Public Sector Productivity Challenges

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Information about Public Sector Productivity Challenges

Published on July 12, 2016

Author: Structuralpolicyanalysis


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?


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