1T The World Bank OCTO BER NUMBER 31 rPUB5LI§C S EC TO R Rethinking civil service reform 21 577 Civil service reform is an increasingly important part of the Bank's public sec- tor portfolio. Yet such reform often does not generate sustained improve- ments in govemment performance. A rethinking of the Bank's approach could lead to broader interventions better tailored to country conditions and demand. Recognizing the importance of govern- lending for civil service improvements ment capacity in achieving economic and began) and 1998. Sub-Saharan Africa has social objectives, the World Bank has accounted for nearly two-thirds of civil ser- invcsted significantly in civil service reform vice lending (figure 1). During this period over the past 10 years. Few observers doubt more than half of civil service reform lend- the centrality of civil service performance ing was carried out through structural to the development agenda-but some adjustment programs, although other question the effectiveness of past programs instruments-such as technical assistance to strengthen civil services in borrower and institutional development grants- countries. Have Bank interventions helped have grown more important in recent years. make governments work better? Despite some progress, the answer is, "probably Has it worked? not." Thus a serious rethinking of the cur- It is hard to say, empirically, whether the rent approach to civil service reform is Bank's civil service reform efforts have been needed. What is civil service reform? FIGURE I REGIONAL DISTRIBUTION OF CIVIL The Bank does a number of tlings in the SERVICE REFORM OPERATIONS, 1987-98 name of civil service reform. The focus has Middle been and remains on addressing fiscal con- East and cerns-bringing balance to government North South pay and employment practices. But civil Europe and Africa Asia service reform also involves revamping gov- Central Asia ernment functions and organizational East Asia structures, improving human resource poli- acific cies in central, local, and sector govern- 7% ments, revising the legal and regulatory framework for the public administration, providing institutional support for gov- Sub-Saharan ernment decentralization, and managing Africa the process through which these changes 61% are implemented. The Bank's civil service reform portfo- lio has been extensive: about 169 opera- . FILE lOPY tions in 80 countries between 1987 (when FROM THE DEVELOPMENT ECONOMICS VICE PRESIDENCY AND POVERTY REDUCTION AND ECONOMIC MANAGEMENT NETWORK successful. Internal Bank assessments tell an Elements of a new approach incomplete story. Ratings by the Operations A new approach would include deeper and Evaluation Department of projects com- slower pay and employment reforms, link pleted between 1987 and 1998 suggest that civil service reform with other institutional civil service reform projects-with 38 per- reforms, move from a project to a program cent unsatisfactory ratings-underper- approach, and follow the lead of smart formed the Bank's general portfolio-which administrative revolutions elsewhere. had a 30 percent unsatisfactory rating for the same period. Adopting deeper and slower pay and Earlier analysis also suggested that civil employment reforms Too often, the service reform has often missed its main Many civil service reform operations have fiscal targets. Through the early 1990s less focused on reforming government pay and Bank has tried than half of the Bank's civil service reform employment policies. The objectives have operations reduced wage bills or com- been to reduce the aggregate wage bill, to use palliative pressed salaries. Reductions in employment streamline the civil service, and rational- were modest-between 5 and 10 percent ize remuneration structures (see Lindauer measures to of government employment-and subject 1994). to reversals. Fiscal savings from these cuts Some would argue that these reforms solve problems were rarely sufficient to finance salary have been driven by narrow fiscal deter- increases for higher-level staff (Nunberg minants, have been politically difficult, and that require and Nellis 1995). have had minimal fiscal impact and-more to the point-little performance impact. major surgery Why not? Thus some observers argue that pay and A gnawing critique of civil service reform employment reforms should be abandoned. efforts persists, intimating that these inter- But in fact, such measures need to be deep- ventions have boosted neither efficiency nor ened, broadened, and lengthened. effectiveness. The outlines of the problem Pay and employment reforms are often are fairly clear: civil service pay and employ- needed to restore fiscal balance-a neces- ment reforms have had only limited achieve- sary but insufficient condition for perfor- ments, and there have been difficulties with mance and capacity improvements. But such government ownership and oversight-espe- reforms have generally been too modest cially in Africa. At the same time, an emerg- to achieve fiscal balance. Most downsizing ing agenda for government reform includes programs have sought reductions of 5-15 standard personnel management and pay percent-but much bolder cuts are needed and employment reforms, but also tries to to render government affordable. link these activities with fundamental tasks Downsizing programs have not proved of transforming the state. politically destabilizing. Even without elab- The main problem with the Bank's con- orate schemes for redundant workers, sev- ventional approach to civil service reform erance (where it exists) and moonlighting is that it has tried to use palliative mneasures and daylighting have provided a transitional to solve problems that require major cushion for displaced workers, and infor- surgery. Technical administrative fixes have mal and agricultural sectors have been able been applied to fundamental problems of to absorb more workers than expected. Thus political economy. And even on the tech- reforms can perhaps be pushed farther on nical side the focus has been narrow, ignor- political grounds as well. ing crucial links with other parts of the ButBank-supported payand employment larger system. Overcoming the limitations reforms have continued to focus on short- of this approach will require a more com- term goals-such as one-shot employment prehensive and realistic framework for cuts-rather than long-term rightsizing and reform-as well as new instruments of performance improvements. Thus even support. where civil services have shed labor through PREMNOTE 31 OCTOBER 1999 adjustment operations, they have sometimes Movingfrom a project to a program simply rehired staff. approach The new agenda for civil service and Linking civil service reform with other administrative reform requires a capac- institutional reforms ity for flexible Bank responses-including Because the focus on pay and employment the ability to intervene quickly but also was too narrow to achieve necessary institu- to stay the course through the frequent tional changes, the emphasis was broadened redesigns often needed in institutional to include human resource management reforms. Moreover, links among different issues. Yet an even broader but highly selec- reform initiatives under the wider umbrella tiveapproachiscalledfor-onethataddresses of state transformation will require sup- Reforms must first-order questions about the role of the port mechanisms with more permeable state, with important implications for the boundaries. be tailored functions, structure, organization, and The Bank's conventional project ap- process of government. proach is not well suited to this new con- to regional Three other dimensions of government struct of government reorientation. Projects reorientation need to be considered in this are based on an engineering model that and country more integrated reform model. The first emphasizes tight timeframes and deem- is the by-nowwidely recognized connection phasizes human variables. Institutional circumstances between civil service management and the reform requires adaptability and partici- framework of controls and incentives pant commitment to reform goals. Such embodied in governments' financial man- reform is subject to myriad unpredictable agement systems. Strong links between per- variables, making blueprints disingenuous sonnel and budget functions are essential at best. to sound government management. In some ways Bank work on civil service The second dimension is the extensive reform hasalreadybegun to move awayfrom administrative reform occurring through- a focus on projects. Various high-impact non- out borrower countries at decentralized, lending operations and anew range of oper- subnational levels ofgovernment. Decisions ational instruments provide for a looser, about devolution and deconcentration of more country-driven approach to reform. staff, functions, and resources must be linked In addition, thought is being given to new to policies on central civil service typesofprogramloans,whichcoulddevelop development. the programmatic approach more system- The third dimension is the link between atically. Such loans can support medium- central government civil service reform and term reforms within a broad policy institutional reforms in individual sectors- framework agreed on by the Bank, the gov- especially health and education, typically ernment, and civil society. Establishing over- the largest government employers. These all program criteria and governance systematic ties are needed to ensure coher- mechanisms for the reform process, con- ent and consistent reform programs. ditioned on the development of results- Basic principles must be explicit in this oriented reform packages, is key to program new model. One is that a more integrated success. approach to government reforms must This model allows for a more tailored, guard against overloading governments' realistic timneframe for governments to pre- already burdensome requirements for pare and pursue activities following an inter- reform. Another is that guidance on the nally determined schedule. It is not a design and implementation of carefully one-size-fits-all approach. Only some coun- sequenced reforms cannot be provided tries possess sufficient institutional capacity through a universal blueprint. Reforms must to pursue this more autonomous model; be tailored to regional and country cir- others would need to move away from the cumstances. project approach more gradually. OCTOBER 1999 PREMNOTE 31 Emulating examples of smart government putting the state in the mainstream of 21s- The past 10 years have seen dramatic changes century modernizing trends, undermine in administrative practices in industrial coun- efforts to move governments toward the cut- tries. Governments have reshaped rigid, ting edge of administrative development. hierarchical bureaucracies into flexible, Finally, countries should embark on a decentralized, citizen-responsive organiza- course toward smart government. More than tions. Reforms have been sweeping in some simply reinforcing new public management countries, representing radical, systemic slogans, smart government means finding transformation based on new public man- the best strategy to carry out essential tasks agement reforms-reforms that emphasize by leveraging scarce resources-possibly narrower government functions and struc- through creative technology applications or The Bank can tures, demands for value for money, and a inventive management solutions. Fresh focus on results. Other countries have pur- approaches could result in a "third wa"'" play an objective sued more incremental improvements in for borrowers that not only bypasses tradi- civil service management while retaining tional administrative approaches but also role for borrowers basic administrative structures and practices. leapfrogs the new public management The range of new approaches and mod- models. inte rested in els available to borrower countries can be over- whelming. Moreover, most industrial country Further reading sampling elements innovations are onlynowbeing tested. Debate Nunberg, Barbara. 1997. "Re-thinking Civil runs high on these reforms, and the jury is Service Reform: An Agenda for Smart of government still outwith respect to some of the more con- Government." Poverty and Social Pol- troversial elements of the new public man- icy working paper. WNorld Bank, Wash- reform agement-including the use of market ington, D.C. mechanisms (such as performance pay or Nunberg, Barbara, andJohn Nellis. 1995. widespread contractual employment) in core Civil Service Reform and, the World Bank. civil services. For three reasons, adapting ele- World Bank Discussion Paper 161. Wash- ments of competing administrative models ington, D.C. to borrower country contextswill be complex. Lindauer, David. 1994. "Governmen t Pay First, countries must be able to choose and Employment Policies and Economic mechanisms that are appropriate for their Performance." In David Lindauer and circumstances, selecting from a menu that Barbara Nunberg, eds., Rehabilitating Gov- neutrally demonstrates the pros and cons ernment. A Regional and Sectoral Study. of each option. In the midst of powerful Washington, D.C.: World Bank. advocacy by true believers in one or another approach, the Bank can play an objective This note was written by Barbara Nunberg (Lead role for borrowers interested in sampling Public Sector Specialist, PREM Unit, East Asia elements of government reform rather than Region). importing a whole-cloth model. If you are interested in similar topics, consider Second, this neutral presentation of joiningtheAdministrativeand CivilServiceReoarm options must be balanced with the need Thematic Group. Contact Barbara Nunberg, to ensure that reforming governments do x37487, or Nick Manning, x31202, or click on not install obsolete systems that, instead of Thematic Groups on PREMnet. ^ i 2 This note series is intended to summarize good practice and key policy findings on PREM-related topics. PREMnotes are distributed widely to Bank staff and are hEAl also available on the PREM website (http://prem). If you are interested in writing aPREMnote, email your idea to Sarah Nedolast. For additional copies of this PREM- iww=mz=maww note please contact the PREM Advisory Service at x87736. Prepared for World Bank staff