Seven perennial design challenges

1. Seven perennial design challenges Gary J. Reid The World Bank May 4, 2004

2. Seven perennial design challenges • Big-bang reductions vs. institutional reforms aimed at improving priority setting and management • Ensuring adequate planning of the reform effort • Addressing sources of resistance • Sequencing • Targeting reductions • Facilitating re-entry into the labor force for retrenched workers • Making severance attractive and cost-effective

3. Big-bang reductions vs. institutional reforms aimed at improving priority setting • Ensuring that policy objectives of the reform are met. • Ensuring adequate establishment and wage bill control (http://www1.worldbank.org/publicsector/civilservice/establishment.htm ) • Anticipating all fiscal impacts • Functional reviews (http://www1.worldbank.org/publicsector/civilservice/reengineering.htm )

4. Big-bang reductions vs. institutional reforms aimed at improving priority setting • Ensuring that policy objectives of the reform are met (cont.) • Reform of the budget process (http://www1.worldbank.org/publicsector/pe/pem1subthemes.htm ) • Reform of Cabinet decision-making processes (http://www1.worldbank.org/publicsector/civilservice/center.htm )

5. Big-bang reductions vs. institutional reforms aimed at improving priority setting • Ensuring that management objectives of the reform are met. • Human resource management reform • Reform of the budget process • Reform of the Cabinet decision-making process • Monitoring reform execution and impacts

6. Ensuring adequate planning of the reform effort • Knowing all the legal constraints and implications • Voluntary vs. involuntary retrenchments • Conditions that must be satisfied for each • Required steps for each • Fiscal obligations by method of retrenchment • Redress rights • http://www1.worldbank.org/publicsector/civilservice/civilservicelaw.htm and http://www1.worldbank.org/publicsector/civilservice/establishment.htm

7. Ensuring adequate planning of the reform effort • Anticipating all fiscal impacts • Wage bill • Severance costs • Pension costs • Social assistance costs (e.g., unemployment compensation) • http://www1.worldbank.org/publicsector/civilservice/pension.htm

8. Addressing sources of resistance • Designing benefits into retrenchment actions • Benefits to managers who make staff cuts • Recognition • Cash flow reliability • Enhanced managerial authority • One-shot budget infusions • Promise of faring better in the normal budgetary process • Benefits to staff who are retrenched • Severance packages • Redress opportunities

9. Addressing sources of resistance • Designing benefits into retrenchment actions (cont.) • Benefits to staff who are not retrenched • More competitive salaries • Better conditions of public service employment • Enhanced intrinsic rewards of public service employment

10. Addressing sources of resistance • Engaging affected staff (e.g., through working with unions) in the design and implementation of downsizing efforts (http://www1.worldbank.org/publicsector/civilservice/psunions.htm ) • Monitoring and publicizing progress and impacts (http://www1.worldbank.org/publicsector/civilservice/agency.htm )

11. Sequencing • Establish effective employment and payroll controls first in order to avoid backsliding (e.g., re-entry). (http://www1.worldbank.org/publicsector/civilservice/establishment.htm ) • Effective establishment control • Post authorization • Hiring authorization • Effective salary-setting control • Salary structure, including all components of remuneration • Individual remuneration decisions

12. Sequencing • Improve salaries only after most retrenchment is completed • Incentive issues • Cost issues • Make easier employment cuts first • Unfilled vacancies • “Ghosts” • http://www1.worldbank.org/publicsector/civilservice/strategies.htm

13. Targeting reductions • By attrition: Ease of implementation approach • Uniform, across the board cuts: Fairness/political feasibility approach • By inducements: “Buy your reductions” approach • By policy priority: Government priority-setting approach. • By performance: Management approach

14. Targeting reductions • Engaging affected staff in the design and implementation of reduction targeting efforts • Management • Staff (e.g., public sector unions) • http://www1.worldbank.org/publicsector/civilservice/evaluatingpay.htm

15. Facilitating re-entry into the labor force for retrenched workers • Cash settlement (up front vs. stream of payments) • In-kind benefits (health insurance, housing, etc.) • Re-training • Job-search assistance • Helping retrenched staff to set up their own businesses • Engaging affected staff (e.g., through working with unions) in the design and implementation of re-entry assistance programs. • http://www1.worldbank.org/publicsector/civilservice/winners.htm

16. Making severance attractive and cost-effective • Credibility of severance promises is important (cash vs. promises) • Prompt payment of severance benefits • Cash vs. in-kind benefits • Engaging affected staff (e.g., through working with unions) in the design and implementation of severance packages. • http://www1.worldbank.org/publicsector/civilservice/winners.htm