governance, political economy, institutional development and economic regulation

Public sector angst

So, what is it about social media which gets sarkari types hyperventilating about their gripes and grouses? First, we have members of the para military forces seeking sympathy for the poor living conditions they suffer on duty. Next, we have a General, passed over for promotion, pedaling conspiracy theories around his being overlooked. To cap it all the managing director of Air India laments that a CBI investigation into improper procurement could sabotage the critical turn-around of the publicly owned airline. 

Why for instance do the owners and employees of private companies not do the same. Why didn’t Mr. Ratan Tata wring his hands on social media about the underhand way his successor was cutting the ground from under his feet? Or, for that matter, why hasn’t Netaji – Mulayam Singh Yadav – done the same about the goings on of his son? Why don’t we get to hear more stories of backstabbing, sell outs and short-circuited ambition from the private sector? I suspect the private sector guys feel that exposing their angst on social media is unlikely to generate any public sympathy for them. Working to improve the bottom line of a private company does not gel with the popular concept of national service. Never mind that using resources efficiently and maximizing output and productivity are the corner stone of growth oriented, competitive economies. In India “profit” remains a dirty, exploitative word.

Not even bumbling saints

At the very least public sector officers could be bumbling saints – role models of honesty, diligence and accomplishment. But forget efficiency most do not even have the basic attributes of rectitude. We saw this in the abandon with which public sector bank employees participated in the conversion of old black into new black recently during notebandi. The reasons why more sarkari types do not conform to the ideal are complex. Low organizational expectations from them; a performance system which provides huge rewards for competing successfully for the market (getting a public-sector job) but virtually no rewards for competing in the market (continuously improving performance in the job); lax disciplinary procedures for miscreants and low accountability, all serve to cocoon the public servant in an impregnable miasma of collective might versus citizen demands.  

Antiquated management systems

Continuously improving public sector systems are part of the job of a public servant. But India, today, has possibly the most antiquated public management processes. This despite the availability of funds for purchase of equipment, procurement of technical expertise and the powers to make changes in existing rules being pervasive. But for years the job of managing the household efficiently has taken a backseat to racing ahead with announcing new initiatives for public good and spinning old initiatives into new ones.

High overheads

The overhead cost or, tail to teeth ratio, is very high in the public sector. Just the expenditure on salaries and pensions is around a quarter of the net revenue receipts of the central government. The administrative costs of managing offices – purchase of consumables, electricity, purchase of new equipment, maintaining and constructing offices and government houses, travel and communication costs are additional. 

In public sector accounting, employees matter more than machines. Getting boots on the ground and waving the flag is more important than empowering the employee. That is why Bollywood delights in stereotyping the bumbling cop who ambles up to a crime site gamely swinging nothing more than a lathi. A lathi costing Rs 300 is the sole piece of equipment the average policeman has. Never mind that the average police constable costs the government upwards of Rest 20,000 per month. Providing jobs is a means of empire building for politicians and far too often becomes a lucrative business for the recruiters.

It is no wonder then that “zero based budgeting (ZBB)” never took off. How could it? ZBB is based on the axiom that you can always do better. The past is nothing more than a sunk cost which must never hold back good decisions making in the future. But our public sector operating mantra is to never accept that a mistake has been made which needs to be corrected. Government auditors view all mistakes as evidence of waste. Never mind that individuals only learn by committing mistakes. A baby who is fearful of falling would never walk, let alone run. 

So, what is it that we can do differently in the public sector?

First, by providing cradle to grave employment, even at the officer level, we create a collective (the cadre) where only individuals need exist. Government must dispense with the cadre system for recruiting officers, which is at the heart of the problem. Recruit instead for specific positions against specific eligibility criterion. Open recruitment, on contract, would keep the officers on their toes. 

Second, adopt cost accounting metrics for budgeting. This would make operational systems more efficient and facilitate performance evaluation across verticals.

Third, decentralize financial and administrative powers extensively whilst making the reporting chain flatter. This is the first change Suresh Prabhu made as Minister for Railways in 2015. The beneficial impact is already visible. The IAS should be as adept at organizational development as at strategy or policy making. The incentive today is to shine in service delivery achievements. This is self-limiting once the low hanging fruits have been plucked.  

Fourth, we should experiment with flexible budgeting by broad banding expenditure allocations across schemes. This would enable the executive to maximize the physical impact of budgetary allocations based on the performance of schemes in the field. Parliamentary approval should be limited to setting the macro variables (primary deficit, revenue deficit, fiscal deficit, current account deficit, debt to GDP ratio and the assumption of economic growth) and approve the specific tax proposals. The specifics of how the money is spent should not be held hostage to Parliamentary approval. Parliament must safeguard the macroeconomic bottom line not become part of the executive in micromanaging expenditure via the power to allocate expenditure. 

Lastly, disciplining of errant public sector staff can be salutary. Mistakes happen. What is more important is that they should be corrected once they are detected. Severe sanctions should apply for those who commit rule infractions themselves or those who turn a blind eye to infractions by their subordinates, whilst managing to keep their own desk clean. Conversely, rewards must accrue for others who adopt a positive and proactive approach to rule infractions made without mala fide intention. Greater rewards should accrue, for those who can propose thoughtful changes in rules to plug loopholes and avoid repeat infractions in future.

Managing a government is very much like managing a large, noisy joint family. A combination of encouraging pats, dissuading slaps, a great deal of open discussion and well intentioned decisions made in public interest are the failsafe ingredients for a happy and productive public sector family.

 

 

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