Why take a stick to public service productivity when a carrot works?

Tony Abbott has promised public sector cuts - but research suggests there are more effective ways to improve productivity. AAP

One of Prime Minister Tony Abbott’s most steadfast election promises was the axeing of 12,000 public sector jobs. Indeed, his first act after being sworn in was to sack three senior public service “mandarins” in a significant departmental shake-up.

But if research is any indication that we should go by, political advisers should be advising ministers that more value can be added from using modest - not necessarily financial - motivators, rather than simply focusing on reducing costs.

Research evidence shows that civil servants are driven more by the notion of making a difference (altruistic motivation) rather than by financial incentives. If this is truly the case, Canberra should be looking at ways by which bureaucracies (and the people working within them) can raise the bar and become more effective in providing services and more importantly the type of service being provided.

History will judge whether the recent restructuring is a start in a more efficient public service, or whether the public service is being slashed and diced, as some fear.

But if we are truly serious about achieving a productivity or prosperity dividend, we need to focus on driving more value from our people.

Not just about money

In the Australian Treasury’s 3Ps (Population-Participation-Productivity) framework to achieve intergenerational prosperity, the “people” element is key without which the other two are meaningless. We need to embrace a mindset whereby people are placed on the investment side of the balance sheet as opposed to being treated as a cost. It should only ever be a cost when people stop creating value in the organisation.

This case is much clearer when we look at the public sector productivity issue. Analysis was conducted of 9,961 government employees in 15 countries including Australia, Canada, Denmark, Great Britain, Israel, Japan, New Zealand, Russia, Taiwan and United States.

The outcomes from the research indicate two factors – one, civil servants are driven to achieving societal goals much more through motivation than they are driven by wage incentives. This factor is seen to be more prominent in senior levels of public sector organisations. The outcome measures used to assess public service motivation were jobs that help other people or jobs that are useful to society.

Two, financial incentives play a role in improving efforts as long as they are used as a support mechanism and not a control mechanism. At the entry levels of government, wage premiums are known to affect motivation and entrant quality.

For Australia, the evidence suggests that public sector wages (in comparison to the private sector) are high in supervisory and non-supervisory roles when compared to countries like the United States, Denmark, France and New Zealand. Many other countries outpaced Australia’s wage rates, such as Great Britain, Germany, Spain, Slovenia, Israel, Japan and Taiwan. The table below provides an outline of these ratios.

Adapted from Taylor and Taylor (2011)

Add value before cutting jobs

What is more important to note, aside from the efficiency wage ratio, is the effort of the public sector in relation to the wages and motivation. For instance, the table denotes that a 1% rise in effort from US civil servants can be achieved from a wage rise of 0.2% or an increase in public sector motivation by 0.68%.

Similarly, if we look at Australia it is clear that a 0.21% wage rise or a 0.61% increase in public sector motivation can yield a 1% improvement in effort. Japan and France are the only other two countries in this research that yield an improvement in effort for relatively lower increases in motivation.

In drawing conclusions from this research to test the efficacy of these findings against the coalface of change, governments should invest in motivating civil servants to identify new opportunities that add value to its services before engaging in cost reduction activities. No doubt these cost measures help, but in the short term.

Governments across the world are embracing new opportunities built upon people capability. Seven “Steve Jobs Schools” opened their doors last month in Netherlands to pilot a different model of education for school children. This revolutionises school education by using new technology and redefining the role of teachers. The initiative received overwhelming parliamentary support.

Similarly, the UAE Government has initiated a rapid process of public sector service transformation and integration that is customer focused and one that provides round-the-clock service to its citizens.

Innovation in public administration is regularly heralded as the panacea for inefficiency. However, what is often forgotten is that institutions do not innovate, people do. For the public sector to be innovative and value driven, people need to be motivated, activated and provided the opportunity. Failing this, our governing institutions will become mere coordinating mechanisms and any aspiration of becoming a beacon will surely remain just that – an aspiration.

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