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.