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/ci
  vilservice/establishment.htm )
• Anticipating all fiscal impacts
• Functional reviews (http//www1.worldbank.org/publ
  icsector/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.worldban
  k.org/publicsector/pe/pem1subthemes.htm )
• Reform of Cabinet decision-making processes
  (http//www1.worldbank.org/publicsector/civilservi
  ce/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/civilservic
  e/civilservicelaw.htm and http//www1.worldbank.or
  g/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/civilservic
  e/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/publ
  icsector/civilservice/psunions.htm )
• Monitoring and publicizing progress and impacts
  (http//www1.worldbank.org/publicsector/civilservi
  ce/agency.htm )

11
Sequencing

• Establish effective employment and payroll
  controls first in order to avoid backsliding
  (e.g., re-entry). (http//www1.worldbank.org/publ
  icsector/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/civilservic
  e/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/civilservic
  e/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/civilservic
  e/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/civilservic
  e/winners.htm