Human Resource Management Reforms

… a core term in Governance and Institutions and Atlas100

Definition

Reforming Human Resource Management (HRM) practices is a key element of many efforts to modernize government.

Disappointing evidence on success

Writing in the OECD Journal on Budgeting in 2007 (reference below, pages 9-12), Teresa Curristine, Zsuzsanna Lonti and Isabelle Joumard note that notes that HRM practices are thought to be a major institutional driver of efficiency in the public sector. However, the evidence on the impact of HRM reforms is disappointing:

“In summary, while there has been a plethora of public sector reforms in many OECD countries, the research evidence shows fewer success stories than have been claimed by practitioners. There are several reasons for this.

  • First, research in this area is extremely complicated due to data availability issues, measurement difficulties, and the potential effect of many external factors on efficiency and productivity (the attribution problem).
  • Second, reforms are often driven by ideological considerations and management fads rather than by efficiency concerns.
  • Third, practitioners often have a vested interest in the success of the reforms and may over-claim their impact.
  • Fourth, governments launch reform initiatives with great fanfare but often devote few or no resources to evaluating them.
  • Finally, there could be substantial differences between the short-run and long-run effects of these reforms, such as efficiency gains dissipating over time.”
Wages

“The soft aspects of human resource management, such as employee satisfaction and morale, are considered to be the most important drivers of performance. While wages are still important for staff, non-monetary incentives are also essential. High wage levels – compared to similar work in the private sector – could lead to inefficiencies, although governments often are model employers and their wage policies reflect equity concerns as well. Wages are also important for attracting and retaining qualified staff, especially in case of skill shortages. Performance-related pay initiatives appear to have a low impact on staff motivation.

“There is extensive literature on wage differences between public sector workers and otherwise comparable private sector workers covering many OECD countries. In many countries wages in the public sector are higher than in the private sector although they vary over time and across countries. The public sector wage difference is the highest at the lower end of the wage distribution (i.e. low-salaried or poorly-skilled workers are paid better in the public sector) and decreases as one moves up the wage distribution. Significant differences have also been found in the differential by various worker characteristics, such as occupation and gender. For example, in Germany wages for men were lower in the public sector than in the private sector, but the opposite was found for women.

Agencification

“Findings are more inconclusive on the impact of ownership, competition and agencification. While private ownership is not a guarantee of higher efficiency, public ownership does not necessarily lead to higher inefficiencies either. Rather than ownership per se it is the importance of competitive pressure on efficiency that matters. However, there is a need to further explore for what and with whom public organisations compete. The nature of service delivery, e.g. whether it has features such as low asset specificity (high levels of alternative uses for resources) and low information costs, is crucial for successful competition in public services.

“Regarding agencification, there is some evidence that a reduction of input controls combined with steering for results, financial incentives and competition could lead to increased efficiency. However, the impact on the quality of service delivery and policy effectiveness is unclear. The literature also calls attention to the major risks of agencification, including the exposure of government to financial and employment risks and opportunities for political patronage and corruption. The effects of new intra-governmental coordination mechanisms are also not known.”

E-government

“Surprisingly, the impact of e-government has also not been thoroughly evaluated by researchers. A survey on e-government among United States municipalities concluded that it has been adopted by many municipal governments, but is still at an early stage and has not obtained many of the expected outcomes such as cost savings and downsizing. Few cities have experienced savings or reductions in the numbers of staff, while many cities have observed changing roles of staff and changes in business processes. It appears that e-government practices reduce time demands but increase task demands on staff members and require more technical skills.

Performance measurement

“There is growing empirical evidence about the negative effects of performance measurement/management, although the question of whether it does lead to better performance is largely unanswered. As will be discussed in the next section, performance information is typically not used in political budgetary decision-making processes, or by a majority of political actors. Rather, its impact is in the internal management of departments and agencies.

Workforce diversity

“There is very little evidence of the impact of workforce diversity and representativeness on efficiency. Little research exists on the impact of diversity on workforce performance, and the findings are contradictory. A public administration study based on a survey of front-line supervisors found that highperforming agencies tend to strive towards workforce diversity. Some studies point to higher creativity and implementation ability in diverse organisations. Others find no link between diversity and performance. Furthermore, there are studies that find negative effects of diversity, such as increased absenteeism.

Unions

“Assessment of the unions’ role in public sector efficiency is also relatively uncharted territory, although union representation is rather high in the public sector in most countries. There is some empirical evidence from local school districts and fire services in the United States that suggests that high levels of unionisation constrain both flexibility and productivity. It has been found that collective bargaining in local government in the United States led to increased municipal expenditures. However, the impact of unions on issues of efficiency and effectiveness is unclear. European studies find no relationship, either positive or negative. This observation points to the importance of national differences in the nature of unionisation, including differences in the level of bargaining. The scarcity of research on public sector unions is all the more remarkable because, in all probability, the role of unions in the public sector differs from the private sector substantially, as public sector unions are more prominent, bargaining is not strictly managerial, it is also a political affair, and many of the public services are considered essential.

Image of the public sector

“In terms of attractiveness of the public sector, its image plays an important role. The relatively unattractive image that the public service is considered to have in the United States encourages many talented students to pursue careers in the private sector. The denigration of the public sector and public servants can produce a self-fulfilling prophecy that drives out the most able. Overall, the empirical evidence on this issue is surprisingly scant. Available research provides a very limited assessment of the impact on efficiency of varying the mix of inputs used or of changing structural and managerial arrangements.

Topic, subject and Atlas course

Modernizing Government in Governance and Institutions and Atlas100.

Sources

Teresa Curristine, Zsuzsanna Lonti, and Isabelle Joumard (2007), Improving Public Sector Efficiency: Challenges and Opportunities, OECD Journal on Budgeting, Volume 7, No. 1, at https://www.oecd.org/gov/budgeting/43412680.pdf, accessed 20 November 2016.           

Page created by: Ian Clark, last modified on 20 November 2016.