to the restriction on their freedom to shift money govemment's goals and medium-term developments af- between output classes without the approval of parlia- fecting New Zealand. ment. Such opposition to the reforms were sporadic, but The Centre for Strategic Human Resource Manage- never stopped the momentum for change. The 1990 re- ment, which is being established by the chief executives view by the new government led to the remaining resis- themselves in concert with the state services commission, tance being largely overcome. I 78 CIV', SERVICE REFORM IN LATIN AMERICA AND THE CARI8REAN There remains a criticism in some academic circles, enabled private sector accounting and management con- and by some politicians, that maintaining a distance be- sulting firms to provide necessary services to more than tween ministers and officials somehow undermines colle- forty government departments simultaneously-central giality. This is doubtful (Scott 1993). management of that effort would simply have been impos- The implementation process was designed to solve a sible. A crucial point, however, is for public sector manag- series of government problems as they came along-it ers to be sensitive in recognizing those points where con- was never sold by officials to politicians as a grand de- ventional private sector approaches are not appropriate. sign or simply the application of proper accounting prin- This is not readily apparent. The public sector is different ciples. I believe this is an important consideration that in important ways, and there are inexperienced private contrasts with piecemeal developments in other jurisdic- sector advisers who are not sensitive to this. On the other tions. The introduction of accrual accounting, for ex- hand there are many public servants who exaggerate the ample, can be a valuable tool-or a waste of resources- differences in order to preserve their own uniqueness. depending on what the rest of the system proposes to do The private sector financial managers and accountants with the information who joined the New Zealand government during the re- Decentralization of human resource management au- form period produced a rapid upgrade in the skills avail- thority has occurred in varying degrees in a number of abl., and the system could not run without them. jurisdictions, but New Zealand appears to have taken it In conclusion I would say that most of these issues further than others. This particular element is crucial to are likely to arise in any country contemplating major improving management performance-to the point that civil service reform. many, if not most, of the benefits of the other reform elements are lost without it. The issue of the relationship between the govemment and state unions at the time this References kind of regime is introduced is therefore critical. The New Zealand experience suggests it is difficult to achieve such Ball, Ian. 1990. "Financial Management Reform in Govem- changes through negotiation. Important questions of po- ment." In J. Gutherie, L. Parker, and D. Shand, eds., The litical accountability for departmental activities had to be Public Sector. New South Wales: Harcourt Brace addressed in New Zealand and remain problematic. While Jovanovich. a minister is no longer expected to resign if there is a Ball, Ian, and Brian McCulloch. 1992. "Accounting in the Con- failure in his or her department, the public and parlia- text of Public Sector Management Reform." Financial Ac- ment still expect the minister to take responsibility for countability and Management 8 (1):7-12. ensuring that the department is properly managed, even James, Colin. 1992. New Territory: The Transfonnation of New though management authority is delegated. If departments Zealand, 1984-92. Bridget Williams Books Limited. create political problems, they will usually be dealt with Pallot, June. 1991. In Boston and others, eds., Reshaping the , 1l 1 .... . ....... ~~~~~State: Newu Zealand Bureaucratic Revolution. New York: politically, and it is a great temptation to ministers to State: new Press. solve specific problems by issuing a general instruction. Oxford University Press. solver timeinputicotrobles can issumg back gent e system Scott, Graham. 1993. "What's Wrong with Managerialism?" Over time input controls can creep back into the system Public Sector 16 (1):2-4. in this way. Scott, Graham, and Peter Gorringe. 1989. "Reform of the Core The New Zealand experience also shows how effec- Public Sector: The New Zealand Experience." Australian tive management practice in the private sector can be Journal of Public Adrninistration 48 (1). brought into a public sector environment and easily Scott, Graham, Peter Bushnell, and Nikitin Sallee. 1990. 'Re- adapted. The reforms could not have been introduced so form of the Core Public Sector: New Zealand Experience." quickly without establishing an overall framework that Governance 3 (2). STRENGTHENING GOVERNMENT CAPACITY TO MANAGE HUMAN RESOURCES: THE NEW ZEALAND EXPERIENCE 179 The Brazilian Experience of Administrative Reform Nilson Holanda During the 1980s Brazil's attempts at administrative re- ceived and implemented by a government that was cen- form at the federal government level were hindered on a tralized and authoritarian. With the return of democracy couple of fronts. One problem was the economic crisis that in 1945, the reforms lost momentum and the basis of began in Brazil in the early 1980s and that left the state DASP's political power was eroded. financially depleted. A second important factor, paradoxi- The period from 1945 to 1963 was sterile in relation cally, was the misguided attempt at administrative reform to administrative reform. A project negotiated and sent to initiated by President Sarney in 1985 and reinforced by the congress in 1953 by President Getiulio Vargas (then a President Collor in 1990. Instead of improving the effi- constitutional president) was discussed for more than eight ciency of government, those reform efforts threw the pub- years but never approved. lic sector apparatus into disarray, recentralized decision- President Juscelino Kubitschek created the Commis- making, and destroyed the delicate equilibrium of sion of Administrative Studies and Projects (CEPA- administrative functions that, in an otherwise chaotic en- Comissao de Estudos e Projetos Administrativos) to re- vironment, had made the government work. view administrative reform projects and to improve coordination with the congress. The Commission pre- History of administrative reform pared a number of recommendations, but none was ap- proved except the Law of Job Classification of 1960 (re- in Brazil placing the previous law, dated 1936). Kubitschek also initiated special management arrangements through the A brief retrospective of administrative reform in Brazil creation of executive groups that worked in parallel with since 1936 reveals three stages. the traditional bureaucracy in the implementation of his government's objectives (plano de metas). Stage one Stage two The first stage, which fits the classic model of public administration (compare Marcelino 1988), began with The second phase of administrative reforms, which fits the creation in 1936 of the Federal Council of the Civil the model of administration for development, began in Service System (Conselho Federal do Servi§o Puiblico 1967 with Decree-Law 200. This is probably the most Civil), later transformed into the Depa, t.nent of Public important piece of legislation in the past fifty years in the Service Administration (DASP-Departamento Admi- area of administrative reform in Brazil. It defined prin- nistrativo do Servi,o Piblico). DASP became a very pow- ciples and guidelines for planning, decentralization, and erful agency and, inspired by the American experience delegation of competence and control, and it tried to with its Civil Service Commission and Bureau of the organize public administration under a systems approach, Budget, pioneered important work in the modernization with central institutions coordinating the different sys- of support systems for public administration, mainly in tems, such as the Ministry of Planning for planning and personnel, budgeting, and auxiliary services. Those re- budgeting; DASP for personnel; and the General forms, however, concentrated on the means rather than Inspectorate of the Ministry of Finance for financial ad- the ends of public administration. Also, they were con- ministration, accounting and auditing, and so on. 180 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Decree-Law 200 emphasized the continuous nature At this point the increase in inflationary and politi- of the reform and modemization process and reorganized cal pressures led the government to seek an easy way out the structure of federal administration, consolidating of the situation through shock treatments, beginning mechanisms of planning and coordination that had never with the Cruzado Plan of 1986. The administrative re- worked before. form lost direction, and became an auxiliary element of In this second phase there was a great expansion of the stabilization plans. Gradually, it lost priority and re. decentralized administration through the organization of ceived little attention in the political debates over the mixed-economy companies (sociedades de economia mista), constitution of 1988. public foundations, and the like. These entities were An important initiative of this period (although par- charged with diverse functions, not only in the exploita- tially frustrated) was the creation of the National School tion of productive activities on an entrepreneurial basis of Public Administration (ENAP), modeled on the French (mixed-economy companies) but also in such areas as ENA (see chapter 30, by Gileno Marcelino, for a discus- research, teaching and training, economics, and social sion of the experience of ENAP). and cultural promotion (public foundations). The constitution of 1988 consecrated the principle of Within the centralized administration, there was a unification of public sector personnel systems, ignoring trend toward flexibility and efficiency through more lib- the rich and varied experience of the previous decades eral hiring of employees according to rules of the private that allowed public managers greater flexibility in hiring sector and oii the basis of a generous number of special employees and contracting services. It also granted stabil- procedures for contracting technical personnel on a tem- ity, or job tenure, for most federal employees working porary basis-the so-called fun,cs de confianqa, such as under private labor contract rules, thereby reducing the DAS (Direcao e Assessoramento Superior) and FAS (Fun- capacity of the government to promote further reforms in coes de Assessoramento Superior). In 1988, of 570,000 the near future. employees in administrative positions, only 6 percent had In 1990 the new government of President Collor been recruited according to the public servants law and tried-again based on the questionable assumption of public contest rules. reducing the size of the state-to cut down the number of The process of reform continued through a large ministries and federal employees. The savings obtained number of complementary laws and regulations. A suc- were negligible-but the ensuing disorganization in the cessful program of debureaucratization was started in public administration was devastating. 1979, and the first attempts at privatizatiotn were initi- ated in 1981. Prospects for the future Stage three What, then, are Brazil's prospects for the future? I think The third phase of administrative reform began in July we are now ready not only to learn from and move beyond 1985 when President Sarney created a new General our recent mistakes but also to restore elements of decen- Commission of Administrative Reform. By that time the tralization and flexibility that were lost in the misguided Brazilian economy was in deep trouble, after being hit by reforms of the past decade. the oil shocks of 1973 and 1979 and the international In November 1992 a modest, down-to-earth counter- financial crisis of 1982. The administration was slow to reform was introduced by President Itamar Franco, reorga- adjust to those changes, placing emphasis instead on nizing the structure of the federal government and correct- management of the external debt and giving priority to ing some of the more evident mistakes of the Collor reform. growth over stabilization. The iesult was a serious in- The constitution of 1988 is to be revised in the fall of crease of inflationary pressures. Those difficulties were 1993, providing an opportunity to improve the provisions compounded by problems in the transition from military related to the fiscal and social security systems, the distri- rule to democracy. bution of responsibilities (at the federal, state, and local In this new context administrative reform took on a levels), public administration, and social and economic strong political and rhetorical character, stressing dra- organization. matic changes such as the merger or elimination of public In spite of political difficulties the privatization pro- companies and institutions and the elimination of public gram has advanced a great deal, particularly in basic in- employee privileges (apartments, cars)-the point being dustries such as steel and petrochemicals. Conditions are to convey to the public the reform program's commitment being created for the privatization of services in such to austerity and to reducing the size of the state. areas of infrastructure as transportation, power, and basic THE BRAZILIAN EXPERIENCE OF ADMINISTRATIVE REFORM 81I sanitation. Right now, for the first time in fifty years, a tion. It must permeate the whole public apparatus and, in private railroad is being built in the central-west region. particular, it should be integrated with the processes of The revision of the constitution will probably elimi- planning and policy formulation at the macroeconomic nate the remaining restrictions on privatization in the and sectoral levels. telecommunications and petroleum industries. For the * Administrative reforms imply changes in three basic companies that remain in the public sector, new forms of elements of public management systems: processes, struc- management and control are being tried, mainly through tures, and human resources. The most important is the the use of contratos de gestao (performance contracts). human resource element, although there is a tendency to Also, the trend toward the consolidation of a more effec- emphasize structural changes, which are more dramatic tive market economy, through deregulation and reduc- and can make headlines. tion of protection, has created a new relationship between * We cannot improve the quality of human resources in the govemment and private sector that implies a redefini- government overnight, but we can achieve great results tion of the role of the state. by creating elite groups in strategic sectors. Therefore, the experience of ENAP should be reevaluated. Lessons from the past Finally, I would like to stress the importance of tech- nical assistance from international organizations, which permits the sharing and evaluation of different countries' What can we learn from the Brazilian experience? experiences in public administration and administrative reform. After decades of slow but continuous progress, we un- The situation in Brazil, for example, would be much derestimated the forces that conspire against the modern- worse if it were not for a loan from the World Bank for a ization of public administration, particularly those un- Public Sector Management Project (GESEP). This project leashed by political pressures during the transition to helped us maintain and improve public management sys- democracy. tems in such strategic areas as planning, research, statis- * Administrative reform should be viewed as a long-term tics, control of state companies, and the organization of and strategic proposition, not a shortcut for achieving the national treasury department. Though the loan was immediate results and short-lived political benefits. small, it had a far-reaching and positive impact that we * Reform should be based on the right assumptions and are only now able to understand and assess. not on slogans, prejudices, and utopian goals. * Assumptions should be derived from a systematic analy- e sis of the rich and varied experiences of our (Latin Ameri- Reference can) countries. * Administrative reform cannot be the exclusive and en- Marcelino, Gileno F. 1988. Govemment, Image, and Society. dogenous business of the Ministry of Public Administra- Brasilia, Brazil: FUNCEP. 182 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Efforts to Improve Executive and Managerial Performance in the U. S. Government Ben Burdetsky I am delighted to have the opportunity to participate in United States being expressed in most countries I have this conference on Civil Service Reform in Latin America visited. The pressure for change and improved manage- and the Caribbean. Our discussion of this topic is timely ment in government intensifies as economies weaken, as and important; governments worldwide are searching for unemployment rises, as taxes increase, and as citizens more effective and efficient ways to manage their pro- look for ways to reduce the costs of government, particu- grams and operations. larly if there is a perception that government workers are Clearly, managing human resources is one of the performing poorly or carrying out functions that can be critical challenges that government managers and execu- eliminated or reduced. tives face. I will describe the U.S. experience in attempt- ing to strengthen and improve executive leadership and Myths about government management in its federal government. I served in the U.S. government from 1950 to 1977, accountablfity with my last two assignments as Deputy Commissioner of the U.S. Bureau of Labor Statistics and Deputy Assis- In preparing a brief synopsis of some of the points I might tant Secretary of Labor for Employment and Training. cover today, I listed a few of the reasons that are often During those years I was also involved with extensive given to explain why it is difficult or impossible to mea- federal-state cooperative programs. Thus, I had direct sure and evaluate performance in govemment: line management responsibility for major U.S. govern- * Government lacks the bottom-line mentality found in ment programs during a time of great change in pro- the private sector. grams and operations, and enormous political leadership * Government's nonprofit, service nature tends to dilute changes occurring on a regular basis. In the years since, I efforts to measure and cost outputs. have been a student of both public and private manage- * The monopolistic nature of many government services ment, and I hold appointments as a professor in aca- and products can reduce concem about productivity and demic departments concerned with both business and costs. public management. * Many govemment managers and executives believe that Starting with President Carter's administration in there are few, if any, valid output measures that can be 1977, the federal work force has been under severe at- compiled and evaluated. tack. There is a widely held feeling that government is * Government has a tradition or culture of resisting too big, too expensive, and too unresponsive, and that change, including the establishment of a system to mea- serious action is required. Actions that have been pro- sure the effectiveness of government programs. posed to curb government spending and improve service Another myth is that government appointees resist to the public include personnel reductions, program evaluation and measurement because they do not wish to elimination, program mergers, more outside evaluation look bad in the public eye if their programs are found less and control, severe budget reductions, and a variety of than effective. other tough measures. Contrary to these myths, government managers want In my travels I have observed many of the same to do a good job. They want to be respected as competent feelings and concerns expressed about government in the individuals who care about their programs and opera- EFFORTS TO IMPROVE EXECUTIVE AND MANAGERIAL PERFORMANCE IN THF U.S. GOVERNMENT 183 tions, and they want the respect and support of the many today collects data from 62 federal agencies. These data publics that they serve. Their performance can be mea- cover 304 separate organizations and more than 2 million sured and evaluated, and government can be held ac- workers, more than 64 percent of the U.S. executive countable for its performance. What is needed is leader- branch civilian work force. ship, from the top down. Productivity measures serve as a management diag- nostic tool. Because govemment lacks a profit measure, Measuring government these measures are the best tools available to gauge its performance over time. Output measures can assist man- productivity agers in determining budgets and personnel requirements. They enable managers to set up mutually agreed upon A government's ability to carry out its programs and op- performance targets for employees and programs, and can erations depends on sustained improvement in productiv- be valuable inputs in designing a program for determining ity. Increasing productivity helps control costs, and thus awards and bonuses for outstanding performance. They reduce government spending, while improving govern- can be used in determining training needs, and as a vital ment services. link in performance evaluation systems. And they can be Knowing whether productivity is improving requires used to make regional and area comparisons. This system measuring it. But government managers often plead that is in place in the U.S. government, but I cannot say for their activities are unmeasurable. That argument has long certain is that it is being used effectively as a management been refuted, however. Government activities, whether tool in all agencies. To function with maximum effective- service or industrial, are being measured and evaluated. ness, a system must have the support of top management, One system used to measure government output is and it must include follow-up and evaluation. the U.S. Federal Agency Productivity Measurement Sys- Table 23.1 lists a sample of output measures used in tem. This system, which was introduced in 1970 after the U.S. Federal Government Productivity Measurement several years of debate, design, testing, and re-testing, System. But each country and each program must estab- TABLE 23.1 Sample output measures by function Audit operations General support services Installation audits completed Mail items processed Transportation documents audited Graphic units produced Intemal operations audited Travelers service Buildings and grounds maintenance Information services Acres of fine lawn maintained Regular reports prepared Average square feet cleaned Climatic requests serviced Minor improvement projects supervised River stage forecasts made Communications Legal and judicial activities Messages processed Cases disposed Telegrams processed Settlements and decisions rendered Telephone service calls made Appellate decisions entered Education and training Library services Undergraduate pilots trained (daily average) Circulabon items loaned Student weeks of training conducted Reference questions answered Miners trained Periodicals and new joumals routed Electric power production and distribubon Loans and grants Kilowatt-hours generated Public works impact program grants approved Megawatts sold Rehabilitation loan applications processed Equipment maintenance Medical services Component parts repaired (weighted composite) Medical care provided (weighted composite) Vehicle miles driven Clinical visits made Engines overhauled and repaired Outpatient visits conducted Finance and accounting Military base services Invoices paid Meals served Insurance claims processed Pounds of clothes processed (laundry) Domestc payroll accounts maintained Deflated dollar value of sales made Source: U.S. Bureau of Labor Statistics. 1 84 CVIL SERVI.-E REFORM IN LATIN AMERICA AND THE CARIBBEAN lish its own measures of productivity. And govemments ment, and what worked in Georgia did not work in the should start productivity measuring systems on a pilot federal government. The massive paperwork require- basis to work out the bugs before installing them govern- ments drowned the system. mentwide. Change does not come easily in organizations. And in government it may come more slowly and meet with Designing and implementing large greater resistance than in the private sector. To install a new system, there must be support and commitment from management improvement systems the very top. There must be a carefully planned, time- phased implementation plan. And, there must be follow- The U.S. govemment attempted to install several large up, evaluation, and feedback. management improvement programs in the past three decades. Each has been characterized by massive paper- Downsizing th ivil ic work and complexity, lack of training, inadequate atten- tion to systems implementation, and poor follow-up and evaluation. Let me give you a few examples: Downsizing has never been easy in the U.S. federal civil * In 1962 a famous U.S. management guru introduced the service. Most staff reductions have relied on a "meat ax" U.S. Department of Labor to the management-by-objec- approach. For example, when agencies have been ordered tives system, in which managers and workers together de- to reduce staff by 5 percent, they have usually responded termine the factors to be used to measure organizational by asking each subunit to reduce positions by 5 percent and program performance for the unit and for individuals. across the board, with little or no consideration of priori- The theory underlying this system is that workers' partici- ties and goals. pation in establishing the basis for evaluating their perfor- The long-standing rules for Reductions in Force mance will motivate them to perform better and will result (RlFs) are complex and difficult to administer. They are in an evaluation system that makes sense. based heavily on seniority, and, as a result, over the years e Although this system had been successful in several they have most affected younger workers, women, and business firms, it never caught on at the Labor Depart- minorities-those hired last. Thus, personnel reductions ment. It failed because it required enormous paperwork, handled though straight RIFs have worked against public and because the training provided before its implementa- policy efforts to improve opportunities for these groups. tion was inadequate. And the system never had the com- Another problem with RIFs is that they allow plete, public support of top management. In its place is "bumping." Employees with seniority who are cut from the traditional annual performance evaluation system, a their positions through RIFs can bump down to lower system that no one likes or respects and that does little to levels. Those bumped can, in turn, bump those below stimulate improvement in performance. with less seniority. The negative effects this has on mo- * Another governmentwide system was the Program Bud- rale are obvious. get Management System of the 1970s. This system, which RIFs can also be expensive to administer. If signifi- introduced short- and long-range planning government- cant severance payments are required, and they often are, wide, led to a morass of paperwork that strangled the the short-term cash savings may not be enough to meet system and dampened managers' and workers' enthusiasm budgetary goals. for the more thoughtful budgeting and planning that it Exceptions to the rules have been granted to allow introduced. A few government executives were able to retention of the highest performers, regardless of senior- salvage some elements of the system, however, and pro- ity. Exceptions have also been granted to allow retention gram budgeting is still found in the federal government. of some lower-seniority women and minorities. These ex- * A third governmentwide system that came in with a ceptions cause anxiety and a feeling of distrust among bang and went out with a whimper was President those affected by RIFs and among the federal work force Carter's Zero-Based Budgeting System. This system re- in general. quired a complete evaluation of budgets and programs Attrition is the time-honored way to achieve staff re- from a zero base each year and thus differed significantly ductions, and it works well when the job market is active from the incremental budgeting system then in effect in and jobs are plentiful. But when unemployment is high, the federal government. people change jobs less readily. Attrition is a risky policy if The system had worked for President Carter when the goal is to achieve staff reductions in a short time frame. he was governor of the state of Georgia. But the govern- If the goal is to reduce employment over a longer ment of Georgia is far smaller than the federal govern- time frame, other schemes can be used. For example, an EFFORTS TO IMPROVE EXECUTIVE AND MANAGERIAL PERFORMANCE IN THE U S GOVERNMENT agency may be authorized to fill two out of three or one and organizational productivity and accountability, reward out of three vacancies during a specified period. While and encourage good performers, increase efficiency and this scheme may be painful to program managers, it does economy in times of tight budgets and improve service to not affect current workers. If the scheme is continued for the public while also improving the image of the Federal a long period of time, however, it can seriously diminish a Employee" (U.S. Office of Personnel Management). program's effectiveness. The system allowed considerable flexibility, and As I said before, downsizing in government is never most agencies adopted its procedures for lump sum easy. Managers need to be concemed about employee awards, merit awards, and other features. But those cov- morale, and they must be assured that politics will not ered under the Merit Pay System (GM) were not always influence the process. The system must be perceived as treated the same as those covered under the General fair. Schedule (GS). Studies of the system revealed many Finally, mindless downsizing schemes that do not problems and prompted the government to introduce a consider goals, priorities, and performance act as disin- new system in 1984. centives for all. Treating poorly performing units the The new system, the Performance Management same as high-performing units can reduce organizational and Recognition System (PMRS), saw a return to a effectiveness. highly centralized, governmentwide approach to man- agement pay for mid-level managers. By installing con- U d compensation sistency across agencies, it eliminated flexibility, but it established more consistency in treatment for General Schedule managers who are not part of the PMRS. The Federal pay has always been a hot topic for discussion and new system also assured that when comparability adjust- for political action. If you have been following the Clinton ments are made, GM employees receive the same in- administration's efforts to cut costs, you know that one of creases as GS employees of equal grade. The new system the first targets for reduction is federal employee pay also includes steps to reduce comparability increases raises for next year, and perhaps beyond. The Clinton and merit increases for employees whose performance is administration has offered up the federal workers' ex- less than satisfactory. pected pay raise to show the public that it is serious about The PMRS has been extended several times, despite budget reductions. Federal employees feel that they have consistent complaints about its fairness and its general been singled out-once again-for special treatment be- administration. Two common complaints are that inequi- cause they are in the public eye and have few advocates, ties persist between GS and GM managers of equal rank, and worker morale is very low. and that funds to support the program have been subject The U.S. government has experimented with several to budgetary cuts. The Congress has adjusted the system managerial pay systems. Early systems based on the con- from time to time in response to the criticisms, and has cept of merit pay, or pay for performance, introduced extended it to September 1993. And the Office of Person- incentive awards programs, suggestion systems, and step nel Management established a committee to review the increases based on performance. Performance appraisal PMRS. The committee issued a report in November 1991 systems were established by law, but initially there was no that made several recommendations on structuring a pay link between performance and pay. system based on performance: A problem with most of the early efforts was that * Plans and expectations should be mutually determined. managers were reluctant to differentiate employees by * There should be fully defined performance standards their performance. Few employees were denied increases for employees. because of poor performance, and few outstanding per- * Evaluators should compare information about an formers were given significant pay increases. Studies con- employee's performance with previously set standards. ducted in the 1970s showed that 99 percent of all workers * A summary rating of an employee should be compiled were rated satisfactory; few were rated either excellent or for review by an official at the next higher level. unsatisfactory. * An employee's rating should have financial conse- Following these studies, and with the passage of the quences, some automatic and some based on independent Civil Service Reform Act of 1978, the govemment intro- review. duced a Merit Pay System for managers in Grades 14 and The review committee also made several recommen- 15, the levels just below the newly constituted Senior Ex- dations for improving the PMRS: ecutive Service (discussed below). This system, in place * The system should be simplified, and non-performance- from 1981 to 1984, was intended to "increase individual related factors should be eliminated. 1 86 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN * Training with regard the system needs to be increased, the U.S. Congress will always be slow to appropriate funds and communication with participants and managers im- for pay catch-up, particularly given the public mood and proved. the persistent budget constraints. * The system should be based on consistent policies, but it should also allow flexibility. Agencies should be permit- Providing manager and executive ted to expand and adapt the performance award process to their individual needs, structure, and culture. trafilig * Changes should be made incrementally rather than all at once. Experience has shown that major changes insti- Training and development programs are expensive. Be- tuted all at once are difficult to absorb and implement fore any system is devised, the needs for training must be effectively. assessed. And once a training and development program The committee's report made many other sugges- is introduced, there must be feedback to both partici- tions relating to the need to establish credibility for the pants and administrators. This means that an evaluation system. All aimed at attracting and retaining top-quality system needs to be built into the training program from managers. The report also recognized that there is no easy the outset. solution to the problem of motivating federal managers These are obvious points, but many training pro- and rewarding good performance. grams fail because they do not follow these simple guide- lines. Management and executive training must be care- Working toward pay fully developed and designed to meet the needs of the trainees, the organization, and the government at large. comparability The U.S. government supports a variety of programs and efforts to train and develop its managers and execu- The U.S. government effort to achieve pay levels for tives. It established the Federal Executive Institute at government positions similar to pay levels for compa- Charlottesville, Virginia, in the late 1960s in response to rable private sector jobs began in the late 1960s, when an identified need, and it was expected that large num- the U.S. Bureau of Labor Statistics introduced a Profes- bers of federal executives would receive training at this sional, Administrative, Technical and Clerical (PATC) excellent facility. Outstanding faculty were hired, a state- Survey. The survey began by selecting a sample of fed- of-the-art executive development curriculum was de- eral job descriptions for different grade levels in a range signed, and the institute was opened with great fanfare similar to the spectrum of private industry jobs. Field and promise. analysts compare these descriptions with similar jobs in At the beginning there was a great demand among private sector firms selected in a carefully drawn sample. government executives to be selected for this eight-week The survey collects compensation information for each training program. The demand continued to be high for job covered and constructs aggregate pay lines for the several years, there was competition for training slots, private sector and the federal govemment. The pay lines and the venture into executive training was considered show the differences between private sector jobs and fed- a success. eral jobs for each grade. Interest soon waned, however. It became increas- The pay in government jobs has consistently lagged ingly difficult to get agencies to nominate employees for substantially behind that in comparable private sector the eight-week program, and less-qualified individuals jobs, especially at the middle and upper levels. And de- were increasingly being selected for the Federal Execu- spite efforts to close the gap sizable differences persist. tive Institute training. Agencies often sent those they Many members of the U.S. Congress and many could spare, rather than those who could really benefit nongovernment observers have expressed skepticism from the training. about the efforts to close the pay gap. Some challenge Why? The reasons are obvious. First, there was only the statistical methodology. They object particularly to lukewarm interest and support for the program among top the sampling method, arguing that it favors larger firms, management. Presidents and department heads had not where compensation can be expected to be higher. And come out in full public support for the program. Second, some hold that federal managers work less hard than and more important, there was no correlation between a private sector managers and do not share the same manager's attending the institute and his or her future types of risk. assignments, promotions, or status. Because the program I believe that the PATC Survey is valid, but I recog- involved few or no incentives and had minimal top man- nize that some will always view it with skepticism. And agement support, it failed. EFFORTS TO IMPROVE EXECUTIVE AND MANAGERIAL PERFORMANCE IN THE U S GOVERNMENT 187 This does not mean that the training was bad. It The SES is a gradeless system in which salary and was and is excellent. But, it does not always reach the career status are linked to the individual, not to the duties right people, and it has no specific place in the rewards of the position he or she holds. Clearly, the system is system. intended to attract and retain individuals from both in- Federal employees obtain management and execu- side and outside the federal govemment. The establish- tive training through other programs as well. Several ment of the service was intended to help build an esprit de federal agencies have their own executive development corps among the government's top executives. programs, some of which have national reputations for The law excludes from the Senior Executive Service excellence. Universities and other organizations also employees from certain investigative agencies, quasi-gov- provide training to federal employees. The George ernmental agencies, government corporations, adminis- Washington University, for example, has developed a trative law judges, and several other organizational cat- Contemporary Executive Development Program that egories. Several of the excluded organizations have their has been accepted by the U.S. Office of Personnel Man- own senior executive program. agement as a substitute for the Federal Executive Pro- Agencies receive a ceiling each year on the number gram at Charlottesville, Virginia. The GWU program, of executive personnel they may employ after consulta- which requires attendance one day a week for nine tion with the Office of Personnel Management and the weeks, is an attractive alternative for busy executives Office of Management and Budget. Agencies may adjust reluctant to be away for several weeks at a time. Nearly their allocations throughout a year, but the govern- 1,000 participants have graduated from the program. mentwide total may not exceed 105 percent of the num- Graduates are inducted into the school's alumni asso- ber initially authorized. Agencies are free to use their ciation through which they build friendships and net- approved allocations flexibly. works. There are three types of appointments in the SES: Federal employees are also sent for training to such career, non career, and limited term/limited emergency. universities as Harvard, Princeton, and Berkeley for as Noncareer appointments may not exceed 10 percent of long as a year. They may even be authorized moving the total SES appointments in the govemment and, within expenses and per diem for themselves and their families. each agency, may not exceed 25 percent of the agency's This is a very expensive model, and it has more failures SES appointments. than successes. Why? Because too little thought is given Appointments to the Senior Executive Service are to how the training fits into the individual's career plans, made through a merit staffing system. Applicants for an and to how the organization will utilize the individual SES position apply directly to the agency with the va- when he or she returns. cancy. Once the agency has determined that an The government is providing an enormous amount applicant's technical qualifications meet its require- of executive and managerial training both inside and out- ments, the applicant's managerial qualifications are re- side its system for its employees. This executive training is viewed by a qualifications review board convened by expensive. And people who enter training have expecta- the OPM. Some candidates are selected through agen- tions that too often go unrealized. Both of these factors cies' executive development programs, but they too are lead to loss in credibility for training and for the organiza- subject to board evaluation. The board makes its deci- tion. The keys to countering this tendency are, once sions based on several criteria relating to managerial again, support of top management for the training, needs competence. assessment to ensure that appropriate training is designed Each new appointee to the SES must serve a one- and given to the right people, a link between training and year probationary period. If it is apparent after full and fair career assignment, feedback, and evaluation of the effec- consideration that a candidate is not acceptable, the tiveness of the training. candidate's supervisor may initiate action to remove him or her from the SES. Creating an elite management Pay rates for SES employees are flexible, and can be negotiated on an individual basis within overall guide- corps lines. The rate must be at least 120 percent of the first step of a GS-15 but not more than the rate for Executive In 1978 the Civil Service Reform Act established a Senior Level IV (presidential political appointee). Pay rates, once Executive Service (SES) in the federal government. Be- determined, may be adjusted only once a year. They may fore, top career officials had been in the grade classifica- be adjusted two steps upward within a range, and no more tion system, at grades GS-16 to GS-18. than one step downward. 188 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN SES employees may receive performance awards. stockholders, and others with a stake in their products Career executive are eligible for bonuses of 5 percent to or services. 20 percent of their pay after internal review by an inde- The concept of TQM has spread through the world. pendent board. But each agency is subject to limits on In the United States TQM has taken hold not only in the total amount of bonuses that it can grant. Other private industry, but in government, academia, the health cash awards include up to $20,000 for an SES employee sector, and virtually every other field of endeavor. The designated as a Distinguished Executive. An SES United States experienced a critical turning point in pro- employee's total compensation from all sources may not ductivity growth in 1969, when the rate of growth in exceed that of Executive Level I, which is equivalent to productivity fell to 0.9 percent after twenty years of growth a Cabinet officer. of at least 3 percent a year. Since then numerous confer- Other benefits in the SES include continuous accu- ences have been held and blue chip White House com- mulation of unused annual leave, moving expenses for an mittees set up to find out why growth in productivity employee's last move at retirement, sabbatical leave after slowed and to suggest ways to improve the nation's pro- seven years as an SES member, traveling assignments, and ductivity and its competitiveness. training opportunities. Leading the way in quality improvement programs SES members must be evaluated annually and recer- were several private corporations and a few federal gov- tified every three years. The recertification of an execu- ernment agencies: the Ford Motor Corporation, Harley- tive takes into consideration a recommendation submit- Davidson, the National Aeronautics and Space Admin- ted by his or her superior indicating whether the executive istration (NASA), the Internal Revenue Service (IRS), should be reappointed, and the executive's performance and several units in the Navy Department. The key in- awards, evaluations, and activities. The recommendations, gredient in the success of their programs was worker- favorable or unfavorable, go up the line for review and management cooperation. Using a team-oriented ap- approval. An individual removed from the SES may be proach, they studied customer needs, tools and assigned to a GS-15 position, and may later reapply for techniques, systems design, production and service sys- the SES on a competitive basis. He or she may also appeal tems, and every other facet of their human and techni- the decision for removal. cal systems. All in all, the SES is a well-constructed, positive As interest in quality and productivity picked up in force for achieving excellence in the U.S. federal govern- the federal government, the Office of Management and ment. It combines an excellent accountability system Budget (OMB) instituted a program called the President's with protection for members who feel that they have Quality and Productivity Program. One of its features is been wronged. Members of the SES for the most part an annual quality improvement award much like the pri- believe that they play an important role in ensuring com- vate sector Malcolm Baldrige Award. petent, high-quality service and support to the public As TQM programs in the United States and and to the nation. worldwide proved successful, the government estab- The system is not without problems, of course. For lished the Federal Quality Institute (FQI) to provide example, there are steady complaints of efforts to politi- leadership and direction for the effort to install TQM cize the system. Individuals with political appointments throughout the federal government. This effort gives are often found trying to get career appointments, par- productivity improvement high priority, but it gives ticularly as elections come along or when a change in equal emphasis to quality, customer satisfaction, and administration seems imminent. But several watchdog the other ingredients found in a well-developed TQM organizations, including the Senior Executive Associa- program. The FQI is staffed by a group of consultants tion, monitor the program to prevent such problems. who work closely with agency and department TQM staffs and administrators in planning, designing, and Introducing Total Quality implementing TQM programs. Many of the largest gov- ernment agencies and some of their subunits have Management availed themselves of the institute's consultative ser- vices. The move toward TQM in hospitals, universities, Total Quality Management (TQM) is an essential as- and government signals a recognition that non- pect of any organization's effort to be productive and manufacturing entities can introduce quality improve- competitive. The high-performing organizations in this ment programs, and that they have elements in their world are those totally committed to improving their operations and administration that can be measured, services to customers, taxpayers, students, patients, evaluated, and improved. EFFORTS TO IMPROVE EXECUTIVE AND MANAGERIAL PERFORMANCE IN THE U S GOVERNMENT 189 Conclusion interesting and challenging assignments for them, providing them opportunities for growth and development, arranging for rotating assignments, and providing them feedback on As I began to prepare this paper, I realized that the issues expectations and performance. And, of course, there must we face in trying to improve government's performance be a fair and competitive compensation package, and po- have been with us for a long time. The seemingly slow litical considerations must be kept out of career systems. process of change in govemment could be discouraging. Finally, you must believe that change can come about Yet I am pleased at the progress that has been made since in government, even if it sometimes occurs more slowly 1955, when I first joined the Labor Department, in devel- than you would like. The key to the success of efforts to oping a high-performing executive corps throughout the change and improve govemment is support for the change U.S. govemment. from the top down. This requires a total commitment to Building a strong executive corps starts with the pro- the efforts and a change in culture. I wish you well in your cess of identifying candidates with high potential, finding endeavors. I will be watching with great interest. 190 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Chile's MIDEPLAN: A System for Programming and Evaluating Social Policy Alvaro Garcia Hurtado MIDEPLAN-the planning ministry of the Government suits achieved through program implementation. It also of Chile-is a tool used by the public sector to strengthen measures the policy's impact in redistributing income and its ability to evaluate and implement social programs. It in improving the quality of life of the poorest sectors of was part of Chile's strategy for increasing the government's the country, thus allowing better targeting of programs. capacity to set goals, to plan and monitor progress, and to The programming and evaluation system has a na- introduce into government institutions the concept of tional and regional coverage, with some instruments also social responsibility. applied locally, in specific areas and programs. The sys- tem is complemented by the work of public sector insti- Elements of the MIDEPLAN tutions responsible for social policy. These institutions draw on their own information systems, studies, and system evaluations of specific programs, as well as studies per- formed by other agencies whose work is related to the The MIDEPLAN system comprises a set of instruments social policy objectives. that contribute to the design and programming of govern- The MIDEPLAN programming and evaluation sys- ment social policy and facilitate control of policy imple- tem consists of the following instruments: mentation and evaluation. Each instrument plays a part * CASEN survey in ensuring that implementation results in effective and * National Investments System efficient actions to overcome social problems. * Follow-up of government goals Two MIDEPLAN instruments provide background * Survey of public perception about government policies information for decisionmaking about priorities and goals, * Monitoring of programs and projects. and about programs and projects to be implemented: the survey of National Socioeconomic Characterization CASEN survey (CASEN-Caracterizaci6n Socio-econ6mico Nacional) and the National Investments System (SNI-Sistema This instrument has the following objectives: Nacionat de Inversiones). CASEN and SNI are key tools: * To measure the impact of social programs on income the first in fomiulating the diagnostic, the second in the redistribution selection of a viable loan portfolio. - To evaluate social programs on how well they are tar- The MIDEPLAN system monitors programs and geted to the poorest and other specific target groups projects that are selected based on their relevance in * To assess poverty levels and living conditions of the fulfilling sectoral goals and with reference to flash studies poor in relation to the status of other income groups of public opinion about government social policy. This * To diagnose the socioeconomic situation of the coun- permits the detection of problems that could hinder the try, taking into account its most relevant aspects: demo- achievement of goals and, if necessary, the introduction graphics, family composition, housing, health, education, of modifications to programs and projects under way. employment, and income. CASEN contributes to program monitoring, evalua- CASEN has a national coverage, with results broken tion, and modification through ex post evaluation of re- down by regional and communal levels (only for the most CHILE'S MIDEPLAN A SYSTEM FOR PROGRAMMING AND EVALUATING SOCIAL POLICY 191 important communities) and by urban and rural zones. The National Investments System The survey, which is conducted every three years, facili- tates analysis of the evolution of the socioeconomic situ- The National Investments System conducts ex ante evalu- ation of the country and compares the effectiveness of ations of public sector investment projects, including those various social progranms. with private sector participation, provided that the public Three surveys have been carried out so far, in 1985, sector's contribution is at least 58 percent of the amount 1987, and 1990. In all three the methodology has been to be invested. the same to ensure comparability of results. SNI has been in operation since 1975, when the The 1990 survey was conducted on a sample of 24,488 budget for public investment in government institutions households, with margins of error and confidence of 5 began to be designed according to projects. A common percent and 95 percent, respectively. It was designed on record card (EBI) compiles information on the main de- the basis of the Population and Housing Census of 1982. scriptive and profitability characteristics of every project. The survey used an aleatory method, and covered a heter- The EBI card is sent to MIDEPLAN via the Integrated ogenous, geographically varied sample. The selection of Project Bank (BIP), a data base that collects information the units surveyed was simple, and the information ob- nationally in a form compatible with the System of Basic tained was proportional and multiphased. The Economics Investment Statistics (SEBI-Sistema de Estadisticas Department of the University of Chile was contracted for Basicas de Inversi6n). These elements constitute SNI, both the sample design and the period of application of which provides a continuous flow of information about the field survey. Statistical processing and information the various stages of the investment process. analysis are the responsibility of the Planning and Social MIDEPLAN's investment department is responsible for Studies Department at MIDEPLAN. SNI's operation. The survey design is carried out in collaboration with Information generated by SNI is used in joint discus- representatives of the sectors and institutions involved in sions among MIDEPLAN, the budget office of the Minis- the different programs. This is to ensure that information try of Finance, and the agency responsible for the budget collected is relevant and that achievements are measur- of the investment project. able. In addition to being published by MIDEPLAN, The EBI card facilitates project identification dur- CASEN survey results are transferred to the institutions ing each stage in the project cycle. The project cycle responsible for social policy research centers. differentiates among pre-investment, investment, and CASEN survey results are expressed in expanded operation stages. Projects can be basic studies, programs, form, using a factor calculated from the National Statistics or investment projects. Funding is required for the ex- Institute (INE-Instituto Nacional de Estadisticas) esti- ecution of basic studies and programs. Projects are fur- mates of the population living in households. The 1990 ther broken down into prefeasibility, feasibility, design, CASEN used income information compatible with an esti- and/or execution stages. In each, problems are identi- mate based on the national accounts of the central bank. fied, as well as the goods and services necessary to solve Using survey results, it has been possible to establish them. Technical solutions that might be required are the scope and characteristics of poverty, to determine the specified along with their respective costs and benefits. access of the poorest groups to various subsidies and social These steps constitute a gradual process of gaining a programs, and to show how these benefits affect their sense of certainty about the project; by no means should income. Through the identification of factors that influ- their cost exceed potential benefits. ence poverty, such as labor insertion and access to educa- Each stage must satisfy information requirements for tion and training-and the characteristics that distin- the technical-economic analysis. This analysis determines guish the poorest groups from the remaining income the appropriateness and timeliness of allocating the re- groups-it has been possible to detect deficiencies in the sources required by the agency sponsoring the project. areas of health, education, housing, labor, and social se- Funding from the national budget or other available curity, and to identify the vulnerable groups in need of sources in the public sector, such as foreign aid, is required. specific programs. The technical-economic analysis identifies the prob- The distribution of social expenditures is assessed in lems to be solved or the needs to be satisfied, goals that accordance with the diagnostic outcomes mentioned are in keeping with these problems or needs, and possible above, allowing both the identification of social policy solutions. It studies all alternatives from the point of view changes necessary to satisfy identified needs and the evalu- of their technical and economic feasibility, evaluates them, ation of these policies. and facilitates the design of the project. 1 92 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN A set of methodologies for project evaluation is avail- To facilitate monitoring, guidelines for activities able for certain types of projects. These include industrial have been designed and adapted to the different sectors. projects and projects for drinking water, electricity, irriga- These comply with the timetable established for achiev- tion, and ports. For social projects-for example, health, ing goals. Implementation records for each activity education, housing, and justice, among others-there is should be accompanied by reports of results-at least no evaluation methodology. Projects are therefore ana- financial results-to permit measuring the efficiency of lyzed using cost-efficiency criteria. sector operations. Follow-up not only allows modification of work pro- Follow-up of government goals cedures and programming; it can also affect current or future goal-setting-say, standards for goods and services The aim of follow-up is to increase the efficiency and or amounts to be produced. Follow-up is thus a feedback effectiveness of programs and projects that carry out gov- instrument in social policy. ernment social policy. To this end this instrument must identify and correct, in timely fashion, problems in execu- Survey of public perception about govemnment performance in tion and deviations from goals. social policy Follow-up is the responsibility of MIDEPLAN (spe- cifically, through its Planning and Social Studies Depart- Public perception surveys, conducted since July 1991 for ment), the Ministry of the Presidency (SEGPRES-Mi- all men and women eighteen years and older, yield infor- nisterio de Secretaria General de la Presidencia), and the mation on the perceived needs and priorities of the differ- ministries, agencies, and other public entities responsible ent social strata, which informs the design of policies and for social policy. Their efforts in monitoring compliance improvements of programs under way. with government goals starts, in practice, with goal-set- The surveys also reveal public opinion about where ting. This process uses two set of tools: (1) diagnostics of responsibility lies for solving social problems. Two sur- the socioeconomic situation, whether for the country, for veys have been carried out so far: the first covered only sectors, or for specific locations; and (2) analyses of spe- the residents of metropolitan Santiago (a sample of 800); cific programs and projects. Priority goals of each social the second had nationwide coverage (a sample of 3,100). sector are identified, based on government social policy, The unit responsible for the surveys is the Social Divi- diagnostics, and other sectoral background. These priori- sion (DIVISO) at MIDEPLAN. Surveys are conducted ties, provided they receive government approval, consti- in cooperation with the Center for Contemporary Real- tute the basis for national budget allocations among the ity Studies (CERC). ministries or agencies. With the budget framework defined, it is up to the Monitoring of social programs and projects specific sector or institution to develop the preliminary budget plan that is the basis for discussions with the This instrument monitors management processes of social Directorate of Budget at the Ministry of Finance, and programs and projects at the regional and local levels. MIDEPLAN. For its part, SNI approves specific projects Programs are monitored to develop new lines of action based on whether they fulfill sectoral goals and are finan- and/or to address problems with management or with cially feasible. SNI-approved projects must accompany public perception. The unit responsible for monitoring is the sectoral proposal in the preliminary budget plan that DIVISO at MIDEPLAN. the Ministry of Finance sends to congress for approval. Monitoring is carried out using the following tech- Goals and their respective programs and projects, the niques: implementation timetable, and the budget for expendi- * Continuous monitoring of selected programs by a team tures and investment permit identification of executing of regional monitors that compiles information on projects units, processes to be followed, and standards to be used in different localities. Monitoring is based on interviews to monitor goals. with users, officials of the executing agencies, and profes- Implementation of programs and projects is carried sionals and technicians in the field. It is complemented out within the selected executing unit. The unit develops with statistical information and studies, as well as infor- a series of activities leading to the production of goods mation gathered through focus groups, seminars with pub- and services (intermediate or final) that can be measured. lic officials, and field supervisors' reports. Monitoring of results is carried out to correct promptly * Flash studies designed to reveal users' perception about deviations from the agreed plan. programs, problems, and possible modifications. CHILE'S MIDEPLAN: A SYSTEM FOR PROGRAMMING AND EVALUATING SOCIAL POLICY 193 * Statistical background information and national stud- Integrating the MIDEPLAN ies. These look at programs in context and distinguish local conditions that dictate that program execution be system into the programming and adapted to local needs. implementation of social policy Information from monitoring is reported quarterly, by program, and every six months, in consolidated reports for the regions and nationwide. Flash studies are con- MIDEPLAN instruments, then, collect background infor- ducted as needed. mation at the national, regional, and sometimes local If monitoring reveals problems that go beyond the level, which is used for social policy programming and local or regional level, instruments are applied at the implementation. They complement sectoral information, national level to determine the magnitude of the prob- which usually supplies statistics on the production of goods lems, and their causes, so that a line of programs can be and services, input consumption, and use of resources developed at the national level. during specific time periods. 194 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Selected Discussion Points Discussants: Mike Stevens and Mauricio Camps The discussion on strengthening institutional capacity to isolated, stranded high and dry, while difficulties persist manage human resources and managerial authority and elsewhere in the public sector. accountability included these comments from Mike In the New Zealand experience I see pointers for the Stevens of the World Bank and Mauricio Camps of Me- civil service reform model we are trying to develop within xico's Ministry of Finance. the Bank-a model that enables us to go beyond the tools of compensation and employment upgrading and manage- M. Stevens: I would like to raise three key issues in civil ment strengthening, which have characterized many Bank- service reform. The first is the issue of commitment, the sponsored reforms in various parts of the world. Here we go second the relationship of civil service reform to other back to the numbers. If you look at some of these programs reforms in an economy, and the third the link between you find they get stuck at the level of retrenchment. In civil service reform and budgeting. First, commitment to many countries it is possible to drop as much as 10 or 15 reform. By this I mean leadership from the top down. The percent of excess staffing from the payroll. And then civil problem for many Bank staff is that often we don't find service reform runs aground. In New Zealand we had a this strong commitment. Instead, we face a reforming reduction in the civil service from 88,000 to 36,000. The government that is concerned with many issues other missing 52,000 were axed-some just got pink slips. In the than civil service reform, which may be quite low on the bulk of cases their responsibilities and activities were re- agenda. And though we may have an entree with one viewed and their jobs redefined. Institutional rules were minister, that minister may or may not have the ear of the changed so that employees could be relocated from the president or prime minister. Furthermore, civil servants central government to govemment-owned companies and themselves may be resistant to change. So the commit- finally to the private sector. I think this approach-con- ment we do find may be conditional in the sense that ducting civil service reform in the context of larger reforms there is a commitment to civil service reform up to a in the economy-is one we must look more closely at. certain point of redundancy and retrenchment and then The third point I want to stress is the link between the commitment ends. civil service reform and budgeting-a fundamental aspect The second point is the relationship between civil ser- of multidimensional civil service reform. For me these are vice reform and larger reforms in the economy. This was two sides of the same coin. We see this in OECD coun- demonstrated clearly in the New Zealand experience where tries that are reforming. And Professor Pempel spoke of it civil service reform was not the key thing on the agenda. yesterday in the context of Japan's budget cut being cru- Rather, the priority for the incoming govemment in 1984 cial to its civil service reform. Several speakers have talked was to improve the efficiency of the whole economy. This about the need to maximize flexibility in management to in tum led to measures to improve private sector efficiency. improve human resource development-to give manag- It also led to a review of the public sector, reform of public ers the flexibility to vary the input mix. "Deep delegation enterprises, and finally reform of government itself. I see of managers' responsibilities" was the way one speaker put this as the best context for civil service reform. it. I believe you can do this only if you have a strong Unfortunately, we don't always see such a compre- financial management framework. hensive approach in the countries we deal with. What we I therefore draw three conclusions: first, if there is find instead are civil service reform programs that are weak budgeting and financial management you have little SELECTED DISCUSSION POINTS 195 hope of achieving civil service reform. Second, if financial cult to defend the government's ownership of two airline management is effected using traditional input approaches, companies when only 4 percent of the population had ever you can carry out civil service reform to a point-but it flown. Economically, it was inefficient to maintain these will be impossible to change the basic model. And third, if companies-the numbers showed financial losses, and ser- you wish to fundamentally change the civil service model, vices were declining. So in 1990 we began the sale of it seems to me you have to look-as New Zealander's Aeromexico. Now, only three years after the divestiture have done-at the whole basis of financial management process, Aeromexico boasts one of the best reputations in and change the rules in a radical way to achieve a corre- the international airlines system, with an 89.9 percent suc- sponding change in civil service performance. cess rate in keeping to its arrival and departure schedules and a 99.8 percent success rate in its baggage handling. M. Camps: There seems to be a general consensus in These outstanding-and quick-results are due to total society, and not only in Latin American and Caribbean quality management systems. It certainly must make us in countries, that public sector employees are inefficient and government stop and wonder whether we haven't been do- corrupt. I'm sure most of you have heard stories like the ing something wrong in our administration of companies. one about the two young women who are talking and one Marcel Proust once said that real discovery consists asks, "Did you know my father doesn't work anymore?" not in seeing new lands but in seeing them with new eyes. And the other one replies, "Why, did he retire?" "No, he That is what we in the public sector in Mexico have to do got a job in the govemment." That's the general consen- right now: see, assess, evaluate, and perform with new sus: that government work is no work at all. That govern- eyes. And I think that one of the instruments that will ment employees are inefficient or, worse, corrupt. help us in this quest is total quality systems. What we can gather from the past two days of pre- Another important issue that we should address if we sentations is that once we have achieved the relatively are to be more competitive is that of governance in terms easy part of establishing administrative reform-that is, of the steering ability of government. In Mexico we have once we have created institutional structures, mecha- developed a program called Solidarity that is aimed at nisms, and policies; once we have downsized, or rather procuring social sector needs. Before we had this program, rightsized the public sector, as Marie Slyfield said yester- the state usually assumed a paternalistic stand, providing day; and once we have established a comprehensive pub- all resources and infrastructure requirements for the so- lic personnel management system that comprises recruit- cial sector. The government was not only steering, it was ment, selection, a promotions system, and retirement rowing the boat! With the Solidarity program, the social enhancement programs-once we have this framework sectors have taken on a great degree of responsibility, working correctly, we still have to deal with the creation both in the formulation of global strategies and in of a rmanagement culture, as well as transformation of the decisionmaking for the construction of infrastructure. The way the general public sees civil servants and the way civil social sectors participate with government authorities in servants see themselves and their jobs. Or, as Joan Prats- the administration of resources, and most important, they Catala put it, the creation and enhancement of the entre- contribute to the labor force, allowing the government to preneurial capacities of the public sector labor force. stretch its limited budget. The results of this participatory I think this is highly important because current pub- approach have been encouraging. For one thing, people lic sector structures cannot support state reforms that are take better care of infrastructure they have helped build aimed at enhancing competitiveness, particularly in this because they have a sense of ownership. More specifically, new world of global competition. We in the public sector we have been able to bring basic health programs to 7.5 must adjust to these changes. million Mexicans, and safe drinking water and sewerage That's why it is important to reflect on Professor systems to 11 million. More than 30 million Mexicans Burdetsky's presentation on total quality management sys- now have electricity. None of this would have been pos- tems, or TQM. Professor Burdetsky stated that total quality sible with limited government budgets. But it was possible systems are not a panacea, a prescription medicine that can with the active commitment of society. be taken globally. This is true-we all have different politi- This commitment is also the trademark of total qual- cal, social, and economic environments to contend with. ity management systems in the public sector. And this But total quality management systems do work efficiently. kind of performance has the additional bonus that the Mexico is a good example of how well TQM has public sees that some of its perceptions about public sec- worked, especially in one case: the divestiture of Aero- tor employees (inefficient, corrupt) are not realistic. The mexico. Mexico's divestiture of the airline was imperative public also sees that we, the government, and they, the for political and economic reasons. Politically, it was diffi- social sector, can work jointly toward the same goal. 196 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN PART VI Role of the World Bank in Civil Service Reform Selected Discussion Points Moderator: Shahid A. Chaudhry S. Chaudhry: I would like to start on a somewhat paro- projects. One is to work with DGI, Direcci6n General de chial note. For the past five years my colleagues and I Impuestos, to strengthen the tax agency, and this has have been working on Latin American and Caribbean been very successful. And we have a project to introduce public sector issues. One of the things we have not done integrated financial management systems and modernize until recently is get involved in civil service reform issues. the customs system and information systems in the cen- In part that has been deliberate. Let me explain why. tral bank. In Bolivia we have had success with a project to First, in the late 1980s we were worrying about public put in a modem financial management system. We are sector strengthening, and I think the attitude intemation- working in Peru to identify problems with the judicial ally-including the feeling in the Bank-was, why should sector. In Ecuador we have worked solely with strength- we try to strengthen govemment when the agenda is to ening the financial systems of key agencies: the petroleum break up government? One of the arguments driving the agency, the telecommunications agency, and a couple of debate was that no government or little government was other major public agencies. We are developing a $50 better than big government. So I think that was a re- million project to upgrade the Colombian tax system and straining factor. to introduce a modern integrated financial management A second factor that was equally important in curb- system there. ing our involvement was that when the Bank had gotten In Venezuela we have a project to install an inte- involved we had not had much success. Most of the grated financial management system in the central gov- Bank's initial involvements in institutional strengthening ernment. We also have approved a project to modernize were in Africa and did not prove very fruitful. Another all 1,500 courtrooms in Venezuela. And we are working factor is that in Latin America, the political situation is with our Venezuelan colleagues on a civil service project. tremendously complex. I had thought that political re- We have a number of projects in Guyana. One is to gimes were fairly ruthless in the North American con- reform the Guyanese civil service. Another is develop- text-but in Latin America public bureaucracies are ment of a new salaries system, as well as modernization treated with extraordinary ruthlessness. In country after of the tax and custom systems. In Jamaica we are work- country I saw that competent senior public servants had a ing on an integrated financial system, which will have a high turnover rate. I think this also made us feel that for human resource component, and on a tax administra- political reasons the context was not right. What we've tion project. done instead is concentrate largely on specific tasks and So you can see that, except in very recent cases, we even single-agency strengthening tasks. have not gotten involved in public administration issues. I would like to give you a flavor, then, of what we One objective of this conference was to gather to- have been trying to do in Latin America and the Carib- gether our friends and colleagues from Latin America and bean over the past five years. Starting in the southern the Caribbean to see how they felt about the issues. And cone, we have a project in Chile with the very limited we wanted to get a clear idea of whether public adminis- aims of strengthening the income tax system and the tration reform issues are a priority for the 1990s, because customs agency and installing an information system in we have a unique opportunity to influence the Bank, as the congress. In Argentina we have carried out three well as the international community, and most important, SELECTED DISCUSSION POINTS 199 political decisionmakers in your countries to focus on N. Holanda: I attended a 1989 meeting of the Intema- these issues. The time is.right. We have already talked tional Association of Schools and Institutes of Public about the increased emphasis on building the more effi- Administration. In his presentation Paul Collins said that cient state. The time is also right because we have the the UNDP had $60 million to invest in management necessary techniques available. And from listening to our development programs. Someone asked whether the role presentations and discussions my feeling is that we also of schools and institutes in this field had been considered. have the professional expertise in our member countries The answer was no, but at the next association meeting in to carry out reforms. Malaysia a working group on the role of schools and Another objective of this conference was to see institutes of public administration in management devel- whether we could develop a network among our Latin opment was instituted. And the association's membership American and Caribbean colleagues and between them has increased significantly as the Eastern European coun- and the Bank. There is a great amount of expertise that tries have become interested in creating schools and insti- can be transferred across countries and we hope this fo- tutes to further their reforms. rum, and others like it, will serve that purpose. So we are riding a wave of interest in this movement. Finally, our hope was to receive guidance from you (Many of you remember that during the 1970s many of on appropriate areas for our involvement. For instance, these institutes were closed down.) And the World Bank Moises Naim said you need agents of change. But is the has gotten involved through its public sector manage- Bank the right agent of change in this area? Your guid- ment divisions. ance would also be welcomed on appropriate ways the I want to add my voice in saying that I believe the Bank, govemments, and research institutions can work most important way to achieve civil service reform is together. I would also like to solicit the ideas of my col- through professionalization. This must come through leagues in the Bank. schools and institutes. And we need a new kind of insti- tute that builds public service capacity on many fronts; C. Wescott: Based on the UNDP's experience in this planning, finance, organizational structure, and-quite area, I think the answer to whether the Bank should get new for us-foreign affairs. We cannot overlook the im- involved depends on how comfortable you are with the portance of international cooperation, of integration. This risks involved. When you embark on comprehensive civil is something all countries are facing, even the United service reforms you are in high-risk territory. To return to States, Mexico, and Canada. We must integrate sub- what Mike Stevens said about the links between eco- regionally, regionally, everywhere. And the institutes we nomic reform, civil service reform, and economic growth, build must stress, not so much long-term programs of let's remember that results are hard to predict. In some formation and training, but creating opportunities for get- countries economic reform leads to civil service reform ting people in the field together. and, together, these lead to economic growth plus other Excellent senior civil servants are at work through- reforms and extemalities. We've seen this happening in out Latin America and the Caribbean, but they are iso- Botswana, Chile, Malaysia, Mexico, Singapore, and Tuni- lated from each other. We must create permanent mecha- sia, and certainly in the New Zealand experience we've nisms-both at the regional and national levels-that heard about here. allow these people to meet and discuss the kinds of issues In other cases economic reform leads to economic and concerns we are addressing at this conference. I think growth but little civil service reform. Indonesia and China the World Bank could play an important role in this. are two cases where we have run up against a brick wall on civil service reform. In other cases economic and civil S. Chaudhry: I think that point is well taken. I think that service reform fail to translate into economic growth. in our projects we have perhaps been remiss in not using Ghana is a case in point. So investing in civil service re- the national institutes more aggressively as a way of build- form is like investing in a high-risk mutual fund portfolio. ing capacity. Incidently, we have done this in the tax You diversify-invest in a lot of countries-because you project in Argentina where all the training is being done certainly can't predict with certainty which ones are going by the University of Buenos Aires. to succeed. But you can predict that some countries likely will succeed, particularly if you give them enough time. In R. Kitchen: I have the impression that the Bank has a lot some cases you might have to wait ten to twenty years to of public administration experience and technical exper- see the fruits of your labor. If you are comfortable with this tise, and I would encourage it to use it. What I would kind of risk then I think you should get into this area. question, however, is whether such high-risk activities as 200 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Mr. Wescott described should be funded with IBRD loans eliminate the obstacles that stand in the way of Brazil- or even with IDA loans. It might be better to look for ian development, and clear the way for foreign invest- grant funding from bilateral or multilateral agencies, say, ment, fiscal adjustment, and fiscal reform. My sugges- the EC or UNDP. With high-risk projects there is going tion, then, in view of this political reality is that the to be a significant amount of failure and I'm not sure that World Bank pay more attention to the newly empow- countries should take on foreign exchange debt to fund ered legislative branch. such activities. S. Chaudhry: Along these lines, part of a World Bank S. Chaudhry: I would like to respond to that. Legally the loan to Chile was geared toward strengthening the Bank cannot finance many elements of civil service re- congress's data bases and information systems to enhance form, including salary supplements or salary upgrading, its analytical capacity in economics. Perhaps that is the severance payments, and so on. What we try to do instead sort of project to support-to bolster the institution's is support substantive changes that involve many reform ability to look into some of these issues themselves. elements we've talked about-suppression of vacancies, downsizing, elimination of ghost workers, and the like- 0. Oszlak: First, I would say that the Bank is not so much in combination with salary upgrading and improvement an agent of change as a facilitator of change. in recruitment and training programs. When you take Mr. Chaudhry has told us about the Bank's many these and other reforms together, the exercise almost frustrating experiences in Africa. But I've been thinking finances itself. In the context of a government's overall about the fact that the World Bank probably is the only expenditures there may be at most a small shortfall that bank in the world that is risk-free. In this sense it's akin to has to be met. the public bureaucracy. We all know that any bank in- What we have done in Guyana is concentrate the volved in disastrous projects would not last long. bulk of investment expenditures on two things. One is a Democracy provides a golden opportunity for im- complete modernization of the tax collection system for proving the civil service-if we are able to install a true income and corporate taxes and for consumption taxes merit system. In turn, a stable, permanent civil service (Guyana's equivalent of the VAT), which are collected might be the best insurance against the Sisyphean task by customs. Our other focus has been on introducing a of reinventing government over and over, which has reasonable financial management system with output in- been typical of Latin American and Caribbean coun- dicators. We believe these programs in combination rep- tries' alternation between authoritarian and democratic resent a suitable debt-bearing investment. systems. There is great need of an integrated approach to civil J.P.P. Machado: There is a new political reality in Latin service reform, one that combines technical, institutional, America. In the late 1980s we made the move to democ- and legal aspects with the political and cultural dimen- racy and now in the early 1990s we are moving toward sions of reform. It's not just a matter of transferring tech- economic liberalism. These are important and difficult nologies that have worked from country A to country B. I changes in our political life-Latin America's history is think it is important to invest where there is commitment, one of state intervention, not economic liberalism. Latin where there are champions of change. Where people go Americans want to make these changes, in step with the to bed every night resolved to continue fighting the next rest of the world, and yet there are strong cultural factors morning. Otherwise there is no way of producing signifi- that have to be overcome to implement liberal economic cant changes in the civil service. policy. Furthermore, Latin American countries often suf- I also think that responsibilities must be clearly de- fer from structural, political, and economic instability, fined. Civil service reform is a national responsibility- which causes administrative instability. not the job of international cooperation. Usually when we hear about World Bank involve- ment we hear about its links with a country's executive S. Chaudhry: Before we break I would like to ask Gary branch, with the economic sector, and with public ad- Reid to sum up for us. ministration. In Brazil, however, the constitution of 1988 radically shifted the balance of power from the G. Reid: A theme touched on again and again in this executive to the legislative branch, enabling the latter conference is that if you want to improve public sector to make amendments to the budget. In October Brazil's performance you must increase the competitive pressures constitution will be revised, and the hope is that we will within the human resource management part of the pub- SELECTED DISCUSSION POINTS 201 lic sector. The New Zealand experience is clearly an ex- It strikes me that a sensible strategy for devolving ample of this and it has come up in other contexts, includ- authority is, first, to make the commitment, second, to ing the reform currently being undertaken in Argentina. build a general plan for the long run and, third, to take Probably the key to doing this, and this was clarified by advantage of opportunities to take steps in that direction. I Graham Scott, is to devolve sufficient authority or au- think the New Zealand approach of decentralizing across tonomy to managers so that they can have a major impact the board is likely to be the exception rather than the rule. on the performance of their agencies. We ought to try to move stepwise in that direction to the If you do this, however, without ensuring that you extent feasible under existing political constraints. This, have in place an effective system of assuring accountabil- too, poses a risk-the risk that the process will get bogged ity for performance you'll be in trouble. So you need to do down during this more gradual implementation, particu- both things. And I think setting in place the system of larly in view of the frequency with which political regimes accountability must be the prerequisite to devolution of tend to change in Latin America. Still, I think the risks are authority. In fact, autonomy could be granted as a reward worth it and that we ought to move in that direction. for demonstrating performance accountability. This will doubtless pose implementation problems. S. Chaudhry: Thank you, Gary. I want to say a special Granting autonomy piecemeal will mean that you will have word of thanks to our guests from Latin America, the some, but not all, agencies making their own decisions Caribbean, the United States, and our sister institutions. about hiring and firing, salary setting, promotions, and so We appreciate your participation and hope the confer- on. Unavoidably, there will be salary discrepancies for given ence has been useful to you. It has certainly been useful to positions across agencies. But without accepting this kind us. Our plan is to publish the conference papers, as well as of discrepancy it will be difficult to get better performance an edited version of conference proceedings, and to send out of your agencies. This is clearly a tradeoff and one that these to you. I hope these will prove to be useful refer- has to be made on a country-by-country basis. ences. Thank you very much. 202 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN PART VI I Background Papers 27 Culture Change in the Singapore Civil Service Jon S. T Quah This chapter describes and evaluates the process of cul- culture. Thus, the culture of the SCS refers to the pattern ture change in the Singapore civil service (SCS). The of basic assumptions or values that influence the behavior SCS traces its origins back 126 years to the formation of of its members. Similarly, this paper will adopt Harrison the Singapore branch of the Straits Settlements Civil M. Trice and Janice M. Beyer's (1993, p. 395) definition Service in 1867 (Quah 1978). It has 61,340 employees of culture change, which refers to 'planned, more encom- and consists of the President's Office, the Prime Minister's passing, and more substantial kinds of changes than those Office, and thirteen ministries (Singapore 1992, p. 26). which arise spontaneously within cultures or as a part of Retaining the original structure of four divisions that was conscious efforts to keep an existing culture vital. Culture recommended by the Trusted Commission in 1947, the change involves a break with the past; cultural continuity SCS has 11,642 Division I officers (of whom 503 have is noticeably disrupted." superscale status), 20,247 Division II officers, 20,492 Di- To demonstrate the four ways in which the SCS's vision III officers, and 8,455 Division IV officers culture has changed since 1959, we must first identify its (Singapore 1992, p. 25). main features during the colonial period. The main thesis of this chapter is that the SCS to- day is successful because of the culture change it has The cl r o t .l i SCS undergone since 1959. More specifically, the SCS has The culture Of the colonal SCS changed in four important ways: it is no longer plagued by corruption, which has been minimized; it has re- Singapore was a British colony for nearly 140 years until it mained competitive by successfully competing with the attained self-government peacefully on June 3, 1959, when private sector for the best talent, by awarding scholar- the People's Action Party (PAP) govemment assumed ships, and by providing competitive salaries and faster office. During the colonial period the SCS exhibited the promotion for high-flyers; it has avoided overstaffing by following four basic characteristics, which influenced the adopting a zero-growth manpower policy and by intro- behavior of its members. ducing computerization; and it has become more cus- tomer-oriented and concemed with improving the qual- No concern for nationa development ity of its services to the public. Before further discussion, it is necessary to define two The colonial SCS did not play an important role in na- key concepts: organizational culture and culture change. tional development because it was preoccupied with en- Edgar H. Schein has defined organizational culture as "a forcing colonial rule in Singapore and with the economic pattern of basic assumptions ... that has worked well exploitation of the region's natural resources for the ben- enough to be considered valid and, therefore, to be taught efit of the home govemment in Britain (Quah 1978b, p. to new members as the correct way to perceive, think, and 429). This meant that the colonial SCS devoted its at- feel in relation to these problems" (Schein 1992, p. 494). tention to the traditional 'housekeeping" functions of According to John R. Schermerhorn, Jr. (1939, pp. 304- maintaining law and order, building public works, and 05), organizational culture, that is, the observable cul- collecting taxes. In other words, the SCS, as an instru- ture, consists of "values or underlying beliefs that influ- ment of the British colonial government, was designed to ence behavior and actually give rise to" the observable handle regulative and routine matters, but was not CULTURE CHANGE IN THE SINGAPORE CIVIL SERVICE 205 equipped to expedite the implementation of socioeco- tackling corruption, indicated that the problem of cor- nomic development programs. Consequently, although ruption had become worse. These reports on the preva- the colonial authorities did create five statutory boards, lence of bureaucratic corruption prompted criticism of their activities did not contribute significantly to the the ACB's ineffectiveness and the colonial government's colony's development (Quah 1987, pp. 125-26). "weak and feeble attempt" to fight corruption by Eliza- beth Choy, a member of the Second Legislative Council, Neglect of administrative reform on February 20, 1952. She recommended that the gov- emment take stronger measures to eradicate corruption As a result of the SCS's inactive role in the colony's by removing the ACB from the police force and expand- development, administrative reform was neglected and ing its size, and by strengthening the Prevention of Cor- was only introduced after World War II. The first admin- ruption Ordinance (Quah 1978a, p. 14). istrative reform was initiated in 1947, when the SCS was The ABC was ineffective for two reasons. First, it was reorganized and divided into four divisions on the recom- a small unit of seventeen members and had to compete mendation of the Trusted Commission. The second ad- with other sections of the CID for limited manpower and ministrative reform was the establishment of the Public resources. Second, it was unable to deal impartially with Service Commission (PSC) on January 1, 1951, "to keep the widespread corruption within the police force as not politics out of the SCS and to accelerate the latter's pace all the senior police officers involved in protection rackets of localization" (Quah 1982b, p. 50). The third adminis- were prosecuted (some even escaped punishment because trative reform was introduced in 1955 following the of insufficient evidence). The ACB's failure to curb cor- change in Singapore's constitutional status from a crown ruption in the colonial SCS in general, and the police colony to a ministerial form of government under the force in particular, led to its dissolution and the establish- Rendel Constitution. Accordingly, the colonial secretariat ment of an independent anti-corruption agency, the Cor- was abolished and the SCS was reorganized into eight rupt Practices Investigation Bureau (CPIB), in 1952 ministries (Lee 1976, pp. 360-61). (Quah 1978a, pp. 14-15). The CPIB's task of weeding out corruption in post- Corruption as a way of life war Singapore was not easy as the problem was not con- fined to the police, but had also spread to other parts of The SCS was afflicted by corruption during the colonial the public bureaucracy. For example, a major reason for period. Corruption was first made illegal in Singapore with the Singapore Improvement Trust's failure in public hous- the enactment of the Penal Code of the Straits Settle- ing was the corruption of its senior expatriate officers and ments in 1871. The Prevention of Corruption Ordinance, local junior officers in contracts procedure, planning and which came into force on December 10, 1937, was con- development control, and the allocation of housing units cerned with "the prevention of bribery and secret commis- (Quah 1975, pp. 281-90). sions in public and private business" and "intended to strike at an evil (corruption) which is generally recognized Civil servants in service to the colonial government, as widespread and of long standing" (Quah 1978a, p. 3). not the people Rampant inflation during the Japanese occupation gave rise to widespread corruption among civil servants When it assumed office in June 1959, the PAP govern- who found it difficult to live on their fixed salaries. Con- ment inherited a civil service consisting of nine ministries ditions deteriorated during the postwar period, low sala- with a total of 28,253 employees (Quah 1984, p. 289), ries and postwar inflation increased civil servants' incen- who had "a colonial mentality and were insensitive to the tive to be corrupt, and poor supervision by their superiors needs of the population at large" and who were "hostile provided them with many opportunities for corrupt be- towards and afraid of the PAP" (Quah 1975, p.325). PAP havior with a low probability of being caught (Quah 1982a, leaders had serious misgivings about the SCS since its pp. 161-62). In short, corruption had "become a way of localization had not resulted in a national bureaucracy for life for many people" in Singapore during the postwar two reasons: the local successor-bureaucrats shared many period (Yoong 1973, pp. 55-56). of their expatriate predecessors' values; and the SCS re- In 1950 the Commissioner of Police, J.P. Pen- mained a stronghold of the English-educated and was nefather-Evans, reported that graft was rife in govern- thus not representative of the local population, especially ment departments. A few days later the Chief of the the Chinese-educated. Furthermore, senior civil servants Anti-Corruption Branch (ACB) of the Criminal Investi- had shown insensitivity to the changing political realities gation Department (CID), which was responsible for in Singapore (Seah 1973, p. 615). 206 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Changing the culture of the SCS reality." As such, they should give their best in the service of the local population by ensuring the existence of "an through attitudinal reform honest and efficient government which works in the in- terests of the people" (Lee 1959, pp. 2-3). For there is no other way to preserve what we On August 17, 1959, the Political Study Centre consider good in the past other than by exorcis- launched its first course, a two-week part-time and non- ing all that was bad in it. (Lee 1959, p. 3) residential training course for senior civil servants (includ- ing permanent secretaries), designed to change their atti- When PAP leaders assumed office in June 1959, they tudes and make them more aware of the local contextual realized that the colonial bureaucracy they inherited had constraints. Apart from attending lectures, the participants to be transformed to ensure that their socioeconomic also interacted with the PAP leaders in discussion sessions. development programs would be efficiently implemented. After training all the senior civil servants, the Political As the colonial SCS was not concerned with national Study Centre conducted similar courses for administrative development, or with being responsible to the needs of officers, school principals and teachers, and civil servants the local population, the PAP leaders sought to change in the professional grades (Seah 1971, pp. 161-62). the mindset of the SCS and its members so that they In spite of the short duration and part-time, nonresi- could contribute to national development. dential nature of its courses, the Political Study Centre attained its objectives as "there was a gradual transforma- The Political Study Centre tion in the understanding and perception of the civil ser- vice of political matters and the issues which concerned More specifically, to rectify the deficiencies of the colo- the electorate and influenced Government policy" nial SCS, the PAP government subjected the SCS to (Bogaars 1973, p. 80). Indeed, senior civil servants who "intense psychological pressure" because it believed that had attended the Centre's courses had become more po- .the values of the [colonial] civil servants were irrelevant, litically aware and sympathetic toward the PAP if not dysfunctional, in the context of mass politics" (Seah government's programs (Seah 1971, pp. 163-64). The suc- 1971, p. 86). Accordingly, it launched a systematic cam- cess of the Political Study Centre can be attributed mainly paign to change the values of the civil servants. The to the absence of any fundamental rift between the PAP attitudinal reform of the SCS was initiated with the for- leaders and the senior civil servants since all of them had a mation of the Political Study Centre on August 15, 1959, common background: English-educated and middle class. slightly more than two months after the PAP government This similarity in background removed any "conflict, hos- assumed office. tility or misunderstanding" between the groups and en- In his opening speech Prime Minister Lee Kuan Yew abled each to be more empathetic toward the other's stated explicitly the purpose of the Political Study Centre: strengths and weaknesses (Chan 1973, pp. 5-6). In addition to the Political Study Centre, PAP lead- The purpose of this [Political] Study Centre is ers employed four other methods to change the attitudes not only to stimulate your minds but also to and behavior of the civil servants. inform you of the acute problems which con- front any popular elected government in a revo- Participation in mass civic projects lutionary situation.... Once the problems have been posed to you, you will be better able to help Civil servants were encouraged to participate in mass us work out the solutions to them, by making the civic projects during the weekends as they would be work- administration more sensitive and responsive to ing alongside the political leaders and, at the same time, the needs and mood of the people.... I ask you to be involved in national construction. The aim of these join us in this task-that having defined and weekend activities was twofold: to enable the civil ser- analyzed the problems that confront us, [we may] vants and political leaders to get to know each other work more effectively together ... to establish a better; and to change the civil servants' dislike for manual liberal, just and happy society. (Lee 1959, p. 3) work by providing them with opportunities for engaging in manual activities. In other words, these weekend In the same speech, Lee stressed that the civil ser- projects were aimed at exposing the civil servants to other vants were responsible for ensuring efficiency and honesty values and improving their personal relationships with in the SCS as "the elected Ministers have to work through the political leadership. Attendance at these weekend you and with you to translate our plans and policies into activities was quite good-even though attendance was CULTURE CHANGE IN THE SINGAPORE CIVIL SERVICE 207 not compulsory-because the civil servants were afraid of combined with the reduction in the variable allowance, being victimized for their absence (Seah 1971, p. 86). resulted in a high turnover rate among the senior civil servants. The emphasis on efficiency as the sole criterion Recruitment of Chinese-educated into the SCS for retaining or retiring a senior civil servant was rein- forced by the deemphasis on seniority as the basis for During the colonial period the SCS was criticized for promotion. Prime Minister Lee Kuan Yew had indicated being a preserve of the English-educated, and therefore his disdain for seniority in 1961: "I am in favor of efficient not representative of the local population. To rectify this service. The brighter chap goes up and I don't care how imbalance, the PAP government in 1960 widened the many years he's been in or he hasn't been in. If he's the scope of recruitment into the SCS by selecting twenty-six best man for the job, put him there."' Accordingly, local Nanyang University graduates for the education service civil servants who were competent were promoted to and subordinate administrative grades. Apart from invali- more responsible positions regardless of their seniority dating the claim that the SCS was an English-educated (Quah 1975, p. 331). This policy remains in force today stronghold, this move was also "an attempt to woo the and is responsible for the relative youthfulness of many of political support of the Chinese-educated in the country the present permanent secretaries. by improving their job opportunities" (Seah 1971, p. 87). In sum the PAP government's efforts in attitudinal Thus, the second method employed by the PAP leaders in reform "were aimed at breaking what it regarded to be an the resocialization of the English-educated civil servants isolationist and anachronistic outlook of the Civil Ser- was to reduce their predominance in the SCS by recruit- vice" (Seah 1971, p.88). It needed the support of the civil ing Chinese-educated graduates. servants to implement its programs. However, it also knew that it had to first demonstrate to the civil servants that it Disciplinary control was firmly in control before they would give their support. The PAP government introduced tougher disciplinary Reducing corruption measures against civil servants found guilty of misbehav- ior. For example, the Financial Procedure Ordinance of 1960 included the provision that civil servants make good In addition to obtaining the support of the civil servants, on any financial loss incurred by the government as the the PAP leaders knew that they had to minimize bureau- result of their mishandling of public funds. In 1961 the cratic corruption to enable the public bureaucracy to at- Central Complaints Bureau (CCB) was formed to provide tain the goals of national development. As corruption was the predominantly non-English-educated public with the a way of life and perceived by many to be "a low risk, high opportunity of making complaints against those civil ser- reward" activity, the PAP government's mission was a vants who had been rude or unfair in their dealings with challenging one: to make corrupt practices publicly known the public. If a complaint was valid, disciplinary action and to change the public perception of corruption to "a would be initiated against the guilty party. Civil servants high risk, low reward" activity. were encouraged to be courteous and impartial toward The PAP government's anti-corruption strategy was the public and the CCB was instructed by the political based on the following logic of corruption control: since leaders to take disciplinary action against those civil ser- corruption is caused by both the incentives and opportuni- vants who spoke "disparagingly of the Government in a ties to be corrupt, "attempts to eradicate corruption must manner calculated to bring the state into disrepute," as be designed to minimize or remove the conditions of both well as those who were either rude or discourteous to the incentives and opportunities that make individual members of the public in speech, writing, or action (Seah corrupt behavior irresistible" (Quah 1989, p. 842). 1971, p. 616). Eliminating opportunities for corruption Selective retention and retirement of senior civil servants Since the PAP govemment could not afford in 1959 to Finally, the PAP government relied on a policy of selec- raise the salaries of the civil servants, it began by strength- tive retention and retirement to transform the attitudes of ening the existing legislation to reduce the opportunities the civil servants. Those expatriate civil servants who and increase the penalty for corrupt behavior. A clear were competent and due for retirement were encouraged manifestation of the govemment's resolve to curb corrup- to stay on while their incompetent and inflexible col- tion was provided by then-Minister for Home Affairs, leagues were retired prematurely. The impact of this policy, Ong Pang Boon, when he moved for the second reading 208 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN of the Prevention of Corruption Bill in the Legislative with unanticipated problems. In 1963 the POCA was Assembly on February 13, 1960: amended to give CPIB officers the power to require the attendance of witnesses and to examine them. This The Prevention of Corruption Bill is in keeping amendment was introduced to enable the CPIB officers to with the new Government's determination to obtain the cooperation of witnesses to help them in their stamp out bribery and corruption in the coun- investigations. The first amendment (section 28) indi- try, especially in the public services. The Gov- cated that a person could be found guilty of corruption ernment is deeply conscious that a Government even though he did not actually receive the bribe, as the cannot survive, no matter how good its aims intention on his part to commit the offense would be and intentions are, if corruption exists in its sufficient grounds for his conviction. The second amend- ranks and its public services on which it de- ment (section 35) was directed at those Singaporeans pends to provide the efficient and effective ad- working for their government in embassies and other gov- ministrative machinery to translate its policies ernment agencies abroad-Singapore citizens would be into action.... Therefore, this Government is prosecuted for corrupt offenses committed outside determined to take all possible steps to see that Singapore and would be dealt with as if such offenses had all necessary legislative and administrative mea- occurred within Singapore (Quah 1978a, p. 13). In 1981 sures are taken to reduce the opportunities of the POCA was amended for the third time to increase its corruption, to make its detection easier and to deterrent effect by requiring those convicted of corrup- deter and punish severely those who are suscep- tion to repay all the money received in addition to facing tible to it and engage in it shamelessly. (Quah the usual court sentence. Those unable to make full resti- 1989, p. 84) tution would be given heavier court sentences (Straits Times, October 26, 1981). The Prevention of Corruption Act (POCA), enacted On December 14, 1986, the Minister for National on June 17, 1960, had five important features that elimi- Development, Teh Cheang Wan, committed suicide nated the weaknesses of the previous ordinance and gave twelve days after he was interrogated by two senior CPIB the CPIB additional powers for performing its duties. First, officers regarding a complaint of corruption against him the POCA's scope was broader, as it had thirty-two sec- by a building contractor (Quah 1988, p. 242). One of the tions in contrast to the twelve sections in the previous results of the Commission of Inquiry that followed was the ordinance. Second, corruption was explicitly defined in enactment of The Corruption (Confiscation of Benefits) terms of the various forms of "gratification" in section 2, Act of 1989, which was passed by parliament on March 3, which also identified for the first time the CPIB and its 1989. This Act was designed "to provide for the confisca- Director. Third, to increase the deterrent effect of the tion order against the defendant in respect of benefits POCA, the penalty for corruption was raised to imprison- derived." In the case of a deceased defendant, the court ment for five years and/or a fine of S$10,000 (section 5). would issue a confiscation order against his estate (Re- Fourth, a person found guilty of accepting an illegal grati- public of Singapore 1989, pp. 107 and 110). Finally, a fication had to pay the amount he had taken as a bribe in deceased defendant is considered addition to any other punishment imposed by a court (section 13) (Quah 1978a, pp. 10-i 1). to have derived benefits from corruption if he The fifth and most important feature of the POCA had, at any time ... since the beginning of the was that it gave the CPIB more powers and a new lease of period of six years ending at the date of his life. For example, section 15 gave CPIB officers powers of death, held any property or interest therein dis- arrest and search of arrested persons. Section 17 empow- proportionate to his known sources of income, ered the Public Prosecutor to authorize the CPIB Director the holding of which cannot be explained to the and his senior staff to investigate "any bank account, satisfaction of the court. (Republic of Singapore share account or purchase account" of any person sus- 1989, pp. 128-29) pected of having committed an offense against the POCA. Section 18 provided for the inspection by CPIB officers of The CPIB is the anti-corruption agency responsible a civil servant's bank book and those of his wife, child, or for enforcing the POCA's provisions. It has grown from agent, if necessary (Quah 1978a, pp. 11-12). eight officers in 1960 to its present seventy-six officers, The government ensures the POCA's effectiveness comprising forty-nine investigators and twenty-seven by introducing, whenever necessary, amendments (in noninvestigative staff (CPIB 1990, p. 3). The CPIB per- 1963, 1966, and 1981) or new legislation (in 1989) to deal forms three principal functions: CULTURE CHANGE IN THE SiNGAPORE C!V L SERVICE 209 * It receives and investigates complaints alleging corrupt ment of salaries and working conditions in the SCS- practices in both the public and private sectors. thirteen years after coming to power, after Singapore had * It investigates malpractice and misconduct by public achieved economic growth. In March 1972 all civil ser- officers. (In practice, the CPIB's role is to assist the min- vants were given a thirteen-month nonpensionable allow- istries in the investigation of civil servants for malpractice ance comparable to the bonus in the private sector (Quah and breaches of discipline that are related to corruption.) 1984, p. 296). * It examines the practices and procedures in the public Speaking before the parliament on March 22, 1985, service to minimize opportunities for corrupt practices Prime Minister Lee Kuan Yew justified the increase in (CPIB 1990, p. 2). salaries of the political leaders and civil servants. He Unlike Hong Kong's Independent Commission contended that political leaders should be paid top sala- Against Corruption (which has more than 1,000 officers), ries to ensure a clean and honest government. If they the CPIB does not need a large staff because its location were underpaid, they would be more likely to succumb to within the Prime Minister's Office and its legal powers en- temptation and indulge in corrupt behavior. Lee said that able it to obtain the required cooperation from both public Singapore needed a corruption-free administration and and private organizations. The CPIB is also responsible for an honest political leadership to preserve its most pre- screening appointments to the SCS. Furthermore, the cious assets. He concluded that the best way of dealing CPIB conducts three types of activities to prevent corrup- with corruption was "moving with the market," which is tion: its officers give talks on the POCA to recruits and "an honest, open, defensible and workable system," in- serving officers in the SCS during their induction and stead of hypocrisy, which results in duplicity and corrup- inservice courses; it provides advice to public organizations tion (Straits Times, March 23, 1985). on how to prevent corruption; and its research unit con- The govemment had to improve the salaries and ducts research on those areas and procedures that are vul- working conditions in the SCS for another reason: to nerable to corruption in the SCS and recommends the stem the outflow of competent senior civil servants to the necessary preventive measures (Quah 1084, pp. 297-98). private sector by offering competitive salaries and fringe To supplement the CPIB's role in preventing corrup- benefits to reduce the gap between the public and private tion, the Ministry of Finance issued a circular in July 1973 sectors. Accordingly, the salaries of civil servants in to all permanent secretaries instructing them to review Singapore were revised upward in 1973, 1979, 1982, and and improve the measures taken to prevent corruption 1989 to reduce the brain drain to the private sector and among their staff by reducing the opportunities for cor- the gap between salaries in the two sectors. (To avoid rupt practices. The permanent secretaries were requested repetition, the details of these salary revisions will be to make their officers aware of the government's commit- provided later in the discussion on competitive pay.) ment to eradicating corruption, and to advise them to report any case of corruption. They were also asked to Competing with the private sector introduce six anti-corruption measures in those depart- ments that are vulnerable to corruption: improving work for the best talent methods and procedures to reduce delay; making supervi- sion more effective to allow senior officers to check and To ensure that it recruits the "best and brightest" in control the work of their subordinates; rotating officers Singapore, the SCS has adopted three policies that enable periodically to ensure that no officer or group of officers it to compete with the private sector for the best talent in remains too long at a single operational unit; carrying out the country: selective recruitment through the provision surprise checks on the work of their officers; providing the of attractive undergraduate scholarships for top students; necessary security arrangements to prevent unauthorized competitive pay for high-flyers; and accelerated promo- persons from having access to a department's premises; tion for high-flyers. and reviewing anti-corruption measures once every three to five years with the aim of introducing further improve- Selective recruitmnent of scholars ments (Quah 1989, p. 845). The Public Service Commission is perhaps the most impor- Reducing the incentives for corruption tant central personnel agency in Singapore because it is responsible, among other things, for recruiting high-quality The PAP government was finally able to implement the personnel into the SCS. The SCS relies solely on inter- second prong of its anti-corruption strategy-the reduc- views to select qualified candidates for Division I and II tion of incentives for corruption through the improve- appointments in the SCS. To be eligible for entry, a candi- 2 10 CIVIL SFRVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN date must satisfy these criteria: citizenship, age, education, the SCS for more lucrative jobs in the private sector. In- experience, medical fitness, and character (for example, no deed, from 1978-81 seventy-five administrative officers criminal conviction). The PSC serves as the gatekeeper to resigned from the SCS. The govemment reacted by sub- the SCS by ensuring fair play and impartiality in recruiting stantially revising the salaries of senior civil servants in and by selecting candidates for Division I and II appoint- April 1982 to reduce the twin problems of disparity in pay ments on the basis of merit (Quah 1982b, p. 51). between the public and private sectors and the brain drain To compete for the best candidates in the labor mar- to private firms (Quah 1984, pp. 296-97). ket, the PSC offers attractive undergraduate scholarships The most recent and most substantial salary revision to students with excellent results in the Cambridge Gen- for the SCS was announced by the Minister for Trade and eral Certificate of Education Advance Level examination Industry Lee Hsien Loong in parliament on March 17, to study at local universities or prestigious universities 1989. This latest revision was necessary for two reasons: abroad. After graduation, these scholars are bonded to the size of the administrative service had declined by 30 serve the SCS for a fixed number of years, depending on percent, from 260 officers in 1975 to 183 officers in 1989, the duration of their scholarships. The most prestigious as a result of resignations; and the salaries of the senior scholarship, the President's Scholarship, was awarded to civil servants were no longer comparable to those in the 119 President's Scholars from 1966-90 (PSC, various private sector (Lee 1989, pp. 2-4). Lee noted that: years). In recent years the PSC has enhanced the com- * The most successful of those who left the administra- petitiveness and prestige of its scholarships to meet the tive service were earning 40 to 100 percent more than challenge posed by those private organizations offering contemporaries who stayed. equally attractive scholarships to bright students. * In every age group below 40, the most outstanding The PSC also competes for qualified personnel in the administrative officer was earning 150 percent less than a open market by conducting career talks for graduating stu- person of the same age in the private sector. dents of the two local universities a few month before their * The salaries of the top three officers in banks, oil com- final examinations. To increase their competitive edge vis-a- panies, multinational corporations, local manufacturing vis the private sector, the PSC and some govemment depart- companies, and law firms exceeded by many times the ments conduct special briefing sessions for selected honors- gross salary of a substantive permanent secretary at year students- before examination results are known-to superscale C. entice them to join the SCS (Buang 1991, p.33). Since "low salaries and slow advancement are major factors in low recruitment and high resignation rates" in Competitive pay for high-flyers the administrative service, Lee indicated that the PAP government's fundamental philosophy was to "pay civil In its report, Leadership for America: Rebuilding the Pub- servants market rates for their abilities and responsibili- lic Service, the Volcker Commission stressed that "the ties. It will offer whatever salaries are necessary to attract commitment to perform cannot long survive, however, and retain the talent that it needs" (Lee 1989, p. 5), unless the government provides adequate pay, recognition Accordingly, he recommended a substantial salary in- for jobs well done, accessible training, and decent working crease of 7 percent for superscale officers and an increase conditions." (The Volcker Commission 1990, p. 33). The of 13 to 20 percent for timescale officers. The revised PAP government shares this view and since 1972, it has salary package also included an increase in the existing attempted to provide competitive salaries and favorable end-of-year nonpensionable variable bonus from one working conditions for civil servants. The first salary revi- month to one and a half months; and a new discretionary sion occurred in 1973, when the salaries of senior civil ser- performance-based bonus of up to two months of salary vants were raised substantially to reduce the gap with the for superscale officers, in order to relate benefits to indi- private sector. A second salary revision was initiated in vidual performance (Lee 1989, p. 8). 1979 for the same reason (Quah 1984, p. 296). As a result of the 1989 salary revision, senior civil ser- In 1981 the Research and Statistics Unit of the Inland vants in Singapore have perhaps the highest salaries in the Revenue Department conducted a survey on the employ- world compared with their counterparts in other countries ment and earnings of 30,197 graduates, or 81.5 percent of (see table 27.1). For example, the gross monthly salary for the working graduate population according to the 1980 the top administrative position (Staff Grade V), S$42,026 population census. The survey found that graduates in the (or US$26,266), is extremely high by international stan- private sector were earning, on average, 42 percent more dards. Indeed, the basic monthly salary for Staff Grade V, than those in the public sector. In the PSC's view, this S$32,425 (orUS$20,140or [Australiandollar] A$28,196), finding explained why many senior civil servants had left is much higher than the top monthly salary of a GS-18 CULTURE CHANGE IN THE SINGAPORE CIVIL SERVICE 2 1 1 employee (the highest salary scale in U.S. govemment ser- didates for promotion are interviewed by PSC members vice), which is US$7,224 (or S$11,631) (Wright and and selection boards. An officer's merit is determined by Dwyer 1990, p. 6), or the top monthly salary of A$18,278 his/her performance in grade, as well as by an assessment (or S$21,020) in the New South Wales Public Service.2 of the officer's ability to carry out the responsibilities and On the other hand, as Lee pointed out in his ministe- duties of the next highest grade. More specifically, three rial statement, the gross monthly salary for Staff Grade V factors are taken into account by the PSC when consider- is still modest compared with the salaries of the top ex- ing officers for promotion: their supervisors' confidential ecutives in the private sector in Singapore. This can be reports on perfonnance and service; the recommenda- seen in table 27.2, which shows that the Staff Grade V tions of their supervisors and ministerial or departmental gross monthly salary is less than the highest salary for committees; and an assessment of ultimate potential bankers, sharebrokers, lawyers, doctors and surgeons, ac- (Kang 1988, pp. 29-30). countants, multinational manufacturers, architects, local In recent years those who have resigned from the manufacturers, and oil company executives. administrative service have complained "that promotions Lee concluded his March 1989 speech in parliament came too little and too late" (Lee 1989, p. 3). Promotion by promising that the govemment "will continue to carry speed in the Administrative Service depends on two fac- out regular surveys of private sector salaries to stay com- tors: the officer's Currently Estimated Potential (CEP); petitive. As the economy grows, and private sector in- and the time norms for promoting officers with that po- comes rise, we will regularly adjust civil service salaries to tential. In other words, the higher an officer's CEP, the keep in step. Paying civil servants adequately is absolutely shorter the time norm, the faster his speed of promotion. essential to maintain the quality of public administration However, promotions in the administrative service have which Singaporeans have come to expect" (Wright and been slow in the past few years because of the permanent Dwyer 1990, pp. 21-22). secretaries' conservative evaluation of the CEPs of their officers, and the slow time norms for promotion (Lee Accelerated promotion for high-flyers 1989, p. 13). Accordingly, the govemment has supplemented its Civil servants are promoted by the PSC on the basis of 1989 salary revision with accelerated promotion for official qualifications, experience, and merit. Eligible can- TABLE 27.2 TABLE 27.1 Average 1987 monthly income of the top Monthly salary levels of superscale officers three executives, selected large Singapore in the Singapore administrative service companies and professional firms Monthly varioble Grass salary (averoge monthly salary in Singaporean dollors) Basic component Gross in U.S. Average salary for all Grade Salary code solary (S$) (MVC) (S$) salary(S$) dollars companies within group Staff Grade V 1001 32,425 9,601 42,026 26.266 Highest salary 1002 28,950 8,572 37.522 23,45 1 Profession Top 2nd 3rd wœthin top group 1003 28,100 8.320 36,420 22,763 Bankers 141,206 30,700 22,044 196,833 Staff Grade IV 1004 27,825 8,239 36,064 22,540 Sharebrokers 122,430 33,989 28,5 15 214,833 Staff Grade III 1005 23,225 6.877 30,102 18,814 Lawyers 102.297 100,113 69,510 157,150 1008 21,100 6.247 27,347 17,092 Doctors and Staff Grade ll 1010 20,125 5.959 26,084 16,303 surgeons 92,917 59,524 50,985 99,258 1017 19,550 5.788 25,338 15,836 Accountants 72,235 59,534 56,801 75,256 Staff Grade 1 1020 17,025 5,041 22,066 13.791 Multinational Grade A 1025 14,550 4.308 18,858 11,786 manufacturers 63,748 31,809 28,915 81,681 Grade B 1035 12,300 3,642 15,942 9,964 Architects 50,004 23,750 17,306 59,260 Grade C 1045 10,175 3,012 13,187 8,242 Local Grade Dl 1050 9,100 2,694 11,794 7,371 manufacturers 49,779 26,028 22,160 80,900 Grade D 1055 8,100 2,398 10,498 6,561 Oil company Grade El 1057 7,550 2,235 9,785 6,116 executives 34,739 25,446 21,141 56,194 Grade E 1060 7,000 2,072 9,072 5,670 Car dealers 28,767 17.531 8,620 40,417 Grade F 1065 6,450 1,909 8,359 5,224 Engineers 28,216 18,778 13,890 32,537 Grade G 1070 5,900 1,747 7,647 4,779 Grade H 1075 5,350 1.584 6.934 4,334 Nore:ThecurrentPermanentSecretarySuperscaleAaveragemonthlysaJaryis$23.565, while for Superscale C i is $16,033. Pnvate sector salaries do not include unquantified 3. US$ 1.00 = S$1.60. side benefrts, which could add another 15 percent. %.ource: Public Service Division. Singapore. Source: Lee 1989, p. 25, Annex C. 212 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN high-flyers because "promotions are a much more selec- the SCS payroll. In 1979 the Management Services De- tive and discriminating method to reward good officers partment conducted a Computerization and Mechaniza- than pay [raises] alone" (Lee 1989, p. 12). To hasten tion Survey of the SCS and found that 105 major infor- promotion the government has shortened the promotion mation and operational systems were candidates for time norms so that officers will be promoted to their computerization (Chuang 1983, p. 5) which could greatly final ranks by the age of 45 instead of 50. Furthermore, improve the service's efficiency. The National Computer all able officers should reach the rank of principal assis- Board (NCB) was formed on August 15, 1981, to pro- tant secretary two years earlier that was the norm, by mote, implement, and guide the development of informa- the age of 30, meaning that their rank would be attained tion systems in the SCS. The Civil Service Computeriza- within eight years of joining the administrative service, tion Program (CSCP) was introduced by the NCB in about the time of expiry of their scholarship bonds. For September 1981 to improve both efficiency and produc- more senior positions, the permanent secretaries of the tivity in the SCS by promoting the widespread use of larger ministries and the chief executive officers of the computers among civil servants. major statutory boards can be promoted beyond As a result of the CSCP, computerization has made superscale Grade C to Grades B, A, or even Staff Grade extensive inroads in the SCS and enabled it to enhance posts (Lee 1989, pp. 13-14). efficiency by reducing manpower costs. The CSCP has Since seniority is not an important criterion for pro- been successful because it "generated [s]$2.71 in returns moting high-flyers in the administrative service, it is not for every dollar spent on computerization and reduced surprising that the majority of the fifteen permanent sec- the need for 5,000 posts in the Civil Service by automat- retaries are in their forties. Their average age is 48, with ing manual and repetitive tasks and streamlining opera- the Head of the SCS being the oldest permanent secre- tions" (Straits Times, January 15, 1993). The SCS be- tary at 62 years old. came fully computerized in 1990, with 107 mainframes and minicomputers, and 10,000 personal computer pro- Preventing overstaffing fessionals. The budget for computerization has increased from S$114 million in 1985 to S$150 million in 1990 (Straits Times, January 15, 1993). Computerization in the In 1980 Peter F. Drucker identified "overstaffing" as the SCS has also resulted in significant improvements in "third deadly sin of public administration." He wrote: public services, including shorter waiting times and faster turnaround and response. It is even worse to overstaff than to overfund [because] the one certain result of having more Zero-growth manpower policy bodies is greater difficulties in logistics, in per- sonnel management, and in communications. In 1986 the government launched a manpower reduction Mass increases weight, but not necessarily com- exercise to reduce staff levels in the SCS by 10 percent petence. Competence requires direction, deci- over five years. This objective was not unrealistic because sion, and strategy rather than manpower. of the rationalization of departmental functions and ac- (Drucker 1980, p. 104) tivities, streamlining of work procedures, more extensive mechanization, automation and computerization, priva- Unlike Indonesia, Malaysia, the Philippines, and tization, and contracting-out of work. As part of the exer- Thailand, whose civil services have grown rapidly,3 cise, all public sector organizations were asked by the Singapore has succeeded in preventing overstaffing-the Ministry of Finance to form manpower scrutiny teams SCS has only increased by 2.2 times, from 28,253 employ- that would review their activities in an effort to improve ees in 1959 (Quah 1984) to 61,340 employees in 1992 manpower utilization and achieve a greater reduction in (Ministry of Information and the Arts 1992). Indeed, staff requirements. The purpose of each scrutiny was to overstaffing has been avoided because of the introduction assess whether the activity was necessary, and, if so, of computerization in 1981 and the zero-growth man- whether it could be done at lower cost and with less power policy in 1988. manpower. Training courses were organized by the Man- agement Services Department and the Auditor-General's The Civil Service Computerization Program Office to provide the local scrutiny teams with the exper- tise required to review staff requirements. The first computer was installed in the SCS in 1962 and A major consequence of the manpower scrutiny ex- was used for the national census, national statistics, and ercise was that it led to the zero-growth manpower policy. CULTURE CHANGE IN THE SINGAPORE CIVIL SERVICE 213 In 1988 the government decided that ministries should vice and responsiveness were recognized as essential as work toward zero growth in total staff strength from the Singaporeans have become more demanding and are now financial year 1986 level. Also in 1988 the PSC began more likely to compare the service they receive from the regulating recruitment to match attrition in order to public sector with that of private firms (Rajamanikam achieve the zero-growth target in the SCS. The Budget 1991, pp. 18-19). Division calculated the ceiling recruitment figure each The SIU introduced its telephone hotline on April 5, year for the various ministries and informed them that no 1991, and received a total of forty calls, with complaints provision would be made for additional manpower re- ranging from the lack of parking space to the state of quirements arising from new functions and services or cleanliness in public areas (Straits Times, April 6, 1991). increases in workload-as these needs were expected to By the end of the first week, the SIU had received about be met by retraining and redeploying existing staff. Within 150 calls, with 25 percent dealing with housing matters the limits of the recruitment target, then, ministries were and 10 percent focusing on immigration matters (Straits allowed to redistribute available vacancies across cost cen- Times, April 14, 1991). The good public response to the ters and programs (Lee 1989, p. 12). SIU during its initial week indicates that the government's In sum, unlike other civil services that are afflicted by decision to establish the SIU was correct. the problem of overstaffing, the SCS has managed to keep trim and lean because of the introduction of two mutually The contemporary SCS: a new reinforcing policies: computerization and the zero-growth i a l manpower policy. wme in a new bottle Improving service to the public In August 1991 Prime Minister Goh Chok Tong advo- cated that the SCS be run like a private sector company to provide more efficient and cheaper services for the In his address at the opening of parliament on February people. However, the SCS should eschew the profit mo- 22, 1991, President Wee Kim Wee announced the es- tive and "try to make costs as low as possible, so service tablishment of a Service Quality Improvement Unit remains cheap and affordable to the public." Civil ser- (SQIU) under the Prime Minister's Office (PMO) "to vants should be "people-oriented" and realize that they monitor and improve upon the standard of public ad- are providing a service to the people (Straits Tines, Au- ministration" and "to maintain the highest possible stan- gust 6, 1991). dards in our public services" by obtaining feedback from More recently Ngiam Tong Dow, permanent secre- Singaporeans to improve the service provided by gov- tary of the Ministry of Finance, urged the SCS to depart ernment departments and statutory boards (Wee 1991, from "established procedures and mindsets, and reposi- p. 3). The creation of the SQIU was another manifesta- tion itself to help Singapore advance into the Super tion of Prime Minister Goh Chok Tong's consultative League" by using its computer resources to carry out "busi- style of government. ness re-engineering" (defined as a complete rethinking The SQIU, whose name was shortened to the Ser- and reorganization of the SCS's operations) to make the vice Improvement Unit (SIU), was established in April quantum leap (Straits Times, October 9, 1992). 1991. The SIU has a five-member political supervisory The SCS has changed greatly as a result of the culture panel and a seven-member management committee, change introduced by the PAP government after its as- chaired by Ngiam Tong Dow, permanent secretary in the sumption of office in June 1959. First, instead of the pe- PMO and the Budget and Revenue Division in the Min- ripheral role in national development they played during istry of Finance. The SIU's responsibility was to "assess the colonial period, the SCS and the statutory boards have the current quality-of-service recommendations or sug- major roles in today's development process. Second, as a gestions on how this service level can be upgraded and result of the government's success in attitudinal reform improved" (Rajamanikam 1991, p. 18). and its effective, two-pronged anti-corruption strategy, To assist the SIU in performing its duties, ninety corruption has been minimized. Third, unlike other civil superscale officers were appointed as Quality Service services, the SCS has managed to compete successfully Managers (QSM) in the SCS and statutory boards. Senior with the private sector for the best talent in the country by officers were selected as QSMs to guarantee the public means of its selective recruitment of scholars, its competi- direct and immediate access to decisionmakers who could tive compensation, and its accelerated promotion for high- deal effectively with complaints or channel these to the flyers. Fourth, instead of being overstaffed like other civil proper ministries or officers concemed. High-quality ser- services, the SCS remains trim and lean because of com- 2 14 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN puterization and its zero-growth manpower policy. Finally, Lee, Kuan Yew. 1959. "Speech at the Official Opening of the the creation of the SIU in April 1991 is clear indication of Political Study Centre," August 15. Singapore. the PAP government's commitment to improving the PSC (Public Service Commission). Various years. Public Service quality of service provided by the SCS. 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The Cultures of tional Youth Leadership Training Institute Journal January). 216 CIVIL SERVICE REFORM IN LATINtJ AMERICA AND THE CARIBBEAN Civil Service Reform in Africa Clay Wescott This chapter reviews the experience of African govem- a precondition. Economically successful countries range ments in civil service reform over the past two decades and from Hong Kong, with one of the least interventionist draws three lessons: act strategically; attract and motivate governments in the world, to interventionist South Ko- top professionals; manage for results.' The goal is not to rea, where govemmental effectiveness is a critical success cover the subject exhaustively, but to stimulate discussion. factor. Singapore's govemment intervenes less in eco- nomic matters than most western European governments, Civil service reform: basic while the Taiwan govemment is more interventionist than -lcrrr cconcepts the French in the 1950s (Wolf 1991). Chile slashed the size of its civil service by nearly 60 What civil service reform is percent in the 1970s; the much leaner government that remained had a horrific human rights record, but success- Civil service reform (CSR) streamlines and reengineers fully managed the transition from socialist chaos to what govemment so that there is a significant increase in the is now one of the world's fastest growing market econo- quantity, quality, and cost-effectiveness of public services. mies (Wall Street Journal, January 25, 1993, p. 1). Hong The goal is systemwide improvement in government opera- Kong provides a different model, where the police force tions to better carry out policies agreed on through a legiti- was extremely corrupt until the mid-1970s, while the mate political process. Types of improvements include: economy boomed (Klitgaard 1988). Similarly, corruption * Rethinking the purpose and scope of government, elimi- in the Singapore Customs Service until the early 1980s nating duplication and nonessential functions, and ex- did not prevent record economic performance (Klitgaard ploring alternative options for service delivery. 1988). And more recently, mainland China had one of * Improving systems for recruitment, career planning, the world's fastest growing economies in 1992, despite participation in decisionmaking, and sense of duty toward administrative opacity, capriciousness, and a traditional the public welfare, thus making the best possible use of and overcrowded civil service (Economist 1992). staff while providing them with job satisfaction. Thus, civil service reform is possible under authori- * Reducing corruption. tarian regimes. Effective systems of public administration * Instituting effective personnel controls, and redeploy- were developed in Chile and South Korea under military ing or terminating redundant employees. regimes, and in Malaysia, Mexico, and Tunisia under * Improving compensation to attract and retain a critical single-party govemments. Indeed, democracies may be mass of outstanding civil servants. less administratively efficient than other types of regimes * Improving budgeting and financial management, and because more actors must be consulted, and because pa- adopting performance management systems that continu- tronage and exemptions have to be spread to a larger ously improve productivity and results of govemment work. group (Schmitter and Karl 1991). And what it is rnot Why undertake civil service reform? Having an efficient and effective civil service is no guar- If civil service reform is neither a necessary nor a suffi- antee of economic growth with equity, nor is it necessarily cient precondition for economic development, then why CIVIL SERVICE REFORM IN AFRICA ^ do it? The main reasons are to ensure sufficient capacity Although many of the reforms may be specific and for high-quality policy formulation and execution; and to unique to the countries making them, some lessons can be assure that essential services and facilities, such as educa- drawn as to the general policies that have promoted suc- tion, security, health, water, sanitation, transport, and cessful civil service reforms. This is not to say that the communications, are provided dependably and equitably. economic successes of these selected countries are due Inefficiency can mean high government deficits and mainly to their civil service reforms. It is more likely that poor quality of public services, which are incompatible they succeeded by doing lots of things right, while avoid- with economic growth with equity. Reducing budget defi- ing big mistakes. cits includes both raising more revenue and cutting ex- The Botswana experience brings out many common penditure. Both strategies require reform: more effective themes also evident in the other four countries. First, systems and personnel for tax collection, and sharp in- there was a clearly forrnulated vision of change, linking civil creases in the productivity of inadequate public funds.2 service reform to broader economic policy changes. This Sometimes this realization may come after significant vision was then carried out under strong leadership and economic reforms have been carried our. For example, with commitment at the highest levels of government Indonesia in the 1970s and 1980s achieved monetary (Economic Development Institute and UNDP 1992).4 stability and rapid economic growth, despite an inefficient The government's strategy was translated into five civil service and a slow and capricious legal system. In the policy decisions for the development and management of 1990s many leaders realize that further gains in interna- the public sector. First, "efficiency and effectiveness were tional competitiveness will only be possible with adminis- made the overriding goals." Thus, the public sector had to trative and legal reform (UNDP 1993a). be staffed with competent personnei, "adhering to simple Some assume that as economies become more mar- and clear rules and procedures to guide all administrative ket-driven, the size and importance of government will actions and management decision-making." shrink. Yet in many African countries there is a convic- Second, there was a priority on building strong na- tion that even in a more market-friendly economy, gov- tional top and middle-level management. Third, the gap ernments still have a major role to play in economic in local expertise was filled by using expatriates and seek- management.3 This conviction is partly selfish (officials ing technical assistance from donor agencies. Fourth, there unwilling to give up power); partly benign (concern for was a commitment to train local staff to replace expatri- mitigating the adverse effects of adjustment on the poor); ates, while making sure to fit skills with needs. And fifth, partly based on economic theory; partly cultural and his- there was the realization of scarcity, a chronic shortage of torical (patrimonialism [The Carter Center 1989], non- human and management resources, which "necessitated existence of an important private sector, legacies of con- prudent, pragmatic and even frugal policies designed to trol-oriented and centralist colonial structures and eliminate redundancy and to pursue objectives as eco- managerial styles, and so on); and partly a reflection of nomically as possible, keeping costs down and concen- the importance of donor funding, which makes up more trating on the essential." As a result, "Botswana has built than half of the gross domestic product (GDP) of some an enviable reputation as having one of the most effective African nations, and is mainly distributed through gov- public sector managements in Africa, and indeed among ernment agencies. The net result is that civil service re- developing countries" (Raphaeli, Roumani, and MacKellar form is promoted to reduce budget deficits, and to im- 1984, pp. ix, 37). prove public sector economic management, including the Botswana has refrained from a policy of "localization" management of foreign assistance. for its own sake. On this issue, Botswana's experience is different from most African countries. It experienced very How to do it: the case of Botswana little colonial subjugation, being mostly ignored by the Brit- ish administration that oversaw the protectorate. There- There have been nearly as many different types of civil fore, it did not perceive European management aid as colo- service reforms as there are governments that have un- nialism and did not reject it at the time of independence. dertaken them. Last year the United Nations Develop- A second overall theme in the Botswana reforms is ment Programme (UNDP) carried out brief studies of the importance of communication of the strategy to citizens, improvements in civil service effectiveness in five coun- and agreement on objectives, perfornmance indicators, and tries that were among the leaders in increasing their working relationships. Three main forums exist for dis- human development rating between 1970 and 1990: semination of government policy: the kgotlas, freedom Botswana, Chile, Malaysia, Mexico, and South Korea squares, and primaries. The kgotla is the oldest and most (UNDP 1992). important of the three. Already prevalent in the 19th 2 1 8 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN century, kgotlas are general village meetings called in or- Furthermore, civil society is starting to play a larger der to inform the people and discuss issues. In the past role in politics and forcing the govemment to reform the village leader had already concluded policies with his public policies. Many interest groups, some better orga- main advisers, and the public had little chance to change nized than others, including teachers, trade unions, civil decisions made. The people got accustomed to seeing servants, environmentalists, businessmen, farmers, their leaders in agreement and not witnessing political women, journalists, and lawyers, are increasingly demand- debates. This is still true to a great extent today. Holm ing the govemment to pay attention to their interests. and Molutsi (1990, p. 328) describe their findings in the Several independent weekly newspapers are also adding Democracy Research Project: "one manifestation of this pressure for govemment reform (Holm and Molutsi 1990). domination [state's power domination over communica- The highly consultative decisionmaking process as- tion] is apparent in the traditional kgotla, which is now sures that policymakers in the different ministries receive used primarily for explaining govemment policies .... thus, informed directives to make policies: a community's reaction to a particular proposal tends to have a spontaneous but ineffective quality." They found The practice of having a caucus of the members that in almost all cases the discussions deal with imple- of Parliament from all parties at which senior mentation issues in a given village rather than questions officials and professionals can discuss key issues, of alternative policies. whether or not there is an immediate require- However, the citizens have become so accustomed to ment for parliamentary action, assures that poli- these informational gatherings, that it has become neces- ticians are exposed to the analysis of profession- sary for the government to run a series of kgotlas on all als, and the constraints and opportunities the issues that have grass-roots impact. "To do otherwise nation faces, and the professionals and civil ser- would seriously compromise a programme's legitimacy," vants can hear the concems and constraints ex- write Holm and Molutsi (1990, p. 334). "This means that pressed at the representative political level. policy makers must anticipate public opinion, or take the (Raphaeli, Roumani, and MacKellar 1984, p. 20) risk that local resistance will be considerable." Freedom squares were started to accommodate party All this communication between the govemment, the politics. They are organized by a political party of a group population, and technical experts assures that the of political activists, often to protest current policies. Of- govemment's policies are in line with the desires of the ten as a consequence of the protests, the Botswana Demo- population and that the population understands the stakes cratic Party (BDP) leadership might change its policy, if it of reforms.5 It also helps to inform the regime what key sees the opposition gaining support. Holm and Molutsi interest groups demand from the reforms in return for (1990, p. 335) write that the BDP decided to provide free their support. Reforms shift income from one group of secondary education "because the BNF [The Botswana people to another; vested interests, power alignments, National Front-the main opposition party] was calling and coalitions will determine whether or not a reform in freedom squares for the abolition of these fees and program will succeed. In Botswana the major groups have gaining considerable popularity thereby." Freedom squares been kept happy with land and income increases (while are where people receive most of their information re- bushmen have been marginalized). garding political party activities and position issues. A third overall theme is to minimize corruption. Party primaries give the public a chance to voice its Botswana's bureaucrats have the reputation of being hon- opinion on local politics. They were primarily created to est. Corruption does not seem to be part of the bureau- replace old politicians who had lost touch with their con- cratic routine. Roger Charlton, analyzing Botswana's low stituencies. Although old politicians are often replaced level of corruption, remarks, "Where Botswana departs with new ones from within the ruling BDP party, prima- more radically from other African states is in the unchar- ries do pressure politicians to act with the interest of their acteristically modest life-styles and moderate personal constituencies in mind. Holm and Molutsi (1990) report consumption patterns of Botswana's political and admin- that a number of local councilors lost in the 1989 prima- istrative elite" (Charlton 1990, p. 10). Batswana tend to ries either because they did not hold kgotlas or they could be disinterested in conspicuous consumption, opting in- not demonstrate achievement of any community improve- stead for investments in long-term projects, especially ments. Overall, the kgotla focuses on local policy imple- cattle ranching (Charlton 1990). mentation questions, the freedom squares concentrate on But perhaps the most important factor explaining the matters of interparty conflict, and the primaries provide low level of corruption is Botswana's legal and judicial for intraparty struggles. system. Ruled by a president who is a Westem-trained CIVIL SERVICE REFORM IN AFRICA 219 lawyer (as was his father), Botswana has developed inde- ization and Training, and started to systematically mo- pendent and powerful judicial bodies, and laws that are nopolize all university graduates, giving second priority to enforced fairly and equitably. the local development of the parastatals and the private Another reason for the low level of corruption is that sector. Thus, the civil service is made up of the best- civil servants' pay although low by Western standards, is educated Batswana, and this is one of the main reasons relatively high compared with the rest of the population for its excellent performance. and with other African countries. This is the case even Promotion within the civil service is directly linked though the ratio of net earnings of top civil servants to the to performance. There is a very regularized promotion lowest class of wage workers fell from 36:1 to 16:1, during system, in which the performance of civil servants is the period from 1966 to 1987, mainly due to a rise in evaluated at regular intervals by the Central Civil Ser- minimum wage (Charlton 1990). Civil servants do not vice Commission, which has a supervisory position need to take on a second job to survive. Thus, they do not (Holm 1992). As in the hiring process, strict merit crite- have conflicting interests and are not concerned with a ria are employed. Civil servants who show the ability to second job during office hours. move up the ladder, but do not have the necessary edu- Another factor is that merit criteria for civil servants cation, can receive training. are strongly enforced. Civil servants are expected to have a As Batswana have become better educated, the crite- certain level of education and the necessary experience to ria used to select civil servants have become more selec- be employed. There is a formal employment chart detailing tive. As a result, the younger civil servants entering the the minimum education needed for each position level. government today are often much better educated than Thus, bureaucrats cannot use employment or promotion their superiors. This has caused tension between the two to pay for favors. Finally, Holm believes that the low level generations, and many older bureaucrats have been asked of corruption is simply due to the Botswana culture, which to resign to leave room for the better educated and trained is very rule-bound. Batswana believe that if "that's the civil servants. It had been the plan of the govemment rule, you should follow it," says Holm (Holm 1992). from the start to replace the first group. That is one of the Furthermore, the Ministry of Finance and Develop- main reasons the retirement age of the civil service was ment Planning is, among other things, responsible for set at forty-five. maintaining a system of effective control and manage- This sort of recycling is also taking place in the politi- ment of all public finance. Civil servants are directly ac- cal parties, where younger MPs have asked their seniors countable for expenditures within their sectors. One of not to seek renomination. Parliament members have also the govemment's most significant contributions to devel- been seeking a more active role, and in 1989, they added opment is: their first policy analyst staff position to their list of per- sonnel (Holm and Molutsi 1990). Furthermore, as mem- .a well-manned and industrious civil service in bers of parliament are becoming better educated, they are which financial discipline is maintained by strict putting pressure on cabinet ministers to take better con- accountability and for which the words "can be trol of the civil servants in their ministries. held pecuniarily responsible" have a real mean- In each of the six development plans the highest ing. The warrant, sub-warrant and virement sys- emphasis was placed on education and training. Bo- tem enables the Government to trace the misuse tswana's expenditure on education rose 2.7 percent of of public funds to the officer ultimately respon- gross national product (GNP) in 1960, to 9.2 percent by sible. There is also an unfettered and indepen- 1986 (UNDP 1992, p. 148), a huge increase when one dent audit which reports to the National Assem- considers the rise in GNP. Simultaneously, its combined bly which is genuinely concerned that the public primary and secondary schools enrollment ratio rose money should be properly used. (Raphaeli, from 46 percent in 1970 to 86 percent in 1987 (UNDP Roumani, and Mackellar 1984, p. 36) 1992, p. 130), one of the largest increases in the world. Primary school was made free and recently secondary In addition the accounting officers are held person- school became free as well. Several universities were cre- ally responsible for the correctness of their recording of ated as well as training schools. expenses on each monthly statement. Additionally, there are many different training pro- A fourth overall theme is human resource management grams to improve the quality of the civil service, such as: systems to recruit, reward, and retain outstanding civil ser- on-the-job nonformal, expatriate training; external part- vants. In order to push for localization, in 1971 the gov- time and correspondence programs; external institution ernment appointed a Presidential Commission on Local- programs, which can be local, in other Southern Africa 220 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Development Coordination Conference (SADCC) coun- the growth of the bureaucracy. Of the senior and middle- tries, or overseas. There are training programs for all level staff, the number of expatriates grew from 438 in levels of the civil service. The stated objectives of these 1964 to 713 in 1982 (Raphaeli, Roumani, and MacKeller, different programs is to improve the motivation, perfor- Table II, p. 44). mance, and productivity of civil servants (Botswana 1987). Several external institutions prepare Batswana for Localization is always a long-term objective. the civil service or for entry into the University of In 1987 the Directorate of Public Service Manage- Botswana, including the National Health Institute, the ment issued a Training Plan as well as a Training Manage- Botswana Agricultural College, and the Botswana Insti- ment Handbook to be used as guidelines for all the insti- tute of Administration and Commerce (BIAC). BIAC tutions involved in training. The emphasis has been to provides training to non-university graduates with su- strengthen existing programs and facilities rather than pervisory management studies for elementary manpower build new ones. There has also been an attempt to pro- development. More advance studies for middle and senior vide more training in-house and in Botswana, and to limit management training across the private and public sector foreign training to SADCC countries (rather than over- are offered by the Institute of Development Management seas), when possible. (IDM) (Botswana 1987). The Botswana govemment has been fostering man- In summary, civil service reforms in Botswana are agement development through on-the-job training by part of a clearly formulated vision of change, which has qualified supervisors (Raphaeli, Roumani, and MacKeller strong citizen participation in its formulation and imple- 1984). These are either teachers of workshops, or Botswana mentation. The reforms have stressed minimizing corrup- or expatriate supervisors. On average a generalist civil ser- tion and improving human resource management systems vant will receive in the course of a twenty-five-year career, to recruit, reward, and retain outstanding civil servants. one two-week induction course, one twelve-week basic The strategy has been one of constant, incremental im- course, five three-week refresher courses, and two four- provements on many fronts. week tailor-made department-oriented courses, or about Donors had an important support role, but as part of one and a half weeks of training a year (Botswana 1987). a national strategy formulated by the government in con- There is a formal program of localization. But due to sultation with citizens. For example, UNDP's project the shortage of educated or trained counterparts, localiza- BOT/87/009 provided support, along with a Netherlands tion is not applied rigorously. Furthermore, expatriates Trust Fund, to build capacity at the University of often do not find the time in their work to train local Botswana to run a Master of Public Administration pro- counterparts. In theory, any position filled with an expa- gram; at the Institute of Development Management for triate is up for localization. A World Bank report on training in inventory management; and at the Botswana public sector management in Botswana describes the pro- Institute of Public Administration and Commerce for cess of localization: training in accountancy supervisors.6 ... ideally, an "understudy" or "shadow" post is Lessons for civil service reform created for the local who will be with the expa- triate for a number of months to determine his/ in Africa her professional strengths and preferences in re- lation to that post. Thereafter, the local person Botswana is a successful case of an African country build- is sent for academic or specialized training, usu- ing up an effective civil service, along with rapid eco- ally for a period of two years. Upon return, the nomic development with equity. Botswana did this while local person spends six months to a year as coun- avoiding the serious problems that have plagued other terpart to the expatriate while receiving on-the- African civil services, such as corruption, ineffective ser- job training. At the end of that period, the coun- vice delivery, sub-minimum-wage compensation, and the terpart relationship is reversed and the expatriate recruitment and promotion of unqualified staff. The ques- becomes an adviser to the local who has taken tion is, what can African countries that already have all of full responsibilities. (Raphaeli, Roumani, and these problems learn from Botswana and other countries MacKeller 1984, p. 67) that have successfully avoided them? The question is difficult to answer empirically be- Although the percentage of expatriates in all levels of the cause the reforms in Botswana and the other successful civil service has dropped from 61 percent in 1964 to 23.5 cases took fifteen to twenty-five years to bear fruit. Like percent in 1982, the number remains very high because of the construction of a medieval European cathedral, civil CIVIL SERVICE REFORM IN AFRICA 221 service reform may need to span two generations of lead- A related point is that having a strategy for imple- ers, subject to setbacks that appear fatal at the time, but mentation is just as important as a grand vision. Tunisian that if managed effectively, can be overcome. Part of the reforms between 1975-80 focused on the political man- reason for the long timeframe is that dysfunctional ele- date of decentralization and deconcentration. Yet despite ments of civil services, such as lack of accountability and decrees requiring the transfer of officers from central min- transparency, lack of rule of law, regressive taxes and istries to the regions, these ministries had neither the staff budgets, and patrimonial recruitment and promotion, are nor the competence to carry them out. The next period of crucial mechanisms to keeping authoritarian regimes in reform from 1980-86 also suffered from the weak execut- power. Regressive taxes spare elite supporters from paying ing capacity of reform units set up within each ministry, taxes. Bureaucratic budgets reflect the relative powers of despite the adoption of a reformed public service statute bureaucratic elites rather than the broader public inter- in 1983. Starting in 1986 new reforms took into better est. Discretionary import licenses and other economic account the views of both the affected officials and the controls can be targeted to obedient partisans. Patrimo- users of government services. The role of the central nial recruitment and promotion can reward loyalists with reform leadership became more that of facilitator, while jobs, bureaucratic influence, and fringe benefits. The lack individual govemment units affected took on execution of rule of law, transparency, and accountability allows responsibilities, including monitoring, evaluation, and regimes to continue these practices and avoid effective midcourse correction. Reforms were also scaled down so scrutiny and sanction from the broader public (Dia 1993). as not to create unrealistic expectations given constraints With these caveats, there are at least three lessons in executing capacity. There was also a recognition that for African civil service reformers: act strategically, hire change management is a skill that needs to be mastered, and retain the best, and manage for results to improve and pursued with considerable energy. governance. It is useful to have two institutional focal points for carrying out a CSR strategy: a group to do the technical Act strategically work of policy formulation and implementation, and a high-level body to build political consensus to make diffi- Civil service reform is a long-term process of change man- cult decisions. For example, the Tanzanian CSRP is being agement. Successful reformers understand the relation- executed mainly by the Civil Service Department of the ship among the different reform components, and com- Office of the President, through a number of committees bine them into a coherent strategy. The reform process and task groups. Overall coordination of the CSRP is the requires successful tactics: plotting and sequencing the responsibility of the Inter-ministerial Technical Commit- necessary steps. Even more important and rare is the tee, including all principal secretaries, and is chaired by vision to formulate grand goals, in consultation with other the Chief Secretary, who is head of the civil service and key stakeholders. The particular goals and tactics vary for secretary to the cabinet. The role of this committee in- each country. Successful countries find coherent solu- cludes review and clearance of policy documents for sub- tions to the problems they face in reaching their goals.7 mission to the cabinet, and communicating cabinet deci- This point transcends the question of comprehensive sions to ministries (Tanzania 1993). versus incremental reform. Botswana's five-point strategy The Zambia Public Service Reform Programme is was the basis for incremental reforms. A comparable glo- executed by the Manpower Department of the Cabinet bal and integrated strategy has provided the foundation Office, with high-level support from the Secretary of the for administrative reforms in Tunisia since 1970. Tunisia Cabinet. The Zimbabwe CSRP is executed both by the learned this lesson from its own experience; the initial Ministry of Labour, Public Service, and Social Welfare, reform period 1970-74 produced few results because of and the Public Service Commission. However, a new political opposition, stemming from the failure to define a unit is being formed in the Office of the Secretary of the strategy based on a consensus among key stakeholders Cabinet for high-level coordination. In Madagascar, the before initiating reforms.8 Ministere de la fonction publique carries out the day-to- In both cases the important thing was a strategic day business of managing the civil service, while the vision understood by key stakeholders, and formulated newly formed Commission nationale de reforme is locally, although foreign ideas were used freely. These charged with formulating, implementing, and evaluating cases point out the importance of the principle of inten- change programs. tionality: that sustainable reform is more likely to occur if Although many of the programs listed above have leaders plot in advance where they want to go, and what coordination mechanisms, not all reforms need to be co- steps they need to take-and in what order-to get there.9 ordinated. This is important to consider because coordi- 222 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN nation requires scarce administrative capacity. Certainly, ernments, to reduce expenditure, cut real wages of gov- some reform components need to be coordinated. For emment employees. As a result, civil servants' remunera- example, effective payroll and personnel records systems tion often fell below subsistence level. The civil service are linked; effective government accounting requires the lost many of its best employees, who left for the private use of the same account codes used in the budget. In sector or simply left the country. Those who stayed had to other case, reform components are additive, such as im- resort to other means to make ends meet. A World Bank proving debt management and a voluntary departure study on West Africa concluded: program; in these cases coordination is less essential (Leonard 1989). Overstaffed bureaucracies afflicted by eroding The importance of building stakeholder consensus salary scales, pervasive demoralization, corrup- around a coherent strategy has implications for donors. tion, moonlighting, and chronic absenteeism are Successful civil service reform, such as the cases of often unable to carry out the essential economic Botswana and Tunisia cited above, has relied on impor- policy and management tasks that are a key part tant donor support. However, the role of donors was in of emergency economic recovery programs. the background: providing inputs and advice as needed, (Nunberg 1987, p. 96). but not providing intellectual leadership. Civil service reform is an art, not a science. Committed reformers Although this situation has been deteriorating for within the concerned government know best what they many years, there have recently been signs of a turn- need, and how to get there. The role of donors should be around in countries in transition toward more representa- mainly facilitation: identifying committed reformers (or tive, accountable government. Some professionals are potentially committed ones) at the highest level, and then being attracted back to their countries by the progress of empowering them to design and carry out needed changes. the democratic movement in their countries. For example, It must also be borne in mind that consensus-building many former South African exiles are returning because and strategic implementation in reforming countries has of the prospect of a more representative government, failures as well as successes along the way. Civil service even though that government still isn't a reality. In other reform touches on many sensitivities, and is thus a high-risk cases, Africans living overseas are being persuaded that enterprise. Donors and governments should not be afraid of there are better opportunities for them in their own coun- failure. If the basic preconditions are met, countries should tries rather than in European or North American coun- plunge ahead with the reforms they think they need. There tries, many of which presently are going through a reces- is no way of telling in advance whether they will succeed. sion. Some are not willing to return to the government Reformers need to be courageous, and "just do it." itself, but return to an African university, think tank, or Donors should assume a long-term commitment in consulting firm where their services are contractually their facilitation role, without any assurance of eventual available to the government. success. For example, the reforms described in Botswana Similar opportunities exist for better motivating top took place over more than twenty years. The only reason- professionals. Some are being motivated as the demo- ably certain prediction is that if well-conceived reform cratic movements in their countries gather momentum. programs are under way in many countries, some are In Eritrea, for example, top government officials receive bound to succeed. Like a mutual fund investing in high- food rations and basic housing, but no salary. Yet they are risk equities, many donor investments in civil service re- very highly motivated by the transition to democracy in form will yield unimpressive results, but a small number of their country. Others will be motivated to work for gov- winners will make the whole portfolio shine. ernment organizations that have a new focus on broadly based development, rather than the previous focus on Attract and motivate top professionals extracting resources from the masses to benefit small num- bers of the elite. Studies show that a great obstacle to reform is the poor Despite the inherent appeal of democratization to implementation capacity of African governments. This is some top professionals, there are structural problems that partly because in many countries, the civil service has are making it difficult for emerging democracies to offer difficulties attracting, motivating, and retaining the most competitive packages. Benin, for example, has recently capable employees, in all job groups, especially the top adopted a representative system of government as demo- professionals. cratic as any in Africa. Yet civil service reforms have had A pattern has developed over the past two decades in to focus initially on redressing the imbalances caused by Africa. As countries' public debt rose to high levels, gov- the previous marxist regime, such as the increase by more CIVIL SERVICE REFORM IN AFRICA 223 than five times in the size of the public service during the transportation, servants, health care, education, 1970s and 1980s, the recruitment of many with false babysitting, overtime, uniforms and fifteen types of allow- credentials, and the heavy burden of salaries on the bud- ances for police and prison personnel. In Tanzania direct get (75 percent of recurrent expenses in 1991). Because of monetary allowances constitute about 50 percent of the the importance of these steps, other measures to attract basic salary/wage in a few grades (SS.2, GS.10, RP.9, and and motivate officers with uncommon skills have not yet RP.8). The top 500 civil servants in the SS grades also been systematically addressed, except for some measures receive furnished government quarters with cutlery, trans- to attract competent women, such as improved maternity port, electricity, water and sewerage services, and use of leave and pension rights. telephone. If monetized, total fringe benefits to this group Cape Verde is another nation that has recently can be more than ten times the size of the basic monthly made a transition to democratic government. Although pay (Nyirabu and Mudzonga 1993). in a better financial position than Benin (personnel ex- Another dimension to the problem of attracting and penses were 51 percent of recurrent expenses in 1991), motivating top-quality staff is the need for civil services to real salaries declined by about 50 percent during the reflect the diversity of their populations. South Africa is a 1980s. Reforms being carried out between 1991 and 1996 typical case. Of 7,258 officials in senior positions in the will, if successful, help to attract and better motivate public service (including people employed by the depart- staff. They include selection of top managers based on ments and administrations as indicated in the Public Ser- personnel management skills, a policy to fill 50 percent vice Act, 1984), an estimated 96 percent are white (Fi- of all vacancies through internal competition (and 50 nance Week, August 22-28, 1991, pp. 21-22; Business percent through external competition), a new decom- Day, November 6, 1991, as cited in Mokgoro 1992).1 pressed salary scale, and separate scales for specialized Although 61 percent of South Africa's public employees areas such as health. are nonwhite (73 percent if the self-governing territories The importance of attracting and motivating high- and TBVC states are taken into account Ivan der Merwe quality staff transcends political ideology. For example, 1992])," most are in low-level jobs. Women of all races one of the critical success factors for East Asian economic face similar obstacles. Although 46 percent of public ser- dynamism has been meritocratic bureaucracies, helped by vants are female (van der Merwe 1992, p. 173), they hold the Confucian tradition of historically autocratic China less than 5 percent of senior positions (Mokgoro 1992). (ohnson 1987). African states such as Burkina Faso have Aside from being morally indefensible, this recognized the importance of fostering a meritocracy, at unrepresentation seriously undermines the legitimacy of least at the level of their statutes and procedures. Begin- the South African public administration, and thereby its ning at the time of Independence, officials trained at state effectiveness in delivering services. Progress to redress expense have been bonded for ten years, and offered this imbalance, without unduly expanding the size of an generous car and housing provisions as other motivating already large public sector, will be a crucial challenge factors. Since the mid- 1980s, retaining staff has not been determining the success of the transition to majority rule. a problem because of high unemployment. Yet during the Many argue that the key to attracting and motivating same period, motivation has remained a serious problem, high-quality professionals is competitive compensation. and is being addressed by revising pay systems so that they There is no question that in many African countries, infla- better recognize and reward merit, by restructuring orga- tion combined with rapid rises in public employment and nizations based on current responsibilities, and by basing stagnant or declining revenues have led to compensation promotions on merit and competence rather than politics. well below the minimum needed for the basic necessities of In the same vein, Mauritania recently set up a Commis- life in an urban center. Part of the problem here is that Afri- sion nationale des concours as an independent agency to can urban formal sector wages are on average more than carry out testing of civil servants. twice as high as in other sectors. Since government officials Other strategies for attracting and motivating top typically work in urban centers, their cost of living is tied to officials include increased salary compression (that is, in- the urban formal sector wage structure. African govern- creasing the wage gap between the highest and lowest ments have a much greater burden trying to pay such wages paid, for example, in Botswana, Lesotho and Zambia), than govemments in East Asia, where the urban formal sec- and "scarcity" or "retention" allowances for professionals tor premium is closer to 20 percent (Page and Petri 1993). with uncommon skills (for example, in Gambia, Lesotho, However, merely paying competitive compensation Tanzania, Zambia, and Zimbabwe). Because of political does not solve all motivational problems. For example, problems with raising low salaries, Tanzania offers thirty South Africa's Commission for Administration sets public allowances, which include, allowance for housing, fuel, service salaries between 5 and 15 percent below the mar- 224 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN ket price, since this is compensated for by security of tion from dockets into a computer. Norms of performance tenure and market-related pension benefits. These sala- were set by work study groups, and workers surpassing the ries have generally kept up with inflation, unlike those in norm received a bonus, normally 25 to 35 percent of many other countries throughout the continent. Yet de- monthly pay. The system failed on many counts. It en- spite these good salaries, government organizations are beset with public incompetence, gross corruption, and misappropriation of funds (Schroenn 1993). BOX 28.1 Civil service reform in Uganda Manage for results The Uganda civil service grew substantially dur- Africans, like citizens in other parts of the world, want ing the 1970s and 1980s, but was increasingly more services from their governments, without having to underfunded. During this period there was also pay more taxes. They are fed up with the poor perfor- loss, through disappearance and emigration, of mance of their governments, as evidenced by growing significant numbers of skilled personnel. The piles of garbage in urban centers, potholes on roads, de- imbalance of revenue and needed expenditures clining quality of health and education services, and cor- for both salaries and operations exacerbated a ruption. For example, the Nigerian government recently decline in morale and performance. postponed its plans to raise petrol prices from their ab- The Report of the Public Service Review surdly low level of US$.11 per gallon because of feared and Reorganization Commission, supported by unrest-thus violating an agreement with the Interna- UNDP/MDP, established a policy framework for tional Monetary Fund (IMF). The government had in- far-reaching reform of the civil service. Changes tended to channel the new funds to a new program to were recommended in structures, personnel and benefit the poor, but the citizens mistrusted that the funds financial management, and planning processes, would be used as intended (Economist 1993). as well as a shift to Results-Oriented-Manage- There are two issues here: efficiency (delivering a ment (ROM). The program includes substantial given result for the minimum cost) and effectiveness (de- reduction in the size of the civil service and a livering the result intended). Tunisia has ongoing efforts rationalized structure, aiming to improve perfor- in both areas. For example, a functional review was re- mance and yield savings that can be used for cently completed in the Office of Personnel of the Minis- incentive programs. The recommendations have try of Agriculture which identified all tasks, their fre- been cleared by the Cabinet in the form of a quency, and the length of time to complete each. Based white paper. on this, one-third of the staff were found redundant, and Guided by the white paper, Uganda has al- redeployed to regional offices. Based on this and other ready reduced the number of ministries to eigh- successful pilots, functional reviews will be carried out teen, and is undertaking ministerial reviews (four this year throughout the government. In another exer- have been completed so far) that will reduce cise, Tunisia has recently identified public services that payroll costs, allocate tasks more rationally, will be converted to commercial operation. The goal is to privatize appropriate functions, decentralize op- use competition with private contractors to stimulate gov- erational tasks to local govemments, and in- ernment operations to deliver higher-quality outputs, at creasingly focus on policy, planning, and moni- lower cost. Uganda (see box 28.1) and Zambia also are toring at the center. undertaking reforms aimed at improving results. Burkina The reviews are consultative, with open Faso has successfully used quality control circles in the communications between consultants and ma- national hospital, pension fund, and tax bureau (Dia istry leadership, foreshadowing the proposed ac- 1993). Zimbabwe's regime in the first decade of indepen- tion planning cycles and ROM. A group of con- dence achieved four results critical to political success: sultants meets with a review team of key remaining in office, handling social conflict, passing stabi- department heads within each ministry, in lization measures, and protecting the most vulnerable weekly workshops. They examine the particular groups (Lindenberg 1989). ministry's mandates (mission statements), objec- Although these and other initiatives are promising, tives (that if met would fulfill the mandates), countries need to proceed carefully. One case in South functions to achieve those objectives, perfor- Africa is instructive. In a provincial administration, a mance indicators, and working relationships. bonus scheme was applied to employees coding informa- CIVIL SERVICE REFORM IN AFRICA 225 couraged cheating, sloppy completion of tasks, and slack- nomic development. Botswana shows that a relatively ing off after the minimu*m work required to receive a large govemment can effectively promote economic de- bonus was completed. The scheme required employing velopment with equity if there are sufficient government additional supervisors. Employees resisted phasing out the revenues to cover the costs, and if measures are taken to scheme, since they came to regard bonuses as part of their ensure that high-quality staff are attracted to the public basic salary. The system has since been abolished in nearly service and that they are well-trained and motivated to all departments (Schroenn 1993). provide high-quality service delivery. Many structural adjustment program (SAPs) negoti- One way they do this is by reducing corruption. By ated with the World Bank and the IMF imply that Afri- some accounts the average unauthorized payment required can govemments are too large. Sometimes this is clearly to secure a large contract in a developing country in- true, such as the case of Egypt where the civil service has creased from about 5 percent at the start of the 1980s to 24 percent of all formal sector employees. 15 percent by the end of the decade. By contrast, both Yet in most other African nations, government em- Botswana and Tunisia have well-established, indepen- ployment is not overly large by world standards. The dent judicial systems, with fair prosecution of wrongdo- problem is that official receipts are insufficient to pay ing, including that by senior officials. Other African coun- competitive salaries to government employees, and even tries are moving in this direction, however slowly. Even so salary payments are major contributors to public defi- Nigeria, one of the worst offenders, recently set up a cits. Furthermore, because of recruitment and promotion Transparency Committee at the highest level to reduce practices based on criteria other than merit, the average corruption in that country. The recent launching of a new technical skills of officials are inadequate. intemational organization, Transparency International, Lessons to be gleaned from successful reformers on may give some support to African corruption fighters. It the question of size of the public sector are mixed. Chile will be looking for both private and public sector organi- cut its public service by nearly two-thirds, and yet ended zations to subscribe to a code of conduct, and then to up with a better record of service delivery, often through restrict for state contracts to companies that have signed new private or semiprivate service providers. Botswana the pledge (Holman 1993). and Tunisia, on the other hand, have steadily increased the size of their public service, but have held the line on Appendix A public service as a proportion of total employment. World Bank-supported reforms in Africa often try to The administrative reform debate: use civil service staff reductions to achieve fiscal savings, but comprehensive reform versus the results have been disappointing. Senegal, for example, agreed to lay off two employees for every new one hired. But management improvement by laying off mainly low level staff, and hiring high-level staff, the program increased the overall wage bill."2 The massive administrative reform effort undertaken in the In the case of Botswana, government, including cen- context of structural adjustment programs over the past tral administration and regional and local governments, decade has brought the issue of civil service effectiveness has greatly increased in size, from 15,000 employees in to the forefront of the management development debate."4 1971 to approximately 60,000 in 1989 (Marinakis 1992, It has forced both practitioners and scholars to reconsider p. 21). (An additional 10,000 employees worked for pub- many of their most cherished assumptions, such as their lic enterprises in 1989.) Despite the increase in size of trust in the ability of modemizing elites to use the public government, the total civil service wage bill has been held sector as the principal engine of development. It has also to reasonable levels, at 26 percent of actual government shifted attention from the creation and strengthening of in- recurrent revenue in 1990, in comparison with 41 percent dividual development organizations (institution building) for Kenya, 45 percent for Namibia, 51 percent for Tuni- to enhancing the political process of govemance and policy sia, 53 percent for Zambia, and 77 percent for Benin formulation, increasing the use of market mechanisms as (UNDP/MDP 1993, p. 85). Government employment as an instrument of development policy, and emphasizing the a percentage of total formal sector employment is compa- broader sociocultural environment as a key determinant of rable to that in Scandinavian countries, which have the the sustainability of development efforts. highest rates of govemment employment among industri- Most experts agree that the centralized, hierarchical, alized countries.'3 bureaucratic administrative model has failed in much of This calls into question part of current conventional the developing world (Esman 1988). Proponents of new wisdom: that big government is always a drag on eco- approaches to institutional development argue that 226 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN well-intended efforts to improve public organizations have less threatening politically than overt examination of ex- had perverse effects on incentives, encouraging isting strategies (Nunberg and Nellis 1990). The same rent-seeking, freeloading, and other unexpected outcomes can be said of training, which is always welcomed by (Goldsmith 1992). They advocate decentralized models of government officials. Unless strategic concerns are ad- management development that make use of alternative dressed, however, the impact of these politically neutral arrangements for the production of public goods and the measures is bound to be short-lived, as was the case in delivery of development services, as well as for cost-recov- Liberia where extensive training efforts were wasted be- ery and maintenance (for example, market-oriented public cause of the persistent patrimonial administrative system services industries and modern or "traditional" local ad- (Werlin 1992). ministration unit; Wunsch 1991). Others argue that Thus, even if there is something to be said in favor of grass-root community organizations are best able to mobi- demand-induced management changes and a cautious lize the support of the poor (Salsman 1991). approach to comprehensive reform of governmentwide Most scholars and practitioners would agree, how- systems, it is clear that administrative reform requires a ever, that the development process requires strong, cen- strategic management approach, such as is being pursued trally directed, hierarchical bureaucracies (at least for under UNDP's Management Development Programme. certain functions), and some (Werlin 1992) would even It also requires, of course, a wide perception that existing argue that decentralization cannot work without strong problems cannot be solved through an incremental ap- central control. They also would "regard the career civil proach, and willingness on the part of senior politicians to service concept as a non-debatable necessity for any commit some of their political capital to systemwide re- state whose leaders seriously aspire to promote social and forms (Esman 1991). economic development" (Esman 1991, p. 43), and agree UNDP also advocates an approach that combines that "traditional, mainly centralized civil service man- comprehensive and partial reform strategies. One report agement models provide the best starting point for many makes the case that, in order to be an effective vehicle for of the least developed country administrations" (Nun- capacity-building, technical cooperation requires a "mini- berg 1992, p. 38). mally congenial administrative environment and moti- With respect to a strategy for civil service reform, vated, stable public employees." It thus conclude that some stress the need for a top-down, politically driven civil service reform should be a principal focus of techni- reform process. Thus, Werlin (1992), citing the example cal cooperation (UNDP 1993b). of countries such as Korea, argues that reforming central At the same time, the report does not expect sub- bureaucracies is primarily a problem of political will and stantial improvements in the public sector work environ- government capacity to effectively use persuasive and ment in the medium term. Therefore, it calls on donors to manipulative (rather than coercive and corrupting) forms follow a parallel track of assisting in the continued of power. downsizing of government, and in building capacity out- Esman, on the other hand, advocates a bottom up side of the public sector. It also advocates alternative approach to administrative reform as more effective than administrative reform strategies based on more partial the comprehensive, systemwide management develop- approaches, such as creating reform islands or enclaves ment and reform strategies which, he claims, disrupt fa- (UNDP 1993b). The creation of some sort of senior ex- miliar routines and threaten established centers of power ecutive service might be part of a reform island strategy. without demonstrating convincingly their efficacity. He As a matter of fact, the comprehensive and partial prescribes, instead, incremental, confidence-building mea- reform strategies advocated above should complement sures, such as training, and new technologies (for ex- each other. What is needed is an interactive process be- ample, microcomputers) introduced with staff participa- tween comprehensive civil service reform, on the one tion and focused at the level of individual programs or hand, and the building or strengthening of management organizations (Esman 1991). capacity in specific ministries and agencies, on the other. The World Bank argues that the choice of a com- This management capacity-building is needed both at the prehensive or incremental approach depends on the par- level of the agency or agencies responsible for the man- ticular conditions existing in a country, the level of ini- agement and monitoring of the civil service reform pro- tial resistance to reform, and the reform process itself cess, and at the level of individual ministries responsible (Nunberg and Nellis 1990). Changes in administrative for carrying out the new rules and procedures. technology (whether incremental or comprehensive) At the level of individual ministries, management may crowd out strategic policy concerns, because they capacity-building should take the form of creating or are perceived to be of more immediate usefulness and as strengthening management units that not only can moni- CIVIL SERVICE REFORM IN AFRICA 227 tor and assist the civil service reform process but also are 10. Statistics on the private sector are roughly comparable. able to promote and help carry out improvements in orga- According to a 1992 survey of seventy-one companies, more nizational structure and processes, program planning and than 98 percent of all senior managers were white, and 91 management, budgeting and financial management, man- percent of middle managers ("Little Time to Level the Playing agement information systems, and so on, within the exist- Fields," The Star, March 31, 1993, p. 23). , ' ' ~~~~~~~~~~~~~~11. Figures are for 1990. ing administrative framework. The introduction of sus-I.Fiuearfo190 taingble administratvem fra mework.Thentrod n of squies- 12. Information is derived from a slide presentation by tainable management improvements, of course, requires Mamadou Dia at the World Bank, July 9, 1993. not only the support of the political leadership (at the 13. Botswana had 14 percent of its formal sector employ. individual minister's level) but also the cooperation of ment in govemment (1985), in comparison with 16 percent for senior managers and, eventually, of the rank and file. This Sweden, 15 percent for Denmark, and 13 percent for Norway cooperation can be secured only through a participatory (1988). Other developing countries with similar rates in 1985 "process consulting" approach to technical assistance, such are Argentina (14 percent) and Mauritius (14 percent) as that used by MDP missions. (Marinakis 1992). 14. The appendix was written by consultants Patrick Notes Demongeot and Souleymame Balde. 1. This chapter was written with help from Sonia Bujas References (consultant), Magid Osman, and Gus Edgren for the Public Administration Working Group of the Special Programme for Botswana, Department of Public Service Management. 1987. Africa (SPA). The views expressed are those of the author. Training Plan for the Botswana Civil Service. 2. Compare with SIDA, Making Government Work: Guide- Carter Center. 1989. Perestroika with Glasnost in Africa. Report lines and Framework for SIDA Support to the Development of Public of the Inaugural Seminar of the Governance in Africa Administration, Stockholm, May 1991. Program, February, Atlanta, Ga. 3. This phenomenon is not restricted to Africa. For ex- Charlton, Roger. 1990. "Exploring the Byways of African Politi- ample, despite market-oriented reforms in the United States cal Corruption: Botswana and Deviant Case Analysis." during the 1980s, the size of the federal civil service increased 9 Corruption and Reform 5:1-27. percent during the period, and the amount of spending reached Dia, Mamadou. 1993. "Position Paper for Improving Civil Ser- historic heights. vice Efficiency in Sub-Saharan Africa." World Bank, Af- 4. The importance of this theme is widely understood, rica Technical Department, Washington, D.C. beyond the five cases discussed here. For example, a strong Economic Development Institute, Office of the Council of Min- consensus emerged on this point at a high-level workshop last isters, and the United Nations Development Programme year in Viet Nam. 1992. "Senior Policy Seminar on the Economy of Viet 5. The design and implementation of the Tribal Grazing Nam," Summary of proceedings of the seminar, April 20- Land Policy is a good example. See Roe 1993. May 1, 1992, Viet Nam. 6. The UN system also had a role in supporting reform in Economist. 1992. "The Faltering State." In "When China Wakes: the other successful cases. For example, CHI/77/001 provided A Survey of China," November 28. experts in municipal administration and finance, systems for . 1993. "Nothing to Lose but Your Chains: Africa's staff development and training evaluation, and advice on re- Anti-Market Grumbles," May 1. structuring central government agencies in response to the Chil- Esman, Milton J. 1988. "The Maturing of Development Admin- ean government's decentralization policy. MAL/77/012 helped istration." PublicAdministrationand Development 8:128, 130. the Malaysian Ministry of Public Enterprises adopt a perfor- . 1991. Management Dimensions of Development. Per- mance evaluation system. Two international management spe- spectives and Strategies. West Hartford, Conn.: Kumarian cialists were funded for two years, along with nine months of Press, Inc. funding for specialized consultants and twelve months of short- Goldsmith, Arthur A. 1992. "Institutions and Planned Socio- duration overseas training. economic Change: Four Approaches." Public Administra- 7. Having a coherent solution (different for each country) tion Review (November/December):595. to each key development function is equally important for suc- Holm, John. 1992. Personal communication, March 9. cess in economic policy. See Page and Petri 1993. Holm, John D., and Patrick P. Molutsi. 1990. "State-Society 8. Tunisia was also one of the leading countries in improv- Relations in Botswana: Beginning Liberalization." ing its human development rating between 1970 and 1990. (See Holman, Michael. 1993. "New Group Targets the Roots of Cor- the UNDP Human Development Report 1993.) ruption." Financial Times, May 5. 9. For more on strategic processes for implementing policy Johnson, Chalmers. 1987. "Political Institutions and Economic reforms, see White 1990. On the importance of clarifying pur- Performance: The Government-Business Relationship in pose and involving multiple leaders, see Lipnack and Stamps, Japan, South Korea, and Taiwan." In Frederic C. Deyo, 1993, pp. 336-45. ed., The Political Economy of the New Asian Industrialism. 228 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Ithaca, N.Y.: Cornell University Press. (Cited in Page and Roe, Emery M. 1993. "Public Service, Rural Development and Petri 1993.) Careers in Public Management: A Case Study of Expatriate Klirgaard, Robert. 1988. Controlling Corruption. Berkeley, Calif.: Advising and African Land Reform." World Development 21 University of California Press. (3):349-65. Leonard, David. 1989. The Secrets of Successful African Gover- Salsman, Lawrence. 1991. "Reducing Poverty." Public Admmnis- nance. Berkeley, Calif.: University of California Press. traEion and Development 11 :295-302. Lindenberg, Mark. 1989. "Making Economic Adjustment Work." Schmitter, Philippe C., and Terry Lynn Karl. 1991. "Exploring Policy Sciences 22:359-94. Meanings of Democracy to Provide Guidelines for Policy," Lipnack, Jessica, and Jeffrey Stamps. 1993. The TeamNet Factor. Manuscript. Political Science Department, Stanford Uni- Essex Junction, Vt.: Oliver Wight. versity, Stanford, Calif. Marinakis, Andres E. 1992. "Public Sector Employment in De- Schroenn, Jessica. 1993. "The South African Public Service: veloping Countries: An Overview of Past and Present Personnel Issues, Incentives and Efficiency." Manuscript, Trends." Occasional Paper 3. International Labour Office, University of Natal at Pietermaritzburg, South Africa. Geneva. Tanzania, Civil Service Department. 1993. "Tanzania Civil Ser- Mokgoro, T.J. 1992. "Human Resource Planning for the Public vice Reform Program: Implementation Framework and Sector: Some Policy Proposals for the Transition." Paper Action Plan." Dar es Salaam. prepared for the Southern African Political Economy Se- UNDP (United Nations Development Programme). 1992. Hu- ries Conference, Capetown, 1992. man Development Report 1992, Technical Note 5. New York. Nunberg, Barbara. 1987. "Public Sector Pay and Employment . 1993a. "Performance Improvement in the Indone- Policy Issues in Bank Lending: An Interim Review of sian Public Service." Draft project document. Jakarta. Experience." (Draft report.) PRE Working Paper. World . 1993b. Rethinking Technical Cooperation. New York. Bank, Washington, D.C. (Reprinted in Robert Klitgaard, . 1993c. Workshop on African Management Develop- Adjusting to Reality: Beyond "State versus Market" in Eco- ment and Innovation, Maputo. Report of the workshop. New nomic Development, San Francisco: ICS Press, 1991, p. York. 96.) van der Merwe, P.J. 1992. "The Handling of Personnel Interests = -. 1992. "Managing the Civil Service: What LDCs Can in a Changing Organisational Structure." In Uitdagings in Leam from Developed Country Reforms." PRE Working Openbare Adminmstrasie en die Beroepslewe. Pretoria: Kantoor Paper. World Bank, Washington, D.C. van die Kommissie vir Administrasie. Nunberg, Barbara, and John Nellis. 1990. "Civil Service Reform Werlin, Herbert. 1992. "Linking Decentralization and Central- and the World Bank." PRE Working Paper. World Bank, ization: A Critique of the New Development Administra- Washington, D.C. tion." Public Administration and Development 2 (Octo- Nyirabu, Christopher Mbote, and Lillian E. Mudzonga. 1993. ber):225, 233. "How to Attract, Motivate and Retain the Best Civil Ser- White, Louise G. 1990. Implementing Policy Reforms in LDCs. vants." New York: UNDPJMDP Working Paper. London: Lynne Rienner. Page, John, and Peter Petri. 1993. "Productivity Change and Wolf, Martin. 1991. "Paths to Progress." Fznancial Times, No- Strategic Growth Policy in the Asian Miracle." Unpub- vember 15. lished manuscript. Wunsch, James S. 1991. "Institutional Analysis and Decentrali- Raphaeli, N., J. Roumani, and A. C. MacKellar. 1984. Public zation: Developing an Analytical Framework for Effective Sector Management in Botswana: Lessons in Pragmatism. Third World Administrative Reform." Public Administra- World Bank Working Paper 709. Washington, D.C. tion and Development 2:443-470. CIVIL SERVICE REFORM IN AFRICA 229 Civil Service in Mexico Mauricio Camps and Carlos Noriega Curtis In light of the profound changes under way in global and monetary adjustments. The massive adjustments un- trade-including the creation of regional trade blocs- dertaken in public finance have moved the country from Mexico has moved to modernize its economy. The starting a deficit of almost 17 percent of GDP in 1982 to a surplus point was the early 1980s, when the country was immersed of 0.5 percent of GDP in 1992-the first surplus in fifty in a severe economic crisis and burdened by extensive gov- years. (These figures exclude revenues from the divesti- ernment involvement in the economy. In the past decade, ture process, discussed below.) the government has reviewed the fundamentals-reassess- The fiscal achievements were based on three pillars. ing the role of the state-and begun to implement struc- First, prices and fees for public goods were set at their mar- tural reforms. The road taken has not been easy and has ket-clearing levels. Second, central government spending demanded the commitment of all sectors of society. was carefully managed, keeping down bureaucratic costs This chapter sketches some of the major changes and and reorienting priorities toward the most pressing social comments on a broader scale on how the global changes needs. Third, the state began divestiture of the parastatal affect the public sector labor force. sector. In addition, renegotiation of external debt and re- duction in domestic debt-by using revenues from dives- The economic environment, titure-have enabled the government to cut total public debt from 62.4 percent of GDP in 1988 to 24.9 percent of 1982-92 GDP in 1992. This figure is substantially lower than the 1991 average-59 percent-for countries of the OECD. The acute crisis Mexico faced in 1982 called for macro- As an outgrowth of improved public finance, in the economic improvements that would stabilize the past decade the financial sector has moved toward liberal- economy-with the elimination of growth-inhibiting dis- ization, with interest rates freed to respond more to mar- tortions. So, the centerpiece of the economic strategy was ket conditions and capitalization criteria set in line with to find nonrecessive control of inflation. And, indeed, in intemational standards. The growing autonomy of mon- the past decade, there have been important achievements. etary policy has helped in the abatement of inflation, Annual inflation, the most unfair of taxes, dropped from assuring that credit growth is orderly. But the deep adjust- almost 200 percent in 1987 to 11.9 percent in 1992. In ments in fiscal and monetary policy, although indispens- 1993, inflation is expected to fall to 7 percent. These in- able for economic stabilization, were not enough to en- flationary levels are the lowest in the past two decades. sure the reduction of inflation, given a context of strong Moreover, this reduction in inflation has been achieved indexation. The economy was burdened with structural while maintaining economic growth. Real GDP grew 1.2 segmentation and underdevelopment that inhibited effi- percent in 1988, 3.5 percent in 1989, 4.5 percent in 1990, cient resource allocation. 3.5 percent in 1991, and 2.6 percent in 1992. It is expected To reach a consensus on disindexation of prices and to grow about 2.7 percent in 1993. These growth rates wages-and to fairly distribute the adjustment costs consistently have exceeded average population growth. among labor, farming, and business-the president of the The healthy transition from extreme instability to- republic and the representatives of the three sectors ward inflation rates more in line with those of Mexico's signed the Pact for Economic Solidarity on December trading partners has been the result mainly of deep fiscal 1987. This consensus-building effort has been continued 230 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN under the present administration as the Pact for Stability In Mexico, public enterprises were born out of diverse and Economic Growth. circumstances, among them the government intent to In the initial stages, strong corrections were made to control, promote, or organize certain functions. So, to public sector prices and tariffs, while the other sectors stabilize the Mexican economic system, the state created compromised, granting previously negotiated moderate the central bank (Banco de Mexico) in 1925. Other en- price and salary increases. In the first, difficult, phases of terprises were born because of state decisions to acquire the pact, as confidence in the economic program was the responsibility to exploit strategic natural resources- slowly building among the sectors, the time span between to guarantee national sovereignty and procure public ser- wage and price increases began to widen-from three to vices of national interest. The outstanding example of six months initially to just over a year. As the macroeco- this was the nationalization of the oil industry, giving nomic and structural reforms gain consistency and as birth to an important decentralized public conglomerate inflationary levels moderate, microeconomic changes also called PEMEX (1938). In addition, for many years, the are needed. Reflecting this need, in October 1992 the state created entities to channel resources and subsidies pact was modified-becoming the Pact for Stability, Com- to underdeveloped economic sectors. Between the 1950s petitiveness, and Employment-to emphasize productiv- and the 1960s, as the government increased its involve- ity, quality, and competitiveness by private enterprises ment in market regulation and focused on providing so- and labor unions. But the transformation of stability into cial needs, enterprises like the National Company of Popu- sustained growth and development still requires deep in- lar Consumption (CONASUPO), the Mexican Institute stitutional changes in the public and private sector. of Social Security (IMSS), and the Institute of Security and Social Services for the Public Sector Workers Reform of public administration (ISSSTE) were born. Last, in the second half of the l970s, to prevent industry shutdowns and subsequent unemploy- ment the government took over some private sector en- Mexico's economic adjustment requires substantial terprises. The addition of new firms to the parastatal changes in public administration at the federal, state, and sector was no longer part of an industrial strategy, but a local levels. Changes in the structure of the public sector massive rescue operation. have had three goals. The first is to enhance efficiency- optimizing the structures and systems of administration, Developtnent of a consensus for privatization. From the evaluation, and personnel management-in order to bet- 1920s to the first half of the 1980s , government policies ter use the state's resources. The second goal is to deregu- and actions evolved and flourished in a context where late the operation of public sector institutions. The third increased state involvement was seen as synonymous with is to make available motivational and training programs more justice. By the end of 1982, the government owned to ensure that public sector personnel are oriented toward 1,155 entities, including all commercial banks, and em- service and that they can perform their tasks. ployed almost 1 million people, equivalent to 5 percent of These broad guidelines can be discussed as two closely total employment. With hindsight, it is clear that some of related aspects. On one hand, some reforms are imple- the decisions were not the right ones, and a bigger state is mented to redefine the role of the state in social organiza- not necessarily more capable. In Mexico, more state meant tion. The divestiture of public enterprises is important, in many instances a diminished ability to respond to press- not only because of its impact on public finances, but also ing social needs, leading to a weaker state. So, although for its contribution to the rationalization of the number of the productive activity of the public sector increased, the public sector employees. This restructuring allows cen- state's ability to address problems such as health, invest- tralized public institutions to respond more efficiently to ment in agriculture, nutrition, housing, environment, and social demands. justice was fast declining. Thus, it became of paramount On the other hand, there are also sizable transforma- importance to increase citizen involvement and improve tions in the management and development of public per- state provision of social services-to realize Mexico's sonnel-involving the view of role civil servants should strength through unity, progress, and social justice. As a play in the economy's modernization. result, in 1983 the government began the sale, liquida- tion, merger, and transfer of public sector entities, an Divestiture effort that has been continued with an special intensity in the present administration. Public enterprises and their role can be seen as a reflec- The entire privatization strategy has been based on tion and a reaction to a country's historical development. the view that divestiture does not mean disappearance of CIVIL SERVICE IN MEXICO 231 the state, but rather a strengthening of capacity to fulfill were only 8,000 shareholders before the 1982 nationaliza- its social mandate. Within this framework, divestiture has tion, over 130,000 stockholders now have access to the proceeded with prudence and common sense-seeking to banking sector. The privatization of Mexico's eighteen minimize risks and mistakes that could produce high eco- commercial banks has raised almost $12 billion for the nomic and social costs. The rules for privatization were government, which still holds stock in some banks, total- carefully designed to ensure complete transparency of the ing 8.88 percent of the capital of the commercial banking process and establishment of a stronger, more competitive system. This percentage is to be sold later, as market economy. All sales have been through public offerings, conditions allow. keeping all sectors of society fully informed of the devel- opments, through major publicity campaigns that have Benefits of privatization. On the whole, divestiture has used television and newspapers. allowed a reduction in the public sector parastatal enti- ties, from the 1,155 operating in 1982 to 214 now. Total The privatization of telephone and banking services. Al- revenues from sales, between December 1982 and De- though each privatization has unique features, two ex- cember 1992, amounted to $21.3 billion. Because this amples can help to illustrate the complex range of politi- income is a one-time benefit the govemment has had to cal and social considerations-the recent sale of the handle the proceeds prudently-to use them to obtain national telephone company (TELMEX) and of the com- permanent benefit for public finances. So, in 1990, with mercial banks that were nationalized in 1982. Because of the proceeds of the first placement of TELMEX shares, the strategic importance of TELMEX, its sale involved a the government created a contingency fund, established careful and complex financial strategy. The goals were to to face adverse external conditions, such as the drop in ensure a successful operation, to protect worker rights, intemational oil prices anticipated as a result of the Per- and to ensure that control would remain in Mexican sian Gulf War. Once the war was over, the government investors' hands. The government contemplated a com- decided to channel a sizable part of the fund to reduce prehensive restructuring that would include fiscal reform, the public debt-and thus free up future spending for a new labor contract, debt renegotiation, and a new fare education, health, and other basic infrastructure. As a structure. This strategy led to a privatization on very consequence of divestiture, the participation of state- favorable terms. On the regulatory side, the new company owned enterprises in total production has declined from is obliged to comply with a franchise agreement that im- nearly 25 percent of GDP in 1983 to 14.1 percent of posed minimum targets for research and development GDP in 1990. In terms of employment, almost 250,000 and investment. Installed capacity had to grow at a rate of public sector employees have been transferred to the pri- 16 percent in the first year and 20 percent in the following vate sector. four years, with explicit requirements for geographical distribution and type of service. The agreement also set Reorganization in the federal sector quality standards, such as the complete digitalization of the network. Coupled with the profound transformation of the Because the operations of commercial banks have a parastatal sector, in recent years there have also been significant effect on macroeconomic stability and long- important efforts to rationalize and simplify the institu- term growth, the divestiture had to proceed prudently. tional structures of the centralized public sector. The selection of new owners for these financial institu- In 1992, the Ministry of Budget and Programming tions was done in two stages, first considering the serious- was merged with the Ministry of Finance. This important ness, experience, and moral character of the prospective restructuring meant a significant reduction of the bureau- buyers and then taking into account the highest bids. cratic personnel in the central sector. The merger also Another important part of the divestiture was the oppor- meant a rationalizing and strengthening of the structure tunity to choose competitive structure that should be of the Ministry of Finance-with a tighter focus on coor- established, particularly the structure of oversight con- dination of income and spending policies and in monitor- trols. In most cases, the oversight controls have been ing the federal budget. established after privatization by a responsible and clearly At the same time, the Ministry of Urban Develop- identified group of shareholders combined with a large ment and Ecology was replaced by the Ministry of Social base of small investors. In addition to strengthening the Development-its main mandates environmental protec- capital base of the institution, having a large number of tion, the promotion of urban and regional development, investors broadens the involvement of all sectors of soci- and conduct of the National Solidarity Program. This ety within this important financial branch. Although there important govemmental program is an excellent example 232 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN of how the state has changed its approach-to better nization and operation of the civil service was signed. fulfill its mandate. Before the modemization efforts of This agreement defined the civil service, including within the last decade, state decisionmaking was centralized. it all employees working for the executive branch, except Under the solidarity program, social groups are actively the heads of the ministries and all first-level employees. and responsibly involved in the formulation of strategies, This agreement set the rules and guidelines for the rights decisionmaking for the construction of infrastructure and responsibilities of civil service personnel on such mat- projects, and administration of infrastructure resources. ters as holidays, vacation periods, promotions, and awards. This program also focuses on the needs of people living This first effort also authorized public sector workers in extreme poverty. In the last three years, more than 7.5 to form associations to defend their rights, but prohibited million Mexicans have begun to be covered by basic the use of strikes or labor shutdowns. The agreement, health care programs, 11 million have benefited from the which was in effect for only eight months, lapsed before it introduction of drinking water and sewerage systems in was widely followed. their communities, and more than 13 million now have It was not until 1938, through the issuance of the electric energy. Public Administration Employees Statute, that a more The Ministry of Public Education now coordinates complete legal framework was set for the working rela- the National Council of Science and Technology. This tionship between the state and its workers. The statute change has allowed the government to incorporate under had many outstanding features, including the distinction one sector the attention and promotion of cultural, edu- between basified and nonbasified workers. The first group cational, and research policies, combining efforts that may be considered as members of a civil service and otherwise were dispersed. The govemment can respond covered by the benefits and responsibilities in the stat- in a more qualified fashion to the continuing need for ute. The statute also itemized the obligation of the state improvements in education. to establish, in each bureaucratic unit of the centralized Other ministries that have undergone important public sector, promotional and upgrading systems based structural changes during this administration are the Min- on job-related skills, experience, years worked in the in- istry of Agriculture and the Ministry of Commerce and stitution, and overall performance. The statute also es- Industrial Promotion. The government has also created tablished workers' rights to join a union, and created a the National Commission of Human Rights, which is union federation, to which every union in the centralized responsible for the safekeeping of universal human rights public sector had to adhere. in Mexican territory. The next important step was the creation, in 1960, of chapter "B" of article 123 of the constitution-through Reforms of public personnel which the rights of public administration workers were elevated to constitutional rank. This way, the working management relationship between the state and its labor force was clearly delineated, stating the difference between the The deep transformations of centralized and parastatal bonds between the government and its employees and the entities of Mexico's public administration have had im- private sector and its labor force. Chapter B establishes portant effects-quantitative and qualitative-on the the framework of bureaucratic rights to workday time public sector labor force. The changes have affected the limits, salaries, seniority- and skill-based promotions, the career of a civil service in Mexico through the legal re- formation of unions, social security systems, and mecha- gime that regulates the working relationship between the nisms for settlement of work-related disputes. Subse- state and its employees; the bureaucracy's size and distri- quently, chapter B was regulated through issuance of the bution; and reforms to the public personnel management Public Administration Employees Federal Law. It was not systems. until 1972 that further additions were made to chapter B, establishing the public sector workers' rights to obtain The legal framework housing using preferential credit and the state's obligation to contribute to a National Housing Fund, created to The first major effort in postrevolutionary Mexico to for- assure the financing. Another important legislative action mally establish a civil service was the 1931 Federal Law of was the issuance of the Incentives, Promotions, and Civil Jobs and Employment. The law specified that the working Rewards Law, created to reward worthy public sector relationship between the state and its employees would be employees for outstanding job performance. ruled by subsequent civil service laws. In accordance with The key to the development of the social security this, in 1934 a presidential agreement governing the orga- system for the public sector labor force was the creation, CIVIL SERVICE IN MEXICO 233 in 1959, of the Social Security and Services Institute for rity, and justice. Under these policies, from 1988 to 1992, public sector employees. The institute gives full support 60,410 job positions in nonpriority sectors were cut-4.3 to the protection of rights and services for government percent of the federal labor force. The latest figures show workers. 823,889 workers employed in the centralized public sec- In Mexico, the state grants its workers, as constitu- tor. This sizable downsizing has saved public sector spend- tional rights, all the guarantees that make a modern pub- ing. It also enables the government to establish compre- lic personnel management system. Still, the system lacked hensive personnel management programs that can a regulatory mechanism to protect against abuses, thus enhance the efficiency of the remaining employees. hindering at times the constitutional mandate. For this, and to assure the permanent character of the civil service, Reforms to the public personnel management systems the Interministerial Commission on Civil Service was cre- ated by presidential agreement in 1983. This commission A qualified, service-oriented, and committed public sec- consists of the general comptroller and the heads of the tor labor force is key to the success of Mexico's structural ministries of the interior, finance, public education, labor, change. Without competitive governmental workers, able and social procurement. The general secretary of the Fed- and willing to contribute their best skills and efforts to the eration of Unions of Public Sector Employees also partici- solution of complex and deeply rooted problems, modem- pates in this group. ization efforts cannot be assured of success. Knowing this, This legal body is intended to foster an environ- the current administration has consistently worked to ment conducive to better performance by bureaucracy, improve all aspects of the civil service system, including thus strengthening the state's effectiveness. Specifically, recruiting, training, on-the-job performance assessment, the commission's two main responsibilities are to pro- compensation and promotion programs, disability, and mote programs in the centralized public administration retirement. that establish standardized public personnel manage- The government has given particular emphasis to ment systems for a career civil service and to advise, as training, considering it an invaluable tool for transform- necessary, on a federal level, about correspondence be- ing the labor force. The importance of training for gov- tween the rules, systems, and procedures of the career emient workers is established in the National Develop- civil service. ment Plan for 1989 to 1994, which says training should be conceived as a global modemization strategy. This is fur- The bureaucracy ther stressed in the National Program for Training and Productivity, which defines what the public sector should A key objective of the current administration is to accom- do to guarantee the proper institutional correspondence plish more with fewer, but better-paid, employees. In this and continuity of training programs. This way, beginning spirit, ftom 1988 to 1992 important progress has been with the presidential term of 1988, the government issued attained toward streamlining and downsizing the public General Guidelines for Training Actions for the Public sector labor force. At the beginning of 1988, 1,206,006 Sector Labor Force, focusing on detecting and pinpoint- public sector employees worked in the centralized public ing the global needs for training actions in the public administration. Distribution of the labor force was also of sector. This set of rules was complemented with the issu- interest; while the Ministry of Public Education in 1988 ance of the Specific Action Guidelines for Public Sector had 793,058 employees-62.9 percent of the total cen- Employees Training. These two normative bodies empha- tralized public sector labor force-the Ministry of Tour- size, nationally as well as institutionally, the importance ism had only 3,117 workers (0.2 percent). of implementing on-the-job and for-the-job training strat- A first step to reduce the excessive levels of public egies: the first strategy is aimed at enhancing the skills employment was an austerity agreement, signed in Janu- needed by a worker to perform in his or her current ary 1988. It provided, among other things, for the reduc- position; the second focuses on training that will prepare tion of 13,000 executive positions and the more effective the employee for promotion to higher positions, by pro- use of human and material resources. A voluntary retire- viding the knowledge needed when the opportunity arises. ment program was also put into effect, reducing the public Another useful strategy has been the establishment work force by another 50,000 employees. And to ensure a of "intemal training instructors," employees who have fair and effective distribution of the public sector labor successfully completed a training program and can in- force, the assignment of job positions is now done by struct other workers, thus creating a multiplying effect, sectors, giving priority to the sectors of greatest impor- contributing to a reduced cost per beneficiary of these tance to society, such as education, health, national secu- sometimes-expensive training programs while upgrading 234 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN the knowledge and skills of coworkers. These steps have Services Institute for Public Sector Employees-the Sav- increased the quantity and quality of the public sector ings for Retirement System for government workers. Fund- training in this administration. By the end of this admin- ing for this system is on deposit in banking institutions istration a complete set of laws on training is to be inte- and provided by the public sector institutions and entities grated, conferring permanence on the National Training on behalf of employees-with the deposits equivalent to a System for the public sector labor force. percentage of each worker's salary. This retirement sys- To maintain competitive salary levels-and thus con- tem allows the workers to take out loans in the case of tinuously stimulate enhanced job performance-the gov- temporary disability or unemployment. ernment has established comprehensive wage tabulators. Human resources management in the public sector These are based on the responsibilities and skills required poses all the challenges found in the private sector-plus for each position in the public sector, in an attempt to special challenges presented by the nature of the services guarantee governmentwide equity in salary setting. These rendered to the community and by the political sphere in strategies are complemented with fringe benefit packages. which public sector institutions must operate. Both chal- A permanent source of concern and attention for the lenges must be faced squarely in the design and reform of government is to guarantee the well-being of a worker's the institutional structure-if Mexico's modernization ef- family in case of a sudden death or work disability. Acting fort is to succeed. Achieving the state reforms described on an express proposal of the Interministerial Commission above, combined with refomis to public sector personnel on Civil Service, the executive branch issued an agree- management systems, is not an end in itself, hut a way to ment expanding the coverage of life insurance policies for strengthen the state and its capacity to effectively re- public sector employees to completely cover total disability spond to pressing social needs. and some cases of partial disability. Premiums for this in- This transformation requires the deep commitment of surance are paid by the public sector institutions and enti- public sector employees-which is why it is important to ties and the benefit amount is pegged to the worker's sal- assure a working environment conducive to the modern- ary, thus avoiding real depreciation. In addition, workers ization and improved efficiency of the public sector labor who add minimal contributions to the premium paid by force. The path to these changes is not quick and easy, but the government can obtain up to three times the benefit. there is the conviction we are going in the right direction. To provide for retirement, the Interministerial Com- With the consensus and cooperation of the public and mission on Civil Service promoted, through the executive private sectors, Mexican society is preparing to success- branch, a law to create-through the Social Security and fully face the challenges of a competitive modern world. CIVIL SERVICE IN MEXICO 235 The National School for Public Administration: An Experiment in Forming Management Teams Gileno Femnandez Marcelino Brazil's administrative reform can be divided into three became an instrument of presidential control of the fed- periods. eral administration. DASP, which focused first on the personnel system, The first began during the thirties after the tried with some success to institute a merit system in Vargas Revolution with the implementation of Brazil. Nonetheless, at the beginning of the democratiza- the classic model of administration, thus named tion process in 1945, the first supernumeraries were ap- for consolidating ... the Brazilian public ser- pointed to the civil service. This marked the beginning of vice's administrative practices, based on prin- the 104 special job registers, which remained in effect ciples and theories of such authors such as Tay- until 1985 and deviated significantly from the model of a lor, Fayol, and Weber. The second, from 1964 rationalized personnel administration established by to 1985, was conducted during the military re- DASP. Thus, the reform, instituted during a political gime, when the model of administration for devel- dictatorship, the New State, was the servant of an auto- opment was directed essentially to state inter- cratic system. vention in the economic and social fabric of With the end of the New State, administrative reform the country. The third period, which began suffered a period of stagnation, gaining new impetus during with the political transition in 1985 and the the 1950s when a plan for national development, the so- accession of President Sarney's civilian govern- called Plan of Aims (Plano de Metas) was fostered by the ment, continued with the administrative reform Kubitscheck government. The idea grew out of an increas- of the Collor government and is not yet con- ing awareness of the inefficiency in state administration. cluded. (Marcelino 1988) After 1964, when the authoritarian, military regime was established, the classic model of administration gave In the first period, from 1937 to 1945, an effort was way to a model of administration for development, which was made to restructure the government apparatus, and par- mainly an instrument for the expansion of the Brazilian ticularly, to simplify administrative systems and budget interventionist state. This model was characterized by an activities to increase efficiency in the federal public ser- expanded network of indirect (decentralized) administra- vice (according to the Weberian model). Emphasis was tive agencies aimed at furthering the aims of develop- placed on reforming the means of govemment-that is, ment, thus avoiding clogging the direct (centralized) ad- administrative activities-rather than the ends-substan- ministrative agencies. tive activities (Warlich 1974). The reformation was This strategy caused a split in the state administra- broadly based, covering the administration of personnel, tion. The indirect administration, although functional in resources and the budget, structural revision, and ratio- some sectors, generally proved unyielding to the political nalization of methods. and administrative imperatives of the executive and legis- In 1938 the reform was institutionalized with the lative branches and the needs of society. There was thus a creation of the Public Service Administrative Depart- dichotomy between the modern technocratic state-or- ment (DASP-Departamento Administrativo de Servi- ganizations of the indirect administration-and the for- cio Publico), a federal institution that was given the task mal, backward bureaucratic state-the direct administra- of rationalizing the public service and that eventually tion (Marcelino 1988). 236 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN In the 1980s these indirect agencies bypassed the cen- embodied principles the new govemment considered es- tralized public service to achieve a more flexible, efficient sential for the reorientation of the public administration, state administration. In exercising this increasing au- explicitly called for the following (Brazil, Ministry of Ad- tonomy, they came under fire for having too great a re- ministration 1985): sponsibility for public expenditure and excessive privileges. * restoration of universal and unrestricted citizenship, to For the most part the indirect agencies comprise guarantee citizens their rights private corporations (about 55 percent), foundations or * democratization of administrative practices throughout civil corporations, and concessionaires of the public sec- the government through tor. Basically, the state was pursuing the flexibility that * reduction of bureaucratic formalities, and increased commercial and civil legislation provides-and that ad- transparency ministrative law lacks-for decentralization. . control of the executive by the legislative branch In 1967 Decree-Law No. 200 was issued, represent- of government and by society ing "one of the more important legal instruments of the * development of new measures for organizational attempts at Brazilian administrative reform, establishing decisionmaking, execution, and control concepts and principles [that still characterize] the public decentralization of administration in order to put administration, and introducing profound alterations in decisionmaking close to the site of action and curb the the organization and operation of the administrative state federal administration's growth inherited from the Second Republic" (Marcelino 1988). a revitalization of the public service and valorization of The law instituted a vigorous policy of decentralization, the public servant which ranged from federal to local governments and from * improvement of performance patterns to achieve the the private sector to the union. most efficient use of resources. In the indirect administration, public companies and On September 3, 1986, the Sarney government is- public-private companies were created to govem eco- sued its Explanation of Motives (Exposicao de Motivos), a nomic activities that for strategic reasons need to remain document that spelled out the guiding principles and in government hands. The Secretariat of Planning was implementation criteria of its reform: created to consolidate and coordinate federal government * rationalization and containment of public expenditure programming and financial planning. * formulation of new human resources policies * rationalization of the federal administration structure. The transition to democratic The Secretariat of the Ministry of Public Administra- tion (SEDAP) was created to oversee the reform, includ- governments ing the operations of DASP, which performed the tasks of centralizing personnel policy and management, rational. The legacy of the authoritarian governments was an orga- izing administrative methods and procedures, and admin- nizational model characterized by centralization through istering planning at the governmental level. Also created a complex bureaucratic apparatus. One of the purposes of was the Executive Group for Reform of the Public Ad- the New Republic (1985-90), when civilian power was ministration (GERAP) (Decree No. 93.212), which con- restored, was to remedy this situation through the pro- sisted of the minister for administration, the president, posed administrative reform and state reorganization. the civil chief of staff, and the ministers of labor, finance, The path to a democratic regime was made especially and planning. GERAP's objective was to carry out studies difficult by administrative distortions, including "the im- that would contribute to the creation of institution ad- age of the public service as a breeding ground for privilege ministrative planning. and inefficiency; the 104 special and emergency job regis- Thus, there was an effort to return to the classic ters created during the military government, with 396 model of administration and to reconfirm the organiza- wage levels, 97 types of bonus and 100,000 employees tional structure to avoid duplication of functions and who entered public service without sitting for public ser- entities. To this end a first version of the Federal Public vice examinations; and of tasks which interfered with the Administration Organic Law, which would replace the reform" (Brazil, Ministry of Public Administration 1988). Decree Law 200, was elaborated. During the New Republic government administra- With respect to human resources, explicit objec- tive reform was understood as a dynamic process that tives were to raise the status of public service and to should permeate the whole administrative machine to upgrade the cadres of civil servants. This was to be achieve greater efficiency and satisfy the requirements done through instituting a merit system, developing a and ambitions of Brazilian society. The reform, which career system, and restructuring the remunerations THE NA1IONAL SCHOOL FOR PUBLIC ADttINISTRATION AN EXPERIMENT IN FORMING MANAGEMENT TEAMS 237 scheme, as well as through evaluating the performance This first step was the creation of the procedure of civil servants. began with the National School for Public Administra- SEDAP sought to achieve its human resources goals tion (ENAP) for the formation, improvement, and through the reform of the Center for Forming Public. professionalization of civil personnel at the postgraduate Servants Foundation (ENAP) and the Center for Devel- level. The school would lead the way in shaping a cadre opment of Public Administration (CEDAM). Although of highly qualified civil servants, committed to democ- SEDAP was not very successful in implementing its hu- ratization of the administrative system and to carrying man resources, the basic principles it promoted were ac- out the new functions arising from the state's recon- cepted by constituent legislators and were written into struction process. the 1988 constitution in the form of a single legal regime ENAP's mission included correcting innumerable and a public service career system. dysfunctions and distortions of the state apparatus, in- cluding: Reasons for the creation and * inflexibility of the public apparatus, which impeded its ability to adapt in times of crisis and uncertainty evolution of ENAP * lack of managerial and technical capacity for elabora- tion, implementation, and evaluation of public policies Following the developmental model of administration, - inability of government administration to delegate au- Latin American states have turned more emphatically to thority and functions in order to meet public demands intervention in the economy and society. The unleashing for services at various levels of the state's bold, entrepreneurial tendencies has led to * gap between the bureaucratic apparatus and citizen disarticulation of traditional structures of production and participation acceleration in the development of the productive poten- * lack of a personnel policy that would enhance valoriza- tial of Latin American economies. tion of the public servant through provision of incentives In this way the state has expanded and diversified its and improvement of qualifications. area of activity, revealing the need to manage an ever- These problems required ample effort in the forma- more-complex institutional structure, especially in the tion of public sector managers who were technically ca- international economic area. pable and adequately prepared to make basic decisions in During the 198Qs in Latin America the economic keeping with nationally set criteria (Kliksberg 1988). crisis revealed problems in public administration, particu- One of the great challenges of the administrative larly the poor quality of essential services such as health, reform of the New Republic would be to transform the education, housing, and the like. The political systems in complex, centralized Brazilian administrative apparatus transition, in their efforts to satisfy or appraise the hopes into "a reduced, organic, efficient entity, receptive to the and dissatisfactions of society, revealed the deficient ad- demands of society" (Marcelino and Souza 1991). And ministrative capacity of the Latin American state appara- this would be done by renovating organizations using the tus. As a result, a new strategy to achieve reform was specialized skills of these better-trained civil servants- considered: "programs for the systematic development of agents of reform and modernization. personnel, with the objective of preparing executives, ENAP was to prepare public servants to perform the planners, and specialized professionals" (Marcelino 1991). federal government's highest managerial tasks. In the In almost all of Latin America, and particularly in Brazil words of its first director: "This school should contribute and Argentina, efforts were made to create an institu- to the professionalization and valorization of the tional infrastructure for the education and development country's public servant, by creating an elite corps, highly of specialized human resources for the administrative sys- capacitated, as much in terms of profound theoretical tem. The qualification of high-level civil servants, mainly formation (of a pluralistic and interdisciplinary charac- for directive and advisory duties, was considered a central ter) as in the assignment of practical training, through point in the reformulation of the state. apprenticeship in official or private entities and through Thus, in Brazil, the Sarney government, in its efforts debate and reflection on concrete problems of the Brazil- to restructure the state, emphasized the need for reform of ian administrative reality, based research and case stud- public administration through the development of human ies" (Holanda 1987). resources. The improvement of the public service person- For ENAP's purposes, the "generalist" trained in ad- nel cadres-through the institution of a career system, ministration would be trained to command, to give direc- including programs for developing human resources-was tion and advice, and to manage all aspects of general considered a nondeferrable aim. administration. 238 CIVIL SERVICE REFORM IN LATIN AMERICA AND THF CARIBBEAN In a first stage, however, ENAP would stimulate the foundation stage was devoted to the study of theoretical organization of centers of reflection and research that and practical problems in formulating and evaluating pub- could contribute to the knowledge of Brazil's economic, lic policies. Teaching methods included group activities, political, and administrative conditions, thereby further- research, analysis, and debate. The apprenticeship stage ing the creation of an administrative technology and cul- consisted of supervised apprenticeships in agencies of fed- ture, adapted to the country's needs. eral, regional, state, and municipal public administration. To fulfill its ambitious and its overriding mission-to The comprehensive stage required the development of a become a school of government-ENAP was to be orga- final paper on the improvement of a sector of public nized as a nonconventional school with the following administration. characteristics: Problems immediately surfaced, as described by Souza * center for recruitment and development of high-level (1992): "This first course developed in a climate of ten- directors for Brazilian public administration sion, created, mainly, by the lack of a structured career for * maintenance of high ideals in the selection of candi- the graduates, and by administrative discontinuity, pro- dates for admission, in the quality of the teaching and voked externally by the extinction of SEDAP and inter- training offered, and beyond these in the preparation of nally through four changes of directorship, (which re- graduates exceptionally qualified to carry out the exact flected) negatively in the teacher-trainee area." functions of state administration During the Sarney administration, as a result of * interdisciplinary and multivalent formation, with a view changes at the macro level and the abolishment of to training generalist administrators who are open-minded, SEDAP-and the consequent subsuming of FUNCEP into flexible, and capable of meeting efficiently and creatively the Secretariat of Planning, Budget, and Coordination the complex challenges of public management (SEPLAN)-a transformation took place at the micro * training that is specific and practical and that is based level and the ENAP program was modified to meet differ- on an understanding of Brazilian society and of problems ent imperatives. The second entrance examination for in Brazil's system of public administration ENAP took a new form. Two examinations were adminis- * concentration on analysis and evaluation of public poli- tered simultaneously: public examination and functional cies, to enable the administrator to better deal with prob- promotion, with the latter examinations designed to se- lems of the large modern state-that is, its intransigence lect candidates to fulfill the functions of finance and and inefficiency in the face of conflicting objectives and control analyst (as members of the permanent cadre of the increasing lack of proportion between the economic, the Ministry of Finance). social, and political challenges of today's world and the The curriculum structure for this second class was government's capacity to respond to them. organized in general and specialized training stages that Committed to the analysis of social and economic occurred over twelve months. The first stage offered the problems, ENAP would be a center for reflection, a labo- minimum curriculum of the public policy and government ratory of ideas, and a crucible for the forging of new management course. The second stage was devoted to technologies for public administration. "Its efforts were specialized training, with courses tailored accordingly. to have been concentrated not only on content, but, With the Collor government's administrative reform above all, on the student as an integral being. With (1990), ENAP became a foundation, maintaining its in- these characteristics it was easy to understand the diffi- stitutional mission of advancing instruction and research culty and complexity of conceiving and, mainly, imple- to further the modernization of the public sector. In the menting the programs of formation of this school" (Souza words of its then-president and fifth director (in less that 1992). two years): "The strengthening of the school was a goal in The selection process for the first class in public the context of state reform, having in mind the develop- policy and government management at ENAP took place ment of the process of modernization of the federal ad- from January to July, 1988, with a total of 69,989 candi- ministration and the implementation of actions which dates applying for the 120 vacancies available. The invita- assure the stability of highly capacitated cadres to carry tion to apply was directed to Brazilian citizens who had out public functions" (ENAP 1991). completed university, with 50 percent of vacancies re- Since this period, ENAP's program, in addition to served for public administration personnel. stressing the development and improvement of univer- ENAP's first training program was constructed in sity-level professionals, has included: three stages, which followed sequentially over eighteen * promotion of cooperation with personnel in central and months: foundation, apprenticeship, and a comprehen- sectoral agencies as well as with education centers of sive phase to synthesize knowledge and application. The other administrative agencies THE NATIONAL SCHOOL FOR PUBLIC ADMINISTRATION AN EXPERIMENT IN FORMING MANAGEMENT TEAMS 239 * emphasis on the development, propagation, and appli- litions, and deterioration in the links between administra- cation of education technologies adequate to the needs of tive agencies, harmed ENAP. It was no longer clear who public administration the school's clientele was or what the public admini- * emphasis on the development of educators, to increase stration's requirements were-and therefore what the the school's capacity to respond to the needs of public school's mission should be. administration and to facilitate integration with cooperat- ing institutions, without prejudice to the specific clientele Doctrine of the permanent program. With the measures adopted by the new government ENAP was created without a clearly defined doctrine. in 1990-the New Brazilian Plan of the Collor adminis- Although the values, objectives, and operational methods tration-ENAP once again underwent structural modifi- of its main model, the French ENA, were adopted during cation. Changes in personnel policy and public sector the project, they were not effective as applied, mostly management brought immediate consequences for the because adaptation of the model to a vastly different school, which had to absorb FUNCEP and undergo a sociopolitical-administrative reality was so complicated. reorganization that would enable it to encompass all the The lack of clearly stated values-a statement of functions of that institution. mission-left ENAP vulnerable to frequent modifications After two years of the Collor government and six to its objectives. The lack of clarity in its doctrine also months of the Itamar government, the school had experi- impeded the development of esprit de corp, which, enced a profound structural transformation and five di- coupled with a strong doctrine, could have given the rectorships. And, after much struggle on the part of the institution some political weight. school's directors and, especially, the students in the first class, the career of Specialist in Public Policies was abol- Program ished, and its functions assumed by the position of Budget Analyst (Law 8126/91). The school's innovative and daring program for develop- With the Itamar government's Law of Reorganiza- ing managers was difficult to implement for several rea- tion of the Executive Power (Law 8490), SEPLAN was re- sons. One problem was that the teachers did not partici- created and allocated the remaining members of the ca- pate in the initial conception and eventual daily routine reer rolls of Specialist in Public Policies and Specialist in of the school. Their lack of direct involvement was re- Governmental Management. Of the 103 specialists origi- flected in their failure to incorporate into their teaching nally appointed, 76 remained after the reorganization. elements of the school's doctrine and mission, thus hin- dering pedagogical activities and the development of stu- An evaluation of the evolution of dents. A second problem was that the disparate academic ENt AP n and professional backgrounds of the students were not ENAP { { adequately explored with a view not only to enriching the experience of class members (which it did), but also to In evaluating ENAP's brief discontinuous history, we can achieving the goals of the program. single out a few factors that marked its evolution-and its eventual failure. Links Leadership ENAP was unable to establish strong links with educa- tional and research institutions that could be of assistance Constant changes in the directorship of the school did with personnel and with project development. A contrib- not allow the development of a strong leadership ac- uting factor in this was that teachers were employed infor- tively engaged in the formulation of a doctrine of imple- mally on a personal basis, rather than through official and mentation and in the execution of the institution's ob- institutional channels, thus losing the opportunity to es- jectives and program. This left the school vulnerable, tablish institutional links. The school's lack of strong lead- not only to pressures from other institutions but also to ership and a clear doctrine meant that its mission, objec- changes arising from the political-institutional instabil- tives, values, and rules were not internalized; nor were ity of the country. they transmitted and incorporated into other institutions. The Sarney government's lack of direction and lead- A result of this was the difficulty in creating-and the ership, which led to ideological conflicts, ineffective coa- later abolishment of-the career of manager. 240 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Corporatism leaders. This was partly the result of internal factors- lack of a clear doctrine, weak leadership, and so on-and That ENAP was created to institute an administrative partly the result of outside interference, which repeatedly elite made it a threat to members of the bureaucracy, forced the school to change course. provoking defensive corporatist reactions from those anx- Because it did not achieve its founding objectives, ious to defend their privileges. ENAP was not institutionalized. But a new opportunity ENAP graduates, because of their comprehensive for the school has appeared with the federal government's education, were capable of carrying out the most varied creation of the National Program for Training, a program tasks in federal administration, making them qualified to to build capacity in the civil service. It will be ENAP's displace many politically appointed personnel. This made responsibility to develop this program, a mission that ENAP a target for corporatist pressures. The school, which should allow it to become the school of government it was had not established strong links, particularly to the execu- meant to be and to rid itself of the identity crisis that has tive and legislative branches of government, was vulner- plagued it since its creation. able to these pressures and suffered repeated changes to its structure and objectives. References Clientelism Brazil, Ministry of Public Administration, General Secretariat. The creation of ENAP with its commitment to the merit 1985. Federal Public Reform: Proposal by the General Commis- system, its sense of public duty, and its incorporation of sion for Reform of the Federal Public Administration. Brasilia. system, vas sentose ofdpublicrduty,eand lttsrincorporationeor.1988. Brazilian Public Administration: A New Policy new values into the administrative culture, constituted for Human Resources. Brasilia: FUNCEP. more a political than a technical proposal. But the estab- ENAP. 1991. 'Programmes, 1990-1991." National School of lishment culture was one in which the directing elite Public Administration, Brasilia. behaved like "myopic feudal lords, captives of an intra- Holanda, Nilson. 1987. "A Programme for the National School organizational ideal in which loyalty to the house and to of Public Administration." ENAP, Brasilia. the values of the intemal culture take precedence over Kliksberg, Bernardo. 1988. "A New Paradigm in Public Manage- the needs and demands of outside society." Thus, the ment." Public Service Magazine (May-June) (FUNCEP, school's progressive ideas threatened the traditionally pat- Brasilia). rimonial and cliental power structure. Marcelino, Gileno F. 1988. Government, Image and Society. Brasilia, Brazil: FUNCEP. Marcelino, Gileno, and Eduardo Souza. 1991. A Proposal of Reform in the New Republic: Some Reflections. Salvador, Bra- Conclusion zil: MSGP Editors. Souza, Eduardo. 1992. "An Institutional Study: ENA, INAP and ENAP." Doctorate thesis (not complete). FLACSO/ University of Brasilia, Brasilia. ENAP did not achieve its aim of instituting administra- Warlich, Beatriz M. de Souza. 1974. "Federal Administrative tive reform through the development of an elite cadre of Reform: Past and Present." Public Administration 8(2):27. THE NATIONAL SCHOOL FOR PUBLIC ADMINISTRATION AN EXPERIMENT IN FORMING MANAGEMENT TEAM1S 241 The Reform of Argentina's Federal Tax Administration Office Constancia Tiboni Civil service reform in Argentina's federal tax administra- Since 1957 it has not been possible to fire a central tion office (DGI-Direcci6n General de Impuestos) took administration employee, except in (infrequent) cases of place in the context of a larger institutional strengthening summary dismissal. This restriction has expanded public plan carried out since December 1989. Included in the employment at a rate of 2.7 percent a year. Furthermore, institutional strengthening was the reform of the public this rule has been complemented by a de facto stability sector, initiated to reform a government administration that has arisen out of the desire to avoid conflicts. For that had become oversized after almost forty years of these reasons there has never been a planned reduction regulation, trade union pressure, and excessive hiring prac- program for public employment. tices. The main elements of the reform were deregulation, Because the government's capacity to reduce em- privatization, restructuring, and downsizing. ployment levels was restricted, revenue crises have been The tax administration offices-DGI and the Na- managed mainly by freezing vacancies and reducing real tional Customs Service (ANA-Administraci6n Nacional salaries. From 1983 to 1988 public administration salaries de Aduanas)-were excluded from the general reform on average declined by 34 percent. plan. Instead, because of the importance the government Salary adjustment affected more than real salaries. placed on legitime resources-that is, tax revenues-spe- In the context of high inflation the govemment's wage cial reform plans were devised for these offices. policy used lump sum increments or minimum wage in- This chapter describes the public employment pic- crements that significantly reduced the differential be- ture in Argentina before 1989-and discusses DGI's par- tween categories. (Lump sum increments, which mean ticular situation in that context. It then describes the greater percentage increases for low-level salaries, result actions carried out since 1990 to upgrade human re- in a flat compensation curve that offers few incentives sources in public administration. for outstanding performance.) Low real salaries were compensated by other non- P l employment monetary benefits, which tended to reinforce the glut in rUillC employment employment. Among these benefits was shorter workdays (thirty hours a week against forty hours a week in the Although public employment comprises many different private sector). In 1988 excess employment in public ad- groups with different labor regimes, that these groups ministration was calculated at about 25 percent. share many common elements permits discussion of a Labor relations in DGI were governed by this regime, public sector employment regime. One overriding and although DGI had always had its own collective work agree- distinctive characteristic of public employment is its sta- ment, with specific regulations within the general regime: bility-that is, job security. * The union can oppose any recruitment effort on rea- Until the mid- 1940s public employment in Argen- sonable grounds (C.C.T. No. 46/75, art. 7). tina represented 9.5 percent of the labor demand of the * Summary trial or dismissal is to be carried out by agents EAP. By 1951, when goods and services enterprises had assigned by the union (C.C.T. No. 46/75, art. 47). been taken over by the state and public activities had * The union has the right to designate employees to be been expanded, public employment had reached 17.8 per- promoted within their career path on the basis of merit cent of labor demand. (C.C.T. No. 46/75, art. 75). 242 CIVl[ SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN * Employees enjoy automatic promotion (regardless of Civil service reform in DGI ability, performance, or training) every one to three years, depending on their seniority. As was true elsewhere in public administration, DGI Reductions in employment levels had to follow specific vacancies and promotions were frozen for more than ten rules designed to minimize conflicts. Firing was out as a years (1981-92). Thus, employees had no incentive to get means of downsizing. (It should be noted that the ad- further training or improve performance. justment program had been severely criticized by the Real average salaries grew between March 1986 and opposition parties as well as by internal factions in the February 1987, then decreased again between July 1987 government.) and May 1988. Because of hyperinflation, 1989 year-end To achieve its downsizing goals the government real salaries reached their lowest levels with a 50 percent instituted a special departure regime, consisting mainly decline compared with March 1989. of monetary compensations for employees leaving the As mentioned, salary adjustments reduced the differ- public sector. But the system had a perverse effect. On ential between categories. The overall decline between the one hand, because compensation depended on 1986 and 1989 for high-level categories was 27 percent, years of service in the public administration, young against a 6 percent decline for lower-level categories. agents had no incentive to leave. And on the other, older agents, who would have retired or left the service Adjustment in the central even in the absence of this program, received large compensations. aldministration In contrast to the larger downsizing efforts, all re- quests by DGI employees for early departure were refused, By the end of 1989 salaries for DGI employees, as well as in accordance with its exemption from the reductions in for all civil servants, were at their lowest levels in ten employment levels. Only in cases of proved malfeasance years. DGI's productivity, in terms of revenue collected, were agents cut from DGI's employment rolls. collapsed. A committee assigned to analyze the situation As mentioned, the union contract had hampered any at DGI concluded that to upgrade performance in tax initiative to improve the quality of the work force. The collection, changes in human resources management had Collective Work Agreement was therefore reviewed. to be carried out. Eventually a new contract was approved-with Labor In the larger picture the central administration un- Ministry arbitration-which had important provisions af- dertook restructuring by decree, to reduce the number fecting human resources management, including: of offices. This was complemented by mandatory reduc- * introduction of a new career path tion of employment levels in almost all central adminis- * introduction of a new disciplinary system tration institutions. A few institutions-including hos- * reduction of union participation in managerial deci- pitals, educational institutions, and security forces sions -were exempted. - introduction of a single work schedule DGI and ANA were exempted from both the re- * elimination of guaranteed job security. structuring and the downsizing programs. Nonetheless, The new career growth plan introduced modifications the organizational structure of DGI was altered: the num- made necessary by extensive introduction of technologies ber of operational offices remained constant, but and consequent changes in functions. nonoperational offices were reduced by a 50 percent. Union participation in the public sector was reduced Over time low salaries and salary compression had in two key ways: the union would neither participate in led to greatest expansion in administrative and support recruitment nor have a say in the promotion process. The areas. So adjustment measures were felt most sharply in promotion system was rationalized: automatic promotion these areas. Operational offices, on the other hand, were was eliminated, and employees could only be promoted maintained because they were considered key to reestab- on the basis of merit after an examination (C.C.T. No. lishing a decentralized organization. Information gather- 15/91, art. 56). ing and enforcement had been consolidated to such an Low salaries and a flat compensation curve made extent that by 1989 the wide range of internal offices had DGI recruiting difficult and worked against the retention become almost useless. Decentralization was seen as a of qualified professionals. In addition, lost job security means to increase control capacity and to improve tax- needed to be compensated. Therefore, DGI's new work payer services. In tandem with decentralization, however, agreement increased salaries for all employees and wid- increases in human resources would be required. ened the compensation curve (table 31.1). THE REFORM OF ARGENTINA'S FEDERAL TAX ADMINISTRATION OFFICE 243 Following these improvements in compensation, DGI To support the decentralization effort, nearly 4,000 was able to carry out its reforms to improve productivity. students (in many cases not yet graduated) have been To improve the quality of its work force DGI designed a hired to work as auditors' assistants. This initiative has training program, which was carried out by DGI's training enabled DGI to increase the number of audits it conducts department and by the University of Buenos Aires. Pro- each year, depending on the kind of audit. gram courses focused mainly on auditing and on auto- mated systems, in support of the nationwide introduction Conclusion of automated systems of collection and administration. It is expected that by the end of the program, nearly 1,700 agents will be trained in those two areas. The quality and efficiency of DGI's work force deterio- rated throughout the 1980s because of a permissive work TABLE 31.1 agreement and a dramatic decline in salaries. These con- DGI compensation, Argentina, before and ditions were symptoms of the absence of a national strat- after 1992 egy for human resources management. Because DGI functioned almost as an autarkic office, (in U S doliars) it was able, with important government support, to de- Salary level through Saoary level beginning Percentage velop and carry out a long-term management program Function December 1991 January 1992 increase outside of the larger public sector reform. Director 1,821.8 3,658.9 loo Through a number of initiatives-improvements in Staff adviser 1,063.2 1,957.4 84 compensation, salary decompression, a training program, Division chief 1,388.2 2,281.6 64 increased coverage in auditing-the quality and efficiency Supervisor 1,478.0 2,230.5 5 l Auditor 812.4 1,227.9 5l of DGI staff and operations have been improved. None- --- - ~~~~~~~~~~~~~rheless, the work force has still not reached the desired Note: Salaries do not include reward bonuses. These are monthly payments that are part of DGI's incentive system. The system is tied to increases in revenue collection standard. Thus, the training program and salary adjust- and. secondaril tothegrade employeesobtain inasemiannual examination. Depending ments should not be isolated or temporary actions. Rather, on the results of that examination, the reward bonus can range from I o to 50 percent these should be part of a permanent plan for upgrading of the empobyees salary. permane. Source: Government data. the quality of DGI's performance. 244 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN The Impact of Sociocultural and Governance Factors on Institutional Reform Thakoor Persaud and Waleed H. Malik officers shall not interfere in the political During the early decades of Bank operation, the pre- affairs of any member; nor shall they be influ- vailing view in most borrowing countries was that if there enced in their decisions by the political charac- were deficiencies in the system, the government had to ter of the member or members concerned. Only take an active role in addressing them. Consequently, economic considerations shall be relevant to several countries nationalized many institutions, created their decisions.... with due attention to consid- parastatal ones, and used their legislative powers to pro- erations of economy and efficiency and without vide incentives and penalties and to influence various regard to political or other non-economic influ- sector activities aimed at increasing output, creating em- ences or considerations." (Articles of Agreement, ployment, and assisting in development. In their rela- IBRD, Articles III and IV, Section 5 and 10, tions with the Bank and other lenders and donors, many February 16, 1989.) countries established several areas which were defined as "off limits." These included population (for example, participation, ownership, and involvement birth control, family planning), education (curricula, [of the poor] lead to more effective and sustain- teaching methods), civil service reforms (salary, qualifi- able development. First and foremost, it is the cations, job security), the electoral system, nuclear and government's responsibility to ensure that its citi- environmental issues, privatization of state enterprises zens are fully involved in the development deci- and military expenditures. sions which affect their lives.... We need to take For many years, the Bank and other lenders and account of the linkages between poverty and donors took these conditions as given and devised various governance issues-accountability, transpar- ways of working within this constrained framework. Be- ency, and adherence to the rule of law. We have cause most of the countries' existing institutions were to recognize that corruption, unjustified military weak and ineffective and the Bank was not ready to spending, and civil strife often divert go- embark on a comprehensive reform process so early in its vernment's attention and resources from devel- lending program, special project units were created. Apart opment." (Plenary address of Mr. Sven Sand- from providing a bypass to existing bottlenecks and assist- strom to International Development Conference ing in the efficient implementation of various demonstra- on "Overcoming Poverty: Global Priority," Janu- tion projects, such units were expected to be later ab- ary 12, 1993.) sorbed by their parent ministries or agencies and become the nuclei of the improved organizational structure needed Over the past four decades, interpretation of the to continue future operations and effect reforms at the World Bank's proper role in relation to its borrowers national level. has undergone a significant change. This has been an Although relatively successful as pilot and demon. evolutionary process (table 32.1)-the result of world stration projects, it became apparent that many of the events and of an increasing awareness that growth and early-generation Bank projects were too ambitious in scope developmenr are intricately linked by noneconomic ele- (christmas tree projects), and perhaps not cognizant ments that cannot be ignored without negative conse- enough of the operational complexity of achieving and quences to the system. sustaining project goals. For most early-generation pro- THE IMPACT OF SOCIOCULTURAL AND GOVERNANCE FACTORS ON INSTITUTIONAL REFORM 245 TABLE 32.1 Evolution of the role of the World Bank Focus Rationale Instrument Demonstration of viable models Need to demonstrate viable alternatives; Special project units: individual projects "off-limits" areas of intervention Macroeconomic changes Limited impact of project approach; need to address Structural adjustment loans (SALs); subsector reforms macroeconomic issues via existing instituiions Improving sector policies and Sharpen focus on sector institutions, policies, and so on, Sectoral adjustment loans (SECALs) and policy reforms investment to promote greater efficiency Social development Need to include human, economic, sociocultural, and Technical assistance for judicial, legal, human resource, other such factors in the development process and other reforms jects, apart from counterpart funding and logistical prob- It now appears that most of the areas which were lems, there were serious interagency rivalries and conflicts once considered off limits to lenders and donors are now among various ministries and the staff of the special project slowly being opened to closer scrutiny.' As stated during a units (who were generally perceived as an elite group with recent symposium, "concern over corruption and waste of better salary and working conditions, usurping the power resources inevitably arises in discussions of improved gov- of established agencies). Several of these problems proved ernance," and "donors have a responsibility to ensure that to be rather intractable as the needed institutional, finan- the human dimension is not lost in pursuit of the equally cial and other reforms and modifications which the Bank essential process of economic reform."4 To a large degree, expected to occur never materialized. Thus, although the evolution of this new attitude is due to a variety of factors, project units had some initial success, it was not long including the worsening economic performance of most before the same legal, institutional, and administrative developing countries over the past two decades, their inefficiencies that plagued the established entities sur- large debt overhang, a move toward democratically elected faced in the project units. governments in many countries, and more recently, the As institutional deficiencies worsened and expecta- disintegration of the Soviet Union and superpower alli- tions on the role of special project units did not material- ances which, for decades, influenced how aid and support ize, the Bank began to refocus its attention on basic struc- were provided. tural impediments within the existing framework. This Although the international environment has changed approach was marked by the elimination of special project greatly in the past few decades, there are important and units with greater focus placed upon existing institutions deeply rooted sociocultural, political, economic, budget- and assistance to improve subsector and overall macro- ary and financial, and other elements that have not economic policies. Structural adjustment lending began changed much; these must be taken into account before in 1980 with the additional goal of ameliorating the acute any workable diagnostic and prescriptive measures can be balance of payment crises in many developing countries reached. To a large extent, recognition of the importance in the late 1970s. Gradually, structural adjustment lend- of these factors is reflected in the charter of the newly ing was expanded and deepened through sector adjust- formed European Bank for Reconstruction and Develop- ment operations which included technical assistance to ment (EBRD). The EBRD preamble explicitly calls for improve the operational efficiency of existing agencies. "the fundamental principles of multiple democracy, the These changes were based on a growing awareness and rule of law, respect for human rights and market econom- conviction that the policy environment is as important, as ics among borrowers."5 the physical and institutional framework in inducing The issues raised in this context include the follow- growth and development.' ing: How does one convince city council members to vote After the negative impact of various institutional for improved property tax collection or increases in such rigidities and weaknesses on many of the initial techni- taxes when these members are the owners of most of the cal assistance efforts became apparent, the focus shifted lands which would be so taxed? Similarly, for a police to more basic questions regarding justification of the commissioner, customs director, or other such officials, appropriateness of existing institutional, administrative, the prevalent systems in many countries provide a "mar- financial, legal, civil service and other such systems, ket" for various choice positions, equipment, and facilities along with issues surrounding governance and account- to go to the highest bidder. How can those who benefit ability questions.2 from these arrangements be convinced to relinquish their 246 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN lucrative positions? And why would a mayor or city trea- people of different regions, nationalities, racial and tribal surer be interested in reforming financial accountability groups, traditions, religions, and languages. Some of these in the system when the existing system allows them greater differences are more pronounced than others, but, as evi- flexibility and discretionary actions? In addition, why denced in several regions today, each has the potential to would a judge or a judicial employee be interested in ignite protracted and debilitating conflicts. This is an streamlining court procedures when these complexities important factor which is often overlooked in understand- allow them to control the system for their own personal ing development issues and implementation of reform benefit. On a broader and more important level, what programs in a country. incentives would a politician be left with if jobs, contracts, In many societies, sociocultural practices require that housing units, subsidies, and so on, are awarded by quali- group members assist each other at the expense of out- fications and merit, through a transparent and neutral siders. In an environment of limited economic opportuni- system? The following analysis is an attempt to highlight ties, population differences can become a powerful crite- some of these factors and discuss their implications for ria for reinforcing such zero-sum decisions. Consequently, lenders and donors. Although it abstracts and greatly upon getting into office, whether by democratic or other simplifies some very complicated relationships, it does means, jobs and other benefits would generally be provide a representative picture of the most salient ele- awarded to those affiliated with the group in power, with ments involved in the process. existing staff either shunted aside or fired. It should be noted parenthetically that such a situation has also oc- Sciocultural factors curred in industrial countries.6 While this practice in the industrial countries may have weakened through legal prohibitions over time and is now only applied to high- In order to gain a better understanding of what is occur- level political positions, it permeates the system in devel- ring in many developing countries today, it is useful to oping countries and may reach as low as the janitorial briefly review the sociocultural context within which level. In several countries, years of conflict resulted in changes are being proposed and effected. For decades, uneasy truces founded on some type of power-sharing Bank staff and other lenders and donors have focused mechanism. However, even after decades of co-existence, their attention almost entirely upon quantitative aspects it does not take much to rekindle old animosities. In of project design and implementation. Part of the reason other cases no accommodation is made and the group in was because of the "off limits" area mentioned above; power dominates and yields no concession to others, irre- however, another important reason was that quantifying spective of ability, efficiency, or other such consider- the problem in this way eliminated many of the subjective ations. Finding examples of such cases involves no more elements of the analysis. Thus, for example, in reviewing than picking up a newspaper today. the operation of an entity, one can say that it has an Although some institutions in the developing coun- overhead ratio which is high when compared with similar tries were initially created with a genuine intention of entities elsewhere. Similarly, for arrears, it can be stated addressing the needs of the population, indications are that the current rate is too high. In such cases, the tech- that they were invariably conceived in an ad hoc man- nical recommendation naturally follows; these figures have ner to mirror systems elsewhere, with no serious consid- to be improved over a set period. In establishing improve- eration given to their overall cultural, geographical, or ment targets, not much is mentioned about the underly- economic applicability. Consequently, several studies ing causes of these figures. For example, to get overheads analyzing the laws, rules, and regulations of various enti- down, expenditures and/or staff must be reduced. What ties have documented many contradictions or inconsis- do these entail? How feasible is it to expect such actions? tencies. One basic problem found in most developing Until recently, a type of "black box" approach existed in countries today is the proliferation of redundant entities this area under which the dynamics of the process needed which are highly overstaffed with inappropriately quali- to effect desirable changes were not explicitly subject to fied employees at all levels. In reviewing many of these any detailed scrutiny. entities, several common features appear both within When discussing countries or regions, there is the and among various countries. The staffs are generally tendency to think in terms of homogeneity among the not appropriately qualified and the few who do have population, geographical areas, and statistics-population some of the needed skills are poorly paid with a high size, GDP, health indicators, growth rate, physical condi- tumover rate. Most employees have more than one full- tions. In general, most of the developing cotrntries were time job and absenteeism is very high as they seek to created arbitrarily, resulting in political areas comprising divide their time among these jobs.7 There is an acute THE IMPACT OF SOCIOCULTURAL AND GOVERNANCE FACTORS ON INSTITUTIONAL REFORM 247 quantitative and qualitative deficiency of basic office fa- problem, which, in some countries is now a major impedi- cilities (desks, chairs, working space, typewriters, tele- ment to reform and development.9 phones), and the existing stock of vehicles and equip- Most of the questionable practices, which possibly ment which are not misappropriated are poorly main- began as a necessity for survival a few decades ago, have tained. A common practice in some countries has been now grown into an art form in many countries, despite to have outgoing staff remove all documentation and intensive exhortations and actions by leaders for a return institutional memory records as they leave. Thus, apart to honest govemment and better services. Corruption and from the tendency to use subjective and nontransparent exploitation of weaknesses in the system is not a recent criteria to create and overstaff institutions in the system, phenomenon, nor is it restricted to the developing coun- the level of skills deficiency, weak institution memory, tries. As recent headlines from several countries show, low salaries, and poor facilities add to the problem. A corruption has permeated systems to an incredible degree. review of the situation in many countries also shows Still, in comparisons between industrial countries and de- another factor which helps to perpetuate the system- veloping countries, the pervasiveness of corruption, the the high financial and political cost of retrenchment. degree of public acceptance, and the economic impact Even if political and union pressures can be overcome, differ substantially. Also, for most cases in the industrial in order to legally terminate employment in the civil countries, misappropriated resources are likely to remain service and other areas, a separation package amounting in the country as savings or investments, while for the to a large multiple of the annual salary may have to be developing countries, indications are that most of the paid along with other benefits. The tradition has there- misused funds obtained by high-level officials find their fore been to increase the payroll as each incoming group way overseas. In terms of prosecution, penalties, asset appoints additional staff. It should also be recognized reclamation, and the like, the industrial countries and that leaders are well aware that swelling the openly un- developing countries again differ greatly in their approach. employed ranks in a country can aggravate a volatile The growing chorus for privatization, market orien- situation and lead to demonstrations, violence, and even tation, institutional reforms and accountability at all lev- changes in government. els of government is based upon the premise that indi- viduals acting in their own self-interest would promote Governance factors the "invisible hand" effect of improved economic welfare for all. In most of the developing countries today, many individuals are acting in their own self-interest; however, In terms of accountability, in most of the borrowing coun- they operate within a highly bureaucratic and distorted tries, the system of checks and balances, monitoring, and system within which they strive to maintain their well- control through such devices as budgeting and audited entrenched positions and associated benefits. For example, statements of operations is woefully deficient. Part of the a private businessman can enter into a partnership with a reason for this can be attributed to poor staff quality. few influential officials and develop a system to produce However, in most cases, factors involving control and housing units, process foodstuff, originate finance, and access to records, the dominance of the public sector, lack the like, at a substantial economic profit. Under such of transparent procedures, and little or no penalties for circumstances, why would there be an interest in seeking noncompliance all work to foster waste and corruption.' out or allowing the entry of other competing, lower cost In many countries, the existence of a one-party system systems in the country, even though such systems can over decades, in the absence of independent media scru- dramatically reduce costs and have a significant impact tiny, adds to the accountability problem. To a large ex- upon sector employment and output? Before any signifi- tent, such waste and corruption are products of the sys- cant progress can be made in dealing with most gover- tem. If, as surveys in several countries indicate, the official nance issues and institutional reform programs, reformers monthly salary is not enough to meet even basic food have the unenviable task of convincing various groups needs of an average family for a few days, one has to seek throughout the system that they have to adopt a more other ways of earning enough for survival. It should be long-term focus and that reform is not a zero-sum process stressed here that not all employees succumb to tempta- under which some gain only if others lose. tions and questionable practices in order to survive; many In the majority of countries with such problems, the of them strive to keep the system functioning in spite of collective force of such special interest groups is powerful overwhelming odds. There are also those who, after trying enough to thwart most well intended but poorly organized for a while, enter the private sector or migrate to other efforts aimed at eliminating their privileged positions and countries and thus further contribute to the "brain drain" establishing a competitive framework. This is a key point 248 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN to understand when considering the chances of any pro- tendency is to yield to borrowers' insistence upon fi- posal to effect free market institutional changes. There nancing for new operations. are many powerful individuals who receive immense gains While factors such as those described above can pro- from their entrenched positions in the existing system and vide strong incentives for politicians to take the least they will not voluntarily yield their positions unless they controversial route in managing their economies, the de- are threatened by a superior force or can be persuaded to mocratization process, along with lack of other viable accept alternative incentives. In a different but somewhat options, has led some policymakers to advocate signifi- related way, there are similarities in many industrial coun- cant institutional reforms and adopt austerity measures. tries where, for example, redundant military bases, weap- Even though many countries have achieved a great deal, ons systems, subsidized tobacco, and other farm programs the results of these actions are still not clear. There are cannot be easily terminated because lobbyists and those cases where reform proposals have drawn a great deal of who currently benefit from the system would lose jobs, criticism, protest, and sometimes violence from groups suffer short-term dislocations, and withdraw support from who feel threatened by their adoption. Many govem- the politicians advocating such changes. ments have been thrown out of office as a direct conse- As more and more countries move to democratically quence of efforts to change the system. As a lesser form of elected systems, the length of time in office becomes reaction, in one country, fourteen government ministers another important factor influencing the nature and di- were impeached and removed from office over a ten-year mension of policy decisions. Most central governments period because they advocated or supported proposals for are elected for four or six-year periods, while local admin- such policies as increasing the price of petroleum and istrations may hold elections more frequently. Several floating the exchange rate. Apart from intimidating countries prohibit multiple terms for positions such as policymakers, such actions also paralyze the legislative president, governor, or mayor. Since the gestation period system as attention is diverted to the impeachment and for most national development programs could extend debate proceedings. well beyond an election term, this generally poses a con- To some degree, such a situation is similar to cases flict for those who place priority on achieving substantial where individuals who lose their jobs strive to maintain or visible results during their term in office. The situation their preloss consumption pattern, with the expectation is further complicated by the fact that during the pre- and that their income loss is temporary and they will not have postelection period, most of the senior-level staff are dis- to make any painful changes to their lifestyle. In an analo- tracted by election tasks or job uncertainty. Consequently, gous manner, countries accustomed to low oil prices or a many important, ongoing and new operations suffer de- tradition of populist governments, are not inclined to lays until the election results are clear and a new admin- change their spending habits when they encounter rev- istrative term begins. enue declines. When both policymakers and the popula- Another factor to note is that most of the develop- tion believe that individual losses are temporary and will ing countries are functioning in a crisis management soon return to previous conditions, achieving changes in mode where the day-to-day requirements of govern- public expenditure or individual consumption patterns is ments do not leave time and resources for intermediate almost impossible. In the petroleum-dependent countries, or long-term programs. Therefore, little or no resource such expectations have been occasionally bolstered by can be devoted to such important but less visible areas periodic surges in oil prices which tend to reinforce expec- as maintenance of plants and equipment, transport fa- tations of such occurrences and make it more difficult to cilities, environmental effects of settlement or industrial accept adjustment measures. After almost a decade, it activities, and the like, although there is clear recogni- appears that most countries in the region have finally tion of the high economic rate of return of such invest- accepted the need to adjust to a changing environment. ments. In this regard, developing countries have the However, in some countries, this acceptance is still being same problem as many cities in the industrial countries resisted, especially if the adjustment process does not take which are struggling with widening budget deficits and a into account the negative impact it has on those who host of underfunded maintenance and capital invest- suffer disproportionately from it. ment programs.'° The Bank and other lending and do- The focus of this paper has been in areas which are not nor agencies have long advocated greater attention to explicitly taken into account in Bank-borrower relations. maintenance investments. Until recently, their lending As it shows, the underlying issues transcend any specific policies in this area were not clearly observed and most discipline. However, unless an appropriate framework is lenders and donors did not follow up and insist that established to include consideration of the areas mentioned borrowers focus on maintenance issues. Even now, the here, an uphill task would be made even more difficult. THE IMPACT OF SOCIOCULTURAL AND GOVERNANCE FACTORS ON INSTITUTIONAL REFORM 249 Notes 6. In the United States, for example, it was not until 1883 that the United States Civil Service Law was enacted to end a widespread patronage system. 1. See, for example, "Issues of Governance in Borrowing 7. Ministers in several countries usually have more than Members: The Extent of their Relevance under the Bank's one job. This raises both conflict-of-interest and efficiency Articles of Agreement." Memorandum of the Vice President questions. and General Council, November 1990. World Bank, Washing- 8. See note 4. ton, D.C. 9. The issue of a "brain drain" arises frequently in North- 2. For an elaboration of governance issues, see "Managing South debates. However, its nature, origin, and pattern of occur- Development: The Governance Dimension," Discussion Paper rence go much deeper than such debates indicate. In some coun- June 25) World Bank, Task Force on Govemance, Washing- tries, the "push" factors can quickly become dominant. For ex- ton, D.C., 1991; and Governance: Experience in Latin America ample, when jobs are not awarded on qualification and merit, this and the Caribbean, LATPS Occasional Paper Series, World Bank, frustrates qualified candidates who are bypassed and deprives the Washington, D.C., 1991. institution of qualified staff. Even for qualified staff who are se- 3. Measures that enhance capabilities of government imple- lected, an important push factor is the low salary level that is mentation are recognized in what the World Bank's Report on steadily eroded by inflation. When crime, violence, and other such Adjustment Lending I1 calls the "political economy of adjust- security threats are added, incentives increase for leaving the ment." country, especially if this is accompanied by "pull" factors of better 4. This is drawn from "Democracy and Development," an working conditions. Once the cumulative effects of these factors address given by the Chairman of OECD/DAC at the Interna- result in migration, and emigres establish a livelihood elsewhere, tional Symposium on Democratization and Development Assis- efforts at expatriate recruitment tend to have limited success. tance, October 8-9, 1991, Ministry of Foreign Affairs, Japan. 10. Washington, D.C.'s water system, for example, suf- 5. This is drawn from Articles of Agreement of the Euro- fers an estimated 24 to 40 percent unaccounted-for water loss, pean Bank for Reconstruction and Development (EBRD), Ar- with much of the distributional network being more than 100 ticles 1, II and VIII, May 29, 1990. years old. 250 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN 33 Transforming the State: Issues in Public Administration Reform in Poland Barbara Nunberg and Luca Barbone Poland's continued success in economic transformation different style of institutions to deal with the new de- will depend crucially on the capacity of the state to play mands of a market economy and democratic society. This its role effectively in formulating essential policies and implies the virtual reinvention of the Polish state and the implementing programs. The country's recent break with creation of a modern public administration staffed with its communist past dramatizes the need for a radically well-trained, efficient civil servants. Context of Reform That Poland is some distance from these objectives is to provide leadership on this vital issue. It also took im- demonstrated by the government's growing inability to portant initiatives in many key areas, ranging from decen- deliver critical services and perform functions assigned to tralization, to budgeting, to the reorganization of minis- it in the course of economic and social reform programs. tries and agencies. Nevertheless, progress on a number of Structures and processes of govemment once suited to key fronts has been slow, and reform needs to accelerate. tasks designed by the old regime are no longer appropri- This report seeks to provide an empirical basis for the ate, but many are still in place. As government adminis- policy actions govemment will need to undertake in the trative modemization lags behind private sector develop- near future and to offer some guidance for the direction of ment, the best and brightest public servants seek better reform, based on comparative intemational experience in working conditions and financial incentives outside state this area. An attempt is made throughout to balance institutions. Those who remain may be ill-prepared to short-term transition demands with long-term institutional fulfill their mission. Financial and human resources for development requirements. The report avoids blueprint government administration are limited and must be allo- prescriptions but tries to raise issues and suggest concrete cated more rationally. steps that might be useful inputs to the Polish authorities' Despite important initial efforts on some fronts of consideration of this topic. public administration reform, including decentralization and early work on civil service legislation, the agenda for Challenges in state restructuring public administration modernization remains largely unaddressed. This agenda must be taken up with great urgency not only because effectiveness of government A major task in Poland's transition to a democratic, work is sharply reduced by outdated machinery, but also market-oriented society is the adaptation of public sec- because pressure to solve public pay and employment tor institutions to the requirements of the new order. problems can be withstood only at extremely high politi- Most fundamentally, the structure and organization- cal and social costs, as evidenced by recent events that led often called the "machinery of government"-need to to the dissolution of parliament. be radically altered. This task is complex. In Poland, it The government has assigned a high priority to ad- implies the elaboration of a legitimate constitutional and ministrative reform. As a first step, it created an Office of legal framework. It also requires the extinction of obso- Public Administration Reform in the Council of Ministers lete institutions whose raison d'etre has disappeared, as TRANSFORMING THE STATE: ISSUES IN PUBLIC ADMINISTRATION REFORM IN POLAND 251 well as the creation of new organs and systems to carry tween the public administration and the ruling party bu- out new functions. Inappropriate and inefficient internal reaucracy. Guided by the ideological principle of "demo- procedures and decisionmaking processes need reform. cratic centralism," the constitution emphasized a hierar- These structural and organizational reforms form the ba- chical administrative structure in which mid- and sis for the development of systems to manage and moti- lower-tier units enjoyed little discretion and were sub- vate public servants and the creation of a professional ject to comprehensive supervision by the central com- civil service. mittee of the party. The agenda for restructuring government in Poland The parliament essentially rubber-stamped decisions. requires resolution of some fundamental issues. First, a Government work, in turn, was coordinated by the minis- definition of the scope of political and economic decen- terial-level organ peculiar to all former socialist econo- tralization is necessary. Shifting important responsibilities mies, the Council of Ministers. Unlike a prime minister's away from the center and toward final users of public cabinet, the Council of Ministers was (and nominally still services has profound implications for the remaining struc- is) charged with a number of administrative activities ture and decision process at the center. Second, absent a including the selection and management of key high-level clear orthodoxy dictating which institutional model should government positions, and the coordination of human be adopted to perform key economic functions, a method- resource policies in the central administration. But the ology for determining which institutions should survive policymaking power of the Council of Ministers was ex- and then, among those, which should be strengthened, tremely limited, since policy was effectively the preroga- needs to be developed and applied to the restructuring tive of Party structures. As in other formerly socialist exercise. Finally, government decisionmaking processes countries, this created a crucial lacuna at the heart of need to be improved to produce cogent, coordinated poli- govemment whose effects are still being felt. cies, implying both the development of better policy for- The state was also extremely centralized, with little mulation capacity in individual ministries as well as the autonomy left to local branches. In economic decision- designation of a single entity in government to build con- making, the post- 1948 system followed the standard cen- sensus and coordinate disparate policy perspectives into a tral planning model. The Central Planning Office was coherent policy output. charged with the elaboration of the targets of the five- Significant progress has already been achieved in year plan and, together with the line ministries, with the Poland in addressing this reform agenda, though clearly annual calculation of material balances and the allocation much improvement is still needed. This section analyzes of inputs for SOEs. The SOEs played a dominant role in progress made so far in state restructuring. First, for those the delivery of social services, providing health facilities, unfamiliar with recent Polish experience, we provide back- vacation resorts, housing, child care, and so on. SOEs also ground on the institutional legacy from the communist absorbed redundant labor, thus furnishing social assis- era. Next, modifications in this structure under the cur- tance and unemployment insurance. An extremely im- rent regime are described. Finally, we offer a brief assess- portant role was played by the Ministry of Labor in setting ment and suggest some directions for further reform.' wages and other working conditions for the nonmaterial economy, comprising the general government in its most Current status of the Polish state ample definition. Toward the end of the 1980s, reforms were under- machinery taken to foster more decentralized economic deci- sionmaking. These reforms assigned more decision- The 1952 Polish constitution, shaped under the direct making responsibilities to SOE managers and workers' influence of the doctrines and practice of the 1936 councils (ironically, presenting an obstacle to reform in "Stalinist" constitution of the USSR, set out the rules later years). At the same time, the role of directive cen- underlying the organization of the state machinery. This tral planning was curtailed through a progressive reduc- constitution, in effect until the Round Table negotiations tion in the number of inputs to be allocated centrally. in 1989, consolidated the existing system of socialist Correspondingly, several line ministries were consoli- authoritarianism and centralized economic planning and dated into a single Ministry of Industry (1987).2 Despite management by stabilizing the political system dominated these incipient attempts to enhance the efficiency of by the Communist Party. the state machinery, the overall political and economic The system enshrined in the 1952 constitution also situation continued to deteriorate rapidly, and Round had the effect in Poland (as elsewhere in Eastern Eu- Table discussions led to the implementation of the eco- rope) of blurring or eliminating the dividing line be- nomic transformation program in 1989. 252 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Modificatiors since the collapse of the communist regime matter) required greater elaboration. Only recently has the tax code been completed, and legislation establishing Constitutional changes. One of the key institutional regulatory authority in several important areas (particu- achievements of the new Polish regime was the constitu- larly in energy) has lagged behind. And important piece of tional amendment of April 1989, approved by the Sejm a legislation and regulation establishing competitive pro- few days after the signing of the Round Table Agreement. curement of goods by the state is still under discussion. The amendment gave legal expression to the sections of the accords conceming the political system and to the Changes in the structure of the state. Reforming the compromise achieved there. It legalized political opposi- state involves creating a new administrative structure to tion activities. The constitutional amendment also had deliver public services and set policies under which pri- impact on the structure of the government. It allowed the vate sector initiative can develop. Government thus with- creation of a second parliamentary chamber (the senate); draws from the productive activities in which it was once the removal of constitutional hindrances to a democratic engaged, and the preexisting functional structure must reform of the electoral law; the establishment of the office shift accordingly. State transformation consists of the abo- of the president of the Polish Republic; and the creation lition of old structures, the assignment of new missions to of the National Council for the Judiciary. individual agencies, and profound cultural changes in bu- The dismantling of the structure of the "socialist reaucratic behavior. It also requires new mechanisms to democracy" continued with further amendments in De- arrive at consensus among different political players and cember 1989 (elimination of ideological provisions rela- to make the state bureaucracy function on the basis of tive to the socioeconomic regime), in March 1990 (in- professional criteria. Getting all these conditions right is troduction of local self-government), and in September not an easy task, and certainly not one for which a blue- 1990 (introduction of direct election of the president). print is readily available. In fact, an analysis of the wide But the 1952 constitution, so amended, still lacked some variety of institutional structures in most industrialized principles common in Western democracies, in particu- countries to perform key economic functions suggests that lar the concept of separation of powers. Supreme power there is no clear orthodoxy which can be easily applied to was attributed to the Sejm. This issue was further clari- Poland to dictate the type or number of state organiza- fied with the passage by the Sejm (August 1, 1992) of tions that should be in place to carry out economic re- the Constitutional Law on Reciprocal Relationships be- forms. Absent an ideal model of the reformed state, and tween the Legislative and Executive Power and on Local given the practical difficulties of organizational change, it Self-Government. This law (the so-called "small consti- is likely that reforming the state in Poland will mean tution") laid the basis of a truly Westem democracy by carving out new structures from existing ones.3 establishing the principle of separation of powers. More The above complexities notwithstanding, it is clear specifically, the small constitution enumerated the fol- that profound modifications have already occurred in lowing organs of the state: the Sejm and the senate in the structure of the state administration in parallel with the field of legislative power, the President of the Repub- the above constitutional and legal changes. An early pri- lic and the Council of Ministers as executive power, and ority in defining the scope of political, economic and independent courts as judicial power. Compared with the administrative decentralization was given by the imple- previous constitution, the small constitution diminished mentation of the Local Self-Government act. This act the powers of the senate, strengthened the position of has led to the creation of approximately 2,500 gminas the Council of Ministers to which the Sejm may delegate (communes), the direct election of city councils, and the some legislative power, and weakened the position of the attribution of a number of spending and revenue-raising President of the Republic. responsibilities to local governments.4 The explicit pur- pose of decentralization was to divert power from the Legal changes. Work to adapt the legal system to the center, especially from the ministries previously charged new economic and political order began in earnest, partly with oversight of local public activities. In the process, a facilitated by the existence of a rich, albeit somewhat number of units in the central government structure outdated, legal tradition going back to the pre-World have lost their role or have seen it reduced. Decentrali- War II period. This work led to a quick settlement of zation continues to be a high reform priority. Currently a issues concerning property rights, the commercial code, proposal for the creation of the powiat level of govem- bankruptcy, rules affecting foreign investment, and so on. ment is under discussion. The powiat would replace the Progress has been slower in areas where the lack of a present administrative rejons in the rural areas and would preexisting tradition (and the complexity of the subject increase the power of the gminas in urban areas. Sub- TRANSFORMING THE STATE: ISSUES IN PUBLIC ADMINISTRATION REFORM IN POLAND 253 stantial devolution of spending and administrative pow- enced by the old "Central Investments" instrument). In- ers would be accomplished, as powiats would be given dividual agencies' ability to prepare, discuss and execute responsibility over large portions of the administration of budgets or at least to formulate fundable programs is health, secondary education, and several other functions inadequate. Public procurement procedures, a necessary now exercised at the central level. requirement for a modern state in a market economy, Within the central administration a few agencies are also inadequate. and ministries have been abolished or substantially re- structured, including the Censorship Office and the Min- Relatiaons between SOEs and the state. A crucial area istry of Intemal Trade (partially absorbed by the Ministry where more progress is needed is the relationship between of Indus"ty). On the whole, though, reforms have re- the central authority and the SOEs. Initially, the sulted in the creation of new organs rather than in a govemment's approach to SOEs was based on indirect reduction of the number of agencies. The Ministry of methods, thought to provide incentives for profit-maxi- Privatization was created in 1990 to carry out the task of mizing behavior by SOE managers. Tax incentives were devolution of the productive apparatus. Regulatory func- also offered to stimulate commercialization and eventual tions have been enhanced through the creation of the privatization of enterprises. The SOEs continued to be Antimonopoly Office. A program for reform of tax ad- under the nonsinal supervision of their "foundingorgans," ministration has so far helped strengthen relevant de- while commercialized enterprises awaiting privatization partments in the Ministry of Finance and a separate Cus- would become the ward of the Ministry of Privatization. toms Council has been established. The voluntary method of commercialization, however, In a number of cases the internal organization of met with only limited success, and the unwillingness to the agencies of the state administration has been reex- enforce penalties for noncompliance with compulsory pay- amined. The Ministry of Industry has undergone a pro- ments substantially decreased the credibility and effec- cess of internal restructuring that, among other things, tiveness of the indirect control policy. resulted in the abolition (at least on paper) of its "verri- The uneven experience with indirect controls calls cal" organizational structure, with the exception of mat- for greater reliance on direct ones. But in practice, the ters related to energy.' Functional audits are being pre- exercise of the treasury function by the state was hin- pared in the Ministry of Agriculture and the Council of dered by the inappropriate legal framework and the thin- Ministers. Anecdotal evidence suggests, however, that ness of the staff of the funding organs. While initially it there is ample scope for further reforns of the adminis- was considered appropriate to create a state treasury as a tration. As will be argued below, misallocation of hu- central organ exercising authority over the SOEs, the man resources rather than overstaffing is the nsain the current approach emphasizes a more diversified and de- central administration problem. Many public employees centralized strategy. The government has identified the still work in agencies whose mission is questionable. In enterprises it intends to keep under public ownership for other agencies, insufficient employees and lack of ca- the time being (either because of strategic considerations pacity to carry out functions essential to a modern state or because of the social and economic difficulties that suggest that further transformation needs to take place. may prevent privatization). These enterprises will gener- The recent debate on defining the role and nature of ally remain under the enhanced control of the Ministry the line ministries and of the central planning office, on of Industry. For the remaining enterprises, the recently the one hand, and the extreme weakness of the opera- approved state enterprises pact provides an avenue for tions of the ministries of health and of education, on the commercialization and privatization with enhanced wor- other, reflects the complexities of this organizational di- kers' participation. Commercialized enterprises would be lemma in Poland. supervised by boards, and ultimate ownership control First steps have been made in changing public sec- would be exercised through a variety of arrangements tor financial management. The most important reform (in the case of agribusiness, for instance, through the may have been the 1991 passing of the organic budget Agricultural Property Agency, a semiautonomous body). law, which established a framework for budget prepara- This pragmatic approach, which no doubt will require tion. Still, the system is far from ideal. Despite the ins- fine-tuning, may attain the desired economic objective, proved preparation (mostly by the Central Planning Of- that is, privatization of the productive apparatus, with- fice) of annual and "multiyear" economic assumptions, out creating the kind of centralized control function that short-term thinking continues to dominate. No satisfac- elsewhere has often proven an obstacle to devolution tory mechanism is in place for the preparation and moni- and whose attributions may never have been agreed toring of a public investment program (still largely influ- upon by parliament.6 254 CIVIL SERICE REtORM IN LATIN AMERICA AND TIE CAR188EAN Assessment: providing a focus for single agency to carry out or facilitate the execution of the two-step institutional audit procedures discussed earlier. reform This agency could set out a process of systematic review of existing institutions as well as an assessment of their tasks. The preceding discussion provides a picture of uneven Equally important, this agency should begin to give direc- progress in adapting the structure of the state to its new tion and initiate reform in areas such as pay and civil tasks, despite the considerable accomplishments of the service management. past three years. The constitutional and legal changes, though The choice of institution and the nature of its man- far from complete, have at least provided the foundations date depend on the evolution of the political process, for a democratic society, clarified the roles of separate and appendix A describes several alternative arrange- state powers, and laid a framework for economic reform ments currently adopted by advanced market economies. and private sector activity. Nevertheless, considerable We note that within the Council of Ministers, consider- work remains. While political and constitutional issues able progress has been made in creating what could form are beyond the scope of this report, we note that in the basis of a future public administration agency. For certain regulatory areas affecting economic activity (tele- the Council of Ministers (URM) to fulfill this role, how- communications, but particularly energy) progress has ever, it will be necessary to confront another problem been slow-despite several legislative and regulatory which delays decisionmaking and implementation. This changes-and reform should accelerate. problem involves the weakness of the institutional role Decentralization has been, on the whole, rather suc- of the prime minister. The prime minister, as President cessful, but greater challenges lie ahead. On the one of the URM, does not currently control her own organi- hand, local governments have yet to receive all of the zational unit to handle administrative and political af- attributions intended for them. The complete devolu- fairs. Instead, the prime minister must mediate through tion of primary education, coupled with the still un- the Minister-Head of the URM who runs the administra- settled intergovernmental fiscal system, may cause strain tive apparatus. A sensible reform meriting serious con- on the administrative capacity of these governments in sideration would be to create a chancellery of the URM, the near future. In addition, plans for further decentrali- subject to the prime minister and directed by a secretary zation of state functions may lead to considerably greater of state-Secretary to the Council of Ministers-ap- shifts of fiscal power and responsibility to local adminis- pointed by the prime minister. Within the framework of trations. The fiscal and administrative consequences of the chancellery, two cabinets, one political and one eco- such shifts should be carefully assessed before further nomic, both with personnel appointed by the prime min- reforms are launched. ister, would coexist. A third section of the chancellery Regarding the reform of the state administration would provide legal and organizational services for the proper, we note that the actions of the last two years prime minister and the government and perform tasks have often occurred in a somewhat haphazard and de- mandated by the prime minister, parliament or the URM. centralized fashion, without a clearly spelled out overall The remaining administrative section of the URM would strategy. There are advantages and disadvantages to this become a new Ministry of Public Administration, fulfill- approach. The major advantage is that progress in adapt- ing the role discussed above. ing the state structures can be made without depending The creation and strengthening of a coordinating on decisions and directions stemming from a central bu- unit which can serve as government's focal point to man- reaucracy which may not yet exist or be sufficiently age the administrative reform and provide the institu- strong to carry out the task. But the decentralized ap- tional basis for the establishment of a more permanent proach may not ensure that adequate and uniform crite- organ to run the public administration is a crucial step ria are applied in all cases. More fundamentally, there that must be given urgent priority. It will make it easier to are a number of problems cutting across all of govern- improve coordination of an enormous task, and might ment that cannot be confronted in isolation. As we will thus permit acceleration of the public administration re- discuss below, employment and pay management reform, form agenda on all fronts. This agenda must be taken up as well as the creation of a modern civil service, are tasks with great urgency not only because effectiveness of gov- requiring strong central direction. emient work is sharply reduced by outdated machinery, There can thus be great merit, as the reform of the but also because pressure to solve public pay and employ- state is about to enter a new phase, in establishing a clear ment problems can be withstood only at extremely high focal point to formulate and coordinate administration political and social costs, as evidenced by recent events reform policies. A strong mandate could be given to a that led to the dissolution of parliament. TRANSFORMING THE STATE. ISSUES IN PUBLIC ADMINISTRATION REFORM IN POLAND 255 Government Pay and Employment: Empirical Basis for Reform Creating a state with the capacity to assume the tasks of Most productive firuis were in the hands of the state. the transition and to play a vital role in the emergent Agriculture was largely private throughout communist market economy depends critically, as was discussed rule; thus, the overall share of private sector employ- above, on getting the functional responsibilities and orga- ment in total employment was somewhat higher than in nizational structure of government right. The need for neighboring socialist countries. Still, it amounted to only rational allocation of staff to carry out redefined state 47 percent of the total labor force by 1989. The reforms functions presents another crucial imperative for adminis- implemented since 1990 nsarkedly altered this picrare, trative reform. The prerequisite to rationalizing the public however. Overall employmenr declined suibstantially (by service is an accurate understanding of the present de- over 12 percent between 1989 and 1992). This decline is ployment of personnel throughout government and of the essentially explained by a sharp decrease in total public kinds of incentives currently in force for public ensploy- sector employment, consprising state employees in the ees. Several important issues will need to be resolved public budgetary and nonbudgetary spheres.7 Together, before reform can occur. What is the appropriate size of these two categories of governusent employment de- the public service for the new Polish state with regard to clined by over a third over the sanse period. In contrast, both functional requirements and fiscal responsibility? the private sector not only increased its share of total What kind of remuneration and overall incentive struc- employment in relative ternss (from 44 to 55 percenit), ture should be installed to ensure a professional civil but also increased it absolutely, absorbing, to sonue ex- service at affordable cost? What mechanisms and institu- tent, public sector redundancies. By 1992, private sector tions need to be established to determine these and other employment was estimated at 8.2 million people-an in- public employment policies and to manage the system? crease of nearly 8 percent over 1989. How can central government employment be separated The significant reduction in public employmenr is ftom that of newly decentralized government and from mainly attributable to the precipitous fall of nonbudgetary noncore funcrions such as education and health, thus sphere enuployment by nearly 39 percent during 1989 to enabling the establishment of a civil service with its own 1992, reflecting rapid privatization and the productive compensation arrangements and conditions of service? crisis of the SOE sector. Job losses in the buidgetary sphere The following discussion takes a first step toward (henceforth referred to as general government) have been clarifying the picture of current public pay and employ- almost negligible. Indeed, at some 2.5 million enmployees ment conditions in Poland, identifying key issues and as of 1993, the general government has remained rela- constraints, and making some initial policy recommenda- tively stable since 1989, increasing by less than 5 perceist. tions. We examine recent public employment trends and Within the general government sphere, employment de- then review the main considerations regarding incentives clines varied considerably by sector. Areas such as arts and remuneration, focusing both on the fiscal aspects of and culture, science and technology, physical cultare and wage bill management as well as the need to provide tourism, in which privatization or sharp funding cats oc- appropriate incentives to good public service performance. curred, showed the sharpest decreases. Aside from these Then, the institutional capacity for establishment man- sectors-often in private hands or semiautonomous pub- agement is examined. Finally, we suggest ways to begin to lic institrtions in asany nonsocialized countries-general improve the current situation. government employment numbers are mainly driven by three large institutional blocks: the state administration, the education sector, and the health sector. Though large Employment trends absolute (but not relative) declines took place in educa- tion and health between 1986 and 1992, stare administra- This section addresses three basic questions: What con- tion increased during the same period. stitutes "the public sector" in Poland and which part of that is "central government"? How are public employees Public employment: irstenuational comparisons distributed among the various branches of general gov- ernment? How do these numbers and distribution com- Is Poland's government overstaffed by international stan- pare to international standards? dards? Cross-country comparisons have only limited util- Before the implementation of the 1990 reforms, ity, as classification methodology varies with national in- most employment in Poland was in the public sphere. stirarional characteristics. Nevertheless, table 33.1 pre- 256 CIVIL SERVICE REFORM IN LATIN -MER C AN TIt CuRsiBBN sents some roughly comparable cross-national data. As- process, as the currently constituted budgetary sphere sessing general government employment more broadly, includes various sectors which may ultimately be pri- Poland's public service does not appear to be excessively vatized, contracted out, or spun off into semi-autono- large. Indeed, at just over six public employees per hun- mous state agencies. Four major public employment con- dred population (or 13 percent of the labor force), Poland stituencies will require particular attention in this defini- compares favorably with all of the OECD countries shown tional exercise: central administration (13.3 percent of in table 33.1, save Japan.5 Equally favorable is the com- government employees), local government (3.4 percent), parison of the narrower definition of central government education (45.1 percent), and health (35.2 percent). employment.9 There are fewer than eight civil servants Employment trends and issues in these sectors are dis- per thousand population in Poland, a figure lower than all cussed below. In the section we briefly review trends in of the OECD countries shown in table 33.1, except Japan each of these subsectors. More in depth treatment for and Germany. education and health employment is beyond the scope Despite the serious comparability problems, intema- of this paper. tional comparisons nonetheless strongly suggest that in the aggregate Poland's government is not overstaffed. This Employment trends in the central administration does not mean that surplus does not exist with regard to particular sectors or agencies possibly necessitating ulti- The central administration has undergone some reorgani- mate downsizing. In Poland, more acute public employ- zation since the late 1980s when early economic reforms ment problems may be those of staff quality and distribu- started to take hold. Trends in aggregate employment tion of skills-particularly those in scarce supply- numbers reflect the thrust of these organizational changes, throughout government. An understanding of these more revealing two distinct phases: first, a considerable con- nuanced issues requires, as a first step, further analysis of traction between 1986 and 1988, when the consolidation the component parts of general government employment. of the line ministries into the Ministry of Industry oc- The next section examines trends in the main public curred; and second, an increase in staffing in the post- employment sectors. 1990 period. Preliminary numbers for 1992 indicate that the size of the central administration, at about 85,000 Redefining Xpr.u.bslic emplt employees, is now at its highest point, having increased substantially over the previous year. It is possible that this increase may be explained by reclassification of personnel Defining the parameters of the new civil service and from elsewhere in the public sector rather than by a net redimensioning the public sphere more generally will re- rise in government employment, though precise data are quire that distinctions be drawn among various parts of not yet available to confirm this conjecture. government that have been, up to now, undifferentiated. Although not sufficiently disaggregated to draw firm This could well turn out to be a complicated, drawn out conclusions, the data, combined with anecdotal infor- mation, also suggest that significant reallocation of hu- man resources toward the agencies charged with the new Public sector employment in selected functions of the state may have already occurred. For countries example, the increase in overall central administration employment can be largely explained by recent programs Generol government Central govemment to strengthen tax administration and expand the tax po- employment employment lice. In addition, new agencies or ministries have been As a share of As a shore of As a shore of As a shore of given higher staffing levels (Antimonopoly Office, Min- Country population labor force population labor force istry of Privatization, Ministry of Justice), which add up Australia 10.57 21.36 0.93 1.88 to a considerable increase in overall numbers. Although Canada 8.98 17.35 0.88 1.70 Denmark 14.93 26.63 3.06 5.46 employment has been substantially reduced in other at- France 8.92 20.61 3.69 8.51 eas, such as censorship and planning, these cuts did not Germany 6.96 14.44 0.50 1.04 alter the overall upward trends in central administration Japan 3.05 6.02 0.41 0.80 employment. Poland 6.21 13.21 0.78 1.66 Sweden 16.77 3 1.45 2.90 544 Without agency-specific functional audits, it is not United Kingdom 9.35 18.77 0.99 1.99 possible to assess the appropriateness of current staffing United States 6.79 13.46 1.24 2.45 levels for any given government entity. Some key minis- Source: Government of Poland; and World Bank data. tries, such as Finance, Health, and Education, have main- TRANSFORMING THE STATE: ISSUES IN PUBLIC ADMINISTRATION REFORM IN POLAND 257 tained constant employment numbers or experienced Local governments engage in personnel and wage bill slight reductions over the last three years. It is possible management practices similar to those of the central ad- that these ministries are understaffed, inhibiting their ca- ministration. Their autonomy is largely limited either by pacity to perform essential functions. In some other min- controls over complement or by centrally set remunera- istries and agencies (such as the Ministry of Industry), tion scales. Plans for enhanced local government respon- overall staffing levels should be reassessed in view of re- sibilities will create new problems which will need to be duced responsibilities. addressed. Decisions will have to be made as to which What cannot be substantiated by the aggregate data public servants currently employed oy central govem- (in the central administration in particular, but probably ment should be placed under local govemment auspices. elsewhere in the "budgetary sphere" as well) is the re- For instance, what would be the institutional and finan- ported exodus of high-level professionals with important cial implications for local govemments of decentralizing policy and technical skills to the private sector. We touch education sector employees, such as primary or secondary upon this phenomenon in the following section's discus- teachers? Which quality standards should be set locally sion of wage policy. Beyond anecdotal accounts, however, and which norms determined centrally? Answering these available data do not permit systematic analysis of the questions will involve thorough assessment of local gov- nature of turnover that might have taken place in various ernments' capacity to manage increased responsibilities. parts of the administration. Lack of disaggregated infor- It will also depend on major government decisions about mation about the quit, attrition or recruitment rates for overarching decentralization policies.'0 different levels of the public service prevent empirical documentation of shortages among particular professional Employment in the education sector or bureaucratic groups. Nor is it possible to know if, for example, higher-quality staff vacated positions which were Teachers and school administrators make up the most then filled by less competent replacements. Given the substantial part of public employment. In the education large increase in employment in some units that was just sector, more disaggregated data are needed in order to noted, however, it is conceivable that whatever loss of establish appropriate staffing norms, to identify redun- qualified professionals may have occurred was limited to dancy and/or shortages, and to undertake manpower selected-albeit possibly critical-units (such as the Min- planning for the future. The World Bank's Education istry of Finance). Sector Study identified approximately 558,000 teachers for 1990 to 1991, of which about 357,000 are in primary Employment impact of decentralization education.]] Polish Department of Statistics data for first quarter of 1992 showed 601,300 teachers, again The likely impact of present and prospective decentraliza- mainly in primary education. While overall budgetary tion programs on public employment and pay requires sphere employment figures in the education sector in- urgent attention. Local employment is large and, with creased between 1988 and 1992 by over 13 percent, the new administrative reforms, almost certainly bound to last year saw a decrease in teachers by 30,000 (including increase. So far, the institution of the gminas was accom- 10,000 retirees). panied by a large transfer of personnel (about 75,000 Redundancy in the education sector is suggested by employees in 1992) from the central government to the the very low student-teacher ratios, particularly in pri- local level. There remain, in addition, some 32,000 em- mary education (about 18 compared with 16 in 1991/ ployees in the deconcentrated voivodship, fully charged 92), due to relatively low teaching contact hours (18 per to the central budget. These numbers probably underesti- week compared with 25 for Europe) and to a prolifera- mate overall local govemment employment, since a num- tion of single-subject teachers and part-time teachers. ber of municipal services are rendered through municipal Proposed reforms in the education sector are likely to companies (water, sewerage, transport, child care), which reduce the overall demand for teachers, to introduce are not included in employment data. more cost-effective and flexible use of existing teachers. Future decentralization actions may also alter this Efforts to rationalize the allocation of teachers may re- picture. It is planned that primary education will become quire measures such as retrenchment or early retirement. a gmina responsibility by 1994. Current proposals for re- The Teacher Act of June 10, 1992 raised the obligatory form would entail a substantially larger transfer of spend- teaching load from 18 hours per week to a minimum of ing responsibilities to existing and future local govern- 25 for technical teachers and 23 hours for others, plus 5 ments. But, overall, the potential staffing implications of additional hours to be assigned as necessary, with a maxi- these reforms are as yet unknown. mum allowable load of 40 hours per week under a "pay- 258 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN ment for overtime" policy. Implementation of the law is and the population-doctor ratio (21.4), dentist (4.8), currently being negotiated between the administration nurse (54.4), and midwife (6.3) all fall within the OECD and teachers' union. mid-range. But certain types of shortages exist: there are Separating the management and pay of teachers and chronic shortages of nurses and auxiliary and primary- school administrators from other government civil ser- level health care workers in relation to doctors and beds. vants will involve drawing distinctions between schemes Nurse-doctor ratios (2.5 compared with 0.8 to 7.7 for of service and pay conditions, and, as just mentioned, OECD, in 1987) and nurse-bed ratios (0.9 compared making a decision as to whether further decentralization with 0.31 to 1.26 for OECD, in 1987) are low by ad- should result in decentralized management of pay and vanced industrialized standards. There are more special- work conditions. Serious reform attention will need to ists than generalists and few public health specialists, focus on streamlining and improving management prac- health managers, administrators and health economists. tices in the education sector.'2 In-depth analysis should There is a shortage of general practitioners, and a surplus include a review of: the functional attributions of the of specialists in many areas but a shortage in others. In central administration in light of current decentralization mid-1992, there were 301,400 health personnel: 85,300 and the need to undertake central functions such as as- doctors and 216,100 nurses and other employees. Health sessment and evaluation, planning and research and ac- care workers also earn low wages, almost at the bottom creditation of private providers; the deployment of staff, of the relative wage scale (women constitute 80.3 per- with particular attention to the need for adequate admin- cent of health care workers). istrative staff at the central level; the need to retrain a large number of teachers and administrative staff; and the Public service pay and wage bill working conditions and incentives necessary to attract and retain a motivated teaching force. issues Health workers In the past three years, aggregate wage bill management has been subject to the overall budget constraints im- Health is the other sector which comprises a large share of posed by Poland's economic situation. Wage bill control budgetary sphere employment and will require extensive has been largely attained, and Poland does not compare reform. The main problems identified in the World Bank's unfavorably with other countries undergoing similar fiscal health sector study were qualitative in nature (training, strain. Wage expenditures in 1992, as a percentage of licensing, human resource management, remuneration GDP (at about 6 percent) or as a percentage of total levels)."3 Concerns of supply and geographic distribution expenditures (around 15 percent) or in relation to goods of staff were also flagged (for example, doctors per 10,000 and services (around 15 percent), are not alarming from a people is 41.8 in Warsaw but only 9.9 in Siedlce comparative perspective. Nonetheless, the trend for the voivodship). Part of the problem stems from the prolifera- period between 1989 and 1992 for all of the above (as well tion of institutions providing health care services. The as other indicators) is one of increase. The public sector main actor is the Ministry of Health and Social Welfare wage bill is clearly becoming more burdensome as a rela- (MOH) but also other ministries, public enterprises, medi- tive share of the national budget. Indeed, wage expendi- cal cooperatives and a small private sector provide health tures as a percentage of total expenditures have increased services. Unfortunately, there is a dearth of information by almost 36 percent during that period. Perhaps more on parallel services provided outside the MOH, which significant is that personnel expenditures rose as a per- makes it difficult to assess the actual capacity of Polish centage of total revenues by over 39 percent. health services and future needs. In addition, health sec- This relative increase in the wage bill over the 1989 tor statistics tend to overestimate actual employment, to 1992 period was occurring as average wages for the double counting retirees, individuals with more than one public sector were falling. Public sector wages (both SOEs position, and the like. and the general government) rose substantially in 1987 While the number of health workers increased mark- and 1988 and then began falling in real terms. These edly in the 1980s, the number has begun to drop off developments resulted from the interaction of several fac- slightly, falling from a high in 1990 of 867,600 to 804,300 tors: the government's attempts to maintain budgetary in 1992 (a decline of just 7 percent). For some types of sphere wages at some constant relativity to state enter- workers, ratios compare favorably with OECD norms. prise salaries; macroeconomic stringencies; the bargain- There are, for example, 2.3 health workers per 100 (mid- ing powers of groups of public employees; and some lim- way in the OECD range of 2.0 percent to 4.1 percent) ited incentive structures and managerial discretion. TRANSFORMING THE STATE: ISSUES IN PUBLIC ADMINISTRATION REFORM IN POLAND 259 Traditionally, remuneration levels in the public ad- tween lowest and highest). In 1991, the state administra- ministration had been kept low relative to those prevail- tion and higher education enjoyed the highest wages (113 ing in the state enterprise "productive" sector, resulting as and 108 percent of average budgetary sphere); the lowest of 1988 in average wages for the budgetary sphere that were reserved to social welfare workers and nonuniformed amounted to approximately 73 percent of the average defense and security employees. In the second half of the wage in the six (key) sectors of the national economy. same year, the relative wage policy was further modified This policy was reversed toward the end of the decade, to benefit a "core" group of state administration employ- when in an effort to "correct" these inequities between ees. The budgetary allocation for wage increases in the budgetary and nonbudgetary spheres of government, a second part of the year was used, apparently with total law was introduced setting new targets for overall com- executive discretion, to raise significantly the remunera- pensation levels of public employees. The stated purpose tions of about 19,000 government employees working in a of the law was to attain, by 1992, an average level of number of agencies (mostly in Warsaw) where private remuierations equivalent to 106 percent of remunera- sector competition was exercising a threatening pull ef- tions in the state enterprise reference group. This was to fect. This is illustrated in table 33.2 which shows that the be accomplished in annual increments which would raise average wage in the "core units" was 191 percent of the the average by three points (1989=97 percent, 1990= 100 average budgetary sphere. Considering that the wage in- percent, 1991 = 103 percent, and 1992 = 106 percent). It crease took place in the second part of the year, it is is unclear as to whether the budgetary implications of apparent that the wage differential within the public sec- what would have amounted to a substantial increase in tor has increased substantially. real public sector remunerations had been carefully as- To the extent that dispersion of salaries across sectors sessed, but judging from the initial jump in budgetary or ministries in the budgetary sphere is increasing, this may sphere wages, the policy was adhered to during the early indicate, as this report has already suggested, a de facto reform period. staff reorganization taking place which reflects some im- The policy was suspended in the second half of 1991 plicit assumptions about more and less valued government (although the Constitutional Tribunal ruled that such functions and professional skills. Although this situation suspension was illegal), and suspended again in 1992 and displays some traits of a healthy labor market within gov- 1993. The basic law remains in effect, however, and there ernment, it also poses problems for essential but perhaps is no alternative mechanism envisaged as yet. In the ab- devalued functions which will find it difficult to attract sence of policy decisions in this area, growing dissatisfac- high-quality staff in the present climate. Functional audits tion within the central administration and the other com- and skills inventories combined with better forward plan- ponents of the public sector is leading to increasing social ning instruments recommended above can help correct tensions, as well as a loss of morale among employees, potential distortions in this internal market. while it is stimulating flight of the best qualified toward The ability of any given ministry to attract good better opportunities in the private sector. professionals to government jobs may thus be decreasing The net effect of these policy shifts has been across- for less esteemed ministries. Anecdotal reports suggest the-board wage erosion in the public service. Erosion is that the problem is widespread and is affecting even those more acute in some parts of the budgetary sphere than others, however. Indeed, differentials between the two TABLE 33.2 major government employment sectors are echoed in the Relative wages in the public sector overall lack of wage uniformity within the budgetary sphere. Clearly, there have been ministerial winners and Employment cotegory 1991 1992 losers, reflecting not only deliberate govemment policy Total budgetary sphere 100.0 100.0 but also the considerable managerial discretion which Education and training 100.6 100. characterizes Polish public sector pay practice at indi- Higher education 108.7 110.5 vidual ministry levels. Culture and art 94.2 93.3 Health 99.7 99.0 The 1989 public sector salary policy also contained Social welfare 90.3 90.8 guidelines setting relative sectoral wages. Despite the lack State administrabon 1 13.1 110.5 of compliance with the overall wage targets alluded to o/w core units 191.5 Administration of justice 98.0 98.7 above, these guidelines, based on unclear criteria, were Nonuniformed MoD 90.3 90.1 generally respected. The relative wage policy that emerges Nonuniformed MoL 90.3 91.5 on the basis of the actual data shows not insignificant Other 97.5 95.3 average wage differentials across sectors (25 percent be- Source: Govemment of Poland. Mistry of Labor. 260 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN ministries that have fared better with regard to remunera- It should also be noted, however, that anecdotal tion. Although the recent pay raise referred to above may accounts not only reported drainage at the top level of the have temporarily mitigated this brain drain, interviews bureaucracy, but also at the level of secretarial support, throughout government point to several instances in especially as regards staff who possess computer skills. which staff with scarce skills are drained out of govern- The result may be some grade inflation whereby skilled ment to private sector jobs, sometimes severely affecting secretaries were elevated to inspector and specialist levels the policymaking ability of key ministries. in order to offer them better pay. Clearly, a serious effort The issue of staff retention is related not only to to redesign the grading system to reward scarce skills dispersion among sectors within the budgetary sphere, appropriately to prevent brain drain and, at the same but also to the question of salary compression between time, to conform to appropriate and accurate descriptions top and bottom bureaucratic or professional levels. Table of job duties will be required in the immediate future. 33.3 presents two snapshots of compression ratios be- Analysis of wage erosion, dispersion and compression tween top and bottom level salaries in government. Us- tells only part of the story. Remuneration in the Polish ing the official salary scale and grading system, the "theo- public service also includes a range of nonwage allow- retical" ratio of top to bottom salaries is very flat at 4.5:1, ances. These, coupled with a high degree of managerial a ratio considerably lower than in most other countries. discretion, account for considerable remuneration vari- Using a sample of some actual bureaucrats' salaries across ability. As the following discussion of some detailed fea- ;he budgetary sphere, the compression becomes extreme, tures of the present remuneration shows, public service with top officials earning barely more than twice the low- incentives are not currently based on rational or meri- est employee's wage. Again, it is not clear as to whether tocratic criteria. this compression has been exacerbated of late; and, due A large part of the pay package is inertial, deter- to lack of data, the ratio cannot be compared to private mined by job grading and length of tenure. The average sector patterns. Thus, further investigation would be employee may receive a basic wage and, in the case of needed to determine whether this is a factor pushing the five highest managerial categories, a functional al- skilled professionals out of government posts at the high lowance (worth up to 15 percent of base). All workers levels. If so, one policy option for government to con- also receive a thirteenth month salary. For workers with sider (without increasing the overall size of the aggregate more than 20 years of seniority, a five-year anniversary wage envelope) would be to shift the wage pyramid to special bonus is paid, starting at 75 percent of base wage, reflect a salary distribution weighted more heavily to the and topping at 300 percent of base wage. Finally, em- top levels-these currently receive less than 30 percent ployees are entitled, upon separation (historically, an un- of the pie-to ensure higher levels of remuneration for likely event), severance pay of up to six months, depend- top bureaucratic echelons. ing on seniority. TABLE 33.3 The base wage is divided into 21 categories, ranging at present from ZI 1.0 million to Z15.4 million. It should Compression ratios for average salaries be noted that the lower end of the scale is determined in the central administration more or less by the movements of the national minimum wage (currently at ZI1.6 million). There appears also to Compression ratio have existed at one time a "job compression" principle, (thousands, Compression based on aiming to maintain the ratio at no less than 3: 1. The Position actuol) rotio solory scole) current ratio, as illustrated earlier, is considerably above Central administration that threshold. Director 6,322 In addition to these allowances, individual manage- Deputy director 5,371 1.18 2.25 rial discretion can be exercised in the allocation of bo- Advisor 4,782 1.12 2.17 nuses. Since budgetary allocations depend on the number Section chief 3,820 1 .25 2.00 Principal specialist 3.572 1 .07 2. 10 of authorized positions, not all of which are filled, manag- Senior specialist 3,035 1.18 2.24 ers can distribute, as they see fit, unspent funds among Specialist 2,815 1.08 2.00 existing workers. It is unclear, however, to what extent all Senior inspector 2,926 0.96 2.I2 or part of the unspent funds can be used for this purpose, Inspector 2,416 1.21 2.13 Other 2,807 0.86 2.40 or whether there are specific rules limiting the discretion Compression between of managers. There appears to be little if any linkage top and bottom 2.25 4.49 between the allocation of basic pay or these allowances Source Govemment of Poland, Ministry of Labor. and job performance. TRANSFORMING THE STATE ISSUES IN PUBLIC ADMINISTRATION REFORM IN POLAND 261 Agency managers' autonomy is also somewhat con- and deconcentrated administrative units, teachers, and strained by indirect controls. Promotions are de facto health workers. The nonbudgetary, state enterprise sector limited by the Council of Ministers' control of the comple- was excluded as were the military and security forces and ment of departments. This limits the number of depart- political positions in ministries. ment directors and deputy directors-the highest paid positions in the administration. In addition, the overall Establishmeot managemenit and payroll administration. complement of positions is customarily agreed upon in The establishment management, payroll administration consultation between the individual organ or ministry and overall personnel functions appear to be extremely and the Ministry of Labor, which in turn consults, at least decentralized and, by and large, rudimentary, by Western on an informal basis, the Ministry of Finance. Aside from standards. Each ministry or agency has a personnel de- this, however, there do not appear to be other forms of partment which keeps records-for example, general in- control over the grade composition of the labor force. formation on age, social background, education and quali- fications, references, general health information, results Institutional management of government pay and employment of written examination and interviews. Personnel depart- ments vet promotion applications submitted with appro- Government pay determination and administration in- priate documentation from individual ministers, and, in volve a number of institutions in a complex system which theory, they review applications for individual salary in- is a hybrid of both the former centralized communist creases. But, at most, this review function is a check for structure as well as features that have evolved during the possible abuse; virtually 100 percent of proposals submit- reform period. ted are approved. Records are kept manually. They are not fed into a Pay determination. The Budget Office of the Ministry larger personnel management information system; nor are of Finance, with the endorsement of the Council of Minis- they linked systematically or electronically to the payroll. ters, provides an overall budget constraint for the aggregate Instead, changes in status are recorded and reported on wage envelope. Year-to-year wage guidelines are elabo- paper. Traditionally, personnel records tended to be main- rated through a process involving the Council of Ministers, tained for control purposes under the ancien regime. Thus, the Ministry of Finance, the Ministry of Labor, the KERM, personnel management, as previously practiced in Po- and the relevant trade unions (especially active in the edu- land, retains an unacceptable political taint. Modern per- cation and health spheres). In the last two years, the bud- sonnel management techniques are not practiced. With geting of the wage bills has been done on an incremental the exception of instruction in the application of periodic basis; the Ministry of Finance makes the key decision as to legal modifications, or recently, for example, in the calcu- how much the salary mass will increase over previous years. lation for remuneration purposes of the newly introduced The Ministry of Finance's main aim of late has been to personal income tax, personnel officers have received vir- abolish automatic indexation in the wage sphere and de- tually no training in this area. velop a new approach to collective negotiation arrange- The actual administration of the payroll is also very ments. Finance is also involved, with the Ministry of Labor, rudimentary. Essentially, the Ministry of Finance distrib- in decisions about the distribution of the total wage pack- utes the payroll to each ministry which in turn makes its age among various ministries in the budgetary sphere. And, own decisions about distribution (circumscribed as above). of course, the Ministry of Finance transfers funds directly Wages are provided in cash; the main secretary from each to ministerial agents to administer the payroll. department signs out a lump sum for the payroll from the The Ministry of Labor, once the principal adminis- cash vault. No systematic check on employee identifica- trator of wage policy for the entire society, continues to tion takes place, though there appears to be a widespread play an extraordinarily (relative to Western administra- impression that fraud is not a problem. tive models) important role in defining remuneration policy, pay scales and allocation of the wage fund among Conclusions and recommendations ministries and other budgetary units. Thus, although a standard salary scale, in principle, exists for most of the budgetary sphere, in practice, norms are developed in In order to equip the state with the necessary capacity to consultation or negotiation among the Ministry of Labor, perform the tasks required for the economic reform pro- the individual state organ and the relevant representa- gram and to prevent a dangerous erosion of public con- tives of collective labor. This system was conceived as sensus, the government will have to address the troubling covering all budgetary sphere employees, that is, central issues of govemment pay and employment raised in this 262 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN section in the very near term. The challenge is threefold: Third, the capacity to formulate sound pay policy on to define and circumscribe what is to be the civil service, an ongoing basis will need to be developed (probably with restricting its composition to those staff who are carrying considerable technical assistance and training) and in- out essential core functions; to set up the right incentives stalled in the institutional infrastructure described above. through the establishment of a remuneration package Even in the very short term, some important data will which is fiscally responsible but adequate to attracting need to be collected in order to begin to build an ad- and retaining qualified personnel; and to set up the insti- equate information base for policy reforms. For example, tutional infrastructure to manage the stock and flow of as a first step toward setting realistic pay levels for civil personnel establishment on an ongoing basis. servants, government should consider carrying out an initial pay survey to analyze central government remu- Public sector wage policy neration levels in relation to selected comparators in the emergent private sector, other relevant parts of the public Regarding wage policy the following picture emerges from sector, and, as appropriate, the nongovernmental sector. the preceding discussion: an urgent need to overhaul In addition, a pay and grading study should be under- compensation of public sector employees, which has not taken. This would propose concrete steps for several re- been addressed in a systematic fashion, thus leaving in forms to rationalize the current pay structure. Likely ac- place the old system; a significant wage compression across tions to be considered would be: folding bonuses and central government; a significant differential between allowances into the basic wage; correction or systematiza- emergent private sector remuneration levels and certain tion of the dispersion of wages among different sectors of jobs or professional skills in the central administration; the budgetary sphere; design of new classification and and an absence of adequate systems, trained professional grading systems for the newly defined civil service, and personnel managers, and infrastructure for efficient pay- similar exercises for the parts of government that remain roll administration. This picture indicates the need for in the budgetary sphere. serious policy reform and modemization of establishment Finally, new rules and a legal framework for pay de- management practice. This should be accomplished in termination will have to be developed. This involves de- consultation with all interested parties, but is no doubt termining the role of various parts of the government going to be a controversial exercise. A number of steps apparatus, including organs of the bureaucracy and the will in any case be required to bring about improvements legislative spheres, as well as the role of organized labor. in the remuneration area. This and other aspects of the pay and employment policy First, the old wage determination system, based on process will need to be codified, at their most general level the 1988 law, should be replaced by a new one, better in the civil service enabling act, and in detail in smaller adapted to the needs of the new public sector. Within the codes and regulations. The elaboration of this legal frame- overall budget constraint (which is unlikely to be substan- work is essential, but it should clearly follow the prior tially softened in the near future), separate wage policies steps enumerated above in the reform sequence. should be adopted for the main components of the public sector identified in the previous section. The main insti- Reform of public employment tutional actor in elaborating and carrying out this re- formed wage policy would once more be the Ministry of Careful examination of the available data on Polish pub- Public Administration, as discussed. Many of the exten- lic employment suggests a picture which is more corn- sive pay determination responsibilities now housed in the plex than earlier, more casual observations indicated. Ministry of Labor would thus be abolished. Using available international comparators, overstaffing Second, a modern, computerized payroll system for the budgetary sphere is not alarming, and a more linking a similarly modernized personnel management narrow focus on the core administration conveys still information system with the budget function must be less redundancy in the aggregate. This does not mean, developed as a high priority. This system will need to be however, that redundancy is not a problem. The issue linked immediately with the results of the employment appears, however, to be one of rational distribution and census recommended above, so the two should be con- allocation of staff, by sector, agency, function, profes- ceived jointly. The successful administration of this sys- sional skills and administrative responsibility. Some or- tem will depend not only on the institutional choices gans and sectors may need drastic downsizing (education referred to above, but also on extensive training of staff is an obvious target) or substitution of existing staff by located in both central and decentralized ministerial per- personnel with more appropriate professional skills. Oth. sonnel functions. ers may require additional staff, which might, in part, be TRANSFORMING THE STATE ISSUES IN PUBLIC ADMINISTRATION REFORM IN POLAND 263 transferred from elsewhere in the public sector. But in- The second exercise would stem from the recom- temal reassignment might be inadequate to staff some of mended review or audit of central government. An the new government institutions and agencies that are overarching review of functions of existing organs would being developed now. Some skills may be better con- inform decisions about which structures should remain in tracted on an as needed basis from the emergent private the machinery of government. This umbrella exercise sector, or, as discussed in a subsequent section of this would then lead to a series of audits, analyzing each min- report, might be developed through pre- or in-service istry or agency in depth, and determining the appropriate- public service training. ness of staffing levels and skills to the tasks and organiza- Several policy implications can be drawn from the tional objectives of the agency. Such reviews have been above analysis. One important conclusion is that reform carried out in numerous countries, employing widely used attention should not focus excessively on downsizing ob- management consulting techniques. In Poland, similar jectives per se, because the overall dimensions of the activities are under way with respect to the Ministry of Polish public service largely conform to international Agriculture and the Council of Ministers, but they should standards. A second finding, however, is that allocation be generalized and extended in scope. and distribution of staff appears to be inefficient-and in The third activity, possibly undertaken in conjunc- an extreme state of flux, as reflected in conspicuous tion with the functional audits, would be a skills inven- shifts of personnel (both rising and falling) for the bud- tory and training needs assessment. This would be a de- getary sphere as a whole. And for some agencies and tailed cross-government analysis of skill profiles and sectors, severe redundancy or scarcity issues will need to deficiencies in individual sectors or agencies in the con- be addressed. text of overall functional requirements. Both this exer- There is a clear need to improve the quality and cise and the functional review might focus initially on a coverage of information on public employment. A com- few key agencies or sectors in order to highlight priority prehensive information base should be formed in order to tasks. This would feed directly into the preparation of a take the immediate steps of defining which organs and manpower plan for acquiring essential skills, either staff are to be included in the new civil service, which are through recruitment, transfer within government, con- to be spun off into other forms of government, and which tracting out, expatriate technical assistance or training. are to privatized, liquidated or downsized. This informa- It would provide the basis for the formulation of a train- tion base would also provide initial input into a forward ing strategy for the public service. Along with the public looking manpower planning strategy, once the institu- service census, it would also serve as the eventual foun- tional capacity is present in the civil service management dation for a manpower planning system which govern- structure to do this; and it should feed uninterruptedly ment will need to install as part of its reform program for into an establishment management system which will need civil service management. to be set up as the foundation of the civil service manage- Even before gathering more complete information, ment structure as soon as possible. some initial consideration should be given to developing This task should be the main priority of the previ- at least a rough approach to the task of separating out ously discussed Ministry of Public Administration. A parts of the public sector as a first step to developing substantially strengthened Public Administration Re- discrete conditions of service for different branches of form Unit in the Council of Ministers could become the government. For example, as discussed earlier, large sec- embryo for such an institution, absorbing some of the tions of what constitutes budgetary employment at tasks now performed by the Ministry of Labor, and thus present (for example, physical culture and tourism, or filling a major institutional void. The immediate agenda finance and insurance) are unlikely candidates for inclu- of this strengthened unit would revolve around three sion in the civil service. Various other sections of public kinds of data collection exercises. The first is a publc employment could be separated from the civil service as service census or survey to determine how many and well, including teachers and health workers, among oth- which kinds of employees are working where in the ers. Preparatory analytical work, examining the legal, fi- public service. This census should also gather social nancial, and implementational implications of at least background data, including age, gender, and educa- the gross categories of public employment should be un- tional and professional characteristics, as well as salary dertaken to produce concrete proposals which would and length of service. Results of this census would be define the parameters of the civil service and establish checked against payroll data to reveal possible irregu- different conditions of pay and employment for those larities such as the existence of ghost workers or double state employees who do not become part of the civil employment. service proper. 264 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Civil Service Management Reform The tasks outlined above will not be easy. More daunting To achieve these objectives, improvements will be still is that they constitute only a first step toward the needed in a number of areas of civil service management. monumental challenge of creating a civil service on the This report highlights those essential functions that must ruins of the former communist bureaucracy. This section be up and running to fulfill basic administrative duties focuses on civil service management aspects of public during the immediate transition period as well as to put in administration reform. First, we outline the main ele- place the building blocks for further civil service develop- ments of civil service management that must be in place ment. These functions fall roughly into the following cat- to meet both the urgent demands of the transition as well egories: the development of a modern civil service organi- as the longer-term expectations for the development of a zational culture; cadre development and leadership- modern, effective, and responsive bureaucracy in Poland. grooming mechanisms; operating systems and rules for The discussion then turns to the present state of the ongoing management of the civil service; establishment Polish public service, providing background on the origins management and manpower planning instruments; staff of current practice and diagnosing critical problems in incentive structures; and institutional infrastructure for crucial administrative areas. This diagnosis leads to con- civil service management and oversight. clusions and recommendations of next steps, bolstered by some international examples (see appendix A). Based on Present state of Polish public this discussion, a concluding section will offer a specific agenda for reform. No strict prescriptions are made with service regard to the correct path to civil service reform, but recommendations are offered about which actions to take Although much of present-day Polish administrative to begin the reform process. structure and behavior can be traced to the recent com- munist regime, beneath lies an important legacy from Poland's requirements: creating Poland's more distant past. Indeed, bureaucratic central- ism, authoritarianism, legal formalism mixed with infor- a civil service for the transition mal influence networks, and the absence of an indig- and beyond enous, administrative elite all stem from a complicated bureaucratic and political history. This history spanned Poland's feudal administration and the advent of state- In order to carry out the more narrowly focused func- hood in the 12th century, years of foreign domination tions outlined elsewhere in this report, the Polish public and partition among Russia, Prussia and Austria-Hun- administration will need not only a streamlined state or- gary, the creation of central government in 1918, Ger- ganization and structure, a clear definition of civil ser- man occupation during World War II, and finally, com- vice employment and appropriate but affordable finan- munist rule during the most recent period. Throughout, cial incentives, but also-perhaps most profoundly-a several bureaucratic characteristics prevailed: rigid and transformation of the civil service and its administrative tall hierarchy (that is, many layers of bureaucracy with culture. Government needs to formulate, implement and decisional autonomy only at the top of the command enforce technically sound policies in key areas. Its main structure); power derived from personal ties and senior- mandate is to stimulate good citizenship and sound eco- ity rather than merit; and the prevalence of rigid rules nomic behavior. And it must be responsive and account- undermined by vertically organized patronage and cir- able to its public clientele who, in turn, must be confi- cumvented by the use of zalatwic (loosely the equivalent dent that the state can do its job effectively and to the English slang word "pull"). impartially. The bureaucratic machine needs to act Rather than radically disturb this traditional organi- quickly; decisions must be made rapidly at all levels of zational culture, the communist regime built upon it. Com- the hierarchy-not just the top of the command struc- munist party domination of the bureaucracy reinforced ture. As initiator and implementor of public policies that the top-down, centralist, decisional structure with promo- will be crucial to the success of Poland's economic re- tion preferences based on political or personal character- form program and the sustained development of a strong istics rather than performance. This behavior was embod- market economy, government must have able cadres and ied in the nomenclature system found in most of the a well-managed civil service. regimes of the region: the list of individuals suitable for TRANSFORMING THE STATE ISSUES IN PUBLIC ADMINISTRATION REFORM IN POLAND 265 appointment was determined by the leading executive The first step in developing high-quality govemment organs of the Party. cadres is to obtain an accurate picture of the present skills Resistance to party domination took the form of in- base of the Polish public service. As discussed above, little sulation of superiors by subordinates, withholding infor- information is readily available regarding the nature or mation and creating a "wall of formalized deference." distribution of professional skills in government. While Authority was also subverted through informal networks. this study cannot add substantially to anecdotal accounts Neither did the highly centralizing impetus of the Party of professional shortages, it can at least confirm them. offset the traditionalist tendency toward isolation and Mainly, reports note a dearth throughout govemment of fragmentation, resulting in minimal communication policy skills, as well as limited technical capacity in some among organizations in the public sphere. Although some key areas, including public finance, expenditure and in- Western intellectual and technical influences, such as the vestment management, accounting, project and sector scientific management and professionalism movements, economics and macroeconomics, market analysis and had modemizing effects in Poland in the 1960s and 1970s, modern computer techniques. The shortages are report- their overall impact was minimal, mainly felt in academic edly exacerbated by the drain of talented personnel to the rather than bureaucratic or political circles.'4 private sector. Some initial organizational studies of indi- The consequence of these various layers of adminis- vidual ministries, such as agriculture, reinforce the gener- trative culture is that, despite an extremely literate and alized picture of scarce policy skills in particular sectors, well-endowed human resource base in the country as a such as agriculture. whole, there is nonetheless a critical shortage of technical Quality secretarial skills also seen to be in short sup- skills required for policymaking, especially in the eco- ply, thus explaining what appears to be an unusually nomic and public management spheres. Some recent high proportion of professionals to clerical support staff trends are promising: many talented professionals previ- (approximately 6:1). The appropriateness of this ratio ously associated with academic institutions have assumed depends very much on workload, technology and skills, key positions in the bureaucracy, replacing virtually the factors not examined in any depth in this study. In any entire previous top administrative elite. Less encouraging, case, Poland's administration does not seem, as is often as demonstrated by the widespread need for advisers who the case elsewhere, to be overstaffed at lower clerical provide some temporary relief but no lasting solution, is levels. Managers clearly view the lack of adequate secre- the fact that these new cadres lack crucial technical back- tarial support as a problem; conventionally, it has been ground and policy skills. And their numbers are insuffi- dealt with through grade inflation, assigning qualified cient to carry out the govemment's critical agenda. secretaries titles implying higher professional grades and As the above history attests, the evolution of orga- thereby better salaries to prevent them from going into nizational culture is a slow process, probably determined the private sector. as much by historical accident as intentional interven- It has also been suggested that there is a surplus of tion. Appreciation of the weight of this indigenous tradi- lower- and middle-management staff. Disproportionately tion should foster appropriate humility in those attempt- high numbers of ideologically motivated appointments may ing to transform the Polish bureaucracy into a modern have been made over the years by the previous regime at public administration. But the importance of the task these levels, interviewees noted. Again, we could not verify demands concentrated, practical action. One strategy for this empirically, but certainly this perception points to the achieving bureaucratic transformation is to reshape the very real problem of dealing with dysfunctional vestiges of administrative cadre that will staff the new service. Some the old system. Because removal of politically tainted com- approaches to cadre development and leadership groom- munist officials has so far focused mainly on high-level ing are discussed below. bureaucrats, lower echelons remain in place. Many of these petty officials are older and more set in ways corresponding Cadre development and leadership grooming to earlier demands placed on them by the communist ap- paratus for obedience and control rather than indepen- Creating a civil service means developing a corps of staff dent analysis. Because of their senior age profile, the prob- well prepared to carry out their technical and policy func- lem may gradually solve itself through the natural tions and committed to a common public service ethos. retirement process. Meanwhile, a balance must be struck Poland faces difficulties in meeting this challenge, but it is between easing out truly untrainable staff and losing a vital that the government be successful in building a critical mass of bureaucratic skills due to the past political competent, public-spirited cadre if it is to transform the background. Besides, given the extent of political compro- public administration. mise in the previous era, few technically skilled people "of 266 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN a certain age" are without some associations or training The NSPA has so far been quite successful in attract- rooted in communist ideology; any attempts to clean house ing international interest and assistance. It has programs of become illusory in this context. cooperation with a growing list of countries and institu- There is a general lack of knowledge among Polish tions, including the Ecole National d'Administration in public servants of basic aspects of everyday administra- France, the United States Office of Personnel Manage- tion in a modem, Western-style bureaucracy. Autono- ment, the United States Information Agency, the John F. mous decisionmaking, critical analysis of policy options, Kennedy School of Govemment's Project Liberty, the Ca- responsive service demeanor, and collegial coordination nadian government, the Lyndon B. Johnson School of Pub- and information sharing are unfamiliar to most staff. An lic Affairs at the University of Texas, the European Insti- effective civil service requires the fostering of these skills. tute of Public Administration, and the Center of European To the extent that these impressions are based on Studies. In addition, it has hired directly several expatriate anecdotal data, they must be supplanted by concrete in- professors to supplement Polish part-time instructors. formation on government staff capabilities. As seen ear- The school's curriculum emphasizes both general and lier, systematic inventory of the actual skills mix of the specific courses. Examples include the role of public insti- public service should provide an input into a forward tutions in Western society; public law and administration; looking manpower planning system to develop a compre- micro-, and macro-, and welfare economics; public fi- hensive training strategy and to inform retirement, pay, nance; and international relations and international pub- classification and recruitment policies. In the meantime, lic law (including an introduction to European Commu- accumulating informal accounts at least reinforce the nity law, international contract making and diplomatic sense that staff development is essential to improve public protocol). It also offers training in negotiation skills, service quality and reorient bureaucrats toward modem decisionmaking, and communication, as well as more gen- administrative methods. eral courses in the social sciences. In addition, a vital element of the curriculum is a six week intemship in a Generating institutional capacity-targeting critical skills Westem country. This year the internships are in Britain, France, Germany, Ireland, or the United States. The pro- Training is an important tool used by successful civil gram is supplemented by daily intensive teaching of two services to develop skilled cadres for the public adminis- Western languages, and practical computer training. With tration. It is likely to play an even larger role in a country an endowment from the German government, NSPA has such as Poland, where a dramatic reorientation of staff built a small but first rate library in several of the above needs to take place quickly to manage the transition fields. Students are financed through bonded scholarships from an authoritarian command system to an open, compelling them to serve in govemment a minimum of democratic market society. Poland's present capacity to five years after graduation. carry out public administration training is limited and The impressive achievement demonstrated by the lacks strategic focus. creation of the NSPA in Poland cannot be overestimated. By far the most energetic, ambitious effort in public It is one of few such institutions in the former Soviet bloc. administration training has been the work of the National In mobilizing resources to tap into international experi- School of Public Administration, established by parlia- ence on elite cadre training, it has planced the seed of a ment in June 1991. The school, set up to provide training very good higher civil service staff college. Much remains for prospective elite cadres, administers a two-year post- to be done, however, and the school's institutional capac- graduate course in general public administration, public ity still needs strengthening. Moreover, without a more policy and international relations for new recruits (under complete vision of the overall civil service model, it is 30 years of age) who enter the school through competitive unclear as to whether government preferences will be to examination. Upon completion of their studies, these ca- continue to focus resources exclusively on a single nar- dets are ranked on the basis of their NSPA performance row-entry, elite training institution or to encourage the and guaranteed middle-management positions in the core development of a more open, competitive system with government administration, assuredly on a fast track to higher-level training provided by other organizations from higher posts; within one year, in fact, they are deemed the public or private sector. One factor which might mo- likely to reach director general (department head) level. tivate a broader institutional approach to training is what The school, which will turn out its first class of 60 gradu- is perceived as NSPA's excessively high cost per student ates this year, draws its part-time faculty from govern- and the small number of graduates produced annually. ment officials, university professors, and visiting or resi- Some argue that a more competitive model would train dent foreign experts. more students more efficiently. TRANSFORMING THE STATE ISSUES IN PUBLIC ADMINISTRATION REFORM IN POLAND 267 Most training efforts have targeted pre-service train- ment practice is very much to be determined. In light of ing, with relatively little attention so far to other impor- the total absence of these subjects in most Polish cur- tant training needs for the public administration. These ricula until very recently, it is unlikely that teaching ca- will have to be dealt with quickly to move Poland along pacity currently exists. the path of administrative reform. The most urgent need While it is uncertain as to what would be the most is for in-service training, which has not been adequately appropriate arrangements for the delivery of in-service addressed. In practice, NSPA's exclusive focus has been training, it is clear that some intensive reorientation and on pre-service training; the school has not assumed re- skills enhancement program for serving public servants is sponsibility for in-service training of public servants, other essential to the success of the transition. The array of than the exceptional short seminar for small numbers of institutions (both private and public) described above is senior govemment officials. There are indications, though, not currently organized or prepared to carry out this task. of some preliminary government efforts have been initi- NSPA's present capacity would also have to be signifi- ated to deal with in-service training issues. An Advisory cantly enhanced to undertake it. Moreover, even incipi- Council for In-Service Training has been formed to de- ent attempts to link NSPA's program with in-service train- velop a system to train serving public servants. In addi- ing for high-level public servants have met with resistance, tion, several ministries, such as those of Industry and as the latter are not uniformly receptive to the notion that Agriculture, are contracting training packages from pri- they even require training. They are reportedly uncom- vate, sometimes intemational, providers. fortable being trained alongside green recruits (this has Still, at present, there is relatively little capacity for been the case at some NSPA seminars). Finally, for some, the latter anywhere in Poland. Although a range of the whole concept of "training" in Poland may still carry public and private institutions, in principle, sponsor an unpleasant ideological association with involuntary some training for public employees, the quality is often socialization. The institutions, instructors, and course con- linked to approaches from the ancien r6gime and is tent selected to reorient and reeducate sitting public ser- mainly inadequate to the task of reshaping a civil ser- vants for the new civil service will thus have to be above vice. In theory, other organizations might be involved reproach in this respect. in in-service public administration training. Training in The other neglected area of training for the new the very broad management area is offered by a number Polish civil service is that of lower-level staff. The trans- of institutions, including higher education institutions formation of the old bureaucratic apparatus into a mod- offering full-time graduate study programs; higher edu- ern civil service will require significant reorientation of cation institutions offering part-time extramural study existing lower ranking officials and support staff. Training programs; independent management training institu- in the areas of basic accounting, word processing, com- tions; and organizations offering management training puter technologies, and commercial law is needed. Such alongside other services. In addition, approximately skills were apparently underdeveloped under the old re- eight upgrading institutes attached to government min- gime because relatively little "paper" was produced. Now, istries provide courses in specific aspects of manage- with more policymaking analysis, production of reports ment-mainly sectorially oriented-to state employees. will require enhanced skills. This training function may Although there has been no rigorous assessment of be mainly (but not totally) contracted out to private insti- these institutions, a quick review of program descrip- tutions, or there may be a need for a separate institution tions suggests that most emphasize economics, enter- apart from NSPA. In light of the scarcity of qualified prise management, and finance and accounting. Clear- lower-level employees, one policy option might be a ly, the intensive higher education route or multiple year "multiskilling" approach which increases staff mobility MBA programs would be feasible only on a limited basis and deployment for lower- and mid-level jobs. Through for most in-service civil service training. Short courses departmental workplace reviews, tasks are redesigned to or seminars of up to several weeks duration would be include a much wider range of skills requirements, and most appropriate. staff are given a broader array of training opportunities. Without further analysis, it is not possible to know Undertaken with extensive union consultation, multi- which of these institutions might have the capacity to skilling is reputed, especially in Australia (where it has provide appropriate in-service training for Polish public been well developed), to have increased job satisfaction servants. The degree to which these schools have in- and worker productivity significantly. In addition to lower- structors well trained in modern management practice, level staff, training for local government also needs to be Western concepts of finance, law, and economics, and, considered in relationship to staff for central government for the case at hand, in modern civil service manage- organs. Which organs will coordinate and deliver this 268 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN training, and what the curriculum should contain, are cational systems and in which interclass mobility is a questions to be addressed. desired feature of the civil service career. Elitist cadre The development of a strategy reflecting informed mechanisms tend to deter upward mobility from the lower choices about resource allocation for training must rely on ranks. This can demoralize lower-echelon employees and better information about the appropriate targets of train- ultimately serve as a disincentive to good civil service ing. This will require a skills inventory and training needs employment. These elitist approaches also have a prefer- assessment to inform decisions about who (currently or ence for training generalists. The degree of balance needed prospectively) in the public service needs what kind of between a generalist elite and good technical personnel is training to achieve which objectives. The question, re- an important policy decision that Poland has yet to re- ferred to earlier, of who ultimately is "retrainable" must be solve. Moreover, an elite staff college model requires care- addressed, perhaps on an individual basis and grounded ful forward planning that ensures graduates will have jobs on some refined, impartial criteria. upon completion of their studies but also offers no guar- The appropriate target for training will be determined antees that will result in overstaffing, as occurs in so many partly through the performance of a training needs assess- countries' distorted application of similar approaches. ment in conjunction with the skills inventory discussed earlier. This assessment would be an input into the train- Recruitment and grooming of leadership cadres- ing strategy, whose overall objective is to make transpar- options for reform ent the links between training approaches, the public sector target population, resources (financial, institutional The other essential aspect of cadre development is re- and human) applied, training needs, time horizons, and cruitment. At present, personnel recruitment into the civil service development objectives. Polish public service takes place, in theory, roughly in Priorities must be established for the in-service train- accordance with the last law governing public service ing that must be carried out urgently, identifying people employment (September 16, 1982, Law on State Ad- and resources required, the institutions to be involved, ministration Employees, with periodic amendments). and additional strengthening that might be needed, per- The law distinguishes between state officials and other haps achieved through external technical assistance. An employees of the state administration. The latter are obvious short-term constrdint will be the dearth of in- generally (but not necessarily) lower-level staff, em- structors to teach both general public administration sub- ployed on the basis of employment contracts, and they jects, as well as more technical subjects such as public are also subject to general rules of the Labor Code. They financial management or personnel management tech- are also subject to various specific rules of remuneration, niques. A training strategy task will be to propose action working hours, and rewards defined in the 1982 Law. plans in these areas. They can be terminated with one to three months' no- Beyond these short-term questions, the design of a tice. State or "nominated" officials are, in principle, se- training strategy must be fit into a medium-term strate- lected for specific posts, the number of which are fixed gic plan for the development of a civil service model. A by the Council of Ministers. They can be fired (with six number of policy choices now being made in an ad hoc months' notice) but only with just cause (mainly malfea- manner would be better taken up through an inten- sance or restructuring). Thus, as the statute stands now, tional planning process. For example, the eventual se- all "nominated" state officials, regardless of their abilities lection of institutions to carry out training might be or the original criteria for their recruitment, have de centralized (through, at one extreme, a single staff col- facto tenure. In addition, there are political appointees, lege for high-level recruits) or decentralized (through selected by the prime minister, who can be recalled or ministerial training institutes or by vouchers to be used fired with six months' severance pay. in the private sector). Although the 1982 Law does stipulate that state So far, the NSPA program assumes an elitist training (nominated) employees have "an appropriate education" model, not dissimilar to ones developed in France or and pass a twelve month administrative apprenticeship, Japan. Such models have many advantages and may fit the law actually does not prescribe recruitment practice. Polish preferences quite well overall, but this approach Current recruitment, as a result, is carried out in an ad needs to be thought through more carefully in the context hoc manner, with no clear or uniform standard for pro- of the general civil service framework and the social, cedures across govemment. Although some agencies (for organizational, and political structure in which it will example, the Personnel Office of the Council of Minis- have to function. For example, elitist training models ters) report episodic efforts to introduce competency cri- tend not to work in countries without elitist general edu- teria into recruitment-written or oral examinations, the TRANSFORMING THE STATE: ISSUES IN PUBLIC ADMINISTRATION REFORM IN POLAND 269 use of skills tests for typing, computer literacy, or lan- changing, incidentally, in many Western countries. In guage proficiency-these seem to be entirely at the dis- any case, the credible prospect that there will be put in cretion of individual managers. Moreover, such tests, if place fair recruitment procedures, based on merit rather they occur, are mainly applied to lower-level labor code than patronage and ideology, should allay concerns that employees whose jobs require concrete technical skills. qualified staff will be forced out of their positions under a At the moment, the most rigorous recruitment criteria new government. are those applied by the National School of Public Ad- The question of relative balance between political ministration. They require university education and sub- appointees and civil servants in govemment is also im- ject candidates to written examinations and intensive portant to the future civil service. The former currently oral interviews. constitute about 25 percent of all government employ- In an effort to regularize and standardize public ser- ees, a relatively high figure compared to many countries. vice recruitment, the Draft Civil Service Act (Article 4) There are proposals for increasing the bureaucratic cov- proposes, in combination with educational credentials and erage of the higher civil service and reducing the number time in service, four different entrance examinations for of political appointees. At the moment, deputy directors the four proposed categories of civil service employment. are politically appointed. The result is a top layer of Essentially, the graduates of the NSPA would be on a fast management that is politically responsive but, many track to high-level jobs.'5 Although this would introduce note, ill-informed and that enjoys little continuity. In meritocratic criteria into civil service recruitment-a very stable political systems, such as that in the United important step-the structure proposed is far less open States, high turnover is (barely) tolerabie because policy than that found in many Western bureaucracies, includ- shifts have historically been gradual, but in more volatile ing Canada, the United Kingdom, and the United States. political settings, such turnover may hinder consistent A major problem confronting well-meaning reform- policymaking and follow-through. ers of the present public service recruitment system con- Another policy choice must be made with respect to cerns the fate of current public servants, many of whom the degree to which recruitment and conditions of em- hold tenure in the old system and fear loss of job security ployment should be centralized and uniform, guarantee- in the new one. The worry is that many will leave without ing job security in compensation for wages that are below assurances of employment stability, especially in light of parity with the private sector. Alternatively, skills could public sector wage erosion. One reform proposal on the be bought in the market as needed and on a decentralized table is to convert all state employees, irrespective of rank management basis, giving individual managers more dis- or current conditions of employment, to employment sta- cretion and flexibility in hiring for their needs. tus regulated by the Labor Code until a newly defined One leadership development alternative to an elit- civil service recruitment system is put in place through a ist training and recruitment system is the establishment revised Civil Service Act. This would allow government of a senior executive service (SES). This would be a considerable leeway for cleaning house and rebuilding a cadre of high-level officials (not including political ap- truly professionalized, merit-based civil service. pointees), either with fixed-term or permanent civil ser- Without fast enactment of legislation and implemen- vice tenure, which would form the policymaking core of tation of new recruitment procedures, however, some in the central government administration. Access would government fear the more competent employees will aban- be from anywhere in the service, thus affording greater don public service for the private sector. Moreover, gov- possibility of upward mobility and career advancement. ernment is under considerable political pressure to pro- Variants of such SES programs have had some success duce some results from its administrative reform program. in Australia and the United States. This option would Short of grandfathering tenure for selected staff-a step need to be very carefully considered and designed to be which could undermine the meritocratic foundation upon successful; its advantage is that it offers serving civil which the authorities will want to build the new civil servants the chance to be incorporated into an elite service, there is an alternative. This option is to enact corps-an option mainly reserved, as reform proposals loose, overarching, provisional legislation to convert all now stand, for the new recruits into the NSPA. staff to three-year contracts, thus assuring some immedi- ate stability without locking govemment into promises of lifetime employment-a commitment so many other fis- System, rules, and laws cally strained countries are now trying to avoid. Indeed, the assumption that government emplovment should be a Some of the problems affecting Poland's public service lifelong sinecure may need to change radically as it is performance stem from what might be called a "system 270 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN limbo." This expression describes the dramatic lack of feel unstructured. Without succumbing to overly formal- clear and consensual procedures and practices for essen- ized rules and procedures, simple operations manuals or tial elements of civil service management, including staff electronic networks could help guide new behavior. This recruitment (as above), career advancement and pro- would stem the now common practice of resorting to the motion, job definition, classification, grading and pay, use of improvised codes and regulations to provide di- performance evaluation, and personnel information rection, by substituting these obsolete tracts with up-to- management and establishment control. In addition, or- date, realistic norms. ganization of work and most bureaucratic transactions The old mechanisms for promotion have been repu- are being carried out without routines which, in most diated, as they were primarily based on a highly question- public administrations, provide predictability and con- able system of performance evaluation and career ad- sistency to administrative life. Enabling civil service leg- vancement dominated by ideological considerations. islation might regulate some-though by no means all- Indeed, a periodic evaluation mechanism officially ex- of the above, but, as discussed in appendix B, this act is isted, but the current regime abandoned it in 1989 be- still in draft form and should ideally await resolution of cause it was deemed contaminated by the values of the some of the more fundamental policy issues raised in previous administration. Again, in an impulse to retain this paper. guidance and order, public service staff are still using In the understandable search for continuity and or- sections from the 1982 Law on State Administration in der, many inappropriate practices based on outdated regu- preparing ad hoc evaluations or justifying promotion re- lations survive. These practices are inadequate to the commendations. Such ad hoc practices aside, promotion present ta'sk requirements and lack overall political and is being carried out essentially without rules. While toler- practical credibility. New systems stressing merit, perfor- able as a temporary feature of the transition, a meritocratic mance, and accountability and autonomy (rather than civil service needs a promotion and performance evalua- control) must be designed for all of the above. Some tion system rooted in some common consensus of fair play salient deficiencies created by this absence of systems and and objectivity. rules are identified below, and options for dealing with them are elaborated. Institutional structures for civil The difficulties confronted by lawyers working in the bureaucracy provide one example of the role confusion service management associated with the administrative transition. Under the former regime, their job was to review and rubber stamp The design and installation of an institutional framework legal decrees issued by superiors. In the new bureaucratic for managing the new civil service is a high reform prior- environment, they have begun to perform tasks for which ity. At present, organizational responsibilities in this area they have no training, and they are unsure as to what is are divided among various organs, including mainly the expected of them. For example, they are now asked to Ministries of Finance and Labor, the National School for comment critically on proposed draft legislation or the Public Administration, and, the main nexus of reform, likely implementational and financial implications of a the Public Administration Reform Unit in the Council of new act of parliament. This role confusion is reinforced Ministers. Individual line ministries are also involved in by the absence of formal job descriptions conveying the civil service management. basic duties and characteristics of jobs and tasks in the The government will need to make institutional new bureaucratic order. The link between these descrip- decisions at varying orders of magnitude. Large deci- tions and the reporting and informational relationships sions about the jurisdiction of parliament, the presi- among various individual officials and, writ larger, divi- dent, the prime minister, the Council of Ministers, and sions or organs of the administration also needs clarifica- the judicial system with regard to the civil service are tion and codification. necessary. And, as suggested above, important but No standard operating procedures apply even to smaller decisions about which organ(s) will have re- simple tasks such as memo preparation or departmental sponsibility for daily management of the civil service, budgeting and accounting. No mechanisms for formal and which will have oversight and appellate functions, information dissemination or horizontal communication will need to be made. Establishment management func- among different sections-even within single minis- tions, including manpower control and pay and classifi. tries-have been introduced. Such mechanisms were less cation determination, among others, will need to be re- important in command bureaucratic structures, but their defined and assigned to a new institution or group of absence in more participative organizations makes work coordinated organs. This will undoubtedly require the TRANSFORMING THE STATE. ISSUES IN PUBUC ADMINISTRATION REFORM IN POLAND 271 transfer of responsibilities from the Ministry of Labor to a more appropriate setting, one that will most likely Conclusions and recommendatons emerge from the embryonic Public Administration Re- form Unit currently situated in the Council of Minis- Building sound practice for civil service management ters. Many functions now carried out on an ad hoc, will be a long-term undertaking in Poland, as it has decentralized basis will minimally need to be subjected been in all countries with effective government institu- to systemic, cross-service procedures, and some central- tions. But immediate needs of the transition demand ized institutional functions will need to be designed. that some key elements of civil service management be Examples include the establishment of examination cri- put in place quickly. The above discussion has tried to teria for high-level cadre recruitment, and a more uni- address the latter without sacrificing the former, con- fied system of personnel information to be used for cluding that some basic civil service questions must be manpower planning activities. given priority attention. Setting up such an institutional network will require First, some provisional and then more permanent many complex tasks, including designing the organiza- institutional structures for civil service management must tional mission and determining and meeting staffing re- be developed, with responsibilities clearly assigned. The quirements. In addition, some institutional development likely starting point will be the Public Administration will need to take place within existing organs, including, Reform Unit; but in some cases, delegation of certain for example, personnel functions in individual minis- tasks to other government entities or working groups may tries, probably involving computerization and equipment be appropriate. Second, basic decisions about the type of and skills upgrading for present staff, as well as recruit- civil service model to be installed will need to be broadly ment of new personncl. agreed upon until more detailed designs can be developed Choices about organizational structures for civil ser- for each function. For example, consensus will be needed vice management and the assignment of responsibilities about the degree of centralization desired in civil service for key personnel functions are critically important to personnel and financial management, the nature of cad- successful public administration development in most res recruited, the importance of merit and performance in countries. Civil service reforms springing from fragile, career advancement, and the overall package of incen- uncoordinated or politically impotent institutions typi- tives (both financial and nonfinancial) needed to attract cally founder, while those with a stronger institutional and retain good staff. Developing this model and building base of support have a better chance of succeeding. consensus among interested parties will also be the job of One important task of Poland's public administra- the Administrative Reform Unit, most likely with consid- tion reform program will be to select a model of institu- erable technical assistance from and exposure to foreign tional management for the civil service, reflecting upon models and experts. Third, operating systems and rules the experience of other countries. In this light, two and some legal underpinning must be put in place quickly points are worth consideration. First, a model which to guide government's routine functioning. Minimally, combines a set of strong, highly placed, well-coordi- this means enacting at least provisional legislation to es- nated institutions that can support and check each tablish behavioral norms and incentive structures for civil other in carrying out civil service management func- servants in addition to the rapid development of proce- tions may work well in Poland, countermanding tI.e tra- dural manuals to be used as guides for basic administra- dition toward over-centralization but providing enough tive tasks and in fulfilling reporting requirements. Some focus to ensure adequate degrees of system control and rules will eventually become part of the overarching civil cohesion, especially in the early days of institution service law, but ideally not until a more concrete vision of building. Second, while decentralized models are prob- civil service development can be achieved. Finally, within ably beyond the present organizational and technical this emerging civil service framework, we underscore the capacity of the government, serious consideration need to elaborate a public administration training strategy should be given to some deconcentrated arrangements and to strengthen institutions to carry out immediate in- whereby line ministries, as their capabilities increase, service training, essential to transforming Poland's public can assume increasing responsibilities for certain per- service. sonnel management functions. Appendix A describes These and other priorities raised in this report's earlier some of the ways in which other countries organize sections are set in a strategic agenda. This agenda must be management of their civil services. The Polish govern- carefully linked to clear, time-bound action plans with con- ment might review these in an effort to sort out their crete steps and monitorable targets in order to achieve the own management preferences. important reform goals discussed in the preceding pages. 272 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN An Agenda for Reform This analysis has highlighted a number of major public ad- Decisions on the structure and ministration reform issues which will need to be addressed to build modem, effective government in Poland. Because functions of government the list of needed reforms is long and resources are limited, a strategic approach will be essential to bring order and co- It will be crucial to define the basic structure of govem- hesion to the reform effort. We suggest an approach that ment to provide a framework for reform. Steps to be taken undertakes actions on four fronts. First, the reform appara- include: tus itself must be fully operational as soon as possible to * Decision on scope of further decentralization of central drive the overall reform process. Second, the basic structure government functions. of government should be defined in order to provide the * Review of functional justification of existing ministries framework into which administrative reforms can be fitted. and agencies. Third, the basic foundations of a workable pay and employ- * Internal audits and management improvements for units ment system for government should be installed in order to to remain in central administration. fix the right incentives for employee performance. Fourth, the essential building blocks of a civil service management Reforms in government pay and system should be established to begin the process of pro- fessionalizing and thereby improving state officials' perfor- employment pohey and practice mance. The above order of presentation suggests a rough sequencing of these reform fronts, but various of them also The pay and employment reforms discussed in this report overlap and imply activities that will have to be undertaken should begin with the 1994 budgetary cycle. Actions in parallel. Moreover, each category subsumes tasks which should follow a rough sequence: range from immediate priorities to long-term activities. The * Decision on functional separation of central govem- following recommendations constitute a preliminary at- ment employees from teachers, health workers, and so on. tempt to order these tasks. Each task will require prepara- * Definition of distinct remuneration policies and reform tion of detailed terms of reference and concrete schedules. of government wage setting and bargaining processes. Preparatory work necessary to implement these Strengthening the reform changes mainly involves improving informational bases for pay and employment reforms and later system design apparatus and maintenance. These activities (which should be un- dertaken immediately and should be executed over a six- It will be essential to assign to a central unit the overall month period) should include: coordination of the reform (see appendix C). The Office * A public sector census (involving building a public for Public Administration Reform (OPAR) in the Council sector employment data base within the office of public of Ministers should be empowered with enhanced respon- administration). sibilities, and should proceed to staff itself with personnel * Skills inventory (assessing both educational levels and (and adequate material) to fulfill the larger role. While the professional achievements of current public employees). head of OPAR already has a plenipotentiary rank, the * A pay comparator survey, which would provide the office needs to be restructured to absorb the new responsi- basis for reassessing pay scales. bilities. Available technical assistance funds should be uti- * Design and installation of Computerized Establishment/ lized for this purpose. (The strengthening of OPAR could Payroll Management System capturing census data. take place in the context of a reorganization of the Council * Institutional designation of establishment management of Ministers, if the latter occurs in short order.) functions and appropriate training of personnel to carry The OPAR should prepare a detailed strategic action out tasks. plan for administrative reform, laying out a rationale for its work agenda, identifying tasks to be undertaken, as- Building a civil service management system signing individual or institutional responsibilities, defin- ing the nature of expected outputs and a schedule for The creation of a professionalized civil service is necessar- their delivery, and estimating the resource requirements ily a long-term endeavor, involving the development of and availability for each task. institutions, practices and cadres which can perform gov- TRANSFORMING THE STATE: ISSUES IN PUBLIC ADMINISTRATION REFORM IN POLAND 273 ernment functions effectively in a democratic, market- velop a plan for in-service training of sitting public ser- based society. As discussed in the body of this report, vants, identifying target clients, potential training institu- however, there are some essential first steps which should tions, requirements for instructor training, and resources be taken immediately to ensure that government func- required to build institutional capacity quickly. The strat- tions essential to the transition be carried out successfully egy should also outline a long-term institutional develop- and to lay the proper foundation for sound civil service ment process for training civil servants in the context of management in the future. These include: the overall choice of a civil service model discussed above. - Policy decisions must be made on the broad outline of * New rules and systems should be put in place as soon as civil service model and constituent elements. Choices is feasible to ensure minimal bureaucratic cohesion and involve the degree of vertical mobility, organizational cen- standards. Having reached agreement on the basic civil tralization, accountability to political institutions, ap- service model, enabling civil service legislation should be proach to recruitment, promotion, training and so on. drafted to reflect the basic directions of the new framework. The OPAR should take the lead role in developing this This legislation should be broadly constructed, allowing for broad framework and in building necessary consensus for maximum flexibility in the evolution of the new civil ser- it among key political and institutional actors. Technical vice. A program for drafting supplementary codes, stipulat- support from international experts should be made avail- ing detailed regulations for specific civil service functions, able to the OPAR for this purpose. should follow agreement on the overall civil service model * Key civil service management tasks must be assigned to and the completion of the enabling civil service legislation. new or existing institutions, and appropriate institutional In the absence of official codes and regulations, some strengthening programs must be designed to build the desig- interim guidance can be provided through quickly pre- nated organs' capacity, most likely including staff training in pared work manuals, outlining some basic procedures and personnel management, equipment and technical support. behavioral norms. * Utilizing data from the skills inventory suggested above, * Staff incentive systems, compatible with overall gov- a civil service training strategy should be designed to emment budgetary constraints, should be designed as address both the short-term requirements of the transi- soon as possible. These include new pay, grading and tion as well as long-term needs. The strategy should de- classification systems. Appendix A International Models for Civil Service Management Two basic models of civil service management (CSM) or- of authority for civil service management. They work best ganization predominate in developed administrations. One when limited to a very few organs with clear division of is a model of centralized control allowing a limited degree labor and good mechanisms for coordination."6 of decentralization, flexibility and delegation of CSM au- Successful centralized models elevate the status of thority to the line level. France, Germany, Japan, Korea, the personnel function in govemment by making key the Netherlands, and Singapore, and (to a lesser degree) CSM organs directly responsible to a high political au- Canada and the United States conform to the first model, thority which often becomes principal agent for major while Australia, New Zealand, Sweden and the United system reforms. In Japan, for instance, the Management Kingdom either now fit or are moving toward the second. Coordination Agency, part of the personnel "troika" in In addition to a high degree of control and profes- central government, operates under the direct authority sional standardization, centralized systems of civil service of the prime minister, coordinating CSM policies and management display a number of common traits. First, for ensuring their direct responsiveness to political require- most modem administrations, centralization implies not a ments. The Japanese attach prestige to the personnel single, central monolithic organ controlling all system function by placing deconcentrated personnel divisions personnel movements, but rather some degree of shared near the top of line ministry hierarchies and identifying personnel authority exercised by several entities at the personnel officers as "high fliers" with good prospects for central level. The arrangement is often tripartite, usually eventual appointment to elevated govemment positions.'7 with powers divided among a policy guidance body, an In the interest of bureaucratic flexibility and more oversight agency which helps ensure fair and meritocratic rapid operations, some centralized systems delegate se- practices, and a financial control cum monitoring organ. lected personnel management authority to deconcentrated Such systems create checks and balances, ensuring redun- levels. For example, routine personnel information man- dancy and fairness, and they curb excessive concentration agement, especially for lower-level staff, might be handled 274 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN by departments, subject to central policy guidelines and other civil service management improvements. Centrally safeguards. Still, the hallmark of this model is the reten- organized civil services appear to perform these tasks ef- tion of close, central supervision of functions with crucial fectively. They generally ensure a high level of system implications for the financial soundness of the service, coordination, providing policymakers and planners with such as establishment control and planning. the necessary degree of information and control both to In contrast with these traditional systems, several stabilize public employment during fiscal crises and to countries are developing an alternative model of decen- design manpower policies for the longer term. Centralized tralized civil service management. This model increases models usually operate tight monitoring systems through the decisional autonomy of line managers on most per- which nationally determined staffing levels are enforced sonnel matters, leaving only broad policy guidelines to be via a coordinated effort of the central personnel authority worked out at the center. In principle, decentralizing CSM and the Finance Ministry. Relying heavily on staff audits functions allows managers flexibility to tailor staffing to or inspection techniques, governments in France, Japan, real requirements. The absence of central controls means Korea, the Netherlands, and Singapore have all sought to these decisions can be made rapidly and in response to impose govemmentwide ceilings on staffing levels and to local market conditions. Note, however, that decentrali- utilize forward planning to contain public employment. zation of personnel management functions, even where it Having achieved successes, some centralized systems has been taken furthest, is being implemented in the of manpower control are now relaxing their reins a bit, context of elaborate, technologically sophisticated sys- ceding limited discretion over staffing levels to depart- tems of information and financial management, utilizing ments and line managers in the interest of greater flexibil- complex and expensive computer software and hardware ity. In Canada, for example, the Treasury Board Secre- in order to maintain tight reins on running costs. Techni- tariat allocates person-years to departments and only cal training of staff throughout government has been nec- controls the number of senior managers. Departments essary just to run these systems. In addition, good finan- and agencies have gotten increased autonomy in distrib- cial and personnel management skills must be present uting person-years among different levels of staff, and down the line in order to make such arrangements work. they can make special appointments amounting to 10 Managers must be prepared to make a range of financial percent of their base complement of positions. and personnel decisions, and line staff need sufficient Other countries have moved even more deliberately technical capability to administer routine personnel move- toward a distinctly decentralized manpower control model, ments. Capacity to feed appropriate information back up using running cost controls as the key determinants of through the system also needs to be present at decentral- optimal staffing levels. These systems impose across-the- ized levels. The importance of these types of organiza- board spending limits but are indifferent as to the level of tional issues is illustrated clearly in the exercise of such staff expenditures within recurrent spending categories. key functions as establishment control and management. Typically, such systems require "micromanagement" of Recent experience with public sector reform clearly information inputs, with regularized reporting at short shows that building sound establishment control and plan- intervals to the finance authority responsible for overall ning practice is a necessary condition for the success of system monitoring. Appendix B Analysis of the Civil Service Draft Law In an effort to introduce some rules for the new order and First, despite its importance to the ultimate consoli- define the roles and responsibilities of the civil service, a dation of the new civil service, the preparation of the law Civil Service Law has been drafted to be put before parlia- is viewed as premature, given the still preliminary stage of ment for approval. This draft law has been the subject of the civil service reform effort. Indeed, resolution of many comment and analysis both within the country and by fundamental issues regarding the type of civil service external observers, including the Bank and the Royal model to be adopted in Poland is still lacking. Questions Institute of Public Administration of the United King- already discussed in this paper regarding the choice of dom. While strongly endorsing the govemment's commit- ment to act decisively to put into place a new civil service These comments refer to the civil service draft legislation legal framework based on merit and rule of law, the analy- reviewed by the Bank in 1993. Forthcoming revisions in the bill ses concurred that the draft act had serious flaws which (see note 15 of this chapter) have not been analyzed and there- should be corrected in future revisions. fore cannot be discussed here. TRANSFORMING THE STATE ISSUES IN PUBLIC ADMINISTRATION REFORM IN POLAND 275 training, promotion, performance evaluation, pay and es- In the absence of a clearer sense of the direction of tablishment management structures, and the choice of reform, the level of detail contained in much of the institutions to manage and oversee the civil service present civil service draft law is inappropriate, poten- (treated in the subsequent section), will need to be ad- tially locking in place a range of practices and a series of dressed. The experience of other country reforms suggests acquired rights which, though expedient in the near term, that the elaboration of enabling legislation for the civil may prove unsuitable or unaffordable in the longer run. service is appropriate only after a clear consensus has Once established, such practices will be exceedingly dif- been reached on the overall objectives of the civil service ficult to abandon. reform. Issuing the civil service act before such a consen- For example, the awarding of bonuses above the basic sus is in place allows the legal, formal considerations to pay package based exclusively on seniority (Articles 34 and drive the substantive elements of the reform effort; the 39) is puzzling in light of the discussion of rewarding merit process should be reversed. in the draft's introduction. Most country administrations In fact, the draft legislation appears to endorse deci- are reducing nonwage benefits and allowances, folding sions about civil service systems before they have actually them into basic pay. Or they are tying discretionary bo- been taken. The civil service created by the proposed nuses to performance. Legal action on pay policy should legislation would be highly centralized, hierarchical, rigid await the results of rationalization reforms which need to and rule-bound with t;ght administrative controls over be undertaken in the public administration program. personnel behavior, little transfer between classes, heavy Article 33 provides for very specific rules on perfor- emphasis on rank-in-person rather than performance, and mance evaluation, but there is no evidence of an under- generalist rather than professional skills. A newly created standing of how performance evaluation systems work, Civil Service Commission would supervise entry and pro- which kind would be most appropriate to the Polish setting, motions, yet oversight of daily management issues and or how such a system would be tied to the pay or promotion training is not clearly designated. mechanism. Such a proposal needs considerable refine- Rigidities, for example, are built into the proposal to ment, and does not belong in the enabling civil service act. create four distinct classes of service with little mobility The statute's position on recruitment and staff nomi- among them; again, most administrations are moving nations does not reflect careful consideration or prepara- away from class systems to more flexible and fluid ar- tion. The act appears to provide for up to 25 percent rangements. The creation of a Commission of the State political appointments to be nominated by a range of Civil Service is sensible-most countries have such an political and administrative officials. The entry require- organ. But the proposed institution is vested with too ments for such posts do not appear to be spelled out. At much responsibility. Ideally, a commission should pro- the same time, Article 30 outlaws civil servants' member- vide guidance and oversight, set standards, and serve an ship or espousal of political parties. This policy could appellate function. Authority would be better shared produce an excessively politicized civil service, as dis- with other institutions, and responsibility for day-to-day cussed earlier in this paper. Despite advantages in terms civil service management functions such as establishment of political responsiveness, the deprofessionalization that control and personnel information nmanagement should occurs as a result of high turnover at upper bureaucratic be assigned to another central organ (probably a depart- levels could be damaging in Poland. ment or ministry for the civil service) in conjunction, for These aspects of civil service management need to be example, with decentralized personnel departments in thought through fully and policies chosen before the civil line ministries. service act enters final draft. The enabling legislation will Although the objective of creating a professionalized, need to be combined with more detailed elaboration of re- public-spirited civil service cadre is laudable, most mod- gulations governing behavior for some of the specific func- ern states are mov;ng (in varying degrees) away from this tions just mentioned. Legislation is obviously necessary, but tight bureaucratic model, introducing flexibility and at the looser the better in order to provide for flexibility in least some decentralized management discretion into per- system design. In some cases, operations manuals may sub- sonnel administration, emphasizing incentives rather than stitute temporarily or even ultimately for detailed legal motivation of staff. The government's reform efforts regulation. Such manuals could be prepared quickly and should take greater account of these changing approaches procedural guidelines could temporarily quell the system in designing their own system. confusion currentiy affecting public service management. 276 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Appendix C Office for Public Administration Reform Thinking through the policy choices and their resource the mechanics of coordinating reform efforts linked to implications will be the job of the Public Administration the public administration; at the other end-and this Reform Unit to be established in the Council of Ministers would be the preferred option for Poland-in addition to to mount the civil service reform effort over the next few administering the various aspects of public administra- years. This unit is really the embryo of all further institu- tion reform, the Unit would be instrumental in the asso- tional development for public administration reforms and ciated policymaking process. Another issue to be ad- must therefore be functioning at full capacity as soon as dressed concerns the long-term viability of the possible. The discussion that follows describes the present Unit-that is, what to do with the Unit role once the status of the unit, outlines its likely responsibilities and major reforms are implemented-whether to fold its suggests staffing and resource requirements for effective managerial responsibilities into those of a separate insti- unit administration. tution or to develop it as a permanent entity. The Unit's activities could broadly be categorized Building reform unit effectiveness under the following functions: public sector pay and em- ployment, external coordination, decentralization and In order to proceed effectively with public administration public administration management. reform it is important that the government strengthen its institutional capacity for dealing with relevant changes. Public pay and employment An initial and significant step has already been taken in the establishment and operationalization of the Public With respect to public sector pay and employment, the Administration Reform Unit (henceforth, Unit) within Unit's responsibilities would include the following: the structure of the Council of Ministers. A few multilat- * Formulating and implementing personnel policies for eral donor agencies have also pledged support in favor of the entire public sector, including those involving re- strengthening the Unit. However, there is further need cruitment, performance evaluation, remuneration, and for the government to think about how it could develop promotion. its capabilities, and take necessary action, for the effective * Introducing and managing modern administrative tech- management of its public administration reform program. niques at the central and state levels, in support of per- As an initial step, the government should take the neces- sonnel polices implemented. sary steps in fulfilling the operational and logistical re- * Determining training requirements for staff in govern- quirements of the Unit, including employing external re- ment agencies and ministries at the central and state sources which have been committed for strengthening the levels, and coordinating the provision of relevant training capacity of the Unit. services. The Unit is situated, physically and notionally, in * Establishing a modern civil service and the institutions the Council of Ministers. With ministry-level status and to manage the new civil service, after the size, nature and a head with the rank of minister, the Unit is closely extent of the civil service has been agreed upon. linked to the Chief of the Council of Ministers and to other key officials responsible for Poland's reform pro- External coordination gram. Accessibility to these policymakers is essential for the Unit's officials to effectively manage public adminis- With respect to external coordination, the Unit would be tration reform; being integrated with the government's responsible for the following: overall reform efforts and strategies will enable senior * Coordinating with international donors supporting pub- Unit officials to plan and implement their own efforts lic administration reform in Poland. and strategies more usefully. This will be particularly im- Preparing documents for the donor agency's public ad- portant during the transition period when the relation- ministration reform project/program, in accordance with ship between public and private institutions will be particular donor agency guidelines. evolving continuously and where public institutions will * Managing all resources-external and internal-allo- require appropriate direction and leadership to adjust to cated for public administration reform, including dealing the needs of a modern market economy. Regarding the with expenditure management, control systems, cash man- Unit's scope of responsibilities: at one end, it could serve agement, accounting, procurement systems and other re- as mainly an administrative entity responsible only for source allocation procedures. TRANSFORMING THE STATE ISSUES IN PUBLIC ADMINISTRATION REFORM IN POLAND 277 Decentralization expertise of two kinds: people experienced in the prac- tices and policies of public administration reform, and In the area of decentralization, the Unit's responsibilities people with particular expertise in training, project prepa- would include the following: ration, and procurement. It is anticipated that these ad- * Determining training requirements for staff at the local visers will be financed by extemal resources. government level and coordinating the provision of rel- Key professional staff will include: evant training services. * Head of the Unit. (The head of the Unit was appointed * Coordinating legal issues related to reform efforts on in early 1992 and accorded minister-level status.) decentralization. * Professional staff. Professional staff would, at a mini- * Understanding the economic and political implications mum, consist of five senior-level officials: one each for of territorial changes to guide the government's decen- public pay and employment, extemal coordination and tralization efforts (for example, factoring in the division of public administration management, and two for decen- assets, unemployment ratios, and so on) and acting as tralization-one for legal issues and the other for eco. primary source of related expertise for the Council of nomic and political issues. These officials would be as- Ministers. sisted by other professional staff depending upon the Unit's * Documenting and maintaining records, and acting as a resources and work program. It is anticipated that in the source for external inquiries, on issues related to decen- initial phase the following staffing plans would be ad- tralization. equate: * Liaising with parliamentary groups to build consensus * Public pay and emnployment. The official responsible on the government's decentralization program and per- for employment activities would be assisted by offi- forming relevant public relations functions. cials with some background in human resource man- agement. Public administration management * Exteral coordination. The official"8 responsible for external coordination would be assisted by three offi- In public administration management the Unit's responsi- cials: one each for issues related to project/program bilities would include the following: preparation, procurement, and finance and account- * Formulating and implementing policies on public ad. ing. ministration management issues such as the architecture * Decentralization. The two senior-level officials re- of central government, responsibilities of public sector sponsible for decentralization issues would be sup- institutions, accountability. ported by junior officials for documentation and ex- * Coordinating the development of public service train- ternal inquiries, and officials with economics and ing institutions. legal backgrounds for research and policy assistance. * Establishing terms of responsibilities between the cen- * Public administration management. The official re- tral and local levels of government. sponsible for policy development would have sub- * Liaising between public administration and political stantive experience in public administration manage- groups. ment and policymaking and could be supported by a * Coordinating the development of legal changes in re- junior official for research and analysis. sponse to changes in the public administration, including In addition, all the above professional staff would be the development of a legal framework for civil service supported by appropriate secretarial and translation management. staff. * Establishing information systems for central govern- The Unit would require suitable communications and ment. information systems. Equipment needs for the Unit in- * Strengthening capacity in institutions such as parlia- clude photocopy machines, personal computers, printers, mentary organizations, administrative tribunals, audit facsimile machines, plotting equipment, access to a satel- agencies. lite communication system and government communica- tion lines. Other facility needs include adequate office Staffing and resource requirements space, furniture and transportation. Several international donor agencies have agreed to The Unit would be managed and staffed by Polish nation- provide technical assistance for public administration re- als, including government officials to head the Unit and form, including assistance for strengthening the institu- to provide professional and administrative services. In tional capacity of the Unit. The EC is the leading provider addition, in its initial phase, the Unit may need external of assistance to the Unit (details are given below). 278 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CAR3IBEAN * The EC has agreed to fund three staff positions for a * Under EC-PHARE's regional public administration re- period of one year in the functional area of external co- form program (SIGMA), an adviser will be provided for ordination. These individuals will work on finance and one year to provide support on public sector employment accounting, procurement, and general office administra- issues. The advisor will help set up reform groups in the tion. These individuals are expected to be familiar with counterpart government agencies and ministries in order the EC's guidelines and procedures and will ensure that to serve as dissemination centers for personnel policies EC-funded public administration reform projects meet formulated and implemented by the Unit. The adviser EC requirements. will also help identify training requirements for govern- * The EC has agreed to fund an external adviser for three ment employees and coordinate the provision of appropri- months to provide guidance on external coordination is- ate training. SIGMA will also provide direct consultative sues, including preparation of terms of reference and con- advice from its Paris office on an as needed basis. tracts for the public administration, reform projects for the * The EC will also fund two external advisers to the Unit Unit's programs, preparation of project/program docu- for a one-year period. One will provide expertise on pub- ments, and the like. The adviser will also help to formulate lic administration reform management and the other on and articulate a work program for the Unit. decentralization issues and training. Notes 1. It should be noted that this assessment is only prelimi- 7. This is the Polish terminology. The budgetary sphere nary. Although questions of the structure and functions of the includes all those economic and administrative units for which machinery of government are critical to public administration the state budget provides direct payment of wagcs, and those reform in Poland, resource constraints prevented in-depth analy- enterprises for which there is a direct budgetary transfer or sis of these issues during the mission that produced this report. subsidy. Among the former would be the state administration Further examination of these and other central Issues of admin- employees, the teachers, health workers, and the like. Among istrative reform, including those of public financial manage- the latter would be the employees of the railway company, of ment, may need to be addressed in future Bank sector work or subsidized theaters, and of sports facilities. The nonbudgetary lending preparation. sphere can be thought of as mainly comprising the State-owned 2. Including the Ministry of Energy and Materials, the Enterprise Sector (Przedsie,biorst panstwa). Ministry of Steel and Machinery, the Ministry of Chemical and 8. The OECD country reference was selected with the Light Industries, and the Ministry of Construction and Con- assumption that the objective of Polish public employment re- struction Materials. form ultimately is to achieve developed country norms. Ad- 3. See in this respect the recent experience of Argentina, vanced country government employment norms may actually be where a comprehensive restructuring of government institu- higher than some middle-income countries; this may possibly be tions and of the civil service has involved requesting each in- explained by a variant of Wagner's Law which correlates a rise in stitution to clearly identify its mission as it relates to its func- government expenditure with increasing GDP. For a disc'ission tion in a market economy. This has resulted in important of this phenomenon and its possible link with employment trends, changes, involving outright closure of redundant agencies, and see David L. Lindauer and Ann D. Velenchik, "Government downsizing/upgrading where necessary. See World Bank, "Ar- Spending in Developing Countries: Trends, Causes and Conse- gentina: Public Finance Review-From Insolvency to quences," World Bank Research Observer, vol. 7, no. I (January Growth," Report No. 10827-AR, February 11, 1993, Washing- 1992), pp. 59-78. ton, D.C. 9. For this table, we have defined central administration as 4. See World Bank, "Poland: Decentralization and Re- comprising the employees of the state administration, minus form cf the State," Report No. 10446-POL, July 2, 1992, Wa- local government employees, plus the police aid the civilian shington, D.C. employees in the defense area. 5. A further internal reorganization, complemented by an 10. Detailed local government issues are beyond the scope assessment of existing personnel, skills required, and training of this report, except where related to the central adnministra- necds is to be executed over the next few months. tion. Other ongoing World Bank sector work is expected to deal 6. For a discussion of the exercise of ownership rights by more explicitly with these questions. the state in Poland, see World Bank, "Report and Recommen- 11. See World Bank, "Poland: Reorienting Investments in dation of the President of the IBRD to the Executive Direc- Human Capital. A Critical Review of Secondary Education and tors on a Proposed Enterprise and Financial Sectors Adjust- Training Systems," Report No. 10697-POL, December 12, 1992, ment Loan," Report No. P-5940-POL, April 8, 1993, Washington, D.C. Washington, D.C. 12. The broad outline of teachers' skills is known: 54 per- TRANSFORMING THE STATE ISSUES IN PUBLIC ADMINISTRATION REFORM IN POLAND 279 cent are graduates from universities, polytechnics, and peda- personnel functions in Singapore is divided among the Ministry gogical universities; 33 percenr have post-secondary education of Finance's Budget Division, which handles manpower control; (teacher training colleges) and 13 percent have only secondary the Ministry of Finance's Public Service Division, which devel- education. But disaggregared information about the distribution ops policy, coordinates implementation, and is responsible for of skills throughout the education sector has not yet been col- pay and grading, training, and productivity improvement; and lected. This is just one of the indications of the lack of personnel the Public Service Commission, which approves high-level ap- policy in the sector. pointments and disciplinary actions. 13. See World Bank, "Poland: Health System Reform- 17. France and Sweden have also made recent efforts to Meeting the Challenge," Report No. 9182-POL, March 25,1991, elevate the personnel function to higher status. To support civil Washington, D.C. service management reforms in France, the General Directorate 14. Christopher Hamilton and Wojciech Roszkowski, for the Public Service, once an appendage of the Prime Minister's "Bureaucratic Poland: Organized Life inside the Maverick So- Office, became part of a free-standing Ministry of Public Service cicty," pp. 131-78, in Public Bureaucracies, edited by Jaroslaw and Reform in the late 1980s. The head of the ministry was Piekalkiewicz and Christopher Hamilton, New York: St. Mar- upgraded to cabinet status. In Sweden, the Ministry of Public tin's Press, 1991. Administration was formed in 1983 to spearhead the public 15. A further revised version of the draft civil service law is sector renewal program. reported to be nearing completion, but was unavailable for review 18. Ar the time of writing, the Unit consisted of the fol- by the World Bank mission of January 1994. Interviews suggested lowing personnel: Unit Head; Director-General (former secre- that the thrust of the new draft would be to introduce civil service tary of state in the legal office; responsible for legal coordina- merit criteria for the recruitment of only a very small cadre of pub- tion); four receptionists/secretaries for the Minister and lic servants; the rest would retain grandfathered conditions of em- Director-General (responsible for external inquiries, post, diary, ployment guaranteed by the 1982 law (also under revision). While and the like); two persons for documentation/archives; one part- more politically feasible than earlier proposed legislation, the deci- time and four full-time research assistants (all for decentraliza- sion largely to retain status quo conditions could introduce major tion issues: two for territorial issue,; two for legal issues, and one obstacles to achieving significant administrative reform. parr-time for liaison with parliamentary groups); director for 16. Singapore is an illustrative case. Authority for public external coordination and director for training. 280 CIVIL SERVICE REFORM IN LATIN AMERICA AND THE CARIBBEAN Distributors of World Bank Publications ARGENTINA EGYPT, ARAB REPUBLIC OF KENYA SAUDI ARABIA, QATAR Carlos Hirsch, SRL Al Ahram Africa Book Service (E.A.) Ltd. Jarir Book Store Galeria Guemes Al Galaa Street Quaran House, Mfangano Street P.O. Box 3196 Florida 165,4th Floor-Ofc. 453/465 Cairo P.O. 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Box ST 125 Southerton Harare RECENT WORLD BANK TECHNICAL PAPERS (continued) No. 222 Selvaratnam, Innovations in Higher Education: Singapore at the Competitive Edge No. 223 Piotrow, Treiman, Rimon, Yun, and Lozare, Strategiesfor Family Planning Promotion No. 224 Midgley, Urban Transport in Asia: An Operational Agendafor the 1990s No. 225 Dia, A Governance Approach to Civil Service Reform in Sub-Saharan Africa No. 226 Bindlish, Evenson, and Gbetibouo, Evaluation of T&V-Based Extension in Burkina Faso No. 227 Cook, editor, Involuntary Resettlement in Africa: Selected Papersfrom a Conference on Environment and Settlement Issues in Africa No. 228 Webster and Charap, The Emergence of Private Sector Manufacturing in St. Petersburg: A Survey of Firms No. 229 Webster, The Emergence of Private Sector Manufacturing in Hungary: A Survey of Firms No. 230 Webster and Swanson, The Emergence of Private Sector Manufacturing in the Former Czech and Slovak Federal Republic: A Survey of Firms No. 231 Eisa, Barghouti, Gillham, and Al-Saffy, Cotton Production Prospectsfor the Decade to 2005: A Global Overview No. 232 Creightney, Transport and Economic Performance: A Survey of Developing Countries No. 233 Frederiksen, Berkoff, and Barber, Principles and Practicesfor Dealing with Water Resources Issues No. 234 Archondo-Callao and Faiz, Estimating Vehicle Operating Costs No. 235 Claessens, Risk Management in Developing Countries No. 236 Bennett and Goldberg, Providing Enterprise Development and Financial Services to Women: A Decade of Bank Experience in Asia No. 237 Webster, The Emergence of Private Sector Manufacturinig in Poland: A Survey of Firms No. 238 Heath, Land Rights in Cdte d'Ivoire: Survey and Prospectsfor Project Intervention No. 239 Kirmani and Rangeley, Initernational Inland Waters: Conceptsfor a More Active World Bank Role No. 240 Ahmed, Renewable Energy Technologies: A Review of the Status and Costs of Selected Technologies No. 241 Webster, Newly Privatized Russian Enterprises No. 242 Barnes, Openshaw, Smith, and van der Plas, What Makes People Cook with Improved Biomass Stoves?: A Comparative International Review of Stove Programs No. 243 Menke and Fazzari, Improving Electric Power Utility Efficiency: Issues and Recommendations No. 244 Liebenthal, Mathur, and Wade, Solar Energy: Lessonsfrom the Pacific Island Experience No. 245 Klein, External Debt Management: An Introduction No. 246 Plusquellec, Burt, and Wolter, Modern Water Control in Irrigation: Concepts, Issues, and Applications No. 247 Ameur, Agricultural Extension: A Step beyond the Next Step No. 248 Malhotra, Koenig, and Sinsukprasert, A Survey of Asia's Energy Prices No. 249 Le Moigne, Easter, Ochs, and Giltner, Water Policy and Water Markets: Selected Papers and Proceedingsfrom the World Bank's Annullal Irrigation and Drainage Seminar, Annapolis, Maryland, December 8-10, 1992 No. 250 Rangeley, Thiam, Andersen, and Lyle, International River Basin Organizations in Sub-Saharan Africa No. 251 Sharma, Rietbergen, Heimo, and Patel, A Strategyfor the Forest Sector in Sub-Saharan Africa No. 252 The World Bank/FAO/UNIDO/Industry Fertilizer Working Group, World and Regional Supply and Demand Balancesfor Nitrogen, Phosphate, and Potash, 1992/93-1998/99 No. 253 Jensen and Malter, A Global Review of Protected Agriculture No. 254 Frischtak, Governance Capacity and Economic Reform in Developing Countries No. 255 Mohan, editor, Bibliography of Publications: Technical Department, Africa Region, July 1987 to April 1994 No. 256 Campbell, Design and Operation of Smallholder Irrigation in South Asia No. 257 Malhotra, Sinsukprasert, and Eglington, The Performance of Asia's Energy Sector No. 258 De Geyndt, Managing the Quality of Health Care in Developing Countries The World Bank Headquarters European Office Tokyo Office 1818 H Street, N.W. 66, avenue d'lena Kokusai Building Washington, D.C. 20433, U.S.A. 75116 Paris, France 1-1 Marunouchi 3-chome Chiyoda-ku, Tokyo 100, Japan Telephone: (202) 477-1234 Telephone: (1) 40.69.30.00 Facsimile: (202) 477-6391 Facsimile: (1) 40.69.30.66 Telephone: (3) 3214-5001 Telex: Mca 64145 WORLDBANK Telex: 640651 Facsimile: (3) 3214-3657 MCI 248423 WORLDBANY Telex: 26838 Cable Address: INTBAFRAD WASHINGTONDC 13041 DEV 100 0-8213-3041-1 CIVIL SERVICE IN L/A 400000013909 $17.95 Cover design by Tomoko Hirata ISBN 0-8213-3041-1