Part I of 2: Competition: Key to reform civil service

Part I of 2: Competition: Key to reform civil service

Ross H. McLeod, Canberra

With the coming of democracy to Indonesia, there is now
competition rather than monopoly in politics. In practical terms,
competition means that different political teams can offer
themselves as those best able to organize and manage the civil
service, the judiciary, the military and state enterprises in the
best interests of voters. Such competition was absent during the
Soeharto era, and the hope now is that its emergence will result
in steady improvement in the quality of public sector governance.

The beneficial influence of competition cannot be overstated.
It is perhaps most obvious in the sporting arena. Here, the offer
of large monetary rewards, in combination with fair systems of
competition, encourages young people to seek coaching and to
spend endless hours practicing to become better at their chosen
sport in the hope that they will be able to outperform their
peers.

Likewise in the field of business enterprise, firms try to
outdo each other by finding better ways to produce goods and
services, and by introducing better products that will gain
acceptance in the market. As with athletes, firms that dont try
hard do not go far. The poor performers are weeded out by the
process of competition, as a result of which products become
better and cheaper, and mankind enjoys a progressively higher
standard of living.

Thinking of things in this way, the poor performance of the
civil service in Indonesia can be interpreted as an unfortunate
legacy of the lack of competition in the political arena for
several decades. But even with the emergence of democracy it is
by no means clear that the contenders for political power have
any idea about how to reform the civil service should they be
given the opportunity.

For example, all five original presidential contenders
promised to deal with public sector corruption, but none
explained how he or she intended to do so: There was an abundance
of statements about policy objectives, but very few statements of
policy. Policy objectives include such things as achieving some
particular rate of economic growth, or reducing unemployment or
poverty to a particular level, and so on. But such statements are
essentially empty unless they are accompanied by explanations of
the policies that will be implemented in order to achieve those
objectives.

The objectives of any organization are best served if it can
appoint the best possible person available to each position
within it. Accordingly, the emphasis in private sector
organizations is on encouraging competition for positions. At
successively higher levels in the hierarchy the number of
positions falls very rapidly, so if there are ten individuals at
a particular level when a position at the next level becomes
vacant, at best only one of them can expect to get it.

Indeed, if applications are invited from people outside the
organization, none of these insiders may be successful. In such
an environment all individuals have strong incentives to perform
to the best of their ability, which is precisely what is needed
if the organization itself is to achieve its objectives.

Promoting a culture of competition for each position is very
different from the process of automatic promotions, based on
seniority, that is a fundamental characteristic of the Indonesian
civil service. When promotions are largely automatic, individuals
have little incentive to compete by performing better than their
peers.

Overstaffing at higher levels becomes the norm, since even
poor performers are promoted rather than being encouraged or
obliged to leave. Those who do perform well are frustrated by
lack of meaningful recognition of their efforts. This may result
in them leaving the organization for the private sector where
they can expect to be rewarded appropriately, or they may simply
become dispirited, resulting in a significant decline in their
productivity. At the same time, there is little incentive to
undertake additional education and training, since in practice
there is little payoff in terms of salary increases or
promotions.

Suppose we take as the starting point for civil service reform
the idea that we should inventorise all positions within the
bureaucracy, listing the skills and experience necessary for each
one. Next, we determine an appropriate salary for each position
based on research into the private sector labor market directed
to discovering the going rates for all relevant combinations of
skills and experience. The end result would be a complete listing
of all positions in each department and their corresponding
salary levels or ranges.

This listing would replace the current exceedingly complex
system, in which total remuneration depends largely on
characteristics of the individual -- including educational
qualifications, years of service and number of dependents -- as
well as the characteristics of the position (at least for higher
levels in the hierarchy).

The next step is to compare what we need with what we already
have. What we are bound to find is:

* a surplus of employees in many positions as a result of a
promotions process that treats promotion as a right rather than
something to be earned through competition

* a relatively large number of individuals who have been
promoted into positions they are incapable of filling adequately;
and

* many other individuals who are deserving of promotion to
higher positions but who have been held back by lack of
seniority.

Dealing with these mismatches is an extremely difficult task,
to be sure, but it is not something that has not been done
before. The process of turning around an underperforming
organization very often requires dealing with precisely these
kinds of issues. We shall discuss this in more detail in Part II
of this series.

The writer is Chief of Indonesia Project and Editor of
Bulletin of Indonesian Economic Studies at Australian National
University, Canberra.