Public Sector Productivity Challenges
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1) Measuring productivity in the public sector faces challenges due to intangible outputs and lack of price signals, but countries are developing better measures of inputs, outputs, and outcomes. 2) Governments can drive productivity improvements through strategic use of resources, human resource management, IT investments, and fostering innovation. 3) Collecting better data, standardizing quality adjustments, studying different levels and sectors, and understanding innovation dynamics can help establish a new public sector productivity agenda.
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Public Sector Productivity Challenges
- 1. PUBLIC SECTOR PRODUCTIVITY CHALLENGES Edwin Lau Head of Division Public Governance and Territorial Development Global Forum on Productivity 7-8 of July, Lisbon
- 2. Outline • Measuring public sector productivity • Driving productivity improvements in the public sector • Agreeing on a public sector productivity agenda
- 3. Measuring public sector productivity
- 4. Public sector Public sector specificities • Mainly services • Heavy in intangibles / tacit knowledge • Absence of price signals (non market goods and services) • Process based • Collective outputs
- 5. A significant share of GDP (excluding transfer) Measuring Inputs: Resources (labour and capital) used for the production of goods and services Measuring outputs: eg. Health care: DRGs. The measurement of inputs is more advanced Quality of administrative data (employment, ICT expenditure) Moving to employment at the sector level (COFOG) Value for Money initiatives Challenges Where are we?
- 6. An illustration-public sector cost effectiveness AUS AUT BEL CAN CHL CZE DNK EST FIN FRA DEUGRE HUN ISL IRL ISR ITA JPN KOR LUX MEX NLDNZL NOR POL PRT SVK SLV ESP SWE CHE TUR GBR USA OECD 72 74 76 78 80 82 84 86 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 Life expectancy at birth (in years) Total health expenditure per person (USD PPP) High spenders high results Low spenders high results Low spenders low results High spenders low results Life expectancy at birth and total expenditure on health per capita (2012) Source: Government at a Glance 2015 based on health statistics database
- 7. Measuring productivity: How can we integrate output quality ? Measuring outputs: quantity and quality of products and services Macro • Government wide level Meso • Sectoral level Micro • Individual organization Challenges Aggregation and standardisation of administrative data Non tangible outputs Understanding outcomes Measuring quality and satisfaction Incentives to game
- 8. Satisfaction with public services: a proxy for demand? Source: Gallup World Poll Confidence and satisfaction across government institutions (2012)
- 9. • Efficiency: transactional (benefit administration, tax collection) back office (HRM, finance), front line (schools, health, etc.) • Example: productivity in education: the total number of full-time equivalent students in publicly funded schools, quality-adjusted by the average score of the General Certificate of Secondary Education. UK Public sector efficiency group (CO) • Detailed information on measurement of inputs, outputs and outcomes on an annual basis. • Consistent with the Atkinson recommendations Australia Productivity commission • Direct output measurement • In line with the 2002 EU recommendations • Use of the COFOG classification (e.g. social expenditures, health) Denmark Statistics Denmark What are the good practices in productivity measurement?
- 10. How can we drive productivity improvements in the public sector?
- 11. What can Government Act upon ? Key policy levers • Resources/budgets • Human Resource Management • IT Investment • Innovation
- 12. The use of performance information in the budgeting process is pervasive… 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 Korea Mexico Canada Switzerland Netherlands Slovenia Turkey Sweden Estonia SlovakRepublic NewZealand Chile Finland France Ireland Australia UnitedKingdom Denmark Norway Japan UnitedStates Luxembourg Poland Italy Greece Belgium Austria Spain Hungary CzechRepublic Germany Portugal OECD average Use of performance budgeting practices at the central level of government (2011) Source: OECD 2011 Survey on Performance Budgeting
- 13. …But difficult in practice 1 1.5 2 2.5 3 3.5 4 4.5 5 Pay cut for head of programme/organisation Programme transferred to other… Negative consequences for leaders' evaluations Programme eliminated More staff assigned to programme/organisation New leadership brought in Budget freezes Budget increases More training provided to staff assigned Budget decreases More intense monitoring in the future Poor performance made public No consequences 2007 2011 What happens when performance objectives are not met?
- 14. Mechanisms to ensure return on investment are still weak 00-25% 25-50% 50-75% 75-100% What is the share of direct financial benefits realised in government ICT projects (self- assessment)?
- 15. Impact of the Fiscal crisis Public Employment • Cutting staff • Increasing working hours • Improving financial incentives through remuneration systems
- 16. Average number of employment reforms by bundle per country (2008-2013) Source: OECD (2014) survey on managing budgetary constraints: implications for HRM
- 17. But public employment is ‘sticky’ 0 5 10 15 20 25 30 35 40 2013 2009 % Public sector employment as a percentage of total employment (2009 and 2013) Source: International Labour Organization (ILO), ILOSTAT database.
- 18. Strategic Investments Investing in Human capital to increase productivity • Investing in skills • Mobilising leadership • Improving strategic human resource management
- 19. Addressing mismatch of skills: strategic workforce planning Use of systematic strategic workforce planning Source: Preliminary findings of the OECD SHRM survey 2016
- 20. Strategic workforce planning takes into consideration… Source: Preliminary findings of the OECD SHRM survey 2016 0 5 10 15 20 25 30 Others, please specify: It includes specific targets for which senior managers… Possibilities for restructuring (e.g. reallocating staff,… Possibilities for outsourcing Job profiling Specific skill sets required to meet future objectives Impact of technological changes Efficiency savings (through e-government for example) Civil service demographics Possibilities for training and development Possibilities for recruitment Current HR capacity Skills shortages in the national labour market Organization's strategic objectives Possibilities for coordination Number of responding countries
- 21. Assessing mismatch of skills through employee surveys? 0 5 10 15 20 25 30 35 Other Inclusion Harassment Skills match Effectiveness of HRM systems Impacts on employees of workplace… Integrity at the workplace Discrimination Perceived employer image Stress levels Work intensity Employee Engagement Effectiveness of management Organizational commitment Employee motivation Work / life balance Job satisfaction Number of responding countries Source: Preliminary findings of the OECD SHRM survey 2016 Employee surveys aim to assess:
- 22. The Digital Challenge Leveraging IT to increase productivity • Streamlining IT investments • Unleashing the power of data • Building shared IT platforms
- 23. Capital investment: public sector ICT expenditure data 0.0 0.5 1.0 1.5 2.0 2.5 % Total ICT expenditures as a share of central government expenditures (2011 or latest year available) Source: OECD Survey of ICT expenditures, 2010-11. OECD National Accounts Statistics.
- 24. 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 Data availability Data accessibility Government support to re-use NonationalOGDportal The 2015 OECD OGD pilot Index The Open-Useful-Re-Usable Government Data Index (OURData Index)
- 25. Innovation Is the critical Intangible IT IS ALL ABOUT INNOVATION! • Generating a dynamics of innovation in the absence of financial incentives • Creating innovative ecosystems • Fostering the diffusion of innovation
- 26. Strategies for diffusing public sector innovation Innovation Units / Labs Awards, Contest, Prizes Innovation Networks
- 27. Creating synergies and fighting fragmentation
- 28. Towards a new public sector productivity agenda: from measurement to insight According to previous research: HRM (satisfaction, engagement) Scale of operations Decentralization Productivity But what about? Skills and innovation ICT Data
- 29. • Inform a measurement agenda by putting forward data requirements and collection methods • Standardise quality adjustment methods for specific sectors/services (e.g. exam scores for education); role of performance information • Finer split between frontline and back-office/transactional services • Case studies at different levels ( e.g. sectorial, institutional, micro service provision) • Better understanding of public sector innovation dynamics, and mechanisms and processes for scaling up innovations • Collect and advance evidence on the importance of institutional drivers (e.g. data, ICT) and enabling conditions (e.g. disruptive innovations) How could the OECD contribute to this new public sector productivity agenda?
Editor's Notes
- Implementing accrual accounting and budgeting is a costly business that needs to be supported by ICT reforms, training and communication efforts.
- Micro levels measures capture the outputs of individual organizations, intermediate measures capture outputs at the policy sector level, and macro measures capture measures at the government wide level. Macro efficiency measurement of outputs may be useful to distinguish trends but less useful for managerial purposes. Typically macro level data encompass a diffuse set of activities of numerous units. However managers should only be accountable for concrete outputs that are managed by the units they manage. Moreover macro-level data do not show where an efficiency problem occurs and thus information does not tell managers where they need to intervene. It is fair to say that the micro-level measurement has more to offer to public managers since this micro-level focus is required if we want to gain an understanding of the underlying causes of inefficiency. Furthermore, the aggregation of micro-level measurement into macro level data poses several problems: double counting if including intermediate outputs. Aggregation requires weights, and in the absence of price information there is no obvious way t add up. A final issue relates to how the quality of goods and services should be incorporated. The output mix of many public sector organizations includes intangibles: routine based tasks, human relations based activities and process based activities. Collective outputs such as defence and public order and safety Measuring outputs can also create incentives to “game” or cheat particularly when output measures affect monetary or career incentives.
- Citizens have higher confidence in – or satisfaction with – public services than in the abstract notion of the national government. In 2012, OECD average, confidence/satisfaction was highest with police (72% of respondents expressing confidence in the police) followed very closely by health care (71%), education (66%) and, finally, the judicial system (51%).
- Governments are increasingly incorporating performance information in the budgeting and governance processes as a means of achieving better results, promoting greater value for money, and increasing the transparency of spending decisions. Good performance information can contribute to better decisions regarding the use of resources and how to run particular programmes. Greater transparency of performance and resource allocation also increases the accountability of government agencies for their expenditures.
- Lack of clarity about how exactly to respond to poor performance. More resources, or fewer? Is a management response required? There is – and perhaps should be – no “automaticity” about how to respond to performance budgeting challenges – a nuanced, case-specific judgement is required.
- Most OECD member countries are aware that they do not harvest the lions share of the financial benefits of digital government. Instead they tend to make service and quality improvements that also create public value. Still, to ensure that digital technologies help increase public sector efficiency and productivity, the financial benefits of digital government needs to be realised. Asked to assess the extent to which countries are currently succeeding in realising the financial benefits of IT projects, the majority of countries answer between 0 and 25%. The data only provides an overall proxy of the challenge and are not based on specific calculation or analysis. The data are preliminary findings only from the OECD Digital Government Performance Survey 2014; we are currently validating the data with the countries and expect to have analysed the results by early 2015. One important step in this analytical process is the OECD workshop on E-Government Indicators, taking place 26 November 2014 in Paris.
- Changes in Public Employment includes various downsizing instruments such as recruitment freezes, dismissals, encouraging voluntary departures, privatization, or decentralisation of employment. Training system reforms includes reductions of training time and budgets, as well as various efficiency mechanisms such as reducing travel costs and providing training through electronic means when possible. Working time reforms includes changes to the number of paid holidays, various kinds of leave, or increase in working hours. Salary reforms include salary reductions (for top-level or all staff) abolishment of allowances, reduction of performance-related pay, and pay freezes. The bundle, “Cost Saving Measures in the field of HRM”, includes the use of furloughs, promotion freezes and reductions of hierarchical levels. Job security reforms asked whether it had become easier to dismiss civil servants and public employees. Status reforms include changes in the use of civil servants and other public employees, including fixed-term employees. This presentation will focus on the three with the biggest implications: Employment Reforms, Remuneration system reforms and Training system reforms.
- Data for Italy are from the National Statistical Institute and the Ministry of Finance. Data for Portugal are from the Ministry of Finance. Data for Korea were provided by national authorities.
- 29 OECD countries + 2 (Colombia and Indonesia) LAC OURData Index Getting more out of the data: Open up data to modernise the public sector by co-creating public value (economic, social and good governance)
- By applying a “life-cycle” approach to the analysis of innovation, the OPSI is advising countries on what tools and approaches work from ideas generation to innovation implementation and diffusion. Three main approaches to diffusion emerges from OPSI analysis: Innovation Units/Labs The Central innovation hub (Canada) supports and coordinates innovative efforts in the federal government. It also supports diffusion of the use of techniques and tools such as behavioural economics, data analytics, design and social innovation. Works as a catalyst helping departments address specific policy, service or design challenges. The Centre for Public Service Innovation (South Africa) is a Government Component in the portfolio of the Minister for Public Service and Administration. It was established to identify, support and nurture innovation in the public service, with a view to improve service delivery. The CPSI seeks to celebrate the successes of individuals, teams and departments in the quest for a more effective, efficient and accountable government. Awards, Contest Prizes The Innovation in American Government Awards (United States) celebrates innovative solutions which brings more effective government at state and federal level Innopalkinto (Finland) is an annual recognition to the work of civil servants to drive new solutions. The competition Innovillage award an innovative solution. It challenges participants to outline the basic work or working solutions resulting in the development of an innovative output. The prize is 3,000 euros. Networks A network of Innovation Champions across the Australian government brings together civil servants to understand and use innovation to improve outcomes, sharing lessons and experience. The Innovation and Policy Co-ordination team (IPC) in the Department of Industry organises an annual Innovation Month to help build an understanding of innovation, involving events, workshops and training. The Common Knowledge Network in Portugal is a collaborative platform to promote the sharing of best-practices and information about modernisation, innovation, and simplification of public administration. In the Netherlands, the Ministry of the Interior manages the Slimmer Network (Smarter Network), a network of around 4,000 innovative officials and advisors within the government, provinces, municipalities, water authority and police. The networks help promote and support innovative initiatives underway.
- Research and experience shows that innovations come from staff at all levels, from the political right down to those charged with front-line service delivery. Furthermore, innovators don’t innovate in a vacuum, but inside an organisational culture that may support or hinder innovation. In this way, our research could explore (slide)
- Frontline services can be considered as those that are delivered directly to individuals/households, whereas back-office and transactional services are of a collective nature – For example, in education, individual services would include all expenditures minus subsidies which are provided to individuals/households, whereas collective services are related to the formulation and administration of government policy; setting and enforcement of standards; regulation, licensing and supervision, etc. • The advantage of the split between frontline/individual and collective/back-office/transactional services is that it also allows for some analysis of distributional impacts – This complements the conventional incidence analysis of spending and tax across income groups