Civil Service Reform in Developing Countries: The Limits of the Merit Model

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Civil Service Reform in Developing Countries The
Limits of the Merit Model

• Geoffrey Shepherd
• 5th Global Forum on Re-inventing Government
• Innovation and Quality in the Government of the
  21st Century
• Mexico City, 5-6 November 2003

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The issue the merit model for civil-service
reform has not taken root in developing countries

• Civil services in developing countries are large,
  underpaid, and politicized.
• Hence service delivery is inefficient and
  corrupt.
• The consensus in the development community is on
  a merit model for civil-service reform (the model
  used by todays advanced countries).
• This model has not taken root because politics
  militates against it
• Patronage politics and large government.
• The challenge to move from patronage to merit
• getting merit and politics to live together.

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Organizing principles for a civil service

• Merit systems employ people on the basis of
  merit, protect them from undue political
  interference, and provide equality of access.
• Patronage systems need capable people, but they
  overwhelmingly use public jobs to provide private
  payoffs.
• Payoffs for political services rendered to
  reward friends and family to shore up political
  support.
• New Public Management principles provide options
  to improve the performance orientation of merit
  systems in the core civil service (or to change
  personnel systems more radically in decentralized
  public agencies)
• Civil service systems and performance
  orientation
• Patronage systems contaminate efforts to improve
  performance.
• Merit systems improve performance.
• Merit systems are pre-conditions for NPM-style
  options.

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Outline of the argument

• The merit model promotes competence and protects
  the civil service from political interference.
• But it largely fails in developing countries
• The evidence of history shows the conditions
  under which merit reforms come about and
  subsequently develop.
• Merit-based reform in developing countries is
  stymied by politics and by large government.
• What can be done?
• We can improve the way we think about the
  problem de-politicizing the civil service is
  unrealistic, re-politicizing the debate is
  realistic.
• We should eschew comprehensive merit reforms and
  look for selective reform opportunities that
  acknowledge political realities.
• Brazil an example of a judicial mix of merit,
  politics, and pragmatism.

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The universal model of merit-based reform the
basics

• Entrance to the service based on competitive
  exams.
• Protection of civil servants from arbitrary
  removal.
• Protection of their political neutrality.
• Policing of these rules by an independent body.

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The universal model of merit-based reform other
features

• Common features
• positions are established centrally and
  classified according to rank
• bureaucrats are paid a salary and pension that is
  determined by their rank, rather than the work
  that they do
• there are often impediments to external lateral
  entry at senior grades
• there are few points of entry, with most entering
  at a young age and most senior positions filled
  by promotion.
• Divergent feature the amount and depth of
  political, as opposed to merit, appointments
• Some countries (the US, Brazil) allow large
  numbers of more senior political appointments.

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Merit reform in developing countries

• Merit principles are often written into
  constitutions and laws.
• But these principles are not respected in
  practice.
• Civil-service reform has proven among the most
  difficult of developmental reforms to sustain,
  and there is little evidence that nationally- or
  donor-inspired reform efforts have met with much
  success.
• The example of World Bank projects the Banks
  own analyses have admitted that success has been
  limited.

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Civil-service reform six propositions from
history (1)

• Patronage systems are not a universal evil they
  fund political competition
• the US in the early 19th Century.
• Merit reforms only come to fruition when they are
  moved by powerful external forces.
• Overwhelming political demands for more
  efficiency and less corruption in the US and UK
  in the 19th Century.
• The French revolution and the demand for
  protection against the state in the 19th Century.
  
• In spite of different paths and conditions,
  reforms have closely converged on a similar merit
  model.
• Helping solve the problem of credible commitment

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Civil-service reform six propositions from
history (2)

• Reforms took a long time to be fully implemented.
  
• Merit reforms have also made the civil service
  into a powerful public-sector institution and
  interest group in its own right.
• Merit reforms create new tensions
• They alleviate problems of political interference
  and of hierarchical control
• But they create incentives that reduce the
  efficiency and political responsiveness of civil
  servants.
• As a result, there is a continuing tension
  between merit-based principles and NPM-style
  principles that lead to greater flexibility, but
  can also open the way to greater politicization.

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Why reform is difficult in developing countries
three propositions (1)

• New interests with the need and the power to
  promote a more efficient and honest public
  administration are weak in many countries.
• Some countries are characterized by spoils
  systems that provide the currency of political
  competition.
• Others are characterized by the continuing vigor
  of traditional systems (kinship and loyalty ties,
  for instance) which frustrate reform movements.

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Why reform is difficul in developing countries
three propositions (2)

• Governments are significantly larger than in the
  past
• This is the result of modern ideological
  approaches to development, as well as the
  improved capacity of populations to articulate
  political demands.
• This has led to large civil services, often
  characterized by public welfare employment,
  whereby public jobs are provided to a large part
  of the population as a means of ensuring their
  political support.
• It has proven very difficult to reduce such high
  levels of employment, while these have led to
  fiscal crisis and personnel performance problems.
• Many of these large civil services have emerged
  as strong interest groups capable of challenging
  reform efforts.

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What next? 1. Changing the mindset

• Recognize reform failures more openly.
• Develop a more balanced view of the relative
  advantages and disadvantages of merit and
  patronage systems.
• Incorporate politics into analysis and solutions,
  rather than ignoring or denying it.
• Avoid the merit trap half-finished merit
  reforms create a political and fiscal burden, but
  do little for performance.
• Rethink the issue of lifetime tenure for civil
  servants.
• Assemble better evidence history, politics, and
  contemporary cases of successful reform.

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What next? 2. Alternative reform approaches
outside the public administration

• The long-term solution economic and political
  development.
• Treat excess employment (public welfare
  employment) as a social-security problem.
• Find alternative methods of funding politics?

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What next? 3. Selective reform approaches inside
the public administration

• Hybrid senior appointments enlarge the scope for
  patronage employment at senior levels, but apply
  merit rules and controls.
• Brazil as an example.
• Agency graduation key agencies graduate within
  a universal set of merit and modernization rules.
• Enclaves key agencies are modernized within an
  ad hoc set of merit and modernization rules.

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Brazils federal civil service some lessons from
success
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Brazil mixing civil service and political
appointments

• The Career system
• Has rigorous merit entry, strong esprit de corps.
  
• Favors elite careers in key ministries. (e.g.
  tax administration, public finances, audit,
  trade).
• Has weak performance/efficiency incentives.
• Political appointments (DAS)
• System has legislated ceiling on numbers and
  covers six levels below Minister.
• Ministries propose and Presidency vets.
• No tenure, no pension.
• Permanent civil servants can become DAS, then
  return to old jobs.
• At top 3 levels half of DAS are civil service,
  half are private.
• Patronage politics at the Federal level is
  limited.

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Brazilian reform a long and painful process

• Civil-service regime created as a rigid Weberian
  system in 1930s.
• Dilution of rigid hierarchy from 1967 onwards
  (military government) in favor of
  decentralization to autonomous agencies for
  greater managerial flexibility.
• This led to perceived abuses, loss of central
  control.
• Hence new rigidities in 1988 Constitution (return
  to civilian rule)
• Extension of tenure and pension obligations.
• 1995 onwards Cardoso government rebuilds the
  civil service
• selective development of specific careers
• measures to ensure a strong regime of political
  appointments.
• 1995-98 Cardoso governments attempt to
  introduce executive agencies
• Proposal to remove tenure from public employees
  in Executive Agencies.
• Limited results due to perceptions of loss of
  central fiscal control, public unions resistance
  to proposed changes in labor regime.

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Brazil some conclusions

• Brazil is well served today by competent, honest,
  and accountable public servants.
• Professionalization (capacity building
  attaining political independence) has been a long
  process (70 years), and is still not yet over.
• Brazil has a large reservoir of capable people
• Changing rules was not enough - continuity and
  competence
• 1930s to 1980s the authoritarian developmental
  state pushed professionalization.
• Since 1988 growth of popular demand for honest
  and effective civil servants.
• The importance of competent public organizations.
  
• A sensible approach to mixing merit and politics
• A hybrid and deep system of political
  appointments.
• Selective approach to Careers.
• There is a constant, never-fully-resolved tension
  of political protection versus efficiency.
• The bad rigidities (the merit trap) tenure
  combined with the pay/pension trap.
• The more bearable rigidities weak incentives for
  efficiency.

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Table 1 Comparing Civil-Service Systems
Management Principles
Patronage system (traditional) Patronage system (modern) Merit system New-Public-Management options
Entrance criteria Based on loyalty/affinities and, to a varying extent, merit. Informally based on loyalty/affinities, formally on merit criteria (see merit column) Competitive, transparent process open to all citizens.
Tenure and relation to political principals Tenure last no longer than the political principals term in office. Most appointments on political/ welfare grounds. Lifetime tenure, with removal only through due process. Lifetime tenure, with removal only through due process, protects political neutrality.
Remuneration Less rigid pay structure. Sometimes political contributions from pay, or political services, are required. Formal pay structures undermined by variety of allowances, supplements, etc. Political contributions and services often required. Relatively rigid pay structure based largely on rank (rather than work done) sometimes back-loading of rewards (e.g. Japan). Pay structure based on work done, with some element of reward for performance.
Position classification Same as merit system. Positions are established centrally and classified according to rank.
Lateral entry points (internal or external labor market) There are often impediments to external lateral entry at senior grades there are few points of entry, with most entering at a young age and most senior positions filled by promotion. Impediments to external entry are loosened, especially at more senior levels.
Senior appointments Many countries have flexible approaches to political appointments. The amount and depth of political (as opposed to merit) appointments is limited in most OECD systems. US, notably, allows large numbers of political appointments. Senior posts are subject to contractual (performance) conditions and tenure is removed
Management Management is centralized, often with an independent body managing appointments. Decentralization of management.
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Table 2 Comparing Civil-Ser ice Systems the
External Environment
Patronage system (traditional) Patronage system (modern) Merit system New-Public-Management options
Political arrangements and the civil-service system Spoils systems fund politics (by rewarding for political loyalty, services) or affinity systems (kin, elites, etc.). Traditional spoils systems can be formal (codified) systems. Modern spoils systems are informal, hidden behind formal merit systems. Informal patronage politics are based on spoils systems, affinity systems, or public-welfare-employment policies (government as employer-of-last-resort). Merit systems arise under mature democracies with checks and balances and where political parties are funded independently of civil-service spoils. Merit civil services protect their privileges, acquire a corporate identity, and become an interest group. A merit system, by protecting civil servants from politicians, promotes credible commitment, but at the risk of shirking and inefficiency. NPM options have mostly been applied where merit systems are entrenched, not to change them fundamentally, but to modify them partially. Regimes more akin to private-sector personnel systems have been applied in non-core agencies (e,g, executive agencies), while core agencies have retained most elements of a merit system. NPM options seek to bring back accountability to politicians and promote efficiency, but at the risk of politicization.
Labor-market conditions and the civil-service system Scarcity of modern-sector jobs. Poorly functioning labor markets, and scarcities of qualified people. Well-functioning labor markets, but many civil services function as internal labor markets, insulated from the national market.