Towards a more productive public sector

by Lionel WIJESIRI

Productivity of the public sector is just as important to the economic performance of a country as that of the private sector. Three main reasons have been identified as to why public sector productivity is crucial.

First, the public sector is a major employer. Second, it is a major provider of services in the economy, particularly business services (affecting cost of inputs) and social services (affecting labour quality). Third, the public sector is a consumer of tax resources. Changes in public sector productivity may have significant implications for the economy.

In the case of Sri Lanka, besides these reasons, it is necessary to take into consideration future challenges facing the public service. It has been claimed that it will become harder in the future to raise the standard of living or even to maintain the current good quality of public services. The labour supply is shrinking and international competition is becoming more demanding.

Public sector finance will remain scarce, and tax competition will restrict available policy alternatives. Information and communication technology allows re-organisation of many services, but reluctance to reshape established practices may constitute a bottleneck.

Whatever the uncertainties about underlying conditions are, the need to accelerate productivity will serve as a policy recommendation and a key economic policy objective. Economic growth and rising living standards depend on higher productivity. The less manpower and capital are available, the more productivity growth must be accelerated.

Definition

Productivity is generally defined as a measure of the amount of output generated per unit of input. The definition of productivity, as being concerned with the relationship between input and output, does not cover issues that many people have in mind when they talk about public sector productivity.

A more general interpretation of productivity encompasses broader concerns about the outcomes achieved by the public sector. In common parlance, many people talking about public sector productivity have in mind the general question of what value they receive from public services in return for the utilisation of public funds.

Productivity and performance are functions of many factors - ranging from top management support, committed personnel at all levels, a performance measurement system, employee training, reward structures, community involvement and feedback to correction of budget-management decisions. It is thus important to build capacities for productivity improvement.

Productivity directly addresses the challenges of doing more with the same or even fewer resources. If an organisation (or government department) is able to increase the number of service activities (which we term outputs) over time and, at the same time, maintain or reduce resources employed (inputs), it will achieve significant productivity gains.

New Zealand experience

A workplace productivity kit for the State Services was launched by the Minister of Labour of New Zealand in July 2008, aiming at encouraging organisations to improve productivity and public value in the State Services. Sri Lanka can absorb a lot from their experience.

The Workplace Productivity Agenda broke workplace operations into seven drivers (segments).

These were considered important areas for workplaces to focus on to improve their performance and productivity. The drivers were highlighted by a working group of businesses and union representatives along with academics and government in the Workplace Productivity challenge report, the drivers provide a check list for workplaces to see where they could improve their operations, and the snapshot tool is a quick way to see how your workplace stands against the drivers.

The drivers emphasised the need to align everyone in the workplace towards better performance, and are about working smarter not harder.

The New Zealand Government understood that there was no one-size-fits-all solution to improving workplace productivity, but these drivers are a start for anyone looking to improving their workplace productivity.

The following were the drivers

* Building leadership and management capability - Emphasised effective leadership. It was about having a clear vision of where the organisation was heading and identifying new opportunities and inspiring people to pursue those opportunities.

* Creating productive workplace cultures - This was about positive relationships among staff, teams and managers. A positive work environment motivated people and helped them commit to the organisation. People felt encouraged to 'go the extra mile'. It was also important to value people's insights and experience. Their ideas helped the workplace to do things smarter and better.

* Encouraging innovation and the use of technology - Innovation was a key part of raising workplace productivity. Productive workplaces were innovative in the way they used technology, and planned and organised themselves.

* Investing in people and skills - The more skills the staff had, the more innovative they could be. They would also be more capable with new technology. Skilled workers could also work more quickly with fewer mistakes. They generally required less supervision, accepted more responsibility and were better communicators.

Training leads to higher skills and wages and lower staff turnover.

* Organising work - Productive workplaces have structures and processes that enable them to adapt and grow as products, technology and markets change. A well-organised workplace can get the best out of its staff and technology.

* Networking and collaboration - People can improve their workplace productivity by exchanging ideas and information with others in the industry.

Collaborating with others can reduce the cost of doing business and give people access to new ideas and new technologies.

* Measuring what matters - It is important to assess the value of any investment made in improving workplace productivity. This helps the Government understand the things that make the biggest difference.

Our experience

Public sector productivity is poorly measured in Sri Lanka. Better information on public sector productivity would make it easier to identify less effective policies.

Nevertheless, based on the information we have, our baseline assumption is that annual productivity growth in the public sector is relatively low. This low rate is due to both the nature of the services (which tend to be labour intensive with less scope for technological advances) and the operating environment (one without competitive market pressures).

A more productive public sector could be an important part of the solution to long-term issues, by getting more for the money that is spent; but this would mean significant change.

The sustainable debt scenario implies, because spending across government is constrained, that the State sector workforce will have virtually no growth over the next 40 years. The challenge for the State sector is to deliver better public services without more resources.

A lift in public sector productivity would have a positive impact on the national basket of services that could be delivered to the average Sri Lankan for a given level of spending. An 0.5 percentage point increase in the baseline assumption for annual public sector productivity growth, if sustained, would result in around 20 percent more public services per person after 40 years. Maybe, we should study the New Zealand experience a little more.