Cyprus: The imperative of public sector reform and modernisation

from Cyprus Mail..

Opinion By Theodore Panayotou, Published on May 26, 2013

CYPRUS HAS inherited a colonial civil service which at the time, more than half a century ago, was quite efficient and affective for the limited demands then placed on it. Over time this changed with economic growth, technological advancement, globalisation and changes to the role of the state.

New demands have been created and old ones reduced or altered, all demanding a leaner, more focused and efficient civil service. New management and technology have provided the means of doing so, yet the Cyprus civil service, through political meddling and distortions has accumulated a lot of flab to the point of becoming a lumbering giant in a small economy.

Even as a good part of the public sector responsibilities have shifted to local government, civil society, the private sector and to Brussels, the Cyprus public sector continued to expand in numbers and cost to the point of becoming unaffordable and a cause cιlθbre of the of the current collapse of the Cyprus economy. Within the public service, meritocracy and performance incentives have gradually been ironed out by union pressures and non-merit based appointments and promotions while technological progress and new management pass it by.

In the post-memorandum era, with the severe budget cuts, the reduction of  personnel and the virtual freeze on new hiring, the civil service and the public sector as a whole are called upon to do more with less, a lot less.

How can the public sector in Cyprus respond to the growing demand from both citizens and businesses for more and better services with less money and fewer civil servants? This is needed not just during the times of crisis because of the recession and the tight budgets, or because it is stipulated by the memorandum or the troika. It is an absolute necessity because of the competition from the lower-cost, more agile emerging economies in a global market with instantaneous communication, free movement of capital, technology and even labour.

The answer is to be found, as always, in institutional and technological innovation and change. On the institutional side, the right incentives must be created for raising public sector productivity, efficiency and speed. These incentives can be provided through results-based performance and result-based management, i.e. by linking salary increases, promotion and bonuses with objectives and performance. This, in turn, requires that public sector productivity is measured at the organisational level and performance is assessed at the individual level.

The role of top executives and senior public managers here is pivotal in terms of both assessment and motivation. They are to set the strategic vision and the strategic priorities as well as the measures of performance and cost effectiveness which are critical for value creation and delivery of value for money to stakeholders, both citizens and businesses. There is no shortcut or alternative to “managing by objectives, managing by results”.

Flexibility and interchangeability of public servants are critical for cost effectiveness in a world of uncertainty and constant change. Both of these qualities require acquisition of transferable skills, including change management and a can do attitude. Involving the stakeholders, be they citizens or businesses, is key to value creation since only they know what they want and how much they value it.

Employment of information technology to a degree that we have effectively an e-Government, not just in name, across the board is a sine qua non for increasing speed, lowering cost, and delivering more and better public services with fewer civil servants, less bureaucracy and tighter budgets. Knowledge management and integrated operation systems can have dramatic effects on raising cost effectiveness and improving problem-solving and decision making thereby adding value while cutting costs. Where an integrated e-Government and knowledge management have been implemented, savings of the order of 30-50 per cent have been attained on top of those attained by linking rewards to productivity and managing by objectives.

Achieving more with less is imperative in a world of pervasive uncertainty, resource scarcity and constant change. It is also quite feasible; but, are the top executives and senior public managers up to the task of managing this change? Potentially yes; pragmatically no, with certain exceptions. Continuous executive development is key to preparing top executives and managers not only to implement changes but more importantly to train, mentor and motivate, if not also inspire, lower-level managers and employees to adopt a mindset of service and value creation, to embrace change and risk-taking and to respond rapidly and flexibly.

Beyond structured training, top executives can learn from each other, through interaction and knowledge management, and from their colleagues in other EU countries, through exchange of experiences and best practices.

Lifelong learning should be part and parcel of public executives’ life and for that matter of all civil servants if they are to deliver value for money in a world where change is the only constant.

Many countries in Northern Europe saw the shifting sands of the global economy and have acted to defend their competitiveness by ensuring that, their public sector, regardless of its size, remains productive and responsive.

Some countries in Southern Europe, notably, Cyprus, Greece, and Portugal, have ignored the winds of global competition and failed to change, allowing a slow moving, high-cost and low-productivity public sector to eat into their competitiveness to an extent that they needed a bailout from European institutions and the International Monetary Fund. For them doing more with less is no longer an option; it is an absolute necessity. Doing less with less would sink them deeper into recession.

On a positive note, the current economic crisis has brought to the surface a festering problem and created the pressures for governments to find the political will to bring about changes that were unthinkable only a couple of years ago. It is hoped that the changes underway are not viewed as temporary responses to the crisis but as permanent and systemic transformations that will put Cyprus on a more solid ground to compete globally. The announcement by the government of public service reform measures are in the right direction. It is hoped that the joint World Bank/British Government study on Cyprus public sector modernisation will help transport the public service to the 21st century.

Top public sector executives have a crucial role to play in this regard, for it is they who will ensure that fewer resources, human and financial, do not mean doing less but doing more with less. Their tools are public sector innovations, such as e-Government, productivity measurement, and management by objectives and results, as well as training and development of themselves and their people.

Management and public administration schools should come to the assistance of top executives in meeting these challenges. Responding to this need my own school, the Cyprus International Institute of Management (CIIM), a non-for-profit postgraduate institution which has been grappling with these issues for the past 20 years, has turned its executive leadership programme and its Master in Public Sector Management into “doing more with less” training and development platform for public sector managers. CIIM also participates, with PwC in the “Strategic, Leadership and Management Programme for the Cyprus Public Service”, a five-year project of the Cyprus Academy of Public Administration, cosponsored by the EU Social Fund.

Link to the article:

http://www.cyprus-mail.com/modernisation/imperative-public-sector-reform-and-modernisation/20130526

Dr Theodore Panayotou is professor and director of the Cyprus International Institute of Management (CIIM). He served as professor of economics and the environment at Harvard University and consultant to the UN and to governments in the US, China, Russia, Brazil, Mexico and Cyprus. He has published and was recognised for his contribution to the Intergovernmental Committee on Climate Change won the Nobel Peace Prize in 2007.

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