9/9/2014

1. Performance Contracts in the Management of the Public Service in Kenya Presentation to Officials of the Government of India by Richard E. Ndubai, CBS,MBS,OGW Permanent Secretary, Performance Contracting (Office of the Prime Minister) Republic of Kenya New Delhi, 26 August, 2011 1 9/9/2014 1

2. PRESENTATIONS • Performance Contracting in Kenya; • Citizens’ Service Charters • Performance Appraisal Systems

3. Scope of Presentation • Background to Introduction of PCs • Overview of PSR in Kenya • What is a Performance Contract? • Citizens’ Service Charter • Experiences, Lessons & Challenges

4. Introduction & Background In 2003  new Government ►inherited • Public Service • Mainstream Civil Service with 32 ministries; • 130 Public Enterprises; • 175 Local Authorities • Staff strength of about 700,000

5. Introduction & Background Did not have: a clear mission; a shared vision; none of the ministries had a strategic plan; over 70% of state corps, and all 175 local authorities did not have strategic plans; no clear strategic direction; An economy growing at 0.4%! 9/9/2014 5

6. Introduction & Background Public service: • regarded corporate governance as a private sector affair; • determination of performance was based on how well processes and activities were carried out; • Serious problem of lethargy and inefficiency; • Lost public trust, and • Even had problems with utilization of resources!

7. Introduction and Background • In the 2004/05 FY, the Treasury released KShs299.065billion to all ministries. Out of this, some KShs34.2billion or 11.4% was however returned unutilised by the end of the FY; • 14 Ministries were not able to spend large portions of the funds given by Treasury in 2004/05. They therefore surrendered back the indicated proportion of their funding to Treasury:

8. MINISTERIAL EXPENDITURES 2004/2005(KSH MILLION)

9. Introduction & Background Public sector had therefore become part of the bigger problem! • a drain on the exchequer for financial support in form of grants and loans, • Impediment to: • economic growth • recovery of the economy

10. Introduction & Background Govt. quickly realized that problem emanated from: • Inefficient exploitation and use of public resources; • Unresponsive service delivery culture;

11. Introduction and Background ∴ Need to reorient public sector management by introducing new systems & adopting best international practices to help to: • Reengineer operations to keep ahead of growing public demand for better services;

12. Introduction and Background b. Reposition country on the growth trajectory; c. Create competitive advantage for the country d. Restore trust in Government, & dignity of the public service;

13. Key Issue? Performance Improvement • Issue – establishing a performance management system; • System which focuses on appropriate leadership and development of “people” capacities;

14. People & Institutions? “an empowered organization is one in which individuals have the knowledge, skill, desire and opportunity to personally succeed in a way that leads to organizational success” Stephen Covey

15. People, Institutions, Systems? But Why “System”?

16. Determinants of Performance

17. Determinants of Performance 80% 20% People Leader R E S T

18. % Year

19. Stark Realities • Efficiency of the public service defines and informs the efficiency of all other sectors of an economy. . “The quality of an effective Government can not be lower than that of itsclients – specifically the private sector”► Malaysian Prime Minister, Mahathir Mohamad,

20. Stark Realities B. Obstacles to performance problems do not lie necessarily with comparative disadvantage in resource endowment; not even with funding deficits; but, because of: i). Hanging onto the same/old ways of doing things and of solving problems; ►you cannot expect different results by persistently applying the same techniques to solve problems 9/9/2014 20

21. Stark Realities C.an agency requires a clear strategic direction to achieve its objectives. “If you do not know where you are going, any road will take you there”. 9/9/2014 21

22. Stark Realities 22 9/9/2014 9/9/2014 22 D. that Government Will be Improved Only When We: recognize that we do produce outputs and that what we do can be measured, managed and improved; discover that we have real customers, with all the rights and privileges that the word “customer” bestows, and that the satisfaction of our customers is absolutely essential to our success.

23. Stark Realities F. • Countries in the world can be classified according to their ability to implement policies and programs; • Implementation depends on effective follow-up (M&E) (another name for accountability) • Effectiveness of follow-up and monitoring depends on quality and not quantity of M&E (Effective evaluation requires explicit rankings).

24. Stark Realities • Foundation of competitive advantage for a country is Public Service Efficiency; Q whyPublic Service Efficiency? Q how do we create, develop & sustain public service efficiency?

25. WHYPUBLIC SERVICE EFFICIENCY? To Fulfill Obligations to Citizen: • deliver top quality, affordable, accessible & timely services; • efficient exploitation & utilization of public resources; • engender accountability & transparency in the utilization of public resources;

26. WHY PUBLIC SERVICE EFFICIENCY? 4. create enabling environment for economic & social activity; 5. Ultimate: • fast-track economic growth; • create wealth and employment • improve citizen welfare;

27. Public Sector Reforms in Kenya In Kenya PSR began soon after independence and: • aimed at improving the quality of the lives of its citizens; • targeted at elimination of poverty, disease, hunger and ignorance, achieving social justice, human dignity and economic welfare for all.

28. Public Sector Reforms in Kenya • exploring new pathways to promoting good governance and sustainable democracy through the adoption and implementation of pro-change policies:

29. Public Sector Reforms in Kenya Thrust: • Reorganizing the governance machinery to achieve higher levels of competence, transparency and accountability, and to minimize waste in government spending; 2) Inculcating ethics and new value systems of honesty, probity, patriotism and respect for the nation’s diversity;

30. Public Sector Reforms in Kenya 3) Enlisting the support of stakeholders from the private and other sectors, to participate in growing the national economy; 4) Changing the role of the state from that of a sole provider of employment and services, to the new role of creating an enabling environment for wealth and employment creation;

31. Public Sector Reforms in Kenya 5) Creating a lean, efficient and working government, and, by curtailing wasteful public expenditure, freeing resources to fund development programs and people issues;

32. Reform Strategies 5-year strategic plan ► Economic Recovery Strategy for Wealth and Employment Creation, (ERS). The strategy recommended sweeping reforms in the management of the public service observing that, “…the problems attributed to the many state corporations arise from the lack of clear performance contracts that facilitate the monitoring of the performance of the CEOs appointed to manage the corporations” 32 9/9/2014

33. Reform Strategies ERS ►Reorientation of public sector management by: • Accelerating ministerial rationalization and developing strategic plans for ministries/departments & downstream institutions; • Developing, introducing and institutionalizing performance based management practices in the public service;

34. Reforms & Performance Contracting Govt. therefore introduced the following initiatives: Required public institutions to develop strategic plans by 2004; Introduced reforms to jumpstart management of the public service; Empowered citizens to demand excellent service as an entitlement. 9/9/2014 34

35. Reforms & Performance Contracting Adopted a two-pronged reforms approach; This approach gave rise to the Performance Contract Capacity Building (tooling & re-tooling) & Behavior Change Shift focus from Processes/Activities to results, outputs & outcomes Performance Contracts 9/9/2014 35

36. Composite scoring Period

37. Composite scoring Period

38. Composite scoring Period

39. Composite scoring Period

40. So, What is a Performance Contract (PC)? 40 40 9/9/2014 9/9/2014 40 • A PC is a freely negotiated performance agreement between Government, acting as the owner of an Agency, and the management of the Agency; ► a range of management tools used to define responsibilities and expectations between parties to enable them achieve mutually agreed results; ∴ Specifies what needs to be achieved, expected levels of achievement, timelines, evaluation and reporting methodologies;

41. What is a PC? ►organizes & defines tasks so management is able to perform them systematically, purposefully & with reasonable probability of achievement. Makes it possible to measure: Performance of a public institution; Performance of manager; Performance of the government 41 9/9/2014 9/9/2014 41

42. What is a PC? • Privatizing the public sector style of management for purpose of: • Retaining for public benefit, or • Disposing at higher return

43. Performance Contract Key objectives are to: Increase efficiency & productivity in public sector; ensure maximum yield to the citizen, on the tax shilling; ensure that performance and results link with stakeholder expectations; Create Global Competitiveness for a country; 9/9/2014 43

44. Performance Contract 5.Link the benefits of economic growth to the grass root levels; 6.Increase Customer (Public) Satisfaction with Government Services; 7.Build and sustain trust in Government; 8.Create wealth and improve the quality of lives of citizens. 9. Link reward to measurable performance in public service; 9/9/2014 44

45. 10. cascade national policy priorities to public agencies for implementation VISION 2030 MINISTERIAL MANDATE MISSION Strategic Objectives Performance Criteria Performance Targets

46. Performance Contract 11. ensure linkage between planning, budgeting and results; 12. enable monitoring and measurement of performance; 13. enhance service delivery

47. Performance Contracts 47 47 9/9/2014 9/9/2014 9/9/2014 47 • PC process has endured 6 cycles with distinct impact on performance of the economy; 7th cycle PCs preparing for evaluation; • Currently, a total of 470 public institutions on board;

48. Performance Evaluation • The measurement of the extent to which public agencies achieve negotiated performance targets; • established using the equation below: • Managerial Performance = Agency Performance ± Exogenous Factors

49. Performance Evaluation • Excellent: achievement ≥30% above the agreed performance target, • Very Good: Achievement between 100% and 130% of the performance target in the signed PC; • Good: Achievement between 70% and 100% of performance target in the signed PC; • Fair: Achievement between 50% and 70% of the target in the signed PC; • Poor: Achievement between 0% and 50% of the target in the signed PC.

50. Experiences, Lessons & Challenges Learnt 50 50 9/9/2014 • Initial Impact on Performance: 1st Cycle PCs • 16 largely commercial pilot state corporations signed PCs on 1st October 2004; • Generation of Pre-tax profits