Downsizing is not the answer

The cabinet committee on institutional reforms has proposed to cut some 150,000 positions in the federal government as part of the ‘rightsizing’ of the public sector. As these positions are currently vacant, the proposal, if put into effect, will not impact employees and thus will be politically and legally easier to go ahead with. All the same, it must have dismayed job seekers, who now will have fewer vacancies to apply for.

Given a predominantly young population and a large workforce, numbering in the shade of 80 million, at least one million jobs need to be created every year. On the other hand, we have loss-making public sector enterprises (PSEs) keeping which afloat costs the public exchequer billions annually. This puts every government into a dilemma: should it continue to give the PSEs a shot in the arm, a situation will eventually arrive – and to many it already has – when such a recipe becomes unsustainable.

Should the government stop putting money in the coffers of the PSEs, thousands of their employees will stop getting salaries. This is not a good option politically or economically, as the workers account for a considerable chunk of an already shrinking consumer market because of the increasing cost of living. So, what’s the way forward?

The situation reminds us of a standard question posed in elementary textbooks of economics: ‘Is it possible to grow all the rice, or for that matter any other commodity, in a small parcel of land by supplying labour and other necessary input?’ Evidently, not. But why?

The law of diminishing marginal returns states that if one or more factors of production are constantly increased while keeping the others unchanged, it will soon result in an ever-smaller rise in output. A stage may even arise, which usually does, when production, instead of expanding, starts shrinking.

In our example, there is a maximum amount of rice that can be grown in a particular parcel of land regardless of the number of farmers who plough the land from dawn to dusk and the quantity and quality of fertilizers they use. Once the maximum level of output is reached, it’s only by bringing another parcel of land under cultivation that more rice can be grown.

Likewise, hiring additional workers will add to the output of a factory. But if the management only keeps introducing more workforce without giving them additional capital or better technology to work with, every marginal worker will be less productive, which eventually will make the entire production process inefficient. Not only that, while the additional workers may make at best only a nominal contribution to the output, they will draw the same remuneration that a productive worker does.

Thus the enterprise in question will be characterized by increasing costs and stagnant or shrinking output and thus falling revenue, which is a recipe for going bankrupt if there’s no one to bail it out. This is what has happened in the case of Pakistan’s PSEs including PIA and the Pakistan Steel Mills (PSM), where more employee inductions relative to the level of output made them less productive and by implication costlier to run.

Be that as it may, to argue that only overstaffing PSE losses or overall inefficiency of the public sector and that they can be turned around just by downsizing is at best a half-truth – convenient to sell though it may be. The traditional management style is no less, if not more, responsible.

The management style in the public sector is activity-oriented. It judges employee performance by the number of activities they perform – such as the number of files disposed of every day – irrespective of their outcome. The result is that employees get so involved in doing their day-to-day activities that they deem them to be an end in themselves rather than a means towards achieving organizational objectives. Not surprisingly in government offices, a lot is done but little accomplished.

Management by activities may be contrasted with management by objectives (MBO), which is a relatively young management philosophy. MBO is driven by goals or targets, which are periodically reviewed. The performance of employees is judged by the progress made towards achieving these targets.

The goals or targets have to be specific, realistic, and jointly determined by the superiors and subordinates. The senior management should play the role of a facilitator, rather than that of the traditional big boss, in helping employees overcome the personal and work-related problems that may bear upon their performance and goal accomplishment.

By contrast, the public sector by and large relies on a top-down approach. Powers are concentrated in the head of the department, who may delegate some of these to their subordinates to lessen their (boss) burden. But since these are delegated powers, they have to be exercised in the way the big boss desires. Almost all key decisions are made at the top and conveyed to the employees in a pecking order. One-way communication – from top to bottom – is the norm.

Modern approaches to management put a high premium on resolving employees’ problems that have a bearing on their work and performance. Even if all the problems are not resolved, employees have the feeling that the organization cares for them, which helps them positively relate to the workplace.

The callousness of the senior management in the public sector towards employees’ problems leads to their alienation from the organization. Hence, not surprisingly, a great majority of workers in the public sector are unable to relate themselves emotionally in a positive way to their organization. As long as they get their salaries, they are not concerned about its success or failure.

A cardinal principle of effective management is to relate rewards to performance. This requires two things: establishing clear-cut performance standards and adhering to them objectively, fairly and transparently. The public sector in Pakistan, however, has been remarkable for its lack of performance-based rewards. In the first place, there are no clear-cut performance standards. And even if they exist, they are not followed. Allocation of rewards has much to do with the personal likes and dislikes of the top management.

In recent years, the public sector seems to be moving towards target-driven management including performance appraisal and apportioning rewards and penalties in the light of the progress made towards achieving the targets assigned. However, giving public functionaries certain goals and then assessing their performance isn’t sufficient. Certain concomitant changes are also in order.

First, diffusion of powers and responsibility across a public-sector organization is necessary, so that officials at all levels are involved in setting goals they need to attain. Two, targets should be used not only to control but also to motivate employees. This necessitates that the goals should be realistic – not like a high revenue goal when the economy is in recession; or a big export target, when the country doesn’t have a large quality exportable surplus. Employees ought not to be expected to do what they are not capable of or don’t have the means to do. Unrealistic goals in an unconducive setting instead of motivating employees frustrate them.

Three, proper attention may be given to building the capacity of employees through mandatory on-the-job training. Four, the culture of callousness that mars the management of the public sector needs to be discarded. Apathy towards employee problems should give way to apathy. If an employee is not equal to the task because he/she is facing some pressing family-related problems, their response is not unreasonable. Even if the department cannot solve the problem, a word of consideration from the senior management will cheer them up.

Finally, political interference in the public sector may be kept to a minimum – ideally, it should be zero. Politicians need to realize that the public sector is for serving the people, not their representatives; that it’s a machinery for running the government, not a forum for extending political patronage; and that the acid test of its performance is effective public service delivery, not keeping the ruling party and its supporters happy.

The writer is an Islamabad-based columnist. He tweets/posts @hussainhzaidi and can be reached at: hussainhzaidi@gmail.com